Extended Stay America mulls real estate spin off

George Sell George Sell Uploaded 27 July 2018

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US: Extended Stay America CEO Jonathan Halkyard says the company is considering spinning off its real estate unit.

ESA is one of the few major hotel companies left with major real estate assets, and says that it is seriously considering the move to the asset-light structure adopted by most of its peers.

During a conference call with investors to discuss second quarter earnings yesterday, Halkyardsaid, "I want our shareholders to know that we continue to evaluate the merits of alternatives to our current corporate structure."

The alternatives being considered include possible merger and acquisition activity and the spinoff of Extended Stay America's real estate investment trust, ESH Hospitality, which owns 599 of Extended Stay America's 626 economy extended stay properties in the US.

Interest both from shareholders and the analyst community in a spin off was cited as the reason behind the announcement.

Halkyard said: "I am reluctant to put any kind of timeline on this. I only want to assure our shareholders that it is a topic that we pay close attention to and is one that we and our board continue to evaluate not only in the context of evaluation but also in terms of performance to the portfolio."

He added that the company is well on its way to fulfilling its ESA 2.0 strategy, and that its pursuit of being more asset-light and reinvesting in its existing properties through asset recycling - selling properties to reinvest in others - will continue, whether or not the company pursues a spinoff.

"In the last few months, we grew our total pipeline to 34 hotels, including 19 franchise hotels, we purchased a hotel for conversion, purchased an additional site for a new hotel and we expect to purchase several more sites in the second half of 2018," Halkyard said.

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