Blackstone to exit from La Quinta via IPO

November 25
12:30 PM 2013

People who were familiar with the company's decision disclosed to Bloomberg that Blackstone Group LP will instead file for an initial public offering to exit from its La Quinta Inns & Suites hotel chain. Blackstone reportedly wanted to obtain highers returns from its exit and believed that it could be achieved via an IPO instead of a sale on the private market, said the people who refused to be named as the plans were not made to be public. The sources added the 20% gain it received from a November 12 share sale of Extended Stay America Inc, which is co-owned by Blackstone, helped the private equity firm decide on the matter.

The world's largest alternative-asset manager was reportedly putting some of its biggest holdings in real estate public in order to capitalize on the US stock rally and the increase in hotel occupancy, Based on data acquired by Bloomberg, La Quinta will be Blackstone's third lodging IPO. La Quinta is valued around USD4.5 billion. Aside from Extended Stay, Hilton Worldwide Holdings Inc would be launching a USD2.25 offering next month, which would be a record in the lodging and real estate history.

CBRE Clarion Securities senior lodging analyst Drew Babin said, "It's an advantageous point in the hotel cycle. Supply growth is limited and we expect three more years (of above-average gains in rates and occupancy)."

When asked for a comment by the news agency about the report, Blackstone spokesman Peter Rose refused to provide a comment on the public listing plans.

Blackstone purchased La Quinta for USD3 billion in January 2006. At that time, La Quinta operated around 360 hotels and has 240 franchises under its namesake brand Baymont Inn & Suites, Woodfield Suites and Budgetel. Blackstone made several changes to the La Quinta by selling the Baymont brand to the predecessor of Wyndham and merged other properties. Blackstone also poured over USD60 million in improvements in La Quinta.

SunTrust Robinson Humphrey Inc analyst Patrick Scholes said about acquiring select-service hotel chains, "There are only so many Four Seasons you can build, but La Quintas you can build almost indefinitely. There is tremendous demand with these types of businesses."

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