Summit Hotel Properties Acquires 26 Hotel Portfolio for $776.5 Million

Embassy Suites by Hilton Amarillo Downtown - Exterior
Embassy Suites by Hilton Amarillo Downtown

Summit Hotel Properties, Inc. (NYSE: INN) yesterday announced that it has completed an initial closing of the previously announced portfolio acquisition through its existing joint venture with GIC from affiliates of NewcrestImage.  The initial closing included 26 of the 27 hotels totaling 3,533 guestrooms, two parking structures, and various financial incentives.  The remaining hotel to be acquired is the currently under construction 176-guestroom Canopy by Hilton New Orleans which is nearing completion, and the joint venture expects to close on the acquisition of the hotel during the first quarter 2022.

The total consideration for the Transaction is comprised of $776.5 million, or $209,000 per key, for the 27-hotel portfolio, $24.8 million for the two parking structures, and $20.7 million for the various financial incentives.  The Transaction is expected to be immediately accretive to adjusted FFO per share, generate a stabilized net operating income yield of 8.0% to 8.5% including future capital investment and excluding any ancillary joint venture fees earned by Summit, and be leverage neutral to the Company’s balance sheet while preserving existing liquidity of nearly $450 million.

Capital Structure and Financing

Upon closing of the Transaction, the Company will fund its 51% equity contribution with a combination of common operating partnership units and preferred operating partnership units.  The Company will issue 15.865 million common operating partnership units valued at $160 million to seller affiliates, based on the 10-day trailing VWAP of $10.0853 per unit as of November 2, 2021.  The Company will also issue $50 million worth of newly designated 5.25% Series Z Preferred Units.  The preferred operating partnership units will be entitled to distributions at a rate of 5.25% per annum, may be redeemed by the holder on the 10th or 11th anniversary of the issuance date and may be called by the Company at any time after the 5th anniversary of the issuance date.  GIC’s 49% equity contribution will be in the form of cash.

The Company has secured a $410 million financing commitment from Bank of America and Wells Fargo Bank which will be the primary debt financing for the Transaction.  The term loan has a four-year initial term with a one-year extension option, subject to certain conditions.  The loan is interest-only and provides for a floating interest rate equal to SOFR + 2.86%. 

Portfolio Asset Listing

PROPERTY NAME

MSA

STATE

KEYS /

SPACES

YEAR
BUILT

AC Hotel by Marriott Houston Downtown

Houston

TX

195

2019

AC Hotel by Marriott Oklahoma City Bricktown

Oklahoma City

OK

142

2017

AC Hotel by Marriott Dallas Downtown

Dallas

TX

128

2017

Residence Inn by Marriott Dallas Downtown

Dallas

TX

121

2017

AC Hotel by Marriott Frisco Station

Dallas

TX

150

2019

Residence Inn by Marriott Frisco Station

Dallas

TX

150

2019

Canopy by Hilton Frisco Station

Dallas

TX

150

2020

Canopy by Hilton New Orleans (1)

New Orleans

LA

176

2021

Courtyard by Marriott Amarillo Downtown

Amarillo

TX

107

2010

Courtyard by Marriott Grapevine

Dallas

TX

181

2013

TownePlace Suites by Marriott Grapevine

Dallas

TX

120

2013

Embassy Suites by Hilton Amarillo Downtown

Amarillo

TX

226

2017

Hampton Inn & Suites by Hilton Dallas Downtown

Dallas

TX

176

2016

Hilton Garden Inn by Hilton College Station

Bryan-College Stn

TX

119

2013

Hilton Garden Inn by Hilton Longview

Longview

TX

122

2015

Hilton Garden Inn by Hilton Grapevine

Dallas

TX

152

2021

Holiday Inn Express & Suites Grapevine

Dallas

TX

95

2000

Holiday Inn Express & Suites Oklahoma City Bricktown

Oklahoma City

OK

124

2015

Homewood Suites by Hilton Midland

Midland-Odessa

TX

118

2014

Hyatt Place Dallas Grapevine

Dallas

TX

125

2000

Hyatt Place Dallas Plano

Dallas

TX

127

1998

Hyatt Place Lubbock

Lubbock

TX

125

2016

Hyatt Place Oklahoma City Bricktown

Oklahoma City

OK

134

2018

Residence Inn by Marriott Tyler

Tyler

TX

119

2014

SpringHill Suites by Marriott Dallas Downtown

Dallas

TX

148

1997

SpringHill Suites by Marriott New Orleans

New Orleans

LA

74

2018

TownePlace Suites by Marriott New Orleans

New Orleans

LA

105

2018

Total Hotel Portfolio

3,709

Dallas Parking Structure

Dallas

TX

335

2019

Frisco Parking Structure

Dallas

TX

667

2019

Total Parking

1,002

Total NCI Portfolio

3,709 / 1,002

(1) Canopy by Hilton New Orleans is still under construction and expected to open and acquired in Q1 2022.

TRANSACTION VALUE COMPONENTS ($000s)

VALUE

PER KEY

Hotel Portfolio

27 Hotels / 3,709 Guestrooms

$          776,500

$                 209

Parking Structures

2 Structures / 1,002 Parking Spaces

24,800

Subtotal

$          801,300

Financial Incentives (1)

20,700

Total

$          822,000

(1) The value of the financial incentives reflects the net present value of the future expected cash flows.

Board Composition

Effective January 13, 2022, Mehul Patel, Managing Partner and Chief Executive Officer of NewcrestImage, was appointed as a director to the Company’s Board of Directors.

Summit Hotel Properties, Inc. is a publicly traded real estate investment trust focused on owning premium-branded hotels with efficient operating models primarily in the Upscale segment of the lodging industry.  As of January  13, 2022, the Company’s portfolio consisted of 100 hotels, 61 of which are wholly owned, with a total of 15,051 guestrooms located in 24 states.  Upon closing of the Canopy by Hilton New Orleans, the Company’s portfolio will consist of 101 hotels, 61 of which are wholly owned, with a total of 15,227 guestrooms located in 24 states.