Strategic Hotels & Resorts, Inc.
), a real estate investment trust (REIT), recently announced that
it has signed an agreement with Dubai Investment Group to acquire
Essex House Hotel for approximately $362.3 million. The transaction
is projected to be closed by September 7, 2012.
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The acquisition is comprised of 509 hotel rooms, nine condominium
units and considerable hotel-level cash reserves. Strategic Hotels
obtained $190.0 million loan in its first mortgage financing deal
Bank of America Corp.
) to fund the transaction. The company intends to fund the balance
amount in cash using other alternatives such as joint venture
options or asset sales. Post-acquisition, Strategic Hotels plans to
invest around $18.3 million towards renovation and redevelopment,
and for branding purposes.
Located in New York, New York, The Jumeirah Essex House (commonly
known as Essex House Hotel) is a 44-storey luxurious hotel
property. The 509 guest rooms feature world-class amenities for
business and leisure travelers. In 2005, Essex House Hotel was sold
to Dubai Investment Group by an affiliate of Strategic Hotels for
approximately $440.0 million.
Strategic Hotels has signed a 50-year management agreement with
Marriott International, Inc.
) to rebrand the hotel under the JW Marriott brand as the JW
Marriott Essex House New York. As per the agreement signed between
the two parties, Marriott will ensure a net operating income (NOI)
of up to $21.5 million per year for a period of 8 years. Marriott's
payment of NOI is subject to a maximum cap of $14 million in 2013
and $12 million per year from 2014 to 2020. Incidentally, the hotel
was previously owned by Marriott between 1969 to 1985, before
changing hands to a subsidiary of Strategic Hotels.
Marriott is a Maryland-based leading lodging company having more
than 3,700 properties in 73 countries and territories. It operates
and franchises hotels under 15 brands including Marriott, The
Ritz-Carlton, JW Marriott, Bulgari and EDITION.
Strategic Hotels owns and provides value-enhancing asset management
of famous hotels and resorts in the United States, Mexico and
Europe. The company currently owns 17 properties comprising 7,762
rooms spanning 840,000 square feet of space.
We presently have a long-term Neutral recommendation on the
Strategic Hotels. However, it carries a Zacks #2 Rank (a short-term