Summit Hotel acquired 19 properties in 2013, ends year with $436 million of debt, $47 million cash

By Lisa Kerner

Charlotte, N.C., March 17 - Summit Hotel Properties, Inc. president and chief executive officer Dan Hansen said he was pleased with the company's portfolio performance in the fourth quarter, noting Summit finished the year above prior expectations.

The company was busy on the acquisitions front, acquiring three hotels for a total of about $63 million in the fourth quarter and a total of 19 hotels during 2013 for $476 million during 2013. As a result, Summit was able to increase its presence in eight new markets, Hansen said during the company's earnings conference call on Monday.

Summit sold seven hotels and three parcels of land for a total of $24 million during the fourth quarter and sold 15 hotels and five parcels of land during the full year for proceeds of $59 million. The company ended 2013 with 89 hotels, according to Hansen.

The company has already acquired four hotels for $126 million and sold two hotels in 2014, making its capital recycling program "largely complete," Hansen said.

Debt and financing

"At year end 2013, we had total outstanding debt of $436 million with a weighted average interest rate of 5.03% and a weighted average term to maturity of 5.6 years," executive vice president and chief financial officer Stuart Becker said on the call.

"During the quarter, we repaid $37 million of secured debt, with no associated prepayment penalties, and we ended the quarter with net debt-to-trailing 12-month EBITDA of 4.2 times," Becker added.

Also during the quarter, Summit closed on a new $300 million senior unsecured credit facility to replace its $150 million secured revolving credit facility. As a result, Summit reduced its all-in funding costs by roughly 50 basis points.

"The new unsecured credit facility is comprised of a $225 million revolver and a $75 million term loan," Becker said. The facility has an accordion feature to increase the capacity by $100 million either through the revolver or the term loan.

In 2013, Summit raised about $382 million of net proceeds from two common stock offerings and one preferred stock offering, closed on $188 million of term debt at an average interest rate of 4.83% and retired about $44 million of debt bearing an average interest rate of 5.4%, according to the earnings news release.

At Dec. 31, Summit had about $47 million of cash and cash equivalents, $75 million outstanding on its senior unsecured term facility, $200,000 in standby letters of credit and about $196 million available to borrow. In addition, Summit had 13 unencumbered hotels, the release stated.

"Maintaining a strong capital structure, with multiple sources of available capital, has always been a hallmark of our company and we entered 2014 in an excellent position," Becker said.

As of March 14, the company has $161 million drawn, including the $75 million term loan and $14 million in standby letters of credit, and has $117.3 million available to borrow on its revolving credit facility.

Financial highlights

Summit reported funds from operations of $0.14 for the fourth quarter and $0.81 for the full year.

The company identified a material weakness in controls related to individual hotels' balance sheets, resulting in reclassification entries within certain balance sheet line items.

Renovations cost Summit about $18 million in the fourth quarter and $47 million for the year.

Adjusted EBITDA for the quarter was up 86.8% to $21.3 million. Full-year adjusted EBITDA was up 79.3% to $93.4 million.

The Sioux Falls, S.D.-based real estate investment trust declared a dividend of $0.1125 per common share on Jan. 30.

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