Carey Watermark Announces $4.6B Merger

The company's two hospitality REITs will combine through an all-stock deal to form Watermark Lodging Trust.
Renaissance Atlanta Midtown Hotel, part of CWI 2’s portfolio. Image courtesy of Sage Hospitality

Carey Watermark Investors (CWI) 1 and 2 have announced a definitive, all-stock merger agreement to create Watermark Lodging Trust, a $4.6 billion, internally managed, non-traded REIT. The new entity’s holding will total 9,658 guestrooms across 33 hospitality assets nationwide. Both boards of directors approved the deal, anticipated to close in the first quarter of 2020.

The announcement comes only months after Park Hotels & Resorts and Chesapeake Lodging Trust agreed to merge. That deal, valued at $12 billion, will encompass more than 35,000 guestrooms across 66 properties.

According to the terms of Carey Watermark’s deal, CWI 1 stockholders will receive CWI 2 Class A common stock at a ratio of approximately 0.91 shares per share of CWI 1 common stock, calculated from the overall portfolio’s assessed value at the end of 2018. Once the portfolios are joined, CWI 2 will change its name to Watermark Lodging Trust. The merger is expected to create operational efficiencies and position the new hospitality REIT for a potential future IPO.

Diverse national portfolio

Ritz-Carlton Bacara in Santa Barbara, Calif., owned by a joint venture between CWI 1 and 2. Image via Google Street View

Properties involved in the deal span 15 states from coast to coast, including assets in California, New York and Florida. The portfolio’s adjusted earnings before interest, taxes, depreciation and amortization overwhelmingly came from its Marriott holdings, comprising 80 percent of the portfolio. Other hotels include major brands such as Hilton, Hyatt, Accor and InterContinental. Most of the properties are full service, though a number of resorts and select-service hotels are also included.

Michael Medzigian will become CEO of Watermark Lodging Trust upon finalization of the deal, with Mallika Sinha taking on the role of CFO. Both currently serve in the same roles within CWI 1 and 2.