Strategic Hotels & Resorts Enters Into a $450
Million Joint Venture on
the Intercontinental Chicago and the Hyatt Regency La
CHICAGO, May 31, 2007 - Strategic Hotels & Resorts (NYSE: BEE) announced
today that it has entered into a joint venture agreement with GIC Real
Estate Pte Ltd (GIC RE), the real estate investment company of the Government
of Singapore Investment Corporation Pte Ltd. Under the terms of the agreement,
GIC RE's affiliate will acquire a 49 percent interest in the company's
InterContinental Chicago and Hyatt Regency La Jolla hotels and the joint
venture will enter into long term asset management and other services agreements
with Strategic Hotels & Resorts. The transaction, with a gross aggregate
value of $450 million, is expected to close during the third quarter.
Both hotels will be held in a joint venture arrangement for which Strategic
Hotels & Resorts will serve as asset manager under a long term asset
management agreement. The company will hold a 51 percent interest and GIC
RE will hold the remaining 49 percent interest. Strategic Hotels &
Resorts will receive asset management fees in addition to various other
fees for its services under the agreement. The company had previously expected
the hotels to produce approximately $34.5 million in combined property
EBITDA for 2007. Including the aforementioned fees, the company's disposition
of the 49 percent interest represents an effective 2007 EBITDA multiple
of 14x. In addition, the agreement provides the company with longer term
operating and capital incentive arrangements.
Laurence Geller, President and Chief Executive Officer, commented,
"We are delighted to forge this partnership with GIC Real Estate, an organization
with whom we have a decade long, successful relationship in a myriad of
formats. They have been our partners in owning European hotels and both
lenders and equity investors in our predecessor company (prior to becoming
a publicly listed NYSE entity). We look forward to a continued expansion
of this fruitful relationship with similar such long term arrangements
in conjunction with a globally oriented partner who has complementary objectives
and philosophies to our own.
"This transaction exemplifies one of our stated strategies of seeking
partial liquidity for assets that have reached the mature phase of their
life cycle, while allowing us to benefit from further cyclical upside,
identified longer term redevelopment opportunities, a recurring stream
of fee income and incremental profit sharing opportunities. In addition,
the opportunity to earn recurring asset management and incentive fees is
an extension of our business which provides value enhancing asset management
systems and services to current and future partners.
"We are pleased with the increases in value created by our successful
asset management strategies at both of these properties. Given the gross
value of $450 million for this transaction, we have achieved a combined
unleveraged internal rate of return in excess of 30 percent during the
company's ownership of the Hyatt Regency La Jolla as a public company and
the InterContinental Chicago since its acquisition approximately two years
The 792-room InterContinental Chicago, located in the heart of the
Magnificent Mile shopping district, is an historic luxury property in the
third most populated metropolitan area in the nation. The hotel consists
of two towers, the 42-story historic tower and the 26-story main tower,
and features 42,000 square feet of function space, including six historic
ballrooms and 30 state-of-the-art meeting rooms. The InterContinental Chicago
also features Strategic Hotels & Resorts' proprietary wine room concept,
ENO, which is the second of eight planned locations within the United States.
Further enhancements are currently underway at the property, including
the addition of a Starbucks franchise on Michigan Avenue, a new location
for the Zest restaurant in previously non income generating public space
and additional meeting space converted from a portion of the Zest restaurant's
previous location. The company acquired an 85 percent controlling interest
in the asset in April 2005 as part of a joint venture with the previous
owner and had subsequently increased its ownership to 100 percent.
The 419-room Hyatt Regency La Jolla, located in San Diego's upscale
resort community of La Jolla, known as the "Jewel of the Pacific," is an
architectural masterpiece inspired by Michael Graves. The property features
more than 34,000 square feet of flexible function space, a popular collection
of food and entertainment outlets, including the well renowned Cafe Japengo,
the 32,000 square foot atrium style Sporting Club and Spa, an Olympic-size
lap pool and an array of business and leisure services and amenities.
About the Company
Strategic Hotels & Resorts, Inc. is a real estate investment trust
(REIT) which owns and asset manages high-end hotels and resorts. The company
has ownership interests in 20 properties with an aggregate of 10,033 rooms.
For further information, please visit the company's website at http://www.strategichotels.com.
This press release contains forward-looking statements about Strategic
Hotels & Resorts (the "Company"). Except for historical information,
the matters discussed in this press release are forward-looking statements
subject to certain risks and uncertainties.