ARA H-Trust to buy three US hotels for US$84.5m

Singapore

ARA US Hospitality Trust (ARA H-Trust) will acquire three Marriott-branded upscale select-service hotels in the United States for US$84.5 million.

They are AC by Marriott Raleigh North Hills in North Carolina, and Courtyard San Antonio at The Rim and Residence Inn San Antonio at The Rim in Texas.

The freehold properties benefit from diversified demand from nearby corporations, universities and leisure attractions, the Reit said in a filing on Wednesday. The acquisition will grow ARA H-Trust's portfolio to 41 hotels comprising 5,340 guest rooms in 22 states in the US.

At a net property income yield of 8 per cent, the acquisition is expected to increase ARA H-Trust's pro forma distribution income from its listing date on May 9 this year to Sept 30 by US$1.4 million. This translates to a rise in distribution per stapled security (DPS) to 3.38 US cents from 3.13 US cents, assuming the acquisition was completed on the listing date.

Lee Jin Yong, chief executive officer of the Reit's managers, said: "This acquisition demonstrates our ability to execute third-party transactions at an attractive yield in the world's largest lodging market. We will continue to explore acquisition opportunities to further diversify our portfolio by location and by brand, and most importantly to enhance stapled securityholders' returns."

The acquisition will be funded primarily by debt and internal cash resources.

Separately, ARA H-Trust reported a DPS of 1.77 US cents for its third quarter, 11.5 per cent lower than the 2.01 US cents forecast in its initial public offering (IPO) prospectus.

This comes after overall supply growth outpaced demand growth in the upscale select-service segment for the first three quarters of fiscal 2019, it said.

Distributable income for the third quarter ended Sept 30 was 11.5 per cent lower at US$10.1 million versus a forecast of US$11.4 million.

Net property income, which was forecast at US$17.3 million, was 22.1 per cent lower at US$13.5 million.

Gross revenue was 8 per cent lower at US$46.8 million versus a projected US$50.9 million.

For the period from its listing date on May 9 to Sept 30, revenue per available room (RevPAR) was US$101, 5.1 per cent lower than forecast.

"The variance in performance is primarily attributable to new supply impact in various markets. Supply headwinds were exacerbated with demand dislocations (eg Hurricane Dorian in September) and property management turnover in some instances," said ARA H-Trust.

"Nevertheless, the portfolio achieved an occupancy of 81.3 per cent, a testament to the appeal of our Hyatt-branded portfolio and affirmation of our upscale select-service segment investment strategy."

The Reit's manager expects the distribution income for its forecast period from May 9 to Dec 31, 2019 to be in line with its IPO forecast.

Units of ARA H-Trust closed down US$0.005 or 0.6 per cent at US$0.86 on Wednesday.