The deal can be interpreted as a bargain that shows the high-end hotel resale market in Greater Orlando has a ways to go before reaching today's replacement cost estimates.
The Hyatt Regency's price per key of $252,000 tops the per-key averages paid in Greater Orlando for the biggest hotel transactions of 2016, which were led by the Orlando Airport Marriott Lakeside sale in June 2016 for $64.3 million ($132,000 per key), and the Embassy Suites Orlando Downtown selling for $35.4 million in March 2016 ($211,700/key), both figures being full sale prices -- including the value of tangible personal property that's not always reflected on the deed.
On a price-per-key basis, this sale ranks 8th among the highest value hotel deals in this market since 2012 that included land and structure, according to Real Capital Analytics.
Those that rank ahead were the Ritz Carlton Grande Lakes and JW Marriott Grande Lakes sold in May 2015 ($618,988 per key average), the Waldorf Astoria Orlando and Hilton Orlando Bonnet Creek in February 2015 ($507,005 per key), the Hyatt Regency on International Drive in September 2013 ($436,929 per key), the Villas of Grand Cypress in April 2012 ($390,411 per key) which included just 146 villas but also 45 holes of golf and 150 to 200 acres of developable land, and the Grand Bohemian Hotel in December 2012 ($323,200 per key).
While Xenia's price per key for the Hyatt Regency is relatively high, it can be viewed as a bargain considering it's roughly half the cost or less of new hotel development for similar-sized projects today, and has value-add potential as a 33-year-old property, said Michael Weinberg, director at HFF in Orlando specializing in hotel sales and financing.
"If you were to build this level of resort today, replacement cost is well north of $400,000 per key minimum, and that depends on how high you're building," he told GrowthSpotter on Tuesday. "So for this to be half or a quarter of that price is relatively good, especially if you have options to improve meeting space and command more group business."
One point of reference is DCS Real Estate Holdings' new plans for a 17-story JW Marriott in Bonnett Creek Resort, projected as 516 keys and 50,000 square feet of meeting space, first reported here on May 2. At a conservative $300 million investment estimate, that new project would cost north of $581,000 per key.
The Xenia acquisition was funded with cash available on the company's balance sheet, and its senior unsecured credit facility, according to a public statement made Monday morning.
The company highlighted the opportunity to increase its presence in an Orlando market it knows well, and believes is poised for long-term growth due to favorable supply and demand outlook.
Xenia expects to grow revenue and improve the hotel's competitive positioning through strategic capital investments over the next several years, including expanding meeting space, renovating guest rooms and adding a new ballroom.
There is also long-term expansion potential for the hotel, as Xenia acquired an adjacent 8 acres in the deal that is currently a nine-hole golf course. More than 32 acres of undeveloped land lie directly north that are separately owned.
The Hyatt Regency property already has more than 65,000 square feet of indoor and outdoor meeting space, six dining outlets, a full-service spa, and other amenities that include access to 45 holes of Jack Nicklaus signature-designed golf courses.
"The sale of the Hyatt Grand Cypress is a terrific indicator of the confidence that highly institutionalized investors have in the Orlando hotel market," said Paul Sexton, vice president of HREC Investment Advisors, a national brokerage offering consulting, development and asset management services to the hotel industry. "Further, it is a testament to the vibrancy of the luxury and group segment of the local market."
Xenia now owns 42 properties nationwide, according to its website, with the Hyatt Regency Grand Cypress being its fourth in Florida. The other three include the Bohemian Hotel in Celebration, the Grand Bohemian in Downtown Orlando, and a Hyatt Centric in Key West.
The seller was an affiliate of Hyatt Hotels Corp., which paid $190 million in 2014 when it invoked a purchase option. Xenia will retain Hyatt as property manager, which has managed since its opening in 1984.
The hotel has received about $32 million in capital investment over the past five years, Xenia officials said.