Summit Hotel to buy 27 US Sun Belt hotels in $822M deal

Summit Hotel Properties Inc. agreed to purchase a portfolio of 27 hotels in the U.S. Sun Belt region from affiliates of hospitality group NewcrestImage LLC for $822 million.

The portfolio comprises 3,709 guest rooms, two parking structures and financial incentives. The total consideration includes $776.5 million for the 27-hotel portfolio, $24.8 million for the two parking structures and $20.7 million for the financial incentives.

The hotels and parking structures are spread across Texas, Oklahoma and Louisiana. Some of the hotels are affiliated with premium brands Marriott International Inc., Hilton Worldwide Holdings Inc., Hyatt Hotels Corp. and InterContinental Hotels Group PLC.

Summit will make the acquisition through its existing joint venture with GIC Pte. Ltd. The hotel real estate investment trust expects to use common operating partnership units and preferred OP units to fund its 51% equity contribution for the deal, while GIC will make its 49% estimated equity contribution of $208 million in the form of cash.

The REIT would issue 15,865,000 common OP units worth $160 million, based on the 10-day trailing volume-weighted average per-unit price of $10.0853 as of Nov. 2, to seller affiliates and would separately issue $50 million of newly designated 5.25% series Z preferred units. The issued common OP units would result in an approximate 13% pro forma seller ownership interest.

Summit also received a $410 million financing commitment from Bank of America and Wells Fargo Bank to help fund the transaction.

The REIT expects the transaction to be immediately accretive to adjusted funds from operations per share. It plans to enter into management contracts with Aimbridge Hospitality LLC for the 27-hotel portfolio.

NewcrestImage will have the right to nominate one director to Summit's board at deal closing, which is expected to take place late in the fourth quarter of this year or early in the first quarter of 2022.

BofA Securities Inc. and Hunton Andrews Kurth are financial and legal advisers to Summit on the deal. Goodwin Procter, Munsch Hardt Kopf & Harr, Haynes and Boone, and Colven & Tran are legal advisers to NewcrestImage.