Summit Hotel Properties acquired two Residence Inn by Marriott hotels located in Baltimore (Hunt Valley), Md., and Branchburg, N.J. on July 24, 2015 for an aggregate purchase price of $56.8 million.
"We are very happy to announce the addition of these Residence Inn hotels to our portfolio. We remain very positive on the current state of the lodging cycle and see these two acquisitions as solid contributors to our long-term growth plan," said Daniel P. Hansen, President and Chief Executive Officer. "Both of these acquisitions are located in strong markets that fit well with our growth strategy and portfolio of premium select-service assets."
The Company acquired the 141-guestroom Residence Inn located in Baltimore (Hunt Valley), Md. for a total purchase price of $31.1 million, and entered into a management agreement with Interstate Hotels & Resorts. The Company plans to spend approximately $1.5 million on capital improvements at the property in 2016 and anticipates an estimated forward capitalization rate in the range of 8.0 percent to 8.5 percent based on management's current estimate of the hotel's 2016 net operating income. The Company currently estimates the hotel will contribute approximately $1.1 million of earnings before interest, taxes, depreciation and amortization ("EBITDA") through the balance of 2015.
Located 18 miles from downtown Baltimore, the Hunt Valley Residence Inn is one-tenth of a mile from the MTA Light Rail station that provides service to BWI International Airport, the Inner Harbor and home of the Baltimore Orioles, Camden Yards. Major corporate accounts for the Residence Inn include PayPal, eBay, McCormick Spice Company, Men's Warehouse and Johns Hopkins University. Leisure demand is driven mainly through the proximity to the Maryland State Fairgrounds and the Pimlico Race Course, home of the Preakness Stakes.
The Company also acquired the 101-guestroom Residence Inn located in Branchburg, N.J. for a total purchase price of $25.7 million and entered into a management agreement with Interstate Hotels & Resorts. The Company plans to spend approximately $1.1 million on capital improvements in 2016 and anticipates an estimated forward capitalization rate in the range of 8.0 percent to 8.5 percent based on management's current estimate of the hotel's 2016 net operating income. The Company currently estimates the hotel to contribute approximately $1.0 million of EBITDA through the balance of 2015.
The Branchburg Residence Inn is located an hour outside of New York City in close proximity to several large pharmaceutical company headquarters, including Johnson & Johnson, Sanofi and Merck. The area's largest demand generator is Diamond Nation, one of the Hotel's largest accounts, which brings tens of thousands of baseball players to the area each year for tournaments and instructional camps.
The acquisitions were funded by advances on the Company's senior unsecured credit facility.