ARC Hospitality Adds Two Portfolios

NEW YORK CITY—American Realty Capital Hospitality Trust Inc. will add 31 lodging properties to its portfolio when two back-to-back acquisitions are completed. The REIT said Monday it had agreed to acquire a portfolio of 26 properties from Austin, TX-based Summit Hotel Properties for $351.4 million. Last Thursday, ARC Hospitality announced that it would pay $92.5 million to buy five properties from affiliates of Wheelock Real Estate Fund LP.

“The Summit Portfolio represents an ideal property fit for ARC Hospitality,” says Jonathan Mehlman, ARC Hospitality's CEO. He says the portfolio offers “both an attractive yield and price per key, as well as scale, brand power, and consistent and growing cash flows that in our view have been unmatched among marketed portfolios this year.”

At Summit, president and CEO Dan Hansen says the sale will enable his REIT “to continue to improve our asset mix and upgrade our portfolio with additional accretive acquisitions with strong growth profiles and diverse demand generators. Recycling capital to create long-term value for our shareholders is a proven strategy for us and one we consider to be a core strength.”

The Summit portfolio includes 25 select-service and extended-stay hotels and one full-service hotel, and totals 2,793 rooms across 11 states. Brands represented include Fairfield Inn & Suites, Courtyard by Marriott, Hampton Inn, SpringHill Suites and Residence Inn, in markets that include Flagstaff, AZ; Denver and Fort Collins, CO; Jacksonville, FL; suburban Chicago; Fort Wayne, IN; Baton Rouge, LA; Jackson, MS; Medford, OR; Memphis; El Paso, TX; and suburban Seattle and Spokane, WA.

“We believe it is still an opportune time to acquire well-located, high-quality upscale and upper midscale hotels as the lodging cycle, and the select-service segment in particular, continues its extended recovery,” Mehlman says. To that end, the Wheelock portfolio falls within the select-service category, with Courtyard locations in Nashville and in Austin and College Station, TX; a Fairfield Inn & Suites in Nashville; and a SpringHill Suites in Cincinnati.

The Wheelock deal is expected to close in the fourth quarter, while the Summit portfolio acquisition is expected to close in three tranches between September of this year and January 2016. Law firm Proskauer Rose represented ARC Hospitality in both transactions, which will bring the REIT's portfolio to 153 hotels totaling 18,280 rooms across 33 states.