Summit Hotel Properties entered a definitive agreement to acquire four West Coast hotels for $249 million through its recently formed joint venture with Singapore-based GIC. The 710-room portfolio consists of two Residence Inn by Marriott hotels and two Hilton Garden Inns.
The total purchase price represents an average capitalization rate of 8.4 percent based on management’s current estimate of the hotels’ net operating income for full-year 2019. The joint venture plans to invest approximately $23 million of capital in the four hotels during the first three years of ownership. The pending transaction is expected to close in Q4.
The 258-room Residence Inn by Marriott Portland Downtown/RiverPlace is located near several demand generators, including Portland State University, Oregon Health & Science University, the Oregon Convention Center and more than 28 million square feet of office space.
The 122-room Residence Inn by Marriott Portland Hillsboro also is situated near major demand generators. Intel, Oregon’s largest private employer, recently announced a 1.5-million-square-foot campus extension that would increase its workforce in the area by nearly 10 percent. Nike’s global headquarters, also located in the market, just finished a 3.2-million-square-foot expansion this year.
The 169-room Hilton Garden Inn San Francisco Airport North is situated near numerous biotech companies, including the world headquarters for Genentech. Summit Hotel Properties anticipates the depth or demand will increase because more than 7 million square feet of office and mixed-use projects and more than 2,600 residential units are in development in South San Francisco.
At the southern tip of the San Francisco Bay, the 161-room Hilton Garden Inn San Jose/Milpitas, is situated near companies such as Cisco Systems, KLA-Tencor, Western Digital, Micron and Cadence Design Systems. A transit-oriented village is under development nearby that will include 7,100 housing units and 1.3 million square feet of commercial, retail, restaurant and entertainment space.
Summit Hotel Properties has separately entered into agreements to sell the 130-room Hilton Garden Inn Birmingham (Ala.) SE/Liberty Park and the 95-room Hilton Garden Inn Birmingham/Lakeshore Drive for an aggregate sales price of $21.8 million. That transaction is expected to close during Q4.
Summit Hotel Properties is a publicly traded REIT. Upon completion of the above transactions, the company’s portfolio will consist of 72 hotels with 11,288 rooms. The company revealed its joint venture with Singapore’s sovereign wealth fund GIC in July when it released its Q2 results. Summit serves as general partner and asset manager of the joint venture and invests 51 percent of the equity capitalization, while GIC invests the remaining 49 percent.