AUSTIN, TEXAS — Summit Hotel Properties Inc. (NYSE: INN), a hotel investment REIT based in Austin, has purchased a portfolio of five unencumbered hotels in Louisiana for $135 million. An affiliate of Marriott International Inc. will operate the hotels, which total 823 rooms, under their current franchise flags.
“These hotels are very well-positioned throughout the diverse areas of the New Orleans metropolitan market,” says Dan Hansen, president and CEO of Summit Hotel Properties.
The five hotels include:
- the 153-room Courtyard by Marriott in Metairie
- the 120-room Residence Inn by Marriott in Metairie
- the 202-room Courtyard by Marriott in New Orleans near the Ernest N. Morial Convention Center
- the 208 SpringHill Suites by Marriott in New Orleans near the convention center
- the 140-room Courtyard by Marriott in downtown New Orleans near the French Quarter
“From the suburban community of Metairie to the bustling convention center to the heart of the French Quarter, these hotels will allow us to take advantage of the substantial business and leisure demand in this market,” says Hansen.
Summit Hotel Properties funded the acquisition with available cash and borrowings from its senior secured revolving credit facility. As of today, Summit’s portfolio includes 91 hotels totaling 10,309 rooms in 22 states.
Summit’s stock price closed Tuesday at $9.72 per share, up from trading at $8.04 per share this time last year.
REITs Active in Hotel Market
REITs like Summit Hotel Properties have been very active in the hotel investment sector. REITs purchased 3,719 U.S. hotel properties in 2011 and 3,148 hotels in 2012, according to Lodging Econometrics, the “Global Authority for Hotel Real Estate” based in Portsmouth, N.H.
Source: Lodging Econometrics, the Global Authority for Hotel Real Estate
REITs are much more active as buyers than as sellers. REITs only sold 421 hotels in 2011 and 920 hotels in 2012. REITs, along with equity funds, invested more dollars into newly purchased assets than what they received from selling properties. The hotels that REITs typically purchase are more mature in nature with stabilized yields.
For 2013, Lodging Econometrics predicts that hotel acquisitions will tick up because it’s an “opportune time to buy.” The research firm points to the historic lows of the cost of capital and the stabilizing stock market as indicators that portfolio sales, such as Summit’s Louisiana purchase, and merger/acquisitions should increase nationwide.
Additionally, the supply of U.S. hotels is expected to grow 1.1 percent in 2013 and 1.3 percent in 2014. In New Orleans, the expected growth rate is 0.6 percent in 2013 and 0.7 percent in 2014.
— John Nelson