SNL Real Estate: American Realty Capital Hospitality To Add 126 Hotels In Equity Inns Deal

In its pending acquisition of a portfolio of Equity Inns hotels for $1.93 billion, American Realty Capital Hospitality Trust Inc. will add 126 properties in 35 states totaling 14,934 rooms. Should the portfolio deal be realized, it would become “one of the largest owners of select-service hotels (by enterprise value) in the North American lodging REIT sector,” ARC Hospitality said.

The combined portfolio will include 132 hotels, comprising 16,115 rooms in 35 states. Florida, Texas and Tennessee are among the top three markets in the Equity Inns portfolio that ARC Hospitality is acquiring, with 22, 11 and 11 hotels, respectively. ARC Hospitality on March 27 completed its first portfolio acquisition, worth a combined $106.5 million, in the form of interests in six hotels across five states totaling 1,181 rooms.

A unit of New York-based Goldman Sachs Group Inc. acquired Equity Inns Inc. for a deal value of $1.29 billion in 2007. At that time, the target’s assets entailed 132 hotels and 15,731 rooms. The privatization of Equity Inns was completed in October 2007.

Among the brands being added to ARC Hospitality’s portfolio, Hampton Inn is the most represented, with 43 hotels and 5,277 rooms. Other brands in the Equity Inns portfolio include Hilton Garden Inn, Homewood Suites, Embassy Suites, Courtyard, Residence Inn, Hyatt Place and Holiday Inn.

ARC Hospitality anticipates funding approximately $271 million of the purchase price with cash on hand, approximately $976 million through the assumption of existing mezzanine and mortgage debt and roughly $227 million through additional mortgage and mezzanine financing, as noted in a Form 8-K filed June 2.

Among nontraded hotel REITs as of the end of the first quarter, Apple Hospitality REIT Inc. had the highest occupancy, at 74 percent, and the largest number of properties and hotel rooms, at 188 and 23,489, respectively. Apple REIT Ten Inc. took the No. 2 spot, logging 70 percent occupancy, owning 49 hotels and 6,188 rooms.

ARC Hospitality recorded 66.9 percent occupancy as of the end of the first quarter for its six-hotel portfolio totaling 1,181 rooms.

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