DALLAS—Ashford Inc. has acquired a controlling interest in a privately held company that conducts the business of Pure Rooms for approximately $97,000 in cash consideration (excluding transaction costs). Pure Rooms utilizes state-of-the-art purification technology to create allergy-friendly guestrooms. Pure Rooms currently has contracts in place with approximately 160 hotels (approximately 2,400 rooms) throughout the United States.
Pure Rooms’ patented seven-step purification process treats a room’s surfaces, including the air, and removes up to 99% of pollutants, according to the company. Hotel rooms participating in this program typically achieve between a $20 and $30 premium per night. Based on historical performance, Ashford’s asset managed hotels that have been included in the Pure Rooms program have experienced an internal rate of return of between 50-70% on the Pure Rooms investment.
In addition to owning a 70% interest in the common equity of Pure Rooms, Ashford owns $300,000, or 50%, of the Series B-2 Preferred Equity of Pure Rooms. The total capitalization of Pure Rooms also includes approximately $475,000 of bank debt and $200,000 of Series B-1 Preferred Equity, which will be senior to Ashford’s investment. During the twelve months ended January 31, 2017, Pure Rooms had net income of approximately $11,000 and adjusted EBITDA of approximately $472,000. The implied total purchase price represents, as of January 31, 2017, a trailing 12-month adjusted EBITDA multiple of 2.9x, according to the company’s preliminary estimates based on unaudited operating financial data provided by Pure Rooms.
After inclusion of all planned Ashford Hospitality Trust Inc. and Ashford Hospitality Prime Inc. hotels in the Pure Rooms program over the next 24 months and without any additional growth, net income and adjusted EBITDA are expected to increase by approximately $434,000 and $257,000, respectively. Ashford expects Pure Rooms to initially contribute approximately $0.07 to its adjusted net income per share. Pure Rooms should add approximately $0.15 to the company’s adjusted net income per share after all planned Ashford Hospitality Trust and Ashford Hospitality Prime hotels are included in the Pure Rooms program, according to the company. Pure Rooms has also made progress in additional vertical markets, such as assisted living, cruise ships and office buildings, to drive additional growth.
Existing management for Pure Rooms will remain in place, and Brian Brault will retain the title of CEO.