June 3, 2019 / 12:18 AM / 2 months ago

Exclusive: Hospitality Properties nears $2.4 billion acquisition of Spirit MTA assets - sources

(Reuters) - Hospitality Properties Trust is nearing a $2.4 billion deal to acquire a rental real estate portfolio from Spirit MTA REIT, a major landlord of bankrupt U.S. retailer Shopko Stores Inc, people familiar with the matter said on Sunday.

The deal would allow Spirit MTA to cash out on most of its real estate. It would also diversify Hospitality Properties’ portfolio beyond the hotel and travel center sectors and into retail properties such as restaurants, movie theaters and car service stations.

More than two dozen U.S. retailers, including Sears Holdings Corp and Toys R US, have filed for bankruptcy in the past two years, succumbing to the onslaught of fierce e-commerce competition from companies like Amazon Inc and putting financial pressure on landlords with limited resources.

Hospitality Properties has agreed to acquire 774 retail properties from Spirit MTA leased to tenants in 22 different industries, according to the sources, who spoke on condition of anonymity.

The deal excludes about 100 properties that Spirit MTA leased mainly to Shopko, a general merchandise store operator that filed for bankruptcy in January, the sources added.

The deal could be announced as early as Monday, the sources said, requesting anonymity because the negotiations are confidential.

Spirit MTA, which has a market capitalization of $303 million, announced in January it planned to explore alternatives that could include a sale of the company, as it sought ways to cope with the fallout from Shopko’s bankruptcy. Shopko accounted for 18% of Spirit’s MTA revenue from contractual rent in 2018.

Last year, Spirit MTA was spun out of Spirit Realty Capital Inc, which was seeking to reduce its exposure to the retail sector. Hospitality Properties will now take over most of Spirit MTA’s properties, whose tenants span 164 brands, including Kohl’s Corp, Lifetime Fitness and Pizza Hut.

Hospitality Properties, which has a market capitalization of $4.1 billion, will use a $2 billion bank loan to help pay for the deal, the sources said.

The Newton, Massachusetts-based company owned 326 hotels as of the end of 2018, managed by or leased to major operators such as Marriott International Inc, InterContinental Hotels Group Plc and Hyatt Hotels Corp.

Hospitality Properties has made efforts to trim its portfolio down to a more profitable core this year, selling 20 travel centers to TravelCenters of America that the latter was already leasing for $308 million.

Reporting by Harry Brumpton in New York; Editing by Will Dunham

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