The Real Deal New York

Hilton pursuing REIT spinoff of hotel properties

Hotel giant consulted IRS to avoid pending legislation barring such deals

December 17, 2015 06:10PM

Hilton NYC

The New York Hilton Midtown at 1335 Sixth Avenue (inset: Christopher Nassetta)

Hotel giant Hilton Worldwide Holdings is the latest company to pursue a REIT spinoff of its real estate holdings – an avenue that has become an increasingly popular option for companies looking for tax savings and a boost to their stocks.

Hilton owns or leases 147 hotels around the world under various names, including the DoubleTree and eponymous Hilton banners, and analysts have estimated the properties could be worth more than $10 billion.

The hotel conglomerate has sought the blessing of the Internal Revenue Service before pursuing the transaction, according to the Wall Street Journal — with a REIT, or real estate investment trust, spinoff involving a large chunk of the hotel properties that Hilton owns.

Having already gone to the IRS for approval, Hilton is exempt from a bill pending in Congress that would ban such spinoffs. The legislation, which is part of a year-end tax deal that the House plans to vote on Thursday, would grandfather companies that sought an IRS ruling for their spinoffs before Dec. 7.

Hilton did just that, sources told the Journal — though an earlier version of the bill that didn’t have the grandfather clause would have prohibited the Hilton spinoff.

McDonald’s and Macy’s are among the companies that have recently entertained the possibility of a REIT spinoff of their real estate holdings, with such entities helping curb corporate taxes and often trading at higher multiples of their earnings than their parent companies. [WSJ]Rey Mashayekhi