Hilton Jacksonville Riverfront Goes Under Contract for $22M

JACKSONVILLE, FL-The 292-room Hilton Jacksonville Riverfront, a landmark lodging property here, is under contract to be sold to MHI Hospitality Corp. of Williamsburg, VA for $22 million or $75,342 per room. Area hospitality industry sources tell GlobeSt.com the per-room price is below the estimated replacement cost of about $100,000 per room.

The deal is tentatively set to close in the third quarter. The acquisition includes two restaurants, 12,000 sf of meeting space, a fitness center, outdoor pool and an 80-foot charter boat, the Jacksonville Princess Yacht, available for private and public cruises.

The property will be managed by MHI Hotels Services LLC which currently manages the company’s six existing hotels and has managed the Hilton Jacksonville since 1996. MHI plans to start a $3-million renovation of the property after the transaction closes, according to Andrew Sims, MHI’s CEO.

“The Hilton Jacksonville represents an excellent opportunity for MHI to utilize the proceeds raised in the company’s initial public offering and from the underwriter’s exercise of the over-allotment option earlier this year,” Sims says in a prepared statement. “This is a performing asset in an attractive market and has the potential to provide positive returns to our shareholders.”

MHI officials couldn’t be reached to learn the occupancy level of the hotel, but area brokerage sources monitoring the tourism industry here tell GlobeSt.com they put the occupancy at about 75%. That number is about 10% higher than most hotels need to break even, according to previously published industry sources.

Sims says the $22-million purchase price will be funded in part by an $18-million first mortgage loan. An affiliate of the seller, the AFL-CIO Building Investment Trust, has agreed to provide the mortgage financing, “subject to certain conditions precedent,” Sims says. An affiliate of MHI Hotels Services currently leases the hotel. The affiliate will “contribute certain personal property and assign contract and other rights relating to the property, to MHI Hospitality in exchange for operating partnership units valued at approximately $913,000,” Sims says.

The remaining portion of the purchase price will be paid in cash from a portion of the company’s IPO proceeds. MHI Hospital Corp. is a real estate investment trust focused on the acquisition, redevelopment and management of mid-scale and up-scale full-service hotels in the mid-Atlantic and Southeast. The company’s six-property portfolio consists of 1,383 rooms, most of them operating under the Hilton and Holiday Inn brands.