With the recent sale of The Vinoy Renaissance St. Petersburg Resort & Golf Club, for $188.5 million, RLJ Lodging Trust (RLJ - Free Report) is making progress with the execution of its asset-disposition strategy. The transaction represents around $521,000 per key.
The 362-room property has been sold for a contractual sale price of $185 million, in addition to member deposit of $3.5 million. This represents an EBITDA multiple of 19.6x and capitalization rate of 3.9% for the 12-month period ended July 2018.
Additionally, the company recently shed a 152-room property — DoubleTree Columbia Hotel — in Columbia, MD, for $12.9 million. Including planned capital expenditures, this indicates a 14.1x EBITDA multiple and 5.6% cap rate, over the 12-month period ended July 2018.
Net proceeds from the sales were used to reduce balances on the company’s credit facility and for general corporate purposes. Following the payment of $75 million this July, balance outstanding on the company’s revolving credit facility was $175 million.
Understandably, disposition efforts will enable the company to de-lever and strengthen its balance sheet. In fact, per management, these asset sales reflect its ability to achieve value maximization through sale of non-core assets.
In fact, over the last 12 months, RLJ Lodging has shed assets worth nearly $600 million at an EBITDA multiple of nearly 16x. Further, with a healthy disposal pipeline, the company remains focused to unlock embedded value in its portfolio through incremental sales for 2018.
While such disposition will enable the company to efficiently recycle capital, such moves may weigh on its near-term earnings. In fact, the company anticipates the aforementioned sales to reduce third-quarter 2018 adjusted EBITDA by $1 million and $4 million in fourth-quarter 2018.
In fact, shares of this Zacks Rank #4 (Sell) company have underperformed its industry over the past three months, declining 5.6% as against the industry’s rally of 3.9%.
Better-ranked stocks from the REIT space include VICI Properties (VICI - Free Report) , Park Hotels and Resorts, Inc. (PK - Free Report) and PS Business Parks, Inc. (PSB - Free Report) . All three stocks carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
VICI Properties’ Zacks Consensus Estimate for 2018 FFO per share has been revised upward by a cent over the past 60 days. Its shares have gained 6.6% in the past six months.
Park Hotels and Resorts’ FFO per share estimates for third-quarter 2018 witnessed marginal upward revision in a month’s time. Its shares have appreciated 25.5% over the past six months.
PS Business Parks’ FFO per share estimates for the current year moved up marginally in the past 30 days to $6.39. The stock has rallied 13.7% in six months’ time.
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