Innkeepers USA Trust
Revenue rose 25% to $80 million, funds from operations (FFO) climbed 7% to $14 million, adjusted FFO was up 11%, and adjusted EBITDA was up 25% to $27.4 million. Revenue per available room (RevPAR) increased by 6.1% as a result of an 8.3% increase in the average daily rate, though that metric was partially offset by a decrease in occupancy.
The company's eight properties in Silicon Valley had a strong showing, with RevPAR up 7.5%. RevPAR in Seattle, Philadelphia, and Dallas also showed a robust 9% RevPAR increase.
The buyout offer will give Innkeepers' shareholders $17.75 per share, or roughly $800 million for the equity value. If we add in the $500 million or so of net debt, we get a takeout enterprise value of $1.3 billion. Given Innkeepers' 74 hotels and 9,808 rooms (or about 9,985 when a joint-venture interest is added in), the buyout price equals about $17 million per property, or $130,000 per room -- and that seems in line with what we'd expect, based on other transactions.
The buyout price is also about 12 times run-rate-adjusted EBITDA, which equals an 8.3% adjusted EBITDA yield on a forward basis. Whereas historically, a 12 times forward EBITDA multiple might be pushing the limit, in this age of low interest rates, abundant liquidity, and tight credit spreads, all things are possible. In the latest quarter, Innkeepers' weighted average interest rate was 6.8%. That rate will likely go up as leverage increases in the buyout, but given the strong prospects for RevPAR increases, the buyout looks like a winner.
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Fool contributor Emil Lee is an analyst and a disciple of value investing. He doesn't own shares in any of the companies mentioned above. Emil appreciates your comments, concerns, and complaints. The Motley Fool has a disclosure policy.