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Summit Plans To Be Net Seller of Hotels To Start 2024

Company Continues To Pay Down Debt To Prepare for Acquisition Opportunities

Hyatt Place Dallas Plano was one of six hotels sold by Summit Hotel Properties in 2023. (Hyatt Hotels Corp.)
Hyatt Place Dallas Plano was one of six hotels sold by Summit Hotel Properties in 2023. (Hyatt Hotels Corp.)

Summit Hotel Properties is in seller mode as the real estate investment trust looks to bolster its balance sheet and lower its overall debt this year.

During Summit's fourth-quarter and full-year 2023 earnings call, President and CEO Jonathan Stanner said the company has three hotels currently under contract to sell for a combined $84 million. For all of 2023, the real estate investment trust sold six properties for a combined $46.6 million.

"This is consistent with what the strategy has been over the last 12 to 18 months, where we've been able to sell some lower [revenue per available room], lower-cap-rate type of hotels," he said. "It's still a relatively slow transactions environment, but a lot of what we've sold has had pretty significant [capital expenditure] needs going forward. I think in the near term, you can expect us to continue to use proceeds to pay down leverage and de-lever the balance sheet."

Stanner said he expects the select-service, hotel-focused REIT to remain a net seller for the first half of 2024 in order to "make sure we're in a good position ... to be opportunistic on the acquisition side, as well."

The hotels sold by Summit in 2023 are the Hyatt Place Chicago Lombard, Hyatt Place Chicago Hoffman Estates, Hilton Garden Inn Minneapolis Eden Prairie, Holiday Inn Express & Suites Minnetonka, Hyatt Place Baltimore Owings Mills, and Hyatt Place Dallas Plano, which sold at a combined cap rate of 2.6%.

"We've found buyers that are a little more focused on room revenue multiples and a little less focused on yields, and I think that's helped facilitate some of these transactions at low cap rates," he said.

Summit acquired two hotels in 2023 through its joint ventures with Singapore sovereign wealth fund GIC — the Residence Inn Scottsdale North in Arizona and the Nordic Lodge Steamboat Springs in Colorado — for a combined cap rate of 9.3%.

Executives said they've improved the REIT's balance sheet outside of asset sales by paying down and refinancing a $225 million loan scheduled to mature in early 2025. The company now has no debt maturities until 2026 and has nearly $400 million in liquidity.

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5 Min Read
November 02, 2023 04:08 PM
Executives of Summit Hotel Properties said the company's portfolio saw particularly strong urban and midweek demand in September and October.
Dana Miller
Dana Miller

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Earnings Performance

For full-year 2023, Summit's comparable hotel revenue per available room increased 6.6% to $119.33, fueled by a 3.2% increase in average daily rate and a 3.3% increase in occupancy. Fourth-quarter RevPAR increased 3.2% to $113.11.

Comparable hotel earnings before interest, taxes, depreciation and amortization for the year came in at $246.7 million, a 5.8% increase from the prior year. The fourth quarter had a 0.7% decrease in comparable hotel EBITDA to $58.3 million.

Summit recorded a full-year net loss of $28 million, with total revenues of $177.4 million across its portfolio of 100 hotels.

For 2024, the company projects RevPAR growth between 2% and 4%.

As of publication time, Summit's stock was trading at $6.42 a share, down 4.4% year to date. The NYSE composite was up 4.5% for the same period.

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