Starwood to sell White Plains, N.Y. >> Starwood Hotels & Resorts Worldwide Inc., owner of the Sheraton and Westin chains, will sell additional properties to cut debt and raise cash for "interesting" opportunities, Chief Executive Barry Sternlicht said.
hotels to cut debt
By Jeannine DeFoe
Bloomberg News"We're looking through our portfolio," Sternlicht said in an interview at the largest hotel owner's White Plains, New York, headquarters. "There's a lot of interesting opportunities right now in the industry."
The sales would be in addition to the four hotels Starwood has agreed to sell from its Ciga Group. Shedding hotels would make Starwood more reliant on managing and franchising, which generates steady fee income, a benefit at times such as these when travel is down, investors said.
"It would increase Starwood's return on equity," Steve Burton, an analyst at CRA Real Estate Securities, said of the planned sales. CRA has about $2 billion of securities under management, including shares of Starwood.
Starwood's 3.8 percent return on equity last year lagged behind Marriott International Inc.'s 7 percent and Hilton Hotels Corp.'s 9.7 percent.
In Hawaii, Starwood owns only one of the 15 hotels that it manages, the 760-room Westin Maui at Kaanapali Beach. Starwood bought the hotel in 1998 for $132 million cash from a subsidiary of Japanese entertainer Kentaro Abe's Abe International Ventures. Abe paid $290 million for the property in 1990.
Starwood will likely want to hang onto the Westin Maui while tourism remains in its current lull, said Keith Vieira, senior vice president of operations for Starwood in Hawaii. If hotels and land prices boom in the future, Starwood would be interested in selling the equity, while keeping a long-term management contract at the Westin, Vieira said. Starwood could then purchase more hotels to secure more contracts, fueling an expansion.
In the past few years, Starwood competitor Marriott International Inc. acquired the Ritz-Carlton Kapalua and Waikiki Beach Marriott Resort, secured long-term management contracts, then sold the properties while keeping a minority interest.
Vieira noted Starwood Vacation Ownership Inc. is building the timeshare Westin Kaanapali Ocean Resort Villas in Maui, and is buying an 18.5-acre site on Kauai's north shore to build a luxury timeshare resort.
Starwood's 41-year-old Sternlicht, who took over a near-bankrupt real estate investment trust in 1994 and built it into a company with 740 hotels worldwide, wouldn't elaborate on what "interesting" opportunities he saw. Doing so might cause Starwood to lose a competitive advantage, he said.
Starwood has an incentive to cut debt. The hotel slump forced it to amend the terms of $1.8 billion of debt in November to avoid a technical default, leading the company to pay higher interest rates. Overall, it has $5.5 billion of debt, according to Securities and Exchange Commission filings.
Star-Bulletin reporter Tim Ruel contributed to this story
