Summit to Buy Four Hotels for $164M

The company expects to spend approximately $7 million to $9 million in capital improvements over the next two years. This off-market transaction will bring Summit’s year-to-date acquisition activity to nearly $600 million.

The Courtyard New Haven at Yale
The Courtyard New Haven at Yale

Summit Hotel Properties Inc. has agreed to acquire four hotels totaling 652 guestrooms for an aggregate price of $164 million, or about $252,000 per key, Summit announced Monday.

The portfolio comprises:

  • The Courtyard New Haven at Yale (207 guestrooms),
  • The Hilton Garden Inn Boston/Waltham, (148 guestrooms),
  • The Residence Inn Cleveland Downtown (175 guestrooms), and
  • The Homewood Suites by Hilton Tucson/St. Philip’s Plaza University (122 guestrooms).

The aggregate purchase price represents a 12.1x multiple on the hotels’ combined trailing 12-month EBITDA as of September 2017, and the portfolio achieved RevPAR of $124 during that period. The seller was not identified, and Summit did not reply to Commercial Property Executive’s request for additional information.

All four hotels are located in strong markets, three of which are new for Summit and further enhance our geographic diversification. The properties are clear market leaders as the portfolio achieved an average RevPAR index of 122.3 for the twelve-month period ended September 2017,” Daniel P. Hansen, Summit’s Chairman, President and CEO, said in a prepared statement.

The off-market transaction will bring Summit’s year-to-date acquisition activity to nearly $600 million, Hansen said, adding that the company’s acquisition strategy focuses on premium upscale hotels with efficient operating models.

Closing is expected before the end of this month.

Next Steps, Succession Plan

In conjunction with the anticipated acquisitions, Summit will enter into new franchise agreements with the respective franchisors for the hotels and expects to spend approximately $7 million to $9 million in capital improvements over the next two years. The estimated cap rate, including the planned capital expenditures, is 7.8 percent based on Summit’s estimate of the hotels’ net operating income in 2018.

Summit announced that CFO and Executive VP Gregory A. Dowell will retire at the end of March 2018, after more than three years in his current role.

Dowell will be succeeded by Jonathan P. Stanner, Summit’s current EVP and Chief Investment Officer, who has been with the company since April. Among his previous positions, Stanner was CFO at Strategic Hotels and Resorts.

Photo courtesy of Marriott