RLJ Lodging Trust has acquired the fee-simple interest in the recently constructed 205-room AC Hotel by Marriott Boston Downtown for a purchase price of $89 million, or approximately $434,000 per key.
The purpose-built hotel opened in 2018 as part of the mixed-use Ink Block development in Downtown Boston. Upon stabilization, the hotel is expected to generate 7.5 percent to 8 percent net operating income yield. The company funded the acquisition with existing cash on its balance sheet.
“We are confident that the addition of this hotel will enhance our portfolio’s growth profile throughout this cycle and fits our investment thesis of buying premium-branded hotels within growth markets,” President and CEO Leslie Hale said. “This off-market acquisition also demonstrates our team’s ability to source attractive opportunities at discounts to both replacement cost and pre-COVID pricing. Our strong balance sheet positions us extremely well to continue to pursue additional external growth opportunities.”
As the only hotel in the four-phase Ink Block development, the site of the former Boston Herald headquarters, the property is positioned to benefit from the significant growth of office and life science laboratory space in the immediate area.
As of the second quarter of 2021, approximately 4 million square feet of office space and 1.7 million-sq-ft of laboratory space was under development within close proximity to the property. The hotel is also poised to benefit from its proximity to Tufts Medical Center and Boston Medical Center. The Ink Block development is adjacent to the fast-developing Seaport District, which is home to a diverse base of corporate demand generators including Amazon, General Electric, Gillette, Reebok, PwC, Roche, Fidelity, AstraZeneca, and Vertex.
Boston as a city benefits from significant inbound domestic and international travel, with Boston’s Logan International Airport experiencing record-breaking volume of 42.5 million passengers in 2019. Anchored by two large convention centers, Boston is a top destination for group events and also benefits from leisure demand associated with major sporting events.