Marriott to pay $210M for Gaylord hotel brand -- Gazette.Net


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Gaylord National Resort and Convention Center, the centerpiece hotel of National Harbor in Oxon Hill, is set to get a new manager: Marriott International.

The Bethesda hotel giant agreed to acquire the Gaylord brand from Gaylord Entertainment of Nashville, Tenn., for $210 million, according to a Marriott statement. The 35-year deal also includes management of Gaylord’s other hotels: its marquee Grand Ole Opry complex in Nashville; Gaylord Palms in Kissimmee, Fla.; and Gaylord Texan in Grapevine, Texas. Together, the four hotels, which will continue to bear the Gaylord brand, encompass about 7,800 rooms and 2 million square feet of space for meetings and other events.

As part of the deal, Gaylord will drop plans to develop another convention hotel complex near Denver.

Marriott’s stock closed up 1.1 percent Thursday; Gaylord’s shot up 10.1 percent.

"Gaylord properties will benefit from Marriott's economies of scale, including lower costs for central reservations, procurement and other services, plus strong sales, revenue management, marketing and distribution systems, while Marriott will be able to capture even a greater share of the major event market,” Marriott CEO Arne Sorenson said in the statement. “Gaylord's ‘everything-in-one-place’ properties are very attractive to group meeting planners. As a new [real estate investment trust] owner, Gaylord Entertainment should benefit from improved hotel profitability associated with Marriott's ability to generate substantial cost savings and incremental demand."

The deal hinges, in part, on Gaylord shareholders approving the company’s conversion into a real estate investment trust. That vote is expected in August; the deal is expected to close by October.

Marriott will promote the Gaylord hotels as a separate brand but will integrate their marketing into its 38 million-member guest rewards program, which helps steer visitors to its 3,700 properties worldwide.

The deal offers Marriott a chance to enhance its revenues by investing in a growing hotel brand that has established itself as a convention and destination developer with its Opryland Resort and Convention Center, Sorenson said during a conference call with Wall Street analysts.

“We are quite optimistic there will be additional Gaylords over time,” he said, adding that they are “big boxes” that take years to get off the ground.

Marriott was one of four companies to bid on the Gaylord brand, which the Tennessee company marketed after conducting a strategic review to improve its debt structure.

Gaylord’s hotels have performed better than the industry average but the company’s growth has been hampered by tight credit conditions since the financial market collapse in 2008, company Chairman and CEO Colin V. Reed said during the conference call. Failure to restructure Gaylord’s finances could have made the company vulnerable to low-ball takeover offers from outside investors, he said.

“We’re not going to have a fire sale for these brands,” Reed said.

Gaylord said the deal will result in a balance sheet that would put it at the top of the hotel real estate investment trust heap. Marriott will receive a 2 percent base management fee and an incentive fee linked to improvement in hotel profitability. Gaylord expects that shifting the cost of management to Marriott will yield net annual savings of $33 million to $40 million, with more than $20 million coming from staff cuts and other efficiencies at the corporate level.

Gaylord said it recently commissioned a survey of more than 400 meeting planners who said that Marriott ranked as the “undisputed top brand in terms of loyalty programs, pricing structure, meeting space, sales process, accommodations, and destinations.”

Private tenants seeking big blocks in Montgomery County

Private tenants are heating up Montgomery County’s office market, where the temperature has long been set by the needs of federal agencies.

At least five companies are looking for big blocks of space larger than 100,000 square feet, according to a recent Tenants in Market report by Transwestern. The broker said Fannie Mae and Intelsat — both in Washington, D.C. — are focusing on the Bethesda-Chevy Chase submarket.

Both tenants would represent major coups for Maryland, which has lost several major employers and thousands of jobs to its neighbors in recent years. These relocations include engineering giant Bechtel, which is moving 625 jobs from Frederick to Reston, Va., this year, but will keep 1,250 jobs at its Frederick power division; real estate information service CoStar, which moved its headquarters and 300 jobs from Bethesda to Washington; and information technology firm Acentia, which is moving its headquarters and 200 jobs from Silver Spring to Falls Church, Va.

But Fannie Mae is looking for 300,000 to 350,000 square feet over the Maryland line and Intelsat is seeking 200,000 square feet. The timing of both moves is undecided. A Fannie expansion into Montgomery County could depend on whether the Obama administration, or its successor, acts to end Fannie’s existence as a government sponsored enterprise. Meanwhile, Intelsat is trying to sell its headquarters in Washington.

