Summit Hotel Properties has completed the initial closing of its previously announced 27-hotel portfolio acquisition through its existing joint venture with GIC from affiliates of Dallas-based hotel development company NewcrestImage.
The development company, meanwhile, is set to transfer its existing hotel management agreement rights to and acquire minority ownership in Plano, Texas-based management company Aimbridge Hospitality.
The initial closing included 26 of the 27 previously announced properties totaling 3,533 guestrooms, two parking structures and various financial incentives. The remaining hotel to be acquired is the in-development 176-guestroom Canopy by Hilton New Orleans, which is slated to open in March. The joint venture expects to close on the acquisition of the hotel during the first quarter of 2022.
Related: Summit Hotel Properties to buy 27 hotels for $822M
The total consideration for the transaction is $776.5 million, or $209,000 per key, for the 27-hotel portfolio, $24.8 million for the two parking structures, and $20.7 million for the various financial incentives. The transaction is expected to generate a stabilized net operating income yield of 8 percent to 8.5 percent including future capital investment and excluding any ancillary joint venture fees earned by Summit, and be leverage neutral to the company's balance sheet while preserving existing liquidity of nearly $450 million.
Summit secured a $410 million financing commitment from Bank of America and Wells Fargo Bank, which will be the primary debt financing for the transaction.
Aimbridge Steps In
NewcrestImage will acquire minority ownership in Aimbridge and is transfering its existing hotel management agreement rights to the company. The two companies have identified new growth opportunities together, with NewcrestImage developing and acquiring new hotels and Aimbridge further building on its services as one of the largest global hotel operators. Mehul Patel will join the newly formed Aimbridge Hospitality CEO Advisory Board.
Related: Why Prism decided to team up with Aimbridge
“We are excited to grow with NewcrestImage as they develop new properties with Aimbridge as their strategic operating partner,” Mike Deitemeyer, Aimbridge Hospitality president & CEO, said in a statement. “I look forward to working closely on growth opportunities with Mehul Patel and his team at NewcrestImage who have built one of our industry’s most respected hotel portfolios.”
“Starting with the sale of 27 distinctive properties, with Aimbridge gaining management responsibilities for those hotels, and with NewcrestImage gaining a minority stake in Aimbridge, each of these transactions is important and impressive on its own,” said Mehul Patel, chairman and CEO of NewcrestImage. “This is a collaboration that will enable both companies to gain unmatched momentum and growth.”
The NewcrestImage deal comes one month after Aimbridge Hospitality acquired Dallas-based hotel management, investment and advisory company Prism Hotels & Resorts.