Blackstone Group LP, one of the biggest real-estate owners in USA, is preparing to sell billions of dollars of hotel property, the latest sign that commercial property values are returning to levels from before the economic downturn. A significant portion includes the La Quinta hotel chain and the private equity firm is to explore both a private sale and a possible public offering.
Blackstone is the largest real estate private equity firm in the world today with $64 billion of assets under management with investments and people in the U.S., Europe, Asia and Latin America.
The La Quinta portfolio includes about 800 moderately priced lodgings with some 80,000 rooms, comes as investor interest in hotels is picking up with more business travel and tourism. Under Blackstone’s ownership, La Quinta has nearly doubled the number of hotels in the chain. Blackstone values the limited-service hotel operator at around $4.5 billion. While the hotel properties themselves account for about two-thirds of the value of La Quinta, the company focused on growing through franchises. Blackstone last month also filed plans to sell shares in its Extended Stay America hotel operator, which has an equity value between $3 billion and $4 billion.
Suggestions within the industry suggest that the moves to sell sections of its hotel portfolio is a leadup to a widely expected initial public offering for Hilton Worldwide, which industry analysts say could file IPO plans before year-end. Blackstone acquired Hilton Worldwide for more than $18 billion, plus debt, in 2007. Some suggest that these sales have a value of about $50 billion.
In recent news, Blackstone has indicated that it expects selling activity to accelerate during the next couple of years and that part of its business plan included buying companies, improving them over a five to seven year period and and then selling them. However, real estate investors suggests that at least some sales are linked to what is seen as a the commercial-property market approaching a peak, before the end of low interest rates.
Commercial real-estate values in the U.S. have been steadily rising over the past four years and are near peak levels, and the improving economy has boosted occupancies, rents and nightly hotel rates. Blackstone is the largest owner of hotel rooms in the U.S. with nearly 200,000 rooms.
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