Innkeepers Enters New Market With $21M Buy

PALM BEACH, FL-As the hotel industry begins a recovery, Innkeepers USA Trust, a locally based hotel REIT, is expanding into the San Antonio, TX, market with the agreement to purchase a 146-suite Homewood Suites by Hilton hotel in the city. Meanwhile, the REIT realized drops in funds from operations and a bigger net loss for the quarter ended March 31, compared with the same quarter in 2003.The Homewood Suites by Hilton, for which Innkeepers USA Trust agreed to pay $21 million in available cash, is located on the famed Riverwalk tourist attraction in Downtown San Antonio. The hotel is about 500 yards from the renovated convention center and about eight miles from the airport. The hotel is situated in the landmark San Antonio Drug Co. building, built in 1919 and fully renovated. The building is listed on the National Directory of Historic Places. This would be Innkeepers’ first property in the city, and with it, the company is expanding its acquisition strategy. The deal is expected to close in May.”Now that the hotel industry is entering its long-awaited recovery, we are ramping up our acquisition program,” according to Jeffrey H. Fisher, president and CEO of Innkeepers. “We have been disciplined and are well-positioned to take advantage of the growing number of properties that are coming to market. We are seeing acquisition candidates coming to market that are more in line with our pricing expectations, and we intend to be a meaningful buyer.”The property is also Innkeepers’ first acquisition of a Homewood Suites–Hilton’s upscale, extended-stay product and a brand the company has desired to add for a long time. “We look forward to the opportunity to expand our relationship with Hilton and other leading brands,” Fisher says in a statement.The company plans to keep its upscale, extended-stay and premium, limited-service brands as its core business, but also plans to broaden its mix with certain full-service properties, turn-around property opportunities and hotels affiliated with or with the potential to be converted to top brands. “We have a strong appetite for deals and are reaching out to owners and the brokerage community,” Fisher adds.The company also reported that its net loss applicable to common shareholders increased from close to $5.1 million in the first quarter of 2003 to $5.2 million for the same period a year later. The diluted loss per share was 14 cents in this first quarter, unchanged from last year.Funds from operations dropped 37.8%, from nearly $3.3 million in last year’s first quarter to about $2 million in the most recent quarter. Adjusted funds from operations dropped 7.7%, from $7 million in the first quarter last year to nearly $6.5 million a year later.Earnings before interest expense, taxes, depreciation and amortization increased 40.4%, from about $11.8 million in the 2003 first quarter to approximately $16.5 million this year’s first quarter.