Reinforcing its asset-disposition strategy, RLJ Lodging Trust (RLJ - Free Report) announced the sale of DoubleTree by Hilton Burlington Vermont, for $35 million.
The sale of this 309-room property represents an EBITDA multiple of 17.3x and capitalization rate of 4.5% (including capital expenditure requirements) for the 12-month period ended August 2018. Per management, the sale is in sync with the company’s efforts to unlock value from non-core asset sale.
In fact, since December 2017, it has sold assets aggregating around $630 million, representing an EBITDA multiple of more than 16x. Further, with a healthy disposal pipeline, the company remains focused to unlock embedded value in its portfolio through incremental sales for 2018.
The company has been strengthening its portfolio on the back of these efforts. Understandably, disposition efforts will enable the company to de-lever and strengthen its balance sheet. It also reflects the company’s ability to achieve value maximization through sale of non-core assets.
In fact, shares of RLJ Lodging have outperformed its industry over the past six months. In fact, its shares have gained 8.3% compared with the industry’s rally of 4.7% during the same time period.
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 fourth-quarter 2018 and full-year 2018 adjusted EBITDA by $1 million, along with a reduction of $3 million in 2018 pro forma Consolidated Hotel EBITDA.
For third-quarter 2018, the company expects pro forma Consolidated Hotel EBITDA to be $135-$138 million and adjusted EBITDA of $128-$131 million.
The company carries a Zacks Rank #4 (Sell), at present. Also, the Zacks Consensus Estimate for 2018 funds from operations (FFO) per share has been revised 2% downward over the past month.
Stocks to Consider
A few better-ranked stocks from the REIT space are Innovative Industrial Properties, Inc. (IIPR - Free Report) , Park Hotels & Resorts Inc. (PK - Free Report) and W. P. Carey Inc. (WPC - Free Report) . While Innovative Industrial Properties flaunts a Zacks Rank #1 (Strong Buy), Park Hotels and W. P. Carey carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Innovative Industrial Properties’ Zacks Consensus Estimate for 2018 FFO per share remained unchanged at $1.19 in the last seven days. Its shares have gained 41.6% in the past six months.
Park Hotels & Resorts’ current-year FFO per share estimates remained unchanged at $2.93 over the last 60 days. Its shares have appreciated 18.3% over the past six months.
W. P. Carey’s FFO per share estimates for 2018 remained unchanged at $5.43 in 30 days’ time. The stock has inched up 1% in six months’ time.
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