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RLJ Lodging Trust (the “Company”) (NYSE: RLJ) today announced that it acquired the historic Humble Oil Building complex in downtown Houston, for a purchase price of $79.5 million, or approximately $151,000 per key based on a combined forward room count of 528 keys.
The Humble Oil Building is a three-tower complex that occupies an entire city block in downtown Houston. The complex consists of an 82-unit apartment tower that will be converted to a 166-room SpringHill Suites and two existing hotels, the existing 191-room Courtyard Houston Downtown Convention Center (“the Courtyard”) and the 171-room Residence Inn Houston Downtown Convention Center (“the Residence Inn”). The purchase price represents a forward capitalization rate of approximately 10.1% for the Courtyard and 9.5% for the Residence Inn based on each hotel’s projected 2013 net operating income and applicable purchase price allocation. The Company purchased this portfolio of assets with its revolving credit facility.
“Our ability to execute this off-market transaction required the expertise, experience, and relationships that are unique to RLJ,” commented Thomas J. Baltimore, Jr., President and Chief Executive Officer. “Acquiring the Humble Oil Building complex represents a value-add opportunity. Both existing hotels have notable upside potential and our extensive experience managing complex renovations will enable us to deliver another conversion property that will help drive economies of scale.”
An estimated $70.0-million renovation of the premises was completed in 2003 that restored several historical features and converted the complex into its present use of two hotels and one apartment tower. The Company will leverage its proven in-house capabilities to convert the existing apartment tower into a high-quality, institutional-grade hotel. The conversion is expected to be completed in mid-2015 and will enable the Company to capitalize on design, brand, and operational efficiencies. The Courtyard and the Residence Inn underwent 6-year Marriott “Refresh” renovations in 2010 and 2011, respectively.