GlobeSt.com UPDATE: Ashford, CNL Plan June Closing for $465M Deal

Ashford made a move on the CNL Hotels & Resorts Inc. portfolio "as soon as we heard it was for sale," Douglas Kessler, the Dallas-based REIT's COO and head of acquisitions, tells GlobeSt.com. He says a "key component" to the deal was locking in a 5.32% fixed-rate interest on a $370-million financing and the portfolio's cash flow. "The leveraged returns are very attractive in the market today," he says, "and we have put in place attractive long-term financing." For yesterday's story, click here.

Kessler, who doesn't foresee any hurdles on the road to the closing, says the hotel roster will be released today. In keeping with past practice of portfolio buys, Ashford will divvy the hotels into pools so they can be financed with the utmost flexibility for assumable loans or the ability to substitute properties in event of a future sale.

The Orlando-based seller will pick up a net gain of $35.5 million after closing and related transaction expenses, which will be applied to debt reduction. The portfolio will trade at an 8.1% cap rate based on last year's net operating income, according to the CNL's press release. CNL bought or developed the hotels between 1999 and 2003.

"Consistent with our investment philosophy, we believe this transaction will mark a significant step in our continued efforts to intensify our focus on the ownership and acquisition of 'distinctive lodging assets' primarily in the luxury resort and upper-upscale industry segments," Thomas J. Hutchinson III, CNL's CEO, says in the release.

Meanwhile, Ashford sees that focus as it does with other hoteliers eyeing upper-upscale and resort brands as a steppingstone to build a geographically and product-balanced portfolio, according to Kessler. The CNL transaction, he says, "clearly demonstrates our broad investment strategies." The June closing will push Ashford's portfolio to 82 hotels with 13,244 rooms, of which 31% will be upper-upscale, 54% upscale and 15% mid-scale.

When the deal closes, the Washington, DC-based Marriott International will become the seventh property manager in Ashford's network. Marriott will remain at the helm of the 30 hotels under an incentive program based on a "dollar amount threshold" for hotel performance, Kessler says. The management pacts vary, but "generally are over 10 years," he says.

Ashford has been investing roughly $120 million per quarter into acquisitions. In mid-March, the REIT spent $250 million for 21 hotels. For details on its last acquisition, click here. "We still have some dry powder in terms of capital available to us," Kessler says. "We continue to see attractive opportunities in the market and are able to access capital to invest." He won't speculate on what the rest of the year will bring, but isn't ruling out another portfolio acquisition before the curtain falls on 2005.