Starwood Looking To Sell Societe Du Louvre Hotels Piece by Piece

Andrew Calvo | September 6, 2009 | 0 Comments

The New York Post had a story providing some light into Starwood Capital’s sale of the Crillon hotel in France. Apparently Starwood Capital was in negotiations with JJW Hotels & Resorts – a high end hotel company based in the Middle East to sell the Crillon and nine other hotels from the Societe Du Louvre portfolio. Recently Starwood had instructed their property brokers to look for other sellers as JJW did not pay the entire $214 million deposit. Starwood had doubts that JJW would be able to get the financing to complete the sale of the portfolio as expected.

Now it looks as though Starwood is looking to sell each property individually – as that would provide a higher total sale price than a portfolio sale of 9 hotels would.

Unfortunately, Starwood’s sale of each individual hotel within the Societe Du Louvre portfolio goes against Starwoods original intentions of the hotels – keep them together and even expand the Crillon brand name with 6 star hotels throughout the world. In fact, in the press release when the deal was first announced the then-Chairwoman of Groupe Taittinger (which owned Societe Du Louvre) said:

It is of great importance to my family and myself that Barry and his team will bring a unique expertise and a full commitment to further developing the group our family has built over more than a half century,

Barry Sternlicht even chimed in by stating

We look forward to building on the company’s proud heritage by growing its economy hotel business in France and into new markets, particularly Eastern Europe, investing in the renovation and restoration of several of its existing jewel properties and working to extend their famous brands to new assets around the world.

It’s very possible that Starwood might only be selling the real estate and fully intend to keep the management contracts as well as ownership of the brands itself upon the close of the sales – but until that’s confirmed it’s anyone’s guess.

It’s a completely different economic environment now vs 2005 when the purchase of Groupe Taittinger was first announced and optimism was still abundant that the economic boom would continue unabated. That optimism called for Starwood to launch not only a Crillon hotel brand, but also a Baccarat (also purchased from Groupe Taittinger) and 1Hotels & Residences brand. As we know now – there is only one 1Hotel location actively being built (Washington DC) and two Baccarat Residences locations – both overseas, and no expectation that a Crillon hotel brand may ever see the light of day.

The loss of income from those properties that have not been built/open yet is putting the pressure on Starwood to continue to pay their high returns to their investors – it’s commonly known that Starwood guarantees a 20% return on investment for the investors – making Starwood resort to selling the assets individually to ensure that those returns can be met, as well as ensure an ample supply of new investment money will be available.

I know we haven’t seen the end of Starwood Capital’s investment into the hotel/lodging industry – but the book may soon close on Starwood’s ownership of some of the most elite properties in the world – all in the name of saving face. Its an admirable move from an admirable company – instead of being so consumed with owning the best and having that title, they are showing their true colors by staying true to their reason for being – the clients who provide the money to invest.

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