Real estate investment firm Colony Capital recently announced its plans to sell six of its hospitality portfolios to Highgate, a real estate investment and hospitality management company. The transaction is valued at approximately $2.8 billion. The portfolios comprise more than 22,000 rooms across 197 hotel properties.
As part of the transaction with Highgate, Colony will transfer five of the six portfolios held in the hospitality segment and an approximately 55% interest in the THL portfolio held in the other equity and debt segment. The sixth portfolio in the hospitality segment, the Inland portfolio, is under receivership and is excluded from the transaction.
The sale is in line with Colony Capital’s intention of simplifying its business profile so it can focus exclusively on digital infrastructure assets. Marc Ganzi, newly appointed CEO of Colony is considered one of the most savvy players in the tower, data center and fiber space. He has a long history of gathering assets that have soared in value as the digital revolution in communications has exploded especially now in light of Covid 19.The company also plans to benefit from the segment and corporate-level G&A savings by leaving the hospitality business.
“We are thrilled to be delivering on our commitment to dispose of non-core assets and harvest positive value for our hospitality business,” Colony Capital CEO Marc Ganzi said in a statement. “With its strong track record, unique insights into the hospitality market and creative approach to hotel management, we are confident that Highgate is ideally suited to own and operate these properties. The sale of our legacy hospitality assets is a significant milestone in Colony’s digital transformation as we pivot to focus exclusively on our fast-growing digital businesses that generate superior returns for Colony shareholders.”
Highgate is optimistic about the acquisition despite the hospitality industry being one of the most impacted by the COVID-19 pandemic. Hotels might not return to pre-COVID-19 levels of business until 2023, according to management consulting firm McKinsey.
“We are excited to continue working with the Colony team in executing on this unique transaction,” Highgate Co-Founder and Managing Principal Mahmood Khimji said in a statement. “Despite the unprecedented disruption in hospitality over the past six months, we remain bullish on the long-term secular trends in our industry, and look forward to partnering with the many employees, franchisors, lenders, and other important stakeholders across these portfolios as we work towards a successful recovery.”
The transaction is expected to close during the first quarter of 2021. It’s subject to customary closing conditions and third-party approvals.
Joe Dyton can be reached at firstname.lastname@example.org.