Equity Inns today announced that it has entered into an agreement to purchase four hotels from partnerships controlled by Hospitality Specialists, a hotel developer and management company, for approximately $25.9 million, or $69,000 per room. Acquisition of the hotels will follow the satisfactory completion of due diligence, and the transaction is expected to close in the third quarter 2005. Equity Inns will acquire two hotels in Grand Rapids, Michigan, one a Hampton Inn and the other a SpringHill Suites, along with two Hampton Inns located in East Lansing, Michigan, and Champaign/Urbana, Illinois. Collectively, the four hotels have an average age of 5 years and will add 376 rooms to the Company’s hotel portfolio. The average cap rate of the acquisition is approximately 9.7% on a trailing 12-month net operating income basis.
HSI will manage the properties for three years with a base fee plus incentive structured management agreement. In addition to the four hotels to be acquired by Equity Inns, HSI owns and operates 19 other hotels in the upper Midwest region.
Howard Silver, President and Chief Executive Officer commented, “We are pleased to expand our presence in Michigan and Illinois, with Hilton and Marriott branded hotels. With this transaction we are acquiring newer, premium-branded hotels in growth markets at a discount to their replacement value. Importantly, we are also adding a new hotel management company and hotel developer to our roster, in keeping with our strategy of adding quality managers, while diversifying our hotel portfolio.”
The Hampton Inn and SpringHill Suites in Grand Rapids are located two miles north of downtown, with easy access from major highways. Grand Rapids is the second largest MSA in Michigan and serves as the primary commercial, medical and financial hub for the western Michigan area. The Hampton Inns in East Lansing and Champaign are both located near major state universities - Michigan State University and the University of Illinois.