Park Hotels is set become the second largest lodging real estate investment trust through the acquisition of Chesapeake Lodging Trust in a deal valued at $2.7 billion.
With the addition of Chesapeake, Park Hotels would operate 66 hotels in 17 U.S. states and Washington, D.C., Bloomberg reported. Chesapeake Lodging Trust has 20 properties, including the JW Marriott San Francisco Union Square and the Royal Palm South Beach Miami. It’s set to sell five of its current properties, including the Hyatt Herald Square and the Hyatt Place New York Midtown South.
Park Hotels spun out of Hilton Worldwide Holdings in 2017. The deal is a part of a move to diversify Park Hotel’s portfolio, which currently has 51 Hilton hotels, including the New York Hilton Midtown and the 1,544-room Hilton Chicago on Michigan Avenue. Bank of America will provide $1.1 billion to finance the cash portion of the purchase, according to Park Hotels.
“Chesapeake’s high-quality portfolio of hotels will accelerate our strategic goals of upgrading the quality of our portfolio and achieving brand, operator and geographic diversity,” Park Hotels CEO Thomas Baltimore said in the statement.
Though the deal hasn’t been signed yet, Park Hotels CEO Thomas Baltimore hopes he won’t have to fight competing offers, like Blackstone Group’s competing offer for the Pebblebrook Hotel Trust acquisition of LaSalle Hotel Properties last year.
“We don’t see a repeat of that drama,” Baltimore said. “We want to stay as far away from that as possible.”
The deal, should it fall through, would come with a steep penalty for Chesapeake: $38.5 million which nearly doubles to $62.5 million after June 4. [Bloomberg] — Georgia Kromrei