Main Photo: Embassy Suites by Hilton Columbus Dublin, Ohio
Date: August 2019
Name: American Hotel Income Properties REIT LP – AHIP
No. of Keys: TBA
Seller: American Hotel Income Properties REIT LP plans to sell 45 hotels—its entire economy-lodging portfolio…immediately post-sale of the portfolio, AHIP’s portfolio will consist of 67 hotels, including the Embassy Suites by Hilton Columbus Dublin in Ohio and hotels under several mainstream brands…Hilton, Marriott, IHG,
Buyer: An affiliate of Vukota Capital Management acquired the hotels for US$215.5 million. They appear to be new entrants to hotels, with a well-established position in Medical and Multifamily – $500m in assets under management. The company is headed up by Tom Vukota
The transaction is part of AHIP’s plan to focus entirely on its premium-branded portfolio of mostly upper-midscale to upper-upscale hotels in the extended-stay and select-service segments.
“Our decision to sell these properties was the result of an extensive evaluation of our portfolio and our view that AHIP’s valuation and unit-holder return would be strengthened by expanding and driving growth as a pure-play, premium-branded, select-service hotel REIT,” said AHIP CEO John O’Neill in a call with investors.
The REIT expects to complete the transaction in September. After the repayment of property mortgages and transaction closing costs, the sale’s net proceeds will total approximately $90 million. According to O’Neill, AHIP plans to use this money to acquire newer, higher-quality properties with limited upcoming renovation and property improvement plan requirements. The company currently is reviewing properties that meet its criteria and expects to use the money from the sale to acquire new hotels by year’s end.
Though he was not willing to disclose the specific cities AHIP will target, O’Neill said it is not looking at markets like Los Angeles, New York City and Chicago. Instead, the REIT is focusing on strong secondary markets consistent with the larger markets where it currently owns properties. “Those kind of markets have better growth potential, higher quality of assets and [are] consistent with our strategy going forward,” he said.
“From the proposals and market opportunities we’re seeing, we believe newer, higher-quality properties can be acquired at cap rate in line with our selling cap rate of the economy-lodging portfolio and with stronger growth potential,” said O’Neill. “Focusing entirely on premium-branded hotels will simplify our corporate structure, our reporting requirements and perhaps, most importantly, our investment proposition.”
Price per Key: TBA
THPT Comment: Logical move for AHIP…new strategy for Vukota…best wishes to them
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