• Interstate develops ownership strategy

Interstate Hotels & Resorts, the listed US company that is focused on managing the brands of other hotel companies on behalf of owners, has formed a JV with Ireland’s Harte Holdings to buy four hotels from Blackstone for $207.8m.

The deal sees Interstate take a 20% stake and further pursue its philosophy of securing its management position through taking a sizeable share of ownership.

Earlier this week, Interstate completed the purchase of another three US hotels of Blackstone for $118m, this time partnering with Investcorp and taking a 15% ownership stake in two and buying the other outright.

Interstate owns seven hotels outright and has a minority stake in 25 (excluding the latest Harte deal). It manages 192 hotels with 43,000 rooms across five countries, mostly the US but including Russia, Belgium, Canada and Mexico.

Interstate has been the worst performing of the major US hotel stocks during the year with its share price slumping by more than a third, according to Citibank research. Weighted by market capitalisation, the average drop to date was 6.3% in Citibank’s basket of hotel stocks as at November 19.

Part of the bearish attitude to the stock has been promoted by fears that Blackstone’s acquisition of MeriStar in February 2006 would lead to Interstate’s management contracts being terminated on around 45 hotels. This has led to Interstate’s push into minority stake and full ownership positions.

The latest JV with Harte is expected to lead to further deals according to both parties. A press release quoted Donald Kelleher, investment director of Harte, as saying: “We look forward to expanding our relationship with other similar opportunities.” Leslie Ng, Interstate’s chief investment, stated similar things in the same release.

Harte already has partnerships with other hotel management companies, notably the Stein Group and resort operator Dolce. Harte’s Stein properties include three in London: the Royal Park, the Cranley and the Elizabeth. Harte also owns the Ramada in London’s Docklands.

The Dolce property is the Dolce Sitges, a Spanish property bought by Irish private equity group Inchydoney last year. Inchydoney has recently bought the Dolce Fregate in France, its third Dolce property.

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