Summit Hotel Properties, Inc.
disclosed the recent acquisition of 2 hotel properties for $59.0
million. The move comes as part of the company’s effort to boost
its portfolio and leverage the growing potentials in Boston, MA and
Asheville, NC.
The property, located in Boston (Norwood), MA, is a 139-guestroom
Hampton Inn. Purchasing the property for $24.0 million in June, the
company has plans to expend around $2.3 million in the latter part
of 2016 for capital improvements, including its conversion to a
Hampton Inn Suites by Hilton.
This lodging real estate investment trust (“REIT”) projects around
$1.2 million of earnings before interest, taxes, depreciation and
amortization (“EBITDA”) contribution for the rest of 2015, along
with an estimated forward capitalization rate of 8.0-8.5% (based on
management’s current estimate of the hotel’s 2016 net operating
income).
The other property, which is situated in downtown Asheville, NC, is
a 115-guestroom Hotel Indigo. The company acquired this property
for $35.0 million. Over the next 12 months, Summit Hotel plans to
spend around $0.4 million on capital improvements. The company
projects contribution of around $1.8 million of EBITDA for the
remainder of 2015 from this property. Further, it anticipates an
estimated forward capitalization rate of 8.0-8.5%. Notably, the
company struck management agreements with Interstate Hotels
Resorts for both the properties.
Both the properties seem to be strategic additions to Summit
Hotel’s portfolio. With the Hampton Inn situated in the growing
suburb of Boston, the company expects the renovation work will
suitably place the property for leveraging the market fundamentals
characterized by solid demand and limited supply growth.
Also, the addition of Hotel Indigo to the vibrant Asheville market,
which is driven by tourism and leisure demand, coupled with health
care, advanced manufacturing and retail trade, appears a prudent
decision.
Should You Buy the Stock?
Along with this acquisition, we note the stock bears a solid Zacks
Rank #2 (Buy) coupled with impressive Growth and Value Style Score
of ‘B’. According to our style score system, a stock with favorable
Zacks Rank and Zacks Growth Style Score of ‘A’ (or ‘B’) is highly
desirable.
Our Growth Style Score condenses the essential metrics from a
company’s financial statements to provide a true sense of the
quality and sustainability of its growth. The Value component
condenses all valuation metrics into one actionable score that
helps investors to steer clear of ‘value traps’ and identify stocks
that are truly trading at a discount.
Back-tested results show that stocks with Style Scores of ‘A’ or
‘B,’ when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy),
handily outperform other stocks.
Investors interested in the REIT sector may also consider stocks
like Host Hotels Resorts, Inc.
HST
, LaSalle Hotel Properties
LHO
and Sunstone Hotel Investors Inc.
SHO
. All these stocks carry the same Zacks Rank as Summit Hotel.
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SUMMIT HOTEL PR (INN): Free Stock Analysis
Report
HOST HOTELRSRT (HST): Free Stock Analysis
Report
SUNSTONE HOTEL (SHO): Free Stock Analysis
Report
LASALLE HTL PRP (LHO): Free Stock Analysis
Report
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