ARC Hospitality Resumes Buying Binge

The non-traded REIT is back in the news, this time with a massive purchase of a 10-hotel portfolio.

 By Scott Baltic, Contributing Editor

It has almost seemed like American Realty Capital Hospitality Trust Inc. was buying hotels like were those little red plastic jobbies on a Monopoly board, and now it’s really happening. In the first tranche of what will eventually be a hotel acquisition surge worth nearly three-quarters of a billion dollars, the REIT has closed on a $150.1 million purchase of 10 hotels from Summit Hotel Properties, ARC Hospitality announced Tuesday.

Hampton Inn
Hampton Inn, Fort Wayne, Ind.

The transaction is part of a 26-hotel, off-market deal with Summit, first reported in early June, that’s worth $347.4 million and will be completed, in three phases, by next January.

Separately, ARC Hospitality has a further 18 hotels under contract with unrelated sellers for $392.4 million. Those acquisitions are scheduled to close within the next eight months.

The addition of all 44 hotels will swell ARC Hospitality’s lodging portfolio to 132 hotels totaling 16,014 rooms across 32 states.

These initial 10 hotels are all flagged as Marriott International or Hilton Hotels & Resorts and are in Baton Rouge, La.; Flagstaff, Ariz.; Fort Wayne, Ind.; Medford, Ore.; and El Paso, Texas.

“We are delighted to acquire these high-quality, stabilized lodging properties with strong brand affiliations from Summit,” Jonathan Mehlman, CEO of ARC Hospitality, said in a prepared statement. “This transaction shows that we are continuing to execute our focused strategy of acquiring market-leading select service hotels with strong brands and durable cash flows.”

CFO Edward Hoganson added: “These 10 hotels have all delivered robust year-over-year financial performance and possess strong operating fundamentals that we expect will continue to drive our future growth. Management of these properties will be divided amongst our affiliated hotel operator, Crestline Hotels & Resorts, and Interstate Hotels & Resorts, which currently operates several of the hotels we are acquiring from Summit.”

The REIT is financing the Summit hotels acquisition through its new $450 million term loan facility, co-arranged by Deutsche Bank AG New York Branch, Deutsche Bank Securities Inc. and BMO Capital Markets.

ARC Hospitality’s other two pending acquisitions are of a group of five hotels from affiliates of Wheelock Real Estate Fund L.P., for $92.5 million, and of a 13-property portfolio from affiliates of Noble Investment Group L.L.C., for $300 million.


2014 was a strong year for select-service hotel portfolio deals, according to a January report from HVS. The report noted that nearly a dozen portfolios of select-service hotels had changed hands last year, with total sales of $6.4 billion and an average per-key price of $140,000. HVS described the rise of portfolio sales as “the result of extremely strong buyer demand and owners willing to sell to capitalize on rising hotel values.”