WASHINGTON, DC—RLJ Lodging Trust has acquired a hotel in the District and is closing on another in a Seattle, WA submarket over the next few days. The total purchase price, which the REIT is paying in cash, is $105.9 million. The REIT sourced both transactions off market.

The DC property is the 164-room Hyatt Place DC/Downtown/K Street, which is trading for $68 million or $415,000 per key.

The Seattle area hotel is the 170-room Homewood Suites in Lynnwood, WA. That property, which is the REIT's first in the Seattle area, is trading for $37.9 million, or approximately $223,000 per key.

Good Fundamentals

Both hotels pencil in with good fundamentals.

The Hyatt Place DC/Downtown/K Street represents a forward capitalization rate of approximately 7.1% on the hotel's projected 2016 net operating income. Also, the projected 2016 RevPAR is approximately 53% higher than the company's 2014 reported RevPAR.

The Homewood Suites in Seattle will have a forward capitalization rate of approximately 8% on the hotel's projected 2016 net operating income.

Good News for DC's Hotel Market

The respective cities' hotel markets offer good prospects as well, the REIT notes in its announcement. Metrics show that DC's hotel market is on the mend and poised for accelerated growth heading into 2016 and through 2017. For 2016, growth is expected to be approximately 20% higher than the current year pace and 2017 demand should exceed prior peak levels of 2005 and 2008, due to the 58th presidential inauguration.

As for the Seattle market, it has been one of the strongest performing Top 25 markets as defined by Smith Travel Research with 12.6% RevPAR growth in 2014 and 10.9% year-to-date as of May 2015.

About That Conversion

For the local market, the trade of the Hyatt Place Washington D.C./Downtown/K Street is particularly compelling as it represented a calculated bet by two investors during a time when the DC hotel market was somewhat stagnant.

Atlanta-based Songy HighRoads and Elliott Management Corp., acquired 1522 K St. NW, a 91,000-square-foot, 11-story office building in July 2013 and began converting it into the hotel.

The conversion required relocating stairwells and elevators, creating more than 60 windows in the brick façade, and adding a custom built rooftop event space. It took about 20 months to complete.

Both properties were recently opened and are expected to be immediately accretive to the RJL Lodging's portfolio RevPAR. Including these two deals, RJL will own 126 hotels and two planned hotel conversions.