01/14/2022 | Press release | Distributed by Public on 01/14/2022 05:04
Summit Hotel Properties Completes Acquisition of NewcrestImage Portfolio
Austin, Texas, January 13, 2022 - - - Summit Hotel Properties, Inc. (NYSE: INN) (the "Company" or "Summit") today announced that it has completed an initial closing of the previously announced portfolio acquisition through its existing joint venture with GIC from affiliates of NewcrestImage. The initial closing included 26 of the 27 hotels totaling 3,533 guestrooms, two parking structures, and various financial incentives. The remaining hotel to be acquired is the currently under construction 176-guestroom Canopy by Hilton New Orleans which is nearing completion, and the joint venture expects to close on the acquisition of the hotel during the first quarter 2022 (collectively with the initial closing referred to as the "Transaction").
The total consideration for the Transaction is comprised of $776.5 million, or $209,000 per key, for the 27-hotel portfolio, $24.8 million for the two parking structures, and $20.7 million for the various financial incentives. The Transaction is expected to be immediately accretive to adjusted FFO per share, generate a stabilized net operating income yield of 8.0% to 8.5% including future capital investment and excluding any ancillary joint venture fees earned by Summit, and be leverage neutral to the Company's balance sheet while preserving existing liquidity of nearly $450 million.
Capital Structure and Financing
Upon closing of the Transaction, the Company will fund its 51% equity contribution with a combination of common operating partnership units and preferred operating partnership units. The Company will issue 15.865 million common operating partnership units valued at $160 million to seller affiliates, based on the 10-day trailing VWAP of $10.0853 per unit as of November 2, 2021. The Company will also issue $50 million worth of newly designated 5.25% Series Z Preferred Units. The preferred operating partnership units will be entitled to distributions at a rate of 5.25% per annum, may be redeemed by the holder on the 10th or 11th anniversary of the issuance date and may be called by the Company at any time after the 5th anniversary of the issuance date. GIC's 49% equity contribution will be in the form of cash.
The Company has secured a $410 million financing commitment from Bank of America and Wells Fargo Bank which will be the primary debt financing for the Transaction. The term loan has a four-year initial term with a one-year extension option, subject to certain conditions. The loan is interest-only and provides for a floating interest rate equal to SOFR + 2.86%.
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Portfolio Asset Listing
|AC Hotel by Marriott Houston Downtown||Houston||TX||195||2019|
|AC Hotel by Marriott Oklahoma City Bricktown||Oklahoma City||OK||142||2017|
|AC Hotel by Marriott Dallas Downtown||Dallas||TX||128||2017|
|Residence Inn by Marriott Dallas Downtown||Dallas||TX||121||2017|
|AC Hotel by Marriott Frisco Station||Dallas||TX||150||2019|
|Residence Inn by Marriott Frisco Station||Dallas||TX||150||2019|
|Canopy by Hilton Frisco Station||Dallas||TX||150||2020|
|Canopy by Hilton New Orleans (1)||New Orleans||LA||176||2021|
|Courtyard by Marriott Amarillo Downtown||Amarillo||TX||107||2010|
|Courtyard by Marriott Grapevine||Dallas||TX||181||2013|
|TownePlace Suites by Marriott Grapevine||Dallas||TX||120||2013|
|Embassy Suites by Hilton Amarillo Downtown||Amarillo||TX||226||2017|
|Hampton Inn & Suites by Hilton Dallas Downtown||Dallas||TX||176||2016|
|Hilton Garden Inn by Hilton College Station||Bryan-College Stn||TX||119||2013|
|Hilton Garden Inn by Hilton Longview||Longview||TX||122||2015|
|Hilton Garden Inn by Hilton Grapevine||Dallas||TX||152||2021|
|Holiday Inn Express & Suites Grapevine||Dallas||TX||95||2000|
|Holiday Inn Express & Suites Oklahoma City Bricktown||Oklahoma City||OK||124||2015|
|Homewood Suites by Hilton Midland||Midland-Odessa||TX||118||2014|
|Hyatt Place Dallas Grapevine||Dallas||TX||125||2000|
|Hyatt Place Dallas Plano||Dallas||TX||127||1998|
|Hyatt Place Lubbock||Lubbock||TX||125||2016|
|Hyatt Place Oklahoma City Bricktown||Oklahoma City||OK||134||2018|
|Residence Inn by Marriott Tyler||Tyler||TX||119||2014|
|SpringHill Suites by Marriott Dallas Downtown||Dallas||TX||148||1997|
|SpringHill Suites by Marriott New Orleans||New Orleans||LA||74||2018|
