AUSTIN, Texas - Summit Hotel Properties, Inc. (NYSE:INN), currently trading near its 52-week high with a market capitalization of $745 million, in partnership with GIC, has entered into an agreement to purchase two hotels for a total of $96 million. The acquisition includes the 250-room Hampton Inn Boston - Logan Airport and the 149-room Hilton Garden Inn Tysons Corner, at a cost of $241,000 per key. According to InvestingPro analysis, the company maintains a healthy dividend yield of 4.69% and has raised its dividend for three consecutive years.
The transaction, expected to close in the fourth quarter of 2024, reflects an 8.8% capitalization rate based on the forecasted net operating income for 2024. The company has highlighted that the acquisition will not require significant capital expenditures until the latter part of 2026. With current EBITDA of $236 million and a debt-to-equity ratio of 1.49, InvestingPro data reveals the company's strategic approach to managing its growth while maintaining financial stability.
Jonathan P. Stanner, Summit's President and CEO, described the acquisition as a strategic move that aligns with the company's capital allocation strategy, facilitated by recent asset sales that generated nearly $150 million and eliminated $50 million in near-term capital expenditures.
The Hampton Inn Boston is strategically located near the Boston Logan International Airport and downtown Boston, benefiting from diverse demand drivers and a $2 billion airport modernization project. It features a 368-space parking lot, with a portion leased to a third-party operator.
The Hilton Garden Inn Tysons Corner is situated in Vienna, Virginia, close to Washington, D.C., and serves as the nearest Hilton-branded select service hotel to Hilton's world headquarters. Tysons Corner is a key business district and hosts the Tysons Corner Center, a major shopping and mixed-use development.
Financing for the acquisition will involve a mix of cash on hand and a $50 million term loan, part of an existing $200 million credit facility with GIC. Summit Hotel Properties' estimated $24 million equity requirement for its 51% share will be funded largely from the sale of the Four Points by Sheraton San Francisco Airport along with cash reserves.
Summit Hotel Properties, a real estate investment trust, currently owns 95 hotels with 14,154 guestrooms across 24 states. The company's portfolio focuses primarily on the upscale segment of the lodging industry. With annual revenue of $736 million and a beta of 2.06 indicating higher market volatility, the company demonstrates strong market presence. InvestingPro subscribers have access to 12 additional investment tips and comprehensive analysis through the Pro Research Report, offering deeper insights into the company's valuation and growth prospects.
This article is based on a press release statement.
In other recent news, Summit Hotel Properties reported a slight increase in revenue per available room (RevPAR) and a 4% rise in adjusted funds from operations (FFO) to $27.6 million during its Q3 2024 earnings call. The company also highlighted the successful sale of 10 hotels, which contributed to a nearly $150 million gain, and a strong liquidity position with over $400 million available.
Summit Hotel Properties revised its 2024 guidance, projecting a RevPAR growth range of 1% to 2% and adjusted EBITDA between $188 million and $194 million. Looking ahead to 2025, the company anticipates managing expense growth between 2.5% to 3% and achieving 1.5% RevPAR growth.
Despite a 3% decline in RevPAR in September due to lower occupancy and hurricane disruptions, the company reported a preliminary 2% year-over-year increase in RevPAR in October. The company also noted a year-to-date adjusted FFO increase of over 9%.
CEO Jon Stanner expressed optimism about capital redeployment acquisitions and a market-agnostic approach to transactions. The company also clarified that it has no current plans to divest all Hyatt Place properties, despite selling four due to lower RevPAR and high capital needs. These are among the recent developments at Summit Hotel Properties.
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