Entering text into the input field will update the search result below

CorePoint Lodging: Disposal Strategy Still In Check

Apr. 09, 2021 9:08 AM ETCorePoint Lodging Inc. (CPLG)16 Comments


  • CorePoint continues to execute well its two pronged approach.
  • Sold $274 million worth of hotel in 2020.
  • Repaid $221 million of debt.
  • Achieved breakeven at the property level in 2020.

This article is a follow up on my last article, CorePoint Lodging: Check In At Its Core Portfolio For $100 Million where I laid out the thesis to invest in CorePoint (NYSE:CPLG). I still believe that their strategy of selling the lower margin hotels and keep the high margin ones in the portfolio is the right one. The article was written in May, when the pandemic was raging, uncertainty was everywhere, and hotels were almost given away for free by investors. After almost a year, the catastrophic scenario did not happen, and the price went from $3.8 to around $9.3.

Disposal strategy

The management continued with its disposal strategy quite successfully given the pandemic context. The company was able to sell 61 hotels in 2020 for $274 million, which amounts around $4.5 million per hotel. This value represents an average multiple of 2.6x 2019 revenues and 21x 2019 EBITDAre on these properties. After the end of 2020, the company sold 8 hotels for $38 million and has more 31 hotels for $185 under contract.

Obj Non core Hotels Nr Value ($millions)
78 Phase 1 already sold 71 283
Phase 1 under contract 0 0
Phase 1 left to dispose 7 28
132 Phase 2 already sold 42 206
Phase 2 under contract 31 185
Phase 2 left to dispose 59 316

If the 31 hotels under contract are sold in 2021, the company has more 66 non-core hotels to sell which means that in roughly two years the company will have completed their transformation.

CorePoint continues to sell hotels at attractive multiples and unlocking value to pay debt. The average value per hotel of past transactions in each phase gives an implicit value to the unsold hotels of $529 million. The unsold hotels of phase 1 and phase 2

This article was written by

"If you want have better performance than the crowd, you must do things differently than the crowd" Sir John Templeton I am a value investor and I try to look for misplaced bets, bets where the odds are heavily on my side. I make my own research, reach my own conclusions and try be an independent thinker.

Analyst’s Disclosure: I am/we are long CPLG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I may buy, add or sell without giving notice here. Do your own research.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (16)

Miguel Marecos Duarte profile picture

Worst acquisition news in the world.. ?!
@Miguel Marecos Duarte yes. 15% below closing price.
Miguel Marecos Duarte profile picture
@GuyRien1 it must be some kind of joke.
And the justification is laughable 42% premium “when announced a strategic review” ?!

If they sell at that price lets liquidate the company. Sell all the hotels and fire the mgmt and get our money back.
@Miguel Marecos Duarte thanks for a great article, have been following for a couple months. Curious any updated valuation thoughts on higher input/labor costs on the core EBITDA? Even notching down by $10mm gets me to a fair value closer to $11-12.
Miguel Marecos Duarte profile picture
@RM505 thank you for the kind words!

Since their announcement that they were seeking strategic alternatives I think valuation will be on the higher end.
Private Markets a valuing hotels higher than public markets.
Miguel Marecos Duarte profile picture
Interesting developments:

If they are selling all their hotels how do they intend to make money?

Secondly, why invest in this small hotel reit which owns la quinta inns when there are higher end properties like bhr, Soho and cdor?
Miguel Marecos Duarte profile picture
They are not selling all the hotels... only the low margin ones!


The idea of the two articles is explaining why is a good investment, in my opinion!

High end properties doesn't mean good investment... price still matters!
@Miguel Marecos Duarte Sure. I bought CPLG at under $6 but at above $10 its not a buy for me. The REITs I mentioned before (BHR, SVC, CDOR) are actively selling and buying hotels. SVC in particular is doing great.

With CPLG's reduced hotel numbers what will their sustainable AFFO be? That will put an upper limit on their dividend which is after all the reason we invest in REITs.
Miguel Marecos Duarte profile picture
Well, not me... I try invest when the odds are good, dividend or not!

When the disposal is done they will be more profitable and they will start to pay a dividend, which will attract dividend seekers.

If the AFFO is low they will be a good takeover candidate. Have seen the multiples on their hotel sales ?
joel.schopp profile picture
Price to Book of 0.64. Selling their worst hotels in the middle of a pandemic at a premium to book, just on liquidation value using their worst hotels being sold in the worst market conditions liquidation value is 2x current stock price. Their best "core" hotels are worth a greater premium to book. Post recovery there is a lot of profitability there that was hidden by their poorest performing hotels.
Miguel Marecos Duarte profile picture
@joel.schopp Thanks for reading!
You say "just on liquidation value using their worst hotels being sold in the worst market conditions liquidation value is 2x current stock price". Can tou walk me through your calculations?

Good idea. Needs patience.
Miguel Marecos Duarte profile picture
@dennis rfm
Thanks. Yes "patience" can be an edge...
bazooooka profile picture
So far so good.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.