NewcrestImage portfolio sale completed; Aimbridge to manage

Summit Hotel Properties Inc. has completed an initial closing of the previously announced portfolio acquisition through its existing joint venture with GIC from affiliates of NewcrestImage. With the closing, NewcrestImage will transfer its existing hotel management agreement rights to Aimbridge Hospitality and gain a minority stake in the company.

NewcrestImage and Aimbridge will build on their respective strengths, with NewcrestImage developing and acquiring new hotels and Aimbridge further building on its value-added services as one of the largest global hotel operators, according to the companies.

“We are excited to grow with NewcrestImage as they develop new properties with Aimbridge as their strategic operating partner,” said Mike Deitemeyer, president/CEO, Aimbridge Hospitality. “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.”

Patel, chairman/CEO, NewcrestImage, added, “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. This is a collaboration that will enable both companies to gain unmatched momentum and growth.”

Patel will join the newly formed Aimbridge Hospitality CEO Advisory Board.

Summit deal
The initial closing of the sale included 26 of the 27 hotels totaling 3,533 guestrooms, two parking structures and various financial incentives. The remaining hotel to be acquired is the currently under construction 176-guestroom Canopy by Hilton New Orleans, which is nearing completion, and the joint venture expects to close on the acquisition of the hotel during the first quarter.

The total consideration for the transaction is comprised of $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 be immediately accretive to adjusted FFO per share, generate a stabilized net operating income yield of 8%-8.5% 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.

Upon closing of the transaction, Summit will fund its 51% equity contribution with a combination of common operating partnership units and preferred operating partnership units. The company will issue 15.865 million common operating partnership units valued at $160 million to seller affiliates, based on the 10-day trailing VWAP of $10.0853 per unit as of Nov. 2, 2021. The company will also issue $50 million worth of newly designated 5.25% Series Z Preferred Units. The preferred operating partnership units will be entitled to distributions at a rate of 5.25% per annum, may be redeemed by the holder on the 10th or 11th anniversary of the issuance date and may be called by the company at any time after the fifth anniversary of the issuance date. GIC’s 49% equity contribution will be in the form of cash.

Summit has secured a $410-million financing commitment from Bank of America and Wells Fargo Bank which will be the primary debt financing for the transaction. The term loan has a four-year initial term with a one-year extension option, subject to certain conditions. The loan is interest-only and provides for a floating interest rate equal to SOFR +2.86%.

BofA Securities Inc. is acting as financial advisor and Hunton Andrews Kurth is acting as legal counsel to Summit on the transaction. Goodwin Procter, Munsch Hardt Kopf & Harr, Haynes and Boone and Colven & Tran are acting as legal counselors to NewcrestImage.

Patel spoke exclusively with Hotel Business when the deal was first announced.