In order to ensure a smooth progress of its capital recycling program, RLJ Lodging Trust divested a portfolio of 11 hotels for about $85.0 million. The selling price of the assets signifies a roughly 7.9% capitalization rate on the assets’ expected net operating income in 2013, which is adjusted for awaiting capital expenditures of around $23.0 million.
Following the announcement, this real estate investment trust (REIT) hit a new 52-week high of $25.99 towards the end of the trading session on NYSE on Friday, Feb 21, 2014.
Of the 11 offloaded assets, 3 properties are based in Texas and Colorado each, 2 are in Indiana and 1 each in Florida, Michigan and Nevada. These assets are Courtyard Austin University Area, Fairfield Inn & Suites Austin University Area, Hyatt House Dallas Richardson, Hyatt House Colorado Springs, Courtyard Denver Southwest Lakewood, Residence Inn Denver Southwest Lakewood, Residence Inn Indianapolis Airport, Fairfield Inn & Suites Indianapolis Airport, SpringHill Suites Gainesville, Courtyard Grand Rapids Airport and Hampton Inn & Suites Las Vegas / Summerlin.
These are non-strategic assets, selected by the company on the basis of their low earnings before interest, taxes, depreciation, and amortization (EBITDA) contribution, which represented less than 3.0% of RLJ Lodging’s estimated 2013 pro forma hotel EBITDA.
RLJ Lodging anticipates this disposition to enhance its Revenue Per Available Room and U.S. portfolio base. Moreover, the company plans to redeploy the sales proceeds for investing in acquisitions of premium assets like the company’s 10-hotel portfolio deal penned earlier this month.
In particular, RLJ Lodging disclosed an agreement with the affiliates of Hyatt Hotels Corp. for the acquisition of a 10-hotel portfolio for around $313 million. The transaction, which is anticipated to be accomplished in Mar 2014, would help RLJ Lodging to strengthen its presence in the West Coast and leverage on the growing fundamentals.
RLJ Lodging is expected to report its fourth quarter and full year results on Feb 26, 2014, after the closing bell. The company’s Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at 0.00%. This along with the Zacks Rank #3 makes surprise prediction difficult.
Investors interested in the REIT industry may consider stocks like Sabra Health Care REIT, Inc. and Winthrop Realty Trust . Both these stocks carry a Zacks Rank #1 (Strong Buy).