Summit resolves Choice arbitration, reveals transaction plans

Summit Hotel Properties, Sioux Falls, South Dakota, announced on Tuesday that it resolved arbitration with Choice Hotels International, Silver Spring, Maryland, over the termination of 11 U.S. hotel franchises.

In March 2011, Choice terminated the franchise agreements of ten of the Summit’s hotels with an additional hotel being terminated in June 2011. On April 4, 2012, an arbitration panel determined that Choice improperly terminated the 11 franchise agreements and that Choice is not entitled to recover liquidated damages in connection with the 11 hotels. The panel awarded the Summit damages in amount of US$298,090 as full settlement of all claims submitted in the arbitration.

“Bringing closure to the dispute and the positive outcome for Summit are wins … we believe this near-term overhang has been lifted,” said David Loeb, an analyst at Baird Equity Research.

The former Choice-franchised hotels have since been rebranded.

“Through our relationships with Marriott, IHG and Hilton we have been able to make brand upgrades, converting some of these former Choice brands to better performing brands such as SpringHill Suites by Marriott, Fairfield Inn and Suites by Marriott, Holiday Inn, Holiday Inn Express and Doubletree by Hilton,” said Dan Hansen, Summit president and CEO. 

2 hotels bought, 4 to be sold

In addition the legal dispute resolution, Summit announced that it bought two hotels in Nashville, Tennessee, a 112-room Hilton Garden Inn for US$12 million and an 83-room Hampton Inn & Suites for US$8.5 million, each including property improvements. Summit also plans to sell four hotels, although it did not give further details as to which hotels.

“These sales, if completed, will give us greater flexibility and access to near-term capital without the need to issue additional equity at this time,” said Hansen.