Goldman Sachs Affiliate to Buy Equity Inns for $1.26 Billion

Hotel real estate investment trust Equity Inns said it has agreed to be purchased by an affiliate of Goldman Sachs for about $1.26 billion in cash.

The deal also involves the assumption of $940 million in debt.

Equity Inns owns 132 hotels in 35 states and focuses on the midscale, limited-service and the upscale, extended-stay segments. Brands include Courtyard, Residence Inn, Embassy Suites and Hampton Inn.

"Equity Inns' strategy of aligning itself with the leading brands in the lodging industry has proven highly effective," Jonathan Langer, managing director of Goldman Sachs' Real Estate Principal Investment Area, said in a release.

Goldman Sachs affiliate Whitehall Street Global Real Estate Limited Partnership 2007 is managing the deal.

The transaction is the latest in a string of hotel REIT buyouts this year that have included deals for Highland Hospitality, Innkeepers USA Trust, Winston Hotels and Eagle Hospitality Properties Trust.

"Private equity is able to raise capital at a relatively low cost and they're willing to leverage up on this real estate more than a company can," said Smedes Rose, an analyst with Calyon Securities (USA) Inc.

Equity Inns has about 54.7 million shares outstanding, according to Thomson Financial.

The purchase price of $23 a share is an approximately 28% premium over Equity Inns' 90 day average closing share price and a premium of about 19% over its closing price of $19.36 on Wednesday.

There is no financing condition to close the acquisition and the deal is expect to close in the fourth quarter, subject to Equity Inns' shareholder approval.

Equity Inns officials said before the deal that they planned more than $200 million in acquisitions, focusing mostly on California, Nevada, New Mexico and Florida.

The company is also in the process of converting 18 AmeriSuites into Hyatt Place Hotels, at a projected cost of between $55 million and $65 million.