Blackstone and Starwood Capital Partner to Purchase $ 6 Billion Extended Stay

Extended Stay is a mid-priced hotel chain that focuses on lodging for guests interested in staying for weeks or more, offering kitchen facilities and more space than a typical hotel room. During the pandemic, its rooms and suites attracted essential workers, medical professionals and others who needed to travel.

This business helped Extended Stay achieve 74% occupancy last year, Blackstone said. The average occupancy rate at all U.S. hotels was 44%, according to hotel data tracking company STR.

Now, as vaccinations roll, hires increase, and more Americans think about traveling again, Blackstone and Starwood believe another breed of guests will fill beds at Extended Stay properties with. an economy that will rebound. This group includes construction workers, contractors, and professionals such as lawyers and consultants.

“Corporate America is going to be a big investor in capital spending and this company is going to benefit,” said Tyler Henritze, Blackstone’s head of acquisitions for the Americas.

The accommodation sector has been one of the hardest hit during the pandemic, which has caused most tourism, conventions and business travel to dry up. The hotel occupancy rate in the United States, which was close to 65% just before the pandemic, hit 22% in mid-April, according to STR.

While analysts say the hotel industry as a whole will not return to pre-pandemic income levels for two to three years, the growing prospect of an economic recovery has some investors believing that now is the time to buy hotels. intended for business travelers or luxury clients.

“Resort resorts are coming back and we would be interested in a large portfolio of resorts,” said Barry Sternlicht, CEO of Starwood Capital. He calls Extended Stay an “investment of bread and butter – it’s not glamorous.”

He said it is a hosting segment that can attract customers through different economic cycles, as there are always people who need an affordable place for an extended period of time without the commitment of a lease. . He cited as examples participants in training programs, people who divorce and those who move but their new home is not ready.

The deal for Extended Stay, which will be owned equally by the two companies, marks a sort of truce after a period of last year wrestling over stakes in the company. Starwood owns nearly 10% of the company’s shares, Sternlicht said, while Blackstone bought a 4.9% stake before cashing it in in June.

Starwood was also a finalist when Blackstone led a group that bought the chain from bankruptcy proceedings in 2010.

This time around, the two occasional rivals determined it made more sense to team up. “It gives us more [cash] to continue to explore other hospitality opportunities that may arise at Covid, ”said Mr. Henritze of Blackstone.

Extended Stay’s share price has more than doubled over the past year. The Blackstone and Starwood offer represents a 23% premium over the weighted average of what Extended Stay shares were trading in the 30 days before the deal struck over the weekend. An agreement for the extended stay, expected to be reached later this year, still requires shareholder approval.

With this purchase, the two firms would acquire the 567 properties owned by Extended Stay. The company franchises 82 others. About two-thirds of its hotels are located in the 25 largest metropolitan areas in the United States, Blackstone said.

Extended Stay shares surged Monday after the deal was announced. They closed at $ 19.21, up 13.4%, and slightly below the all-cash offering’s $ 19.50 per share value.

When the deal closes, it will mark the third time Blackstone has owned Extended Stay. She first bought the chain in 2004 and combined it with other hosting portfolios she had purchased.

Both companies have extensive experience in the hotel industry. Mr. Sternlicht created the hotel operator Starwood Hotels & Resorts Worldwide Inc., which is now part of Marriott International Inc.,

and other hotel brands. Blackstone’s biggest real estate profit comes from its 2007 acquisition of Hilton Worldwide Holdings Inc.,

which brought the company more than $ 14 billion in profits after going public and cashing in its final assets in 2018.

Blackstone reduced its hotel portfolio in the years leading up to the pandemic. Accommodation represented less than 10% of its portfolio at the start of last year, up from nearly 50% in 2010.

Mr. Henritze suggested that the new Extended Stay acquisition was just the beginning of his renewed interest in the accommodation industry. “Overall, there is great interest in investing in a large-scale travel and leisure recovery that would include all segments of the hospitality industry,” he said.

Write to Peter Grant at [email protected] and Craig Karmin at [email protected]