RLJ Lodging Trustacquired the historic Humble Oil Building complex in downtown Houston, for a purchase price of $79.5 million, or approximately $151,000 per key based on a combined forward room count of 528 keys.
The Humble Oil Building is a three-tower complex that occupies an entire city block in downtown Houston. The complex consists of an 82-unit apartment tower that will be converted to a 166-room SpringHill Suites and two existing hotels, the existing 191-room Courtyard Houston Downtown Convention Center and the 171-room Residence Inn Houston Downtown Convention Center. The purchase price represents a forward cap rate of approximately 10.1 percent for the Courtyard and 9.5 percent for the Residence Inn based on each hotel’s projected 2013 net operating income and applicable purchase price allocation. RLJ purchased this portfolio of assets with its revolving credit facility.
“Acquiring the Humble Oil Building complex represents a value-add opportunity,” RLJ President and CEO Thomas J. Baltimore Jr. said in a statement. “Both existing hotels have notable upside potential and our extensive experience managing complex renovations will enable us to deliver another conversion property that will help drive economies of scale.”
An estimated $70.0-million renovation of the premises was completed in 2003 that restored several historical features and converted the complex into its present use of two hotels and one apartment tower. The company will leverage its in-house capabilities to convert the existing apartment tower into a hotel. The conversion is expected to be completed in mid-2015 and will enable the company to capitalize on design, brand and operational efficiencies. The Courtyard and the Residence Inn underwent 6-year Marriott “Refresh” renovations in 2010 and 2011, respectively.
Houston’s revenue per available room growth of 13.8 percent in 2012 was the third highest among the top 25 U.S. lodging markets.
With the addition of these three assets, the company now owns 147 hotels with nearly 22,000 rooms and one planned hotel conversion across 21 states and the District of Columbia.