SPT continues portfolio reshaping with Sonesta shift
 
SPT continues portfolio reshaping with Sonesta shift
02 MARCH 2020 8:39 AM

In the latest move to remake the real estate investment trust’s hotel portfolio, Service Properties Trust executives said they plan to rebrand or sell its extended-stay Sonesta properties.

NEWTON, Massachusetts—Service Properties Trust has added Sonesta to the list of brand portfolios company officials have decided to revisit, announcing plans during the company’s fourth-quarter and full-year 2019 earnings call to rebrand or divest 39 extended stay Sonesta properties.

“After we exit these extended-stay hotels, Sonesta will continue to manage 14 full-service hotels on our behalf where we believe they can compete more effectively,” said President and CEO John Murray.

Sonesta and SPT are affiliated companies via SPT’s external manager the RMR Group. Murray noted the amended agreement gives SPT “a 34% equity interest in Sonesta.”

SPT executives estimate the value of the extended-stay Sonesta properties at $480.5 million collectively. Murray said the sales or conversions are expected to be settled by the third quarter of 2020.

The company recently announced plans to reshape or sell its portfolios of Marriott International and Wyndham Hotels & Resorts properties.

The Marriott agreement, effective 31 December 2019, brings multiple portfolios under one umbrella for SPT and includes plans to sell 33 “noncore” hotels for a combined price between $315 million and $400 million.

The company is also currently marketing 20 properties with Wyndham flags, which the company estimates has an “aggregate net carrying value of $111.3 million,” Murray said, adding that the company is close to a sale on the company’s Hawthorn Suites properties.

He said the sales of both the Marriott and Wyndham portfolios should be completed by the end of the second quarter.

Murray noted sales proceeds will be devoted largely to paying off debt.

He said the company has received significant interest in both the Marriott and Wyndham portfolios and expects the same with Sonesta properties eventually put up for sale.

“As of last night, we’re seeing bids increasing and seeing portfolio bids on everything we’re calling for offers on,” he said. Interest is coming from “smaller private equity shops, high-net-worth individuals and some bidders from the Asian American Hotel Owners Association.”

Q4/full-year performance
The company recorded a contraction in revenue per available room on a year over year basis in 2019.

With a 1.1% drop in average daily rate for comparable hotels, and a 0.3 percentage point contraction in occupancy, RevPAR for full-year 2019 fell 1.5% to $92.20. RevPAR fell 0.2% in Q4 to $85.17.

For the full year, the company saw revenues of $2.3 billion and net income of $259.8 million.

As of press time, SPT stock was trading at $18.08 a share, down 26% year to date. The Baird/STR Hotel Stock Index was down 22.3% for the same period.

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