Crystal Gateway is managed by Marriott International under a long-term management agreement. The acquisition is expected to close within 30 days. The seller was represented by Molinaro Koger. Ashford was self-represented.
Ashford plans to invest $13 million over the next year renovating all 697 guestrooms. "We expect this hotel to benefit from increased demand in the DC hotel market, aggressive yield and asset management, and further RevPAR penetration resulting from the recent and future capital expenditures," says Monty Bennett, president and CEO of Ashford Hospitality Trust.
CFO David Kimichik tells Globest.com that the acquisition was indicative of Ashford's strategy of acquiring off-market hotels. "The Marriott Crystal Gateway acquisition is consistent with our overall acquisition strategy--buying high quality, well located first class assets at a very good multiple."
"With an operating partnership structure, we were able to make good use of Ashford's currency at a price premium to the last offering, and at a stated payment that is less than the current dividend payment," Bennett adds. "This per-key price for an upper-upscale hotel in such a high demand location with strong barriers to entry represents a value well below today's replacement cost."
The purchase price consists of the assumption of a $53.5 million loan with a fixed interest rate of 7.24% and maturity date of 2017, the reimbursement of capital expenditures costs of approximately $7 million, and the issuance of approximately $46.5 million in class B Operating Partnership units. Each unit is priced at $11.20 and will have a fixed dividend of 6.63% in years one through three and 7% thereafter and will have priority over common dividends. After 10 years, either party may convert the units to common units. On a trailing 12-month basis, the purchase price represents a cap rate of 9% on net operating income and an 8.8x EBITDA multiple.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
