RLJ Lodging Trust Trims Stake in NYC Hotels

The REIT sold two Manhattan properties for a combined $286 million.
Hilton New York Fashion District

Hilton New York Fashion District

New York—RLJ Lodging Trust, of Bethesda, Md., has sold two hotels in New York City for $286 million or $494,500 per key, the REIT recently announced. The two properties are the 298-room Hilton Garden Inn New York/West 35th Street and the 280-room Hilton New York Fashion District in Manhattan.

The price reportedly represents a cap rate of about 4.7 percent on the hotels’ projected 2016 net operating income, including planned capital expenditures. The sale cut the share of RLJ’s pro forma 2016 hotel EBITDA from the New York City market to less than 5 percent.

“We capitalized on the strong interest from international investors in the New York City market to execute an opportunistic transaction,” RLJ President & CEO Ross Bierkan said in a prepared statement. “While we continue to believe in the New York City market over the long term, in the near term these sales reduce our exposure as this market goes through a soft period.”

The buyer was not identified, and RLJ did not respond to Commercial Property Executive’s request for additional information.

New York City remains a highly sought-after market among international investors because of its “diverse demand generators, high barriers to entry and strong operating metrics,” Pete Nichols, national director of Marcus & Millichap’s National Hospitality Group, told CPE. “Many investors see NYC as an opportunity to enter a market that produces strong returns in both performance and underlying real estate value.”

As to the NYC hospitality market’s recent performance, Nichols noted that RevPAR has seen a modest decline this year, due largely to a significant increase in the number of available hotel rooms entering the market. “We believe that as this new supply is absorbed, RevPAR will once again move into positive territory.”

In a transaction about a week earlier, RLJ sold a 119-room, non-core hotel in Bakersfield, Calif., for $13 million or $108,000 per key. The price represents a cap rate of about 7.8 percent on the property’s projected 2016 NOI, including capital expenditures.

The company reportedly intends to use the proceeds from these sales for general corporate purposes, which may include paying down debt and repurchasing shares.

Following these sales, RLJ owns 122 hotels with approximately 20,100 rooms in 21 states and the District of Columbia. The company focuses on premium-branded, focused-service and compact full-service hotels.

Image courtesy of Hilton