Skyline International Development Inc. (TASE: SKLN) is expanding its hotel business in the US. The company notified the TASE today that it had signed a contingent agreement to acquire 13 business hotels with a total of 1,900 rooms for $135 million, excluding expenses for the deal. Under the agreement between the parties, Skyline will deposit $1.5 million from the purchase price in a trust account, and will have 50 days to conduct due diligence on the properties. Completion of the deal is slated for up to 45 days after the end of due diligence.
Skyline, controlled by Mishorim Development Ltd. (TASE:MSHR), a company controlled by Gil Blutrich and Alex Shnaider, said that the hotels were located "mostly in nine different states on the US east coast," and that all of them were similar in size, number of rooms (an average of 150 rooms per hotel), structure, and design, and had all been built around the same time.
The seller has invested $80 million in upgrading the hotels since 2005, half of it in 2012-2014. Skyline plans to consider additional investments "in order to upgrade the acquired hotels" after the purchase.
Skyline also said that the hotels were being managed by the global Marriott hotel chain under the Courtyard Marriott brand name - a select service category of hotels with a limited range of services and facilities, and that it was therefore possible "to operate them more efficiently."
Figures attached to the announcement by Mishorim show that the hotels' revenue rose 4% to $51 million in 2016, and that net operating income (NOI) from them grew 11% to $14.5 million. Occupancy averaged 65% in 2016, and the average overnight price was $101.50.
Most of the financing from US banks
In order to finance the deal, Skyline reports that it has received several non-binding offers from US banks to finance up to 70% of the cost with non-recourse loans "for a period of up to 10 years on easy terms." Skyline plans to finance the rest of the price from its own and external sources.
When the deal is completed, Skyline will own 19 income-producing properties with a total of 3,300 rooms in various areas of the US and Canada. Skyline noted that its acquisition "is in line with the company's declared strategy," and that it "had examined a large number of potential acquisitions before deciding on the current one."
Most of Skyline's business is concentrated in hotels and income-producing real estate in Canada and the US. The company currently has 1,400 hotel rooms, commercial space, vacation and ski resorts, and nearby land reserves for development amounting to 3,300 apartments on three main sites north of Toronto.
The company last month completed the sale of its rights in the Port McNicoll project in Canada for 42 million Canadian dollars (spread over six years), and signed contingent preliminary agreement for the sale of 100 acres of land near the Horseshoe resort site for 6.25 million Canadian dollars.
Skyline's share price has dipped 4% this year, and now reflects a NIS 410 million market cap.
Published by Globes [online], Israel Business News - www.globes-online.com - on August 3, 2017
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