Colony Capital’s (NYSE:CLNY) stock received a boost Wednesday on the news that it had inked a deal to sell most of its hotel business to Highgate, a real estate investment and hospitality management company, in a transaction valued at $2.8 billion. The six hospitality portfolios in the sale include 22,676 rooms across 197 hotel properties.
Under the terms of the deal, Colony will transfer ownership of five of its six hospitality portfolios to Highgate and a 55% interest in its THL portfolio. A sixth hospitality portfolio, the Inland portfolio, is currently under receivership and is excluded from the transaction.
The transaction is in line with Colony’s intention to simplify its business and desire to focus exclusively on digital infrastructure assets. Colony already holds over $20 billion in digital real estate investments through Digital Colony, its digital infrastructure platform and has plans to grow this further.
The hospitality sector has been hit hard by the pandemic while digital infrastructure has thrived with a boom in demand for online retail, video conferencing and home working solutions.
“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 the first quarter of 2021, subject to customary closing conditions and third-party approvals.