Truist Discusses Challenges in Choice Hotels and Wyndham Deal

The DJIA fell 333 points, the Nasdaq fell 219, the S&P 500 was down 59 points, and the S&P 500 is one inflation or jobs report away from 5%, up another .06 to 4.90%. Lodging stocks were lower. SOHO traded down to a new low. VCSA was down -7% and is close to a new all-time low after the reverse split. SOND was down -6%, and SLNA fell -5% on the day.

JP Morgan said they expect relatively strong international 3Q23 RevPAR, net rooms, and pipeline growth, though to varying degrees between chain scale exposures and geographies. They also expect commentary from MAR and HLT around 2024 fundamentals to bracket Consensus RevPAR and net unit growth forecasts. JPM is selective on the lodging sector as they believe we face primarily ADR-driven year-over-year RevPAR gains with occupancy improvements limited to group and larger corporate transient, the latter of which is still recovering to 2019 levels. Multiples are above long-term historical averages for C-Corps, and REITs are near historical averages. JPM views Hyatt as a relative outperformer and remains relatively underweight Lodging REITs.

Truist held talks with both Choice Hotels and Wyndham Hotels, along with investors in both names. They believe WH holders want a takeout price closer to $95 and a larger cash component as well as a breakup fee if the deal does not give anti-trust approvals. CHH holders do not seem comfortable with the nearly 6x net debt/EBITDA leverage. CHH seems more confident than WH that anti-trust issues won’t pop up. WH is very concerned that they and their shareholders would take on significant risk if the deal does not go through. WHalso said they have already had issues with franchisees and their NUG/pipeline. WH told Truist some of their existing and potential franchisees do not want to be part of the CHH system and that some new deals and projects are already on hold due to the CHH offer. Assuming this is not posturing to force CHH to come up with a better price and terms, we see little chance WH is going to change their mind, but there already are rumors that others are interested with Blackstone and IHG already popping up in conversations. Judging by how far away WH is from the CHH cash/stock ratio, it is pretty clear Wall Street does not believe this deal is going through any time soon.

STR reported US lodging data for the week ended 10/14. US hotel RevPAR was up 0.8% year over year, with ADR making up for soft occupancy with rates up 3.2%. Group RevPAR was up 0.9%.

The Ritz-Carlton, Dallas, announced the completion of a multi-million dollar renovation of all 218 guestrooms and suites and refinements to the lobby, public areas, and corridors, as well as to The Ritz-Carlton Club Lounge. The property features the recently re-imagined The Spa at The Ritz-Carlton, Dallas, and three iconic dining outlets.

IHG Hotels & Resorts announced the opening of the Holiday Inn Express & Suites Atlanta South - Stockbridge. Located in Stockbridge, Georgia, the 78-room property is owned by Nitesh Patel and managed by YM Hospitality. The property features an onsite business center, 500 square feet of meeting space, and a fitness center.

The Midland, Texas, City Council unanimously approved a tax abatement and a development agreement with LS Brentway, LLC, for a new hotel downtown. The boutique property, called Tapestry Hotel, will offer around 80 guestrooms and will provide valet parking.

Arlo Hotels announced the topping off of Arlo Washington D.C.. The 12-story boutique hotel, slated to open in August 2024, will be the brand’s seventh property in the U.S. Owned by Quadrum Global, the hotel will offer 445 guestrooms, four meeting rooms, an indoor-outdoor rooftop lounge and pool, additional food and beverage venues and an interior courtyard.

Driftwood Capital refinanced the Scottsdale McCormick Ranch located in the heart of Scottsdale, Arizona. MetLife Investment Management provided the refinancing loan totaling $115 million. Driftwood Capital is nearing completion of the $40 million transformational renovation and revitalization of the Scottsdale McCormick Ranch Resort. The ambitious renovation includes a complete redesign of all guestrooms, expanded food and beverage offerings, the introduction of 12 five-bedroom villas, and the addition of a luxury spa. Upon completion, the resort will be part of the Curio soft brand within the Hilton portfolio of properties. The property is adjacent to two 18-hole championship golf courses and boasts 90,000 square feet of indoor-outdoor meeting and event space, two outdoor pools, a spa and fitness center, and several food and beverage outlets. Driftwood Hospitality Management will assume management responsibilities.

