Extended Stay Surges in Debut After $565 Million IPO

Nov. 13 (Bloomberg) -- Extended Stay America Inc., the largest owner of mid-price long-stay hotels in the U.S., jumped 19 percent in its trading debut after raising $565 million in an initial public offering.

Extended Stay closed at $23.87 after selling 28.25 million shares at $20 each. The company, led by former Starbucks Corp. Chief Executive Officer Jim Donald, initially offered the stock for $18 to $21. Charlotte, North Carolina-based Extended Stay, which was held equally by Blackstone Group LP, Centerbridge Partners LP and Paulson & Co., will use proceeds to pay debt, according to a regulatory filing. None of the firms sold shares.

Extended Stay, which owns and operates almost 700 hotels with about 76,000 rooms in the U.S. and Canada, went public three years after its owners bought the company out of bankruptcy and invested about $626 million in renovations that are close to completion. The investors are taking advantage of hotel stocks close to all-time highs and a rebound in room rates and occupancies to extend the busiest year for real estate IPOs since 2004, data compiled by Bloomberg show.

Extended Stay sold paired common stock, comprising one share of the company and one Class B share of a related entity that is taxed as a real estate investment trust, the filing shows. Each paired share is trading as one unit, listed on the New York Stock Exchange under the ticker STAY.

Extended Stay sold about 14.1 percent of the company in the IPO, giving it a market value of about $4 billion. The $565 million raised excludes 4.24 million shares the underwriters could sell to meet demand, called the overallotment, or green shoe. That would increase IPO proceeds to $649.75 million.

Higher Occupancies

Lower-priced long-stay hotels such as Extended Stay’s properties filled 69.8 percent of their rooms on average in 2012, compared with 61.3 percent for all U.S. lodging, according to travel-research firm STR. At higher-priced extended-stay hotels, occupancy averaged 76.3 percent last year.

Extended Stay has added amenities such as Wi-Fi and breakfast to charge higher room rates. The company, whose average daily rate was $52.34 during the 12 months through June, has said it’s trying to attract more shorter-stay and corporate guests who would pay higher rates.

“You’re just seeing more bifurcation in the industry,” said Steve Hennis, a director at the STR Analytics unit of Hendersonville, Tennessee-based STR. Lower-tier extended-stay hotels charged an average daily rate of $54.77 last year, compared with $119.88 for upper-level long-stay companies, according to the firm.

Kansas Start

Extended-stay hotel rooms are equipped with kitchens and are rented by the week or month by people including executives relocating, construction workers on a project away from home and families going through a move.

The industry got its start in 1975, when real estate developer Jack DeBoer opened the first Residence Inn in Wichita, Kansas, eventually selling the chain to Marriott International Inc. in 1987, according to fact sheets provided by Marriott and DeBoer’s office. In 1988, DeBoer, now 82, co-founded the Summerfield chain, later selling that company to Hyatt Hotels Corp. and, in 1995, started the Candlewood chain, which was bought by InterContinental Hotels Group Plc in January 2004, according to DeBoer’s office and Bloomberg data.

Also in 1995, billionaire Wayne Huizenga and his business partner George Johnson founded Extended Stay America, expanding it to 472 properties by the time they sold the company to Blackstone in May 2004 for $3.1 billion.

Blackstone sold it three years later, close to the top of the market, for $8 billion to Lightstone Group LLC, which put the debt-laden company into bankruptcy protection after the credit crisis. In 2010, the current owners bought Extended Stay for $3.9 billion. The IPO will almost triple the value of their realized and unrealized holdings in the company, according to Bloomberg calculations.

To contact the reporter on this story: Hui-yong Yu in Seattle at hyu@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net

At the Box Office, There's Not Much Life After Death

Even if Robin Williams wasn't playing a talking dog in his final film, there would be little reason to expect a posthumous box office boost

Robin Williams in 2011.

Photographer: Carl Court/AFP/Getty Images

The final film starring Robin Williams, Absolutely Anything, arrived in British movie theaters over the weekend. The late actor lends his voice to a dog named Dennis, who in the film has been granted the ability to speak by his owner, who in turn received unlimited powers from aliens. Those aliens are considering destroying the earth. Things get pretty ridiculous from there.

Williams, who died in August 2014, will probably not win a posthumous Academy Award for this role. A trailer suggests that his first line is: “Biscuits!” The film doesn't exactly look like a blockbuster in the making. There's not even a U.S. release date at this time. Still, it’s not hard to imagine that people passionate about Williams will pay to see Absolutely Anything, if only to experience his antic humor in a movie theater one last time.

The idea of a posthumous film, known at the time of release to be a performer's swan song, poses an interesting question for box office observers: Do these rare films get a boost because they offer a last chance? We looked at the career box office returns of 10 actors with parts in films released after their deaths to see if posthumous works like Absolutely Anything outperform expectations.

For the most part, films released after an actor’s death don't do very well at the box office. Nearly three-quarters of such films in our sample failed to earn at least $25 million in the U.S. and Canada. Half the actors in our survey gave their last performance in the film whose box office results rank last for their entire career, a finding that would seem to undercut the notion that final films get a funerary boost.

There are plenty of reasons why a posthumously released film may fail to perform. A celebrity out of the limelight may lose his or her cachet as a box-office draw. A small-budget film done later in a career may get only sparse distribution. Perhaps most importantly, the vast majority of all films are flops. In 2014, for example, only 102 of the 699 movies released domestically made more than $25 million in the U.S. and Canada. That’s fairly consistent with the recent past and actually a little worse than the posthumously released movies in our sample.

The five films in our sample that were blockbusters, pulling in $100 million or more, all shared something in common: They were sequels.

It makes sense that series installments would account for at least some of the most lucrative posthumously released films: Hollywood leans heavily on franchises. That they account for all of posthumously released blockbusters in our sample may have something to do with how the producers of big-budget sequels cope with the death of a high-profile actor during production.

When Paul Walker was killed in a car crash before finishing his scenes in Furious 7, Universal Pictures kept him in the movie and filed an insurance claim of about $50 million to cover the cost of reshoots and digital effects. When Philip Seymour Hoffman died before shooting all of The Hunger Games: Mockingjay – Part 1, his character remained in the film, and his leftover lines were redistributed among other actors. Both films were among the highest-grossing of those actors’ careers.

Although a successful theatrical run is generally a sign of a happy audience, it’s hardly a guarantee of critical praise. We looked at the scores on Rotten Tomatoes, a film-review aggregation website, for the films in our sample and found that 13 of the 18 posthumously released films had ratings of more than 50 percent, which means that more than half of critics had given the film a positive review.

Absolutely Anything currently has a Rotten Tomatoes critics’ score of 14 percent. Variety called it “a clunky sci-fi satire set to bomb abroad before it reaches U.S. theaters.” On the other hand, of the more than 1,000 Rotten Tomatoes users who have rated the film before its release, 96 percent said they want to see it.

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Extended Stay Surges in Debut After $565 Million IPO

Higher Occupancies

Kansas Start

At the Box Office, There's Not Much Life After Death

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