The New York-listed hotels group, which is being advised by Deutsche Bank and Goldman Sachs, said that it would inject about 70 of its owned hotel properties with a total of 35,000 rooms into a tax-efficient real estate investment trust (Reit).
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Hilton Worldwide now has more than 4,600 managed, franchised, owned and leased hotels and timeshare properties with more than 758,000 rooms in 100 countries and territories. (NYSE:HLT) reported its stronger-than-expected earnings for the fourth quarter of fiscal 2015 (4QFY15), along with its decision to spin off some of its real estate business into publically traded real estate investment Trust (REIT).
The giant hotel chain expects to complete the spin off by the end of the current year.
McLean, Virginia-based Hilton Worldwide noted that it received a private letter ruling from the Internal Revenue Service regarding the spin-off.
Hilton Grand Vacations, the firm’s timeshare business, will turn into a separate publicly-traded company. Analysts estimate that the properties are worth more than US$10 billion.
Details of both spinoffs will be provided in regulatory filings to be made in the second quarter, Hilton said in a statement.
Marriott Vacations Worldwide Corp.’s earnings have climbed since its separation from parent company and its share price has almost tripled.
“By simplifying our business, each segment should benefit from a dedicated management team with the capital and resources available to take advantage of both organic and inorganic growth opportunities”, Chief Executive Officer Christopher Nassetta said “We believe it will also allow investors to more effectively allocate capital towards businesses more aligned with their objectives”.
A spinoff of its real estate would help Hilton increase shareholder value while its rivals combine to overshadow it. The owner of brands including Waldorf Astoria and Embassy Suites also faces intensifying competition from online travel agents and startups such as Airbnb Inc.
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David Loeb, an analyst with Robert W. Baird & Co. estimated that the timeshare company would be valued at roughly $2.1 billion.
