Equity to Enter California Market
Equity Inns, the third largest hotel real estate investment trust, today announced that it has entered into an agreement to purchase a Marriott Courtyard from entities controlled by Huntington Hotel Group, a developer and operator of Marriott and Hilton branded hotels, for $22 million. Acquisition of the hotel will follow the satisfactory completion of due diligence, and the transaction is expected to close by the end of the fourth quarter 2005. The capitalization rate of the acquisition is 9.2% on a trailing 12 month net operating income basis. The Company expects that the acquisition of these hotels will be accretive to its 2006 funds from operations.Equity Inns will acquire a 145 room, five year old Marriott Courtyard in the San Diego suburb Carlsbad, California. Huntington Hotel Group will continue to manage the property under a three-year performance based management contract. Huntington currently owns and operates twelve hotels in southern California, Maryland and Texas, with an additional four projects either under construction or in development.
Howard Silver, President and Chief Executive Officer commented, “We are pleased to have a presence in California and specifically its strongest MSA, while embarking on a new relationship with Huntington Hotel Group. This transaction enables us to expeditiously enter a new market with high barriers to entry. We will continue to seek out similar opportunities that will augment our portfolio as we continue to further diversify our portfolio geographically, to better position us to create shareholder value over the long-term.”
Carlsbad, California is located 25 miles north of downtown San Diego. Over the last ten years, this area of San Diego County has evolved from being primarily a weekend vacation market into a substantial commercial, residential and leisure destination. Since 1995, over eight million square feet of office space and research/development facilities and 15,000 housing units have been developed, and there are currently an additional three million square feet of office and research and development space in development.
Separately, Equity Inns announced that it has finalized its purchase of four hotels in the Midwest. The Company completed the purchase of four hotels from partnerships controlled by Hospitality Specialists, Inc. (HSI), a hotel developer and management company, for approximately $25.9 million, or $69,000 per room. The hotels include a Hampton Inn and SpringHill Suites in Grand Rapids, Michigan, along with two Hampton Inns located in East Lansing, Michigan and Champaign/Urbana, Illinois.
When this transaction and other announced transactions are finalized, the Company will own 123 hotels with 14,788 rooms in 36 states.