NEW YORK, June 24, 1998 - LaSalle Hotel Properties (NYSE: LHO) today announced the acquisition of the Harborside Hyatt Conference Center Hotel in Boston from Bird Island Limited Partnership for $73.5 million. Hyatt Hotels Corporation will continue to operate the property according to an existing management agreement.
This is the second hotel acquisition since the company's initial public offering on April 23, bringing total acquisitions since the IPO to $146.5 million.
"Due to the current and projected strength of the Boston hotel market, the demand for rooms, and the high barriers to entry, this hotel fits our strategy of acquiring upscale and luxury properties in urban, resort and convention markets with sustained high growth," said Jon E. Bortz, LaSalle Hotel Properties' President and Chief Executive Officer. "While there have been recent reports about significant increases in the supply of hotels in the U.S., this is not the case in the markets in which we are focused. Urban, convention and resort markets continue to see little new supply with significant lead times for future additions."
The Harborside Hyatt, a full-service luxury conference center and airport
hotel, opened in 1993. Located adjacent to Boston's Logan International
Airport along the waterfront, the Harborside Hyatt features 19,000 square
feet of meeting space, the Harborside Grill restaurant, the Midships Lounge,
a tented pavilion, an indoor swimming pool, a health club, and dramatic
views of Boston from guest rooms and public spaces. The hotel is directly
across the harbor from Boston's central business district and next to the
Ted Williams tunnel, providing convenient access to downtown Boston, the
World Trade Center, the future convention center, and the Massport
Water Shuttle, a ferry service to Rowe's Wharf.
The Harborside Hyatt demonstrated extremely strong performance gains in 1997 from 1996, with average daily rate (ADR) growing by 21.2 percent to $186.97 from $154.26, occupancy declining to 72.4 percent from 76.8 percent as rate growth was emphasized, and room revenue per available room (RevPAR) increasing 14.3 percent. This strong performance has continued through the first five months of 1998, with the Harborside Hyatt's ADR increasing to $195.12 in the first five months of 1998 from $171.45 in the same period of 1997, 67.8 percent occupancy in 1998 versus 68.8 percent in 1997, and RevPAR increasing 12.2 percent to $132.29 from $117.91. According to Landauer Associates, Boston's hotel market achieved 80.1 percent occupancy in 1997 versus 78.7 percent for the same period in 1996, and had an ADR in 1997 of $164.11 versus $146.46 in the same period of 1996, representing a 12.1 percent increase. RevPAR in Boston rose by 14.0 percent to $131.45 from $115.26 in 1997 according to Landauer Associates.
"The performance of the Harborside Hyatt mirrors the strength of the
overall LaSalle Hotel Properties portfolio. In the first quarter 1998,
the portfolio's RevPAR increased 9.4 percent from the same period in 1997,"
said Mr. Bortz. Boston is a high growth market with significant barriers
to entry resulting primarily from the length of time for approvals from
the Boston Redevelopment Authority, limited land availability, and restrictions
on other hotels near Logan International Airport. The city is currently
under-supplied with hotel rooms to serve its more than nine million visitors
annually and has plans for a new convention center and modernization of
Logan Airport. According to the Boston Redevelopment Authority, Boston
needs 2,044 more hotel rooms to meet the current
demand and another 1,485 between 1998 and 2002. In addition, the planned convention center development will generate a need for approximately 3,800 hotel rooms.
The international terminals at Logan International Airport will undergo a major overhaul as part of the Logan 2000 project targeted for completion in 2004. The airport is the nation's 17th busiest with over 25 million passengers in 1997. It currently is served by 51 airlines, including 14 major U.S. carriers and 15 international flag carriers. The hotel is subject to a long term ground lease from Massport, Logan International Airport's owner and operating authority. As part of the $73.5 million purchase price, LaSalle Hotel Properties will assume $40 million of existing tax exempt industrial revenue bonds with an interest rate of 10 percent, with the ability to prepay the bonds as early as 2001. Also as part of the purchase, LaSalle Hotel Properties will receive an existing approximately $1.5 million capital expenditure reserve that can be used for future capital needs as required, and a $4 million deposit held by State Street Bank as trustee for securing the quarterly bond payments. In order to accommodate the purchase and management agreement, the hotel will be leased by LaSalle Hotel Lessee, Inc.
"Hyatt is renowned worldwide as one of the finest hotel brands and operators
in the upscale and luxury segments, providing consistent quality and high
levels of customer service," said Mr. Bortz. "LaSalle's new relationship
with Hyatt underscores our commitment as a multi-operator REIT to acquire
hotels and establish strategic relationships with many premier hotel management
companies. LaSalle Hotel Properties is pleased to be developing a relationship
with Hyatt, the seventh hotel operator in our portfolio and second new
operator since our initial public offering. With Boston's Harborside Hyatt
Conference Center and Hotel and the recent
acquisition of the renamed San Diego Paradise Point Resort, formally the San Diego Princess Resort, we are well on our way to meeting or exceeding our 1998 acquisitions target."
Doug Geoga, President of Hyatt Hotels, said, "Hyatt is looking forward to working with a company of the caliber and reputation of LaSalle Hotel Properties, and I expect this relationship to be beneficial for both companies and to grow over time."
Hyatt Hotels Corporation is a $3.4 billion revenue company that manages 92 hotels and 16 resorts in the United States, Canada, and the Caribbean, reflecting the local color, environment, and culture of their surroundings. The Hyatt has long been regarded as a leader in the creation of innovative products for business, group and leisure customers. Hyatt offers a unique array of products and services including Meeting Connection, the industry's most comprehensive small meeting services program; Meeting Dividends, which awards bonus points to meeting planners; and a new partnership program with the Professional Convention Management Association (PCMA) to certify Hyatt convention services personnel as expert meeting consultants.
LaSalle Hotel Properties is a leading multi-tenant, multi-operator real estate investment trust which, with the purchase of the Harborside Hyatt Conference Center Hotel, owns 12 upscale and luxury full-service hotels totaling 4,111 guest rooms in nine states. The company seeks to grow through strategic relationships with premier recognized hotel operating companies including Le Meridien Hotels Resorts, Marriott International, Inc., Radisson Hotels International, Inc., Durbin Companies, Outrigger Lodging Services, Noble House Hotels Resorts, and Hyatt Hotels.
LaSalle Hotel Properties is focused on acquiring upscale and luxury full- service hotels located primarily in major business and urban, resort and convention markets. The REIT serves as the exclusive vehicle for LaSalle Partners' hotel investment activities in the United States. Founded in 1968, LaSalle Partners Incorporated (NYSE: LAP) is a leading vertically integrated global real estate services firm providing management services, corporate andfinancial services, and investment management services for public and private institutions and other real estate owners and investors worldwide.
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