Service Properties Trust, the real estate investment trust formerly known as Hospitality Properties Trust, promised to keep 55% to 60% of the portfolio in hotels, even after spending $2.4 billion on retail properties and rebranding the company.
NEWTON, Massachusetts—A $2.4 billion investment in net lease retail properties isn’t going to keep the company once-known as Hospitality Properties Trust from investing in hotels.
Speaking during the company’s third-quarter earnings call, Service Properties Trust President and CEO John Murray said he expects to keep “55% to 60%” of the company’s portfolio in the hotel space and will split acquisitions 50/50 between the different asset classes going forward.
“But that will probably be a bit lumpy as we ramp up the net lease acquisition activity,” he told analysts.
To that point, the company purchased the 261-room Kimpton Palomar Hotel in Chicago in October for $55 million, adding it to its existing management agreement with InterContinental Hotels Group.
The REIT closed on the acquisition of a net lease portfolio from Spirit MTA REIT in September for $2.4 billion in cash, adding 774 retail properties—including restaurants, movie theaters, fitness centers and other forms of retail.
In October, the company closed the sale of two retail properties and signed an agreement to sell 126 more for a combined $501.3 million.
Murray said the company will be a net seller in the near term as they look to pay down debt incurred in relation to the Spirt MTA deal, which included $1.7 billion in unsecured senior note offerings and drawing on the company’s existing revolving credit facility.
“We’re being selective and have dialed things back a bit while we’ve focused on the disposition plan,” he said, while noting the company could still be in the market to pick up “a couple hundred million” dollars a piece of both retail and hospitality properties.
Service Properties Trust’s comparable hotel portfolio saw a 0.3% drop in revenue per available room to $98.78, according to the company’s Q3 earnings news release. Murray said RevPAR performance was negatively impacted by disruptive renovations at a handful of the company’s highest performing properties. RevPAR was up 0.9% for the company’s properties not undergoing renovations, he said.
The company continues to work toward winding down its portfolio of Wyndham properties with plans to either sell or rebrand the 22 properties remaining in that management agreement by 30 September 2020. Two properties have already been rebranded as Sonesta flags.
Murray said the company now expects full-year 2019 RevPAR growth in the range of down 1% to up 1%.
As of press time, Service Properties Trust stock was trading at $23.99 a share, a year-to-date increase of 0.4%. The Baird/STR Hotel Stock Index was up 12.3% year to date.