DALLAS-Ashford Hospitality Trust has closed a $210-million, three-year loan, with a 3.5% interest rate, in a debt restructuring for 34 hotels, of which nine have just been bought for $62 million from Evansville, IN-based Dunn Hospitality Group.

The decision to bundle the two transactions came in the midst of pricing the Dunn assets for an off-market acquisition. “We were happy that it happened simultaneously,” says Monty J. Bennett, president and CEO of the Dallas-based Ashford. Merrill Lynch Mortgage Lending Inc. and Merrill Lynch Capital, a division of the business financial services, provided the interest-only loan, which comes with a trio of one-year extension options.

Ashford’s debt facility, secured by 25 hotels, carries a 6% Libor cap and moves $105 million of stair-stepped, floating-rate financing to a fixed-rate interest at an average of 4.9% over the term of the swap. The $210-million facility was used to pay off two hotel mortgages, totaling $26 million, and partially fulfill a $10-million note on a third, all bearing rates of 350 basis points over Libor. A fourth asset’s $31-million debt rolled from a rate of 325 basis points over Libor. Another $57 million was applied to a $60-million credit line, also 325 basis points over Libor, while the balance has been set aside to fund future acquisitions.

The Dunn portfolio purchase adds Indiana and Kentucky to Ashford’s portfolio and comes with a $6.5-million renovation tab across the board. Dunn, which sold nine of its 16 hotels, secured a three-year, performance-based management contract with Ashford to continue at the helm of properties and oversee renovations. “When the time is right, we’d love to talk to the group for more,” Bennett tells GlobeSt.com. “Dunn is a good solid group of people.”

Dunn received $59 million in cash and $3 million in operating partnership units. It’s also getting 4% of the gross revenues for continuing to manage the package.

The 972-room portfolio’s average age is six years and occupancies run from the high 60% to the low 70%, well above the national average, according to Bennett. He says none of the hotels outshines another. “All are pretty equal, all are good quality,” he says of top flags that are in place at least 10 more years. The properties have combined annual gross revenues of about $20.1 million.

The just-bought portfolio consists of three Courtyard by Marriott properties, three Hampton Inns, two Fairfield Inns and one Residence Inn. The Courtyard package is the 117-room hotel at 310 S. College Ave. in Bloomington, 90-room property at 3888 Mimosa Dr. in Columbus, both in Indiana, and 150-room facility at 819 Phillips Lane in Louisville, KY. The Hampton Hotels are the 143-room property at 8000 Eagle St. in Evansville and 112-room facility at 3325 US Highway 41 S in Terre Haute, both Indiana, and the 101-room hotel at 750 Flint Ridge Rd. in Horse Cave, KY. The Fairfield Inns are the 73-room hotel at 2828 Dixon St. in Princeton, IN, and 110-room property at 5400 Weston Rd. in Evansville. Dunn sold a third in its headquarters city, the 78-room Residence Inn at 8283 E. Walnut St.

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