History has a way of repeating itself, and the ever-cyclical real estate market is no exception. With its latest takeover of a publicly-traded real estate investment trust (REIT), however, The Blackstone Group isn’t looking to rehash the past.
Last month, the New York-based private equity real estate giant announced its plans to buy Strategic Hotels & Resorts, a Chicago-based hotel REIT, in a transaction valued at a total of $6 billion. Blackstone, of course, is no stranger to take-private deals, particularly in the lodging industry. After all, it bought eight listed hotel REITs – including Hilton Hotels, Extended Stay America and La Quinta Corporation – during the last market peak and then launched initial public offerings for a number of the companies in 2013 and 2014.
Blackstone’s latest real estate acquisition is distinct from its previous take-private hotel transactions, however. That’s largely because Blackstone’s interest in acquiring Strategic is because of the company’s real estate assets – which include 17 of the top luxury hotel and resort properties in the US – not the business itself.
“The main difference between Hilton, Extended Stay and La Quinta is that those three companies were more brand-oriented and fee business-oriented rather than real estate oriented,” said Lukas Hartwich, an analyst at real estate research firm Green Street Advisors.
With the takeover for Hilton, the opportunity was to reinvigorate the brand, and the company’s business was not about owning hotels, but rather management and franchising, he added. “With Strategic, it’s all about the ownership,” he said. “It was definitely tilted more toward fees with other companies, Hilton and La Quinta, in particular.”
Given the unique nature of the Strategic portfolio, however, the transaction may be viewed as more of a one-off deal, rather than necessarily a sign of things to come.