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Hilton to Spin Off Major Hotel Properties and Timeshare Business

Newly Formed Real Estate Company to Become One of the Largest Publicly Traded Lodging REITs in the Country
February 26, 2016
Hilton Worldwide plans to spin off the bulk of its real estate business into a publicly traded real estate investment trust (REIT). The firm also plans to spin off its timeshare business, Hilton Grand Vacations (HGV), as a separate publicly traded company.

Hilton Worldwide intends to elect REIT status for the newly formed real estate lodging company, which will include approximately 70 properties and 35,000 hotel rooms, forming one of the largest and most geographically diversified publicly traded lodging REITs.

The new REIT will have a portfolio of mostly luxury and upper upscale assets, including hotels located in urban and convention markets, resorts as well as international regions and airport locations.

Overall as of Sept. 30, 2015, Hilton owned, leased, managed or franchised 4,480 hotel and resort properties, totaling 737,922 rooms in 97 countries, as well as 45 timeshare properties comprising 7,152 units. Of those, Hilton owned 147 properties totaling 59,962 rooms.

Hilton Worldwide expects the newly formed timeshare company to manage nearly 50 club resorts in the United States and Europe and have an exclusive, long-term license agreement with Hilton Worldwide to market, sell and operate resorts under the Hilton Grand Vacations brand.

“The transactions we announced today will result in three pure-play companies, enabling dedicated management teams to fully activate their respective businesses, taking advantage of both organic and inorganic growth opportunities as well as capital market and tax efficiencies,” said Christopher J. Nassetta, president and CEO of Hilton Worldwide. “We intend to have the appropriate leadership, strategies and capital structures in place to set up all three companies for further success.”

Importantly, Hilton Worldwide initiated this action with the Internal Revenue Service prior to Dec. 7 when the federal government enacted a law blocking the tax-free spinoff of corporate real estate assets into a REIT.

Hilton Worldwide said it has received a private letter ruling from the IRS to qualify the spin-offs as tax-free. The transactions will be effected through a distribution of the new entities’ stock to existing Hilton Worldwide shareholders.

The company intends to file registration statements with the Securities and Exchange Commission (SEC) during the second quarter of this year and complete both spin-offs by the end of the year.

The transactions are subject to a number of contingencies, including executing intercompany agreements, arranging financing and final approval by Hilton Worldwide’s board of directors. The spin-off transactions will not require a shareholder vote.

Deutsche Bank Securities and Goldman, Sachs & Co. are acting as financial advisors to the company.

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