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ARA US Hospitality Trust to divest hotel asset in Chicago for $10.5m

It will be sold to IHP Hospitality.

ARA US Hospitality Trust (ARA H-Trust) will be divesting its hotel asset in Chicago, Hyatt Place Chicago Itasca (HPCI), for a consideration of $10.5m (US$7.75m) to be satisfied wholly in cash.

In a bourse filing, ARA H-Trust’s managers said the trust, through its indirectly wholly-owned subsidiary—ARA USH Chicago—has entered into a conditional purchase and sale agreement (PSA) with IHP Hospitality, LLC for the sale of the property.

HPCI is a six-story hotel with 126 rooms, situated on freehold land located at 1150 Arlington Heights Road, Itasca, IL 60143, a suburb of Chicago. Operating since 1996, the hotel is one of the oldest assets in ARA H-Trust’s portfolio. It also is one of the smallest assets, accounting for 1.1% of total portfolio value as of 31 December 2021.

“As the Hotel is located in a market with declining economic conditions exacerbated by the COVID-19 pandemic, it is anticipated to have a longer road to recovery as compared to the other hotels in the portfolio. Being one of the oldest assets in the portfolio, the Property is also envisaged to require sizable capital expenditure outlays relative to its value over the next few years,” the managers said.

Net proceeds from the sale of the Chicago hotel asset will be used to pare down existing bank borrowings of ARA H-Trust and improve its aggregate leverage ratio, “and/or for general working capital requirements.”

The sale is expected to be completed within 60 days from the signing of the PSA. The completion date may be extended for up to two periods of 15 business days each which will require the IHP Hospitality to pay an additional non-refundable deposit of $270,873.00 (US$200,000) in connection with the first extension and an additional non-refundable deposit of $67,718.25 (US$50,000) in connection with the second extension.

HAd the sale been completed on 1 January 2021, ARA H-Trust’s distribution per staple security (DPS) for FY21 would be $0.50 (US$0.371), slightly higher than the actual DPS of $0.48 (US$0.355).

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