Extended Stay Hotels, the mid-priced lodging chain owned by Blackstone Group LP, Centerbridge Partners LP and Paulson & Co., plans to file today for an initial public offering later this year, said a person with knowledge of the situation.
Extended Stay, based in Charlotte, North Carolina, hasn’t decided how many shares will be sold or at what price, said the person, who asked not to be identified because the process is private. Extended Stay is owned in equal thirds by its private-equity and hedge-fund shareholders.
The IPO could raise about $500 million, based on the midpoint of the typical 10 percent to 20 percent of a company’s value sold in IPOs, according to data compiled by Bloomberg. Extended Stay is valued at about $3 billion to $4 billion, before debt, the person familiar with the process said. The company has debt of about $3.6 billion, according to the person.
The Bloomberg REIT Hotel Index has gained 21 percent with dividends this year and is hovering around a five-year high set in May amid a recovery in the real estate market.
Peter Rose, a spokesman for Blackstone, Centerbridge’s Gallogly, and Armel Leslie, a spokesman for Paulson, didn’t immediately respond to e-mails and phone calls placed outside regular business hours.
Extended Stay owns and operates almost 700 hotels in the U.S. and Canada under its namesake brand and others, including Homestead Studio Suites.
Extended Stay changed owners three times during the past decade’s boom and bust in real estate. In 2004, Blackstone acquired the core of the company’s assets when it bought Extended Stay America Inc. for $3 billion, as industry revenue was in a slump following the terrorist attacks in 2001. The New York-based private-equity firm later combined it with other purchases.
When the commercial real estate market peaked in 2007, Blackstone sold Extended Stay for $8 billion to Lightstone Group LLC. Saddled with $7.6 billion of debt after the credit crisis shut off refinancing sources, the hotel chain filed for bankruptcy protection in 2009. The following year, Blackstone joined Centerbridge, a lender who had worked to restructure Extended Stay debt, and Paulson to buy back the hotel chain out of bankruptcy for about $3.9 billion. Centerbridge was co-founded by former Blackstone partner Mark Gallogly.
Since the three bought Extended Stay, its cash flows have increased more than 40 percent amid a recovery in the hotel business, two people with knowledge of the situation said last November. The owners invested about $420 million to renovate rooms and consolidate properties under the Extended Stay brand name, they said at the time.
Blackstone, the largest U.S. hotelier with holdings including Hilton Worldwide Inc., has begun to sell real estate holdings as markets recovered from the financial crisis. The company’s shopping center unit Brixmor Property Group filed last week for an IPO that Renaissance Capital estimates could raise more than $700 million.
“This is a good environment to start seeking some exits,” Blackstone Chief Financial Officer Laurence Tosi said July 18 on the company’s second-quarter earnings call. An improving U.S. economy is translating into higher occupancies and rents at the firm’s real estate holdings, he said.
Blackstone has said it expects to take public Hilton, the world’s biggest hotel chain, over the next 12 to 18 months.
Plans for the Extended Stay IPO filing were reported earlier by the Wall Street Journal. Deutsche Bank AG, Goldman Sachs Group Inc. and JPMorgan Chase & Co. are arranging the stock sale, the newspaper said.