LOS ANGELES—Colony Capital, Inc. has entered into a definitive agreement to sell six of its hospitality portfolios to Highgate in a transaction valued at $2.8 billion, including $67.5 million of gross proceeds on a consolidated basis and the assumption of $2.7 billion in consolidated investment-level debt. The six portfolios consist of 22,676 rooms across 197 hotel properties.
As part of the transaction with Highgate, Colony will transfer five of the six portfolios held in the Hospitality segment and an approximately 55% interest in the THL Portfolio held in the Other Equity and Debt segment. The other portfolio in the Hospitality segment, the Inland portfolio, is under receivership and is excluded from the transaction. This transaction will reduce Colony’s consolidated debt outstanding by $2.7 billion, including its $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, cofounder/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 toward a successful recovery.”
The transaction is expected to close in the first quarter of 2021, subject to customary closing conditions and third-party approvals.
Moelis & Company served as financial advisor to Colony Capital in connection with the transaction and Willkie Farr & Gallagher LLP served as legal counsel. Latham & Watkins LLP served as legal counsel to Highgate.