Watermark Lodging Trust, Inc., a publicly registered non-traded real estate investment trust, has agreed to be acquired by private real estate funds managed by Brookfield in an all cash transaction valued at $3.8 billion, including the assumption of debt and preferred equity.
Watermark Lodging Trust was created by the April 2020 merger of non-traded REITs, Carey Watermark Investors 1 and Carey Watermark Investors 2, which were previously advised by W. P. Carey.
Brookfield will purchase all of the outstanding shares of Watermark for $6.768 per Class A share and $6.699 per Class T share. The purchase price represents a premium of more than 7.5 percent from the most recently published net asset values per share of $6.29 per Class A share and $6.22 per Class T share, as of December 31, 2021.
The Watermark portfolio is comprised of 25 upscale lodging properties with more than 8,100 rooms located in 14 states with a high concentration in the Sun Belt region.
“Hotels and resorts of this scale and quality are difficult to replicate,” said Lowell Baron, managing partner and 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.”
The proposed transaction has been unanimously approved by the Watermark board and is expected to close in the fourth quarter of 2022, with shareholder approval.
“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 and chief executive officer of 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…”
As reported by The DI Wire in March 2022, the market value of Watermark’s real estate portfolio as of December 31, 2021 was approximately $3.56 billion, reflecting an overall increase of approximately 1.5 percent from the original purchase price paid by either Carey Watermark Investors or Carey Watermark Investors 2, plus post-acquisition capital investments. Other assets totaled $258.5 million, and the fair market value of the REIT’s mortgage debt was approximately $1.96 billion. Watermark Lodging Trust had 186.9 million Class A shares and 61.1 million Class T shares outstanding.
Watermark Lodging Trust reported an estimated NAV of approximately $1.56 billion, as of December 31, 2021.
Brookfield is a global alternative asset manager with approximately $700 billion of assets under management across real estate, infrastructure, renewable power and transition, private equity, and credit.
Late last year, Brookfield took over as the adviser to another non-traded REIT, Oaktree Real Estate Income Trust Inc., which changed its name to Brookfield Real Estate Income Trust in November 2021.