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BOSTON-Host Marriott Corp. acquired the 1,139-room Boston Marriott Copley Place, located in the Back Bay district of the city. The hotel was purchased for $214 million, or $188,000 per key, which is 65% of estimated replacement cost.

“Given our purchase price represents a 35% discount to replacement cost, we are confident this asset will create long-term value for our shareholders,” says James Risoleo, executive vice president of acquisitions and development for Host Marriott.

Christopher J. Nassetta, president and CEO of Host Marriott, acknowledges that the local hotel market has been very soft this year but he points out that that is a perfect scenario for the company’s acquisition strategy. “This investment is another example of our strategy of acquiring high quality, large urban hotels in difficult to replace locations at a significant discount to replacement cost,” he says. “The hotel’s cash flow [is] down approximately 35% from 2000 levels. As a result, we believe there is meaningful upside potential over the next several years as the Boston market recovers and as we implement our asset management strategies.”

The purchase price includes the assumption of $97 million of debt, with an interest rate of 8.39% and a maturity date in 2006. According to a released statement, the hotel, which opened in 1984, has had an average occupancy of 85% over the past five years. It also has the largest hotel ballroom in New England and includes over 60,000 sf of meeting, exhibit and banquet space. The hotel’s lobby opens to the Copley Place Shopping Galleries and the Prudential Center, with over 200 shops and restaurants. The release emphasizes that the hotel is located in a “strong market with high barriers to entry.”

Host Marriott is a lodging real estate company that currently owns or holds controlling interests in 123 upscale and luxury hotel properties primarily operated under premium brands such as Marriott, The Ritz-Carlton, Hyatt, Four Seasons, Swissotel and Hilton.

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