Host Hotels & Resorts, Inc. (HST), the largest lodging real estate investment trust (REIT), has divested the Sheraton New York Times Square Hotel for a consideration of approximately $373 million. The transaction amount represents a 28x EBITDA multiple of the 1,780 room hotel’s 2019 earnings before interest, taxes, depreciation, and amortization (EBITDA).
The transaction includes about $136 million in foregone capital expenditures over the next five-year period. Additionally, Host is also providing a $250 million bridge loan to the acquirer.
Management Weighs In
The President and CEO of Host, James F. Risoleo, commented, “The sale of the Sheraton New York Times Square Hotel represents another step in the transformation of our portfolio as we look to deploy capital into assets that will bolster our EBITDA growth profile.”
Since 2021, Host has divested eight hotels for a total consideration of $1.4 billion, while investing $1.6 billion in early-cycle acquisitions.
Host is one of the biggest luxury and upper-upscale hotel owners and owns 74 properties in the U.S. and five properties internationally.
Analyst Take
Stifel Nicolaus analyst Simon Yarmak has reiterated a Buy rating on the stock while increasing the price target to $21.5 from $21.
Overall, the Street is cautiously optimistic on Host with a Moderate Buy consensus rating based on eight Buys, three Holds, and a Sell. The average Host Hotels & Resorts price target of $21.13 implies the stock is fairly priced at current levels. That’s after a 15.7% gain in the share price so far this year.
Closing Note
Host has been undertaking a strategic portfolio rejig since the beginning of 2021, and this sale transaction at 28x EBITDA fits well into the strategy. On the other hand, the blended EBITDA multiple for Host’s recent seven hotel acquisitions is 13x.
Additionally, TipRanks data indicates investor sentiment in the stock is very positive, with the number of portfolios holding Host shares up about 28% in the past month.
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