ARA US Hospitality Trust : XZL -1.05% (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&rsquo s independent market valuation of US$31.5 million as at end-2021, said the stapled group&rsquo 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&rsquo 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&rsquo 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&rsquo s balance sheet for long-term growth, said the managers.

 

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 &ndash 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.

 

ARA US Hospitality Trust (ARA H-Trust) ARA HTrust USD : XZL +2.08% is proposing to divest Hyatt Place Chicago Itasca for US$7.75 million to family-owned corporation IHP Hospitality Group, the stapled group' s managers announced on Thursday (Mar 17).

 

The consideration will be satisfied wholly in cash and represents a slight 0.6 per cent discount to the asset' s independent valuation of US$7.8 million as at end-2021.

 

IHP Hospitality Group has paid a non-refundable deposit of US$0.5 million after entering into a conditional purchase and sale agreement with a subsidiary of ARA H-Trust as the vendor.

 

Upon completion, net proceeds from the divestment will be used to pare down existing bank borrowings to improve ARA H-Trust' s aggregate leverage ratio, aside from general working capital requirements.

 

Hyatt Place Chicago Itasca is a 6-storey hotel with 126 rooms. It commenced operations in 1996 and was last renovated in 2015.

 

Located at Arlington Heights Road in Itasca, a suburb of Chicago, the freehold property is about 19.3 kilometres (km) from the O' Hare International Airport and 43km away from downtown Chicago.

 

It accounts for 1.1 per cent of ARA H-Trust' s total portfolio as at end-2021, and is among the oldest and smallest assets within the portfolio.

 

In a regulatory filing, ARA H-Trust' s managers said selling the asset will help to optimise ARA H-Trust' s portfolio as they anticipate the hotel to have a comparatively longer road to recovery. This is considering the asset' s location in a market with declining economic conditions, exacerbated by the Covid-19 pandemic.

 

The property is believed to require sizeable capital expenditure outlays relative to its value over the next few years, being one of the oldest assets in the portfolio, they added.

 

Divesting Hyatt Place Chicago Itasca is also expected to free up capital for ARA H-Trust, which may be re-deployed to either accretive and higher-yield acquisitions, or pare down existing bank borrowings to improve ARA H-Trust' s aggregate leverage ratio.

 

For illustrative purposes, the managers estimate ARA H-Trust' s distribution per stapled security (DPS) for the financial year ended Dec 31, 2021 to have been higher at 0.371 US cents as compared to the actual FY2021 DPS of 0.355 US cents, had the sale been completed on Jan 1, 2021.

 

Pro-forma net asset value (NAV) per unit would have remained unchanged at US$0.70.

[SINGAPORE] ARA US Hospitality Trust (ARA H-Trust) posted a distribution income of US$2 million for the full year ended Dec 31, 2021, which works out to a distribution per stapled security (DPS) of 0.355 US cent.

 

This was unlike the previous year, when there was no distributable income.

 

Net property income came in at US$24.9 million in FY2021, reversing from a net property loss of US$5 million the previous year.

 

Revenue was up 67.2 per cent to S$130.7 million for the full-year, from S$78.2 million the year before.

 

Operating profit jumped 218.7 per cent to US$40.5 million for FY2021 versus the US$12.7 million the previous year.

 

The ARA H-Trust portfolio had benefited from recovering domestic travel and hotel demand, which led to sequential improvements in quarterly performance across all brands, it said in a statement.

 

For FY2021, the portfolio posted an average occupancy and average daily rate of 57.1 per cent and US$112, respectively.

 

Lee Jin Yong, chief executive of the managers, said: " The US economy is booming as the disruptions from Covid-19 diminish and the pandemic transitions to an endemic. The expected return of corporate and group demand will further bolster recovery and stoke renewed optimism for the US lodging industry in 2022 and beyond."

 

On Feb 23, 2022, the managers also successfully obtained new 3-year unsecured loan facilities amounting to US$95 million from the existing lenders, to refinance loans maturing in FY2022 and FY2023.

 

ARA H-Trust, which listed on the Singapore Exchange in May 2019, is a stapled group comprising ARA US Hospitality Property Trust, a real estate investment trust, and ARA US Hospitality Management Trust, a business trust.

ARA Logos Logistics Trust (ARA Logos) ARA LOGOS Log Tr: K2LU 0% will likely see growth from strong leasing enquiries at its Singapore and Australia portfolios, but it may also be a takeover target of ESR-Reit, UOB Kay Hian (UOBKH) said on Friday.

