ARA US Hospitality Trust lodges prelim prospectus

Chan Chao Peh

SINGAPORE (Apr 24): ARA US Hospitality Trust, which owns a US$719.5 million ($977.4 million) portfolio of US-based hotels and hospitality assets, has lodged its preliminary prospectus in what could be the largest IPO year to date.

ARA US Hospitality Trust is seeking to raise US$450.7 million in the IPO. According to Bloomberg, the hospitality group will offer units at 88 US cents apiece.

The hospitality group will offer units at 88 cents apiece, according to terms of the deal obtained by Bloomberg. Six cornerstone investors have agreed to invest a combined US$116.5 million, equivalent to 25.8% of the total offer.

The listing, which will be Singapore’s first Mainboard IPO this year, is a return to Singapore’s public markets for John Lim, the founder of ARA Asset Management.

In late 2016, a group including Lim and New York-based private equity firm Warburg Pincus LLC had agreed to buy out the manager of real estate trusts, valuing the firm at around $1.8 billion. Lim had said earlier that year his company’s stock was undervalued relative to its earnings, peers and historical prices.

See: Lendlease reportedly gunning for US$500 mil with intended retail REIT listing on SGX

See also: US-based Eagle Hospitality Trust swoops in on Singapore listing

ARA US Hospitality Trust is a hospitality stapled group comprising ARA H-REIT, a real estate investment trust and ARA H-BT, a registered business trust.

ARA US Hospitality Trust's initial portfolio comprises 38 hotels in the US with a total of 4,950 rooms. This consists of 27 Hyatt Place hotels and 11 Hyatt House hotels. Hyatt Place hotels are upscale so-called “select-service” hotel whereas Hyatt House hotels are meant for extended stay.

The sponsor of this offering is ARA Asset Management, which also manages Singapore-listed Suntec REIT and Cache Logistics Trust. It is also behind Hong Kong-listed Hui Xian REIT and owns the manager of Prosperity REIT, as well as Fortune REIT, listed on both Singapore and Hong Kong.

Between FY17 ended Dec 31 2017 and FY2018, its revenue decreased from US$183.9 million to US$179 million. Net property income over the period decreased from US$57.6 million to US$53.4 million. Net income fell from US$21.4 million to US$16.7 million while total distribution income fell from US$38.2 million to US$37.4 million. All these numbers are on a pro-forma basis.

A distribution yield of 8% is forecast for 2020 and trading is expected to start May 9.

This issue is managed by DBS.