5/6/2019 | By Sarah Borchersen-Keto
Park was formed in early 2017, when Hilton Worldwide spun off most of its owned real estate into a separate public REIT.
The combined company is estimated to have an enterprise value of $12 billion, making it the second largest lodging REIT behind Host Hotels & Resorts, Inc. (NYSE: HST), with a $17 billion enterprise value.
Under the terms of the merger agreement, Park is offering $31.71 per Chesapeake share, a premium of about 8 percent on the previous close. Upon completion of the deal, Park and Chesapeake shareholders will own approximately 84 percent and 16 percent of the combined company, respectively.
During a conference call, Thomas Baltimore, Jr., chairman and CEO of Park, described the deal as a “very compelling acquisition” that will enable the REIT to accelerate its long-term strategic goals of upgrading the quality of its portfolio and achieving brand, operator, and geographic diversity.
Post-closing, about 84 percent of the portfolio will be comprised of Hilton-operated hotels, with 11 percent operated by Marriott, and less than 5 percent by Hyatt, Baltimore said. Park plans to sell five non-core hotels prior to the proposed closing, including both of Chesapeake’s New York hotels, the Hyatt Herald Square New York, and the Hyatt Place New York Midtown South, in addition to three non-core Park hotels currently under contract. Park and Chesapeake expect the transaction to close in the late third quarter or early fourth quarter of 2019.
Baltimore described the steps Park has taken over the past two years, which include recycling capital, buying back stock, and taking a disciplined approach toward leverage. “We’ve worked really hard to put ourselves in this position,” he said.
Baltimore also commented on the broader hotel and lodging landscape: “We’re a highly fragmented segment. Lodging should consolidate.”