ARA H-Trust to divest Pittsburgh Airport hotel at US$7.7 million valuation
ARA US Hospitality Trust (ARA H-Trust) has proposed to sell hotel Hyatt Place Pittsburgh Airport at its valuation of US$7.7 million.
The move will free up capital that can be redeployed to acquire accretive, higher yield properties or pare down existing borrowings, the managers said on Tuesday (Nov 28).
They noted that the hotel is the smallest within ARA H-Trust’s portfolio, accounting for 1 per cent of its total valuation as at Dec 31, 2022. It is also one of the stapled group’s older assets and will require “sizeable capital expenditure outlay relative to its value”.
“Capital investment in this hotel is considered dilutive to distributable income. By selling this asset, the trust saves capital expenditure dollars that are better redeployed to higher-performing assets in the portfolio,” the managers said.
The 127-room hotel commenced operations in 1998 and is 12.9 km from Pittsburgh International Airport and 19.3 km from downtown Pittsburgh. It was last renovated in 2016 and is located in a neighbourhood with a mix of retail, commercial, industrial and hospitality properties.
The managers said the market has been slow to recover, with market room demand negative at a compounded annual growth rate of negative 7.3 per cent from 2019 to 2022. Its property value has also slipped 9 per cent since 2019 due to market conditions and continued underperformance.
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Hyatt Place Pittsburgh Airport is also one of ARA H-Trust’s bottom three performers, with a gross operating profit margin of 21.6 per cent in the trailing 12 months ended September 2023, compared with the Hyatt portfolio average of 33 per cent.
The property will be divested at valuation, conducted on Aug 31 by the stapled group’s trustee. Assuming the deal was completed on Jan 1, 2022, distribution per stapled security would have fallen slightly to US$0.03051 from US$0.03054, based on pro forma estimates.
The managers expect to complete the divestment in Q1 2024.
ARA H-Trust’s stapled securities finished 1.7 per cent or US$0.005 lower at US$0.285 on Monday.
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