Military contractor Lockheed Martin also is looking at consolidating from several locations and is in the market for 260,000 square feet of space in Maryland, Transwestern reported.

Another company that might be on the move is Sodexo, the Paris food and facilities services company, which has 181,146 square feet of office space in Gaithersburg. The company has been looking at Maryland sites since February, possibly looking to improve its deal at CBRE’s 9801 Washingtonian Blvd., where lease termination rights could be exercised in December 2013, according to Transwestern.

Finally, Emmes Corp., a clinical data services firm, is looking for 80,000 to 100,000 square feet.

RLJ snags Marriott in downtown Bethesda for $82M

RLJ Lodging Trust of Bethesda has paid $146.5 million for two hotels, including the 187-room Residence Inn by Marriott Bethesda Hotel Downtown.

The other is the 226-room Courtyard New York Manhattan/Upper East Side.

“We were able to leverage our extensive network and strong industry relationships to source and execute accretive transactions in key gateway cities,” CEO Thomas J. Baltimore Jr. said in a statement. “We expect these two new additions to yield strong results and strengthen our overall portfolio.”

RLJ paid $82 million for the New York hotel through a bankruptcy court-ordered sale, or about $363,000 per key — “considerably lower than other recently traded hotels in Manhattan and ... a significant discount to replacement cost,” according to the real estate investment trust.

The Bethesda hotel was an off-market purchase for $64.5 million, or about $345,000 per key.

Both hotels are in “key gateway markets [that] exhibit high growth and high barriers-to-entry characteristics,” said RLJ, which now owns 143 hotels in 20 states and Washington, D.C.

Federal Capital buys Hyattsville apartment complex for $14.75M

Federal Capital Partners announced the $14.75 million acquisition of Ager Road Station, a 234-unit garden apartment complex in Hyattsville across the street from the West Hyattsville Metro Station.

The Chevy Chase company bought 19 brick buildings within easy reach of the University of Maryland, and Howard and Catholic universities, as well as University Town Center, Prince George’s Plaza and other local restaurants and retailers.

The property, which is 98 percent occupied, will be renamed North Pointe and undergo $2.5 million in renovations for common areas and interior apartment upgrades. The company also owns the 242-unit Toledo Plaza apartments in the same submarket.

“The Hyattsville submarket as a whole has excellent demand dynamics, with Delta Associates reporting 97 percent occupancy in Class B apartments for the first quarter of 2012,” Federal Capital managing partner Alex Marshall said in a news release.

The off-market deal is the company’s sixth multifamily acquisition in the past six months. The company said it is aggressively pursuing other multifamily investments in this region and other mid-Atlantic markets.

Hanover industrial building sells for $11.7M

An affiliate of Industrial Income Trust bought a 198,369-square-foot industrial building in Hanover for $11.65 million, according to CBRE, which represented the seller, Bavar Properties Group.

The fully leased, multi-tenant building at 7463 New Ridge Road is part of the Baltimore Commons Business Park, which is just east of the Baltimore-Washington Parkway interchange with Md. 100.

“Industrial assets in this region continue to attract some of the most aggressive capital in the country due to projected rent growth,” Bo Cashman, CBRE senior vice president, said in a statement. “This property presented a rare opportunity for an investor to buy into in a high-demand market that is otherwise constrained by a lack of developable land and a high cost of new construction.”

CBRE’s marketing of the property generated a total of 17 offers preceding the sale. The rear-loading property also is served by rail and is near Baltimore-Washington International Thurgood Marshall Airport.

Brick Yard office park lands $20.1M in financing

Broker HFF Dallas announced that it has arranged a $20.1 million financing for a three-building, 272,938-square-foot industrial portfolio in the Brick Yard Business Park in Laurel.

A joint venture between Jackson-Shaw and Prudential Real Estate Investors secured the seven-year, 3.98 percent fixed-rate loan through Principal Global Investors.

The Brick Yard buildings, completed in 2009, are part of a larger mixed-use complex that spans 125 acres of master-planned residential, office, industrial and retail space. Plans call for almost 2.3 million square feet of space.

The Brick Yard is north of the Capital Beltway halfway between Washington and Baltimore.

Commercial real estate news items may be mailed to Robert Rand, The Business Gazette, 9030 Comprint Court, Gaithersburg, MD 20877; emailed to rrand@gazette.net; or faxed to 301-670-7183.