Watermark Lodging Trust to be sold for $3.8B

Watermark Lodging Trust Inc. has 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 more than 7.5% from the most recently published Net Asset Values per share as of Dec. 31, 2021, of $6.29 per Class A share and $6.22 per Class T share.

The Watermark portfolio, built by more than a decade of investing and intensive asset management, comprises  high-quality lodging assets consisting of 25 properties totaling more than 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/CEO, 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/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 Sun Belt.”

Completion of the transaction is subject to certain closing conditions, including the approval of Watermark’s stockholders. The proposed transaction has been unanimously approved by the Watermark board of directors and is expected to close in the fourth quarter.

Morgan Stanley & Co. LLC is serving as exclusive financial advisor to Watermark, Hodges Ward Elliott is serving as real estate advisor to the company and Clifford Chance US LLP and Paul Hastings LLP are acting as legal counsel. Fried Frank Harris Shriver & Jacobson LLP is acting as legal counsel to Brookfield, and Citigroup, Bank of America, JP Morgan and Wells Fargo are acting as financial advisors and providing financing for the transaction.