Acrophyte Hospitality Trust plans to sell a loss-making hotel for US$6.65 million, which is below its most recent valuation of US$7 million.
Excluding various fees, Acro-HT will book net divestment proceeds of US$6.2 million.
The property, Hyatt Place Detroit Auburn Hills, began operations in 1996 and has 127 rooms.
Acro-HT explains that this property is both "non-core" and "underperforming"; it suffers from low operational efficiency and faces prospects of "substantial" capex.
As of Dec 31, this hotel contributes just 1% of Acro-HT's total property valuation.
Its gross operating margin in FY2024 was just 0.7%, versus 35.3% across Acro-HT's portfolio.
See also: Sasseur REIT taps RMB508 million loan from sponsor for refinancing
As such, this hotel, with its negative net property income, has been a drag on distributable income.
Acro-HT's manager will use proceeds from the sale to acquire properties with higher yield and to also lower debt.
On a pro-forma basis, assuming the sale has been completed on Jan 1, Acro-HT's distribution per stapled security would be 1.927 US cents instead of 1.772 US cents.
See also: Acrophyte Hospitality Trust another listed entity to 'evaluate strategic options'
Just on May 30, Acro-HT said it is "evaluating a range of strategic options", citing capex needed to enhance its portfolio of hospitality assets in the US.
"In connection with their evaluation, the managers are also in discussions with the sponsor in respect of a potential transaction involving the stapled securities."
As at March 31, its NAV per unit was 71 US cents (91 cents), versus its May 29 closing price of 26.5 US cents.
Since then, Acro-HT's units have gained around 17% to change hands at 31 US cents as 1.12 pm on June 5.
