After closing its purchase of W New Orleans – French Quarter from Starwood earlier this month, Chesapeake Lodging Trust on Thursday completed the acquisition of W New Orleans for US$65 million from Starwood Hotels & Resorts Worldwide.
The 410-room W New Orleans, located on 333 Poydras Street, features approximately 10,000 sq ft (929 sq m) of flexible meeting space, two bars and a full-service restaurant, a roof top pool with a large deck, and a fitness center.
“We are fortunate to have a quality portfolio of owned assets in a number of high barrier-to-entry markets. With continuing improvements in hotel industry fundamentals, historically low interest rates and improving capital markets conditions, we’ve seen a meaningful increase in buyer interest in our assets from an increasingly diverse global buyer universe,” said Simon Turner, president of global development at Starwood.
As part of the agreement, Chesapeake Lodging Trust will invest US$29 million to renovate the hotel. The repositioning renovation will impact all areas of the property, including each guestroom with new hard and softgoods, corridors, relocation of the restaurant and creation of approximately 3,000 sq ft (278 sq m) of additional meeting space, and new orientation and finishes throughout the Living Room lobby. After the renovations are completed the hotel will rebrand under Starwood’s Le Méridien brand.
“When the renovation is complete, management expects the hotel to deliver a 9%-9.5% 2015 EBITDA yield on the all-in cost. We view the decision to swap brands favorably given the vicinity of the W French Quarter and Westin New Orleans Canal Place, each just a half mile away; adding a Le Meridien brand to the submarket should provide attractive diversification benefits from a customer segmentation perspective,” David Loeb, an analyst with R.W. Baird & Co. wrote in a note to investors. “We view valuation of the deal particularly favorable given that Chesapeake has the right to franchise the hotel with Starwood rather than be subject to a long-term management agreement. While the company maintains an amicable relationship with Starwood, which operators three hotels for Chesapeake, it also has experience working with a third-party manager of a Starwood product.”
The hotel is Chesapeake Lodging Trust’s fifth property managed by Starwood Hotels & Resorts Worldwide, Stamford, Connecticut.