|TownePlace Suites by Marriott New Orleans||New Orleans||LA||105||2018|
|Total Hotel Portfolio||3,709|
|Dallas Parking Structure||Dallas||TX||335||2019|
|Frisco Parking Structure||Dallas||TX||667||2019|
|Total NCI Portfolio||3,709 / 1,002|
|(1) Canopy by Hilton New Orleans is still under construction and expected to open and acquired in Q1 2022.|
|TRANSACTION VALUE COMPONENTS ($000s)||VALUE||PER KEY|
|Hotel Portfolio||27 Hotels / 3,709 Guestrooms||$||776,500||$||209|
|Parking Structures||2 Structures / 1,002 Parking Spaces||24,800||-|
|Financial Incentives (1)||20,700||-|
|(1) The value of the financial incentives reflects the net present value of the future expected cash flows.|
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Effective January 13, 2022, Mehul Patel, Managing Partner and Chief Executive Officer of NewcrestImage, was appointed as a director to the Company's Board of Directors.
BofA Securities, Inc. is acting as financial advisor and Hunton Andrews Kurth is acting as legal counsel to the Company on the Transaction. Goodwin Procter, Munsch Hardt Kopf & Harr, Haynes and Boone, and Colven & Tran are acting as legal counselors to NewcrestImage.
About Summit Hotel Properties
Summit Hotel Properties, Inc. is a publicly traded real estate investment trust focused on owning premium-branded hotels with efficient operating models primarily in the Upscale segment of the lodging industry. As of January 13, 2022, the Company's portfolio consisted of 100 hotels, 61 of which are wholly owned, with a total of 15,051 guestrooms located in 24 states. Upon closing of the Canopy by Hilton New Orleans, the Company's portfolio will consist of 101 hotels, 61 of which are wholly owned, with a total of 15,227 guestrooms located in 24 states.
NewcrestImage has become one of the leading hotel companies in America having transacted over 184 hotels throughout its history. It is known and respected for its unique properties and for repeatedly developing bold award-winning projects that have transformed the hospitality industry. Many of the notable properties include dual-brand hotels, the adaptive re-use of historic buildings, and "lifestyle hotel campus," which creates vibrant mixed-use neighborhoods.
SVP - Finance & Capital Markets
Summit Hotel Properties, Inc.
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This press release contains statements that are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally identifiable by use of forward-looking terminology such as "may," "will," "should," "potential," "intend," "expect," "seek," "anticipate," "estimate," "approximately," "believe," "could," "project," "predict," "forecast," "continue," "plan," "likely," "would" or other similar words or expressions. Forward-looking statements are based on certain assumptions and can include future expectations, future plans and strategies, financial and operating projections or other forward-looking information. Examples of forward-looking statements include the following: the Company's ability to realize financial and operational synergies; projections of revenues and expenses or other financial items; descriptions of the Company's plans or objectives for future operations; forecasts of EBITDAre; and descriptions of assumptions underlying or relating to any of the foregoing expectations regarding the timing of their occurrence. These forward-looking statements are subject to various risks and uncertainties, not all of which are known to the Company and many of which are beyond the Company's control, which could cause actual results to differ materially from such statements. These risks and uncertainties include, but are not limited to, the state of the U.S. economy, supply and demand in the hotel industry, and other factors as are described in greater detail in the Company's filings with the Securities and Exchange Commission ("SEC"). Unless legally required, the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.
For information about the Company's business and financial results, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections of the Company's Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC, and its quarterly and other periodic filings with the SEC. The Company undertakes no duty to update the statements in this release to conform the statements to actual results or changes in the Company's expectations.
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