Brookfield to Buy Watermark Lodging For $3.8B

Private real estate funds managed by Brookfield has entered into a definitive agreement to acquire the non-traded REIT Watermark Lodging Trust in an all-cash transaction valued at $3.8 billion. 

The acquisition price includes the assumption of debt and preferred equity. The purchase price represents a premium of over 7.5% from the most recently published net asset values per share as of December 31, 2021, of $6.29 per Class A share and $6.22 per Class T share.

The Watermark portfolio, built over a decade, consists of 25 luxury and upscale properties totaling over 8,100 rooms, many of which are located in the Sun Belt region. It owns, for example, the Ritz-Carlton in Ft Lauderdale, FL and one in San Francisco as well. 

“Hotels and resorts of this scale and quality are difficult to replicate,” said Lowell Baron, managing partner and chief investment officer in Brookfield’s Real Estate Group. “This portfolio is well positioned given its concentration in high barrier to entry coastal destinations, gateway cities and the sunbelt.”

The transaction is expected to close in the fourth quarter of 2022, subject to certain closing conditions, including the approval of Watermark’s stockholders. The proposed transaction has been unanimously approved by the Watermark Board of Directors.

Morgan Stanley & Co. LLC is serving as exclusive financial advisor to the company, Hodges Ward Elliott is serving as real estate advisor to the company and Clifford Chance US LLP and Paul Hastings LLP are acting as legal counsel. Fried Frank Harris Shriver & Jacobson LLP is acting as legal counsel to Brookfield, and Citigroup, Bank of America, JP Morgan, and Wells Fargo are acting as financial advisors and providing financing for the transaction.