Another US hospitality trust, Eagle Hospitality Trust, eyes SGX listing

JUST two days after ARA Group lodged a preliminary prospectus to list about US$720 million of US hotels under the Hyatt brand into a business trust, another issuer, the manager of Eagle Hospitality Trust (EHT) also lodged a preliminary prospectus to list its portfolio of US hotel assets.

The offering price range is currently between US$0.80 and US$0.81 per stapled security.

EHT is a US hospitality stapled group, backed by Urban Commons, a privately-held real estate investment and development firm. It has an initial portfolio of 18 full-service hotel properties, with a total of 5,420 rooms and an aggregate valuation of about US$1.27 billion.

The assets span states such as California, Texas, Colorado, Utah, Georgia, Florida, New Jersey and Connecticut. Seventeen of the 18 assets are freehold.

The issuer has projected a yield of 8.1 to 8.2 per cent for 2020. It said that it is banking on strong US macroeconomic and hospitality fundamentals, including robust corporate and leisure demand drivers and favourable demand-supply dynamics.

If both ARA US Hospitality Trust and EHT get listed successfully, they will be the first two entrants to the Singapore Exchange's mainboard since the listing of food court operator Koufu Group last July.

EHT's sponsor, Urban Commons, has a portfolio of various property types comprising mostly hotels. The company is headquartered in Los Angeles.

The Reit manager is indirectly 51-per-cent owned by Howard Wu and 49-per-cent owned by Taylor Woods, the co-founders of the sponsor.

The founders will collectively own an 18.3 per cent stake in EHT, based on the maximum offering price.

Unsurprisingly, the sponsor will be critical to the trust's growth strategy by acquisitions, as the former has access to a pipeline of US hospitality assets which the trust may have right of first refusal over.

The sponsor's industry experience will also come in handy when assessing potential acquisition opportunities and in the refurbishment, rebranding and repositioning of hospitality assets, the issuer said.

As at the listing date of May 1 2019, EHT is expected to have an aggregate leverage of about 38 per cent, which provides debt headroom of about US$170 million for future capital expenditure or acquisitions.

Under each master lease agreement signed for its assets, the Reit component of the stapled trust will receive rental payments with fixed and variable rent components.

While the fixed rent represents two-thirds of the total rent for the projection year 2020, the variable rent is pegged to gross operating revenue and gross operating profit, thus providing upside growth exposure.