$56M Loan Closes for Purchase of Ritz-Carlton Pentagon City Hotel

ARLINGTON, VA-Hotel REIT MeriStar Hospitality Corp. has finalized an approximately $56 million financing package, courtesy of lender Metropolitan Life Insurance Co. The funds come in the form of a seven-year, fixed-rate mortgage loan at an interest rate of 5.8%. MeriStar’s recently acquired prize property, the Ritz-Carlton, Pentagon City hotel, served as collateral for the seven-year loan. A company spokesperson tells GlobeSt.com that the funds will be directed toward the $93 million purchase price of the hotel, accounting for 60% of the property’s total cost.

Ritz-Carlton, Pentagon City–located just 10 minutes outside the District–was a prime acquisition for MeriStar; it carries the distinction of being MeriStar’s first Ritz Carlton property, and it fits perfectly into the company’s strategy of filling its portfolio with luxury hotels in major markets with significant barriers to entry. The 14-year-old property, which is physically connected to the upscale Fashion Centre Mall, stands 18 stories tall and features 18,000 sf of meeting space, as well as a fitness center, restaurant and lounge.

“The operating results from this exceptional asset are exceeding our initial expectations,” MeriStar CFO Donald D. Olinger says. Upon announcing the agreement to purchase the hotel in April, company chairman and CEO Paul W. Whetsell noted that the projected operating income from Ritz-Carlton, Pentagon City for the year was $5.1 million. “The Washington, DC metropolitan market is one of the best performing markets in the US, and we expect the market to remain one of the strongest over the coming years,” Olinger adds. “The mortgage financing we obtained allows us to continue to improve our balance sheet by lowering our average borrowing cost and also improves our equity yields.”