Charlotte, NC

Inside the $6B Acquisition of Charlotte-HQ’d Extended Stay America

Shannon Cuthrell

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A shot of Extended Stay America's Charlotte-Pineville location on Pineville Matthews Road.Extended Stay America, via Google Maps

(This story was originally published on June 28, 2021.)

Charlotte-headquartered Extended Stay America is under new ownership as investment titans Blackstone Real Estate Partners and Starwood Capital Group have now completed their $6 billion take-private acquisition of the hotel chain.

The mega-deal is the largest of its kind so far this year, as news emerged last week that it would be mostly financed through a massive $4.65 billion commercial mortgage-backed securities (or CMBS) offering. Commercial Observer and Bloomberg reported that the loan—originated by JPMorgan Chase, Citigroup and Deutsche Bank—is one of the largest single-asset, single-borrower CMBS loans in the last decade, following the $5.6 billion CMBS loan Blackstone secured in 2019 for an $18.7 billion acquisition.

Per its first-quarter 2021 report, Extended Stay America owns and operates 563 hotel properties, comprising 62,700 rooms across 40 states. The company's home state of North Carolina claims about 5% of its portfolio, with 31 hotels and 3,168 rooms spread across the state as of December 2020. That includes seven locations in Charlotte.

The company relocated its headquarters to the Queen City from Spartanburg, South Carolina, in 2011. At the time, the Spartanburg Herald-Journal reported that air travel access was the main motivation for relocating. That year, the Charlotte Douglas International Airport ranked sixth on the Airports Council International's list of the world's top airports by landings and takeoffs.

The move came as the company re-emerged from Chapter 11 bankruptcy in 2010 after it was acquired by a group of investors, including Blackstone Group, for $3.9 billion. Blackstone had previously acquired the company in 2004 before selling it for $8 billion three years later.

Last year, Blackstone re-entered the picture to grab a 4.9% stake in the company through its Blackstone Real Estate Partners arm, which has about $196.3 billion assets under management as of the first quarter of 2021. Florida-based Starwood Capital Group, with more than $80 billion assets under management, also stepped in to purchase an 8.5% stake in 2020. Starwood is no stranger to Extended Stay either—Blackstone outbid the firm in a 2010 auction for the then-bankrupt hotel chain.

In March of this year, the two firms teamed up to propose a $6 billion buyout, priced at $19.50 per share. They later upped their offering to $20.50 per share, and shareholders voted to approve the transaction earlier this month.

It's unclear whether Extended Stay America will maintain its headquarters in the Ballantyne area. The company's 2020 annual report mentions it was negotiating an extension of its lease term, which is set to expire in August of this year.

Extended Stay America's Pandemic Performance

With tourism stagnated and travel limited in 2020, the COVID-19 pandemic naturally rocked the hospitality industry.

Extended Stay America lost a sizable portion of its short-term customer base. According to its 2020 annual report, revenue from customers who stayed one to six nights fell from about $441 million in 2019 to $281 million in 2020; and for customers staying seven to 29 nights, revenue dropped from $243 million in 2019 to $211 million in 2020.

However, revenues from its core base of customers, those who stay 30 nights or more, jumped from $487 million in 2019 to $502 million in 2020.

Demand for long-term lodging bolstered Extended Stay America's resilience through the pandemic, compared to competitors. Fitch Ratings' recent analysis of the acquisition noted that while the hotel industry's overall RevPAR (revenue available per room) took a 41.9% drop from pre-pandemic levels, Extended Stay America's portfolio only declined by 6.4%.

Those trends appear to be continuing this year, as Extended Stay's first-quarter 2021 RevPAR only decreased by 1.7% from the same period last year. Comparatively, year-over-year RevPAR across the entire U.S. hotel industry fell to 48.2% in January and 44.8% in February, while March's RevPAR represented a 35.8% decline from pre-pandemic levels in March 2019.

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Shannon Cuthrell is a Charlotte-based freelance journalist with a background covering business, technology and economic development. She has written for Business North Carolina magazine, WRAL TechWire and EE Power, among other publications.

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