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Park Hotels (PK) Sheds Non-Core Assets Worth $166 Million

Zacks Equity Research

Park Hotels & Resorts Inc. PK recently announced selling of three non-core assets for $166 million. The move comes as part of the company’s capital-recycling efforts, helping substantially lower the company’s leverage ahead of its proposed merger with Chesapeake Lodging Trust CHSP.

The assets sold off this time include three hotels. These comprise the 507-room Hilton Atlanta Airport in Atlanta, GA; the 317-room Hilton New Orleans Airport in New Orleans, LA; and the 274-room Embassy Suites Parsippany in Parsippany, NJ.

Situated in non-core airport and suburban markets, these hotels generated a combined 2018 RevPAR of $109. The figure is around 37% lower than that of Park’s 2018 portfolio average. Hence, there disposition seems a strategic fit.

In fact, Park Hotels is on track with its capital-recycling efforts, generating more than $750 million through sale of 18 non-core assets since its formation in 2017. The company is focused on enhancing its market position and this May, it announced the $2.7-billion acquisition of Chesapeake Lodging Trust.

The cash-and-stock transaction, expected to close in late third quarter or early fourth quarter this year, will help Park Hotels significantly boost its portfolio quality, increasing comparable RevPAR by nearly 4% to $182 and enhance the EBITDA margin. The buyout will provide immediate brand, operator as well as geographic diversification, while the combined entity will benefit from increasing scale, lowering cost of capital and combined synergies.

Park Hotels currently carries a Zacks Rank #3 (Hold). In the year-to-date period, shares of the company have underperformed the industry. While the stock has appreciated 4.3%, the industry has increased 19.5% during this period.

Stocks to Consider

Some better-ranked stocks from the real-estate space include Host Hotels & Resorts, Inc. HST and Lamar Advertising Company LAMR, each carrying a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Host Hotels’ Zacks Consensus Estimate for 2019 funds from operations (FFO) per share moved 2.8% north to $1.82 in the past two months.

Lamar’s FFO per share estimates for the current year inched up 0.3% to $5.83 over the past month.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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Lamar Advertising Company (LAMR) : Free Stock Analysis Report
Chesapeake Lodging Trust (CHSP) : Free Stock Analysis Report
Host Hotels & Resorts, Inc. (HST) : Free Stock Analysis Report
Park Hotels & Resorts Inc. (PK) : Free Stock Analysis Report
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