Deutsche Bank Mexico, S.A., Banking institution, Trust Division F/1616 or Fibra Inn, a Mexican real estate investment trust specializing in the hotel industry serving the business traveler with international brands, announced its decision to exercise its call option to purchase the Staybridge Suites Guadalajara Expo and Arriva Express Guadalajara Plaza del Sol Expo hotels, located in the state of Jalisco.
Staybridge Suites Guadalajara Expo
The acquisition price will be Ps. 133.6 million, plus Ps. 4.7 million that will be used for taxes and acquisition-related expenses. Additionally, the company has budgeted Ps. 8.9 million for property improvements. Fibra Inn’s corporate governance bodies approved the purchase of this property at a 9.54 percent projected cap for the 2015 end-period. The hotel operates 117 rooms in the extended stay segment and Fibra Inn will be in charge of the operation of the hotel.
Staybridge Suites is an IHG international chain brand and will be the 13th international brand in Fibra Inn’s portfolio. With this acquisition, Fibra Inn enters the extended-stay segment, a segment that is not highly developed in the Mexican market, a new business area which it had been considering for a long time, in order to broaden the customer service options for the business traveler. This segment has great growth potential, since there is already an existing business traveler profile that requires lodging for periods exceeding five days, for several weeks or even months. The rooms have lower operating costs compared to hotels with higher guest turnover; which makes profitability margins attractive.
The Staybridge Suites Guadalajara Expo has 73.5 percent occupancy levels, an average daily rate of Ps. 1,097.4 and a RevPAR of Ps. 806.6 for the accumulated January to May 2015 period.
Arriva Express Guadalajara Plaza del Sol Expo
The acquisition price will be Ps. 141.4 million, plus Ps. 4.9 million that will be used for taxes and acquisition-related expenses. Additionally, the Company is considering a brand name change, to be defined in 2016, as well as the conditioning of 15 additional rooms, for which the Company has budgeted Ps. 38.0 million. Fibra Inn’s corporate governance bodies approved the purchase of this property at a 10.23 percent projected cap rate for the 2017 period. The hotel will have a total of 181 rooms, of which 166 are currently under operation. This is a select service segment property and will be operated by Fibra Inn.
The Arriva Express Guadalajara Plaza del Sol Expo has 44.3 percent occupancy levels, an average daily rate of Ps. 774.6 and a RevPar of Ps. 343.1 for the accumulated January to May 2015 period.
Payment for both properties, which reached Ps. 284.6 million plus corresponding VAT expenses, will be made using available funds from the bank credit line.
Oscar Calvillo, Fibra Inn’s Chief Executive Officer, stated: “The acquisition of these two properties consolidates our leadership position in the city of Guadalajara; with presence in all of the relevant market segments of this city. Furthermore, with the inclusion of Staybridge Suites to Fibra inn’s portfolio we penetrate a fourth market segment, that of extended stay, which has enormous growth potential in Mexico within hotel services serving business travelers with excellence.”
The business fundamentals employed by Fibra Inn for the acquisition of these hotels are the following:
- Location: Guadalajara is the second-largest metropolis in Mexico. Its strategic location in the western part of the country, near the Bajio region, gives it a competitive advantage due to its proximity to the most active industrial cities with a significant population density. These properties are located near the Expo Guadalajara; the most recognized venue for meetings and conventions in the country, which has generated historic records in terms of occupancy and attendance in recent years.
- Diversified Industry: This city’s economy is supported by a large number of technology, manufacturing and corporate companies in the region, including: IBM, Continental Automotive, GAP, Sanmina, Flextronics, Honda, Nestlé, Hewlett Packard, Gruma and Cemex.
- Group Demand: Currently, there is demand from groups and meetings during the weekends from both domestic and international travelers.
- Hotel Demand: There exists a large demand for hotel rooms, divided between various sectors and serviced by a large number of domestic and international hotel chains.
- Potential Industry: The Creative Digital City project is geared towards creating and strengthening the digital design, software, cinema and video games industry. This project is expected to generate approximately 20,000 new jobs in the next 15 years and will attract international companies to the area.
With these acquisitions, Fibra Inn has a portfolio of 35 hotels in operation (including Staybridge Suites Guadalajara Expo and Arriva Express Guadalajara Plaza del Sol Expo under agreement) and two hotels under development, with a total of 6,238 rooms; 531 of these are currently under construction.