Blackstone Rides the Hospitality Wave

The Blackstone Group continues adding to its hospitality holdings with two portfolio deals announced within two days this week.
SpringHill Suites

The Blackstone Group, the global investment and advisory firm, continues adding to its hospitality holdings with two portfolio deals announced within two days this week.

The largest transaction is a 19-property portfolio of national select-service hotels acquired from OTO Development. The second deal is for five TownePlace Suites hotels in Denver. Both portfolio sales were handled by JLL’s Hotel & Hospitality Group. Purchase prices were not released.

An affiliate of Blackstone acquired the National Upscale Select-Service Portfolio, which has 2,385 rooms spread across 18 premium select-service and one full-service hotel, from OTO. The brands are Hampton Inn & Suites, SpringHill Suites, Hyatt Place, Hyatt House and Sheraton. Most are located in the Washington, D.C./Baltimore corridor and southern and central Florida with three in California.

“Hospitality portfolios are in high demand, but you rarely see portfolios of this quality, geographic diversity and of relatively recent construction,” Nick Meli, a vice president with JLL’s Hotel & Hospitality Group, said in a news release. “Across the portfolio, the properties are collectively generating strong cash-flow and high NOI margins. On top of that, there is enormous upside to be realized in all of the properties, many of which are located in markets which have lagged the broader national lodging recovery until recently.”

Meli was part of the JLL team, also led by Managing Directors Mark Fair and Al Calhoun, which handled the OTO deal. OTO will retain long-term management of 18 of the properties.

This is the second portfolio OTO has sold to Blackstone within the last year. In April, 2014, the private equity firm acquired a 15-hotel select-service portfolio with 1,856 rooms in Alabama, California, Connecticut, Florida, Pennsylvania and metropolitan Washington, D.C., from OTO.

The JLL group noted that the biggest hospitality trend in the United States is the amount of private equity chasing portfolio deals.

“Investors continue to demonstrate their appetite for select-service hotels, and the portfolio’s affiliation with premier select-service hotel brands will help drive yield and deliver strong returns,” Fair said in the release.

Fair was also a leading member of the JLL Hotels & Hospitality Group team on the Denver portfolio transaction.  He was joined by Senior Vice Presidents Mark Fraioli and Chris Dewey.

The TownePlace Suites Denver Portfolio has a total of 584 rooms in five properties across the Denver metro area. The JLL team represented AB Real Estate Group and Sage Hospitality in the sale to Blackstone. Sage Hospitality will continue to manage the portfolio, which underwent a comprehensive renovation in 2013. It is comprised of TownePlace Suites Denver Downtown, TownePlace Suites Denver West/Federal Center, TownePlace Suites Denver Southeast, TownePlace Suites Denver Tech Center and TownePlace Suites Boulder Broomfield. The hotels are part of the Marriott franchise system.

“The portfolio checked all the right boxes for a sale in the current hotels market,” Fraioli said in a release. “Denver is one of the strongest and fastest growing economic hubs in the country, drawing top quality professionals and employers from all over the nation. Moreover, these particular hotels are located near some of the most robust demand generators in the market, such as hospitals, corporate office parks, and the downtown core.”

Dewey said the sale shows the strength of the extended-stay business model.

“By focusing on guests that stay three nights or longer, Sage Hospitality has been able to maximize the stability of hotel revenues and at the same time, drive superior profitability,” he said in the release.

Blackstone, which owns the majority of stock in Hilton Worldwide, recently invested $75.7 million in three New Orleans hotels and a parking garage. The deal, which was made with Highpointe Hotel Corp., gave Blackstone the Hampton Inn & Suites Convention Center, Hampton Inn & Suites Downtown French Quarter, and the Hampton Inn Garden District.