Extended Stay shares rise in debut as U.S. hotel market recovers

  • Extended Stay valued at about $4.7 bln at day’s high
  • Backed by Blackstone, Paulson and Centerbridge
  • Headed by former Starbucks CEO James Donald

The Charlotte, North Carolina-based company raised $566 million after its initial public offering of 28.3 million shares was priced at $20 per share.

The company, headed by James Donald, former chief executive of Starbucks Corp, was bought for $3.9 billion at a bankruptcy auction in October2010 by a group including Paulson & Co, Centerbridge Partners and Blackstone Group LP.

Blackstone and Paulson each hold about 27.8 percent in Extended Stay. The private equity owners did not sell any shares in the offering.

Extended Stay, which operates 682 hotels in the United States and Canada, reported revenue of $313.7 million and net income of $46.6 million for the quarter ended Sept. 30.

The proceeds of the share sale will be used to help repay its debt, which stood at about $3.6 billion as of June 30.

The company, which operates Crossland Economy Studios and Hometown Inn brands, is betting on a rebound in business travel that has boosted the rates hotels can charge for rooms.

The hotel industry’s revenue per available room, a measure of room rates and occupancy levels, is expected to grow by 5.9 percent in 2013 and by 6.2 percent in 2014, according to PricewaterhouseCoopers.

The U.S. lodging industry generated revenue of more than $162 billion in 2012, according to Smith Travel Research.

The Dow Jones U.S. Hotels index has risen 26 percent this year through Nov 12. Shares of Marriott International Inc rose 25 percent in the period, while those of Starwood Hotels and Resorts are up about 29 percent.


Private equity firms have been selling or listing assets to take advantage of a surging IPO market as low interest rates and a rally in the stock markets attract investors.

Blackstone has also filed IPO plans for U.S. hotel operator Hilton Worldwide Inc and is seeking a valuation of about $30 billion, including debt.

Another Blackstone-owned real estate company, Brixmor Property Group Inc, raised about $825 million in October. However, Brixmor Property shares are now trading below their offer price.

Deutsche Bank, Goldman Sachs and J.P. Morgan were the lead underwriters for Extended Stay’s offering.

Neha Dimri and Tanya Agrawal are reporters for Reuters News in Bangalore