Park Hotels & Resorts Inc. · NYSE:PK
Park Hotels & Resorts — Investor Day (December 2016)
53 slides from Park Hotels & Resorts's investor day presentation, December 2016
Slide 1: Investor Presentation
Hilton Hawaiian Village Investor Presentation December 2016
Slide 2: Safe Harbor Disclosure
Safe Harbor Disclosure Basis of Presentation References to pro forma amounts herein are not intended to reflect pro forma adjustments made pursuant to Article 11 of Regulation S-X of the Securities Exchange Act of 1934, as amended. Unless otherwise noted, the information and figures presented herein
Slide 3: Mission
Mission “To be the preeminent Lodging REIT, focused on consistently delivering superior, risk- adjusted returns for shareholders through active asset management and a thoughtful external growth strategy, while maintaining a strong and flexible balance sheet” Hilton San Francisco Union Square CONFIDE
Slide 4: Company Highlights
Company Highlights Park is a leading lodging real estate company with a diverse portfolio of Premium Sep 2016 LTM iconic and market-leading hotels and resorts with significant underlying real Brands Performance(3) estate value in top U.S. markets and internationally $2.8 billion Total Portfolio Reve
Slide 5: Pillars of our Corporate Strategy
Pillars of our Corporate Strategy Aggressive Asset Management Continually improve property level operating performance Consistently implement revenue management initiatives to optimize market pricing / segment mix Prudent Capital Allocation Allocate capital effectively by leveraging scale, liq
Slide 6: Leadership
Hilton San Francisco Union Square Leadership CONFIDENTIAL | 6
Slide 7: Seasoned and Experienced Management Team
Seasoned and Experienced Management Team Years of Officer Title Experience Relevant Experience • Co-founder and former President and CEO – RLJ Lodging Trust (NYSE: RLJ) • Former Executive – Hilton Hotels Corp., Host Marriott Services and Marriott Thomas J. Chairman, President & Corp. (NYSE: MAR) Chi
Slide 8: Senior Management (continued)
Senior Management (continued) Years of Officer Title Experience Relevant Experience • Former SVP, Asset Management – Hilton (NYSE: HLT) John C. Senior Vice President, Asset Management 25 • Former MD, Asset Mgmt - Axios Hospitality Boettger • Former VP, Asset Mgmt - Host Hotels & Resorts (NYSE: HST)
Slide 9: Board of Directors
Board of Directors Park has assembled a Board of experienced, diverse and successful corporate executives including current/former CEOs, CFOs and other senior corporate executives Full Director slate includes: Proven leaders with strong strategic orientation Highly qualified financial experts
Slide 10: Board of Directors
Board of Directors Name Principal Occupation Experience • Co-founder and former President and CEO – RLJ Lodging Trust (NYSE: RLJ) Chairman, President & Chief Executive • Former Executive – Hilton Hotels Corp., Host Marriott Thomas J. Baltimore, Jr. Officer Services, and Marriott Corp. (NYSE: MAR) Pa
Slide 11: Board of Directors
Board of Directors Name Principal Occupation Experience • Head of U.S. Asset Management for The Blackstone Group (NYSE: BX) • Previously worked for Blackstone in Los Angeles and also Senior Managing Director and Head of U.S. London as head of Blackstone’s European Real Estate Debt Rob G. Harper Asse
Slide 12: Board of Directors
Board of Directors Name Principal Occupation Experience • Senior counsel with Kasowitz, Benson, Torres & Friedman LLP • Served 24 years in the U.S. Senate (Connecticut), retiring in January 2013; served as Chairman of the Committee on Senator Joseph I. Senior Counsel Homeland Security and Government
Slide 13: Portfolio Overview
Hilton New York Midtown Waldorf Astoria The Reach Resort Hilton Chicago Portfolio Overview
Slide 14: Diversified Exposure to Attractive Markets
Diversified Exposure to Attractive Markets High Barriers to Entry Urban Select Suburban and Landmark Resorts and Convention Hotels Strategic Airport Hotels Hilton New York Hilton San Francisco Hilton Hawaiian Village Hilton Waikoloa Village Hilton Short Hills Hilton Boston Logan 1,929 rooms (1) 1,91
Slide 15: Diversified Exposure to Attractive Markets
