Blackstone and Starwood Capital Group secure stakes in Extended Stay America

Paul Stevens Paul Stevens Uploaded 23 April 2020

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US: Real estate investors and private equity firms, Blackstone Group and Starwood Capital Group, have secured stakes in extended stay hotel chain Extended Stay America.

According to the Wall Street Journal, Starwood, owned by Barry Sternlicht, has paid $136.8 million for an 8.5 per cent stake, or roughly $9.05 per share in the company, while Blackstone has claimed a 4.9 per cent stake in the chain, for around $6.50 a share.

It is also not the first time Blackstone has invested in the firm.

In 2004, the private investment group, owned by Stephen Schwarzman, acquired Extended Stay America for around $2 billion before selling the portfolio to Lightstone Group for $8 billion three years later. Then in 2010, despite competition from Starwood, Blackstone took the firm out of bankruptcy by purchasing it again for $3.9 billion, and then tripling its money by taking it public in 2013.

Though the hotel and wider travel segments have been hit hard by the coronavirus outbreak, demand is on the rise for affordable, extended-stay brands. Data intelligence company STR recently revealed nine per cent of luxury hotels were occupied in the week commencing 6 April, while economy-class hotels were left with occupancy of around a third.

Despite not yet closing properties and withdrawing its 2020 guidance last month, the hotel chain will require funding at least until restrictions are eased and the virus recedes. 

Speaking to Barron’s, however, David Katz, managing director and equity research analyst at Jefferies LLC, said more affordably priced hotel brands would struggle less with the effects of Covid-19 as they are located in outlying suburbs and "drive-to destinations", which are more conducive to social distancing.

The firm is also focusing on housing displaced workers and those in need of temporary housing, such as builders on construction sites, flight attendants and health professionals.  

 

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