AR Capital Hospitality Trust Acquires Six Hotels for $108.3 Million, Reinstates PSA
American Realty Capital Hospitality Trust Inc., a publicly registered non-traded real estate investment trust, finalized the purchase of six hotels for $108.3 million from Summit Hotel Properties Inc. (NYSE: INN), a publicly-traded hotel real estate investment trust.
The six hotels are branded either by Marriott International or Hilton Hotels & Resorts and are located in Bellevue and Spokane, Washington, and Denver and Fort Collins, Colorado.
The transaction represents the second tranche of purchases that the company announced it will be acquiring from Summit.
As reported by The DI Wire in June 2015, the REIT agreed to acquire a portfolio of 26 hotels in three tranches from Summit for approximately $350 million. The company closed on 10 hotels in the portfolio in October for $150 million, but terminated the purchase of the remaining 10 hotels earlier this year.
The REIT and Summit agreed to reinstate their previously terminated agreement to purchase the 10 hotels, representing the balance of the 26-hotel portfolio acquisition. ARC Hospitality is scheduled to close on these remaining properties in late 2016.
“We are pleased to acquire these high-quality lodging properties, located in key Colorado and Washington markets, from Summit,” commented Jonathan P. Mehlman, chief executive officer of ARC Hospitality. “The hotels have been purchased at what we believe is an attractive yield and price per key. Moreover, today’s transaction also provides us the opportunity to buy the remaining ten hotels under our original 26-hotel contract with Summit. This transaction shows that we are continuing to execute on our vision of driving long-term shareholder value through the creation of a best-in-class select-service portfolio with strong brands and durable cash flows.”
Edward Hoganson, chief financial officer of ARC Hospitality, added, “With the increased volatility in the capital markets, we have reviewed our acquisitions carefully. Summit has been a great business partner, and we are pleased to be buying another high-performing hotel portfolio transaction with them. We believe our overall portfolio will continue to generate strong, durable income moving forward. Further, we have selected Crestline Hotels and Resorts and Interstate Hotels & Resorts to manage the hotels in this portfolio because of the firms’ proven track record of driving premium revenues and delivering an excellent guest experience.”
ARC Hospitality financed the acquisition of these hotels with a draw on its term loan facility, which was arranged by Deutsche Bank AG New York Branch and Deutsche Bank Securities, Inc. Summit also provided the company with financing for a portion of the transaction.
ARC Hospitality’s investment strategy focuses on acquiring stable, institutional quality and strategically located lodging properties in North America branded by premium national hotel brands. This transaction increases ARC Hospitality’s lodging portfolio to 142 hotels totaling 17,351 rooms across 32 states.
AR Capital stopped offering and selling new investment products after December 31st, including shares of American Realty Capital Hospitality Trust. Realty Capital Securities, the REIT’s dealer manager, also suspended the sales activities it performed for its initial public offering. These changes followed a series of scandals involving AR Capital and its affiliates, originally stemming from intentional accounting irregularities at ARCP revealed in October 2014 and concluding with proxy fraud charges being filed by the state of Massachusetts a year later.
