Watermark Lodging Trust, a self-managed non-traded real estate investment trust created by the April 2020 merger of Carey Watermark Investors 1 and Carey Watermark Investors 2, has declared its first post-merger net asset value per share. The company also suspended its special circumstance redemption program, effective December 2, 2020.
The NAV per share is based on the estimated value of the company’s assets, less the estimated value of its liabilities, divided by the number of shares outstanding, all as of September 30, 2020. CBRE Hotels and Robert A. Stanger & Co., both third-party firms, assisted with the valuation process.
Watermark Lodging Trust’s NAV per share is $5.51 per Class A share and $5.45 per Class T share, as of September 30, 2020.
Carey Watermark Investors 2’s most recent NAV per share was $11.41, as of December 31, 2018, while Carey Watermark Investors 1 shares were valued at $10.39 during the same period. Shares for each company originally sold for $10.00 each.
“The primary factor contributing to the decrease in our NAVs per share is the impact of the COVID-19 pandemic on the hotel portfolio, including the resulting 2020 operating losses and decrease in hotel appraised values,” the company said in a filing with the Securities and Exchange Commission.
The market value of the REIT’s real estate portfolio as of September 30, 2020 was approximately $3.5 billion, reflecting an overall decrease of approximately 8.4 percent from the original purchase price paid by either Carey Watermark Investors or Carey Watermark Investors 2, plus post-acquisition capital investments. The resulting imputed capitalization rate based on the 2019 net operating income of the portfolio was approximately 6.4 percent.
The total fair market value of its property-level debt was approximately $2.1 billion, as of September 30, 2020.
Starting December 2020, the NAV of $5.51 per Class A share and $5.45 per Class T share will be used for “permitted redemptions” of its common stock.
The REIT suspended distributions and redemptions in March, citing reduced travel and lodging demand and related financial impact from the global coronavirus (COVID-19) pandemic.
At the time of the suspension, the company indicated that requests for special circumstance redemptions may be submitted for review, however, the board has now suspended the special circumstance redemption program effective December 2, 2020, citing the need to preserve cash and enhance liquidity in light of the COVID-19 pandemic.
All qualifying special circumstance redemption requests received on or before December 1, 2020 will be considered for approval by the board in December. Shareholders may continue to submit requests after December 1, 2020, however, the company will not take any action until the suspension is lifted.
In July 2020, Watermark Lodging Trust completed a financing transaction with a joint venture between affiliates of Ascendant Capital Partners and funds managed by Oaktree Capital Management LP.
The REIT received $200 million of preferred equity capital and a commitment of up to an additional $250 million of new preferred equity capital over the next 18 months. The investors have also been granted warrants to purchase up to 6.75 percent of the company’s fully diluted common equity.
Watermark Lodging Trust held ownership interests in 31 hotels, with a total of 9,614 rooms, as of September 30, 2020.