Innkeepers USA Trust Acquiring from an Affiliate of RLJ
Four California Hotels for $215 million, or $231,000 per room
|PALM BEACH, Fla., July 27, 2006—Innkeepers USA Trust (NYSE: KPA), a
hotel real estate investment trust (REIT), today announced that it has
entered into an agreement to acquire from Bethesda, Md.- based RLJ
Urban Lodging Fund, L.P., an affiliate of RLJ Development, LLC, four hotel
properties with 931 rooms in Southern California for a total cost of $215
million, or $231,000 per room.
The company expects to fund the acquisition with borrowings under its unsecured line of credit and the issuance of approximately $165.0 million in non-recourse debt at a weighted average interest rate of approximately 6.25 percent, including the assumption of $13.7 million of debt. After the acquisition, the company estimates that its debt to total investment in hotels at cost will be approximately 40 percent, without regard to any future borrowings or equity offerings.
Innkeepers Hospitality Management, which is owned by Jeffrey H. Fisher, chief executive officer of Innkeepers USA Trust, will manage the hotels under long-term management agreements. The acquisition, which is expected to close in the 2006 third quarter, is subject to a number of customary contractual closing conditions.
The four hotels are being acquired at a net operating income (NOI) capitalization
rate of approximately 7 percent on projected 2007 net operating income
and a multiple of approximately 12.5 times projected 2007 earnings before
interest, taxes, depreciation and amortization (EBITDA).
“This transaction combines one of the most dynamic regional lodging markets in the U.S. with strongly performing hotels, affiliated with two of the best-performing and most desirable brands among hotel investors—Residence Inn by Marriott and Hilton,” Fisher said. “The addition of these properties to our portfolio further diversifies our distribution throughout the state; marks our initial entry into San Diego, one of the very best and highest-barriers-to-entry hotel markets in the country; establishes a significant footprint in the desirable Anaheim market; and bolsters our existing presence in the fast growing Ontario market.
“With this acquisition, we are also furthering our strategy of opportunistically acquiring full-service hotels. Perhaps more important, this transaction gives us the opportunity to acquire a unique mix of high-quality, profitable, full-service and extended-stay hotels on a portfolio basis at an attractive price, with upside potential.
“Southern California remains one of the nation’s most sought-after locations for real estate investment,” he added. “Business and leisure travel to the region remains robust, with Smith Travel reporting revenue per available room (RevPAR) growth for all hotels in Southern California of 11-plus percent in 2005 and 9.3 percent in 2006 through June. Each of these properties is in an outstanding location in its respective market, which we believe will provide us an advantage over current and future competition.”
The two Residence Inns are upscale, interior-corridor, all-suite buildings that opened in 2003. “No expense was spared in creating high-quality, upscale extended-stay properties that are among the best in the entire Residence Inn chain. The Hilton and Hilton Suites also are in excellent physical condition, with the sellers indicating that they have made $12.5 million in capital improvements in the last five years, equivalent to $23,100 per room. The renovation of the Hilton Ontario should be completed later this year. We have budgeted approximately $2.0 million for additional upgrades that may be required by franchisors as a result of the transfer. All four properties are well-positioned to take advantage of the expected aggressive average rate growth in their respective markets.”
Fisher noted that the company will continue to seek acquisition
and development opportunities that achieve high shareholder returns, with
the primary focus remaining premium-branded upscale extended-stay and select-service
hotels, the core of the company’s portfolio; selected full-service hotels;
and turn-around opportunities for hotels that operate under or can be converted
to the industry’s leading brands.
This press release, and other publicly available information on the Company, includes forward looking statements within the meaning of federal securities law.
|Also See:||The 80-room Bulfinch Hotel in Downtown Boston Acquired for $19.6 million by Innkeepers USA Trust / November 2005|
|Privately held RLJ Development, LLC Acquiring 100 Hotels from White Lodging Services Corporation for Approximately $1.7 billion / February 2006|