In a further vote of confidence in the future of hospitality—and in the extended-stay sector, specifically—Blackstone and Starwood Capital Group have agreed to acquire Extended Stay America and its paired-share real estate investment trust, ESH Hospitality, for $6 billion.
A 50/50 joint venture between funds managed by Blackstone Real Estate Partners and Starwood Capital Group will acquire the 650 properties and nearly 63,000 guestrooms owned by Extended Stay America for $19.50 per paired share in an all-cash transaction. It is the latest pivot for ESA, which divided into two brands last month after years of being a single-brand vertical.
The extended-stay segment has been a bright spot for the industry during the pandemic, and the brand maintained comparable systemwide occupancy of 73.7 percent in 2020.
“After a thorough review of the company’s business plan, the boards concluded that the immediate cash premium offered by this transaction is compelling for stockholders,” said Doug Geoga, chairman of the boards of the company.
ESA CEO and President Bruce Haase said Blackstone and Starwood Capital have “impressive track records of building value” in a wide variety of real estate assets. “The boards and senior management are especially grateful to the excellent team of leaders and associates who have made this company such a leader in the lodging industry and we are confident in the company’s continued success under private ownership.”
The transaction has been unanimously approved by ESA’s board of directors and also has been approved by ESH’s board of directors. Completion of the transaction, which is expected to occur in the second quarter of 2021, is contingent upon customary closing conditions, including approval of the company’s stockholders. The transaction is not contingent on receipt of financing. In connection with the transaction, an affiliate of Starwood Capital, which owns approximately 9.4 percent of the company’s outstanding paired shares, has entered into a support agreement whereby it has agreed to vote its shares in favor of the transaction.
Tyler Henritze, head of U.S. acquisitions for Blackstone Real Estate, said that the travel and leisure segment is one of Blackstone’s “highest-conviction” investment themes. “We have confidence in the extended-stay model. We helped create this company nearly 20 years ago, and believe our expertise puts us in a unique position to add long-term value.”
“Extended Stay has demonstrated resilience over the past year despite persistent challenges due to government lockdowns and travel restrictions,” said Barry Sternlicht, CEO of Starwood Capital. “We are excited about the company’s growth opportunity as restrictions ease and we’re confident that, in partnership with Blackstone and the company, our team has the right experience to drive continued success."