Strategic Hotels & Resorts' $54m deal to sell the Four Seasons Hotel in Mexico City is unlikely to be the last. The US REIT is making no secret of the fact it is willing to negotiate with potential buyers in a bid to claw back liquidity and continue with its "strategic asset disposition plan".
The sale to private equity group Meridia Capital closed in the same quarter as Strategic also formed a joint-venture agreement on its 60-acre ocean-front site near the Four Seasons Punta Mita Resort in Nayarit, Mexico.
This latter deal with Cantiles de Mita, SA de CV – the wholly owned subsidiary of DIME – the master developers of Punta Mita and the original seller of the land parcel, sees Strategic take an interest in the land in exchange for being released from its final instalment payment of $17.5m which was due on August 2009. Instead it has received a preferred position which entitles it to receive the first $12m of distributions generated from the project with any excess distributions split equally among the partners.
The Four Seasons purchase by Meridia Capital takes the group's hotel interests in Latin America to four and into Mexico for the first time.
Both transactions were detailed as Strategic Hotels reported Q3 EBITDA of $31.2m – down from $55.8m over the same period last year. Total North American revpar declined by -21.9% while in Europe revpar dropped -12.6% on a constant dollar basis. Over the nine months to the end of September EBITDA was $87.5m compared to $185.6m in 2008.
Earlier in the year CEO Laurence Geller was one of several high profile industry chiefs to criticise politicians and the media for condemning corporate spending, saying the critics were harming the hotel industry.
This quarter Geller said: "Although operating performance continues to be impacted by challenges within the hospitality sector, recent macroeconomic trends, including a 3.5% GDP growth in the third quarter, are reason for optimism that we are beginning to turn the corner on hotel demand."
The quarter also saw two new appointments to the board – independent directors Ray Gellein – former president of Starwood Hotels & Resorts' Global Development Group – and Gene Reilly – president of AMB Property Corporation's Americas division.
Geller said both appointments were in line with Strategic's plan to strengthen the board to see the group through the volatile trading environment.