Platinum For Sheraton Bloomington - Analyst Blog

LaSalle Hotel Properties (LHO), a lodging real estate investment trust (REIT), has recently revealed the name of the new owner of Sheraton Bloomington Hotel, a 564-room premium hotel near Minneapolis/St. Paul International Airport. LaSalle Hotel Properties had earlier sold the property without disclosing the identity of the buyer for $20.0 million (net proceeds of $19.6 million), bulk of which was utilized to repay debt under its senior unsecured credit facility. The hotel is currently owned by Platinum Equity, a Los-Angeles based private equity investment firm focusing on leveraged buyouts of established companies in the U.S. and Europe.

Platinum Equity intends to spend approximately $12.5 million for renovations and upgrades of the hotel, which are expected to be complete by mid-2012. The property would be managed by Richfield Hospitality, a Denver-based leading hotel management firm with a track record of maximizing profitability and improving asset values for hotel owners.

LaSalle Hotel Properties owns 34 upscale full-service hotels, totaling over 8,500 guest rooms in 13 markets across 9 states in the U.S. and the District of Columbia. Besides improving the size and quality of its portfolio through  strategic acquisitions of high-quality hotels, the company plans to continue selling non-core properties that do not seem functional for its long-term strategy. LaSalle Hotel Properties has a geographically diversified portfolio with high barriers to entry and a strong demand for high-quality facilities. The latest asset sale transaction is one of the several noteworthy deals occurring in the hotel industry, as investors seek to cash-in on the tremendous growth potential predicted by industry experts and third-party research reports.  

Jones Lang LaSalle Incorporated (JLL), a leading full-service real estate firm that provides corporate, financial, and investment management services, had recently revealed in its research report that hotel sales and acquisitions would increase to the tune of 25% in 2011 in the Americas with investors vying for premium assets. According to Real Capital, a leading market research and commercial real estate sales and trends analysis firm, about 666 hotels were sold in 2010 for $11.6 billion. Jones Lang further anticipated that transaction volume would total approximately $13.0 billion in 2011 and envisioned the U.S. hotel market as one of the most active in the world.

The report cites that a healthy rebound in the U.S. business and leisure travel has attracted a wide array of investors in the hotel industry, including investors from the Middle East. According to Smith Travel Research Inc., an independent research company in the lodging industry, RevPAR (revenue per available room) in the top 25 U.S. markets rose to $76.61 during the first 11 months of 2010 from $71.55 in the year-ago period. Jones Lang expects REITs to be the dominant buyers in 2011, with private equity groups and institutional investors increasingly joining the party as leverage levels and terms become favorable with improving market fundamentals.

We presently have a ‘Neutral' recommendation on LaSalle Hotel Properties, which currently has a Zacks #3 Rank that translates into a short-term ‘Hold' rating and indicates that the stock is expected to perform in line with the overall U.S. equity market for the next 1–3 months.

 
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