Ashford Hospitality Prime has completed the acquisition of the 415-room Sofitel Chicago Water Tower for a total consideration of USD153m (USD369,000 per key).
The property will continue to be managed by Sofitel (Accor SA).
The acquisition was funded with proceeds from an USD80.0m non-recourse mortgage loan and proceeds from the company's January equity offering. The new USD80.0m mortgage loan bears interest at a rate of LIBOR + 2.30 per cent and has a five year term, including extension options.
On a forward 12-month basis, the purchase price represents a cap rate of 6.8 per cent on net operating income and an EBITDA multiple of 12.7x. In 2013, the Sofitel Chicago Water Tower achieved RevPAR of USD182, with 82 per cent occupancy and an average daily rate of USD222.
"Aside from being our first acquisition since the spin-off from Ashford Trust, the purchase of the Sofitel Chicago Water Tower is an extremely attractive transaction for Ashford Prime," says Monty J Bennett, Ashford Prime's chairman and chief executive officer. "We have gained a high RevPAR, luxury hotel in the heart of Chicago; a key US gateway market. Additionally, the hotel will increase Prime's overall average RevPAR and broaden our portfolio by market, brand and manager. We are very pleased with this acquisition and will look for comparable acquisition characteristics as we seek to expand the Ashford Prime portfolio."
A major US gateway market for both corporate and leisure travellers, the Chicago lodging market has recovered substantially in the past three years driven by outsized corporate and leisure demand growth with little corresponding supply growth. Continued gains in RevPAR and ADR are anticipated with occupancy now above prior 2008 peak levels.
Located in the desirable Gold Coast submarket of Chicago, Illinois and just minutes from the exclusive shopping of the Magnificent Mile, the Sofitel Chicago Water Tower has 415 rooms, including 32 suites and one presidential suite.
Ashford Hospitality Prime is a real estate investment trust (REIT) focused on investing in high RevPAR full-service and urban select-service hotels and resorts located predominantly in domestic and international gateway markets.