Skyline International Development Inc. (TASE: SKLN) last month reported progress in a deal for the acquisition of 13 US business hotels. Skyline, controlled by Mishorim Development Ltd. (TASE:MSHR), a company controlled by Gil Blutrich and Alex Shnaider, notified the Tel Aviv Stock Exchange (TASE) that it had completed due diligence for the hotels, managed by the Marriott chain, thereby making the deal binding.
At the same time, Skyline has completed the part of its new bond issue (Series B, dollar-linked, with a five-year duration, rated Baa1 by Midroog) for financial institutions.
Skyline's $135 million acquisition will be financed with a non-recourse loan of up to $90 million (65% of the acquisition price) from a major US bank, the proceeds from Skyline's bond issue, and the company's own resources.
Demand for the institutional part of the bond issue totaled NIS 286 million, and the company announced that it would raise NIS 162 million from it at 5.65% interest, 1.1% lower than the maximum rate set for the issue. Skyline will try to raise NIS 40 million more today in the part of the issue for the public. Rosario Capital is leading the issue, with participation from Discount Underwriting, Excellence Nessuah Underwriting, Egoz Issuing and Finances, and Value Base Underwriting.
Skyline stated that the hotels it was acquiring were located "primarily in the Eastern US in nine different states," and that all of them were similar in size, number of rooms (an average of nearly 150 rooms per hotel), structure, and design, and were built around the same time. The seller invested $80 million in upgrading the hotels starting in 2005, with half of the amount invested having been in 2012-2014.
Few services for more efficient operation
Following the acquisition, Skyline is planning to consider additional investments "in order to upgrade the acquired hotels." The bank that is providing Skyline with a loan is also making a line of credit of up to $31 million available to the company.
The company also said that the hotels were being managed by the Marriott chain under the Marriott Courtyard brand name. This brand is part of category of hotels featuring a relatively limited range of services and facilities, with less extensive public space. The hotels can therefore "be operated more efficiently," the company states.
Figures published for the deal by Mishorim show that aggregate revenue from the hotels rose 4% to $51 million in 2016, and net operating income (NOI) grew 11% to $14.5 million, based on a 65% average occupancy rate in 2016 and an average overnight price of $101.50 per room.
Most of Skyline's business is in hotels and income-producing properties in Canada and the US. It currently holds 1,400 hotel rooms, commercial space, vacation and ski resorts, and adacent land reserves for development of 3,300 housing units on three main sites north of Toronto. The Skyline share price has risen 20% over the past year, driving the company's market cap up to NIS 542 million. The company reported an operating profit of 7.3 million Canadian dollars and a net profit of 2 million Canadian dollars on 60 million Canadian dollars ($48 million) in revenue.
Published by Globes [online], Israel Business News - www.globes-online.com - on September 26, 2017
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