ARC Hospitality Binge Buying?

For the second time in less than a week, American Realty Capital Hospitality Trust is making a big deal.
Jonathan Mehlman

Jonathan Mehlman, ARC Hospitality

For the second time in less than a week, American Realty Capital Hospitality Trust Inc. reveals that it has entered into an agreement to acquire a large hotel portfolio. This time around, the REIT has committed to purchasing a group of 26 premium-branded lodging destinations from Summit Hotel Properties Inc. for $351.4 million.

News of the Summit deal comes just days after ARC Hospitality announced that it had signed on to acquire a five-property, 565-room hotel collection from affiliates of Wheelock Real Estate Fund L.P. for $92.5 million. Not only was ARC Hospitality able to secure back-to-back deals, it was also able to do it off market–and it had little to do with luck.

“Over the past 20-plus years, the ARC Hospitality senior management team has developed broad and deep relationships across the public and private hotel industry, including global and domestic brands in the select service sector, as well as private equity investors,” Jonathan Mehlman, CEO of ARC Hospitality, told Commercial Property Executive. “These relationships, coupled with our significant and proven fundraising capabilities, have positioned us as one of the major hotel owners in the industry.”

The Summit Portfolio, nearly five times the size of the Wheelock Portfolio, will give the REIT quite a boost in size with 2,793 rooms spanning 11 states. The upscale and upper midscale hotels–all but one being either select-service or extended-stay–operate under various flags of the Marriott International, Hilton Hotels & Resorts, Hyatt Hotels and InterContinental Hotels Group brands.

ARC Hospitality plans to obtain debt financing for the Summit Portfolio acquisition, and if all goes as planned, the transaction will close in three separate tranches beginning in September 2015 and wrapping up in January 2016.

Thus far, 2015 has been quite momentous for ARC Hospitality, which made its very first purchases in March 2014. In February, the REIT completed the $1.8 billion acquisition of the 116-property, 13,744-room Equity Inns Lodging Portfolio from Whitehall Real Estate Funds, a move that put the company on the map as one of the largest select-service hotel REITs in North America. And the year is only half over.