ARA H-Trust to divest 4 Hyatt Place hotels for US$32.5m

ARA US Hospitality Trust : XZL 0% (ARA H-Trust) has agreed to sell a 4-property portfolio of Hyatt Place hotels for US$32.5 million to US-based real estate investment firm Three Wall Capital.

The consideration represents a 3.2 per cent premium above the portfolio’s independent market valuation of US$31.5 million as at end-2021, said the stapled group’s managers in a bourse filing on Thursday (Jun 30).

Completion of the sale is expected to take place in Q3 of 2022. Aside from general working capital requirements, the estimated US$31.4 million of resultant net proceeds will be used to reduce existing bank borrowings to improve ARA H-Trust’s aggregate leverage. 

The portfolio comprises Hyatt Place Pittsburgh Cranberry in Pennsylvania; Hyatt Place Birmingham Inverness in Alabama; as well as Hyatt Place Cincinnati Northeast and Hyatt Place Cleveland Independence, which are both located in Ohio.

According to the stapled group’s managers, the 4 properties are non-core assets with declining historical performance and located in sub-markets with declining demand, where asset enhancement is not expected to boost cashflow yield in the future year.

Divesting these properties will allow ARA H-Trust to free up capital in the process of optimising and rebalancing its portfolio while strengthening the stapled group’s balance sheet for long-term growth, said the managers.

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For illustrative purposes, distribution per stapled security (DPS) for FY2021 would have been 0.495 US cent had the sale been completed on Jan 1, 2021 as opposed to a DPS of 0.355 cent before the proposed sale – representing DPS accretion of 39.4 per cent.

Pro-forma net property income (NPI) would have been US$24 million as opposed to an audited FY2021 NPI of US$24.9 million, while distributable income would have been US$2.8 million compared to US$2 million.

Stapled securities of ARA H-Trust ended Thursday US$0.005 or 1.1 per cent higher at US$0.48, before the announcement was made.