On a trailing 12-month basis, the purchase price represents a cap rate of 6.7% on net operating income. The trailing 12-month revenues for the hotel are $41.1 million. Ashford funded the acquisition with proceeds from the 1031 exchanges and its July 2006 follow-on offering. Ashford expects to close a $101-million loan on the property in November with a 10-year term at a fixed interest rate of 5.81%.
Officials with JER Partners could not be reached for comment. The company had completed a $14-million renovation in 2003.
A spokesman for the Ashford tells GlobeSt.com that the REIT sees a lot of projected growth in the Chicago hotel market. "I think being the only four-diamond hotel sets us apart in the O'Hare area, and then you've got the planned $15-billion expansion planned for the airport," he says.
The property is on 11.5 acres, and includes extra property for a possible expansion of the hotel or for pad sites, says the spokesman. The hotel also has 43,000 sf of meeting space and three food and beverage facilities. Ashford intends to invest an additional $6.1 million over the next 24 months to further enhance the guestrooms and bathrooms with new improvements such as soft goods and flat panel TV's, says company officials. Starwood Hotel & Resorts Worldwide manage the property.
Monty Bennett, president and chief executive officer with Ashford, says the transaction is a good example of the company's ability to source off-market transactions. "Having originally conducted due diligence on the property for a mezzanine loan we were to originate, the owner opted to pursue a sale of the hotel instead," Bennett says in a statement. "We were able to move quickly and be the only buyer in position to purchase the hotel." With the purchase, the company now owns 74 hotels, totaling 13,488 rooms.
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