American Realty Capital Hospitality Trust Inc., a publicly registered non-traded real estate investment trust, has changed its name to Hospitality Investors Trust Inc. following its transition to a standalone self-managed REIT.
The company also closed the initial $135 million investment from an affiliate of Brookfield Strategic Real Estate Partners II, which committed $400 million in convertible preferred limited partnership units of the REIT’s operating partnership. The OP was re-named Hospitality Investors Trust Operating Partnership, and the remaining $265 million of convertible preferred units will be issued on a delayed draw basis through February 2019.
“We believe the company’s transition to self-management will allow us to operate more cost efficiently in better alignment with our peers and enable us to compete head-to-head with them,” said Edward Hoganson, chief financial officer.
The REIT simultaneously terminated its previous external management agreement with American Realty Capital Hospitality Advisors LLC, an affiliate of AR Global. As part of this transition to self-management, former employees of the advisor and its affiliates who had been involved in the day-to-day management of the company’s hotel assets, including the company’s executive officers, have become employees of the company.
As part of the transaction, the board of directors increased from four to seven members. William Kahane and Robert Burns resigned from the board, and the REIT’s president and chief executive officer Jonathan Mehlman was elected to the board for the first time.
Brookfield appointed Bruce Wiles as chairman and Lowell Baron, both of whom currently hold senior management positions at Brookfield. The new independent directors include Edward Glickman, executive chairman of FG Asset Management and former president and chief operating officer of Pennsylvania REIT, and Stephen Joyce, chief executive officer of Choice Hotels International Inc. Stanley Perla and Abby Wenzel will continue as independent directors.
Hospitality Investors Trust agreed to purchase a 7-hotel portfolio from Summit Hotel Properties for $66.8 million, but pushed the closing date to April 27th.
The net proceeds from Brookfield investment will be used to redeem preferred equity interests held by Whitehall affiliates that mature in 2018 and 2019, repay company debt to Summit affiliates, and fund contractual property improvement plans and part of the Summit portfolio.
The convertible preferred units are convertible into common units of limited partnership interests in the OP at an initial conversion price of $14.75 per unit, which are redeemable for cash or shares of the company’s common stock on a one-for-one basis.
Brookfield Asset Management is a global alternative asset manager with more than $250 billion of assets under management. The company’s flagship global opportunistic private real estate fund, Brookfield Strategic Real Estate Partners II, closed in April 2016 with total capital commitments of $9 billion.
Hospitality Investors Trust focuses on acquiring stable, institutional quality select-service lodging properties in North America branded by premium national hotel brands. The REIT’s offering went effective in January 2014 and suspended sales activities in November 2015 after raising $911 million in investor equity, according to Summit Investment Research. As of the fourth quarter, the company’s $2.1 billion portfolio was comprised of 141 properties.