2,500-key Grand Hyatt development tied to Orlando sale

ORLANDO — Hyatt Hotel Corp.’s high-profile sale of its 1,641-key Hyatt Regency Orlando includes the development of a 2,500-key Grand Hyatt that will be built on an adjacent parcel.

On Friday, Hyatt officially announced the $1.07 billion sale of the hotel to Los Angeles-based Ares Management and Houston-based Rida Development (after Hotel Investment Today initially announced the sale early last week). It’s the largest single-asset hotel transaction in 2024.

The sale was originally reported as $1.02 billion but was raised to $1.07 billion after a 45-acre entitled development parcel adjacent to the property was included in the sale (along with $50 million in seller financing for that property). That parcel is where the 2,500-key Grand Hyatt will be developed.

Hyatt said upon the satisfaction of certain conditions, Hyatt and an affiliate of RIDA and Ares will enter into a long-term management agreement of the Grand Hyatt hotel (the JV also entered into a new 30-year management agreement for the Hyatt Regency).

Hyatt President and CEO Mark Hoplamazian said the sale is the largest single-asset sale in Hyatt’s history. “We are thrilled to be working with RIDA and Ares on this transaction, and in collaboration with these world-class developers, we will continue driving the success of Hyatt Regency Orlando and thoughtfully expand our brand footprint in the most-visited destination in the U.S. with a new Grand Hyatt hotel,” he said.

Analyst Michael Bellisario of R.W. Baird said that in addition to the hotel sale, the land sale and development of a future Hyatt hotel are big wins for the company. “The combined price of $1.07 billion is much higher than the ~$620 million of Hyatt’s net cash proceeds,” he said. “The hotel’s pricing was 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 several phases and Bellisario said the first phase of development could take 5-10 years to open.

JLL assisted with $620 million in acquisition financing for the hotel. Hyatt included $265 million in preferred equity, which is 26% of the capital stack and has four tranches: a $165 million senior preferred equity at 7.45% (which is reduced to 6% when renovations are completed) plus $60 million in junior A and B preferred equity, which will be converted to senior preferred equity if certain cash flow requirements are satisfied. It can also be reduced to $0 if NOI hurdles aren’t met by 2032. There is also $40 million in “renovation preferred equity,” which can be reduced to $0 once renovations are completed.

Bellisario said the JV is planning about $60 million in elective improvements scheduled to be completed by the second half of 2025 or 2026.

Hyatt purchased 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, for the trailing 12 months, generated $83.3 million in hotel EBITDA and $74.6 million in NOI (which is 2% higher than 2023 and 17% higher than 2019), which includes Hyatt’s management fee of 3%. Its RevPAR was $182 (which is 15% higher than 2019).

The sale exceeded Hyatt's $2 billion asset-disposition commitment announced in 2021 as part of its asset-light strategy. Over the last three years Hyatt has now realized $2.6 billion of gross proceeds, net of acquisitions, at a 13.3x multiple.