Through its existing joint venture with GIC, Summit Hotel Properties completed the initial closing of a previously announced portfolio acquisition from affiliates of NewcrestImage. The initial closing included 26 of the 27 hotels of the acquisition, 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 Q1/22.
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; to generate a net operating income yield of 8% to 8.5%, including future capital investment and excluding any ancillary joint venture fees earned by Summit Hotel Properties; and to be leverage neutral to the company’s balance sheet while preserving existing liquidity of nearly $450 million.
Summit Hotel Properties secured a $410 million financing commitment from Bank of America and Wells Fargo Bank that will be the primary debt financing for the transaction. The financing commitment is made up of a term loan that has a four-year initial term with a one-year extension option, subject to certain conditions. The term loan is interest-only and provides for a floating interest rate equal to SOFR plus 2.86%.
Upon closing of the transaction, Summit Hotel Properties will fund its 51% equity contribution with a combination of common operating partnership units and preferred operating partnership units.
BofA Securities is acting as financial advisor and Hunton Andrews Kurth is acting as legal counsel to Summit Hotel Properties on the transaction. Goodwin Procter, Munsch Hardt Kopf & Harr, Haynes and Boone and Colven & Tran are acting as legal counselors to NewcrestImage.