Innkeepers USA Acquires 49% of Raleigh, NC Sheraton
PALM BEACH, FL, November 28, 2006. Innkeepers USA Trust (NYSE: KPA), a hotel real estate investment trust (REIT), today announced that it has acquired a 49 percent interest in the 355-room Sheraton Capital Center Hotel in Raleigh, N.C. The property was purchased in a joint venture with Gencom Group, a private, Miami-based hospitality investment firm, for approximately $42 million, which includes $5 million for renovations which are expected to begin shortly.
The new joint venture funded the acquisition with $8.5 million in cash and approximately $33.5 million in debt from CapitalSource Finance LLC. Innkeepers funded its portion of the cash from borrowings on its unsecured line of credit. The debt issued by the joint venture is floating rate debt to bear interest at LIBOR plus 285 basis points and matures in November 2009, and the joint venture can extend the maturity up to two years under certain conditions. Innkeepers Hospitality, which has managed the property since 2003, will continue to operate the hotel under a revised long-term agreement.
"This is our first joint-venture property and adds another dimension to our flexible acquisition/development growth strategy," said Jeffrey H. Fisher, Innkeepers chief executive officer and president. "At a price of approximately $118,000 per key including approximately $5 million in upgrades required by Starwood as a result of the acquisition, we felt it was a very attractive opportunity with compelling economics and the potential to generate positive long-term shareholder returns. It also allows us to establish a solid working relationship with an excellent partner and sets the stage for additional opportunities for structured transactions with The Gencom Group."
Located at 421 S. Salisbury St. in the heart of downtown Raleigh, the 355-room Sheraton Capital Center is attached to the Hanover Office Building and within walking distance of the Raleigh Convention and Conference Center, the State Capitol, museums, restaurants, nightlife, and the BTI Center for the Performing Arts. Hotel amenities include a full-service restaurant, lounge, coffee bar, indoor heated pool, whirlpool, fitness facility, concierge, room service and a business center. Guest rooms feature high-speed Internet access and Sheraton's Sweet Sleeper beds.
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