The Home2 Suites by Hilton Colorado Springs South was completed in 2019
ARA US Hospitality Property Trust is ready to work with Uncle Sam as the Singapore-listed REIT announced on Wednesday that it has agreed to buy a Hilton-branded property in one of America’s biggest military hubs for $29 million.
The ESR-controlled manager of ARA US Hospitality Trust told the Singapore exchange on Wednesday that it proposes to acquire the three-star Home2 Suites by Hilton Colorado Springs South hotel near the Fort Carson army base, noting that the 119-key asset will provide a yield of 9 percent, based on net property income.
“The Property is strategically located in the south end of Colorado Springs, near the Fort Carson military base and the Broadmoor Convention and Resort with over 200,000 square feet of meeting space,” the manager said.
It added that the 2019-vintage extended-stay hotel benefits from, “a consistent demand base well-supported by a dominant military and aerospace presence,” along with other sources of visitors to the second-largest city in Colorado.
Checking into a Hyatt
The trust is proposing to purchase the hotel, which would be the first Hilton-branded property in a portfolio dominated by Hyatts and Marriotts, from a franchisee named CH Tenderfoot Hill, LLC, with the resilience of Colorado Springs’ hospitality market figuring prominently in its strategy.
Lee Jin Yong, CEO of ARA US Hospitality Trust
“Colorado Springs is at the center of the Rocky Mountain recreation activities and is a popular tourist attraction. It is a strong base for prominent US aerospace and military establishments as well as higher education institutions,” the trust’s manager said. “The growing sports and high-technology industries also offer strong support to the expanding submarket.”
Revenue per available room, or RevPAR, for the city during the first 10 months of 2022 already surpassed the total for the same period in 2019, according to the manager’s statement.
Located at 1235 Tenderfoot Hill Road, the Home2 Suites by Hilton Colorado Springs South is a select-service hotel located about three miles (4.8 kilometres) from the Fort Carson army base and five miles from Cheyenne Mountain Zoo.
Colorado Springs is also home to Peterson Air Force Base, the US Air Force Academy and the US Olympic and Paralympic Training Center, which provides facilities for many of the country’s Olympians.
The trust is paying about $243,697 per room for the property, which generated RevPAR of $129 in the 12 months through October 2022. As of October, its year-to-date occupancy stood at 83.7 percent and its average nightly income generated per occupied room was $164.
Under the terms of the deal, the hotel will continue to be managed by Nashville-based Chartwell Hospitality, which looks after 27 Marriott and Hilton-branded hotels across nine US states
The seller is also terminating its ongoing franchise agreement with Hilton Franchise Holding, with ARA H-Trust set to obtain its own franchising rights to operate the property under the Hilton brand.
Five for One
ARA H-Trust’s manager proposes to pay for the Colorado Springs asset in cash with the $32 million net proceeds generated from its sale of five Hyatt Place properties a half-year ago.
In July, it completed the $7.75 million sale of the Hyatt Place Chicago Itasca in Illiinois to Puerto Rico’s IHP Hospitality Group. Three months later, ARA H-Trust closed on its $32.5 million disposal of a 507-room portfolio serving Birmingham, Alabama; Pittsburgh, Pennsylvania and the Ohio cities of Cleveland and Cincinnati.
In presenting its case for the acquisition, ARA H-Trust estimated that, had it disposed of the five Hyatt properties and acquired the Colorado Springs asset by the start of 2021, its distributable income for the year would have increased by more than 54 percent to $4.46 million, from the $2.01 million achieved with its earlier portfolio.
ARA H-Trust currently owns 36 hotels in 19 US states with a total of 4,707 rooms. Its latest business update showed that portfolio occupancy rose to 65.4 percent in the nine months ending September from 58 percent for the full year of 2021, but was still below the 66 percent achieved in 2019.
Imagine trading at 50c on the dollar (P/NAV) and still acquiring assets. I feel sorry for the shareholders. Why not just do a buyback? ARA looking after their AM fees instead of the shareholders. Shame.