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Monday, 31 July 2017

La Quinta Holdings to Spin Off Hotels into Separate REIT; Eyes Big Refinancing

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Commercial Real Estate Direct Staff Report

La Quinta Holdings Inc. is planning to spin off the ownership of its hotels through a REIT, CorePoint Lodging Inc., in a process that would involve the refinancing of some $1.7 billion of debt.

La Quinta, of Irving, Texas, is roughly 30 percent owned by Blackstone Group, which had acquired the company 12 years ago in a deal that had valued the company, which then owned and operated 360 properties with 45,000 rooms, at $3.4 billion. Its goal then was to aggressively expand the La Quinta brand and franchise operation, which involves franchising 218 hotels with 19,000 rooms.

Three years ago, Blackstone took La Quinta public, raising nearly $750 million through a stock offering.

Its 2014 IPO was prompted in part by the then-pending maturity of some $2.8 billion of debt that the hotel operation had carried. That debt included $1.5 billion of loans, securitized through Merrill Lynch Floating Trust, 2008-LAQ, and was refinanced with proceeds of a $2.1 billion senior secured term loan that matures in 2021 and was provided by lenders led by JPMorgan Securities and Morgan Stanley.

CorePoint would own 316 hotels with 40,500 rooms that would be managed and franchised by La Quinta under 20-year terms that would be renewable. La Quinta would earn a management fee of 5 percent of gross hotel revenue plus a royalty of 5 percent of gross room revenue.

The move is designed to further La Quinta's franchise business, which now numbers 570 properties. Another 249 are in its pipeline.

The company, in a regulatory filing, said, "La Quinta expects to actively capitalize on the embedded growth opportunity of a large and growing pipeline, strong interest from developers in expanding the La Quinta brand into the more than 30 percent of U.S. markets where the brand is not yet represented, and a highly scalable property management platform."

As of the end of last year, La Quinta carried $1.7 billion of debt on its balance sheet, with nearly all of it not coming due until three years, at the earliest. In its filing, CorePoint said it would complete "one or more financing transactions" designed to refinance "substantially all" of the La Quinta debt. But, it added that assurances couldn't be made as to timing nor exact size.

CorePoint says it would be the only publicly-traded hotel REIT focused solely on the midscale and upper-midscale select-service sectors, which haven't been hit with the volatility that has hit higher-end hotels.

Comments? E-mail Jenny Robinson or call her at (267) 247-0112, Ext. 208.



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Additional Info

  • Syndicate to Realpoint: No
  • Subject: REITS -general (REITS), Stock/Equity Offerings (IPO)
  • Company: Blackstone Real Estate Advisors
  • Private: No
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Data Digest

 

CMBS DELINQUENCY VOLUME

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CMBS SPECIAL SERVICING VOLUME

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Top Bookrunners Domestic, Private-Label CMBS - 2016
Investment Bank #Deals Vol$mln MktShr%
JPMorgan Securities 14.94 10,350.16 15.14
Deutsche Bank 14.21 9,926.60 14.52
Wells Fargo Securities 13.36 9,513.96 13.92
Citigroup 10.87 8,061.79 11.80
Goldman Sachs 10.05 7,563.72 11.07

 

MOODY'S/RCA CPPI

 

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CMBS 2.0 Spreads

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Top CMBS Loan Contributors - 2016
Lender #Loans Vol$mln MktShr%
JPMorgan Chase Bank 133.67 8,670.33 13.34
Goldman Sachs 156.20 7,418.37 11.41
Deutsche Bank 178.17 6,510.75 10.02
Citigroup 184.41 5,512.20 8.48
Morgan Stanley 113.18 4,130.53 6.35

 

 

 

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