Summit Hotel Properties, Inc. (NYSE: INN) reported today that it has completed the acquisition of the 150-guestroom Residence Inn by Marriott Boston Watertown and the previously announced sale of the 148-guestroom Hyatt Place Fort Myers/at the Forum.
“We are thrilled with the acquisition of the Residence Inn by Marriott Boston Watertown, which represents a continuation of our capital allocation strategy by acquiring an exceptionally well-located hotel in a vibrant market,” said Chairman, President and Chief Executive Officer Daniel P. Hansen. “With the completion of the sale of the Hyatt Place Fort Myers, our capital recycling program has generated $107 million of gross proceeds year-to-date at a blended capitalization rate of 7.7%, including estimated capital expenditures. We have successfully redeployed a portion of these proceeds through this off-market transaction into a high-quality asset with a superior RevPAR, EBITDA margin and going-in yield than the hotels that were sold. This acquisition will further enhance our diversified portfolio of premium-branded hotels with efficient operating models and will lead the portfolio in absolute RevPAR and hotel EBITDA margin.”
On September 12, 2018, the Company completed the acquisition of the 150-guestroom Residence Inn by Marriott Boston Watertown for a purchase price of $71.0 million, or approximately $473,000 per key. Opened in August 2016, the hotel will require very limited capital expenditures, and the Company estimates a capitalization rate of 8.1 percent based on management’s current estimate of the hotel’s forward twelve-month net operating income. The Company estimates that the hotel will contribute approximately $1.7 million of EBITDAre through the remainder of 2018.
Located in the emerging submarket of Watertown near Cambridge, along the Charles River in Boston and adjacent to the new mixed-use development known as “Arsenal Yards,” the Residence Inn by Marriott Boston Watertown is uniquely positioned to capture business from a large and diverse demand base. Prestigious universities such as Harvard, MIT, Boston University, Boston College, and Tufts University are within a few miles of the hotel and Kendall Square, Boston’s premier tech hub and home to tech giants Microsoft, Facebook, Google, and Amazon as well as small startups and biotech companies, are in close proximity as well. The hotel is across the street from the transformative redevelopment of Arsenal Yards, which will provide an additional 200,000 square feet of office space, 425 residences, and 250,000 square feet of retail, including a luxury movie theater, numerous restaurants and shops, and a grocery store. In addition, the hotel’s location, approximately six miles from downtown Boston, will allow the hotel to garner demand from one of the nation’s strongest convention markets.
On September 28, 2018, the Company completed the sale of the 148-guestroom Hyatt Place Fort Myers/at the Forum located in Fort Myers, FL for a total sales price of $16.5 million, or approximately $111,000 per key. The sales price, plus estimated foregone capital improvements, represents a capitalization rate of 7.5 percent based on the hotel’s net operating income for the twelve months ended August 31, 2018. The Company included the sale of this hotel in its updated 2018 guidance provided on August 1, 2018 and estimates that the hotel would have contributed approximately $0.3 million of EBITDAre from the sale date through the remainder of 2018.