With a $3 billion agreement to acquire San Antonio-based La Quinta Inns, Meditrust has taken more steps toward building a diversified real estate operating company.
The Needham Heights, Mass.-based real estate investment trust agreed to buy the midpriced hotel chain for $26 per share, including stock and cash. The REIT also will assume $900 million in outstanding La Quinta debt. The deal is expected to close in the second quarter.
On news of the proposed purchase, Duff & Phelps Credit Rating Co., New York, placed Meditrust's BBB senior debt rating on "Rating Watch -- Down" and La Quinta's BBB senior debt and BB subordinated debt ratings on "Rating Watch -- Uncertain." The ratings, which affect a total of $1.7 billion in debt, reflect concerns over Meditrust's "moderate increase in business risk" and "potential for reduced financial flexibility," the agency says.
New York-based Moody's Investors Service, meanwhile, confirmed its long-term debt ratings for Meditrust and La Quinta.
Abraham Gosman, Meditrust's chairman, says the deal creates "a platform for a lodging and leisure sector within Meditrust." La Quinta Inns owns and operates 270 hotels with 35,000 rooms in 28 states. Meditrust, the nation's largest healthcare REIT, invests in more than 500 healthcare facilities in 41 states and has a market capitalization of more than $4.5 billion.
Meditrust set the stage for branching beyond healthcare last November when it acquired Santa Anita Cos., a "paired-share" REIT that owns Santa Anita Park horse-racing track in Arcadia, Calif. (Dec. 8, p. 30). That transaction opened the door for Meditrust to operate businesses as well as own real estate. The company has about $2.5 billion in assets.