Hilton Worldwide Holdings filed SEC documents outlining names and details of two spinoffs, including its new real estate investment trust. The REIT portfolio will launch with 69 Hilton assets.
McLEAN, Virginia—Hilton Worldwide Holdings’ previously announced spinoff of its real-estate business will be called Park Hotels & Resorts.
The spinoff is in in line with its February 2016 announcement that it would separate into three distinct, publicly traded companies—real-estate ownership arm, a timeshare business and the core fee-based franchise and management business.
Hilton on Thursday filed a Form 10 registration statement with the U.S. Securities and Exchange Commission, which provided detailed information about its plans for Park Hotels & and Resorts and Hilton Grand Vacations. The fee-based business will retain the Hilton Worldwide Holdings name.
The separation of the company is expected to be closed by the end of the year, according to a news release. Also, as previously announced, former RLJ Lodging Trust president and CEO Tom Baltimore will head Park Hotels & Resorts as CEO. Sean Dell’Orto, currently senior VP and treasurer of Hilton, will be Park’s CFO. Park will be a publicly traded real estate investment trust when it launches.
Upon completion of the tax-free spinoffs, Hilton parent stockholders will own 100% of the outstanding shares of common stock of each of Park and HGV, and will continue to own 100% of the outstanding shares of common stock of Hilton (NYSE: HLT), Hilton President and CEO Chris Nassetta said in the Form 10 filing.
Hilton’s stock closed trading on 2 June at $21.61, according to the Baird/STR Hotel Stock Index.
Nassetta said in the news release that the filing of the Form 10 is an important milestone that will simplify Hilton to a capital-light, fee-based business that activates its real estate and timeshare businesses as separate companies.
“As a result of the proposed transactions, we expect to unlock growth opportunities that are embedded within the three businesses and take advantage of capital market and tax efficiencies,” he said in the release. “We look forward to completing the spins later this year, realizing significant benefits for all three companies and continuing to generate long-term value for Hilton shareholders.”
Hilton Worldwide will continue to be led by Nassetta as president and CEO and Kevin Jacobs as CFO. On a standalone basis, Hilton’s pro-forma adjusted earnings before interest, taxes, depreciation and amortization for full-year 2016 is projected to be between $1.77 billion and $1.83 billion, according to the news release.
Park Hotels & Resorts will focus on premium assets with a scaled platform and strong growth potential, according to the release. When the spinoff is completed, the company will have 69 hotels comprising nearly 36,000 guestrooms in its global portfolio, the company said. More than 85% of the rooms will be in the luxury or upper-upscale segments, and nearly 90% of them are located in the United States.
With $2.7 billion of revenue, $817 million of Adjusted EBITDA and $299 million of net income in 2015, Park is expected to be the second-largest publicly traded hotel REIT. Park’s pro-forma adjusted EBITDA for full-year 2016 is projected to be between $795 million and $825 million, according to the release.
Prior to the spinoff, Hilton expects to migrate certain rooms at Park-owned hotels in New York, Hawaii, and Washington, D.C., to HGV’s platform for future conversion to timeshare inventory, the company said.
Included in Park’s portfolio will be assets that the company labeled in the Form 10 filing as “top 10 properties” and said contributed more than 60% of its hotel adjusted EBITDA in 2015 while achieving average revenue per available room of $201.78:
- Hilton Hawaiian Village-Honolulu, Hawaii: a 22-acre oceanfront resort with 2,860 guestrooms, 96,000 square feet of meeting space and nearly 145,000 square feet of retail space.
- Hilton Waikoloa Village-Waikoloa Village, Hawaii: a 62-acre oceanfront resort with 1,241 guestrooms and 57,000 square feet of meeting space. Of the guestrooms, 600 will become part of the HGV inventory prior to the spinoff.
- Hilton San Francisco Union Square/Parc 55 Hotel San Francisco: Adjacent hotels with 1,919 and 1,024 guestrooms, respectively, and combined have 168,000 square feet of meeting space.
- Hilton New York Midtown-New York, New York: 1,932 guestrooms (25 of which will become part of the HGV inventory prior to the spinoff).
- Hilton New Orleans Riverside-New Orleans, Louisiana: 1,622 guestrooms and 143,000 square feet of meeting space.
- Hilton Chicago: 1,544 guestrooms and 190,000 square feet of meeting space.
- Waldorf Astoria Orlando/Hilton Orlando Bonnet Creek-Orlando, Florida: 498 and 1,001 guestrooms, respectively, on a 482-acre resort complex.
- Waldorf Astoria Casa Marina Resort-Key West, Florida: 311 guestrooms with nearly a quarter mile of private beachfront.
Hilton Grand Vacations will market and sell vacation ownership intervals, manage resorts in leisure and urban destinations, and operates a point-based vacation club. Its 46 resorts comprise 7,402 units. HGV has approximately 255,000 members. As previously announced, HGV’s management team will be led by CEO Mark Wang, who has led Hilton’s global timeshare operations since 2008.
HGV’s pro-forma adjusted EBITDA for full-year 2016 is projected to be between $370 million and $390 million, according to the release.
Approval by Hilton's shareholders is not required for completion of the separation.
Hilton Worldwide’s history goes back 97 years when Conrad Hilton bought his first hotel in Cisco, Texas, in 1919. Its portfolio includes more than 4,660 managed, franchised, owned and leased hotels and timeshare properties comprising more than 765,000 rooms. Its 13 brands include Hilton Hotels & Resorts, Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts, Canopy by Hilton, Curio—A Collection by Hilton, DoubleTree by Hilton, Embassy Suites by Hilton, Hilton Garden Inn, Hampton by Hilton, Tru by Hilton, Homewood Suites by Hilton, Home2 Suites by Hilton and Hilton Grand Vacations.