Summit Hotel Properties Inc

Our Portfolio

According to current chain scales as defined by STR, as of December 31, 2023, six of our lodging properties with a total of 953 guestrooms are categorized as Upper Upscale hotels, 78 of our lodging properties with a total of 11,903 guestrooms are categorized as Upscale hotels, and 14 of our lodging properties with a total of 1,998 guestrooms are categorized as Upper Midscale hotels. We have two independent lodging properties with a total of 58 guestrooms. Lodging property information for the year ended December 31, 2023 is as follows:

(1) We own a 51% controlling interest in these lodging properties through our consolidated GIC Joint Venture.

(2) We own a 90% controlling interest in these lodging properties through our consolidated Brickell Joint Venture.

(3) We own a 90% controlling interest in this lodging property through our consolidated Onera Joint Venture.

In addition to our lodging property portfolio, we own two parcels of undeveloped land that are designated as held for sale. The land parcels are generally suitable for the development of new lodging properties or the development of restaurants. When unique opportunities to develop lodging properties utilizing our own resources arise, we may develop our own lodging properties on occasion. To reduce the risk of incurring a prohibited transaction tax on any sales of our undeveloped land, we may transfer some or all of these land parcels to our TRSs.

Our Lodging Property Operating Agreements

Ground Leases

At December 31, 2023, six of our lodging properties are subject to third-party ground lease agreements that cover all of the land underlying the respective lodging property.

•The Residence Inn by Marriott located in Portland (Portland Airport at Cascade Station), OR is subject to a ground lease with an initial lease termination date of June 30, 2084 with one option to extend for an additional 14 years. Ground rent for the initial lease term was prepaid in full at the time we acquired the leasehold interest. If the option to extend is exercised, monthly ground rent will be charged based on a formula established in the ground lease.

•The Hyatt Place located in Portland (Portland Airport/Cascade Station), OR is subject to a ground lease with a lease termination date of June 30, 2084 with one option to extend for an additional 14 years. Ground rent for the initial lease term was prepaid in full at the time we acquired the leasehold interest. If the option to extend is exercised, monthly ground rent will be charged based on a formula established in the ground lease.

•The Hampton Inn & Suites located in Austin, TX is subject to a ground lease with an initial lease termination date of May 31, 2050. Annual ground rent currently is estimated to be $0.5 million, including performance-based incentive rent. Annual rent is increased every five years with the next adjustment coming in 2025.

•The Hilton Garden Inn located in Houston (Galleria), TX is subject to a ground lease with an initial lease termination date of April 20, 2053 with one option to extend for an additional 10 years. Annual ground rent currently is estimated to be $0.5 million, including performance-based incentive rent. Annual rent is increased every five years with the next adjustment coming in 2028.

•The Embassy Suites located in Amarillo, TX is subject to a ground lease with an initial lease termination date of October 1, 2095. The annual ground rent is nominal and increases every year.

•The Canopy Hotel located in New Orleans, LA is subject to a ground lease with an initial lease termination date of December 31, 2054. The annual ground rent is nominal and is fixed for the first 30 years.

These ground leases generally require us to make rental payments and payments for our share of charges, costs, expenses, assessments and liabilities, including real property taxes and utilities. Furthermore, these ground leases generally require us to obtain and maintain insurance covering the subject property.

Franchise Agreements

At December 31, 2023, all except for two of our lodging properties operate under franchise agreements, or similar agreements, that allow for access to reservation systems, with Marriott, Hilton, Hyatt, or IHG. We believe that the public’s perception of the quality associated with a branded lodging property is an important feature in its attractiveness to guests. Franchisors provide a variety of benefits to franchisees, including centralized reservation systems, national advertising, marketing programs and publicity designed to increase brand awareness, loyalty programs, training of personnel and maintenance of operational quality at lodging properties across the brand system.

The terms of our franchise agreements generally range from 10 to 30 years with various extension provisions. Each of our franchisors receive franchise fees ranging from 3% to 6% of each lodging property’s room revenue, and some agreements require that we pay marketing fees of up to 4% of room revenue. In addition, some of these franchise agreements require that we deposit into a reserve fund for capital expenditures up to 5% of the lodging property’s gross or room revenues, depending on the franchisor, to ensure that we comply with the franchisors’ standards and requirements. We also pay fees to our franchisors for services related to reservation and information systems.

Property Management Agreements

At December 31, 2023, all of our lodging properties are operated pursuant to property management agreements with professional third-party property management companies as follows:

Our typical property management agreement requires us to pay a base fee to our property manager calculated as a percentage of total property revenues. In addition, our property management agreements generally provide that the property manager can earn an incentive fee upon achieving earnings before interest, taxes, depreciation and amortization ("EBITDA") over certain thresholds. Our TRS Lessees may employ other property managers in the future. We do not, and will not, have any ownership or economic interest in any of the property management companies engaged by our TRS Lessees.