CHICAGO (AP) — Strategic Hotels & Resorts Inc. said Friday that it reached a deal to buy New York City's Essex House Hotel from the Dubai Investment Group for about $362.3 million.
The Chicago-based real estate investment trust said the deal includes 509 hotel rooms, nine condominium units and "significant hotel-level cash reserves." It is expected to close on or before Sept. 7.
Strategic Hotels said it has arranged for $190 million in first mortgage financing from Bank of America, with the rest of the purchase price to be funded in cash. The company said it's looking at joint venture options and other alternatives, including asset sales, as ways to fund the rest of the purchase.
In connection with the deal, Strategic Hotels said it signed a 50-year management agreement with Marriott International Inc. to rebrand the hotel as the JW Marriott Essex House New York.
Under that deal, Marriott will guarantee the net operating income of the hotel up to $21.5 million per year for eight years, subject to maximum funding by Marriott of $14 million in 2013 and $12 million in each year from 2014 to 2020. Total cumulative funding by Marriott is capped at $40 million, the company said.
Strategic Hotels said it plans to invest about $18.3 million to improve and renovate the property.
In midday trading, shares of Strategic Hotels were flat at $5.94, while Marriott shares rose 18 cents to $37.99.