American Realty Capital Hospitality Trust (ARC Hospitality), which intends to qualify as a non-traded REIT, announced today that it will acquire the Equity Inns lodging portfolio. The portfolio contains 14,934 rooms in 126 hotels located throughout 35 states. It is franchised by several leading global hotel brands such as Hilton Hotels & Resorts, Marriott International, Hyatt Hotels, and InterContinental Hotels Group.
The Equity Inns lodging portfolio is being sold by subsidiaries of W2007 Grace I, LLC and WNT Holdings, LLC each of which are indirectly owned by one or more Whitehall Real Estate Funds, an investment fund sponsored by The Goldman Sachs Group, Inc.
Nicholas S. Schorsch, Chairman of the board of directors of ARC Hospitality, commented, “The acquisition of the Equity Inns lodging portfolio is a transformational event for ARC Hospitality. We believe this acquisition catapults ARC Hospitality into a position of leadership within the hospitality industry, becoming a top-tier player in the select-service lodging REIT sector and providing us a strong foundation for further expansion.”
The purchase price for the portfolio was approximately $1.925 billion, exclusive of closing costs. The company intends to fund the acquisition with $271 million from cash-on-hand, approximately $976 million through the assumption of existing mezzanine and mortgage indebtedness, and approximately $227 million through additional mortgage and mezzanine financing. The company expects to pay the remaining $451 million by issuing preferred equity interests in ARC Hospitality Portfolio I Holdco, LLC and ARC Hospitality Portfolio II Holdco, LLC, both of which are newly-formed Delaware limited liability companies.
The addition of the Equity Inns will bring ARC Hospitality’s portfolio to 132 hotels with 16,115 rooms.
ARC Hospitality aims to build a diversified portfolio of strategically-located hotel properties throughout North America in both the select-service and full-service markets of the hospitality sector.
ARC Hospitality commenced its initial public offering in January of 2014 and has a maximum offering size of $2 billion. As of March 31, 2014, the company had 142,559 shares of stock outstanding, and had received total gross proceeds from its IPO of approximately $3.3 million.