Because MeriStar is a public company and that the deal won't formally close until the end of the first quarter--for the moment--locally based Blackstone is not making any comment on the deal, a company spokesperson tells GlobeSt.com. On Jan. 25, La Quinta Corp. and Blackstone closed a $3.4-billion merger. Last August, Blackstone formed a new brand, LXR Luxury Resorts, on the on the heels of the firm's closure of its $3.24-billion merger with Wyndham International.
The properties involved in the transaction are the 579-room South Seas Island Resort on Captiva, the 426-room Hilton Clearwater Beach Resort, the 296-room Hilton Cocoa Beach Oceanfront, as well as the Dunes Golf and Tennis Club. Others in the portfolio are the 46-room Best Western Sanibel Island Beach Resort, the 96-room Sanibel Inn, the 32-room Seaside Inn, the 200-room Sheraton Beach Resort Key Largo, the 30-room Song of the Sea and the Sundial Beach Resort, which has 243 rooms.
Mike Bauer, MeriStar's senior director, finance and investor relations, tells GlobeSt.com that six of the properties are located on Sanibel Island with another on nearby Captiva. MeriStar had planned to sell the Sanibel holdings as a group and Blackstone expressed interested in the other properties. "The pricing was opportunistic." He adds that approximately five of the 27 properties the REIT earmarked in its asset disposition effort remain unsold.
Bethesda, MD-based MeriStar intends to use the majority of the proceeds to further reduce debt, particularly its 10.5% senior unsecured debt, which currently is callable by the company. The company expects the deal will accelerate its business plan objectives of repaying more expensive debt and completing property upgrades. Also with this deal, its asset disposition program is nearly complete. "As a result of this transaction we will have significantly greater financial flexibility and greater visibility on the timing of restoring a regular cash dividend to our common shareholders," Paul Whetsell, chairman and CEO, points out. The sales price reflects an EBITDA multiple for the 10 properties that is accretive to the company's current trading value.
MeriStar owns 58 hotels with 17,003 rooms in 19 states and Washington, DC under such brands as Hilton, Sheraton, Marriott, Ritz-Carlton, Westin, Doubletree and Radisson. In the fourth quarter of 2005, MeriStar sold five hotels, in separate transactions, for $58.5 million. The properties are the Hilton Salt Lake City Airport; Doubletree Bradley International Airport in Hartford, CT; Hilton in Durham, NC; Crowne Plaza-San Jose, CA; and a Holiday Inn in Madison, WI.
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