Ashford Hospitality Prime Inc. announced that it has signed a definitive agreement to acquire the 415-room Sofitel Chicago Water Tower for a total consideration of $153 million in cash ($369,000 per key). The company expects to close the acquisition in the next 30 days. Located in the desirable Gold Coast submarket of Chicago, the four-star hotel features more than 10,000 square feet of meeting space. The property will continue to be managed by Sofitel (Accor SA). The company intends to finance the property with approximately $80 million of non-recourse mortgage debt.
The purchase price of $153.0 million represents a trailing 12-month cap rate of 6 percent on net operating income and an EBITDA multiple of 14.1x. On a forward 12-month basis, the purchase price represents a cap rate of 6.8 percent on net operating income and an EBITDA multiple of 12.7x. In 2013, the Sofitel Chicago Water Tower achieved RevPAR of $182, with 82 percent occupancy and an average daily rate of $222.
“We are very excited to acquire the Sofitel Chicago Water Tower as this high RevPAR asset is representative of how we envision building out Ashford Prime’s portfolio. This property will increase Prime’s overall average RevPAR and further diversify our portfolio by market, brand and manager,” said Monty J. Bennett, Ashford Prime’s chairman and chief executive officer. “Also, its prime location in a major U.S. gateway market fits perfectly with the investment strategy that Ashford Prime was specifically designed to capitalize on. We will look for similar characteristics in acquisition opportunities as we continue to expand the Ashford Prime portfolio.”
Chicago is a major U.S. gateway market for both corporate and leisure travelers. The Chicago lodging market has experienced a substantial recovery in the past three years driven by outsized corporate and leisure demand growth with little corresponding supply growth, and continued gains in RevPAR and ADR are anticipated with occupancy now above prior 2008 peak levels. The nation’s ongoing economic recovery continues to support increased business and leisure travel and Chicago is considered one of America’s most dynamic cities, renowned for its iconic architecture, museums and a blend of urban sophistication and mid-western warmth.