Singapore’s sovereign wealth fund GIC has agreed to acquire four hotels along the west coast of the US for $249 million through a recently formed joint venture with Summit Hotel Properties, according to an announcement by the New York Stock Exchange-listed real estate investment trust.
The transaction marks the first set of acquisitions by the GIC-Summit Hotels JV, which was set up in July specifically to acquire US hotel assets.
The 710-room portfolio consists of two Residence Inn by Marriott hotels in Portland, Oregon and a pair of Hilton Garden Inns in California’s Bay Area, and at the purchase price of $249 million the GIC-Summit JV is paying approximately $351,000 per key for its new hospitality properties.
Investment Made at 8.4% Cap Rate
The Singapore-American partners are investing at an average capitalization rate of 8.4 percent based on the REIT manager’s estimate of the hotels’ net operating income for the full year 2019, the trust’s manager indicated in the filing.
With an average revenue per available room (REVPAR) of $162 and an average hotel EBITDA margin of over 50 percent, the Texas-based real estate investment trust said the pending acquisitions, which are expected to close in the fourth quarter of 2019, will further enhance its portfolio. Once the purchase is completed, the joint venture expects to invest approximately $23 million of capital on the four hotels during the first three years of ownership, Summit Hotel Properties said in the statement.
Among the set of four properties, the 258-room downtown Portland Residence Inn by Marriott benefits from its proximity to Portland State University, Oregon Health & Science University, the Oregon Convention Center and more than 28 million square feet of office space, while the 122-room Residence Inn by Marriott in Portland’s Hillsboro area leverages its location close to Oregon’s four Intel campuses and Nike’s global headquarters.
Further south, the joint venture will be acquiring a 169-room Hilton Garden Inn north of San Francisco Airport, along with a 161-room Hilton Garden Inn in the San Jose-Milpitas area which serves clients visiting local offices of corporates including Cisco Systems, Western Digital, Micron and Cadence Design Systems.
GIC Makes Third Major Hotel Investment of 2019
For GIC, this latest set of acquisitions through its joint venture with Summit Hotels is just the latest in a set of hotel asset acquisitions during 2019. The $100 billion sovereign wealth fund had announced its joint venture with Summit Hotel Properties in July, with the Dallas-based REIT manager serving as general partner and asset manager for the joint venture. Summit also is committing 51 percent of the equity capitalization for the JV, with GIC investing the remaining 49 percent.
The move for the set of west coast hotels comes after GIC in May had teamed up with South Asia’s largest hospitality group by market capitalization, IHCL, to set up a $600 million joint venture platform aimed at acquiring luxury hotels in India.
In March, GIC took a 25 percent stake in CitizenM, a European hotel owner-operator valued at €2 billion (then $2.25 billion) as part of an expansion plan for the affordable luxury chain.