• To market! To market!

Four Seasons Holdings and Fairmont Hotels & Resorts are the latest to join the current slew of IPO rumours, with shareholder Prince Al Waleed bin Talal said to be driving the move.

The pair join the likes of Hilton Worldwide and La Quinta to take advantage of the current appetite for hotel shares, hoping to capitalise before the frenzy dies down.

Al Waleed is rumoured to be planning to bring Four Season and Fairmont together for the listing. Speaking at a conference hosted by Bloomberg, the Saudi billionaire said: “Our objective right now is to grow both companies and have a monetisation process. The hotel industry is facing major upside right now. This may go on another three or four years. So there is a zone of opportunity for us right now. Clearly we’ll defer to management but they have my views very clear.”

The comments do not come as a surprise to the sector, Al Waleed cutting his stake in Fairmont from 58% two years ago to 35%, bringing in new investment from Voyager Partners.

At the time of the deal, Qatari Diar Real Estate Investment Company also agreed to provide Fairmont the opportunity to manage more properties. Bin Talal said at the time: “They will supply us with a maximum number of hotels that will add to our income stream. Consequently when we go public, hopefully in the next two to three years, this will add dramatic value to us.”

The recent Hilton IPO shows the appetite for hotel stocks. Hilton raised USD2.35bn, six years after one of the biggest leveraged buy outs ever and certainly the biggest in the hotel sector.

The proceeds will be used to pay down debt, the size of which remains a concern for investors at USD13bn. Commentators have warned that the high level of debt in comparison with its competitors could mean that raising further debt would be costly.

The enthusiasm for Hilton’s debt currently appears high. Ahead of its IPO Hilton sold USD3.5bn of CMBS via five investment banks, in what Reuters describes as the largest commercial-mortgage bond offering since the financial crisis. According to a report from Morningstar the debt was backed by 23 Hilton hotel properties, including properties in Hawaii, New York, and San Francisco, with a mix of fixed- and floating-rate debt.

According to investors, the offering was broken up into a USD875m floating-rate slice and a USD2.625bn fixed-rate slice. The floating-rate portion has a two-year maturity and three one-year extension options, with fixed-rate slice will have a five-year maturity.

Blackstone is also thought to be looking at an IPO for La Quinta Inns & Suites, reportedly in the belief that it can raise more money than through a sale. The company was reported to have received more than half a dozen first round bids for the group, in line with its USD4.5bn valuation. The success of its IPO for Extended Stay America – where shares rose more than 18% on the first day of trading – appears to have given it pause.

The private equity group is thought to be showing greater caution when it comes to Center Parcs, the business which has been linked to rumours of a sale for some years. It came close to selling a majority stake in 2010, but is rumoured that Blackstone is reluctant to exit before the fifth UK site has been built – expected next year. The group is thought to be looking for GBP2bn, having acquired Center Parcs in 2006 for GBP1.1bn.

Away from all matters Blackstone and PPHE Hotel Group has announced the successful refinancing of eight hotels; three of its four sites in London and five Dutch hotels. The refinancing involves a five year term facility comprising a Sterling tranche of GBP167.6m and a Euro tranche of EUR153.191m. The hotels were previously financed by three separate facilities provided by Aareal with various maturity dates between December 2013 and September 2017.

As well as refinancing the existing facilities, the facility will fund capital expenditure.


HA Perspective: How good a deal was Hilton for Blackstone? Buying at the top of the cycle in 2007 was certainly not propitious but it was arguably the only chance Blackstone would get to take out the company.

The current market capitalisation of Hilton is around USD21.5bn. When factoring in debt, the enterprise value of the company is more than USD36bn, suggesting a fair return on Blackstone's USD26bn acquisition price.

But Blackstone still retains 76% of Hilton and it can only start selling down again after its lock-up expires in six months. Most commentators, however, expect Blackstone to sell out entirely within three years even though Blackstone's CEO Steve Schwarzman said he would hold Hilton stock for "many years".

Provided Hilton's share price holds up over this time, Blackstone looks to have done remarkably well given the original deal's timing. Even though it had to commit more funds in the refinancing in 2010, outsider estimates suggest Blackstone has made about 2.5 times its original investment.


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