Private Equity Firm Brookfield to Pay $3.8 Billion for Watermark Lodging Trust

Daily Lodging Report

Skift’s Daily Lodging Report is a subscription-required, email-only newsletter read by anyone and everyone in the hotel investor, owner, and operator space, including CEOs of some of the industry’s top brands. It covers North America and Asia Pacific with two separate regional editions.

Here are some excerpts of what the Daily Lodging Report informed its readers during the past week. If you’re not a subscriber, you should be. Sign up now, here.

Sunday, May 8

Watermark Lodging Trust announced they signed a deal with private real estate funds managed by Brookfield Asset Management that will see Brookfield acquire Watermark in a $3.8 billion all-cash deal. Brookfield will pay $6.768 per Class A share and $6.699 per Class T share. The transaction includes the assumption of debt and the preferred equity. Watermark’s portfolio consists of 25 properties with more than 8,100 rooms located in the drive-to-leisure destinations and urban cities in 14 states. Brookfield expects to close the transaction in the fourth quarter of this year.

According to Lodging Econometrics’s Construction Pipeline Trend Report for Q1 2022, the Latin America hotel construction pipeline stands at 563 projects, or 92,356 rooms. Mexico leads Latin America’s construction pipeline with 216 projects. Next is Brazil with 90 projects or 15,115 rooms, Peru with 32 projects or 972 rooms, Dominican Republic with 22 projects or 4,853 rooms, and Columbia with 18 projects/2,782 rooms. Cities in Latin America with the largest pipelines including Mexico City, Guadalajara, and Cancun. In 2023, LE analysts are forecasting 108 projects/16,587 rooms to open in Latin America.

Orient Express signed a partnership agreement with Arsenale S.p.A. to open the second Orient Express hotel in Italy at the Palazzo Dona Giovannelli in Venice. The Orient Express Venice Hotel will consist of 45 rooms and suites, a restaurant, and bar.

Skift Note: The Brookfield deal shows that investment interest in hotel portfolios remains strong. Notably, in this case, the Sun Belt region has a high concentration of assets. A portfolio with similar assets is Xenia Hotels, said analysts at Baird.

Monday, May 9

In case you are interested in owning a piece or all of a hotel that never should have been built, the Supreme Court of Bermuda has appointed a liquidation and inspection committee for South Shore Holdings, the former backer of the 13 Hotel located in Macau. While people wind up the company, the hotel remains in limbo regarding ownership and its future. 

Seven years after selling the Best Western Plus in the Denver Tech Center for $15 million, DTC Hotel LLC is still owed $11.5 million. According to DTC Hotel, Rockies Lodging Capital signed a promissory note for $11.5 million and took out a $200,000 loan for repairs in the hotel in April 2015. DTC says the firm owes it $11.3 million from the promissory note and the full $200,000 from the loan, along with interest, late fees and attorney fees. DTC Hotel has begun foreclosing on the 149-room Best Western and has asked an Arapahoe County judge to appoint a receiver to oversee daily operations at the hotel and ensure its bills are being paid. District Court Judge Frederick Martinez agreed and appointed Colorado Hospitality Services.

Skift Note: Expect to see litigation over hotel assets that began in the pandemic to clog the courtrooms as they make their way to hearings at last.

Tuesday, May 10

The Ace Hotel is finally launching in Australia, with Sydney the first location for the brand. Ace Hotel Sydney will open on May 18, the first Ace in the Southern Hemisphere. The hotel will take over the Tyne Building on Wentworth Avenue in Surry Hills, owned by the Golden Age Group. Ace Sydney will feature 264 rooms, a gym, restaurant and café, a lobby bar, and a rooftop bar and restaurant

The Nustar Resort & Casino has opened on Cebu island in the Philippines. It calls itself the first integrated resort for the holiday destination. The resort will feature three hotel towers. Tower 1 is ultra high-end, Tower 2 will be five-star, and Tower 3 will be for the MICE market. It will also feature a commercial and retail center that will bring in luxury retail and food options, a first for Cebu. The casino floor totals 21,000 square meters and will eventually feature 1,500 gaming machines and 500 tables. The opening had originally been planned for March.

Deutsche Hospitality said since entering the Middle Eastern market in 2015, the brand now has a total of 23 operational properties across the region. They are looking to establish an additional four hotels by the end of the year. Their global strategy includes their entire portfolio of brands including Steigenberger Hotels & Resorts, Steigenberger Icons, MAXX by Steigenberger, House of Beats, Jaz in the City, Intercity Hotel, Zleep Hotels and now Steigenberger Porsche Design Hotels. The group is set to launch their first luxury lifestyle hospitality concept with Steigenberger Porsche Design Hotels, offering a minimum of 150 rooms, suites and penthouses, as well as the first Intercity Hotel in Muscat, Oman. In March this year, the group announced its partnership with Al Hamra to take on the management of Al Hamra Village Hotel and Al Hamra Residence in Ras Al Khaimah. They were able to reopen Al Hamra Residence on April 15, within a record time of 25 days from the hotel management signing. Al Hamra Village Hotel is expected to re-open in Q3 2022.

Skift Note: These items are good news for the brands The Ace Hotel, Nustar, and Steigenberger that appear to have bright, globalized futures.

Wednesday, May 11

The South China Morning Post published an article on the recent sale announcements of two Hong Kong hotels. The SCMP said Shun Ho Construction buying the Bay Bridge Lifestyle Retreat and Weave Living acquiring the former Grand City Hotel from Magnificent Hotel totaled US$295 million and shows cash-rich investors are betting on a hospitality sector rebound once the borders reopen. Shun Ho is the wholly-owned subsidiary of Magnificent Hotel Investments. The Bay Bridge Lifestyle Retreat is a 435-room waterfront hotel in the western New Territories overlooking Tsing Ma Bridge while the Grand City Hotel is in Sai Ying Pun. Weave Living is partnering with investment firm Angelo Gordon on that purchase.

The Australian said Accor is planning for three more Movenpick hotels in the region. The article said the popularity of the chocolate-themed hotels has inspired Accor to supercharge the brand’s growth across the Pacific. Accor will open two new Movenpick hotels in New Zealand while another is planned for the inner Brisbane suburb of Spring Hill. Since opening in Tasmania last year, Accor has grown the brand to four locations in Australia and New Zealand. Early construction has begun on its fifth location, Movenpick Hotel Brisbane Spring Hill, which will open in 2024. Overall there are more than 110 Movenpick locations open globally.

Skift Note: Some investors are thinking beyond current covid-related restrictions to a brighter future.

Thursday, May 12

PEG Companies acquired a nine-property portfolio of hotels and anticipates operating each of the properties as hotels and ultimately converting them into quality Class B multifamily communities when the highest and best use of the property is no longer as a hotel. The nine hotels are located in Boston, MA; Vancouver, WA; Dallas, TX; Atlanta, GA; Jacksonville, FL; Philadelphia, PA; Ann Arbor, MI; and Princeton and Ocean City, both in NJ. With the majority of them originally built as Residence Inn by Marriott extended stay hotels, the properties lend themselves to efficient and cost-effective conversions. To date, through the PEG Extended Stay Conversion Fund, L.P., PEG has acquired 15 extended stay hotels and is currently finishing out a $130 million fundraising.

Skift Note: Many investors now think more along a continuum from residential to hotel.