Goldman exits hotel portfolio for $2bn

The investment bank’s Whitehall platform has sold its portfolio of Equity Inns properties below its 2007 purchase price.

Goldman Sachs Group’s Real Estate Principal Investment Area (REPIA) has agreed to sell its Equity Inns lodging portfolio to American Realty Capital Hospitality Trust, a New York-based real estate investment trust, for $1.925 billion. The hotels currently are held by Whitehall Street Global Real Estate Limited Partnership 2007, one of the funds within Whitehall Real Estate Funds, the private equity real estate funds platform sponsored by the New York-based investment bank.

The portfolio comprises 126 limited-service hotels totaling 14,934 rooms across 35 US states and is franchised by major hotel brands such as Hilton Hotels & Resorts, Marriott International, Hyatt Hotels and InterContinental Hotels Group. ARC Hospitality is expected to assume $976 million in existing financing backed by 106 hotels in the portfolio, while the remaining 20 hotels are free of any debt. The closing of the transaction, which is subject to franchisor and lender approvals as well as other typical closing conditions, is expected to occur during the fourth quarter. 

The sale price of Equity Inns would represent a loss for Whitehall Global 2007, on behalf of which Goldman acquired Equity Inns, then the third-largest hotel REIT in the US, in June 2007. At the time, the deal was valued at approximately $2.2 billion, including debt. Whitehall paid $23 per share in cash for Equity Inn, a premium of approximately 28 percent over the hotel company’s 90-day average closing share price. In late 2010, Whitehall was reported to have restructured and extended $1.1 billion of debt on the portfolio. 

Whitehall Global 2007 was Goldman’s largest private equity real estate fund, attracting $4.8 billion in commitments that year. The firm added one more fund to the Whitehall platform, the $2.3 billion Whitehall Global 2008, one year later, but it has not raised a new real estate equity vehicle since then. Both funds currently are being harvested.