ARA Launches $451M Singapore IPO of US Hotel REIT

ARA Asset Management announced today that it has registered the initial public offering prospectus for ARA US Hospitality Trust, kicking off a $451 million listing for the hotel investment vehicle in Singapore.

The public offer, which began on Thursday night and closes on 7 May, gives individual and institutional investors in Asia a chance at a piece of a portfolio of 38 Hyatt-managed hotels in the US.

The listing by the Warburg Pincus-backed real estate fund manager comes just five months after the company had purchased the set of properties for a reported $590 million in a deal announced at the beginning of December last year.

The offering for ARA’s hotel collection, which has been appraised at a value of $719.5 million, has already attracted cornerstone investments from a Singapore-based business partner of Neil Bush – brother of former US president George W Bush – as well as from leading local and international banks and other institutional investors.

Getting a Taste of US Hospitality

“We are pleased to have received strong interest and support from the cornerstone investors and institutional investors for our offering,” Lee Jin Yong, chief executive officer for the managers of the trust said in a statement. “This is a testament of our investment proposition to offer investors a unique opportunity to gain exposure to a high quality, upscale select-service hospitality portfolio in the US in a favourable, tax-efficient manner.”

The investors are signing up for stakes in a portfolio of 27 assets franchised under the Hyatt Place brand, and another 11 under the Hyatt House moniker, across 21 states in the US. ARA had purchased the 4,950 room set of properties from a unit of Lone Start Funds as its maiden investment in North America.

In its statement, ARA, which is sponsoring the trust through a wholly-owned subsidiary and will also act as the manager of the listed entity through a subsidiary, pointed out that the existing portfolio’s average gross operating profit margin has remained steady at approximately 40 percent over the past three financial years.

For the 2018 fiscal year the company indicated that the hotels had averaged an occupancy rate of 77 percent and a weighted revenue per available room of $94. The portfolio is managed by independent hotel management company Aimbridge Hospitality.

Trust Set Up as a Stapled Offering

ARA US Hospitality Trust has been structured as a combination of ARA US Hospitality Property Trust, a real estate investment trust, and ARA US Hospitality Management Trust, a business trust, which have been linked as a stapled hospitality entity in Singapore. Investors are being offered a chance to invest in approximately 379.8 million stapled securities at an offering price of $0.88 per stapled security.

With the public portion of the REIT launching today, ARA has already locked down commitments for $116.5 million in investment from its cornerstone backers.

Leading the list of cornerstone investors named by ARA in a press release are mainland billionaire-turned-Singaporean-investor Gordon Tang and his wife Celine Tang. Gordon Tang is best known as chairman of American Pacific International Capital, a real estate investment firm where American political scion Neil Bush is a board member. Bush also serves as non-executive chairman of developer SingHaiyi, where Celine Tang is group managing director.

Also among the cornerstone investors are local Singaporean institutions Bank of Singapore, DBS Bank, United Overseas Bank, and ICH Capital, a private equity firm founded by investor Danny Teow Teck Toe. Swiss investment bank Credit Suisse AG is also taking a cornerstone stake in the offering.

DBS Bank is the sole issue manager for the offering, with DBS, OUB and UOB serving as joint financial advisors and joint global coordinators for the offering. DBS, OCBC, UOB and Credit Suisse (Singapore) are joint bookrunners and underwriters for the offering.