MCLEAN, VA-Hilton Worldwide Holdings Inc. on Monday filed for what will be the largest hotel IPO ever, offering approximately 112.8 million shares at up to $21 each. The second lodging IPO this year from the Blackstone Group, the stock issue could raise as much as $2.4 billion, or $2.7 billion if the underwriters exercise their overallotment options.
In Monday's SEC filing, Hilton notes that under CEO Christopher Nassetta, hired after Blackstone took the company private in 2007, it has “transformed” its business, “creating a globally aligned organization and establishing a performance-driven culture.” As part of the transformation under Blackstone ownership, the company has focused on both top- and bottom-line operating performance, “strengthening and expanding our brands and commercial services platform, and enhancing our growth rate, particularly in markets outside the US where our brands historically had been underrepresented.”
Among other achievements, between June 2007 and Sept. 30 of this year Hilton added 176,248 keys for a 36% increase in the number of open rooms in its system, “the highest growth rate of any major lodging company,” according to the SEC filing. It also has 185,699 keys in development, “over 99% of which are within our higher-margin, 'capital light' management and franchise segment.”
Much of that tally, along with the total of rooms under construction, is in properties outside the US, a change from previous years. RevPAR and EBITDA have also climbed along with the size of Hilton's portfolio.
Separately from the IPO, Blackstone is seeking to refinance all of Hilton's debt, with a $3.5-billion CMBS issue in the works. Standard & Poor's last month rated the 13 classes of commercial mortgage pass-through certificates in the refi in a range from AAA to BB, noting both strengths and the potential of risk in the underlying collateral.
“Standard & Poor's considers lodging properties to be among the riskiest property types because of the daily pricing structure, a significant operating component and a high expense ratio relative to other property types,” S&P said in its Nov. 15 preliminary report. “This is somewhat mitigated by the low supply growth rate in recent years in the U.S. Standard & Poor's accounted for the property type in its evaluation of the transaction.
Hilton says it plans to launch the IPO as soon as possible after the SEC declares the offering plan effective. To date, the largest IPO in the hospitality industry has been the $1-billion offering that Hyatt Hotels Corp. made in 2009. Following the IPO, Blackstone would continue to own a majority of the voting power in Hilton.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
