AUSTIN, Texas, Feb. 16, 2016 — Summit Hotel Properties, Inc. (NYSE:INN) ("the Company") announced today 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 February 11, 2016 (the "February Closing") as follows:
LOCATION
ROOMS
Fairfield Inn & Suites – Spokane, WA
84
Fairfield Inn & Suites – Denver, CO
160
SpringHill Suites – Denver, CO
124
Hampton Inn – Ft. Collins, CO
75
Fairfield Inn & Suites – Bellevue, WA
144
Hilton Garden Inn – Ft. Collins, CO
120
707
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 $74.0 million and to pay down the Company's $300.0 million unsecured revolving credit facility by $105.0 million, resulting in an outstanding balance of $40.0 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.
Reinstated Purchase Agreement On February 11, 2016, the Company also reinstated the purchase and sale agreement with affiliates of ARCH (the "ARCH Affiliate") for the sale of the following 10 hotels with a total of 996 guestrooms at the original selling price of $89.1 million (the "Reinstated Purchase Agreement"):
LOCATION
ROOMS
Residence Inn – Jackson, MS
100
Holiday Inn Express – Vernon Hills, IL
119
Courtyard – Germantown, TN
93
Courtyard – Jackson, MS
117
Fairfield Inn & Suites – Germantown, TN
80
Residence Inn – Germantown, TN
78
Aloft – Jacksonville, FL
136
Staybridge Suites – Ridgeland, MS
92
Homewood Suites – Ridgeland, MS
91
Courtyard – El Paso, TX
90
996
The transaction was previously canceled just prior to its originally scheduled closing date of December 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 December 30, 2016. The $7.5 million earnest money deposit is non-refundable to the ARCH Affiliate except in limited circumstances.
Execution of $27.5 Million Loan Agreement On February 11, 2016, the Company entered into a $27.5 million loan with ARCH and $20.0 million of the loan proceeds were applied towards the purchase price of the six hotels sold in the February Closing and $7.5 million of the loan proceeds were applied towards the new earnest money deposit required by the Reinstated Purchase Agreement. The loan has an initial maturity date of February 11, 2017 and two one-year extension options that may be exercised by ARCH subject to certain conditions.
Acquisition of Two Hotels for $109.0 Million On January 19, 2016, the Company acquired the 226-guestroom Courtyard by Marriott® located in Nashville, Tennessee, for a total purchase price of $71.0 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 vibrant Midtown neighborhood near many of the area's finest restaurants and entertainment venues as well as Vanderbilt University, the Ryman Auditorium, and Bridgestone Arena. In addition, the hotel benefits from proximity to Music City Center, Historic 2nd Avenue, Country Music Hall of Fame, Nissan Stadium, Nashville Convention Center and Centennial Sportsplex all located less than a mile away.
On January 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. The Company anticipates limited capital improvements in 2016, and estimates a capitalization rate 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 heart of Atlanta's diverse Midtown neighborhood and conveniently located near the High Museum of Art, Alliance Theatre, Atlantic Station, Center Stage, and the Fox Theatre.
