ARA US Hospitality Trust

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ARA US Hospitality Trust Seeks $451 Million in Singapore IPO
> Cornerstone investors have agreed to subscribe to 26% of offer
> Deal marks return to public markets for ARA founder John Lim
By Joyce Koh
April 24, 2019, 8:02 AM GMT+7 Updated on April 24, 2019, 9:43 AM GMT+7

ARA US Hospitality Trust is seeking to raise $450.7 million in Singapore’s first main board initial public offering this year.

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 $116.5 million, equivalent to 25.8 percent of the total offer.

The listing is a return to Singapore’s public markets for John Lim, the founder of ARA Asset Management Ltd. A group including Lim and New York-based private equity firm Warburg Pincus LLC agreed to buy out the manager of real estate trusts in late 2016, valuing the firm at around S$1.8 billion ($1.3 billion). Lim had said earlier that year his company’s stock was undervalued relative to its earnings, peers and historical prices.

Singapore’s IPO market has been in the doldrums for some time. The ARA IPO will be the first IPO of size in Singapore this year, as companies have raised just $28 million from first-time share sales, according to data compiled by Bloomberg. In 2018 the money raised from the stock exchange’s 15 IPOs, excluding depositary receipts, fell more than 80 percent to $535 million.

More details in
Specuvestor: Asset - Business - Structure.
ARA Trust Management (USH) Pte Ltd
- ARA US Hospitality Trust aka ARA H-Trust
1H Result as at 30 Jun 2020
Rev USD39m
Operating profit USD5m
Net property loss USD2m
Distibution income NIL

ARA H-Trust reported positive gross revenue and gross operating profit of US$39.3 million and US$5.8 million respectively in 1H 2020. However, after taking into account fixed costs, ARA H-Trust recorded a net property loss of US$2.0 million and nil distributable income for 1H 2020

The Managers previously announced the temporary closure of 30 properties in March 2020 as part of its cost mitigation measures and have since reopened all properties as at 1 July 2020 in view of gradual improvement in hotel demand from the domestic leisure segment. 
Mr. Lee Jin Yong, CEO of the Managers said, “ARA H-Trust’s 1H 2020 financial results reflect the adverse impact on our hotel portfolio arising from lockdowns and travel restrictions amidst the COVID-19 pandemic. However, we observed a gradual uptick in hotel occupancies in June 2020 arising from domestic leisure demand with the loosened restrictions in some states within the country. Our U.S. based team has been working relentlessly in pursuing demand from leisure and alternative segments and streamlining operating costs.
In the near term, the velocity of recovery will be difficult to determine. However, as hotel demand gradually recovers, we believe that trends will favor value-priced, transient guest-oriented, compact hotels located in drive-to markets such as our portfolio. ARA H-Trust remains in a secure financial position to weather the crisis and will continue to exercise caution and prudence in our capital and cashflow management.”
Wear mask and keep your social distance, everyone
The Trust is selling 2 properties at ~1.3% discount to NAV. In the context of the market cap at a 60% discount to NAV, this is a value-accretive move. But unfortunately, the value accretive may not be captured by shareholders due to high(er) interest costs.

These properties were just injected into the Trust during IPO 5 years ago. And how things have changed with "mounting/outsized" capital expenditure needs!


1) Hyatt House Philadelphia Plymouth Meeting is a non-core asset with outsized capital expenditure needs

(2) Realizing optimal pricing for Hyatt House Shelton, an asset that has limited upside with mounting capital expenditure needs
The Tangs are getting into the AUM business, paying 5.2mil USD. As of end FY23, ARA Hospitality Trust has ~750mil AUM and so the sale of the asset mgr translates to ~5.2/750 = 0.7% of AUM - This looks cheap but probably part of the entire package to buy over ARA's REIT stake.

The Tangs have a Momentus Hospitality brand started up in the last few years but it is surely not competitive in US. So I reckon that ARA US Hospitality Trust's geographical reach will extend beyond US and include some of the hotels that Chip Eng Seng are owning (eg. Momentus Hotel Alexandra)


ARA Asset Management Limited (“ARA”) has today entered into a shares purchase agreement (the “Shares Purchase Agreement”) with Acrophyte Asset Management Pte. Ltd. (“Acrophyte AM”), an entity wholly-owned by Acrophyte Pte. Ltd. (“Acrophyte”) and ultimately owned by Mr. Gordon Tang and Mrs. Celine Tang, to sell to Acrophyte AM (a) 1,500,000 ordinary shares in the capital of the REIT Manager, being 100.0% of the total number of issued shares in the REIT Manager as at the date of this Announcement and (b) 50,000 ordinary shares in the capital of the Trustee-Manager, being 100.0% of the total number of issued shares in the TrusteeManager as at the date of this Announcement; a

The aggregate consideration paid by Acrophyte AM to ARA under the Transactions is US$5.2 million (asset manager)

The aggregate consideration paid by Acrophyte to ARA under the Transaction is US$34,162,198.40 (19% stake in Trust)

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