NEW YORK CITY — Affiliates of American Realty Capital (ARC) Hospitality Trust have purchased a six-property hotel portfolio from Summit Hotel Properties (NYSE: INN) for $108.3 million. The portfolio contains a total of 707 Marriott- and Hilton-branded rooms throughout the states of Washington and Colorado.
Properties included in the transaction are the 84-room Fairfield Inn & Suites in Spokane and the 144-room Fairfield Inn & Suites in Bellevue, Wash.; the 120-room Hilton Garden Inn and 75-room Hampton Inn in Fort Collins, Colo.; and the 160-room Fairfield Inn & Suites and 124-room SpringHill Suites in Denver.
The latest six-property portfolio acquisition brings ARC’s lodging holdings to 142 hotels totaling 17,351 rooms across 32 states. Crestline Hotels and Resorts and Interstate Hotels & Resorts will manage the new acquisitions.
ARC drew on its term loan facility to finance the transaction. Deutsche Bank AG New York Branch and Deutsche Bank Securities arranged that portion of the financing.
Summit also provided a $27.5 million loan to ARC, which included $7.5 million for earnest money. The remaining balance was applied toward the six-hotel purchase price. The loan has an initial maturity date of Feb. 11, 2017, with two, one-year extension options.
Proceeds from the latest sale were used by Summit to complete a 1031 exchange of about $74 million. The funds also reduced Summit’s unsecured revolving credit facility by $105 million. The outstanding balance is now $40 million.
These dispositions come on the heels of Summit’s purchase of the 226-room Courtyard by Marriott in Nashville for $71 million and the 160-room Residence Inn by Marriott in Atlanta for $38 million this past January.
As part of the deal, ARC and Summit also reinstated a prior agreement for ARC to acquire an additional 10-property hotel portfolio for $89.1 million. The two REITs had previously agreed on to the acquisition in June 2015, but the deal was terminated in December 2015. ARC is scheduled to close on the remaining 10 hotels in late 2016.
The new purchase agreement for the 10-hotel portfolio requires the ARC affiliates to deposit $7.5 million of new, non-refundable earnest money with an escrow agent to support the closing of the reinstated sale on or before Dec. 30, 2016.
Austin, Texas-based Summit Hotel Properties is a publicly traded REIT that focuses on premium-branded, select-service hotels in the upscale and upper-midscale segments. The company’s portfolio contained 83 hotels with a total of 11,099 rooms throughout 23 states as of Feb. 16, 2016. The company’s stock closed at $9.87 on Tuesday, Feb. 16, down from $12.94 one year ago.
New York-based ARC Hospitality is a publicly registered, non-traded REIT that acquires stable, institutional-quality and strategically located North American lodging properties branded by premium national hotel flags.
— Nellie Day