To strengthen its presence in the West Coast and leverage on
the growing fundamentals,
RLJ Lodging Trust
) is acquiring a 10-hotel portfolio from the affiliates of
Hyatt Hotels Corp.
) for around $313 million.
CHATHAM LODGING (CLDT): Free Stock Analysis
HYATT HOTELS CP (H): Free Stock Analysis
PEBBLEBROOK HTL (PEB): Free Stock Analysis
RLJ LODGING TR (RLJ): Free Stock Analysis
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A definitive purchase and sale agreement has already been inked
in this context and the deal is anticipated to be accomplished in
Mar 2014, subject to customary closing conditions. The hotels
would continue to be managed by a Hyatt affiliate under new
The Hyatt portfolio of 10 hotels, comprising 1,560 rooms, would
add 7 hotels in California, thereby significantly enhancing this
lodging real estate investment trust's (REIT) presence in the
region. The rest of the hotels are situated in dense leading
markets in Texas, North Carolina and Wisconsin.
Encouraging fundamentals in the lodging industry are expected to
drive RevPAR (revenue per available room) growth and improve
operating results in the West Coast. The pace of group booking
for 2014 is favorable, reflecting better business this year while
supply growth in the West Coast is expected to be pretty slow.
The acquisition of this portfolio would help RLJ in more than
doubling its hotel EBITDA in the West Coast and over 50% of the
hotels in this Hyatt portfolio are projected to be included in
RLJ's top 50 EBITDA contributors roaster.
RLJ plans to use around $25 million in capital expenditures
(large part this investment to take place in the next 2 years)
for the Hyatt Portfolio. The company would fund this buyout
through several measures including cash on hand, its undrawn
revolving credit facility and debt financing.
Following this acquisition, RLJ is projected to enjoy ownership
of 160 properties, comprising 158 hotels and 2 planned hotel
conversions, positioned in 24 states and the District of
Columbia. The deal would also lead to RLJ's asset acquisition
tally reaching nearly $900 million since its IPO.
RLJ currently has a Zacks Rank #3 (Hold). Investors interested in
the REIT industry may also consider stocks like
Chatham Lodging Trust
Pebblebrook Hotel Trust
). Both these stocks carry a Zacks Rank #2 (Buy).