{"id":1004127094,"date":"2015-09-09T06:30:07","date_gmt":"2015-09-09T14:30:07","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004127094"},"modified":"2021-05-14T18:41:39","modified_gmt":"2021-05-15T02:41:39","slug":"blackstone-makes-a-big-strategic-buy","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/blackstone-makes-a-big-strategic-buy\/","title":{"rendered":"Blackstone the Right Fit for Big Strategic Buy"},"content":{"rendered":"

By Gail Kalinoski, Contributing Editor<\/em><\/p>\n

\"Montage<\/a>

Montage Laguna Beach, Laguna Beach, Calif.<\/p><\/div>\n

Attracted by many of America\u2019s top luxury properties in its portfolio, Blackstone Real Estate Partners<\/a> VIII L.P. has agreed to buy Chicago-based Strategic Hotels & Resorts, Inc., in a deal valued at approximately $6 billion including debt.<\/p>\n

The definitive agreement calls for Blackstone to acquire all outstanding shares of Strategic\u2019s common stock for $14.25 per share in cash, and all of the outstanding membership units of the company\u2019s subsidiary, Strategic Hotels Funding, L.L.C., not held by the company, for $14.25 in cash. The offer price is about 13 percent higher than the intra-day trading price on July 23 when news broke that Strategic, a luxury hotel REIT, was considering a sale. On Aug. 17, company confirmed that the Board of Directors had hired J.P. Morgan as its financial advisor to consider its options, including a potential sale. Strategic released that information after Bill Gate\u2019s investment firm Cascade Investment Trust, Inc. disclosed it had increased its stake in Strategic to nearly 10 percent.<\/p>\n

Several analysts said Tuesday they were not surprised that Strategic would be sold, although one said he thought the deal might go to Cascade. But he also noted that Blackstone has been very active this year with acquisitions and has deep roots in the hospitality sector with its majority ownership in Hilton Worldwide and other lodging companies like La Quinta Holdings Inc.<\/p>\n

\u201cFrom a strategic perspective, this is what Blackstone does,\u201d Stephen Boyd, director of Fitch Ratings Inc.\u2019s Gaming, Leisure and Lodging Group and one of its REIT analysts, told Commercial Property Executive. <\/em>\u201cBlackstone historically has a strong appetite for hotel companies and has done a number of privatizations in the past.\u201d<\/p>\n

The New York-based private equity giant and now the world\u2019s biggest real estate investor has been particularly active in recent months, raising more than $14.5 billion to spend on properties around the globe, according to The Wall Street Journal. Blackstone currently has $92 billion in investor capital under management in a real estate portfolio that includes hotel, office, retail, industrial and residential properties in the U.S., Europe, Asia and Latin America.<\/p>\n

The deal, which needs approval of Strategic\u2019s shareholders, is expected to close by first quarter 2016. Strategic\u2019s board of directors has unanimously approved the merger agreement.<\/p>\n

\u201cOur board and management have consistently stated that we would consider any opportunity that maximizes stockholder value,\u201d chairman & CEO Raymond \u2018Rip\u2019 Gellein said in a prepared statement. \u201cWe believe that this transaction capitalizes on our unique portfolio, strong asset management platform and continued operating outperformance over the past several years. The board thoroughly considered various alternatives over the course of the past few years, and this all cash offer from Blackstone creates significant stockholder value with a high degree of execution certainty.\u201d<\/p>\n

Rumors of Strategic\u2019s potential sale go back nearly three years when founder, president & CEO Laurance Geller was pushed out in late 2012. In February 2013, Orange Capital, L.L.C.,<\/a> a shareholder and activitist investment firm, began urging the REIT to sell its portfolio as the best way to maximize shareholder value.<\/p>\n

Strategic\u2019s portfolio of 17 luxury properties includes Four Seasons hotels and resorts in Silicon Valley, Washington, D.C., Jackson Hole, Wyo., Scottsdale, Ariz., and Austin, Texas; the Fairmont and Intercontinental hotels in Chicago, Miami and Scottsdale; the JW Marriott Essex Hotel near Central Park in Manhattan and the landmark Hotel Del Coronado in San Diego. The 291-key Four Seasons Austin Hotel<\/a> was purchased in May for $197 million and Strategic broke a record with the February acquisition of Montage Laguna Beach,<\/a> a 250-key high-end luxury resort in Laguna Beach, Calif., for $360 million, or $1.4 million per key.<\/p>\n

\u201cWe are excited about the opportunity to acquire one of the highest quality luxury hotel portfolios in the U.S.,\u201d Tyler Henritze, co-head of U.S. acquisitions for Blackstone Real Estate, said in a prepared statement. \u201cAs long-term investors in the lodging industry, we remain confident in the fundamentals of the sector despite recent market volatility.\u201d<\/p>\n

Boyd said in an interview that hotel and REIT stocks have been selling off sharply since the beginning of the year on fears of rising interest rates. He noted that hotel stocks have been \u201ctrading at close to 20 percent discount to net asset value.\u201d<\/p>\n

\u201cIt\u2019s not entirely surprising that Blackstone would look to capitalize on the arbitrage between the public valuations and private valuations,\u201d Boyd told CPE<\/em>.<\/p>\n

Lukas Hartwich, senior analyst, lodging, for real estate research firm Green Street Advisors, said in an interview there had been talk that Strategic would sell for a higher price, perhaps the high teens, rather than the $14.25 share agreed upon.<\/p>\n

\u201cIt may be a little disappointing to some investors, but the pricing seems fair,\u201d Hartwich told CPE<\/em>. \u201cIt\u2019s roughly in line with where the NAV (net asset value) is at.\u201d<\/p>\n

He said expectations that the company might sell for more were probably fueled by the high sales prices some individual luxury hotels fetched in the past year. Last October, Anbang Insurance Group Co. of China bought the Waldorf Astoria in Manhattan for $1.98 billion<\/a>. Another Manhattan luxury asset, the New York Palace Hotel, is in contract to sell for $805 million<\/a>.<\/p>\n

Hartwich said Strategic likely considered selling off the properties individually but may have worried it would take too long and they might \u201cmiss the cycle\u201d because of the length of time it would take to do separate deals.<\/p>\n

J.P. Morgan is acting as financial advisor to Strategic and Sidley Austin L.L.P. is acting as legal advisor. J.P. Morgan and Duff & Phelps provided fairness options to the Strategic Board of Directors in connection with the transaction. Simpson Thacher & Bartlett L.L.P. is legal advisor to Blackstone.<\/p>\n

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Analysts weigh in on Blackstone Real Estate Partners’ latest major acquisition.<\/p>\n","protected":false},"author":1068,"featured_media":1004127358,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21808,21751,11,21742,10],"tags":[],"class_list":["post-1004127094","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-featured","category-hotel","category-midatlantic","category-latest","category-northeast"],"acf":[],"yoast_head":"\nBlackstone the Right Fit for Big Strategic Buy - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/blackstone-makes-a-big-strategic-buy\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Blackstone the Right Fit for Big Strategic Buy\" \/>\n<meta property=\"og:description\" content=\"Analysts weigh in on Blackstone Real Estate Partners' latest major acquisition.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/blackstone-makes-a-big-strategic-buy\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2015-09-09T14:30:07+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2021-05-15T02:41:39+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2015\/09\/montage-laguna-beach.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1400\" \/>\n\t<meta property=\"og:image:height\" content=\"795\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Gail Kalinoski\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/blackstone-makes-a-big-strategic-buy\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/blackstone-makes-a-big-strategic-buy\/\",\"name\":\"Blackstone the Right Fit for Big Strategic Buy - 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