John Murray
NEWTON, MA–Locally-based Hospitality Properties Trust is selling 20 travel centers located in 15 states to TravelCenters of America LLC in a sale leaseback transaction for $308.2 million.
Hospitalities Properties expects to realize a gain of $160 million from these sales. The sales price reflects a 5.7% cap rate based on property level cash flows for the twelve months ended September 30, 2018. The REIT expects to use the proceeds from these sales to repay borrowings under its revolving credit facility and for general business purposes.
There are many advantages to this transaction for Hospitalities Trust, according to CEO John Murray: the sales are at an attractive cap rate and will provide liquidity for additional hotel investments.
In addition, Hospitalities Properties will be able to improve the quality of its travel center portfolio by materially improving the aggregate coverage of minimum rents for the portfolio. “As we move into the tenth year of this economic recovery, materially improving rent coverage for a tenant that accounts for approximately one third of [our] returns helps [us] maintain secure, steady cash flows and provides our largest tenant financial flexibility to help weather any potential economic downturns in the future,” he says.
The aggregate annual minimum rents due from TA for the remaining 179 travel centers Hospitalities Properties leases to TA will be $243.9 million. On a proforma basis, coverage for the twelve-month period ending September 30, 2018 would have increased from 1.60x to approximately 1.80x.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
