A hospitality real estate investment trust sold one of its Dallas hotels in a $111 million deal as the company takes a closer look at its balance sheet and considers new purchases.
Xenia Hotels & Resorts, based in Orlando, Florida, has sold the Fairmont Dallas, a 545-room luxury hotel at 1717 N. Akard St., to an undisclosed buyer for about $203,670 per key, the REIT announced.
The property required "significant and disruptive near-term capital needs," prompting the sale along with expected disruption from the upcoming $3.7 billion Dallas convention center redevelopment that's expected to impact meetings and event business.
Still, the deal marks a 61% premium over the firm's $69 million purchase of the hotel in 2011. The investment's rate of return during the ownership period is 11.3%, Chair and CEO Marcel Verbaas said in a statement, which was "an excellent outcome for this investment," particularly given the pandemic's significant negative impact on cash flows during 2020 and 2021.
The net proceeds of the deal are earmarked for general corporate purposes, including debt repayment, potential acquisitions or share repurchases.
"The disposition reflects our ongoing focus on upgrading the quality of the portfolio, prudent capital allocation, and maintaining balance sheet strength and flexibility," Verbaas said in the statement.
The hotel's trade has also increased the REIT's overall quality of its portfolio, with Fairmont Dallas' historical revenue per available room and earnings having trailed meaningfully below its portfolio averages, he added.
The challenges tied to the Dallas convention center redevelopment were also noted in a recent $300 million loan refinancing for Sheraton Dallas Hotel, the biggest hotel in Texas, as reported by CoStar News. The challenges noted in the presale reports on the hotel are likely to remain for the next several years until the overhaul of the city's convention center is complete.
Xenia Hotels & Resorts did not immediately respond to an inquiry from CoStar News seeking additional information. The REIT also owns another Dallas hotel, the Dallas Marriott Downtown, at 650 N. Pearl St.
The Fairmont Dallas hotel, which has hosted presidents and other high-profile executives, has an estimated $80 million of near-term capital expenditures, the REIT said.