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Blackstone takes 60 percent of Hotel del Coronado
NEW YORK |
NEW YORK (Reuters) - Private equity firm Blackstone Group (BX.N) has taken a majority stake in San Diego's historic Hotel del Coronado in return for a cash infusion that that will reduce the hotel's debt load by about one-third.
Blackstone will receive a 60 percent ownership interest in the property, according to a statement on Monday from Strategic Hotels & Resorts (BEE.N), which will continue as the hotel's asset manager and will have a 34.3 percent stake. KSL Resorts, the hotel's operator, will also inject cash into the property and will hold 5.7 percent.
A hotel asset manager is responsible for financial aspects of a hotel like insurance, taxes and debt.
Blackstone, sitting on about $30 billion of capital, has been active in buying U.S. commercial real estate such as hotels, retail property and warehouse space from distressed owners and others who need cash.
The company is seeing a recovery in the office and hospitality sectors, and has said concerns about inflation are increasing the interest in real estate as an investment.
The deal will reduce the debt of the Hotel del Coronado to $425 million. Strategic's debt level will fall by $81 million to about $1.22 billion. The company has a market capitalization of about $1 billion.
"This is an equity infusion by Blackstone," said FBR Capital Markets analyst Patrick Scholes. "Strategic is a highly levered company, the stock got crushed in the downturn and they want to make sure that never happens again."
Strategic, which is unique among its peers for its focus on high-end properties, has several more hotels in its portfolio that it will need to refinance in the near-term, Chief Executive Laurence Geller said.
"This is another step in our rebuilding of the balance sheet," he said.
Of the hotels that need refinancing, the Fairmont Scottsdale Princess in Arizona will be the most challenging. With $180 million of debt, it owes far less than the Hotel del Coronado, but Scottsdale's hotel market is taking longer to recover, Geller said.
A national landmark, the Hotel del Coronado opened in 1888 and has hosted presidents, royalty and Hollywood stars.
Strategic's shares closed up 6.1 percent at $6.3 percent at $6.59 on the New York Stock Exchange.
(Reporting by Helen Chernikoff; Editing by Lisa Von Ahn, Steve Orlofsky and Bernard Orr)
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