DALLAS—Ashford Hospitality Trust Inc. has completed the previously-announced acquisition of the 357-room Fremont Marriott Silicon Valley hotel for a total consideration of $50 million ($140,000 per key), which is approximately 45 percent below estimated replacement cost. The transaction was funded with a combination of cash on hand and $37.5 million of non-recourse mortgage debt.
On a forward 12-month basis, the purchase price represents an estimated cap rate of 8.1 percent on net operating income, which equates to an expected 10.0x forward EBITDA multiple. On a trailing 12-month basis, the hotel achieved RevPAR of $105.68, with occupancy of 75.6 percent and an average daily rate of $139.80. Remington Lodging took over property management of the hotel at the closing of the acquisition.
The $37.5 million of non-recourse mortgage debt has a two-year term and three, one-year extension options. The loan provides for a floating interest rate of LIBOR + 4.20 percent, with no LIBOR Floor.
The hotel is located directly off Interstate 880 at the gateway to Silicon Valley, home to over 1,200 high-tech, life sciences, and clean technology companies. On a trailing 12-month basis, the Fremont/Newark submarket has seen RevPAR growth of 16.6 percent through June 2014. The robust strength of the Bay Area economy and the continued growth in the technology sector combined with increasing visitation to the area is expected to make the Bay Area and Silicon Valley one of the country’s top annual RevPAR growth markets in 2014.
“The Fremont Marriott presented us with a very attractive investment opportunity and we are excited to complete this transaction,” said Monty J. Bennett, Ashford Trust’s chairman and chief executive officer. “We see tremendous upside opportunity for this asset with its desirable location in a high barrier to entry market that is one of the nation’s fastest growing RevPAR markets being so close to Silicon Valley. Further, we expect that our affiliated property manager, Remington Lodging, can significantly enhance the hotel’s operating performance given its proven experience at similar hotels.”
The hotel offers 357 guestrooms and approximately 15,000 square feet of meeting space spread across 19 flexible meeting areas including a 7,590-square-foot grand ballroom. The hotel’s amenities include an indoor pool and whirlpool, 24-hour fitness center, the Great Room restaurant and lounge, and complimentary on-site parking. The Fremont Marriott Silicon Valley is in exceptional condition with minimal capex needs, having recently undergone an approximate $8.1 million ($23,000 per key) renovation completed in 2013.