Acrophyte Hospitality Trust, formerly known as ARA US Hospitality Trust, is divesting Hyatt Place Detroit Livonia for a consideration of US$10.0 million ($12.97 million), 2.9% below its last valuation of US$10.3 million at July 31.
In a Dec 10 bourse filing, the manager of Acrophyte Hospitality Trust says its indirect wholly-owned subsidiary ARA USH Chicago entered into a conditional purchase and sale agreement with NJA Management Group on Dec 8.
Distribution per unit (DPU) for Dec 31, 2024 would have been 1.866 US cents, higher than the actual 1.772 US cents, had Acrophyte Hospitality Trust completed the proposed sale on Jan 1, 2024.
The hotel, which commenced operations in 1998, has 127 rooms and is located in Livonia, a suburb of Detroit Michigan. The hotel is situated off Highway 275 within a retail centre.
The hotel is predominantly surrounded by residential buildings, but there are also healthcare offices and several industrial parks, says the manager of Acrophyte Hospitality Property Trust and the trustee-manager of Acrophyte Hospitality Management Trust.
The managers are entitled to a divestment fee of approximately US$50,000, being 0.5% of the sale consideration. In addition, the sale is expected to incur approximately US$495,000 of transaction costs. Accordingly, the net divestment proceeds are estimated to be approximately US$9.5 million.
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The proposed sale will free up capital, which can be redeployed to either fund the capital expenditure needs in relation to the ongoing renovation requirements of the existing portfolio; pare down existing bank borrowings to improve the portfolio’s average leverage ratio and increase debt headroom; acquire accretive and higher yield properties; or meet general working capital needs.
The divestment is expected to be completed in 1Q2026.
Michigan-based NJA Management Group is a downstate hotel management company.
Non-core asset
According to the managers, Hyatt Place Detroit Livonia ranks at the bottom quartile of Acrophyte Hospitality Trust’s portfolio in terms of its contribution to both valuation and gross operating profit (GOP).
As one of the smallest assets within the portfolio, the hotel accounted for 1.5% of Acrophyte Hospitality Trust’s total portfolio value as at Dec 31, 2024.
Its GOP margin stood at 20.3% in 2024, significantly below Acrophyte Hospitality Trust’s portfolio average of 35.3% in 2024.
The hotel also continues to underperform with a revenue per available room (RevPAR) Index (RPI) of just 94% in 2024.
As a result of market conditions and continuing underperformance, the property value as at end-2024 has declined 28.9% since 2019.
Moreover, the suburb of Detroit faces a difficult labour market, characterised by a shortage of skilled talent, which has led to staffing challenges at the hotel and increased operational inefficiencies, says the managers.
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In September, Acrophyte Hospitality Trust completed the sale of Hyatt Place Detroit Auburn Hills for US$6.65 million.
In November, Acrophyte Hospitality Trust posted 6.3% lower revenue y-o-y for 9M2025, at US$121.2 million. As compared to the same period last year, GOP and NPI were 9.6% AND 13.9% lower y-o-y, at US$41.9 million and US$29.1 million respectively.
Prior to the proposed sale of Hyatt Place Detroit Livonia, Acrophyte Hospitality Trust had 32 hotels in its portfolio and 4,188 rooms.
Units in Acrophyte Hospitality Trust have risen 25% year to date.
