Looking to leverage an increasing appetite among publicly traded REITs to build up their portfolios, NewcrestImage recently agreed to sell 27 hotels to Summit Hotel Properties in one of the industry’s largest portfolio deals this year.
The deal to sell the majority of its portfolio, as well as two parking garages, will net Grapevine, TX-based NewcrestImage some $822 million and make the company the second largest shareholder for Summit. As part of the deal—which is scheduled to close in the fourth quarter or first quarter of 2022—NewcrestImage will have the right to nominate one director to the Austin, TX-based company’s board of directors.
Mehul Patel, managing partner and CEO of NewcrestImage, noted the discussions for the portfolio of lifestyle and select-service brands started as far back as the Hunter Conference in May. At the time, Patel said he personally reached out to a handful of REITs (Real Estate Investment Trusts), including Apple Hospitality REIT, to gauge their potential interest before Summit “stepped up.”
Patel further detailed how the deal played out.
“It was a large transaction so it just took a little time, but [President/CEO] John Stanner and their entire team worked tirelessly to put together this transaction. We’re really excited to partner with Summit on it, this is just beginning for both of us. We also become their growth partner,” he said.
The hotel portion of the transaction is comprised of $776 million, or 209,000 per key. The deal will bring Summit’s portfolio to 100 hotels, 61 of which are wholly owned, with more than 15,000 keys.
Patel noted a major catalyst for the deal was the company’s presence in the Sun Belt market.“
“They are a Texas-based company, but they didn’t have much in Dallas/Fort Worth when you look at it and we have three different markets in Texas. When you look at our properties in New Orleans, Oklahoma and Texas it really fits the Sun Belt very nicely. We were the missing link in their portfolio so it really in effect balanced it and it really complements the entire portfolio,” he said.
Made up of premium-branded properties under the Marriott, Hilton, Hyatt and IHG brand affiliations, the 27-hotels include several upscale properties under the AC Hotels by Marriott and Canopy by Hilton flags, as well as select-service hotels. Part of the appeal of the portfolio for Summit, in addition to the location of the properties, is the average age of the acquisition portfolio is 3.8 years old. Furthermore, more than 70 percent of the guest rooms were developed since 2015.
Patel added that upon closing of the deal, the management contracts of the properties will be sold to Dallas-based Aimbridge Hospitality, which has some 1,500-plus hotels in its global portfolio.
“Much of our portfolio is in DFW [Dallas/Fort Worth] so it’s really complementary. We have been managing it, but when you become a shareholder you want to make sure that everything is not directly tied to you. We felt it was ideal to partner with the largest management company,” he said, adding Summit already had some 35 hotels operated by Aimbridge.
Meanwhile, NewcrestImage has two luxury trophy properties—the Magnolia Hotel in Dallas and The Sinclair, Autograph Collection by Marriott, in Fort Worth, TX—to build around as it looks to rebuild its portfolio.
The company acquired the Magnolia Hotel from Stout Street Hospitality in March and plans to convert the hotel—which was on the site of the former the Magnolia Petroleum Company Building—into a luxury property. NewcrestImage also acquired the historic 164-room, 17-floor Sinclair Hotel during the pandemic.
Patel added NewcrestImage already has more than a half-dozen other properties in development, including a triplex project in Grapevine, TX, which will be home to an AC Hotel and Element. The active pipeline also features a Kimpton in Plano, TX; Hyatt Place in Frisco Station, TX: a Hilton Garden/Canopy in Cincinnati; and an Element in Seattle.
“We already have a number of projects underway and we will continue to look for opportunities to acquire. We have been doing it for the past 40 years,” concluded Patel.