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): July 24, 2015
Strategic Hotels & Resorts, Inc.
(Exact name of registrant as specified in its charter)
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Maryland (State or other jurisdiction of incorporation) | | 001-32223 (Commission File Number) | | 33-1082757 (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.):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
In connection with the Put Option Exercise (as defined below), the borrowers under the $225 million mortgage loan (the “Mortgage Loan”) secured by the JW Marriott Essex House Hotel (the “Hotel”) became 100% owned by certain indirect subsidiaries of Strategic Hotels & Resorts, Inc. (the “Company”). The Mortgage Loan bears interest at a rate of LIBOR plus 2.95% per annum and matures in January 2020 assuming all extension options are exercised. The information contained in “Item 3.02 – Unregistered Sales of Equity Securities” of this Current Report on Form 8-K is incorporated herein by reference.
Item 3.02 Unregistered Sales of Equity Securities.
As previously disclosed, on September 14, 2012, in connection with the closing of the acquisition of the Hotel, the Company established a joint venture arrangement (the “Joint Venture”) with affiliates of KSL Capital Partners, LLC (collectively, the “Joint Venture Partners”) to fund the equity portion of the acquisition of the Hotel. Pursuant to the agreements establishing the Joint Venture (the “Joint Venture Agreements”), among other things, (i) the Company owned 51% of the Joint Venture and served as the managing member and the asset manager of the Hotel and (ii) at any time prior to September 14, 2015, the Joint Venture Partners had the right to exchange their respective interests in the Joint Venture for shares (the “Exchange Shares”), of the Company’s common stock in accordance with the terms of the Joint Venture Agreements (the “Put Option”) at an exchange rate per Exchange Share of the greater of (a) $7.50 and (b) the 20 day volume-weighted average price per share of the Company’s common stock as of the date the Joint Venture Partners exercised the Put Option.
On July 24, 2015, the Joint Venture Partners exercised the Put Option (the “Put Option Exercise”). In connection with the Put Option Exercise and in accordance with the terms of the Joint Venture Agreements, among other things, (i) the Company will issue an aggregate of 6,595,449 Exchange Shares to the Joint Venture Partners and (ii) the Joint Venture will terminate. The issuance of the 6,595,449 Exchange Shares in connection with the Put Option Exercise will be made in reliance upon the exemption from registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended.
Item 7.01 Regulation FD Disclosure.
A copy of the press release announcing, among other things, the Put Option Exercise 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 attached hereto, shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any incorporation by reference language in any such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
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Exhibit Number | Description |
99.1 | Press Release dated July 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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July 30, 2015 | By: | /s/ Paula C. Maggio |
| Name: | Paula C. Maggio |
| Title: | Executive Vice President, General Counsel & Secretary |
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EXHIBIT INDEX
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Exhibit Number | Description |
99.1 | Press Release dated July 29, 2015 |
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| COMPANY CONTACTS: Diane Morefield EVP, Chief Financial Officer Strategic Hotels & Resorts, Inc. (312) 658-5740
Jonathan Stanner SVP, Capital Markets, Acquisitions & Treasurer Strategic Hotels & Resorts, Inc. (312) 658-5746
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FOR IMMEDIATE RELEASE
WEDNESDAY, JULY 29, 2015
STRATEGIC HOTELS & RESORTS ANNOUNCES ACQUISITION OF THE REMAINING INTEREST IN THE JW MARRIOTT ESSEX HOUSE HOTEL
CHICAGO, IL – July 29, 2015 - Strategic Hotels & Resorts, Inc. (NYSE: BEE) today announced that it has acquired the remaining 49 percent ownership interest in the 514-room JW Marriott Essex House hotel. The Company previously owned a 51 percent ownership position in the asset through a joint venture with certain affiliates of KSL Capital Partners, LLC (“KSL”). Pursuant to the terms of the joint venture agreements, KSL exercised a contractual put option of its equity interests in the asset and the Company will issue to certain affiliates of KSL an aggregate of 6,595,449 shares of common stock priced at $12.82 per share, or an implied valuation of $84.6 million. The transaction values the asset at a gross valuation of approximately $397.6 million, which includes $6.3 million of value for three owned condominiums, $2.2 million of cash currently held within the joint venture, and the existing $225.0 million mortgage financing.
"We are very pleased to acquire the remaining interest in the JW Marriott Essex House hotel from our partner, KSL," commented Raymond L. “Rip” Gellein, Chairman and Chief Executive Officer of Strategic Hotels & Resorts, Inc. "Under our joint ownership we created substantial incremental value, with EBITDA projected to have increased over six times by the end of 2015. There continues to be significant upside in this iconic hotel, which is situated on Central Park. The New York City market is long-term one of the most outstanding travel markets in the world, and we are confident that our efforts to reposition the hotel will drive favorable future growth. This transaction also represents the acquisition of the sole remaining joint venture interest in our best-in-class portfolio of hotels and resorts, further simplifying our balance sheet."
The net hotel purchase represents an approximately $757,000 per key valuation. The acquired 49 percent interest in the hotel is projected to generate an incremental approximately $5.5 million of EBITDA in the remaining five months of 2015.
About the Property
Towering 40 floors and offering commanding views of Central Park, Essex House is among the most luxurious and recognized hotels in Manhattan. Quintessentially New York, the Hotel has played host to world dignitaries and celebrities alike since opening in 1931. The building underwent a comprehensive $90 million renovation in 2007. Today, the Hotel features world-class amenities including a full-service spa and fitness center, a fine-dining restaurant and well-appointed meeting and event spaces. The 514 guestrooms offer stylish furnishings that celebrate the property’s rich history while offering guests all the comforts of a luxury hotel.
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 and Europe. The Company currently has
ownership interests in 18 properties with an aggregate of 8,199 rooms and 851,000 square feet of multi-purpose meeting and banqueting space. For a list of current properties and for further information, please visit the Company’s website at www.strategichotels.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 Company’s future financial results, stabilization in the lodging space, 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 disruptions 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 Securities and Exchange Commission, 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.