RLJ Lodging Trust (
, a real estate investment trust (REIT), recently inked a
purchase and sale deal for the acquisition of Hilton Cabana Miami
Beach for $71.6 million. With this acquisition of the top-class
property, RLJ Lodging is set to debut in Miami.
HOSPITALITY PRP (HPT): Free Stock Analysis
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RLJ LODGING TR (RLJ): Free Stock Analysis
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The property first opened as a hotel in 1950 but was demolished
in 2007 to be restructured into a condominium. However, the plan
did not materialize and the current owner of the property
purchased it in 2011 intending to develop a hotel under the
Hilton brand. RLJ Lodging will acquire the hotel after the
completion of the construction in the fourth quarter of 2013.
As per the deal, RLJ Lodging has committed to pay a deposit worth
$7.2 million, which is refundable in case of non-completion of
the property. The company has not assumed any construction
related risk. The hotel acquisition is also subject to
other conditions, along with the customary closing conditions.
This includes significant completion of the property by a
third-party developer within the contractual scope of the
Miami has one of the strongest lodging markets in the U.S, next
only to New York, Oahu Island and San Francisco. According
to Smith Travel Research (STR), the Miami-Hialeah market reported
a 14.1% year over year growth in RevPAR (Revenue per Available
Room) in 2011. The strong trend has continues; the market posted
a 7.9% year-to-date hike in RevPAR through September 2012. The
STR expects RevPAR in Miami to increase in the range of 5% - 10%
According to STR, there are just two Hilton-affiliated hotels,
representing around 1% of total hotel rooms in the Miami Beach
market. The 231-room Hilton Cabana Miami Beach hotel will be
positioned on the beach along the 6200 block of Collins Avenue.
Numerous properties along Collins Avenue and Ocean Drive area are
historic. This notification creates a barrier to entry for new
developments owing to strict market regulations. However, if
completed, the hotel will benefit from Miami's progressively
rising transient demand, strong convention activity and close
connections with Latin America.
The booming lodging industry encouraged RLJ Lodging to enter the
Miami market. However, the company should be wary of its
Host Hotels & Resorts Inc. (
which has a noteworthy presence in the market.
Currently, RLJ Lodging has been highly active on the acquisition
front in key gateway markets of the U.S. like Washington DC, New
York city and others. Last month, RLJ Lodging entered the Greater
Boston market with the acquisition of Embassy Suites in Waltham,
Massachusetts, for $64.5 million.
RLJ Lodging carries a short-term Zacks #3 Rank (Hold). One of its
Hospitality Properties Trust (
, holds a Zacks #4 Rank (Sell).