ORLANDO – Hyatt Hotel Corp.’s high-profile sale of the 1,641-room Hyatt Regency Orlando includes construction of a 2,500-room Grand Hyatt to be built on an adjacent site.
On Friday, Hyatt officially announced the sale of the hotel to Los Angeles-based Ares Management and Houston-based Rida Development for $1.07 billion (after Hotel Investment Today first reported the sale earlier last week). It is the largest single hotel transaction in 2024.
The sales price was originally reported at $1.02 billion, but was increased to $1.07 billion after a 45-acre building lot adjacent to the property was included in the sale (along with $50 million in seller financing for that property). The 2,500-room Grand Hyatt is to be built on that property.
Hyatt announced that, subject to the satisfaction of certain conditions, Hyatt and an affiliate of RIDA and Ares will enter into a long-term management agreement for the Grand Hyatt hotel (the joint venture has also entered into a new 30-year management agreement for the Hyatt Regency).
Mark Hoplamazian, president and CEO of Hyatt, said the sale is the largest single sale in Hyatt’s history. “We are thrilled to partner with RIDA and Ares on this transaction. Working with these world-class developers, we will continue to advance the success of Hyatt Regency Orlando and purposefully expand our brand presence in the nation’s most visited destination with a new Grand Hyatt hotel,” he said.
RW Baird analyst Michael Bellisario said that in addition to the hotel sale, the land sale and development of a future Hyatt hotel were big wins for the company. “The total price of $1.07 billion is much higher than Hyatt’s net cash proceeds of $620 million,” he said. “The hotel was priced at the high end of our expectations, while the structure was in line with our expectations… The development agreement is a long-term positive.”
The Grand Hyatt Orlando will be developed in phases, and Bellisario said the first phase of development could take 5-10 years to open.
JLL assisted with the hotel’s acquisition financing with $620 million. Hyatt contributed $265 million in preferred stock, representing 26% of the equity and consisting of four tranches: $165 million in senior preferred stock at 7.45% (which will be reduced to 6% upon completion of renovations) and $60 million in subordinated A and B preferred stock, which will convert to senior preferred stock if certain cash flow requirements are met. They can also be reduced to $0 if NOI hurdles are not met by 2032. There is also $40 million in “renovation preferred stock” that can be reduced to $0 upon completion of renovations.
Bellisario said the joint venture plans to make about $60 million worth of optional improvements to be completed by the second half of 2025 or 2026.
Hyatt bought the Hyatt Regency Orlando, located next to the Orange County Convention Center, for $717 million in 2013 and spent $117 million on renovations in 2016. It has about 351,000 square feet of meeting space and generated $83.3 million in hotel EBITDA and $74.6 million in NOI over the last 12 months (up 2% from 2023 and 17% from 2019), which includes Hyatt’s 3% management fee. Its RevPAR was $182 (up 15% from 2019).
The sale exceeded Hyatt’s $2 billion commitment announced in 2021 to divest assets as part of its asset-light strategy. Over the past three years, Hyatt has now generated gross proceeds of $2.6 billion, net of acquisitions, a multiple of 13.3x.
