Hyatt Hotels Corporation (NYSE: H) announced that one of its wholly owned subsidiaries has signed an agreement to purchase a portfolio of assets from hospitality company LodgeWorks, L.P., and its private equity partners.
The acquisition covers 24 hotels and related assets, including management, franchise and intellectual property rights for an aggregate purchase price of approximately $802 million in cash.
As part of the deal, key members of the LodgeWorks management and development team are expected to join Hyatt.
The hotels being purchased are key assets in strategic, high barrier to entry markets and are currently branded under the Hotel Sierra (17), AVIA Hotels (4), Hyatt Place (1) and Hyatt Summerfield Suites (2) brands.
With the acquisition, the hospitality company may afterwards introduce Hyatt-branded hotels in nine markets where it currently has no representation and to establish its extended stay presence in 16 new markets.
Following the transaction, 16 Hotel Sierra hotels will be branded as Hyatt Summerfield Suites, which will increase the number of hotels in that portfolio from 38 to 54.
Five properties, including the AVIA Hotels, are expected to be converted to full service Hyatt brands. The brand affiliations of Hyatt Summerfield Suites and Hyatt Place properties in the LodgeWorks portfolio will remain unchanged.
The deal is expected to close in the third quarter of 2011. The hotels will be managed by Hyatt.
The transaction remains subject to the satisfaction of certain customary closing conditions. The closings for the majority of the asset purchases are expected to take place in the third and fourth quarters of 2011 while the purchases of the remaining assets are expected to close by the end of the first quarter 2012.
“This is a significant expansion of our presence in the United States and enhances our extended stay representation with a great collection of high quality hotels,” said Mark Hoplamazian, President and Chief Executive Officer of Hyatt Hotels Corporation.
“We know that for Hyatt Summerfield Suites to become the preferred brand among extended stay guests, we must increase the number of markets we serve. This transaction is a noteworthy step in that direction, and will give us an immediate boost in brand awareness among both guests and potential third party developers.
“The extended stay hotels coming into the portfolio are, on average, four years old – and many have been open less than two years – making them welcome additions to our brand. Most of the hotels slated to become full service Hyatts were new-builds in 2009, and are already recognized as market leaders in guest experience and performance.”
LodgeWorks founder, Chairman and CEO Rolf Ruhfus, said: “It is exciting to build a portfolio that brings value to our investors and teams and now to an industry-leading Hyatt. We respect the Hyatt heritage and culture and are very pleased to contribute to its growth.”
Industry veteran Anthony Isaac, President of LodgeWorks, is expected to join the hospitality company, as are other key members of the LodgeWorks management team. The team members will bring with them significant development and construction management expertise, extensive extended stay operating experience, and a broad range of owner and industry relationships.
Steve Haggerty, Executive Vice President and Global Head of Real Estate and Development for Hyatt, said: “More than just adding hotels to our portfolio, this transaction deepens and strengthens Hyatt’s overall select service and extended stay capabilities.
“We are delighted to welcome Tony Isaac and members of his team into the Hyatt family and enthusiastic about enlisting his team’s management and development expertise in the service of our mission to grow our select service brands.”
“We have long admired Hyatt as an innovator and an operator,” said Isaac.
“Given the company’s financial and brand strength and the depth of its commitment to becoming the preferred hospitality brand in each segment it serves, it’s an exciting time to join forces with the Hyatt team. With our intimate knowledge of the extended stay industry and as the original creators of the Summerfield Suites brand, we see the integration of Hotel Sierra and AVIA into the Hyatt portfolio as a powerful combination.”
Although Hyatt does not expect a significant benefit to 2011 full-year Adjusted EBITDA as result of this purchase, due to the expected timing of the closings, transaction costs, and the fact that several of the assets are continuing to ramp up post-opening, it hopes this purchase will generate approximately $50 million of Adjusted EBITDA during 2012.
“The annual Adjusted EBITDA of this purchase is expected to grow in 2013 and beyond as the properties stabilize and the full benefit of the conversion and re-branding occurs,” the hospitality company said.