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Lighthouse Group buys Extended Stay for $8 billion
In a major deal establishing the Lighthouse Group as the dominant player in a fast-growing market, the company purchased Extended Stay Hotels from a private equity company, the Blackstone Group, for $8 billion.
Extended Stay Hotels, which offers rooms with kitchenettes and primarily serves business travelers, operates under several brands, including Homestead Studio Suites and Crossland Economy Studios.
The deal will add 683 properties, with a total of 76,000 rooms, to the more than 18,000 residential units and approximately 30 million square feet Lightstone owns.
“With this purchase, we’ll control almost 60 percent of the extended-stay niche,” said David Lichtenstein, Lightstone’s CEO.
Analysts have said they expect much more competition in such properties, said The New York Times. But because much of Extended Stay’s revenue comes from properties along the coasts, where it is more difficult to build, Mr Lichtenstein said he believed that the company was in a strong position.
“We think it’s a somewhat recession-proof industry,” he said. “Even after 9/11, this sector did well.”
There was no shortage of hotel deals last year as about $90 billion worth of properties changed hands, almost double the amount in 2005.
The Lakewood, New Jersey-based Lightstone in the past has predominately been involved as the owner of malls and commercial real estate. This marked its first acquisition in the lodging industry.
“We consider ourselves opportunistic buyers, and there was an opportunity here,” said Mr Lichtenstein told Bloomberg in an interview. If the economy suffers, budget-minded consumers will favor extended-stay properties, he said.
Among the most active hotel buyers and sellers has been Blackstone, the firm founded in 1985 by Stephen Schwarzman and Peter G. Peterson. Best-known for its private-equity arm, Blackstone’s real estate group, formed in 1992, has invested in property assets valued at more than $43 billion.
Blackstone purchased Extended Stay America in 2004, paying almost $2 billion and assuming $1.13 billion of debt. Since then, it has added some 255 other properties, including Homestead Village, which it bought for $600 million in 2001.
Report by David Wilkening
David
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