June 8, 2022
Background on Watermark-Brookfield Deal
Watermark Lodging Trust, Inc. announced on May 6, 2022, that it had entered into a definitive agreement with private real estate funds managed by Brookfield, under which...

Background on Watermark-Brookfield Deal

June 8, 2022 | James Sprow | Blue Vault

Watermark Lodging Trust, Inc. announced on May 6, 2022, that it had entered into a definitive agreement with private real estate funds managed by Brookfield, under which Brookfield will acquire all of the outstanding shares of common stock of Watermark for $6.768 per Class A share and $6.699 per Class T share in an all-cash transaction valued at $3.8 billion, including the assumption of debt and preferred equity. The purchase price represents a premium of over 7.5% from the most recently published Net Asset Values per share as of December 31, 2021, of $6.29 per Class A share and $6.22 per Class T share.

Morgan Stanley is set to earn a fee of roughly $37 million for advising Watermark Lodging Trust and providing a fair opinion on its sale to Brookfield Asset Management Inc.

Watermark Lodging Trust, a nontraded real estate investment trust, agreed to pay Morgan Stanley $4 million upon the announcement of the merger. The remaining portion of the fee is contingent upon the closing of the transaction, according to a filing. The deal, with a transaction value of roughly $3.8 billion including the assumption of debt and preferred equity, is expected to close in the fourth quarter.

The Watermark portfolio, built over a decade of investing and intensive asset management, is comprised of high-quality lodging assets consisting of 25 properties totaling over 8,100 rooms. These luxury and upper-upscale assets are located in drive-to leisure destinations and gateway urban cities across 14 states with a high concentration in the Sun Belt region.

“We are very pleased to reach this agreement with Brookfield, as it achieves our longer-term objective of a liquidity event while providing our stockholders with an immediate and certain cash value,” said Michael Medzigian, Chairman and CEO of Watermark. “The transaction’s premium to our most recently published Net Asset Values per share represents the strong execution of our entire team who have demonstrated the ability to find innovative solutions to address the challenges brought on by the COVID-19 pandemic. I would like to thank the members of our Watermark team, across all functions, for their dedication and hard work over the past several years.”

“Hotels and resorts of this scale and quality are difficult to replicate,” said Lowell Baron, Managing Partner and Chief Investment Officer in Brookfield’s Real Estate Group. “This portfolio is well positioned given its concentration in high barrier to entry coastal destinations, gateway cities, and the sunbelt.”

Carey Watermark Investors 2 Incorporated (“CWI 2”) merged with Carey Watermark Investors Incorporated on April 13, 2020. Watermark Lodging Trust is the legal successor to Carey Watermark Investors 2. The net asset values per share as of December 31, 2015, for both Class A and Class T common stock of CWI 2, were $10.53. The REIT’s public offering closed in July 2017 after raising an aggregate of $851.3 million. In April 2017 the advisor determined an estimated net asset value per share of $10.74 for CWI 2 as of December 31, 2016. In April 2019, the NAV per share was determined to be $11.41. The impact of the Covid-19 pandemic was reflected in the REIT’s NAV per share as of September 30, 2020, of $5.51, a reduction of 52% from the previously announced NAV. The price offered by Brookfield of $6.798 represents a 23% recovery from the low NAV as of September 30, 2020.

Sources: S&P Capital IQ, Blue Vault, SEC

Recent

The Real Villains of Today’s Housing Market

The Real Villains of Today’s Housing Market

The tale of the housing market over the past few years, in which big Wall Street firms and greedy Airbnb investors elbowed out first-time buyers and drove up home prices, is appealing. It's nice and tidy, with a clear delineation between good guys and bad guys. But it also misses the mark.
Office Landlords Increasing Pace Of Handing Properties Back To Lenders

Office Landlords Increasing Pace Of Handing Properties Back To Lenders

Office landlords are looking at the shifting landscape and deciding to cut their losses, Hatch said. “Now, borrowers are looking forward and just realizing that even if they can get a modification on their loan, it's just not a feasible asset class for them to really even stay in,” she told CoStar. 

Most Popular

Blue Vault Q2 2023 Performance Reports Update

Blue Vault Q2 2023 Performance Reports Update

Blue Vault Q2 2023 Performance Reports Update 10-3-2023 Blue Vault wishes to acknowledge and apologize for the delay in publishing some Q2 2023 NTR Individual Performance Pages (IPPs) as well as the full review. We recently added additional reporting metrics to our IPPs, and that, combined with coverage of all share classes and some additional…
Blue Vault Q2 2023 Performance Reports Update

Blue Vault Q2 2023 Performance Reports Update

Blue Vault Q2 2023 Performance Reports Update 9-25-2023 Blue Vault has published the Q2 2023 Nontraded BDC Industry Review as well as Individual Performance Report and Limited Operations pages for the following offerings (newly published pages in bold font): Nontraded REITS American Healthcare REIT Q2 2023 Apollo Realty Income Solutions Q2 2023 (limited operations) Ares…

Explore

Blue Vault Logo
Don’t miss alts news
and educational events

Subscribe Now