CHICAGO /PRNewswire via COMTEX/–Security Capital Group Incorporated (NYSE: SCZ) announced today that it has sold Homestead Village, its extended-stay lodging company, to an affiliate of Blackstone Real Estate Advisors for a total value of $740 million. The consideration received in the transaction includes $480 million in cash, the assumption of $145 million of liabilities, and the issuance to Security Capital of a five-year $115 million note. The note carries an initial coupon of 12% that increases by 100 basis points annually. Net cash proceeds from the transaction, excluding the five-year note and after transaction costs, are expected to be approximately $462 million.
“The sale of Homestead is in keeping with Security Capital’s stated intention to exit businesses that do not fit the company’s current strategy,” said C. Ronald Blankenship, Vice Chairman of Security Capital. “This strategy is to focus capital in six private real estate operating divisions that will lead the industry in high sustainable return on equity and earnings growth.” Mr. Blankenship noted that proceeds from the sale will further enhance Security Capital’s liquidity. “This transaction places the company in an even stronger position to execute its strategy, as well as to fund additional share repurchases,” he said.
Salomon Smith Barney served as the financial advisor to Security Capital. Bear, Stearns & Co. Inc. served as the financial advisor to Blackstone and provided the mortgage financing for the transaction.
Security Capital is an international real estate operating company. The company’s current strategy is to own all or a high percentage of six real estate businesses that function as private operating divisions and to eliminate the discount to the underlying value of its assets. Security Capital currently has ownership positions in 10 real estate operating businesses with combined assets of $16.8 billion, as well as a capital management division with over $2.8 billion of assets under management. The company plans to reposition or sell its investment in several of these businesses and focus its capital in those that hold one of the top two market positions in their specific niche and are able to create measurable brand value, as well as generate significant income from services and managed capital. The principal offices of Security Capital and its majority-owned affiliates are in Brussels, Chicago, El Paso, Houston, London, Luxembourg, New York and Santa Fe.
Blackstone Real Estate Advisors (“BREA”) is an affiliate of The Blackstone Group, a private investment bank with offices in New York and London. BREA has raised four funds representing approximately $3.6 billion in total equity. BREA has made more than 100 separate investments in hotels and other commercial properties with a total transaction value exceeding $12 billion. In addition to real estate, The Blackstone Group’s core businesses include Mergers and Acquisitions, Restructuring and Reorganization, Private Equity Investing, Private Mezzanine Investing, and Liquid Alternative Asset Management.
This press release contains certain statements that are neither reported financial results nor other historical information. These statements are forward-looking statements within the meaning of the safe-harbor provisions of the U.S. federal securities laws. These statements reflect the current views of Security Capital with respect to future events and are not guarantees of future performance. Because these forward-looking statements are subject to risks and uncertainties, actual future results may differ materially from those expressed in or implied by the statements. Many of these risks and uncertainties relate to factors that are beyond Security Capital’s ability to control or estimate precisely, such as future market conditions, the behavior of other market participants, the actions of governmental regulators and other risk factors detailed in Security Capital’s reports filed with the Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Security Capital does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this press release.