The managers of ARA US Hospitality Trust, on March 17, announced that they will be selling Hyatt Place Chicago Itasca for a consideration of US$7.75 million ($10.6 million).
A conditional purchase and sale agreement was entered into with IHP Hospitality on March 17.
The consideration will be fully paid in cash. Of the amount, a non-refundable deposit of US$500,000 has been paid. The deposit will be applied towards the sale consideration payable at closing.
The completion of the sale is expected to take place within 60 days of the signing of the agreement.
Under the agreement, IHP Hospitality may extend the completion date for up to two periods of 15 business days each. At the time, it’ll be required to pay an additional non-refundable deposit of US$200,000 in connection with the first extension and an additional non-refundable deposit of US$50,000 in connection with the second extension.
The property is a six-story hotel with a total of 126 rooms and is situated on freehold land. It is located at 1150 Arlington Heights Road, Itasca, in Chicago.
See also: CICT's manager proposes to acquire ION Orchard at $1.85 billion, subject to EGM
The hotel is approximately 12 miles and 27 miles from the O’Hare International Airport and downtown Chicago, respectively. It commenced operations in 1996 and was last renovated in 2015.
According to an independent valuation conducted by JLL Valuation & Advisory Services, the hotel was valued at US$7.8 million as at Dec 31, 2021.
The way the managers see it, the proposed sale will bring about portfolio optimization for the trust, as the hotel is one of the oldest and smallest assets within the trust’s portfolio at 1.1% of its total value as at Dec 31, 2021.
See also: CICT's manager proposes to acquire ION Orchard at $1.85 billion, subject to EGM
“As the hotel is located in a market with declining economic conditions exacerbated by the Covid-19 pandemic, it is anticipated to have a longer road to recovery as compared to the other hotels in the portfolio. Being one of the oldest assets in the portfolio, the property is also envisaged to require sizable capital expenditure outlays relative to its value over the next few years,” reads the statement put out by the managers.
The proposed sale will also free up capital for the trust, which can be used to acquire accretive properties that bring in higher yields. The capital can also pare down the trust’s existing bank borrowings to improve its existing leverage ratio and up its debt headroom.
The divestment would have lifted the trust’s distribution per stapled security (DPS) to 0.371 US cents from 0.355 US cents for the FY2021 ended December on a pro forma basis.
Units in ARA US Hospitality Trust closed at 48 US cents on March 16.
