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Summit Hotel Properties Inc.

01/14/2022 | Press release | Distributed by Public on 01/14/2022 05:04

Press release issued January 13, 2022 - Form 8-K

NEWS RELEASE

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

PROPERTY NAME MSA STATE KEYS /
SPACES
YEAR
BUILT
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 Parking 1,002
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 -
Subtotal $ 801,300
Financial Incentives (1) 20,700 -
Total $ 822,000
(1) The value of the financial incentives reflects the net present value of the future expected cash flows.

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Board Composition

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.

Advisors

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.

About NewcrestImage

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.

Contact:

Adam Wudel

SVP - Finance & Capital Markets

Summit Hotel Properties, Inc.

(512) 538-2325

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Forward-Looking Statements

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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