Blackstone Group's dominance in the private and public markets continues and its confidence in the underlying fundamentals of the hospitality industry isn't wavering, either.
The private-equity firm has reportedly paid $6 billion in cash for Chicago-based real estate investment trust Strategic Hotels & Resorts, whose luxury portfolio includes such properties as the Four Seasons in Washington, D.C. (it also owns four other Four Seasons in the U.S.), The Ritz-Carlton Half Moon Bay (pictured) outside of San Francisco and the Montage Laguna Beach. In sum, Strategic owns a portfolio of 18 upper-upscale to luxury hotels, according to its website.
In April of last year, Strategic made headlines when it exited its European investments, closing on the sale of the Marriott London Grosvenor Square hotel.
Up until the sale announcement today, the Blackstone name hadn't been mentioned, though obviously was lurking and never out of mind. First there was word that Ebay founder Pierre Omidyar, who also controls Ohana Real Estate Investors, was showing interest in Strategic. This was followed by news that Cascade Investment, Bill Gates' investment firm, might be the buyer after it upped its shares in the company.
Blackstone Wins Out
But in the end, it was Blackstone, like so many times before.
"Our board and management team have consistently stated that we would consider any opportunity that maximizes stockholder value," said Raymond L. "Rip" Gellein, chairman and CEO of Strategic Hotels & Resorts, Inc. "We believe 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."
Not two months ago, Reuters valued Strategic's portfolio at $3.5 billion.
Tyler Henritze, co-head of U.S. acquisitions for Blackstone Real Estate, added, "We are excited about the opportunity to acquire one of the highest quality luxury hotel portfolios in the U.S. As long-term investors in the lodging industry, we remain confident in the fundamentals of the sector despite recent market volatility."
Under the deal, Blackstone will acquire all outstanding shares of common stock of Strategic for $14.25 per share in cash, and all of the outstanding membership units of the company's subsidiary, Strategic Hotels Funding L.L.C., not held by the company, for $14.25 per unit in cash. Including outstanding debt of the Company, the total transaction value is approximately $6 billion.
The offer price represents a premium of approximately 13 percent over the unaffected intra-day trading price on July 23, 2015, at which this media article was issued reporting a potential transaction for the company.
Blackstone has been active buying piecemeal in the U.S., including these three hotels from Paulson & Co. in a billion-dollar-plus deal. It's also been active overseas. At the beginning of the year, Blackstone and Malaysia's CIMB Bank said it partnered to invest in three Sentosa Cove properties in Singapore owned by City Developments (CDL), including the W Singapore hotel, in a transaction valued at around US$2 billion.
Not long after, Blackstone agreed to sell Gold Fields House, a property in Sydney's business district, to China's Dalian Wanda Group for approximately $327 million.
Completion of the Strategic transaction is expected to occur by the first quarter of 2016. J.P. Morgan is acting as financial advisor.