 

The real estate investment trust (Reit) has " twin engines of growth" , said analyst Jonathan Koh. He expects its Singapore portfolio will benefit from growth in third-party logistics and e-commerce sectors, while demand for its Australia portfolio could also be boosted by omni-channel retailers.

 

UOBKH maintained its " buy" call on the stock, and raised its target price to S$1.07 from S$1.02, noting that the Reit will likely provide an attractive distribution yield of 6 per cent for 2022.

 

Units of ARA Logos closed unchanged at S$0.905 on Friday.

 

Koh had raised estimates for ARA Logos' distribution per unit for 2022 by 2.6 per cent on higher occupancy in Singapore, noting that the higher unit price also lowers dilution from paying management fees through the issue of new units.

 

He also expects the capitalisation rate of the Reit' s Australia portfolio to drop to 4.5 per cent from 5.1 per cent, which would increase its net asset value per unit by 7 per cent by Dec 2021. A lower capitalisation rate - an indicator for the expected rate of return generated on a real estate investment property - means better valuation and prospect of returns with lower risks.

 

Additionally, Koh noted that ARA Logos has actively worked on potential acquisitions, which could involve properties in Singapore and Tier-2 cities in China. Even on the fundraising end, the Reit' s distribution yield has compressed to 5.6 per cent from 8.1 per cent earlier this year, which makes equity fundraising to finance acquisitions more feasible.

 

ARA Logos, however, could be taken over by ESR-Reit, after ESR Cayman - which owns 67 per cent of ESR-Reit' s manager - completes its acquisition of ARA Asset Management, a majority shareholder of ARA Logos' manager.

 

In August, Hong Kong-listed ESR Cayman said that it would buy the entire share capital of ARA Asset Management for US$5.2 billion, resulting in it indirectly owning the manager of ARA Logos.

 

ESR-Reit ESR-REIT: J91U -1.08%, which is pivoting its investment strategy towards acquiring logistics assets, would therefore likely issue a takeover offer for ARA Logos due to their overlapping investment mandates, given that the former is also 1.4 times larger in terms of market capitalisation, according to UOBKH.

 

DBS Group Research analyst Geraldine Wong has maintained &ldquo buy&rdquo on ARA US Hospitality Trust (ARAHT) as she deems the REIT&rsquo s recovery to be &ldquo on track&rdquo .

 

&ldquo We expect a sustained recovery for ARAHT on the back of a summer leisure demand spillover into 2HFY2021 and the return of corporate travel,&rdquo she writes in an Aug 20 report.

 

That said, Wong has reduced her target price estimate to 75 US cents ($1.02) from 79 US cents previously, as she reduces her earnings estimates slightly.

 

&ldquo We were too optimistic previously,&rdquo she explains.

The new target price implies a 48% upside and an &ldquo attractive&rdquo FY2022 yield of 9.5%.

 

Wong, however, remains optimistic on the REIT&rsquo s prospects as she still sees a doubling of cashflows in 2HFY2021 and a further recovery in FY2022.

 

&ldquo We [still] see scope for occupancy and rates to move further upwards towards normalised levels,&rdquo she says.

&ldquo Operational data sector-wide also seems to support this steady recovery to normalcy,&rdquo she adds.

 

To Wong, ARAHT is well-positioned in the select-service and extended-stay segments, which are favoured over the full-service segment, given the more labour-efficient operating model.

 

&ldquo We thus see profits and distributions rebound quicker than the other segments on the back of a lower cost front and consumer preferences, benefitting ARAHT,&rdquo she writes.

On the back of a return in travel demand, an improvement in cashflows in the second-half of FY2021 will support higher portfolio valuations.

 

The catchup in valuations and lower gearing will be positive catalysts for the counter.

&ldquo Valuers have opined that the fair value for ARAHT portfolio should be US$888 million upon normalisation in 2024 (vs US$687 million as at end December 2020), bringing the gearing level down to 40% in the medium term,&rdquo says Wong.

 

ARA US Hospitality Trust (ARA H-Trust) on Thursday posted a net property income (NPI) of US$9.1 million for the six months ended June 30, reversing from a net property loss of US$2 million in the year-ago period, as the stapled group continues to recover from the pandemic.

