BETHESDA, MD—Hyatt Hotels Corporation affiliates have entered into a definitive purchase and sale agreement for RLJ Lodging Trust (RLJ) to acquire a portfolio of 10 hotels totaling 1,560 rooms. A Hyatt affiliate will continue to manage the hotels, which consist of Hyatt, Hyatt Place and Hyatt House hotels, under new management agreements.
The Hyatt portfolio, which is located primarily on the West Coast, is expected to be acquired for a total purchase price of approximately $313 million. RLJ intends to spend approximately $25 million in capital expenditures across the Hyatt 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,” stated 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.”
Steve Haggerty, global head, real estate and capital strategy for Hyatt, said in a statement, “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. We are delighted to deepen our relationship with the team at RLJ Lodging Trust and look forward to future collaboration with them.”
The hotels, the majority of which were acquired by Hyatt in 2011, will immediately increase RLJ’s West Coast presence, particularly in California where the company is currently seeking to grow its presence. 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 remaining hotels are located in dense premier markets with multiple demand generators.
The Hyatt portfolio will represent more than 7% of RLJ’s projected 2013 Hotel EBITDA and more than 7% of its total enterprise value. RLJ estimates that the Hyatt portfolio’s 2013 aggregate RevPAR will be greater than $120, which is more than a 10% premium to RLJ’s projected RevPAR for 2013. Also, more than half of the hotels are expected to be added to RLJ’s top 50 EBITDA contributors.
The transaction is expected to be completed in March 2014 and is subject to customary closing conditions. RLJ made a $10-million non-refundable deposit upon execution of the purchase agreement.