The Real Deal New York

Hilton plans REIT, timeshare spinoffs

Conglomerate valued at $20 billion with announcement of new publicly-traded funds

February 26, 2016 04:00PM

Hilton NYC

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

Hotel giant Hilton Worldwide Holdings plans to spin off its timeshares and most of its real estate businesses in a move that could bring tax savings and lift stocks.

After the move was announced Friday morning, its shares rose 6.1 percent before falling again to 1.9 percent, valuing the company at $20 billion.

About 70 of the hotel conglomerate’s hotel properties — most of those in the U.S. — will be spun off into a publicly-traded real estate investment trust, the New York Times reported.

Under the DoubleTree and eponymous Hilton banners, the hospitality firm owns or leases 146 hotels around the world, worth an estimated $13.5 billion, Bloomberg reported. The news service reported that 10 of the hotels generate half of the group’s pretax earnings, and eight of the most valuable 10 would be folded into the new REIT.

Hilton Grand Vacations, the firm’s timeshare business, will turn into a separate publicly-traded company. The new timeshare firm, with roughly 50 properties in Europe and the U.S., will have a long-term license agreement with Hilton Worldwide to market, run and sell resorts under the brand, Hilton Grand Vacations, the Times reported.

David Loeb, an analyst with Robert W. Baird & Co. estimated that the timeshare company would be valued at roughly $2.1 billion.

Hilton sought Internal Revenue Service approval before announcing the move. Both the REIT and the timeshare spinoffs are expected to be completed by the end of the year, and do not require a shareholder vote, the Times reported.

The Blackstone Group, which took Hilton public in 2013, owns a 46 percent share in the lodging company.

In its fourth quarter financial results, Hilton reported an adjusted profit of 22 cents per share on revenue of over $2.8 billion, according to the Times. [NYT] and Bloomberg]Dusica Sue Malesevic

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