Shareholders of Carey Watermark Investors 1 Inc. (CWI 1) and Carey Watermark Investors 2 Inc. (CWI 2), two publicly registered non-traded REITs managed by affiliates of W.P. Carey Inc. (NYSE: WPC) and Watermark Capital Partners, have approved the proposed merger of the two companies to create a self-managed non-traded REIT named Watermark Lodging Trust (WLT).
The Carey Watermark REITs were formed to invest primarily in the lodging and lodging-related sectors, and the combined company will oversee a portfolio of 33 lodging assets previously valued at $4.6 billion.
Last month, the REIT suspended distributions due to the reduced travel and lodging demand and related financial impact resulting from the global coronavirus (COVID-19) pandemic. The company indicated that the suspension would be temporary.
In connection with the merger, CWI 1 stockholders will receive a fixed exchange ratio of 0.9106 shares of CWI 2 Class A common stock for each share they hold. CWI 2 will be the surviving entity in the merger and will be renamed Watermark Lodging Trust.
Following the close of the merger, the combined company will complete an internalization transaction with W. P. Carey Inc. and Watermark Capital Partners, as a result of which the combined company will become self-managed.
“We believe the strategic combination of CWI 1 and CWI 2 creates meaningful benefits for all shareholders and is even more compelling amid today’s economic backdrop,” said Michael Medzigian, CEO of both REITs. “As a combined company with a more simplified structure, we will have a larger balance sheet with greater financial flexibility and are better positioned to improve value as we work through this challenging period in the lodging industry. We will continue to work on behalf of our shareholders to execute on our strategy and create long-term growth.”
The REITs have filed articles of merger with the Maryland State Department of Assessments and Taxation, and the transaction is “expected to close as soon as practicable,” once closing conditions are met.
Carey Watermark Investors launched in September 2010 and closed in December 2014 after raising approximately $1.2 billion in investor equity in its initial public offering and follow-on offering. The company’s $2.3 billion portfolio is comprised of 26 properties, as of September 30, 2019.
Carey Watermark Investors 2 owned a $1.6 billion portfolio of 12 properties, as of December 31, 2019. The REIT’s initial public offering was declared effective in February 2015 and closed in June 2017 after raising $851.3 million in investor equity.