A joint venture between Summit Hotel Properties and GIC has purchased the 120-room Embassy Suites by Hilton Tucson Paloma Village for $25.5 million.
The joint venture acquired the property from an entity taking title as LDK Tucson LLC, according to Pima County real estate records. The entity shares the same Utah address as Lodging Dynamics Hospitality Group. The joint venture acquired the property with a combination of cash and an assumed loan that has a balance of about $13.3 million. The loan has a fixed interest rate of 4.99% and a maturity date of June 2028.
The Embassy Suites hotel is located on nearly 6 acres in the Catalina Foothills at 3110 E. Skyline Drive in Tucson, Arizona. The hotel is adjacent to La Encantada, an outdoor luxury shopping center, and east of La Paloma Country Club. It was built in 2007, and since then, no other hotels have been built within a 3-mile radius, according to the joint venture.
"The property's excellent location and dominant Embassy Suites brand affiliation have allowed the hotel to consistently rank at the top of its competitive set, commanding an average RevPAR Index of nearly 150% over the last five years," the joint venture said in a corporate statement announcing the acquisition.
The joint venture also noted that while occupancy and average daily rates in the Tucson market are historically the strongest in February and March, driven predominantly by leisure travel, the Embassy Suites hotel benefits from year-round demand from government, group and business transient segments.
Summit Hotel Properties expects the hotel to generate a full year of 2022 net operating income yield between 7% and 7.5%. After this purchase, Summit maintains nearly $450 million of total liquidity and over $150 million of current investment capacity permitted under its current credit facility amendments to pursue future investments.
Summit Hotel Properties and GIC also own the Homewood Suites by Hilton Tucson/St. Phillip's Plaza University hotel located less than 3 miles from the Embassy Suites hotel, which will allow the joint venture to implement operational synergies and revenue enhancement strategies that will benefit both hotels.