Summit Hotel Properties, Inc. (NYSE:INN) (the “Company”) today announced that it has two hotel properties, containing an aggregate of 421 guestrooms, under contract to acquire.
The Company announced that it has entered into a definitive agreement to acquire the 210-guestroom DoubleTree by Hilton located in San Francisco, Calif. for a purchase price of approximately $39.0 million. The Company expects to implement approximately $4.1 million in capital improvements to the property prior to year-end 2014 and anticipates an estimated forward capitalization rate in the range of 8.5 percent to 9.5 percent based on management’s current estimate of the Hotel’s 2015 stabilized net operating income.
The hotel was built in 2000 and is undergoing an extensive repositioning and rebranding, converting it from a Radisson to a DoubleTree by Hilton. Prior to acquisition, the seller will complete a portion of the conversion and deliver the property with a DoubleTree by Hilton flag. The Company will deploy the additional capital to complete the repositioning prior to year-end 2014.
“We are thrilled to expand our San Francisco presence with the recently repositioned DoubleTree by Hilton,” said Company President and CEO Dan Hansen. “We see strong upside potential in this newly rebranded property, located in a top market with multiple demand generators, including both an abundant base of corporate demand as well as strong leisure and weekend demand driven by the hotel’s close proximity to the San Francisco International Airport and downtown area.”The Company anticipates assuming approximately $13.1 million in mortgage debt associated with the acquisition of the DoubleTree by Hilton. The loan bears a fixed interest rate of 5.98% and has a maturity date of March 08, 2016. The Company also announced that it has entered into a definitive agreement with Mortenson Development to acquire a 211-guestroom Hampton Inn & Suites currently under development in Minneapolis, Minn., for a purchase price of approximately $37.7 million. In January of 2014, the Company issued a $13.1 million letter of credit in support of this acquisition under its senior unsecured credit facility. This agreement is subject to certain conditions, including the completion of the hotel in accordance with agreed upon architectural and engineering designs, receipt of a Hampton Inn & Suites franchise and receipt of a certificate of occupancy.
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