BETHESDA, MD. — RLJ Lodging Trust (NYSE: RLJ) has entered into a definitive purchase agreement with Hyatt Hotels Corp. (NYSE: H) to acquire a portfolio of 10 hotels totaling 1,560 rooms. A Hyatt affiliate will continue to manage the hotels under new management agreements.
The portfolio, which is located primarily on the West Coast, is expected to be acquired for a total purchase price of approximately $313 million. RLJ, a publicly traded hotel real estate investment trust (REIT), intends to spend approximately $25 million in capital expenditures across the portfolio, the majority of which will be invested over the next 24 months.
“We are excited about expanding our strategic relationship with Hyatt and increasing our presence on the West Coast,” says Thomas Baltimore, Jr., president and CEO of RLJ Lodging Trust. “Once completed, we will have acquired almost $900 million of assets since our IPO. This deal will be immediately accretive to the portfolio and will reinforce our stated goal of becoming the aggregator in this segment.”
The portfolio consists of young, high-performing and well-situated properties, the majority of which were acquired by Hyatt in 2011. The hotels include:
· The 142-room Hyatt House Cypress/Anaheim in Cypress, Calif.
· The 234-room Hyatt House Emeryville/SF Bay Area in Emeryville, Calif.
· The 151-room Hyatt Place Fremont/Silicon Valley in Fremont, Calif.
· The 193-room Hyatt House San Diego/Sorrento Mesa in San Diego
· The 164-room Hyatt House San Jose/Silicon Valley in San Jose, Calif.
· The 142-room Hyatt House San Ramon in San Ramon, Calif.
· The 150-room Hyatt House Santa Clara in Santa Clara, Calif.
· The 70-room Hyatt Market Street, The Woodlands in The Woodlands, Texas
· The 163-room Hyatt House Charlotte/Center City in Charlotte, N.C.
· The 151-room Hyatt Place Madison/Downtown in Madison, Wis.
“This transaction demonstrates the value from asset recycling. We were able to successfully convert hotels in key markets to Hyatt brands and sell these hotels to a high-quality owner while maintaining long-term presence in key markets,” says Steve Haggerty, global head of real estate and capital strategy for Hyatt. “We are delighted to deepen our relationship with the team at RLJ Lodging Trust and look forward to future collaboration with them.”
With the addition of this portfolio, RLJ will more than double its hotel earnings before interest, taxes, depreciation and amortization (EBITDA) on the West Coast. The portfolio will represent more than 7 percent of RLJ’s projected 2013 hotel EBITDA and more than 7 percent of its total enterprise value.
RLJ estimates that the portfolio’s 2013 aggregate revenue per available room (RevPAR) will be greater than $120. The company also expects more than half of the hotels to be among the REIT’s top 50 EBITDA contributors.
RLJ will fund the acquisition through a combination of cash on hand, its undrawn revolving credit facility and debt financing.
With the addition of the portfolio, RLJ will own 160 properties, consisting of 158 hotels with approximately 24,000 rooms and two planned hotel conversions, located in 24 states and Washington, D.C.
RLJ’s stock price closed at $24.12 per share on Feb. 7, up from $21 per share this time last year.
Hyatt Hotels Corp.’s stock price closed at $48.30 per share on Feb. 7, up from $41.59 per share this time last year.
The portfolio acquisition is expected to be completed in March and is subject to customary closing conditions.
— John Nelson