Hilton to Spin Off Real Estate into REIT

Hilton Worldwide said Feb. 26 that it plans to spin off the bulk of its hotel real estate holdings into a publicly traded REIT by the end of the year.

McLean, Virginia-based Hilton Worldwide noted that it received a private letter ruling from the Internal Revenue Service regarding the spin-off. The hotel company intends to file appropriate registration statements with the Securities and Exchange Commission (SEC) during the second quarter.

The newly formed REIT will include approximately 70 properties and 35,000 rooms, forming one of the largest and most geographically diversified publicly traded lodging REITs, according to Hilton Worldwide. The REIT’s portfolio will include luxury and upper-upscale assets located across urban and convention markets, resort destinations, select international regions and airport locations, the hotel group added.

“We’re setting up a company that has terrific assets,” said Christopher Nassetta, president and CEO of Hilton Worldwide, during a conference call. He noted that most of the assets in the portfolio will be based in the United States, with a small component of international properties “where it makes sense.”

Given macroeconomic uncertainty, Nassetta said the current environment is not a favorable time to buy or sell assets. “There are times in the REIT world where the thing to do is hunker down and drive the value of what you have,” he said. Before joining Hilton Worldwide, Nassetta served as president and CEO of lodging REIT Host Hotels & Resorts, Inc., (NYSE:HST) from 2000 to 2007.

Hilton Worldwide also said it would spin off its timeshare business, Hilton Grand Vacations (HGV), as a separate publicly traded company.