The purchase includes two Courtyards and three Residence Inns. The Courtyards include a 78-room hotel in Asheville, NC and a 105-room hotel in Athens, GA, for $12.7 million. The Residence Inns include a 76-suite hotel in Chattanooga, TN, a 78- suite hotel in Knoxville, TN and a 66-suite hotel in Savannah, GA, for $22.9 million. The average age of these five properties is approximately seven years. The transaction was executed at an average cap rate of 10% on a trailing twelve-month cash flow basis.
As part of the acquisition, McKibbon Hotel Management, Inc. will continue to manage the hotels with incentive-based management contracts. McKibbon currently manages 37 hotels in seven states, primarily Marriott Courtyards and Residence Inns. The transaction is expected to close during the second quarter of 2004.
Equity Inns CEO/chairman Phillip McNeill says the company's strategy is to buy up assets in the upscale segment and generate additional value from the assets over time. "Our strong balance sheet enables us to constantly upgrade our portfolio and take full advantage of opportunities as they arise," says McNeill.
In addition to the acquisitions, Equity Inns sold two exterior corridor Hampton Inns in Florida to separate private investor groups. The first was a 97-room Hampton Inn hotel in Sarasota, which brought in $2.95 million. The second was a 122-room Hampton Inn hotel in Jacksonville, which sold for $4.85 million. Both hotels are 17 years old. The transactions were executed at a capitalization rate of approximately 5.0% on a trailing twelve-month cash flow basis, according to Equity Inns.
Equity Inns president/COO Howard Silver says the sales were a function of the company's desire to reduce the number of exterior-corridor properties is owns. "We will continue to rebalance our hotel portfolio and make acquisitions or divestitures, as we seek to reduce the average age of our properties and create value for our stockholders," says Silver.
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