Hospitality Investors Trust NAV Per Share Declines Nearly 39%
The board of Hospitality Investors Trust, a publicly registered non-traded REIT formerly known as American Realty Capital Hospitality Trust, unanimously approved the estimated net asset value per share of the company’s common stock of $13.20, as of March 31, 2017. The company’s previous NAV per share was $21.48 as of March 31, 2016, a decline of approximately 38.6 percent year-over-year.
Earlier this year, the company changed its name to Hospitality Investors Trust Inc. following its transition to a standalone self-managed REIT and the close of a $135 million investment from an affiliate of Brookfield Strategic Real Estate Partners II.
The Brookfield affiliate committed $400 million in convertible preferred limited partnership units of the REIT’s operating partnership, which was re-named Hospitality Investors Trust Operating Partnership, and the remaining $265 million of units will be issued through February 2019.
The valuation was based on an estimated fair value of the company’s assets less the estimated fair value of its liabilities, divided by 39.6 million shares of common stock outstanding. While Duff & Phelps assisted with previous 2016 valuation, the board decided to use a different valuation firm in 2017 because of the company’s transition to self-management and Duff & Phelps’ historic relationship with AR Global.
The company noted that the new independent valuation firm, which requested not to be identified by name, previously performed accounting services during the transition period and conducted asset appraisals using Investment Program Association guidelines.
Hospitality Investors Trust also published a series of frequently asked questions for financial advisors and stockholders relating to the new NAV per share.
According to the FAQs, the company noted three primary reasons for the NAV per share decline. The two independent third-party valuation firms used different estimates and assumptions in their calculations. The company also said the 2017 NAV calculation includes higher exit capitalization rates due to an increase in the interest rate environment since the 2016 valuation. A higher capitalization rate applied to a hotel’s net operating income will result in a lower value of the hotel.
Lastly, the company has more shares outstanding because of stock distributions paid to shareholders and shares issued as part of the transition to self-management. From March 31, 2016 to March 31, 2017, the number of shares of common stock outstanding increased by approximately 3 million shares, or an increase of 8.1 percent.
Hospitality Investors Trust suspended distributions in January 2017 and does not expect to pay any distributions this year. The company is not currently offering a redemption plan to shareholders.
Hospitality Investors Trust focuses on acquiring stable, institutional quality select-service lodging properties in North America branded by premium national hotel brands. The REIT’s offering went effective in January 2014 and suspended sales activities in November 2015 after raising $911 million in investor equity, according to Summit Investment Research. As of the first quarter of 2017, the company’s $2.4 billion portfolio was comprised of 141 properties.