Diversified Exposure to Attractive Markets 75% of LTM Ownership EBITDA from coastal markets 86% of Ownership EBITDA from top 25 markets & resort destinations(1) Washington Colorado Kansas / Missouri 3 Hotels | 1,621 Rooms 1 Hotel | 159 Rooms 2 Hotels | 465 Rooms Illinois 2% Ownership EBITDA <1% Owne
Slide 16: Portfolio Overview
Portfolio Overview Geographic Diversity Diverse Revenue Stream (% of Total Rooms) (% of LTM Total Revenue) Top 10 Cities Revenue Segmentation(1) Orlando 11% Food and Beverage Other San Francisco 28% 8% 26% 8% Honolulu 8% 8% 12% Chicago Other 66% International 5% 2% Rooms 4% 6% New Orleans Atlanta 4%
Slide 17: Park Portfolio: Well Insulated from Supply
Park Portfolio: Well Insulated from Supply ~2% Supply Growth for Park Favorable Supply Picture for Park’s Hotels Against a backdrop of increased US supply growth, Park is well positioned relative to its peers With outsized exposure to Orlando, Oahu, San Francisco and New Orleans, Park anticipate
Slide 18: Group Portfolio Positioned to Outperform
Group Portfolio Positioned to Outperform Park’s Leading Group Platform Park Hotels & Resorts portfolio’s strong group positioning increases visibility into forward bookings and reduces operating volatility by enhancing the stability and predictability of revenue throughout the lodging cycle Grou
Slide 19: Industry Overview: Possible Catalyst in International Demand
Industry Overview: Possible Catalyst in International Demand Bullish predictions for inbound international travel to the U.S. could serve as a catalyst for growth in select U.S. markets 4.0% 2016-2020E CAGR International Visitors to the U.S. (Arrivals in Millions) 95.0 90.3 2.8% 2000-2015 CAGR 86.9
Slide 20: Investment Highlights
Hilton Bonnet Creek Investment Highlights CONFIDENTIAL | 20
Slide 21: Investment Highlights
Investment Highlights 1 Size and Scale of Park Creates Competitive Advantage 2 Iconic Assets in Key US Cities and Geographic Diversity Significant Growth Profile: Acquisitions and 3 Redevelopment 4 Enhanced Profitability with Aggressive Asset Management 5 Strong and Flexible Balance Sheet CONFIDENTI
Slide 22: Size and Scale: Park ~2.5x the Size of Most Lodging REITs
1 Size and Scale: Park ~2.5x the Size of Most Lodging REITs(1) Upon spin, Park becomes a significant player as the second largest publicly traded Lodging REIT $18.0 Full Service $16.6 Mixed & Limited Service $16.0 Value range for Park $14.0 Enterprise Value ($ in billions) $12.0 $10.0 $10.0 $8.0 $8.
Slide 23: Size and Scale: Park will Rank Among the Top Largest REITs
1 Size and Scale: Park will Rank Among the Top 25 Largest REITs Park LTM Adjusted EBITDA vs. US REITs Universe(1) Top 25 Largest REITs(1) ($ in millions) ($ in millions) LTM Adj. Average Company Sector EBITDA 1. Simon Property Group, Inc. Malls $4,640 2. General Growth Properties, Inc. Malls $2,260
Slide 24: Overview of Top Assets: Landmark Resorts
2 Overview of Top 10 Assets: Landmark Resorts Hawaii Two landmark, oceanfront resorts catering to both domestic and international travelers in the group and transient business segments Hilton Hawaiian Village: Extensive renovations over the last 5 years totaling ~$200 million, from modernization o
Slide 25: Overview of Top Assets: Urban
2 Overview of Top 10 Assets: Urban Hilton San Francisco Union Square and Parc 55 hotels Hilton New York Midtown Adjacent hotels spanning 1.5 city blocks in San Francisco’s premier Union Premier NY conference hotel located in Square sub-market with ~3,000 rooms the heart of Midtown Extensive room a
Slide 26: Overview of Top Assets: Convention/Conference
2 Overview of Top 10 Assets: Convention/Conference Hilton Chicago Downtown Hilton New Orleans Riverside Hilton Orlando Bonnet Creek Premier convention hotel located on a Strategically located adjacent to 1,001-room conference hotel with 113k full city block in downtown Chicago convention center and
Slide 27: Iconic Assets Valued at Well Below Replacement Cost
2 Iconic Assets Valued at Well Below Replacement Cost Assuming a peer EBITDA multiple range(1), Park’s assets will likely be valued at a significant discount to replacement cost(2) $20.0 $18.5 $18.0 PK EV Range $8.0 bn $9.0 bn $10.0 bn $16.0 Top 10 Assets Portfolio Replacement $18.5 bn $18.5 bn $18.
