The four hotels involved in the transaction are the Residence Inn San Diego (Mission Valley) with 192 rooms, Residence Inn Anaheim (Resort Area) with 200 rooms, Hilton Suites Anaheim with 230 rooms and Hilton Ontario with 309 rooms. The Bethesda, MD-based seller is an affiliate of RLJ Development, LLC.
The locally based REIT funded the $213,000-per-room transaction with $81.3 million in borrowings under its unsecured line of credit and the issuance of a $120-million financing package involving three loans, all at a 10-year fixed rate of 5.98% that bear interest only for three years and thereafter will amortize over a 30-year period, according to Innkeepers. The REIT adds that the loans are secured by the two Residence Inn hotels and the Hilton Ontario, with Capmark Finance, Inc. acting as the sole underwriter.
In addition, Innkeepers is also assuming a $13.7-million term loan, secured by the Hilton Suites Anaheim, at a five-year fixed rate of 5.41% that bears interest only through July and matures in July 2010. Capmark Finance was the underwriter of the original loan.
The Innkeepers release estimates that its post-acquisition debt to total investment in hotels at cost is approximately 39%, without regard to any future borrowings or equity offerings. Additionally, these new term loans reduce the average interest rate on the company's fixed-rate debt to 6.8% from 7.8% at June 30 and extends its weighted average maturity date to 6.7 years from 3.7 years.
"Southern California remains one of the strongest markets in the country, and continues to grow at a brisk pace," says Jeffrey H. Fisher, Innkeepers USA's chief executive officer and president. "Together with our under-construction Embassy Suites hotel in Valencia in the high-growth Santa Clarita Valley, these five hotels give us a strong presence in this important market and represent a significant source of future growth for us."These top-tier branded hotels are in prime markets, are in excellent physical condition, and, combined with our planned $2 million in upgrades, will be in a highly competitive position," he adds.
Innkeepers Hospitality Management, which is owned by Fisher, will manage the Hilton Suites Anaheim and the Hilton Ontario hotels under long-term management agreements, and the two Residence Inn hotels will be managed by a joint venture between Summit Hospitality Group, Ltd. and Innkeepers Hospitality Management.
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