JER acquires Highland REIT for $2bn(2)

Private equity real estate firm JER Partners is buying upscale US lodging REIT Highland Hospitality in a $2 billion deal.

Private equity real estate firm JER Partners is acquiring Highland Hospitality, a New York Stock Exchange-listed real estate investment trust, for $2 billion (€1.5 billion) in cash, including the assumption of $260 million in debt.

In the deal, which will come out of JER’s fourth US-focused fund, McLean, Virginia-based JER will pay stockholders $19.50 per share, a premium of 15 percent of the REIT’s three-month average closing share price. After the merger, JER will pay $25 per share of preferred stock.

“Highland has assembled a premium portfolio of upscale properties,” Cia Buckley, head of JER’s US fund business, said in a statement. “JER intends to undertake a focused capital investment program to position the portfolio for further growth.”

McLean, Virginia-based Highland owns 27 hotels with 8,379 rooms across 14 US states and the District of Columbia. The company focuses on upscale and premium limited-service properties under the Marriott, Hilton, Ritz-Carlton, Westin, Hyatt, Sheraton, Renaissance, Hilton Garden Inn, Wyndham and Residence Inn banners.

JER, which is the private investment arm of the JE Robert Companies, has been active in the hotel sector.  Last month, the firm acquired the 394-room Fairview Park Marriott Hotel in Washington, DC for $109 million.

In 2005, JER made a $75-million investment in Longhouse Hospitality, which operates a chain of extended-stay hotels in the Southern US. The same year, the firm acquired the Westin North Michigan Avenue hotel in Chicago for $137 million, which it sold in March 2006 for $215 million.