Blackstone eyes property sales over next two years 11/13 03:49 PM
By Ilaina Jonas
NEW YORK, Nov 13 (Reuters) - Blackstone Group LP (BX:$14.36,00$-0.04,00-0.28%) will likely take Hilton Hotels public in the next two years and sell other properties as it looks to cash out of some of its U.S. commercial real estate, a senior Blackstone executive said on Tuesday.
Given Hilton's size, taking the company public would make the most sense, said Jonathan Gray, Blackstone's Global Head of Real Estate, at the Bloomberg Commercial Real Estate Conference. Hilton has 630,000 rooms worldwide.
"We're just sort of getting to the point where we feel like the assets are going to get appropriately valued," Gray said. "My guess is over the next year or two."
Blackstone's office holdings include more than 100 buildings. Gray said the private equity company may sell those properties as their occupancies reach in the low to mid 90 percent from the 80 to 81 percent they hit during the recession.
Likely buyers would be publicly traded real estate investment trusts that can tap the unsecured bond market at a very low cost of capital of about three percent, he said.
Other buyers may include sovereign wealth funds. However, rules that subject foreign buyers to U.S. capital gains taxes may present a hurdle for them.
"We think the pace of realization for us will pick up in 2013 and 2014 in our real estate portfolio," Gray said, adding that any sale or IPO would be subject to market conditions. (Reporting By Ilaina Jonas; Editing by Tim Dobbyn)
Get more news on:SYMBOLS: BXNEWS TYPE: Market Headlines, Corporate Events, Real EstateSECTORS: Financials, Real Estate Management and Development, Capital Markets
They will be selling chunks of assets but retaining a sizeable portion for their account and funds under management. I stayed at the Hotel Roanoke, VA(Doubletree) during Christmas. The Doubletrees are booked for New Years Eve. Hilton is making lots of dough.
One way you can tell that the Hilton people expect much better times ahead is that they have raised the bars for their "elite sleeper" program. In the worst of the recession you only had to make 12 stays to be "HHonors Gold". A couple years back it was raised to 16 stays, and they recently announced that you have to make 20 stays to get Gold status for next year.
They must be pretty confident because I know that I can't make 20 stays this year, so I will be looking to switch programs. 16 I could barely do by not staying at convention hotels and stuff like that, but no way I can do 20. I have discussed it with others in my office and the same is true for them. We have all been at least Gold for at least the last 5 years (one had Diamond status before they increased last time), but we are all going to be out now.
It's too bad regarding my sleeping arrangements, because I liked staying at the Hilton properties (especially when I have Gold status) but other chains have not raised their bars (yet.) However, as a BX shareholder, I'm encouraged.