Ashford picks up Marriott Crystal Gateway

Ashford Hospitality Trust has signed a definitive agreement to acquire the
697- room Marriott Crystal Gateway in Arlington, Virginia, for $107.0 million from EADS, a partnership
headed by Robert H. Smith and Arthur A. Birney.The seller was represented
by Molinaro Koger. Marriott Crystal Gateway is managed by Marriott
International under a long- term management agreement. The acquisition is
expected to close within 30 days.
  The purchase price is comprised of the assumption of a $53.5 million
loan with a fixed interest rate of 7.24% and maturity date of 2017, the
reimbursement of capital expenditures costs of approximately $7.0 million,
and the issuance of approximately $46.5 million in Class B Operating
Partnership units. The Class B Operating Partnership units are priced at
$11.20 per unit, will have a fixed dividend of 6.63% in years 1-3 and 7.0%
thereafter based upon the $11.20 per unit price, and will have priority
over common dividends. After 10 years, either party may convert the units
to common units. On a trailing 12-month basis, the purchase price
represents a cap rate of 9% on net operating income and an 8.8x EBITDA
multiple.
  Marriott Crystal Gateway has 697 rooms, 33,355 square feet of meeting
space and 2 food and beverage facilities. Opening in 1982 with the 453-room
Capital Tower and subsequently adding the 244-room Arlington Tower in 1986,
the hotel completed a $9.5 million renovation in 2002 and renovated the
lobby and food and beverage areas in 2005. Ashford expects to invest $13
million during the first year of ownership on additional capital
improvements to complete a full guestroom renovation. The Marriott Crystal
Gateway is one of two hotels that directly connect to the Metro, DC’s rapid
transit rail system. The hotel is located within Crystal City, a premier
office, residential and retail market, and minutes away from Reagan
National Airport.
  Monty Bennett, President and CEO of Ashford Hospitality Trust, said,
“The Marriott Crystal Gateway acquisition is another example of our ability
to acquire off-market hotels at accretive yields utilizing favorable
structures. With an operating partnership structure, we were able to make
good use of Ashford’s currency at a price premium to the last offering, and
at a stated payment that is less than the current dividend payment. This
per-key price for an upper-upscale hotel in such a high demand location
with strong barriers to entry represents a value well below today’s
replacement cost. We expect this hotel to benefit from increased demand in
the DC hotel market, aggressive yield and asset management, and further
RevPAR penetration resulting from the recent and future capital
expenditures. We look forward to adding this hotel to our growing portfolio
of luxury, upper-upscale, and upscale hotels.”
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