AUSTIN—Summit Hotel Properties, Inc. has announced the completion of the sale of six hotels with a total of 707 guestrooms to affiliates of American Realty Capital Hospitality Trust, Inc. (ARCH) for an aggregate selling price of $108.3 million on Feb. 11, 2016.
The sales proceeds were used to complete certain reverse like-kind exchanges under Section 1031 of the Internal Revenue Code to defer otherwise taxable gains of approximately $74 million and to pay down the Company’s $300 million unsecured revolving credit facility by $105 million, resulting in an outstanding balance of $40 million.
“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, the company’s president and chief executive officer.
On Feb. 11, 2016, the company also reinstated the purchase and sale agreement with affiliates of ARCH for the sale of 10 hotels with a total of 996 guestrooms at the original selling price of $89.1 million.
The transaction was previously canceled just prior to its originally scheduled closing date of Dec. 29, 2015 and ARCH forfeited its $9.1 million earnest money to the Company as liquidated damages upon termination of the transaction. The reinstated purchase agreement requires the ARCH Affiliate 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 ARCH affiliate except in limited circumstances.
On Jan. 19, 2016, the company acquired the 226-guestroom Courtyard by Marriott located in Nashville, Tenn., for a total purchase price of $71 million and entered into a management agreement with Interstate Hotels & Resorts. The company plans to spend approximately $0.3 million on capital improvements at the property in 2016, and estimates a capitalization rate, including planned capital expenditures, in the range of 8.25 percent to 8.75 percent based on management’s current estimate of the hotel’s 2016 net operating income. The hotel is located in the Midtown neighborhood.
On Jan. 20, 2016, the company acquired the 160-guestroom Residence Inn by Marriott located in Atlanta, Georgia, for a total purchase price of $38.0 million and entered into a management agreement with Interstate Hotels & Resorts.
