NEW YORK CITY—American Realty Capital Hospitality Trust Inc. said Friday it would receive a $400-million convertible preferred investment commitment from Brookfield Asset Management. As part of the agreement between ARC Hospitality and Brookfield, the hotel REIT will become self-managed, its name will change to Hospitality Investors Trust and its board will be enlarged from four members to seven, including two appointed by Brookfield.
Jonathan Mehlman, president and CEO of ARC Hospitality, says the scale of the investment “speaks to Brookfield's vision for the opportunities for both the Company as well as the select-service lodging REIT sector in general. We believe that this investment positions the Company's platform favorably for future success and growth.”
Proceeds from the initial $135-million issuance of convertible preferred limited partnership units will be used in part to repay preferred equity interests held by Goldman Sachs' Whitehall funds, and to acquire a seven-property portfolio from Summit Hotel Properties for $66.8 million. The 651-key portfolio is located in the Memphis and Jackson, MS metropolitan areas, and will increase ARC Hospitality's lodging portfolio to 148 hotels totaling 17,844 keys across 33 states. ARC Hospitality previously acquired 16 hotels from Summit for $258.4 million.
Brookfield is expected to name Bruce Wiles and Lowell Barton to the ARC Hospitality board, with Wiles serving as chairman. Mehlman is expected to join the board as well, and current board members William Kahane and Robert Burns are expected to resign concurrently with the closing of the deal, which is expected to occur in March.
Jefferies LLC acted as financial advisor and Proskauer Rose LLP acted as legal advisor to ARC Hospitality. Hentschel & Co. acted as financial advisor and Morrison & Foerster LLP acted as legal advisor to the independent directors of the ARC Hospitality board. Cleary Gottlieb Steen & Hamilton LLP acted as legal advisor to Brookfield.
Jonathan Mehlman, president and CEO of ARC Hospitality, says the scale of the investment “speaks to Brookfield's vision for the opportunities for both the Company as well as the select-service lodging REIT sector in general. We believe that this investment positions the Company's platform favorably for future success and growth.”
Proceeds from the initial $135-million issuance of convertible preferred limited partnership units will be used in part to repay preferred equity interests held by
Brookfield is expected to name Bruce Wiles and Lowell Barton to the ARC Hospitality board, with Wiles serving as chairman. Mehlman is expected to join the board as well, and current board members William Kahane and Robert Burns are expected to resign concurrently with the closing of the deal, which is expected to occur in March.
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