IRVING, TX—La Quinta Holdings Inc. said Thursday it had filed a registration statement with the SEC in connection with its previously announced plans to spin off its real estate into a separate, publicly traded REIT. To be known as CorePoint Lodging Inc., the REIT will come into being with a portfolio of 316 owned properties, while La Quinta will continue as an asset-light, fee-based franchise and management business. La Quinta first announced its spin-off plans this past January.
“We believe this separation will result in greater strategic clarity, with distinct management teams that can fully activate and run the respective businesses,” says Keith Cline, La Quinta's president and CEO. “In addition, we expect this will allow us to unlock growth opportunities that are embedded within each business and take advantage of capital market and tax efficiencies.”
La Quinta says that post spin-off, it expects to actively capitalize on strong interest from developers in expanding the La Quinta brand into the 30%-plus of US markets where the brand isn't represented yet and a highly scalable property management platform. The company, part of the Blackstone Group portfolio, expects to enter into franchise and management agreements with CorePoint Lodging that have initial terms of 20 years with renewal options.
As a standalone company, CorePoint expects to be the only publicly-traded US lodging REIT strategically focused on the midscale and upper-midscale select-service segments. The CorePoint portfolio encompasses about 40,500 keys, 32% of which are located within the top 25 US markets as defined by Smith Travel Research.
In all, La Quinta's owned and franchised portfolio consisted of more than 885 hotels as of March 31, encompassing about 87,500 keys across the US, Canada, Mexico, Honduras and Colombia. Not included in the CorePoint portfolio will be three properties that are currently being marketed for sale.
Post-spin La Quinta's total adjusted EBITDA for full year 2017 is estimated to be between $110 million and $115 million, including fee revenue under ongoing franchise and management agreements with CorePoint. The latter's total adjusted EBITDA for this year is estimated at between $200 million and $215 million.
J.P. Morgan is acting as financial advisor to La Quinta, while Simpson Thacher & Bartlett LLP is acting as legal advisor. Completion of the spin-off is subject to a number of conditions, including the SEC's declaration that CorePoint's registration statement is effective.
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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.
