Summit Hotel Properties Announces Acquisitions and Dispositions, Resolution of Arbitration with Choice Hotels
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Summit Hotel Properties Announces Acquisitions and Dispositions, Resolution of Arbitration with Choice Hotels
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Category: Worldwide - Industry economy
- Group or hotel buyout
This is a press release selected by our editorial committee and published online for free on 2012-04-11
Summit Hotel Properties (NYSE:INN) (“the Company”) today announced several recent developments.
Property Acquisitions
The Company has entered into agreements to acquire the properties described below. The completion of these acquisitions is anticipated during the second quarter of 2012. These transactions are subject to lender approval and satisfactory completion of due diligence and other customary closing conditions.
A 112-room Hilton Garden Inn property in Nashville (Smyrna), TN for a purchase price of $12.0 million including planned property improvements. The Company anticipates a post-renovation, estimated NTM capitalization rate in the range of 8 to 9 percent.
An 83-room Hampton Inn & Suites property in Nashville (Smyrna), TN for a purchase price of $8.5 million including planned property improvements. The Company anticipates a post-renovation, estimated NTM capitalization rate in the range of 9 to 10 percent.
“The opportunity for acquisitions like these continues to be robust,” said Dan Hansen, Company president and CEO. “We continue to build our portfolio with the best brands in the best markets at great cap rates.”
Portfolio cultivated through strategic dispositions
The long-standing strategy of the Company and its predecessor, Summit Hotel Properties, LLC, has been to continuously cultivate and improve the portfolio through acquisitions as detailed above, as well as strategic dispositions. In keeping with this strategy the Company has entered into contracts to sell four properties. Details on the properties and terms of sale will be disclosed as the transactions reach certainty of closure. “These dispositions go hand in hand with our acquisitions as we are always seeking to improve our portfolio and add value for our investors,” said Hansen. “These sales, if completed, will give us greater flexibility and access to near-term capital without the need to issue additional equity at this time.”
Resolution of Arbitration with Choice Hotels
An arbitration panel has issued an award in the Company’s dispute with Choice Hotels International, Inc. (“Choice”). In March 2011, Choice terminated the franchise agreements of ten of the Company’s hotels with an additional hotel being terminated in June 2011. On April 4, 2012, an arbitration panel determined, among other things, that Choice improperly terminated the 11 franchise agreements, that Choice is not entitled to recover liquidated damages in connection with the 11 hotels and that the Company did not make any materially false or misleading statements to Choice or omit any material information. The panel awarded the Company damages in amount of $298,090 as full settlement of all claims submitted in the arbitration. Neither the Company nor Choice is entitled to recover attorney’s fees in connection with the matter.
Resolution of the case allows the Company to bring closure to the dispute and focus directly on the development and growth of the eleven affected hotels as well as the other 62 hotels in its portfolio. “We are now in a much better position to execute our core strategy of owning the best brands in the best markets, as well as the positioning of select assets for the recycling of capital,” said Dan Hansen, the Company’s president and CEO. “With the re-branding process nearly complete for the 11 hotels, we are quite satisfied with the performance of the new brands and it solidifies our point that the change was not only necessary, but in the best interest of our shareholders. It certainly wasn’t the way we wanted to go about making these changes, but we believe the end result is an upgrade and improvement to our portfolio.”
Re-branded Property Operating Performance
Following the improper terminations, the 11 affected properties underwent re-branding. “We have been able to significantly improve the operating performance and create long term shareholder value, most notably in the underperforming former Cambria Suites branded properties,” said Hansen. “Through our relationships with Marriott, IHG and Hilton we have been able to make brand upgrades, converting some of these former Choice brands to better performing brands such as SpringHill Suites by Marriott, Fairfield Inn and Suites by Marriott, Holiday Inn, Holiday Inn Express and Doubletree by Hilton. In addition to the upgrade in brands we’ve also been successful in securing long term franchise agreements for these properties. The former Comfort Suites in Ft. Worth is not only undergoing a complete renovation and upgrade in brand quality to a Fairfield Inn & Suites by Marriott, it is also accompanied by a 20 year franchise term. This provides significantly greater accretive revenue opportunities as well as excellent long term value. Five of the former Comfort Inn brands have been converted to the AmericInn brand. We were able to eliminate substantial capital expenditure requirements on these properties while at the same time securing franchise agreements of ten years, which we believe will create additional value for these hotels over time.”
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