CHICAGO-Ashford Hospitality Prime, Inc., New York, says it has completed the previously-announced acquisition of the 415-room Sofitel Chicago Water Tower for a total consideration of $153 million ($369,000 per key). The luxury hotel will continue to be managed by Sofitel (Accor SA).

"Aside from being our first acquisition since the spin-off from Ashford Trust, the purchase of the Sofitel Chicago Water Tower is an extremely attractive transaction for Ashford Prime," said Monty J. Bennett, Ashford Prime's Chairman and Chief Executive Officer. "We have gained a high RevPAR, luxury hotel in the heart of Chicago; a key U.S. gateway market. Additionally, the hotel will increase Prime's overall average RevPAR and broaden our portfolio by market, brand and manager. We are very pleased with this acquisition and will look for comparable acquisition characteristics as we seek to expand the Ashford Prime portfolio."

Located in the desirable Gold Coast submarket of Chicago, just minutes from the exclusive shopping of the Magnificent Mile, the Sofitel Chicago Water Tower has 415 rooms, including 32 suites and one presidential suite, all featuring Sofitel's luxurious feathertop and duvet sleep system - SoBed. The hotel has more than 10,000 square feet of meeting space including a 4,592-square-foot ballroom, eight meeting rooms and a private dining room with open kitchen. Additionally, the hotel is home to one of Chicago's finest restaurants - Cafe des Architectes. This luxurious, downtown Chicago hotel is an architectural icon, designed by French architect Jean-Paul Viguier. The hotel is a 32-floor prism of glass featuring stunning views of Lake Michigan and the Chicago skyline. Its spectacular design has garnered the honor of being on the American Institute of Architects list of America's Favorite Architecture.

The acquisition was funded with proceeds from an $80 million non-recourse mortgage loan and proceeds from the company's January equity offering. The new $80.0 million mortgage loan bears interest at a rate of LIBOR + 2.30% and has a five year term, including extension options.

On a forward 12-month basis, the purchase price represents a cap rate of 6.8% on net operating income and an EBITDA multiple of 12.7x. In 2013, the Sofitel Chicago Water Tower achieved RevPAR of $182, with 82% occupancy and an Average Daily Rate of $222.

A major U.S. gateway market for both corporate and leisure travelers, the Chicago lodging market has recovered substantially in the past three years driven by outsized corporate and leisure demand growth with little corresponding supply growth. Continued gains in RevPAR and Average Daily Rate (ADR) are anticipated with occupancy now above prior 2008 peak levels.

Acquisition Highlights:

Purchase price equates to a forward 12-month cap rate of 6.8% and forward 12-month EBITDA multiple of 12.7x; approximately 20% below replacement cost
Minimal CapEx needs after $6 million of capital expenditures over the last few years
Chicago market forecasted by PKF to have 4^th highest RevPAR growth CAGR in the country from 2013-2015

Ashford Hospitality Prime is a real estate investment trust (REIT) focused on investing in high RevPAR full-service and urban select-service hotels and resorts located predominantly in domestic and international gateway markets.

Instant Insights /

Sofitel Chicago Water Tower Brings $153M

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