RE:RE:RE:Short position between Aug 16 - Aug 31I am not impressed. Stock price may go higher but I won't be buying.
1. Did they just get a haircut of at least $7 million and as much as $14 million on the sale of the economy lodging portfolio? Maybe this explains the two month closing delay:
In connection with closing of this transaction, AHIP has agreed that approximately $7.0 million of the gross proceeds will be subject to an earn-out to be settled in the next 12 months based on the achievement of certain criteria. In addition, AHIP has agreed to pre-fund from the gross proceeds a maximum of $7.4 million of brand mandated property improvement plans for the Economy Lodging hotels with a credit for any cost savings.
2. 8.2% cap rate on the sale ($215 million) and ~ 8% on the purchase ($191 million).
Ergo, FFO will decline by approx $2 million and payout ratio will increase (already over 100%).
3. Did AHIP buy high? Of the 12 new hotels, 5 are in cities heavily dependent upon the oil and gas drilling industry (San Angelo x2, Midland x2, Corpus Christi). Drilling and completion activity in 2020 is expected to be substantially lower than 2019. Fewer oil workers translates into lower revenues and lower cash flows. I look forward to the Q1 conference call next spring.
4. Some good news - interest rate on mortgage financing is slightly lower.