NEW YORK—American Realty Capital Hospitality Trust, Inc. (ARC Hospitality) has agreed to acquire a portfolio of 13 hotels for a purchase price of $300 million from affiliates of Noble Investment Group, LLC, a leading lodging and hospitality real estate private equity firm.
The Noble portfolio consists of 12 premium-branded, select-service and extended-stay hotels and one full-service hotel totaling 1,913 rooms. The hotels are located in nine states, with markets including Boston; Atlanta; Monterey, CA; Columbus, OH; Fort Worth, TX; Chicago; Minneapolis; Birmingham, AL; and Northern and Central New Jersey. The hotels are franchised by major global brands including Hyatt Hotels, Hilton Hotels & Resorts and Marriott International. Hotel flags include Hyatt Place, Hilton Garden Inn, Hyatt House, Courtyard by Marriott and Hilton.
The acquisition of the Noble portfolio and other recently announced transactions, when completed, will increase ARC Hospitality’s lodging portfolio to 166 hotels totaling 20,193 rooms across 34 states, enhancing its position as one of the largest owners of select-service hotels (by enterprise value) in the North American lodging REIT sector, according to the company. Approximately 95% of the company’s pro-forma portfolio will be branded by Hilton Hotels & Resorts, Marriott International or Hyatt Hotels (by total room count).
“We are delighted to announce our agreement to acquire the Noble portfolio, which strongly complements our recently announced transactions and further augments our portfolio of high-quality, stabilized lodging properties with premium brand affiliations,” commented Jonathan P. Mehlman, CEO of ARC Hospitality. “We believe these assets, when acquired, will be in the upper echelon of our portfolio, and we expect these hotels to lead our RevPAR growth across the company. We are excited that, assuming all recently announced transactions are completed, our aggregate portfolio will represent a competitive unlevered yield in the mid-7% range based on trailing 12 month net operating income as of May 2015 at an attractive basis, which we believe is well below replacement cost. This speaks to our disciplined approach of creating a best-in-class portfolio that maximizes long-term shareholder value.”
Edward Hoganson, CFO of ARC Hospitality, added, “We are pleased to announce this agreement to acquire institutional-quality assets that we believe are located in strong and growing RevPAR markets. We believe there is considerable upside opportunity with the hotels due to recent renovations and our ability to combine operations in markets where we own other assets. We look forward to continuing to cultivate a strategic relationship with the Hyatt, Marriott and Hilton brands included in this portfolio.”
The acquisition is subject to customary franchisor approvals and the completion of customary and confirmatory due diligence as well as other conditions and, if all are obtained and satisfied, the acquisition is expected to close in three separate tranches (which are not conditioned on each other) during the fourth quarter of 2015 and first quarter of 2016, subject to extension under certain circumstances. ARC Hospitality intends to secure debt financing in connection with the acquisition and there can be no assurance that this acquisition will be completed.
ARC Hospitality was represented by Hunton & Williams LLP.