AUSTIN, TX – January 5, 2022 – Summit Hotel Properties, Inc. today announced that it completed the acquisition of the 120-guestroom Embassy Suites by Hilton Tucson / Paloma Village for $25.5 million through its joint venture with GIC on December 21, 2021. The investment represents a high-quality, market-leading hotel in a rapidly growing market.
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. While occupancy and ADR in the Tucson market are historically strongest in February and March driven predominantly by leisure travel, the Embassy Suites benefits from year-round demand from a multitude of sources within the government, group, and business transient segments. The Company’s joint venture with GIC also owns the Homewood Suites by Hilton Tucson/St. Philip’s Plaza University located less than three miles south of the Embassy Suites, which will allow the Company to implement operational synergies and revenue enhancement strategies that will benefit both hotels.
Situated on nearly six acres, the Embassy Suites’ location in the Catalina Foothills places it among the highest end single family homes, shopping, and dining in Tucson and provides significant barriers to entry. The Embassy Suites was built in 2007, and since that time, no other hotels have been built within a three-mile radius. The hotel is adjacent to La Encantada – an outdoor luxury shopping center with high-quality dining options and an attractive tenant roster including Apple, Coach, Kendra Scott, Crate & Barrel, Williams Sonoma, Pottery Barn, and Lululemon, among others. Directly east of the Embassy Suites is La Paloma Country Club – a private club featuring 27 holes of Jack Nicklaus Signature Design Golf, world class tennis facilities, a resort pool complex, and a variety of dining options. Additional demand in the market is generated by the University of Arizona and its health network, government and related contracting businesses, youth sports teams, national park enthusiasts, and corporate travelers.
The joint venture acquired the property with a combination of cash and an assumed loan that has a balance of approximately $13.3 million. The loan has a fixed interest rate of 4.99% and a maturity date of June 2028. After this transaction, the Company 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 investment opportunities.
The Company expects the hotel to generate a full year 2022 net operating income yield between 7.0% and 7.5%.