The Company initiated and successfully acquired the asset through a foreclosure sale after the borrower defaulted on the loan in early 2013. The successful bid, which was equal to the Company’s basis in the mortgage loan, represents a significant discount to the Hotel’s value.
The Hotel will be closed later this year to undergo a comprehensive renovation that will include upgrades to the guestrooms and public spaces. When the Hotel re-opens in the third quarter of 2014, it will continue to have the Residence Inn by Marriott flag. The Company expects that the total investment, including capital expenditures, will represent a forward capitalization rate of approximately 12% based on the Hotel’s 2015 net operating income.
“Our initial investment thesis for this mortgage loan included us owning the underlying real estate. We immediately recognized the value of this asset given its location in such a desirable submarket of Atlanta and the strength of the Residence Inn brand.”
“Our acquisition of this mortgage loan provided us with yet another opportunity to purchase an attractive asset in a key market at a significant discount to replacement cost,” commented Thomas J. Baltimore, Jr., President and Chief Executive Officer. “Our initial investment thesis for this mortgage loan included us owning the underlying real estate. We immediately recognized the value of this asset given its location in such a desirable submarket of Atlanta and the strength of the Residence Inn brand.”
Located in one of the country’s major gateways to the southeast, the Hotel will benefit from Atlanta’s diverse economy. The Atlanta market has a strong corporate presence with several Fortune 500 companies headquartered in the metro, such as The Coca-Cola Company, UPS, Home Depot, and Delta Air Lines. Given the availability of a variety of conference facilities, Atlanta also attracts major group events and is considered one of the top convention destinations in the United States. Furthermore, Atlanta is recognized as one of the premier entertainment districts in the region, attracting multiple cultural and sporting events that drive a steady flow of tourism.
The Hotel is located in Midtown Atlanta, which is known for its urban, high-density office, commercial, and residential setting. Midtown is home to major employers including the Federal Reserve Bank of Atlanta, Georgia Institute of Technology, Equifax, Norfolk Southern, and PricewaterhouseCoopers. With approximately 16.5 million square feet of total office space within close proximity, the Hotel benefits from a stable supply of corporate demand. In addition, the Hotel also benefits from its close proximity to several local tourist attractions such as the High Museum of Art, Fox Theatre, and Piedmont Park.
The Company expects that the Hotel will continue to benefit from its strong location, brand affiliation, and once completed, from its comprehensive renovation. With the addition of this asset, the Company now owns 150 properties, comprised of 148 hotels with more than 22,300 rooms and two planned hotel conversions, located in 22 states and the District of Columbia.
RLJ Lodging Trust is a self-advised, publicly traded real estate investment trust focused on acquiring premium-branded, focused-service and compact full-service hotels.
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