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Service Properties (SVC) Expands Miami Footprint With Buyout
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Service Properties Trust (SVC - Free Report) closed the acquisition of Nautilus Hotel, a high-end destination resort hotel, for $165.4 million or roughly $661,600 per key. The move aligns with the company’s strategic expansion efforts in the key markets and marks a significant entry into Miami’s South Beach market.
Reflecting positive sentiments, shares of SVC gained 5.62% on Jun 2 normal trading session on the NYSE.
The lifestyle oceanfront hotel at 1825 Collins Avenue, Miami Beach, FL, comprises 250 guestrooms, including 55 suites. It also offers four food and beverage outlets, an outdoor pool, spa, fitness center and flexible outdoor and indoor event space spanning 17,500 square feet.
The hotel, to be initially branded as the Nautilus Sonesta Miami Beach, is set to undergo a $25 million repositioning beginning in the summer of 2024. It is expected to reopen in early 2025 under Sonesta’s lifestyle brand — The James.
Per Todd Hargreaves, president and chief investment officer of SVC, “This is an irreplaceable beachfront parcel located in the heart of Miami Beach in an area with numerous high-end luxury and upper upscale hotels. We are confident that the rebranding as a Sonesta and subsequent renovation will result in an attractive return on SVC’s investment.”
Service Properties owns a geographically diverse portfolio of hotels and service-focused retail net lease properties across the United States, Puerto Rico and Canada. With the lodging industry presently witnessing a rebound in post-pandemic traffic, SVC seems well-positioned to benefit.
In the first quarter of 2023, the company’s comparable revenue per available room increased 22% year over year to $80.05 while occupancy rose 380 basis points to 57.7%. As a result, comparable hotel EBITDA increased significantly year over year to $34.9 million.
Moreover, over the years, to enhance its portfolio quality, Service Properties has made concerted efforts to dispose assets with lower earnings potential and expand its footprint in markets with better prospects. During the first quarter of 2023, it disposed 18 hotels for $157.8 million.
The company also remains focused on acquiring upscale limited service, extended stay and full-service hotel properties, full-service travel centers and necessity-based retail properties to drive external growth.
In addition, SVC’s solid balance-sheet position is expected to support its growth endeavors.
Shares of this Zacks Rank #3 (Hold) company have gained 19.2% over the past six months against the industry’s decline of 4.9%.
Image Source: Zacks Investment Research
Nonetheless, macroeconomic uncertainty and a high-interest rate environment are key concerns for the company.
The Zacks Consensus Estimate for Rexford Industrial’s current-year funds from operations (FFO) per share has moved 1.4% northward over the past two months to $2.19.
The Zacks Consensus Estimate for Stag Industrial’s ongoing year’s FFO per share has been raised marginally upward over the past month to $2.25.
The Zacks Consensus Estimate for Innovative Industrial Properties’ 2023 FFO per share has moved 3.6% upward in the past month to $8.66.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Service Properties (SVC) Expands Miami Footprint With Buyout
Service Properties Trust (SVC - Free Report) closed the acquisition of Nautilus Hotel, a high-end destination resort hotel, for $165.4 million or roughly $661,600 per key. The move aligns with the company’s strategic expansion efforts in the key markets and marks a significant entry into Miami’s South Beach market.
Reflecting positive sentiments, shares of SVC gained 5.62% on Jun 2 normal trading session on the NYSE.
The lifestyle oceanfront hotel at 1825 Collins Avenue, Miami Beach, FL, comprises 250 guestrooms, including 55 suites. It also offers four food and beverage outlets, an outdoor pool, spa, fitness center and flexible outdoor and indoor event space spanning 17,500 square feet.
The hotel, to be initially branded as the Nautilus Sonesta Miami Beach, is set to undergo a $25 million repositioning beginning in the summer of 2024. It is expected to reopen in early 2025 under Sonesta’s lifestyle brand — The James.
Per Todd Hargreaves, president and chief investment officer of SVC, “This is an irreplaceable beachfront parcel located in the heart of Miami Beach in an area with numerous high-end luxury and upper upscale hotels. We are confident that the rebranding as a Sonesta and subsequent renovation will result in an attractive return on SVC’s investment.”
Service Properties owns a geographically diverse portfolio of hotels and service-focused retail net lease properties across the United States, Puerto Rico and Canada. With the lodging industry presently witnessing a rebound in post-pandemic traffic, SVC seems well-positioned to benefit.
In the first quarter of 2023, the company’s comparable revenue per available room increased 22% year over year to $80.05 while occupancy rose 380 basis points to 57.7%. As a result, comparable hotel EBITDA increased significantly year over year to $34.9 million.
Moreover, over the years, to enhance its portfolio quality, Service Properties has made concerted efforts to dispose assets with lower earnings potential and expand its footprint in markets with better prospects. During the first quarter of 2023, it disposed 18 hotels for $157.8 million.
The company also remains focused on acquiring upscale limited service, extended stay and full-service hotel properties, full-service travel centers and necessity-based retail properties to drive external growth.
In addition, SVC’s solid balance-sheet position is expected to support its growth endeavors.
Shares of this Zacks Rank #3 (Hold) company have gained 19.2% over the past six months against the industry’s decline of 4.9%.
Image Source: Zacks Investment Research
Nonetheless, macroeconomic uncertainty and a high-interest rate environment are key concerns for the company.
Stocks to Consider
Some better-ranked stocks from the REIT sector are Rexford Industrial Realty (REXR - Free Report) , Stag Industrial (STAG - Free Report) and Innovative Industrial Properties (IIPR - Free Report) . Each of these companies presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Rexford Industrial’s current-year funds from operations (FFO) per share has moved 1.4% northward over the past two months to $2.19.
The Zacks Consensus Estimate for Stag Industrial’s ongoing year’s FFO per share has been raised marginally upward over the past month to $2.25.
The Zacks Consensus Estimate for Innovative Industrial Properties’ 2023 FFO per share has moved 3.6% upward in the past month to $8.66.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.