After notifying shareholders this year of substantial doubt about the real estate investment trust’s ability to continue as a going concern, Condor Hospitality Trust has found a buyer for its portfolio of select-service hotels.
Affiliates of Blackstone Real Estate Partners agreed to acquire Condor Hospitality Trust’s entire portfolio of 15 hotels for $305 million in cash. The portfolio contains 1,908 rooms and the price averages out to about $159,850 per room.
Bethesda, Maryland-based Condor acquired its current portfolio between 2012 and 2018 at a combined purchase price of $288.1 million or about $150,950 million per room, according to its latest quarterly report. The portfolio is comprised of upper-midscale and upscale hotel brands, with several extended-stay properties.
Hotels were among the hardest-hit sectors during the pandemic and are still struggling to rebound.
The pandemic even nixed a $318 million acquisition Condor had already agreed to in July 2019 by NexPoint Hospitality Trust. That deal, valued at $11.10 per share, was approved by Condor shareholders and was projected to close in the fourth quarter of 2019. Condor terminated the deal in September 2020, citing "failure of NHT's operating partnership to consummate the acquisition of the company and for material breaches of the merger agreement."
Condor put its portfolio back on the market this past June.
Leisure travel demand was lifting hotel occupancy rates and the spirits of U.S. hoteliers early this summer, but those hopes were dashed as the delta variant of the COVID-19 began spreading. Occupancies began to decline again in August, according to STR, CoStar's hotel analytics firm. As a result, revenue and occupancies are expected to end the year below 2019 levels.
In August, STR and Tourism Economics released an updated U.S. hotel industry forecast. The new projected lower performance growth in 2022 as well, but a full recovery is still on track for 2023.
Complementary Portfolio
“The portfolio is complementary to our existing select-service hotels and is demonstrating strong performance, which we look forward to building on as travel continues to recover,” Scott Trebilco, managing director of Blackstone Real Estate Partners, said in a statement.
This would be Blackstone’s first major acquisition of U.S. hotels outside of Las Vegas since the onset of the COVID-19 pandemic in early 2020.
Bill Blackham, CEO of Condor, stated, “The company portfolio is highly attractive as evidenced by the strong buyer interest that surfaced during the marketing process and appears to fit very well into the investment profile of our buyer."
Condor was founded in 1994 as Supertel Hospitality and began trading in 1996. The company changed its name and stock trading symbol in 2015 as part of an effort to diversify into upscale hotels.
This is an all-cash transaction without the assumption of any existing debt. Completion of the transaction is expected to occur in the fourth quarter of 2021.