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Real estate fund closes $1.2 billion merger deal with hotel chain

A Virginia real estate investment fund recently merged with a hotel chain in a deal worth $1.2 billion, including the assumption of debt. Richmond-based Apple REIT Six Inc. announced it merged with BRE Select Hotels Corp. (BRE), which is part of Blackstone Real Estate Partners VII. The deal allows BRE to expand into new markets, adding to its portfolio of hotels.

This merger gives BRE 66 hotel properties located across 18 states for a total of more than 7,000 hotel rooms. If the net costs and payments of some ongoing regulatory and litigation matters exceed $3.5 million, the final value of this deal to Apple REIT Six shareholders could end up adjusted downward. However, as it stands now, the new company's shares have a cash value of $9.20 plus a share of BRE Select Hotels' preferred stock, worth $1.90 per share, for a total value of $11.10 per share. Richmond-based Apple REIT Cos. is the parent company of Apple REIT Six and also runs several other funds. Blackstone is one of the largest companies in commercial real estate transactions and operates a New York-based global fund.

Although Apple REIT Six shareholders gave the green light to proceed with this deal earlier in the month, the merger did not close until May 14. In addition, the U. S. Securities and Exchange Commission is looking into disclosures that four of the company's not listed public real estate investment trusts made to ensure that they were sufficient.

Apple Reit Six turned to a local law firm skilled in handling mergers and acquisitions as counsel for the deal. A large nationwide bank provided financial advice. It is important to get advice from those experienced in business acquisitions and mergers when contemplating this type of deal.

Source: Virginia Business, "Deal closes on $1.2 billion merger of Richmond real estate fund", May 15, 2013

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