ARC Hospitality Wheels and Deals

American Realty Capital Hospitality Trust has added to its portfolio.
Jonathan Mehlman

Jonathan Mehlman, ARC Hospitality

American Realty Capital Hospitality Trust plans to boost its portfolio again, this time adding five hotels in Texas, Tennessee and Ohio from affiliates of Wheelock Street Capital, L.L.C., for $92.5 million.

ARC Hospitality said it had entered into an agreement with affiliates of Wheelock Real Estate Fund, L.P., sponsored by the Greenwich, Conn.-based real estate private equity firm, for the purchase of the five select-service hotels with a total of 565 rooms. Once the deal closes in the fourth quarter, it would give the New York-based REIT a portfolio with 127 hotels totaling 15,487 rooms in 32 states. The acquisition will enhance ARC Hospitality’s positioning as one of the largest owners of select-service hotels by enterprise value in the North American lodging REIT sector, according to a news release.

The REIT plans to acquire the fee simple interests in the Courtyard Austin Round Rock in Austin; the Courtyard College State in College Station, Texas; the Courtyard Nashville in Opryland in Nashville; the Fairfield Inn & Suites Nashville at Opryland in Nashville; and the Springhill Suites Cincinnati North/Forest Park in Cincinnati.

The Tennessean newspaper reported that ARC Hospitality recently acquired a 126-key Hyatt Place Hotel in Cool Springs, Tenn., for $19.9 million from a subsidiary of Goldman Sachs. The newspaper noted that ARC Hospitality also owns the Hampton Inn and Suites Nashville in Franklin, Tenn., and several other Tennessee hotels.

The REIT closed on its biggest deal – and the largest ever by a non-traded REIT industry – in February when it acquired the Equity Inns Lodging Portfolio of 116 hotels in 31 states from affiliates of the Whitehall Real Estate Funds sponsored by Goldman Sachs for $1.8 billion.

The company stated it planned on securing debt financing for the Wheelock acquisition.

The select-service hotels are all branded by Marriott International and located near corporate headquarters, colleges or universities, hospitals, tourist attractions, retail centers, convention centers or airports, the company said.

“We are delighted to acquire this outstanding portfolio of premium Marriott-branded hotels, which we believe are located in some of the nation’s top-performing lodging markets and are proximate to a diverse base of powerful demand generators,” Jonathan Mehlman, ARC Hospitality CEO, said in the release. “We believe the Wheelock Portfolio, if acquired, will further our position of leadership in the select-service lodging REIT sector as well as our platform’s ability to drive shareholder value.”

CFO Edward Hoganson called the portfolio “an excellent addition to what we believe is a best-in-class portfolio of select-service lodging properties.”

He stated in the release that the acquisition, which is expected to be an off-market deal, would offer strong in-place cash flow and other value enhancement opportunities.

“We look forward to continuing to cultivate a strategic relationship with the highly talented Wheelock team, as well as working cohesively with Marriott International, through the closing of this transaction,” Hoganson added in the prepared statement.

Since it was founded in 2008 by Rick Kleeman and Jonathan Paul, Wheelock has raised four funds. The latest closed in April 2014 with $625 million in capital commitments. The firm manages $1.4 billion of equity capital and has invested in a broad range of U.S. real estate assets including hospitality, retail, residential land and homebuilding, office, multi-family, including student housing, and mixed-use projects for institutional and high net-worth individual investors.