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Sale decisions tougher now for Supertel
April 5 2013

After selling 42 non-core hotels over a three-and-a-half year period, it’s getting tougher for Supertel Hospitality to make decisions on which hotels should leave the portfolio, a company official said.

Highlights
  • Supertel Hospitality sold 15 non-core hotels during 2012 and announced the sale of two more this year.
  • “It’s getting to the point where those decisions on an asset-by-asset basis sometimes are getting more difficult,” Supertel’s Judah Matthews said.
  • Supertel is looking to acquire select-service hotels in secondary markets.
By Shawn A. Turner
Finance Editor
Shawn@HotelNewsNow.com

ATLANTA—When real estate investment trust Supertel Hospitality first began selling non-core hotels three-and-a-half years ago as part of an asset disposition program, it was easy to pick out the properties that would be better off sold, Director of Asset Management Judah Matthews said.

Those choices are not as easily made these days, Matthews said last month during a break at the 25th annual Hunter Hotel Conference.

The Norfolk, Nebraska-based company has been actively selling non-core properties as it moves to refocus its strategy on purchasing midscale and upper-midscale hotels. All told, 42 properties have been sold, Matthews said. The REIT sold 15 non-core hotels during 2012, resulting in gross proceeds of approximately $25.5 million. The proceeds from the sales were primarily used to reduce debt.

Overall, Supertel owns 84 hotels comprising 7,431 rooms.

Year to date, Supertel announced the sale of two economy hotels: the 120-room Days Inn North in Fredericksburg, Virginia, for $2.1 million and the 63-room Guesthouse Inn in Ellenton, Florida, for $1.3 million.

“It’s getting to the point where those decisions on an asset-by-asset basis sometimes are getting more difficult,” he said. Still, he added that the REIT is likely to remain a net seller of hotels during the coming 12 months.

Matthews said the company is looking to deleverage and “right-size” its balance sheet via the transactions.

“We’re excited about getting the pendulum swinging back in the other direction,” he said during a break at the conference. “We feel like there is a lot of runway left in the cycle.”

Acquisitions, financing
While the company still has some selling to do, Supertel also has a checklist in place for hotel acquisitions, Matthews said.

Supertel intends to focus on primarily buying select-service properties located outside the top 25 U.S. markets. “Markets 26 through 200 are very positive,” he said.

The company sees upper-midscale hotels located in low barrier-to-entry markets particularly attractive, he said.

The overall transactions environment has brightened somewhat of late, Matthews said.

“Financing has eased,” he said. Small Business Administration loans “continue to be an avenue that most of our buyers are utilizing. It allows assets under $5 million to transact easily.”

Most buyers are going to relationship lenders for financing, Matthews said. “Financing has come back,” he added.

Disruption in the overall macro environment hasn’t seemed to interrupt the hotel transactions market, Matthews said.

“People are starting to grasp that the noise items are probably not going to go away,” he said.

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