ARC Hospitality Acquires Six Hotels From Summit

NEW YORK—American Realty Capital Hospitality Trust, Inc. (ARC Hospitality) has completed its previously announced acquisition of six hotels totaling 707 rooms for a purchase price of $108.3 million from Summit Hotel Properties, Inc. The six properties acquired are branded either by Marriott International or Hilton Hotels & Resorts and are located in Bellevue and Spokane, WA; Denver; and Fort Collins, CO. This transaction increases ARC Hospitality’s lodging portfolio to 142 hotels totaling 17,351 rooms across 32 states.

The six hotels acquired by ARC Hospitality are the Fairfield Inn & Suites, Spokane, WA (84 rooms); Fairfield Inn & Suites, Denver (160); SpringHill Suites, Denver (124 rooms); Hampton Inn, Ft. Collins, CO (75); Fairfield Inn & Suites, Bellevue, WA (144); and Hilton Garden Inn, Ft. Collins, CO (120).

“We are pleased to acquire these high-quality lodging properties, located in key Colorado and Washington markets, from Summit,” commented Jonathan P. Mehlman, CEO of ARC Hospitality. “The hotels have been purchased at what we believe is an attractive yield and price per key.  Moreover, today’s transaction also provides us the opportunity to buy the remaining 10 hotels under our original 26-hotel contract with Summit. This transaction shows that we are continuing to execute on our vision of driving long-term shareholder value through the creation of a best-in-class select-service portfolio with strong brands and durable cash flows.”

Edward Hoganson, CFO of ARC Hospitality, added, “With the increased volatility in the capital markets, we have reviewed our acquisitions carefully. Summit has been a great business partner, and we are pleased to be buying another high-performing hotel portfolio transaction with them. We believe our overall portfolio will continue to generate strong, durable income moving forward. Further, we have selected Crestline Hotels and Resorts and Interstate Hotels & Resorts to manage the hotels in this portfolio because of the firms’ proven track record of driving premium revenues and delivering an excellent guest experience.”

“This sale represents another notable success for us in executing on our capital recycling strategy and is particularly significant given the current volatile market conditions.  It demonstrates our commitment to value creation and our ability to be creative in achieving our goals,” commented Dan Hansen, Summit’s president and CEO.

ARC Hospitality financed the acquisition of these hotels with a draw on its term loan facility, which was arranged by Deutsche Bank AG New York Branch and Deutsche Bank Securities, Inc. Summit also provided ARC with financing for a portion of the transaction.

In addition, ARC Hospitality and Summit have also agreed to reinstate their previously terminated agreement in which affiliates of ARC has agreed to acquire a portfolio of 10 hotels, representing the balance of the 26-hotel portfolio acquisition it initially announced in June 2015. ARC Hospitality is scheduled to close on these remaining 10 hotels late this year.

The transaction was previously canceled just prior to its originally scheduled closing date of Dec. 29, 2015, and ARC Hospitality forfeited its $9.1 million earnest money to Summit as liquidated damages upon termination of the transaction.  The reinstated purchase agreement requires the ARC affiliates to deposit $7.5 million of new earnest money with an escrow agent to support the closing of the reinstated sale on or before Dec. 30, 2016.  The $7.5 million earnest money deposit is non-refundable to the ARC affiliates except in limited circumstances.