JV To Acquire Lodging REIT Sotherly At 153% Premium
Upscale lodging REIT Sotherly Hotels is being acquired by a joint venture of Kemmons Wilson Hospitality Partners and Ascendant Capital Partners in a deal valuing the REIT at about $46.1M.
The joint venture, called KW Kingfisher, will pay $2.25 for each share of Sotherly, the owner of 10 upscale hotel properties in the mid-Atlantic and southern U.S. The price is a premium of 152.7% to Sotherly’s closing price Friday and a 126.4% premium to its volume-weighted average share price over the last month.
Sotherly said in a news release that this is the highest premium paid for a public, exchange-traded REIT in the past five years. Several REITs have been acquired at significant premiums in recent months, including Plymouth Industrial REIT, City Office REIT and Paramount Group.
REITs have asserted that they are undervalued, and many announced plans to explore strategic alternatives this year, such as looking at the private sector to boost valuations.
Sotherly’s acquisition “delivers compelling, immediate, and certain cash value to our stockholders,” Andrew Sims, Sotherly’s board chairman, said in a statement.
Williamsburg, Virginia-based Sotherly Hotels was formed in 2004 to own, acquire, renovate and reposition upscale hotel properties. The REIT owns 10 hotels across seven states, including The Whitehall in Houston, Lyfe Resort & Residences in South Florida and the Hyatt Centric Arlington near Washington, D.C., as well as interests in two condominium hotels.
Kemmons Wilson Hospitality Partners is a Memphis-based, hospitality-focused investment management firm established by the founders of the Holiday Inn brand. Ascendant Capital Partners is a real estate investment and operating platform headquartered in Los Angeles.
The joint venture “will bring additional resources to Sotherly’s unique and compelling portfolio of high-quality hotels to position them for continued success over the long term,” KWHP Chief Investment Officer Webb Wilson said in the release.
Affiliates of Apollo Global Management and Ascendant provided debt financing commitments to the joint venture, and Berkadia is arranging financing for KWHP for the merger, which is expected to close in the first quarter, subject to stockholder approval.
