Hospitality Properties Trust Buys National Net-Lease Retail Portfolio for $2.4B

by John Nelson

NEWTON, MASS. AND DALLAS — Hospitality Properties Trust (NASDAQ: HPT) has purchased a portfolio of net-leased retail assets from Spirit MTA REIT (NYSE: SMTA) for $2.4 billion. The portfolio consists of 774 service-oriented retail properties in 43 states that are occupied by tenants including AMC Theatres, Academy Sports + Outdoors and CarMax.

The portfolio was 98 percent occupied as of March 31 and has a weighted average remaining lease term of 8.6 years.

The portfolio includes all of SMTA’s owned properties held in its “Master Trust 2014” segment and excludes approximately 100 assets leased to Shopko Stores Inc., a Wisconsin-based general merchandiser that filed for bankruptcy in January.

The portfolio also includes three Pilot Travel Centers that are currently owned by Spirit Realty Capital Inc., a Dallas-based net-lease REIT that owns single-tenant retail assets subject to long-term leases. Spirit Realty externally manages SMTA after spinning off the REIT from its holdings last summer.

“Ultimately, we concluded that a sale to Hospitality Properties Trust represented the best possible outcome for our shareholders,” said Richard Stockton, lead independent trustee of SMTA, in a statement. “We will continue our work to close the transaction in the coming months and realize cash value for the remainder of SMTA’s assets in order to provide special distributions to our shareholders.”

Both HPT and SMTA expect the deal to close in the third quarter once SMTA’s stockholders approve the transaction.

The portfolio sale is a big step in Spirit Realty’s goal of winding down SMTA. Spirit Realty will manage and liquidate SMTA’s remaining assets and recover debt owed under its Shopko B-1 Term Loan. Net proceeds from the sale to HPT are expected to total $450 million.

The hotel REIT plans to finance this transaction using a new $2 billion loan facility provided jointly by BofA Securities Inc., Citigroup, Morgan Stanley Senior Funding Inc., RBC Capital Markets and Wells Fargo Securities LLC.

BofA Merrill Lynch is acting as exclusive financial advisor to HPT, and Hunton Andrews Kurth LLP is acting as the REIT’s legal advisor.

Barclays acted as SMTA’s financial advisor, and Fried, Frank, Harris, Shriver & Jacobson LLP served as legal advisor. ICR LLC acted as communications advisor to SMTA.

Hospitality Properties Trust is a REIT that owns a portfolio of hotels and travel centers located in the United States and Canada. The company’s properties are operated under long-term management or lease agreements. The REIT is managed by the operating subsidiary of The RMR Group Inc. (NASDAQ: RMR), an alternative asset management company based in Newton, Mass.

HPT’s stock price closed on Monday, June 3 at $24.33 per share, down from $29.17 a year ago.

Spirit Realty’s portfolio comprises approximately 1,528 properties as of March 31. The REIT’s portfolio spans approximately 28.6 million square feet and is leased to about 256 tenants across 49 states and 32 industries.

Spirit Realty’s stock price closed on Monday at $44.09 per share, up from $38.30 per share a year ago.

Spirit MTA’s stock price closed on Monday at $8.40 per share, down from $9.71 per share on a year-over-year basis.

— John Nelson

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