Best Western Hotels & Resorts announced the opening of the Best Western Glenview - Chicagoland Inn & Suites located in Glenview, Illinois. The hotel is owned by Lal Patel and features 107 guestrooms, including 20 suites. The property has undergone a complete renovation of the guestrooms and its heated outdoor pool. Additional amenities include a fitness center, a business center, a meeting room, and electric vehicle charging stations.

Habitus Brickell Off A LLC has proposed a boutique hotel in the Brickell neighborhood of Miami, Florida. The eight-story hotel would consist of 40 rooms, seven parking spaces, a roof deck with a plunge pool, and a small gym. The hotel would be flagged under Sonder, which operates in more than 40 cities.

A luxury hotel is slated to open this winter in Rockport, Maine. The Rockport Harbor Hotel will be a 20-room, year-round establishment with two dining venues. The newly constructed hotel is part of the Bay View collection.

Sherwood Equities is in contract to sell the Renaissance New York Times Square Hotel at 2 Times Square to a joint venture of Apollo Global Management and Newbond Holdings for $165 million, according to the WSJ. The 317-room, Marriott-branded property overlooks the site of the famed New Year’s Eve ball drop.

The St. Francis Motel and the St. Charles Motel in Saratoga Springs, New York, were listed for sale for $4.75 million. The St. Francis has 11 units, including 10 rooms with kitchens or kitchenettes and one apartment. The St. Charles, located across the street, has 18 units, 13 traditional rooms, and five with kitchenettes. The listing also includes a three-bedroom single-family home behind the St. Charles.

Personnel Moves

American Hotel Income Properties REIT appointed Amy Freedman as an independent director after the resignation of Richard Frank as an independent director of the company. Ms. Freedman was also appointed as the Chair of the Compensation Committee and as a member of each of the Audit Committee and Investment Committee effective today. Amy Freedman is a Partner and Head of Engagement Fund Investment at Ewing Morris & Co. Investment Partners Ltd. Mr. Frank resigned as a director of the company and from various Board Committees in order to focus on other opportunities and to allow AHIP to progress its Board gender diversity goals.

Maybourne announced the appointment of Alexander Dietrich as Chief Construction and Design Officer. Dietrich operated as Director of Project Management and Construction at Craigewan and then Executive Director at Goldman Sachs within the Investment Banking Division. In his new role at Maybourne, Alexander will work across the global properties, focusing on the design, project and construction management for all existing hotels and new developments.

Europe Highlights

Cohort Capital has provided a £73 million loan to a Qatari-based group for the refinancing of NoMad Hotel in Convent Garden, London. The NoMad Hotel is a 91-bedroom luxury boutique hotel with a restaurant, museum and bar. The debt facility provided by Cohort has been used to refinance a syndicate of banks whose loan term was approaching expiry. The business will continue to be operated by Sydell Group.

Jesmond Dene House, in Newcastle, UK, has been purchased by Kronen Hotels Ltd for an undisclosed sum after the owners decided to retire. The luxury boutique hotel offers 40 bedrooms, an a la carte bar and a restaurant. The deal was an off-market transaction, set in motion and sealed by Knight Frank and Simon Stevens Associates for the owners.

Deutsche Hospitality announced the new Intercity Hotel in Geneva is now open, marking the company’s first hotel in French-speaking Switzerland. The Intercity Hotel offers 270 rooms, a conference area with five meeting rooms, a restaurant and a bar, and a wellness and fitness area with a sauna and steam bath. IntercityHotel Geneva is operated by Deutsche Hospitality in the capacity of leaseholder. PG Promotors SA owns the property. The project has been managed by GoodNight Partners SA.

Middleton Castle, in Norfolk, England, a magnificent 500-year-old fortress complete with a water-filled moat and embattled parapets, is now open to guests. Under the careful management of ALTIDO, part of the DoveVivo group, Middleton Castle sleeps 30 guests across 15 bedrooms, including two separate cottages. The 15th-century castle offers freestanding baths, a billiards room, a summer house and a croquet lawn.

Leumi UK has agreed to a €43 million loan to The Dean Hotel Group for the purchase of The Clarence Hotel, a historic hotel in Dublin, Ireland, previously owned by members of the rock band U2. The funds will allow the borrower to acquire the freehold and add an additional 43 rooms. Dean Hotel Group’s refurbishment will combine the hotel with the adjacent building, which the company is also purchasing. The addition of 43 rooms will bring the total room count to 102, and further renovations will create a modernized boutique hotel containing eight food and beverage spaces.