GIC-Summit Hotel JV acquires four US hotels for $249m

Photo: Reuters

Singapore’s sovereign wealth fund GIC has entered an agreement to acquire four hotels in the US for $249 million through its recently formed joint venture with NYSE-listed real estate investment trust Summit Hotel Properties.

The transaction marks the first set of deals made by the joint venture between GIC and Summit Hotel, which was set up specifically to acquire US hotel assets.

The portfolio acquired is located in three high-growth markets and includes the 258-guestroom Residence Inn by Marriott Portland Downtown/RiverPlace, the 169-guestroom Hilton Garden Inn San Francisco Airport North, the 161-guestroom Hilton Garden Inn San Jose/Milpitas, and the 122-guestroom Residence Inn by Marriott Portland Hillsboro.

The total purchase price of $249 million, or approximately $351,000 per key, represents an average capitalization rate of 8.4 percent based on management’s current estimate of the hotels’ net operating income for the full-year 2019.

With an average RevPAR of $162 and an average hotel EBITDA margin of over 50 percent, Summit Hotel Properties said the pending acquisitions will further enhance its diverse portfolio of well-located hotels with efficient operating models.

The joint venture expects to invest approximately $23 million of capital on the four hotels during the first three years of ownership. The pending transaction is expected to close in the fourth quarter of 2019.

For GIC, the JV with Summit Hotel is one of a number of deals the firm has made in the hotel space globally this year. Announced in July, the joint venture sees the US-based company serving as general partner and asset manager of the JV, investing 51% of the equity capitalization, with GIC investing the remaining 49%.

In May GIC formed a similar partnership with India’s Indian Hotels Co Ltd (IHCL) to set up an investment platform of around $600 million, which will be used to acquire fully operational hotels mainly in the luxury, upper-upscale and upscale segments in India.

This followed GIC’s acquisition of a 25 per cent stake in Netherlands-based boutique hotel chain citizenM in a deal that brings the latter’s enterprise value, including its debt, to €2 billion ($2.3 billion).