SINGAPORE (Nov 6): ARA US Hospitality Trust (ARA H-Trust) has declared a distribution per stapled security (DPS) of 1.77 US cents for 3Q19 ended Sept.
This is 11.5% lower than the 2.01 US cents figure forecast in its IPO (initial public offering) prospectus.
This comes after revenue per available room (RevPAR) was US$101 for the period from its listing date on May 9 to Sept 30, 5.1% lower than forecast.
In a Wednesday filing before the market opened, the managers of ARA H-Trust say the variance in performance was due to the supply impact in various markets.
The upscale select-service segment saw supply growth of 4.7% for the first three quarters of this year as hotel brands and developers continue to favour select-service hotels because of the superior demand by customers. On the other hand, demand growth for the segment lagged at 3.7%.
In addition, supply headwinds were exacerbated with demand dislocations from Hurricane Dorian in September as well as property management turnover in some instances.
Nevertheless, the managers say ARA H-Trust’s portfolio achieved an occupancy of 81.3% which is “a testament to the appeal of our Hyatt-branded portfolio and affirmation of our upscale select-service segment investment strategy”.
In addition, the portfolio’s RevPAR index of 106.4% demonstrates the strength of the portfolio in outperforming its competition, it adds.
Gross revenue for 3Q19 came in 8% lower at US$46.8 million ($63.6 million) versus the forecast US$50.9 million.
Net property income came in at US$13.5 million, 22.1% lower than the US$17.3 million forecast while distributable income came in at US$10.1 million, 11.5% lower than the US$11.4 million forecast.
In its outlook statement, the managers expect the distribution income for its forecast period from May 9 to Dec 31 to be in line with its IPO forecast.
Separately, ARA H-Trust says it is acquiring three upscale select-service Marriott-branded hotels in the US for US$84.5 million.
The hotels are AC by Marriott Raleigh North Hills in North Carolina, and Courtyard San Antonio at The Rim and Residence Inn San Antonio at The Rim in Texas.
The properties have a net property income yield of 8% and the accretive acquisition should increase ARA H-Trust’s pro forma distribution income from May 9 to Sept 30 by US$1.4 million.
This translates to a rise in DPS to 3.38 US cents from 3.13 US cents, assuming the acquisition was completed on the listing date.
ARA H-Trust’s managers say the freehold properties will benefit from diversified demand from companies, universities and leisure attractions nearby.
The acquisition will also be funded primarily by debt and internal cash resources.
With the latest acquisition, ARA H-Trust’s portfolio is expected to grow to 41 hotels with 5,340 guest rooms in 22 US states.
As at 2.40pm, units in ARA H-Trust are down 1 cent at 86 US cents.
