The seller, an affiliate of McLean, VA-based JER Partners, completed a $14-million renovation in 2003. Ashford plans to invest another $6.1 million in upgrades to baths and guestrooms over the next 24 months. Washington, DC-based Molinaro Koger marketed the property and represented JER in the transaction, which is expected to reach completion within 70 days.
It is an all-cash deal. On a trailing 12-month basis, the price represents a cap rate of 6.5% on net operating income and a 12.9-times-Ebitda multiple yield of 7.8%. Ashford is funding the buy with a combination of property-level debt and proceeds from its follow-on offering of 13 million shares this July.
The hotel includes 43,000 sf of meeting space and three food and beverage facilities. It is located on 11.5 acres, which provides for potential expansion. A call to Ashford regarding the amount of potential expansion and any plan for utilizing it was not returned by deadline, nor was a call to JER.
"Chicago is one of our targeted markets," says Monty Bennett, Ashford's president and CEO, in a statement. "We believe [this] is the best asset in the O'Hare submarket at a price below replacement cost." He cites the airport's planned $15-billion expansion, the surrounding area's office and industrial developments, continuing strengthening of the Chicago hotel market, the hotel's high ratio of meeting space "and potential for future expansion" as indicators of additional upside potential for the asset. The acquisition increases Dallas-based Ashford's direct hotel portfolio to 74 assets with an aggregate of 13,488 rooms.
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