Colony Capital Inc. announced Thursday that it entered into a definitive agreement to sell six of its hospitality portfolios to real estate investment and hospitality management company Highgate in a transaction valued at US$2.8 billion. That includes US$67.5 million of gross proceeds on a consolidated basis and the assumption of US$2.7 billion in consolidated investment-level debt.
As part of the transaction with Highgate, Los Angeles-based Colony will transfer five of six hospitality portfolios and an approximately 55% interest in the THL Portfolio, totaling 22,676 rooms across 197 hotel properties. The sixth hospitality portfolio, the Inland portfolio, is under receivership and is excluded from the transaction. This transaction will reduce the company’s consolidated debt outstanding by US$2.7 billion, including Colony Capital’s US$2.3 billion pro-rata share.
The transaction is consistent with Colony’s stated intention of simplifying its business profile to focus exclusively on digital infrastructure assets. In addition to the strategic benefits of exiting the hospitality business, Colony Capital expects to generate segment and corporate-level G&A savings post-closing.
“We are thrilled to be delivering on our commitment to dispose of non-core assets and harvest positive value for our hospitality business. With its strong track record, unique insights into the hospitality market and creative approach to hotel management, we are confident that Highgate is ideally suited to own and operate these properties,” said Marc Ganzi, CEO of Colony Capital. “The sale of our legacy hospitality assets is a significant milestone in Colony’s digital transformation as we pivot to focus exclusively on our fast-growing digital businesses that generate superior returns for Colony shareholders.”
“We are excited to continue working with the Colony team in executing on this unique transaction,” said Mahmood Khimji, co-founder and managing principal of Highgate. “Despite the unprecedented disruption in hospitality over the past six months, we remain bullish on the long-term secular trends in our industry, and look forward to partnering with the many employees, franchisors, lenders, and other important stakeholders across these portfolios as we work towards a successful recovery.”
The transaction is expected to close in early 2021.