Loews Acquires Madison Hotel - Analyst Blog

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In a concerted effort to consolidate its hotel business, Loews Hotels & Resorts, a wholly owned-subsidiary of Loews Corporation ( L ), will buy Madison Hotel in Washington, D.C. from Jamestown Properties.  The transaction is scheduled to close in January next year.

The acquisition is a part of Loews' strategic endeavors to strengthen its portfolio of hotels and boost the count to more than 30 from 18 in the forthcoming three to five years. Alongside, the company aims to bring about an approximate threefold increase in its net income by 2015.

With traffic of nearly 18 million visitors in 2012, Washington is the foremost U.S city for international visitors and ranks among the first 20 on a domestic basis. Possessing a property at such a prime location is expected to assist Loews in achieving its goal.

With 356 rooms, Madison Hotel has more than 12,000 square feet of state-of-the-art meeting and event space in 12 separate settings, including the 3,300-square-foot ballroom. Also, it houses the renowned Federalist restaurant.

Management earlier stated that with capital at disposal to acquire and develop property, they will seek like opportunities in Boston, Chicago, San Francisco, Washington, D.C., New York, Dallas, Toronto and Seattle to add assets to its portfolio and hence cater to an expanding customer base.

This is the second acquisition of its kind that Loews made in order to enhance its competitive advantage. In June this year, Loews Hotels acquired Renaissance Hotel & Spa in Hollywood, California.

Loews Hotels posted highest revenue growth in the third quarter, which improved 19.5% year over year. We believe the addition of this hotel to its portfolio will help the company to continue delivering such robust numbers.

Loews carries a Zacks #3 Rank, translating into a short-term Hold rating. With the optimism over its latest acquisition, we expect analysts to raise their estimates, providing an upward directional pressure on its Zacks Rank. We have a long-term Neutral recommendation on the company.  The Travelers Companies, Inc. ( TRV ), which competes with Loews, shares the same Zacks Rank.



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