After a busy second quarter spent buying, selling, renovating and converting brand-named hotels, Summit Hotel Properties Inc. saw its net income come drop to negative $1.5m in the second quarter of 2012.
On the positive side, however, the hotel REIT reported increases in all key metrics – RevPar was up 11.7 percent to $70, ADR up 5.1 percent to $95.50 and occupancy at 73.4 percent, a 6.3 percent increase.
Also increasing was adjusted EBITDA was $14.9m, an increase of 35.6 percent as compared to second quarter 2011. Adjusted FFO for the second quarter 2012 was $10.1m or 27 cents per diluted share/unit, an increase of 32% as compared to second quarter 2011.
Summit acquired three hotels during the second quarter 2012, including:
§ 103 room Courtyard by Marriott – Dallas (Arlington), TX
§ 112 room Hilton Garden Inn – Nashville (Smyrna), TN
§ 83 room Hampton Inn & Suites – Nashville (Smyrna), TN
‘We continue to be pleased with the performance of our company,’ said Dan Hansen, president and CEO. ‘Very solid RevPAR growth for the quarter was the result of several factors, including steadily improving demand throughout many of our markets, continued muted hotel supply growth and solid performance by our hotels we rebranded during 2011. ‘
Summit spent $4.4m for renovations during the quarter, a significantly lesser amount than in the previous two quarters.
Hansen said the company generally tends to undertake hotel work and expenditure during the seasonally slow periods for its hotels.
Major improvements and capital invested during the second quarter include:
§ $1.1m at Fairfield Inn & Suites by Marriott in Fort Worth, TX
§ $700,00 at Hampton Inn, Fort Wayne, IN
§ $400,000 at Fairfield Inn & Suites by Marriott, Denver, CO
§ $400,000 at Hampton Inn, Provo, UT
§ $400,000 at Hilton Garden Inn in Atlanta (Duluth), GA
Varying in scope, the major improvements listed above include renovation to guestrooms, common areas, and exteriors of the hotels.
Summit was able to refinance two lower-interest loans of $9.8m and $5.3m for two hotels in Scottsdale, AZ, with GE Capital Corp. The REIT also amended a $125m senior secured revolving credit facility, with an option for greater leverage and an extended maturity date by a year. Also in 2Q 2012, Summit refinanced a loan with Chambers Bank with a principal balance of $1.5m and a loan with Bank of the Ozarks with a new principal balance of $8.9m, which resulted in $2.5m of net proceeds after repaying the previous loan.
Summit sold three hotels in Twin Falls, ID, for a total of $16.5m; some land in Twin Falls for $300,000 and land in Boise, ID, for $1.4m.
Just after 2Q closed on June 30, the company purchased the 96 room Residence Inn by Marriott in Dallas (Arlington), TX, for $15.5.
Since its IPO in February 2011, the company has acquired 12 hotels, adding 1,336 additional guestrooms to its portfolio.
On July 16, Summit completed the conversion of its previously branded Comfort Suites in Fort Worth, TX, into a 70 room Fairfield Inn and Suites by Marriott. This conversion completes the rebranding of all 11 of the company’s former Choice Hotels International branded hotels.
On August 3, the company expanded its capacity under its $125m Senior Secured Revolving Credit Facility to $112m by pledging three additional hotels under the borrowing base. The additional collateral pledged includes: 96 -room Residence Inn, Dallas (Arlington), TX; 103-room Courtyard by Marriott, Dallas (Arlington), TX; and 90-room Courtyard by Marriott – El Paso, TX. Summit has seven ‘unencumbered’ hotels in its portfolio.
‘We have been very active in executing on our strategy of deploying capital in the top 50 US markets,’ said Hansen, adding, ‘We have been successful in selling hotels and land parcels in markets that no longer meet our investment criteria.’
As of June 30, the company had total outstanding debt of $298.4m and $11.6m in cash and cash equivalents.
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