AUSTIN, TX—Summit Hotel Properties Inc. has entered into definitive agreements to acquire four hotels totaling 652 guestrooms for an aggregate purchase price of $164 million, or approximately $252,000 per key. The portfolio includes the 207-guestroom Courtyard New Haven at Yale in Connecticut, the 148-guestroom Hilton Garden Inn Boston/Waltham, the 175-guestroom Residence Inn Cleveland Downtown, and the 122-guestroom Homewood Suites by Hilton Tucson/St. Philip’s Plaza University in Arizona. The aggregate purchase price represents a 12.1x multiple on the hotels’ combined trailing twelve-month EBITDA as of September 2017, and the portfolio achieved RevPAR of $124 during that same period.
“We are thrilled with the opportunity to acquire this portfolio of four exceptionally well-located hotels where we see considerable long-term value. 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,” said Daniel P. Hansen, the company’s chairman, president and CEO. “The off-market transaction will bring our year-to-date acquisition activity to nearly $600 million as we continue to grow our portfolio with a prudent capital allocation strategy focused on acquiring premium-branded upscale hotels with efficient operating models, while maintaining a geographically diversified portfolio.”
The company estimates a capitalization rate, including planned capital expenditures, of 7.8% based on management’s current estimate of the hotel’s net operating income in 2018. 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 closing of the transactions is subject to the satisfaction of certain customary closing conditions and is expected to occur before the end of November 2017.