American Hotel Income Properties REIT LP to market 45 hotels for $215.5 million
American Hotel Income Properties REIT LP announced that it has already reached a definitive agreement to market its Economy Lodging portfolio comprising 45 hotel properties through certain of its subsidiaries to a joint venture partner of VCM, Ltd. for US$215.5 million (excluding closing and post-closing adjustments). This sale culminates a thorough overview of the portfolio that reinforced AHIP’s view that its long-term strategy is way better centered on expanding and driving growth from its Premium Branded hotel portfolio, which includes 67 hotels in larger U currently.S. secondary markets which are predominantly associated with Marriott, IHG and hilton hotel brands.
After the repayment of property transaction and mortgages closing costs, the net arises from the sale of around US$90 million will undoubtedly be redeployed to obtain additional Premium Branded hotels which are better suitable for AHIP’s long-term strategy, and useful for general corporate purposes also.
“It is a transformational transaction for the business, and can simplify our corporate structure, cost base and investment story, while providing us with the chance to redeploy capital towards initiatives we believe will create stronger growth prospects, along with higher and much more consistent returns for the investors,” said John O’Neill, CEO. “Following sale of our Economy Lodging properties, AHIP will be better aligned with this U.S. hotel REIT peers by running a focused portfolio of mid to upscale purely, select-service branded hotels. We anticipate this more focused strategy can help value our business in the general public markets effectively.”
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“Within our announced capital recycling initiative, this transaction completes our shift from Economy Lodging properties also. Our long-term strategy is targeted on enhancing the caliber of our hotels and cashflow by focusing on an evergrowing portfolio of Premium Branded hotels. The sale of our 45 Economy Lodging properties may be the first step for the reason that strategy. While our existing total portfolio RevPAR for the trailing a year ended March 31, 2019 was $73.31, alone, our Premium Branded portfolio RevPAR was 20% higher at $88.23. AHIP’s Premium Branded hotels deliver an increased Net Operating Income margin of 34 also.2% in the trailing twelve ended months March 31, 2019, when compared to Economy Lodging hotels at 31.7%. In the years ahead, we plan to focus on accretive growth within the upper-midscale to upper-upscale types of hotels in secondary metropolitan U.S. cities. We’ve already begun our overview of potential hotel acquisition opportunities that people believe could possibly be highly complementary to your existing Premium Branded portfolio, and so are offered by capitalization rates close to what we have been selling our Economy Lodging portfolio for. Furthermore, today we expect such acquisitions to reap the benefits of improved debt financing terms open to us, including longer amortization periods and lower interest levels, that will meaningfully lower our financing costs in accordance with your debt currently secured contrary to the Economy Lodging portfolio. Combined, we believe higher-quality properties, less expensive debt, and much more attractive financing terms shall drive accretion and preserve cash for the Company on the long-term.”
Mr. O’Neill continued, “We’re happy with the approximately 8 also.2% cap rate achieved with this sale of the portfolio, which demonstrates the enhanced value we built-in that segment of our business since originally acquiring it in 2013.”
AHIP intends to redeploy the web arises from the sale into new, income-generating investments. Predicated on AHIP’s current estimates of go-forward cashflow for the Premium Branded portfolio and the effectiveness of its balance sheet, the business expects to keep its current monthly cash distribution of US$0.054 per unit following completion of the transaction.
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