Slide 28: Growth through Disciplined Capital Allocation
3 Growth through Disciplined Capital Allocation Focus on building portfolio of Upper Upscale and Luxury branded assets in Top 25 markets and premium resort destinations Pursue larger scale deals (assets and portfolios) that offer significant value add opportunities Diversify brand and operator mix t
Slide 29: Capital Allocation: Target Larger Scale Acquisitions
3 Capital Allocation: Target Larger Scale Acquisitions Market Backdrop for Deals of Scale Less competition exists on larger transactions as only a limited number of investors have access to equity needed to pursue $250+ million single assets Consequently, the share of deals pre-empted and execut
Slide 30: Brand Strategy Maximizes Revenue and Profitability
3 Brand Strategy Maximizes Revenue and Profitability Brands Matter: Park will focus on owning hotels and resorts in the luxury and upper upscale segments Benefits of Partnering with Brands Consistent quality through a branded product allows Park to achieve higher RevPAR and margins as a result of: W
Slide 31: Asset Management
Waldorf Astoria Orlando Asset Management CONFIDENTIAL | 31
Slide 32: Active Asset Management: Hands on Approach
4 Active Asset Management: Hands on Approach Approach Implementation Every Dollar Counts Hope is Not a Strategy Develop strong relationships with hotel operators through proactive communication Weekly calls with Top 25 hotel teams: Continuous improvement of property level Understand 90-day p
Slide 33: CapEx: Over $1bn Has Been Reinvested in Park Hotels
4 CapEx: Over $1bn Has Been Reinvested in Park Hotels Well-capitalized portfolio with ~$1.1 billion invested over the past 5 years to maintain competitive strength Historical Cumulative CapEx Spend(1) Capital Investment Overview $ in millions $1,088 Invested heavily to drive market share $864 $704
Slide 34: Future ROI Projects: New Orleans
4 Future ROI Projects: New Orleans Hilton New Orleans Riverside: Development Rights/Land Sale Hilton New Orleans Riverside 1,622 room hotel with 143,000 sq. ft. of meeting space Adjacent to the 1.1 million sq. ft. New Orleans Ernest N. Morial Convention Center (NOCC) – 7th largest in the US Oppo
Slide 35: Future ROI Projects: Hawaii
4 Future ROI Projects: Hawaii Hilton Hawaiian Village: Development Rights Rainbow Tower Hilton Hawaiian Village Ali’i Tower 22-acre oceanfront resort along Oahu’s Diamond Head prestigious Waikiki Beach Tower 2,860 rooms, nearly 145,000 sq. ft. of retail space, 20 restaurants and lounges, 5 pools
Slide 36: Future ROI Projects: Orlando
4 Future ROI Projects: Orlando Bonnet Creek: Development Rights Hilton Bonnet Creek and Waldorf Astoria Orlando The 1,001-room Hilton and the adjacent 498-room Waldorf Astoria Orlando feature a combined 147,000 sq. ft. of meeting space, a 3- acre Florida-style lazy river pool, a luxurious spa, a r
Slide 37: Strong and Flexible Balance Sheet
Hilton Chicago Strong and Flexible Balance Sheet CONFIDENTIAL | 37
Slide 38: Strong and Flexible Balance Sheet
5 Strong and Flexible Balance Sheet Pro Forma Debt Capital Structure Overview(1) Pro Forma Debt Capital Structure(1) % of Weighted Avg. Debt $ Amount Total Cost of Debt CMBS (secured) $ 2,000 66% 4.2% (2) Term Loan A (unsecured) 750 25% 2.1% Consolidated JV Debt (secured) 207 7% 3.9% Floating Other
Slide 39: Strong and Flexible Balance Sheet
5 Strong and Flexible Balance Sheet Pro Forma Debt Maturity Schedule(1) ($ in millions) WA Fixed Rate - 7.50% - - 3.55% - - 4.11% - - 4.20% Maturing Debt WA Floating Rate - - - - - 2.09% 2.89% - - - - Maturing Debt Weighted average maturity of almost eight years No meaningful maturities within t
Slide 40: Investment Summary: Why Park Hotels & Resorts?
