While it's unknown when a supermajority ownership stake in the Crowne Plaza Orlando Universal Hotel could be sold by the Brazilian federal government, local hotel market analysts tell GrowthSpotter the property's size and location could demand top value in Orlando's sizzling hotel sales market, if listed this year.
"If put on the market, there would be no shortage of qualified groups interested in buying the property," said Paul Sexton, vice president at HREC Investment Advisors.
"Without knowing what the current profitability of the hotel is or the cost of 'change-of-ownership' renovation, it is difficult to guess what the market value is," he continued. "But given its excellent location in the market and the fact that Orlando is on fire from a transactional perspective, I would think that the hotel could go for somewhere north of $50 million."
As reported Friday by GrowthSpotter, future ownership of the Crowne Plaza Orlando Universal Hotel is in limbo as its majority owner serves time in a Brazilian federal prison for charges related to money laundering, tax evasion and homicide, and his stake in the hotel is held for potential auction.
João Arcanjo Ribeiro accumulated international assets estimated at more than BRL 900 million ($285 million) in value that are now controlled by Brazil's government. One of those is a 65 percent stake in Orlando-based Universal Towers Construction (UTC), a super-majority share that belongs to Arcanjo's Brazilian company, Universal Towers Investimentos e Participações Ltda. (UTI).
UTC built the 400-room Crowne Plaza Orlando Universal Hotel in 2002 at 7800 Universal Blvd., owns the property and shares the hotel's address.
Brazil's government controls the hotel's fate by controlling Arcanjo's Brazilian business, UTI. A Brazilian court appointed judicial administrator Francisco Ferreira Bomfim to manage assets of Arcanjo and UTI, but there is no forecast for when the auction process may start for UTI's majority stake in the Crowne Plaza.
Multiple commercial real estate brokers have told GrowthSpotter that they have pursued contact with the hotel's owner, UTC, on behalf of clients since Friday.
Hotel sales are heating up in Orlando this year. More than $2 billion of hotel transactions have either closed or are under contract this year, GrowthSpotter reported on Monday, meaning the metro region could see at least three times the sales of its most recent peak year of 2013, when $890 million in existing hotels sold.
Orlando's hotel market has returned to valuation metrics as the base for sales offers, instead of a "price-per-key" basis commonly used during the recession, reflecting a growth stage in Orlando's hospitality economy, Sexton said.
Typical valuation metrics for a full-service hotel like the Crowne Plaza focus on a direct cap rate/multiplier that is applied to the hotel's net operating income. In this case, the hotel's current income is not known.
Hotels of this size are selling at direct cap rates in the 7 percent to 8.5 percent range, or roughly 12 to 14 times net operating income, Sexton said. That value doesn't include any adjustment that buyers would make for renovation work to bring the hotel up to current brand standards.
Kent Hricko, senior agent specializing in hotels at Marcus & Millichap, says "a cap rate deal" closer to 8.5 percent is the standard pursuit for a hotel property of this stature in a healthy sales market like Orlando's.
But because buyers would only be acquiring a 65 percent stake in the Crowne Plaza's ownership, it will prompt them to evaluate what they're paying on a per-key basis, he said.
"Without knowing the revenues, my guess would be that someone would pay up to $70,000 or $80,000 per key for this hotel," said Hricko, which at 400 rooms comes to $28 million to $32 million.
"Prices have been going up in the I-Drive area, but this is a property all its own in that market," he said. "You can't compare this to any of the smaller, limited-service hotels selling on I-Drive to date, which have been selling in the $45,000 to $50,000-per-key range."
Ultra-competitive room pricing on International Drive can also suppress a hotel's potential sales value, Hricko said.
"I-Drive is such a competitive market, if this hotel was in Lake Mary, it would sell for $100,000 to $110,000 per key," he added.