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Starwood Sells Westin & Aloft Assets

Zacks Equity Research

As part of its asset-light strategy, leading hotelier Starwood Hotels & Resorts Worldwide Inc. (HOT) recently divested two properties – The Westin San Francisco Airport and Aloft San Francisco Airport – in San Francisco, Calif. to Ultima Hospitality for about $125 million. Post sale, the properties will continue to operate under Starwood’s Westin and Aloft brands.

The 397 luxurious rooms of Westin San Francisco Airport hotel will undergo a complete renovation following the sale. Aloft San Francisco Airport was unveiled in late 2012 and underwent extensive makeover prior to its sale. Both the properties are located near the San Francisco International Airport and are close to several Fortune 500 companies.

Asset disposition remains a bright spot for the company. Since late 2010, transition to an ‘asset light’ business model has gained momentum in the hotels and REIT industry. Many other hoteliers such as Red Lion Hotels Corporation (RLH) and Morgans Hotel Group Co. (MHGC) have embarked on this strategy.

Asset sale remains a long-term strategy of Starwood for greater financial flexibility, which would help it grow through management and licensing arrangements instead of direct ownership of real estate. The company plans to deploy its capital to transform its owned assets into lucrative acquisition targets. In the last four years ended 2012, it has earned $1 billion in cash through the sale of owned assets and strives to generate around $3 billion in hotel sales by 2016.

In the last two years, Starwood offloaded properties like W New Orleans, St. Regis Aspen, the Westin Gaslamp (San Diego), W City Center (Chicago) and the Boston Park Plaza. Management indicates an increase in buyers’ interests, which, coupled with improving lodging industry fundamentals, will lead to future asset sales.

Starwood holds a Zacks Rank #2 (Buy). Another hotelier currently performing well is Choice Hotels International Inc. (CHH) carrying a Zacks Rank #2.

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