Commercial real estate investors in California may now have a chance to own a share in Hilton Worldwide hotel chains. On Feb. 26, Hilton Worldwide announced that it would be creating a publicly traded real estate investment trust by spinning off a majority of its real estate holdings. Hilton Worldwide will spin off its hotel chains, which include Conrad and Waldorf Astoria hotels, as well as its timeshare business, Hilton Grand Vacations.
At the conclusion of 2014, Hilton Worldwide was the owner or lessee of 144 hotels with a combined value of over $10 billion. The company's commercial real estate properties are all over the world. In addition to hotels, Hilton Worldwide manages almost 50 club resorts that are part of Hilton Grand Vacations. Around 12 percent of Hilton's fourth-quarter revenue came from HGV.
Shares in Hilton Worldwide have risen in value recently. In the fourth quarter of 2015, Hilton shareholders earned a net income of $814 million. In comparison, Hilton shareholders earned just $158 million in the fourth quarter of 2014. Higher room rates at Hilton hotels have helped to raise the company's revenue to $2.86 billion, a 1 percent increase.
Some companies decide to create real estate investment trusts as a way to earn revenue for new projects or pay off debts. A business owner that has a lot of commercial property may want to talk to a real estate law attorney about spinning off the property in this type of a transaction.
Source: FOX Business, "Hilton Worldwide to Spin Off Real Estate, Timeshare Businesses," Feb. 26, 2015