American Hotel Income Properties REIT to sell economy lodging portfolio for $215.5m
Real Estate - AUGUST 2, 2019

American Hotel Income Properties REIT to sell economy lodging portfolio for $215.5m

by Kali Persall

American Hotel Income Properties REIT has reached a definitive agreement to sell its economy lodging portfolio, consisting of 45 hotel properties, to an affiliate of VCM Ltd. for $215.5 million.

The transaction marks the company’s first step in its new capital-recycling initiative, a long-term strategy to shift away from economy lodging properties and enhance its growing portfolio of premium-branded hotels, which consists of 67 hotels in larger secondary markets predominantly affiliated with the Marriott, Hilton and IHG hotel brands in the United States.

AHIP intends to redeploy the estimated $90 million in net proceeds from the sale, following closing costs and mortgage repayments, into new, income-generating investments that are better aligned with the premium-brand model.

"This is a transformational transaction for our business, and will simplify our corporate structure, cost base and investment story, while providing us with the opportunity to redeploy capital towards initiatives we believe will generate stronger growth prospects, as well as higher and more consistent returns for our investors," said John O'Neill, CEO of the REIT.

"Following the sale of our economy lodging properties, AHIP will be better aligned with our U.S. hotel REIT peers by owning a focused portfolio of purely mid to upscale, select-service branded hotels,” added O’Neill. “We anticipate this more focused strategy will help effectively value our business in the public markets."

The company aims to concentrate on accretive growth within the upper-midscale to upper-upscale categories of hotels in secondary metropolitan U.S. cities. It already has started reviewing potential acquisition opportunities

“Combined, we believe higher-quality properties, lower cost debt and more attractive financing terms will drive accretion and preserve cash for our company over the long-term,” said O’Neill.

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