The managers of ARA US Hospitality Trust have agreed to sell Hyatt House Shelton and Hyatt House Philadelphia Plymouth Meeting for a total consideration of US$31 million ($42.0 million). The consideration will be paid in cash.
Two conditional sale and purchase agreements (SPAs) were signed between the managers’ indirectly wholly-owned subsidiary, ARA USH Chicago, LLC, and GHM Properties, LLC on May 8 (US time).
Hyatt House Shelton is a 127-room hotel that’s located on freehold land in Shelton, Connecticut. It began operations in 2010 and was last renovated in 2017. The 131-room Hyatt House Philadelphia Plymouth Meeting is an extended-stay hotel that’s located on freehold land in East Norriton, Philadelphia. It first opened its doors in 2000 and was last renovated in 2016.
The total sale consideration represents a 1.3% discount to the properties’ total valuation of US$31.4 million as at Dec 31, 2023. Individually, Hyatt House Shelton will be sold for US$19.7 million, in line with the valuation. Hyatt House Philadelphia Plymouth Meeting, on the other hand, will be sold for US$11.3 million, or a 3.4% discount to its valuation of US$11.7 million.
Both properties were valued independently after being commissioned by ARA US Hospitality Trust’s trustee.
According to the managers, the proposed sale will be slightly dilutive to the trust’s distribution per stapled security (DPS) and net asset value (NAV) on a historical pro forma basis. However, it would provide the trust with additional debt headroom for its “long-term, accretive growth strategy”.
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The divestment of Hyatt House Philadelphia Plymouth Meeting is also said to be in line with its portfolio optimisation strategy to divest its non-core assets. Hyatt House Philadelphia Plymouth Meeting is said to rank at the bottom quartile of the trust’s portfolio in terms of contribution to valuation and net property income (NPI). The property accounted for 2% of the total portfolio valuation as at Dec 31, 2023.
Furthermore, the property has outsized capital expenditure needs relative to its low valuation, the managers add.
Hyatt House Shelton, on the other hand, is a performing asset, but the managers believe there is limited upside for future revenue growth and further value appreciation. Furthermore, the property’s unique stone façade exterior and a subterranean car park also require outsized maintenance.
See also: UHREIT completes divestment of Albany-Supermarket for US$23.8 mil
The divestment is expected to be completed in the third quarter of 2024.
As at 10.13am, units in ARA US Hospitality Trust are trading at 27.5 US cents.
