[SINGAPORE] ARA USH Chicago, an indirect wholly owned subsidiary of Acrophyte Hospitality Management Trust (AHT), is selling a hotel in the United States for US$7.8 million.
Located in Memphis, Tennessee, the Hyatt Place Primacy Parkway hotel has 126 rooms and is 11.3 miles (18.2 km) south-east of the Memphis central business district, the managers of AHT noted in a bourse filing on Wednesday (Dec 17).
An independent valuation by DBS Trustee, as trustee of AHT, placed the hotel at US$8.5 million as at Jul 31, based on the income capitalisation and sales comparison approach.
The proposed sale price – which the managers said was negotiated on a willing-buyer, willing-seller basis – represents an 8.8 per cent discount to the valuation.
The managers added that the buyer is named Shivam Patel.
The sale is expected to be completed in the first quarter of 2026, and set to be settled wholly in cash.
The managers expect about US$456,000 in transaction costs, and added that they are “entitled to a divestment fee” of about US$39,000, which is 0.5 per cent of the sale consideration.
Net divestment proceeds are expected to come in at about US$7.3 million.
The Memphis hotel was described as a “non-core and underperforming” asset in AHT’s portfolio.
“The hotel ranks in the bottom quartile in terms of its contribution to both valuation and gross operating profit (GOP), accounting for only 1.2 per cent of the total portfolio value as at Dec 31, 2024,” said the managers.
“Operational performance has deteriorated significantly in recent years. Its GOP margin stood at 17.2 per cent in 2024, significantly below the trust’s portfolio average of 35.3 per cent in 2024,” they noted.
The hotel “continues to underperform”, the managers added, pointing out that its revenue per available room index stood at 87 per cent in 2024.
Noting that the hotel commenced operations in 1996, the managers said that various renovations of guest rooms and public areas would require a capital investment of about US$3.7 million, or 44 per cent of the asset value, to maintain its Hyatt Place branding.
This is “substantial capital expenditure” relative to its value as “one of the older properties” in AHT’s portfolio, said the managers.
They added that given “weakened market conditions and continuing property underperformance”, the property’s value has declined 34.6 per cent over the past five years.
The managers said the proposed divestment will “free up capital” to be redeployed towards capital expenditure needs for ongoing renovations of properties in AHT’s portfolio; paring down existing bank borrowings; acquiring accretive and higher-yield properties; and/or meeting “general working capital needs”.
Stapled securities in AHT closed flat at US$0.255 on Wednesday.
Decoding Asia newsletter: your guide to navigating Asia in a new global order. Sign up here to get Decoding Asia newsletter. Delivered to your inbox. Free.
