Summit Hotel Properties Sells Multi-State Portfolio for $135M

Hyatt Place Dallas/Arlington. Image courtesy of Hyatt Hotels

Arbor Lodging Partners has acquired a six-property, multi-state hotel portfolio from Summit Hotel Properties Inc. for $135 million. The hotels totaled 815 keys and Summit’s ROI on the sale was approximately $36.6 million.

The six hotels in the deal included two properties in Minnesota, the 146-key Hampton Inn & Suites Minneapolis St. Paul Airport – Mall of America, at 2860 Metro Dr. in Bloomington, and the 113-key SpringHill Suites by Marriott Minneapolis St. Paul Airport – Mall of America, located at 2870 Metro Dr. in Bloomington. The portfolio also encompassed the 139-key Hampton Inn Boston-Norwood, situated at 434 Providence Highway in Norwood, Mass., the 101-key Hampton Inn Santa Barbara/Goleta, located at 5665 Hollister Ave. in Goleta, Calif. Completing the group are the 127-key Hyatt Place Dallas/Arlington, situated at 2380 E. Road to Six Flags St. in Arlington, Texas, and the 189-key Residence Inn Salt Lake City Downtown, at 285 Broadway in Salt Lake City.

A spokesperson for Arbor Lodging said all the hotels in the portfolio will transition to management by Arbor Lodging Management and all will receive a renovation program that includes upgrades to guestrooms, lobbies and common areas.

“Cap rate compression in Top MSA markets such as New York has pushed operators to look to secondary and even tertiary markets for new acquisitions and opportunities,” George Steffani, director in the investment sales division at Lee & Associates NYC, told Commercial Property Executive. “All markets have diverse demand generators that can shift hospitality economics including the recent boom of biotechnology employment in Boston or a hefty increase in commercial development in Dallas.” Therefore, identifying value-add opportunities in markets with fundamentals as these from education, government, demographic or business/employment fronts is key to continued success on the buy-side.

According to Steffani, REITs are constantly evaluating their portfolios to ensure that their properties are in-line with core future strategy and REITs such as the seller are constantly evaluating its assets to see how they relate to this strategy. “Cap rate compression and favorable—although slower-than-average—rate growth lead to a good time for Summit to sell assets that were likely not core to their ongoing strategy,” he said. “Speaking to the buy-side, secondary and tertiary markets are where operators are finding value driven by localized economic factors such as the ones I mentioned that relate to the markets involved.”

A look back

In the Summit’s most recent earnings call recapping 2018, it announced its net income attributable to common stockholders dropped to $0.68 per share to $71.0 million, down from the $79.2 million—or $0.79 per share—in 2017. On the call,

Dan Hansen, Summit’s chairman, president & CEO, said the fourth quarter of 2018 actually came in at the high-end of its expectations and the company’s outlook for 2019 was positive. “We have taken advantage of a favorable transaction environment by completing approximately $120 million of asset sales over the last 12 months at very attractive capitalization rates and we continue to invest capital to add value across the portfolio,” he said.

Last February, Arbor Lodging Partners received a $38.7 million loan for the acquisition and renovation of Chicago Marriott Schaumburg, a 398-key hotel located in suburban Chicago.