UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant
to Section 13 OR 15(d)
of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 28, 2015
Strategic Hotels & Resorts, Inc.
(Exact name of registrant as specified in its charter)
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| Maryland |
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001-32223 |
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33-1082757 |
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of incorporation) |
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(Commission
File Number) |
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(IRS Employer
Identification No.) |
200 West Madison Street, Suite 1700
Chicago, Illinois 60606
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (312) 658-5000
Not Applicable
(Former
name or former address, if changed since last report.)
Check the appropriate box below
if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 1.01 |
Entry into a Material Definitive Agreement. |
On January 28, 2015 (the
“Execution Date”), Strategic Hotels & Resorts, Inc. (the “Company”) and SHR MLB, LLC (the “Purchaser”), a wholly-owned subsidiary of Strategic Hotel Funding, L.L.C., the operating
partnership of the Company, entered into a purchase and sale agreement (the “Purchase and Sale Agreement”) with Laguna Beach Luxury Hotel LLC (the “Seller”), and Ohana Holdings, L.L.C. (the “Seller
Affiliate”), pursuant to which the Seller agreed to sell to the Purchaser and the Purchaser agreed to acquire from the Seller the hotel commonly known as the Montage Laguna Beach Resort (the “Hotel”) and related property
for an aggregate purchase price of $360,000,000, which includes (i) $100,000,000 of the Company’s common stock, par value $0.01 per share (the “Common Stock”), valued at a price of the volume-weighted average price of a
share of Common Stock over the 10 trading days ending on and including the date five business days prior to the Execution Date, (ii) approximately $110,000,000 in cash and (iii) the assumption of $150,000,000 of financing (the
“Mortgage Loan Assumption”) encumbering the Hotel, subject to certain adjustments provided for in the Purchase and Sale Agreement (the “Acquisition”).
The Acquisition closed on January 29, 2015 (the “Closing Date”). On the Closing Date, 7,347,539 shares of Common Stock
(the “Shares”) were issued to the Seller Affiliate in accordance with the terms and conditions of the Purchase and Sale Agreement. The issuance of the Shares pursuant to the Purchase and Sale Agreement was made in reliance upon the
exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”).
In addition, as contemplated by the Purchase and Sale Agreement, on the Closing Date, the Company entered into a registration rights agreement
(the “Registration Rights Agreement”) with the Seller Affiliate pursuant to which, among other things, the Company agreed to file a resale shelf registration statement with the Securities and Exchange Commission (or a prospectus
supplement to an effective automatic shelf registration statement) to register the resale of the Shares as soon as reasonably practicable but not later than the fifth business day after the Closing Date.
In connection with the Mortgage Loan Assumption, on the Closing Date, the Purchaser entered into an amended and restated loan agreement (the
“Loan Agreement”) with Massachusetts Mutual Life Insurance Company, as lender (the “Mortgage Loan”). Pursuant to the Loan Agreement, the principal amount of the Mortgage Loan is $150,000,000, which bears interest at
a fixed rate of 3.90% per annum and matures in August 2021. The Mortgage Loan is secured by, among other things, a first mortgage with respect to the Hotel.
The foregoing descriptions of each of the Purchase and Sale Agreement, the Registration Rights Agreement and the Loan Agreement are qualified
in their entirety by reference to the Purchase and Sale Agreement, the Registration Rights Agreement and the Loan Agreement, copies of which will be attached as exhibits to the Company’s annual report on Form 10-K for the year ended
December 31, 2014, which the Company intends to file in February 2015.
| Item 2.01 |
Completion of Acquisition or Disposition of Assets. |
The information set forth above in
“Item 1.01 - Entry into a Material Definitive Agreement” of this Current Report on Form 8-K (this “Current Report”) is incorporated herein by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth above in “Item 1.01 - Entry into a Material Definitive Agreement” of this Current Report is incorporated
herein by reference.
| Item 3.02 |
Unregistered Sales of Equity Securities. |
The information set forth above in “Item
1.01 - Entry into a Material Definitive Agreement” of this Current Report is incorporated herein by reference.
| Item 7.01 |
Regulation FD Disclosure. |
A copy of the press release announcing the Acquisition is
attached to this Current Report as Exhibit 99.1 and is incorporated herein solely for purposes of this Item 7.01 disclosure.
