Blackstone files to take La Quinta public
11 FEBRUARY 2014 10:28 AM
The move comes hot on the heels of IPOs of Hilton Worldwide in December and Extended Stay America in November.
NEW YORK—Blackstone Group on Monday filed an initial public offering of La Quinta Holdings’ common stock with the U.S. Securities and Exchange Commission.
The newest SEC filing did not state how many shares Blackstone wished to sell of the La Quinta brand nor on which stock exchange the IPO would be listed. The filing did state that La Quinta Holdings wished to raise up to $100 million via the IPO.
La Quinta declined to comment, stating the company is in a quiet period. Blackstone did not return request for comment by press time.
Blackstone in December had submitted confidentially a draft registration to the SEC under the Jumpstart Our Business Startups Act, which allows companies with less than $1 billion in revenue to keep applications confidential until shortly before the offering is promoted.
The move follows the investment and advisory firm’s IPOs of Hilton Worldwide Holdings in December and Extended Stay America in November.
Blackstone bought La Quinta in early 2006 for $3.4 billion. As of 30 September 2013, the company had 836 hotels, all in North America, 370 of which were owned and operated and 466 of which were franchised. The company had an additional franchised pipeline of 175 hotels.
As of 30 September 2013, La Quinta had designated 17 owned hotels for sale. The company has since sold 13 and expects to dispose of the remaining four prior to the consummation of the offering. The company will initially own and operate 353 properties if the IPO is successful.
“After the completion of this offering, affiliates of The Blackstone Group L.P. will continue to own a majority of the voting power of all outstanding shares of our common stock. As a result, we will be a ‘controlled company,’” the filing states.
La Quinta had approximately $2.8 billion of total indebtedness, all of which matures in July 2014. The company wishes to raise a $2.1-billion term loan to refinance commercial mortgage-backed securities before the IPO goes ahead next month, according to a Bloomberg report citing “a person with knowledge of the deal.”
La Quinta reported net income of $8.6 million attributable to the company for the nine months ended 30 September 2013, according to the filing. It had $3.3 billion in total assets.
Underwriting the deal are business advisory companies J.P. Morgan and Morgan Stanley.
Blackstone’s IPO is the culmination of an eight-year turnaround in which it invested more than $700 million in capital in La Quinta, including $301 million of “repositioning capital” that was invested in owned hotels to increase the chain’s revenue-per-available-room index, according to the filing. Updates included 32-inch flat panel televisions, pillow-top mattresses, large work desks with ergonomic “task” chairs and high-speed Internet access, among others.
After experiencing a decrease in the metric of 340 basis points from 2006 to 2007, which Blackstone attributed to the conversion of 128 non-La Quinta hotels to the La Quinta brand, system-wide RevPAR index jumped more than 1,000 basis points to 99.2%, the filing states.
During the most recent upturn, executives increased the chain’s average daily rate 8.4% from $69.38 to $75.21 for the 12 months ended 31 December 2012 compared to the 12 months ended 31 December 2010. RevPAR increased 16.5% from $40.49 to $47.17 during the same timeframe, according to the filing.
The company also achieved growth in its franchise system. Through 30 September 2013, La Quinta’s franchised portfolio increased from 158 hotels to 466 hotels, with an additional 175 properties in the pipeline.
Expanding its “capital light” franchise business both domestically and internationally remains a key pillar of future growth, according to the filing.
“We believe that there remains meaningful opportunity for continued growth in the United States, with La Quinta under-penetrated in many of the markets served by our main STR competitive set, including the Northeast and Northwest,” the filing states.
“We believe the opportunity for franchise growth in Mexico, Central America and South America is significant given our existing infrastructure, established brand history with travelers from these regions and our presence in the U.S. southern border states and Mexico,” it continues.