ACQUISITION & MANAGEMENT
HILTON GREENVILLE
Greenville, SC
The Hilton hotel is located in Greenville, SC and is comprised of a nine-story tower situated on more than seven acres. The property consists of 256-keys, 14,000 square feet of meeting space, an indoor heated pool, fitness center, business center, and a full-service restaurant.
The hotel was constructed in 1987, and just prior to Urbana’s purchase, the property had completed a $3.2 million ($12,500 per key) renovation that focused on public areas, meeting space, and a refresh to the guest rooms. Located along I-385, minutes from the I-85/I-385 interchange, and only four miles from downtown Greenville, the property is in close proximity to major corporate demand generators such as IBM, General Electric, Flour, Hubbell, Michelin, BMW, Kemet, Verizon, and Charter Communications.
Additional demand generators include weekend SMERF oriented group business. Leisure demand is generated by nearby Clemson and Furman universities, as well as weekend visitors seeking to spend time in trendy downtown Greenville without having to incur the cost of the more expensive downtown hotels.
-
256 well-appointed smoke-free guest rooms.
-
The Concierge Floor features private elevator access.
-
Palmetto and Piedmont Ballrooms
-
12,000 square feet of flexible meeting
-
Banquet space for groups of up to 500 people.
-
Two outstanding food and beverage outlets.
-
On-site A/V staff and Corporate Catering Manager.
INVESTMENT SUMMARY
Due largely in part to favorable macroeconomic conditions as a result of pro-growth policies in the state of South Carolina, and a robust regional market in Greenvilledue to it having a large corporate presence, Urbana acquired the Hilton Greenville in October of 2013. Attempting to capitalizeon what it viewed at the time as a strengthening in the group/ corporatesegments, Urbana viewed this Hilton property as being ideal because of the property’s existing meeting space, its location, and Urbana’sexperience in the group sector.
Further, success in capturing more group and corporate base business would in turn allow for an increase in the transient segment average daily rates. The 256 key property was purchased for $16.75 million ($65,000 per key) with approximately $6.1million of equity and a $13.4 million debt facility.
INVESTMENT CHALLENGES
Project Improvement Plan(“PIP”).Even though the property had undergone a recent and fairlyextensiverenovation project ($3.2 millionor $12,500 per key) before Urbana’s purchase, Hilton required an additional PIP with the change in ownership(“COO”). Budgeted at nearly $1.3 million (or nearly $5,000 per key), major renovation work included an entire repaving of the property’s parking lot, enhancing existing and creating additional meeting space, upgrades to the fitness center in terms of equipment and painting, and betterment of guestrooms in terms of enhancements to case goods, windowtreatments, granite thresholds, mattress and box spring replacements, etc.
ACTION PLAN
Drive Rate Through Increasing Group Demand-Urbana’s principal strategy for the Hilton Greenville was to drive rate by increasing group and corporate demand,which would in turn drive transient rate as well. A strategy that proved to be successful as the Trailing Twelve MonthAverage Daily Rate (“ADR”) at the end of 2013 (a few months after purchase)was$103.64as compared to $128.33at time of sale in September of 2018. This was a 24% increase and demonstrates the effect Urbana’s execution of the PIP plan and group/corporate business strategy had on the success of the hotel.Hand in hand with theincrease in ADR, revenue per available room (“REVPAR)increased from $74.50 at the time of purchase to $85.15 at the time of sale.
OUTCOME
The successful execution of its ADR strategy combined with other operating improvement initiatives resulted in the property’s Income Before Fixed Charges margin increasing from 28% at the time of acquisition to 31% at the time of sale.
PERFORMANCE METRICS
Urbana sold the Hilton Greenville in Septemberof 2018for $30,750,000, or $120,000 per keyyielding (to total equity) an Internal Rate of Return of 39% and a Capital Return Multiple of 3.90x.