ARC Hospitality Revises Equity Inns Deal

NEW YORK CITY—American Realty Capital Hospitality Trust's deal to acquire a select-service hotel portfolio from private equity funds sponsored by Goldman Sachs has undergone some changes since it was first announced. The New York City-based REIT said Wednesday afternoon that the amended and restated deal for the Equity Inns portfolio now encompasses 116 properties rather than the original 126, and whittles down the purchase price from the original $1.925 billion to $1.81 billion.

Both buyer and seller have agreed to the removal of several contingencies that were included in the original purchase and sale agreement reached in early June. The revised deal provides greater certainty of execution, ARC Hospitality said Wednesday, and although the portfolio being acquired from entities indirectly owned by Goldman's Whitehall real estate funds is now smaller by 10 properties, it will still establish the REIT as one of the largest owners in the select-service space domestically, with 122 hotels encompassing 14,925 keys.

When the acquisition from subsidiaries of W2007 Grace I LLC and WNT Holdings LLC was first announced, board chairman Nicholas Schorsch said it would provide ARC Hospitality with “a strong platform for further expansion.” He added that “the select-service hotel segment offers tremendous value given the economic recovery in the US, higher profit margins and reduced operational risks characteristic of these assets. We further believe that now is an opportune time to acquire well-located, high-quality hotels in the upscale and upper midscale tiers as the lodging cycle continues its recovery and enters what we expect will be an extended upward trajectory.”

It was against the backdrop of an earlier such recovery that Goldman bought the Equity Inns portfolio for $2.2 billion in 2007. “Securities firms and buyout companies, armed with record funds, are purchasing hotels as business travel rebounds from the Sept. 11 attacks,” Bloomberg reported at the time. “The average daily room rate at US hotels increased 7.2% in 2006 to $97.61, lifting industry profits to a record $26.6 billion, according to Smith Travel Research in Henderson, TN.”

Originally slated to close in the fourth quarter of 2014, the deal is now expected to be completed on Feb. 27, 2015. Spanning 31 states, the portfolio represents such well-known brands as Hampton Inn, Hilton Garden Inn, Homewood Suites, Embassy Suites, Courtyard, Residence Inn, Hyatt Place and Holiday Inn.