Chesapeake Lodging Trust announced Tuesday that it has entered into a definitive agreement to acquire the 185-room Hyatt Place New York Midtown South for US$76.5 million, or approximately $414,000 per key. The hotel is currently under development at 52-54 West 36th Street, between 5th Avenue and 6th Avenue.
Closing on the proposed acquisition is expected to occur following completion of the hotel by the seller, anticipated in the third quarter of 2012. In conjunction with the proposed acquisition, the Trust has agreed to provide the seller, a cohort of developers under the McSam Hotel Group umbrella, US$6.5 million in bridge financing to facilitate the completion of the development. The Trust intends to enter into a management agreement with Real Hospitality Group, the operator of the Trust’s other hotel in New York.
“Similar to the Holiday Inn New York City Midtown, which we acquired in late December 2011 and opened on January 19, we expect the Hyatt Place to ramp-up very quickly given the robust demand in Manhattan, the strength of the Hyatt brand, and our operator’s extensive experience managing hotels in New York City,” said James Francis, Chesapeake’s president and CEO. “Following this acquisition, approximately 8% of our portfolio’s hotel rooms will be based in Midtown Manhattan.”
Equity research firm Robert W. Baird has commented on the deal stating that it is in keeping with Chesapeake’s CBD-centered portfolio strategy and expects going-in EBITDA yields of ~7% for the hotels’ first year of operations. It added that the deal should not make an equity raise for Chesapeake imminent.
