Pebblebrook Hotel Trust (NYSE: PEB) announced that it has acquired the Hotel Modera for $47.5 million. The 174-room, urban, boutique, upper upscale, full service hotel is located in downtown Portland, Oregon. The property will be managed by OLS Hotels and Resorts. As a part of this transaction, the Company is assuming a $23.7 million secured, non-recourse loan, with the balance of the purchase price being funded by the Company with available cash.
“We’re thrilled to acquire the Hotel Modera in the west coast gateway city of Portland and further expand our presence in the highly desirable downtown Portland market,” said Jon Bortz, Chairman and Chief Executive Officer of Pebblebrook Hotel Trust. “This distinctive hotel benefits from its central downtown location, consistently high occupancy levels and strong positive cash flows. The hotel is located within one block of Portland Plaza, five blocks from both the Portland Art Museum and the Tom McCall Waterfront Park, and a half mile from Pebblebrook’s Hotel Vintage Plaza Portland. The already healthy operating performance of the property, coupled with a strong rebound in demand fundamentals and the implementation of Pebblebrook’s best practice and asset management initiatives, makes the Hotel Modera a great investment opportunity for our company.”
The 174-room Hotel Modera is well-located between 5th Avenue and 6th Avenue on Clay Street, just steps from fine restaurants, art galleries, museums and nightlife venues. The hotel is also proximate to major area tenants, including US Bank, Deloitte, NRC, Wells Fargo, Intel, Nike, Providence Health Systems, Portland State University and other top-tier institutions. Downtown Portland is one of the most successfully integrated downtown districts in the country, with more than 10 million square feet of Class “A” office space, over 3,500 condominium and residential units, accessible parks and outdoor venues, over 800 retail shops, two large urban malls and one of the best multimodal transportation networks in the nation. Portland is also home to the Oregon Convention Center, the largest convention center in the Pacific Northwest, which hosts over 650 events and more than 700,000 visitors annually.
Originally built in 1962, the hotel underwent a comprehensive $13.0 million renovation and repositioning that was completed in 2008. The hotel boasts luxury and comfort, balanced with a chic atmosphere that includes numerous pieces of local art, elegant Italian Carrera marble, black walnut floors and modern architecture. The hotel’s guest rooms include iPod docking stations, 32-inch LCD flat screen TVs, pillow-top mattresses and plush microfiber robes. The hotel offers 2,000 square feet of meeting space in three meeting rooms and an additional 600 square feet of space in two private dining rooms. The hotel also features Nel Centro (leased), a modern Italian restaurant open daily, serving classic Italian cuisine for breakfast, lunch and dinner. In addition, the hotel’s inner courtyard projects a tranquil, elegant symmetry that is home to Portland’s first “Living Wall,” a fully sustainable 63-by-15 foot living work of art. The hotel also provides a business center and sundry shop, as well as valet parking in the hotel’s 72 underground parking spaces.
In 2012, the Hotel Modera operated at 79 percent occupancy, with an average daily rate (“ADR”) of $135, room revenue per available room (“RevPAR”) of $106, earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $3.8 million and net operating income after capital reserves (“NOI) of $3.5 million. During the next 12 months, the Company currently forecasts that the hotel will generate earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $3.8 to $4.3 million and net operating income after capital reserves (“NOI”) of $3.4 to $3.9 million.
In connection with the acquisition, the Company is assuming a $23.7 million secured, non-recourse loan, which is subject to a fixed interest rate of 5.257%. The loan matures in July 2016.
In conjunction with the Company’s acquisition of the Hotel Modera, the Company has selected OLS as manager for the hotel.
“OLS has an extensive amount of industry experience, particularly with high-quality boutique hotels, and we believe their approach to managing the property will maximize its long term value while also taking advantage of the strength of the Portland market,” continued Mr. Bortz. “We’re delighted to be developing a strategic relationship with OLS and we look forward to working with them at the Hotel Modera.”
“We are excited to be renewing a long and prior relationship with the senior executives of Pebblebrook Hotel Trust and to bring our extensive experience with boutique hotels to the Hotel Modera,” said OLS’s Chief Executive Officer, John Fitts. “The Hotel Modera offers strong growth potential and we are enthusiastic about unlocking additional value in the hotel.”
The Company expects to incur approximately $0.4 million of costs related to the acquisition of the hotel and $0.4 million of costs related to the transition of a new management team that will be expensed as incurred.
The acquisition of the Hotel Modera brings the total number of properties in the Company’s portfolio to 28, comprising $2.2 billion of invested capital. This acquisition marks the Company’s third investment in the Portland area, including the 117-room Hotel Vintage Plaza in downtown Portland, Oregon and the 254- room Skamania Lodge in Stevenson, Washington.
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