ARA US Hospitality Trust reports 3Q19 net property income missed IPO forecasts

U.S. one-dollar and five-dollar currency notes; taken September 2018.U.S. one-dollar and five-dollar currency notes; taken September 2018.

ARA US Hospitality Trust reported Wednesday its third quarter net property income came in at US$13.50 million, missing the US$17.33 million forecast from its IPO prospectus by 22.1 percent.

Gross revenue for the quarter ended 30 September came in at US$46.84 million, missing the IPO forecast of US$50.89 million by 8 percent, the REIT said in a filing to SGX.

The distribution per stapled security (DPS) was 1.77 U.S. cents for the quarter, missing the IPO forecast for 2.01 U.S. cents by 11.5 percent, the REIT said.

For the 9 May to 30 September period, the DPS was 3.13 U.S. cents, and the REIT said it expected the distributable income for the 9 May to 30 September period to be in line with the IPO forecast for that period.

The REIT listed on SGX on 9 May.

For the 9 May to 30 September period, the revenue per available room (RevPAR) came in at US$101, or 5.1 percent below the IPO forecast, mainly on new supply impact in some markets, the REIT said. The RevPAR performance is expected to improve gradually as new supply is absorbed and introductory rates taper off, the REIT said.

“Supply headwinds were exacerbated with demand dislocations (e.g., Hurricane Dorian in September) and property management turnover in some instances,” the REIT said. “Nevertheless, the portfolio achieved an occupancy of 81.3 percent [over the 9 May to 30 September period], a testament to the appeal of our Hyatt-branded portfolio and affirmation of our upscale select-service segment investment strategy.”

For the 9 May to 30 September period, the portfolio generated a net property income margin of 30.9 percent, as the upscale select-servcie hotel segment is “highly profitable,” ARA US Hospitality Trust said.

The REIT said the prospectus included a forecast for the 1 May to 31 December period, with the forecast results for the 9 May to 30 September period derived by pro-rating that forecast.

ARA US Hospitality Trust said it has begun a “comprehensive action plan” for its hotels, which includes sales initiatives to attract groups, improved digital marketing, cost management and renovations, such as television platform upgrades and improved internet access.

The REIT also pointed to its announcement Wednesday it would acquire three Marriott-branded hotels for US$84.5 million.

“The acquisition pipeline remains robust and the managers are continuing to source for potential yield accretive acquisitions,” the filing said.

The REIT’s initial portfolio had 38 hotels, including 27 Hyatt Place hotels and 11 Hyatt House hotels in the U.S.

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