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Bethesda-Based Hotel REIT To Be Acquired In $318M Deal

The Hilton Garden Inn in Dowell, Md., a property owned by Condor Hospitality Trust

A Bethesda-based hospitality REIT has reached a deal to be acquired, the latest in a series of mergers and acquisitions in the market. 

NexPoint Hospitality Trust announced Monday it reached an agreement to buy Bethesda-based Condor Hospitality Trust for $318M. 

The deal would bring the gross asset value of NexPoint, a Toronto-based REIT, to roughly $700M. NexPoint would acquire Condor's portfolio of 15 hotels totaling 1,908 rooms across eight states, bringing the combined portfolio to 26 hotels with 3,515 rooms. The portfolio consists largely of select-service and extended-stay properties, sectors on which NexPoint CEO Jim Dondero said he remains bullish. 

The deal is expected to close in Q4. NexPoint would pay with a combination of cash and debt at a price of $11.10 per share, a 34% premium over Condor's stock price when the market closed Friday. 

Condor announced in October it was launching a review process to consider a range of strategic alternatives including a potential sale. The REIT is working with KeyBanc Capital Markets as its financial adviser and McGrath North as legal counsel. NexPoint is working with Winston & Strawn and Goodmans LLP as legal counsel. 

The acquisition continues the trend of M&A activity in the hospitality REIT sector, with many of the deals involving firms based in the D.C. area. In December, Bethesda-based Pebblebrook Hotel Trust completed its $5.2B acquisition of Bethesda-based LaSalle Hotel Properties. In May, Tysons-based Park Hotels & Resorts announced it reached a deal to acquire Arlington-based Chesapeake Lodging Trust

Experts say mergers between two REITs largely occur when one company has a significantly higher public market valuation, allowing it to capitalize on the difference. Park Hotels CEO Tom Baltimore has been vocal about the need for greater consolidation in the hospitality REIT space as a way to make the market more efficient.