American Realty Capital Hospitality Trust (ARC Hospitality) announced on Monday that it has entered into an agreement to buy the Equity Inns lodging portfolio for US$1.925 billion from subsidiaries of W2007 Grace I and WNT Holdings, each of which are indirectly owned by one or more Whitehall Real Estate Funds real estate private equity funds sponsored by The Goldman Sachs Group, New York City.
The portfolio consists of 126 hotels totaling 14,943 guestrooms across 35 U.S. states and is franchised by the brands of IHG, Hilton Worldwide, Marriott International and Hyatt Hotels Corp. brands, including Holiday Inn, Hampton Inn, Hilton Garden Inn, Homewood Suites by Hilton, Embassy Suites Hotels, Courtyard by Marriott, Residence Inn by Marriott and Hyatt Place. The acquisition of Equity Inns, when completed, will increase ARC Hospitality’s lodging portfolio to 132 hotels totaling 16,115 guestrooms.
“The acquisition of the Equity Inns lodging portfolio is a transformational event for ARC Hospitality. We believe this acquisition catapults ARC Hospitality into a position of leadership within the hospitality industry, becoming a top-tier player in the select-service lodging REIT sector and providing us a strong foundation for further expansion,” said Nicholas Schorsch, chairman of the board of directors of ARC Hospitality. “We believe the select-service hotel segment offers tremendous value given the economic recovery in the U.S., higher profit margins and reduced operational risks characteristic of these assets. We further believe that now is an opportune time to acquire well-located, high-quality hotels in the upscale and upper midscale tiers as the lodging cycle continues its recovery and enters what we expect will be an extended upward trajectory.”
The closing of the acquisition is subject to customary franchisor and lender approvals as well as other usual closing conditions and is expected to close in the fourth quarter of 2014.
“These assets are located primarily in top 100 MSA, high barrier-to-entry markets with diverse demand drivers that will provide sustained growth and value creation opportunities. Further, given the track record of our operating partner Crestline Hotels & Resorts, we believe there is strong potential for long-term improvement in property performance,” said Jonathan Mehlman, ARC Hospitality CIO.