 

Revenue was up 34.3 per cent to US$52.8 million, from US$39.3 million the year before, ARA H-Trust' s managers said in a press statement.

 

Its managers reported no distributable income for the period, after deducting reserves set aside for capital expenditure for the Jan 1 to June 30 period. This relates to routine capital asset improvements and refurbishments for hotel properties.

 

The income before reserves set aside for capital expenditure amounted to around US$2.8 million, after deducting loan interest expenses, other trust expenses and fees payable to the Reit trustee and managers.

 

Net asset value per stapled security as at June 30, 2021, was US$0.61, down slightly from US$0.62 as at Dec 31, 2020. This was mainly due to accounting depreciation of the properties, partially uplifted by the income generated from hotel operations in H1 2021, the managers said.

 

The managers said the ARA H-Trust portfolio " picked up momentum" from rising domestic travel and hotel demand, leading to sequential improvements in quarterly performance across all brands. 

 

In the first half, average occupancy and average daily rate stood at 51.2 per cent and US$101 respectively. Revenue per available room was US$52. 

 

The stapled group' s aggregate leverage stood at 49 per cent. There are no refinancing requirements until 2022, the managers added. They have also secured loan covenant waivers from Singapore-based relationship banks up to December 2021. 

 

The managers expect the US hospitality market to further strengthen and rebound closer to pre-pandemic levels in the months ahead as the summer travel surge continues. There have also been emerging signs of a return in business travel as more companies approve corporate travel. 

 

Lee Jin Yong, chief executive of the managers, said: " As our portfolio is oriented towards domestic leisure and business travellers, we anticipate that the trust' s performance will be in the vanguard of the US hospitality market recovery."

 

ARA H-Trust is a pure-play US upscale select-service hospitality trust that was listed on the Singapore Exchange in May 2019. It is a stapled group comprising ARA US Hospitality Property Trust, a real estate investment trust, and ARA US Hospitality Management Trust, a business trust.

 

ARA US Hospitality Trust (ARA H-Trust) posted a net property loss of US$3 million and no distributable income for the second half ended Dec 31, 2020, after taking fixed costs into consideration.

 

This came as the Covid-19 pandemic " adversely impacted" the stapled group' s portfolio performance, with a significant drop in hotel occupancies and temporary hotel closures resulting in significant declines in revenue, the manager said on Wednesday in a bourse filing.

 

ARA H-Trust projected a net property income of US$31.1 million, a distributable income of US$21.1 million and distribution per stapled security of 3.72 US cents in its initial public offering (IPO) forecast.

 

Revenue for the six months ended December 2020 dropped 54.9 per cent to US$38.8 million, from US$86.1 million a year ago. Revenue was 60.3 per cent lower than its forecast of US$97.7 million. Average daily rate stood at US$102, missing the IPO forecast by 22.1 per cent.

 

Operating expenses narrowed to US$32 million, from US$55.4 million a year ago, as the manager implemented plans to substantially reduce operating costs, including the temporary suspension and consolidation of hotel operations, and comprehensive cost and labour reductions.

 

Total property value stood at US$686.9 million as at Dec 31, 2020, down 2.5 per cent from US$704.7 million a year ago. Valuation declined by 13.5 per cent on Covid-19 pandemic impact, partially offset by the acquisition of the Marriott portfolio in January 2020.

 

ARA H-Trust' s portfolio recorded occupancy of 41 per cent for FY2020, compared with its forecast of 77 per cent.

 

The manager said all 41 properties within the stapled group' s portfolio are open and generating positive cash flows from operations since July 2020.

 

ARA H-Trust remains in a secure financial and liquidity position to meet its operational needs and financial commitments, the manager said. As at end-December 2020, the stapled group had US$26.8 million cash on hand and aggregate leverage of 48.2 per cent. Lender banks also provided a further extension to a financial covenant waiver up to June 2021.

 

For the full year ended Dec 31, 2020, ARA H-Trust recorded a net property loss of US$5 million, compared with an IPO forecast of net property income of US$60.6 million. There was no distributable income, compared with an IPO forecast of US$40.8 million. Revenue for the full year stood at US$78.2 million, missing the IPO forecast of US$192.2 million by 59.3 per cent.

 

ARA H-Trust, which listed on the Singapore Exchange in May 2019, is a stapled group comprising ARA US Hospitality Property Trust, a real estate investment trust, and ARA US Hospitality Management Trust, a business trust.