RLJ Lodging Trust (RLJ) disclosed the sale of the 150-room Hilton Garden Inn St. George in Utah for around $15.7 million. The company has already sold a portfolio of 11 hotels for about $85.0 million in February.
The disposition of these assets comes as part of RLJ Lodging’s capital recycling program. The company plans to redeploy the sale proceeds in opportunistic moves that are aimed at enhancing the company’s presence in higher-growth markets.
Notably, the current Utah property’s sale price signifies a roughly 8.7% capitalization rate on the assets’ 2013 net operating income, which is adjusted for awaiting capital expenditures of around $2.3 million. Also, the estimated 2013 revenue per available room (RevPAR) for this non-strategic hotel reflects a discount of over 30% to the company’s pro forma RevPAR for 2013.
While the company is shedding its non-strategic assets on one hand, on the other hand, it is acquiring a 10-hotel portfolio from the affiliates of Hyatt Hotels Corp. (H) for around $313 million. The transaction, which is anticipated to be completed in Mar 2014, would help RLJ Lodging to enhance its presence in the attractive West Coast market.
This REIT recently reported adjusted FFO (Funds From Operations) per share of 51 cents for the fourth quarter 2013 that came in line with the Zacks Consensus Estimate. While the portfolio restructuring moves stand well for long-term growth, these may lead to earnings dilution in the near term.
RLJ Lodging currently has a Zacks Rank #4 (Sell). Investors interested in the REIT industry may consider stocks like Cousins Properties Incorporated (CUZ) and Liberty Property Trust (LPT). Both these stocks carry a Zacks Rank #2 (Buy).
Note: Funds from operations (:FFO), a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.