As good and upbeat the officials of Strategic Hotels and Resorts might have sounded in public, it is reported that the company’s board and executives aren’t as happy. Over the summer, the sale hasn’t shown any noteworthy progress and the future of the hotel market is in jeopardy.
According to a latest proxy filing with SEC (Securities and Exchange Commission), occupancies and room rates might have driven down due to the recent construction din. As per the expert forecasting of Strategic Hotel directors, the organization will no longer have good times and should prepare itself for the end.
The decision to sell the company for $4 billion last month seems pretty practical and legit. According to the sources, it was sold to the Blackstone Group (New York’s Private Equity Firm). New detailed information is added to the sale process and the documents unveil more than 15 parties are deeply involved in this year’s Strategic buyout. Top five executives will replace $40.2 million in stock and breach payments because of the sale.
Blackstone, whose retention includes LaQuinta, the Hilton and Extended Stay America chains, is optimistic about their acquisitions. The sale of Strategic, spotlights the debate of where the market is headed within the hotel industry.
Is the hotel industry moving toward a gloomy period?
As per the latest Bloomberg report, the real estate industry conference held on October 1, 2015, discussed several critical issues including the current tracks and trend of the hotel industry. Though, public hotel companies’ investors have inverted bearish in 2015, they are still waiting for a high thrust jump to come. With -19.7% of Bloomberg REIT Hotels Index vs. 2.3% of standard & poor’s 500 Index, the sale of the company is considered as a “challenge”. This debate includes hotel industry’s recovery cycle in the ongoing economy, slow economy risk and increased interest rates leading to a subsequent increase in the cost of debt and acquired assets in light of the recuperation in hotel lodging prices.
Also, previous week’s slowdown of LaSalle Hotel Properties resulted in disappointment and intrigue. Looking at the other side of the coin, suburban hotels are performing excellent and 2016’s conventional bookings seem high.
More detailed information about the current hotel market and growth will be revealed on Nov. 5, 2015, when REIT submits a portfolio of seventeen hotels and 7,920 rooms. The portfolio will include InterContinental on North Michigan Avenue and Millennium Park.
Blackstone won against all the other bidders
Several parties expressed interest in the buyout but they were recognized only as ‘Party A through Party O’ by letter. Many wished to own the company by themselves while many were expressing a smart view to be a part of an investor group. With so many bidders in the competition, it ultimately came down to one firm. Blackstone was the only firm that put forth the application bid by the deadline. On Dec. 8, 2015, the voting of the Strategic shareholders will take place to finalize the deal.
Blackstone will get an opportunity to balance the payouts with Strategic Hotel executives and CEO Raymond will receive $21.7 million in stock and severance payments.
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