The
information in Item 7.01 of this Current Report, including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), or otherwise subject to the liabilities of such section. The information in Item 7.01 of this Current Report, including Exhibit 99.1, shall not be incorporated by reference into any filing under the Securities
Act or the Exchange Act, regardless of any incorporation by reference language in any such filing.
| Item 9.01 |
Financial Statements and Exhibits. |
| (a) |
Financial statements of business acquired. |
In connection with the Acquisition, any
financial statements that are required to be filed pursuant to this item will be filed by amendment to this Current Report as soon as practicable, but not later than 71 days after the date that this Current Report is required to be filed.
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Pro forma financial information. |
In connection with the Acquisition, any pro forma
financial information that is required to be filed pursuant to this item will be filed by amendment to this Current Report as soon as practicable, but not later than 71 days after the date that this Current Report is required to be filed.
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| Exhibit
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Description |
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| 99.1 |
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Press release dated January 29, 2015 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
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STRATEGIC HOTELS & RESORTS, INC. |
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| January 29, 2015 |
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By: |
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/s/ Paula C. Maggio |
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Name: |
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Paula C. Maggio |
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Title: |
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Executive Vice President, General Counsel & Secretary |
EXHIBIT INDEX
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| Exhibit
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Description |
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| 99.1 |
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Press release dated January 29, 2015 |
Exhibit 99.1
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COMPANY CONTACTS: Diane
Morefield EVP & Chief Financial Officer Strategic Hotels
& Resorts (312) 658-5740
Jonathan Stanner SVP, Capital Markets, Acquisitions &
Treasurer Strategic Hotels & Resorts (312)
658-5746 |
FOR IMMEDIATE RELEASE
THURSDAY, JANUARY 29, 2015
STRATEGIC
HOTELS & RESORTS, INC. ACQUIRES MONTAGE LAGUNA BEACH
CHICAGO – January 29, 2015 - Strategic Hotels & Resorts, Inc.
(NYSE: BEE), today announced that it has acquired the 250-room Montage Laguna Beach from an affiliate of Ohana Real Estate Investors LLC for $360.0 million, plus customary working capital adjustments. The Company funded the acquisition, in part,
through the issuance of 7,347,539 shares of common stock to an affiliated designee of the seller, priced at $13.61 per share, or an implied valuation of $100.0 million. In addition, the Company assumed a $150 million mortgage loan encumbering the
property, priced at a fixed interest rate of 3.90%, which matures in August 2021. The remaining portion of the purchase price was funded with existing cash balances.
Montage Hotels & Resorts will continue to manage the Forbes Five-Star destination resort, which features 250 ocean facing guestrooms and is located
on approximately 30-acres of fee simple owned land sitting atop a 50-foot bluff overlooking the Pacific Ocean. Opened in 2003, the hotel features 60 suites, 16,000 square feet of indoor meeting space, a 20,000 square foot spa, and multiple acclaimed
food and beverage outlets.
“We are thrilled to acquire Montage Laguna Beach, a truly iconic luxury hotel located on one of the best resort settings
in the continental United States. The acquisition is consistent with our strategy of expanding our best-in-class portfolio of irreplaceable and world-class luxury hotels located in North America,” commented Raymond L. “Rip” Gellein,
Chairman and Chief Executive Officer of Strategic Hotels & Resorts, Inc. “The Southern California market generally, and the coastal Orange County market specifically, have been among the highest rated markets in the country and
are poised to continue their strong growth given the diverse set of demand drivers and no competitive supply in the current pipeline as the result of extremely high barriers to entry. The opportunity to acquire a hotel of this prominence is
exceptionally rare and we are delighted to work with the team at Ohana on this transaction as well as beginning what we believe will be a long and successful partnership with Montage, whose exceptional stewardship of this asset over the years has
positioned the company as a pre-eminent operator of luxury hotels and resorts.”
Said Alan Fuerstman, Founder & Chief Executive Officer of
Montage Hotels & Resorts, “We are excited to be working with Strategic Hotels & Resorts, who, as one of the leading luxury hotel owners in our business, share our ongoing commitment to the outstanding hospitality established
at Montage Laguna Beach over many years.”
Strategic Hotels & Resorts
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The purchase price represents a 16.5 times multiple on forecasted 2015 EBITDA of $21.8 million and a 5.0 percent capitalization rate on forecasted 2015 NOI of
$18.1 million.
