RLJ Lodging Trust's asset roll just got a whole lot bigger. The Bethesda, Md.-based real estate investment trust has entered into a definitive purchase and sale agreement with Hyatt Hotels Corp. to acquire 10 hotels totaling 1,560 rooms consisting of Hyatt, Hyatt Place and Hyatt House hotels. The purchase price is approximately $313 million, and it is expected that RLJ will spend an additional $25 million in capital expenditures.
A Hyatt affiliate will continue to manage the hotels under new management agreements.
“We are excited about expanding our strategic relationship with Hyatt and increasing our presence on the West Coast,” said Thomas J. 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.”
For Hyatt, it allows them to hold onto management contracts while disposing of assets. “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,” said Steve Haggerty, global head, 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.”
The hotels are:
Hyatt House Cypress / Anaheim
Hyatt House Emeryville / SF Bay Area
Hyatt Place Fremont / Silicon Valley
Hyatt House San Diego / Sorrento Mesa (pictured)
Hyatt House San Jose / Silicon Valley
Hyatt House San Ramon
Hyatt House Santa Clara
Hyatt Market Street, The Woodlands
Hyatt House Charlotte / Center City
Hyatt Place Madison / Downtown
RLJ has been on a buying binge of late. In the past year it acquired the SpringHill Suites in Oregon, a Residence Inn in Atlanta, a the Vantaggio Suites Cosmo in San Francisco, which it will reflag a Courtyard, and the Courtyard in Waikiki, which it acquired for $75.3 million.
One of its larger acquisitions to date was the Courtyard by Marriott on New York's Upper East Side (92nd Street), which it paid $82 million for.
The addition of the Hyatt portfolio will reportedly more than double RLJ's EBITDA on the West Coast. The Hyatt portfolio will represent more than 7 percent of RLJ’s projected 2013 hotel EBITDA and more than 7 percent of its total enterprise value.
The REIT estimates that the Hyatt portfolio's 2013 aggregate RevPAR will be greater than $120, which is more than a 10-percent premium to RLJ’s projected RevPAR for 2013.
The transaction is expected to be completed in March 2014. RLJ expects to fund the acquisition through a combination of various financial resources available for use, including but not limited to cash on hand, its undrawn revolving credit facility, and debt financing.
The expected 10-hotel addition would push RLJ's total portfolio to 160 properties owned, consisting of 158 hotels with approximately 24,000 rooms.