UNITED STATES- ING Clarion Partners has acquired Apple Hospitality Two and turned it from a REIT owning 63 extended stay hotel properties in 24 states into a private company.
Acquisition price for the company was $877m ($649.5m euros) and financed by $277m of equity along with $600m through Wachovia Bank.
Having completed the deal, ING Clarion hopes to achieve a leveraged IRR in the mid teens over a 5-10-year holding period for its three institutional investors – two commingled Lion funds managed by ING Clarion – and a separately-managed pension fund client account advised by the ING Clarion.
Chuck Latham, managing director and group head of the hospitality division for ING Clarion, said many people in the pension fund industry believe this is the best way to invest in hotels because capital infusions to existing assets then boost the bottom line the more companies send employees out on business trips.
"We felt that the Apple assets are some of the best brands in the extended stay industry. We believed that the improvements planned for the properties will make them more profitable."
ING Clarion will be spending $128m beyond the purchase price to improve the properties with both exterior and interior upgrades over 18 months, and will most notably be spent putting in new kitchens and bathrooms.
That said, ING Clarion not continue to hold the entire portfolio as the real estate manager is planning to sell 15 properties seen as located outside of the company’s primary markets.
The remaining 48 assets being held are spread out across the United States in the major metropolitan areas as a mixture of suburban stays under the Hilton’s Homewood Suites brand and Marriott’s Residence Inn brand, both of which have an average annual occupancy of close to 80%.