“Montage Laguna Beach is one of the Southern California resort market leaders with a trailing twelve month RevPAR penetration index
of 185 times and a 2015 budgeted ADR of nearly $600 and Total RevPAR over $1,000, both of which meaningfully exceed the average of these respective metrics in our already industry leading portfolio,” continued Gellein. “Together with
Montage, we will continue delivering a superior guest experience at the hotel while further enhancing operating results by leveraging our industry leading asset management expertise and their ability to deliver market-leading results.”
JLL acted as an advisor on the transaction. The Company was represented by Greenberg Traurig LLP and Paul Hastings LLP on the transaction and Ohana was
represented by Dentons.
About the Company
Strategic
Hotels & Resorts, Inc. is a real estate investment trust (REIT) which owns and provides value-enhancing asset management of high-end hotels and resorts in the United States. The Company currently has ownership interests in 18 properties
with an aggregate of 8,325 rooms and 875,000 square feet of meeting space. For a list of current properties and for further information, please visit the Company’s website at http://www.strategichotels.com.
About Ohana Real Estate Investors LLC.
Ohana Real Estate
Investors (OREI) is a real estate investment and development firm focused on high quality, desirably located hotels and fully serviced residential communities. OREI’s operating portfolio includes the Montage Beverly Hills, the Montage Deer
Valley, and Maravilla Los Cabos, an oceanfront private residential community under development in Cabo San Lucas. The company is currently developing Hanalei Plantation Resort on the island of Kauai and Saggio Hills in Healdsburg, CA. For further
information, please visit www.ohanare.com.
About Montage Hotels & Resorts
Montage Hotels & Resorts is a hotel and resort management company founded by Alan J. Fuerstman in 2002. Designed to serve luxury travelers and
homeowners, Montage Hotels & Resorts is a diverse hotel management company that is the compilation of two hotel collections that cater to the broad range of travel desires and needs of the luxury consumer. Montage Hotels offers comfortable
luxury hotels and residences, with a unique sense of place and spirit, impeccable hospitality and memorable culinary, spa and lifestyle experiences. Pendry Hotels will be a celebration of the best of Southern California, influenced by great
taste-making destinations across the world. Offering anticipatory service and fashion-forward design, Pendry Hotels will open its first hotel in San Diego in 2016. For more information, please visit www.montagehotels.com and www.pendryhotels.com
This press release contains forward-looking statements about Strategic Hotels & Resorts, Inc. (the “Company”). Except for
historical information, the matters discussed in this press release are forward-looking statements subject to certain risks and uncertainties. These forward-looking statements include statements regarding the
Strategic Hotels & Resorts
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Company’s future financial results, positive trends in the lodging industry and the Company’s continued focus on improving profitability. Actual results could differ materially from the
Company’s projections. Factors that may contribute to these differences include, but are not limited to the following: the effects of economic conditions and disruption in financial markets upon business and leisure travel and the hotel markets
in which the Company invests; the Company’s liquidity and refinancing demands; the Company’s ability to obtain, refinance or extend maturing debt; the Company’s ability to maintain compliance with covenants contained in its debt
facilities; stagnation or deterioration in economic and market conditions, particularly impacting business and leisure travel spending in the markets where the Company’s hotels operate and in which the Company invests, including luxury and
upper upscale product; general volatility of the capital markets and the market price of the Company’s shares of common stock; availability of capital; the Company’s ability to dispose of properties in a manner consistent with its
investment strategy and liquidity needs; hostilities and security concerns, including future terrorist attacks, or the apprehension of hostilities, in each case that affect travel within or to the United States, Germany or other countries where the
Company invests; difficulties in identifying properties to acquire and completing acquisitions; the Company’s failure to maintain effective internal control over financial reporting and disclosure controls and procedures; risks related to
natural disasters; increases in interest rates and operating costs, including insurance premiums and real property taxes; contagious disease outbreaks; delays and cost-overruns in construction and development; marketing challenges associated with
entering new lines of business or pursuing new business strategies; the Company’s failure to maintain its status as a REIT; changes in the competitive environment in the Company’s industry and the markets where the Company invests; changes
in real estate and zoning laws or regulations; legislative or regulatory changes, including changes to laws governing the taxation of REITs; changes in generally accepted accounting principles, policies and guidelines; and litigation, judgments or
settlements.
Additional risks are discussed in the Company’s filings with the SEC, including those appearing under the heading “Item 1A.
Risk Factors” in the Company’s most recent Form 10-K and subsequent Form 10-Qs. Although the Company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that
its expectations will be attained. The forward-looking statements are made as of the date of this press release, and the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new
information, future events or otherwise, except as required by law.