|Summit acquired the Courtyard by Marriott Dallas Arlington South in Texas for $15.25 million in May.
SIOUX FALLS, South Dakota—Summit Hotel Properties is stepping up its investment in the top 50 U.S. markets.
Dan Hansen, Summit’s president and CEO, said approximately 50% of the REIT’s 72 hotels comprising 7,407 rooms are in the top 50 U.S. metropolitan statistical areas. During the coming years, Hansen said Summit will look to nudge that percentage up, possibly to a range between 55% and 75%. Top 50 MSAs always have been a focus for Summit.
“We look at everything as a math equation,” he said during a telephone interview. “Where can we get the best return for our shareholders?”
Hansen said the top 50 MSAs are showing a great deal of opportunity for hotel investment. He added that there also are distressed opportunities available in these markets.
“Our history is one of recycling capital and reshaping the portfolio,” he said. “We have always focused on having the best brands in the best markets.”
As such, the REIT’s most recent deal making in May resulted in the acquisition of the 112-room Hilton Garden Inn Nashville/Smyrna near Nashville, Tennessee, for $12 million, including planned improvements; and the purchase of the 103-room Courtyard by Marriott Dallas Arlington South in Arlington, Texas, for $15.3 million, including planned improvements.
In total, the company spent $28 million in renovations last year. The company intends to spend approximately $20 million on renovations during 2012, Hansen said in an email.
Also in May, Summit announced the sale of three hotels in Twin Falls, Idaho: a Holiday Inn Express, Hampton Inn and AmericInn. The properties, which did not fit in with Summit’s strategy, were sold at an aggregate price of approximately $16.5 million.
Summit is likely to enter into one acquisition a month during the next six or seven months, Hansen said. “We’re having good conversations … We’re looking to find more (deals),” he said.
Asset sales involving non-core properties are a possibility, though Hansen said Summit generally is a net buyer of hotels. “Older, smaller” hotels are examples of properties that Summit might consider non-core, he said.
Hansen noted that Summit was a net seller of hotels when the transactions market peaked in 2007 and 2008.
The company is “market agnostic” in searching for deals, Hansen said. Summit targets branded hotels from the links of Hilton, Marriott, Hyatt and InterContinental Hotels Group. The REIT’s hotel portfolio, broken down by brand company, is:
- Marriott: 32 hotels
- Hilton: 17 hotels
- IHG: 10 hotels
- Hyatt: 4 hotels
- AmericInn: 4 hotels
- Aspen Hotel & Suites: 2 hotels
- Carlson: 2 hotels
- Starwood Hotels & Resorts Worldwide: 1 hotel
“We are very excited about our continued partnership with Marriott, Hilton, IHG and Hyatt,” Hansen said in a follow-up email. “We have had some great acquisitions early on primarily with Marriott and Hilton but see great opportunity with IHG and Hyatt as well. We have been extremely pleased with our conversions to IHG brands, and they continue to outperform.
“Our strategic partnership with IHG is designed to uncover great opportunities like these, and although deal flow for these ‘value creation’ opportunities has been slow, we are working directly with them to uncover more.”
Going forward, the company’s growth will be predicated on its ability to raise capital, he said during a telephone interview.
“One of the reasons we went public is so it would be easier to raise capital,” he said. “There are opportunities to raise capital, but it comes at a price. It’s not that we won’t raise equity, but it’s that we will be more cautious and surgical in how we proceed.”