Publicly traded hotel brand companies and real estate investment trusts in the U.S. were active buyers and sellers during the latter half of 2021, and many plan to keep that momentum going this year.

Hotel executives shared success stories of being aggressive in off-market deals by leveraging relationships to capture assets they otherwise might not have. At the same time, they're also finding success in homing in on properties within regions that help fill gaps in their portfolios.

Here are some highlights of commentary from executives during the fourth quarter and full-year 2021 earnings season providing color on deals that have closed and ones that are on the horizon.

“We had a very active year in 2021, realizing $630 million of gross proceeds from owned asset sales. In addition to the sales of wholly owned assets, we had a very active quarter in our joint venture portfolio. In the fourth quarter alone, we sold our joint venture ownership interests in five hotels, four of them being select-service properties for an average price of $380,000 per room, resulting in $83 million of net proceeds to Hyatt. And we retained a long-term management or franchise contract for each hotel. In addition to the activity outlined above, I'm pleased to announce that we are in advanced stages for the disposition of two other wholly owned hotels for an aggregate amount of approximately $270 million, implying a multiple of approximately 15 times 2019 EBITDA levels. Should we successfully close these two transactions, they will mark early and solid progress toward the $2 billion asset sell-down commitment announced in August.”

“We are going to continue to aggressively recycle. Our top 27 assets really accounts for about 90% of the value of the company. And so we've identified another batch of non-core assets that we're going to aggressively move. Keep in mind, we also had the built-in gain tax requirements that have now expired so that also gives us even more optionality with the portfolio. And we also had … four assets that were self operating. Given some of the tax restrictions, it was punitive for us to sell those sooner. Those are now easier for us to sell here in 2022. Without those [restriction] sales activities are already underway. So it's a core priority for us in 2022. You'll see us accelerate those non-core asset sales. We also have a number of joint ventures. There are nine of those remaining; three of those are consolidated. We'll also look to [sell those] where possible. Some of those have legal and tax issues, as well. We will continue to work hard to reshape the portfolio, improve the portfolio metrics and then use those proceeds for share buybacks. We trade at a significant discount to not only NAV but also to replacement cost, and we're not happy about that. And we want to work hard to address that immediately, but use those proceeds for share buybacks, also for ROI projects, and also for opportunistic acquisitions that fit our profile.”

“We continue to make progress on the previously announced sales of 68 Sonesta-branded hotels. We've closed on two hotels for $28 million, one during Q4 2021 and one during Q1 2022. We are under purchase and sale agreement to sell 45 hotels for $402 million and are under a letter of intent to sell an additional 19 hotels for $132 million. There are two hotels for which we have not yet selected a buyer. Aggregate pricing for the hotels remains in line with expectations we discussed on our third quarter earnings call. We expect to close the majority of the sales over the balance of Q1 and early Q2. We expect aggregate sale proceeds for the 66 hotels either sold or under agreement to total about $560 million or approximately $66,000 per key. Approximately 72% of the sale hotels are expected to be sold encumbered by long-term Sonesta branding, maintaining Sonesta’s distribution and assisting in jumpstarting franchising efforts for the Sonesta brands, as well as providing SVC with an additional future revenue stream due to it pro rata ownership in Sonesta and the royalties it will receive from the franchisees. An additional 13% of the sale hotels are expected to be sold under short-term franchise agreements, while the buyers explore multifamily alternatives, which could potentially convert to more permanent branding arrangements if the buyers determine lodging is the highest and best use. The balance of the sale hotels will be rebranded or converted to an alternate use. We believe the timing of these sales has been favorable given the excess demand of buyers targeting hotels relative to the supply being offered. While most of the hotels will retain the semester brand, the hotels that are being sold unencumbered of long-term franchising agreements are being sold at prices that commanded a premium compared to offers received to keep them as Sonesta-branded hotels. We believe our overall execution strategy on the sales will provide the maximum long-term SVC.”

“In January, we completed the initial closing of 26 of the 27 hotels included in the $822 million portfolio acquisition from NewcrestImage. The investment significantly increases Summit’s exposure to several dynamic and high growth Sunbelt markets. The 27th and final hotel — the 176-room Canopy in downtown New Orleans — is expected to open next month, at which point we would complete the acquisition. The value allocated to the 27 hotels in total equates to approximately $209,000 per key and represents a meaningful discount to estimated replacement cost. The NewcrestImage portfolio acquisition also included two parking garages and various economic incentives. In total, we announced or completed over $1 billion of transaction activity in 2021, which increased the number of hotels in our portfolio by 40%. Our joint venture with GIC now totals 40 hotels representing over $1.3 billion of invested capital, including the pending acquisition of the Canopy New Orleans the recent growth of the joint venture will result in a substantially increased ancillary fee stream earned by Summit for asset and capital project management services. For 2022, We estimate our pro rata share of annual fees to be approximately $2 million to $2.5 million, which equates to 10% to 15% of our estimated corporate cash GNA.”

“As we look ahead, we will continue to further simplify our business model. We were very pleased in the fourth quarter to negotiate our exit from the resource-intensive, lower-margin select-service management business, and at the same time, with significant interest from buyers of leisure real estate, we began exploring the strategic sale of our two owned hotels, the Wyndham Grand Bonnet Creek Resort in Orlando and the Wyndham Grand Rio Mar resort in Puerto Rico.”

“We expect to be a net acquirer this year and are encouraged by the quality of our assets within our pipeline, which includes several off-market opportunities.”

“We focus on off-market transactions; we leverage unique relationships and situations to allow us to get the asset that we might not otherwise. That’s played out in the value and yield of the deals that we’ve required most recently.”

"These good results were largely the product of a decision we made several years before the pandemic to pivot and focus our external growth on drive to resort and lifestyle hotels. Since that pivot, we have completed more than $1 billion in transactions to assemble the portfolio that today defines DiamondRock. We acquired Havana Cabana Key West; the Westin Fort Lauderdale Beach Resort; the Kimpton Shorebreak; Margaritaville Key West; Kimpton Phoenix Palomar; L'Auberge de Sedona; Orchards Sedona; The Landing Lake Tahoe; Cavallo Point in Sausalito; and our most recent acquisitions the Bourbon Orleans in the French Quarter; Tranquility Bay in the Florida Keys; and the two Henderson Beach Resorts."
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"How do we find these great deals in a competitive market place? Mostly because we don't rely on brokers. Rather we have spent years building relationships with the owners in micro markets like Sedona and Destin Beach that fall outside the mainstream. Off-market transactions provide the time to solve the seller’s partnership, debt or legal issues to our benefit. We're optimistic we can close a similar volume of transactions in 2022. In fact, we are actively working on four deals right now at some stage of evaluation. Half of those are off-market through long standing relationships.

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