Hilton Old Town Rumored to Trade at $93M; LaSalle Hotel Refis $750M Revolver

ALEXANDRIA, VA-A rumor around town that LaSalle Hotel Properties is getting ready to sell Hilton Old Town for $93 million (or $385,892 per unit) to Walton Street Capital just got a little more interesting.

First, though, the disclaimer: when reached for comment on the rumored deal of the Hilton property here, Walton Street declined to comment and a LaSalle spokesperson was not immediately available to speak.

On Monday the REIT announced that it refinanced $1.05 billion of debt, reducing the interest cost on its $750 million revolver and a $300 million five-year term loan, extending their maturities to January 2019.

The revolver and term loan include accordion features that allow for total commitments up to $1.05 billion for the revolver and $500 million for the term loan.

It is, in short, a balance sheet makeover, and one that could conceivably bolster the idea that LaSalle is prepping to recycle some of its portfolio, which might include the sale of the 246-key hotel in Old Town.

Also, it appears that the REIT is trying to minimize its exposure to DC area market to a certain extent. In the earnings call in October 2013, CEO Mike Barnello said that "while [LaSalle Hotel Properties] does have a concentration in this market, our percentage of EBITDA coming from the DC market is now at 16%, which is significantly down from the 22% level only 18 months ago."

He also took pains to distinguish between the DC CBD and MSA data.

"The overall Washington DC, CBD experienced a 6.4% demand improvement in August compared to a 0.5% decline in the Washington MSA and a 3.1% increase for the US hotel industry," he said in the same call.

"Year to date through August, the Washington, DC, CBD experienced a 2.4% demand increase which is the same as the overall US lodging industry demand during the same period. That compares to a 0.9% decrease for the DC MSA."

Whatever the plans are for the Hilton Old Town, LaSalle Properties has secured itself financing that leaves it very well positioned for 2014.

The interest rate for the new revolver is currently Libor plus 1.86%. It is based on a pricing grid with a range of 170 to 245 basis points over Libor, based on its leverage ratio. Pricing for the term loan is Libor plus 160 to 235 basis points, based on LaSalle's leverage ratio. The term loan remains swapped, fixing Libor through August 2017, for an interest rate of 2.37%.

The revolver was arranged by Citigroup Global Markets, BMO Capital Markets and RBS Securities as Joint Lead Arrangers and Book Running Managers. The term loan was arranged by Citigroup Global Markets Inc.

CFO Bruce Riggins says in a prepared statement that the new credit facility has resulted in a current weighted-average interest cost of 3.8% for all company debt. "We have less than $9 million of debt maturing in 2014 and our balance sheet remains in excellent shape."