AMERICA’S Hilton Hotels Corporation (HHC) has held talks with Blackstone Group, the US investment firm, over the sale of a big chunk of the £2 billion of property assets that it is acquiring through its £3.3 billion takeover of Hilton International, The Times has learnt.
The revelation comes amid speculation that Whitbread and Marriott International have selected an Israeli lawyer as preferred bidder for their UK hotel joint venture, which owns 46 hotels — including the London Marriott at County Hall — with a combined value of up to £1 billion.
Both putative deals would involve the sale of the underlying property assets, with HHC and Marriott continuing to operate the respective hotel portfolios under long-term management contracts.
In the case of the Hilton talks, it is thought that a deal could also include some of HHC’s existing assets in the United States, which include landmarks such as the Waldorf-Astoria in New York, as well as most of the Hilton International property portfolio that it is acquiring from Britain’s Hilton Group.
Although HHC is expected to attempt to drum up wider interest to ensure that it gets the best possible price, Blackstone is one of the few property investors with the funding and the geographical reach to undertake a transaction of this size.
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After the announcement at Christmas of its deal with Hilton Group, which is expected to be completed next month, HHC’s debt rating has been reduced to junk status by Moody’s, the credit rating agency.
Stephen Bollenbach, HHC’s co-chairman and chief executive, has hinted that asset sales would be used to help it to regain investment grade status. A spokesman for HHC refused to be drawn on the size or timing of any such disposals. Asked whether HHC had held discussions with Blackstone, he replied: “We are in contact with lots of potential buyers.”
In November Hilton Group announced its intention to sell assets worth between £400 million and £500 million, including the Hilton Metropole hotels in London and Birmingham. It is unclear whether that process would be superseded by a wider asset sell-off.
In the case of the £1 billion Marriott sale, the preferred bidder is rumoured to be Egal Ahouvi, an Israeli lawyer, working with Royal Bank of Scotland. The two parties teamed up in November to buy 16 hotels in the UK from Hilton Group in a £400million sale-and-manage-back arrangement.
It is understood that, as with the Hilton deal, Mr Ahouvi would provide as little as 5 per cent of the purchase price in equity, with RBS funding the rest with debt. The terms of the ongoing management contract with Marriott International are said to have put off several other bidders.
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Other parties in the running included Host Marriott, the separate US property investment firm, Hugh Osmond’s Sun Capital and London & Regional Properties working with Nomura.
None of the parties involved would comment.