Investment Summary: Why Park Hotels & Resorts? Iconic, irreplaceable assets with significant embedded value; replacement cost is estimated at $18.5bn or $525,000 per key Scale and Iconic Portfolio is well insulated from supply pressures, facing just 2.2% supply growth per annum Real Estate ove
Slide 41: Appendix
Hilton New York Midtown Appendix CONFIDENTIAL | 41
Slide 42: Iconic Assets Valued at Well Below Replacement Cost
Iconic Assets Valued at Well Below Replacement Cost Top 10 Assets Overview Meeting Replacement Hotel Rooms Space Cost (/ key) (3) Description Hilton Hawaiian Village 2,860 96,000 $2.9bn 22-acre oceanfront resort along Waikiki Beach, with 145,000 Honolulu, Hawaii (sq. ft.) ($1.0mn/key) sq. ft. of ret
Slide 43: Pro Forma Adjusted EBITDA
Pro Forma Adjusted EBITDA FYE FYE FYE LTM ($ in millions) 2013 2014 2015 2016 GAAP Net Income $ 147 $ 181 $ 299 $ 191 Interest income (2) (1) (1) (1) Interest expense 162 186 186 188 Income tax expense 104 117 118 84 Depreciation and amortization expense 246 248 287 295 Interest, income tax and depr
Slide 44: Funds from Operations
Funds from Operations Historical Hotels Spin-off and Financing Pro Forma ($ in millions) LTM Disposed of (1) Adjustments (2) LTM Net income attributable to Parent $ 184 $ 16 $ 80 $ 280 Depreciation and amortization expense 295 (1) - 294 Impairment loss 15 (15) - - Gain on sales of assets, net (1) 1
Slide 45: Historical Operating Results – Consolidated Hotels
Historical Operating Results – Consolidated Hotels The following table presents the historical operating results of the Consolidated Hotels (1): 2015 2016 2011A 2012A 2013A 2014A LTM ($ in millions) Q1A Q2A Q3A Q4A FYE Q1A Q2A Q3A Room Count 30,624 30,639 30,660 30,676 30,627 30,627 30,631 30,612 30
Slide 46: Historical Operating Results – Top 10 Hotels
Historical Operating Results – Top 10 Hotels The following table presents the historical operating results of the Top 10 properties (1) as measured by 2015 Hotel EBITDA: 2015 2016 2011A 2012A 2013A 2014A LTM ($ in millions) Q1A Q2A Q3A Q4A FYE Q1A Q2A Q3A Room Count 13,978 13,980 13,981 13,996 13,94
Slide 47: Historical Operating Results – Other
Historical Operating Results – Other Pro Forma Unconsolidated Joint Venture EBITDA Bridge from Corporate G&A to Corporate Expense and Other 2015A YTD (2) LTM ($ in millions) 2015 LTM ($ in millions) Pro Forma Unconsolidated JV EBITDA (9 hotels) (1) $ 46 $ 45 Corporate G&A Expense $ 45 $ 35 $ 44 Adju
Slide 48: Pro Forma Debt Profile and Pro Forma Capitalization
Pro Forma Debt Profile and Pro Forma Capitalization Pro Forma Debt Profile ($ in millions) Tranche Amount Maturity Rate Amortization (1) Senior Unsecured Revolver $1,000 (undrawn) 5 years L+1.50% Interest only (1) Senior Unsecured Term Loan A $750 5 years L+1.45% Interest only CMBS Loan - HHV $1,275
Slide 49: Reconciliations
Hilton Hawaiian Village Hilton Waikoloa Village Reconciliations 1
Slide 50: Reconciliation – GAAP Net Income to Pro Forma Ownership EBITDA
Reconciliation – GAAP Net Income to Pro Forma Ownership EBITDA FYE FYE FYE FYE FYE LTM ($ in millions) 2011 2012 2013 2014 2015 2016 GAAP Net Income $ (44) $ 59 $ 147 $ 181 $ 299 $ 190 Other revenue (10) (10) (10) (10) (13) (14) Impairment loss 5 23 - - - 15 Depreciation and amortization expense 239
Slide 51: Reconciliation – Pro Forma Hotel Adjusted EBITDA to Ownership EBITDA
Reconciliation – Pro Forma Hotel Adjusted EBITDA to Ownership EBITDA FYE FYE FYE FYE FYE LTM ($ in millions) 2011 2012 2013 2014 2015 2016 Pro forma Hotel Adjusted EBITDA $ 477 $ 551 $ 662 $ 753 $ 780 $ 763 (1) Add: Adjusted EBITDA from hotels disposed of 58 54 64 67 (2) 1 Spin-off adjustments (2) 5
Slide 52: Reconciliation – Pro Forma Total Portfolio Revenue to Total GAAP
Reconciliation – Pro Forma Total Portfolio Revenue to Total GAAP Revenue and Pro Forma Hotel Adjusted EBITDA Margin FYE FYE FYE FYE FYE LTM ($ in millions) 2011 2012 2013 2014 2015 2016 Pro forma Total Portfolio Revenue (1) $ 2,230 $ 2,358 $ 2,516 $ 2,707 $ 2,840 $ 2,855 Less: Pro rata share from Un
Slide 53: Defined Terms
Defined Terms LTM Last twelve months as of September 30, 2016, unless stated otherwise Replacement Cost Replacement cost is the cost of developing a property similar to the subject property and includes the following elements: land value; building construction cost; furniture, fixtures, and equipmen