Is Blackstone Getting Out While the Getting's Still Good?

Blackstone Group (NYSE: BX  ) is a giant asset management firm. When it makes bets, they have to be big or they aren't worth making. Now that it's set to launch its fourth real estate investment trust (REIT) IPO in less than six months, however, investors have to be wondering whether Blackstone is cashing out its chips while it thinks it still can.

Too big to go small
With total assets under management of $266 billion, it takes a lot to move the needle at Blackstone. That's why it goes in with both feet when it sees an opportunity. An example is the aggressive investment in the single family housing market, where Blackstone owns over 40,000 houses—all bought after the housing-led 2007 financial crisis. It has doubled down on that investment, offering to help finance would-be landlords and issuing debt backed by the rental income of its property portfolio.

In all, the company's real estate arm has nearly $80 billion under management. And the group has been pretty active lately, selling shares of Hilton Worldwide (NYSE: HLT  ) , Brixmor Property Group (NYSE: BRX  ) , and Extended Stay America (NYSE: STAY  ) late last year. The recently announced plan to IPO La Quinta rounds the list out at four. That's a lot of companies to bring public in a very short period of time.

What's Blackstone selling?
The interesting thing is that Brixmore is the odd man out. This REIT owns over 500 "local" shopping centers. That's generally a pretty consistent business, since these types of properties tend to house stores that sell things we need and use every day, like food retailers, dry cleaners, nail salons, and restaurants. Over 70% of its properties are anchored by a grocery store, a business that brings customers back every week.

Hilton, Extended Stay, and La Quinta are all hotel chains. Hilton, the largest hotel company in the world, is positioned at the high-end of the market. It's increasingly been using a franchise model to expand its reach. That keeps Hilton's costs down, since other companies are buying the hotels and paying to rent Hilton's brand names. The management and franchise segment represents over half of Hilton's business.

Extended Stay owns and operates over 680 mid-price extended stay hotels. Unlike Hilton, which has a global presence, Extended Stay is focused on the U.S. market. Over the last couple of years the company has been working to refresh its hotels. That's a process that isn't complete yet, with another 90 hotels starting the renovation process late last year.

La Quinta owns 370 mostly mid-level hotels and has franchise relationships with another 466. The big growth at the company in recent years has been on the franchise side, where the number of hotels has tripled since 2006. It is looking to international markets -- where it has just six franchised hotels -- for growth in this segment. Since 2006, the company has also been working to renovate its properties, improving bathrooms, beds, and televisions, among other things. The company is almost a mix of the Hilton and Extended Stay models.

Why all the hotels?
Before jumping aboard yet another Blackstone REIT IPO, you should ask yourself, "why all the hotels?" All three appear to be in different stages of their turnaround efforts, which suggests that Blackstone is looking to raise cash while it still can. But La Quinta's prospectus lays out a fairly positive picture for the industry, where overall supply doesn't keep up with demand over the next few years.

What might explain the rash of hotel IPOs is the economy since, unlike Brixmore's community centers, hotels are very susceptible to downturns. "The economy" is referenced in the first three "risks" listed in La Quinta's prospectus. Demand essentially collapsed during the last recession -- a repeat of that would leave Blackstone out in the cold on the IPO front. If you're a conservative investor, it might be better to sit out this hotel REIT IPO spree.

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