Sale May Drive Hilton Headquarters From Beverly Hills

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There is no clear indicator of the Blackstone Group’s plans for the Hilton Corp. and its Beverly Hills headquarters in the wake of the private equity firm’s planned $26 billion purchase of the massive hospitality chain.

But experts said that the 40 percent premium will come at a price.

“They’ve got to cut costs somewhere,” said Alan X. Reay, president of Atlas Hospitality Group, who believes the headquarters will be moved. “I think it’s inevitable that they will close down Beverly Hills.”

The New York-based company did not announce any such plans late last week, and Kathy Shepard, a spokesperson for Hilton, said the company doesn’t anticipate any such changes. Hilton is Los Angeles County’s eighth-largest publicly traded company based on its $14 billion market capitalization.

In the meantime, the Beverly Hills Chamber of Commerce is hoping that Hilton’s takeover, by an even bigger company, could mean even good things for the city providing it stays.

“They have a lot of expansion projects going on right now,” said Jacqueline Paynter, director of communications for the Beverly Hills Chamber. “But the expansion projects may be even more positive with the buyout. If the company is growing, that’s good for Beverly Hills in tax revenues and potential jobs at corporate headquarters.”

Even if Hilton’s offices are merged with Blackstone’s on the East Coast, Reay said Beverly Hills should have no trouble finding suitable tenants.

“If it were a town solely dependent on that one company, they would have a much bigger problem,” he said. “But their office rates are at a record high and will continue to go up. I don’t think you’ll get another publicly traded company, but you’ll get a lot of smaller companies moving in.”

Blackstone is already the world’s largest private-equity investor in the hotel business, with more than 100,000 hotel rooms in the United States and Europe, including the La Quinta Inn and Suites and LXR Luxury Resorts and Hotels. The firm has grown the La Quinta brand by approximately 45 percent since its acquisition in January 2006.

Hilton Corp. is the leading global hospitality company, with nearly 3,000 hotels and 480,000 rooms in 76 countries and territories. Hilton’s brands include Doubletree, Embassy Suites, Homewood Suites and Waldorf=Astoria.

Hilton has been on a growth binge of its own in the last 18 months. The company repurchased overseas partner Hilton International, which it sold back in 1964. While the company sold or marketed a number of European hotels to even out the balance sheet following the $1 billion acquisition, it also announced plans for expansion in Asia.

Wall Street responded favorably to last week’s announcement, upping its shares to $45 from $34; the stock has been trading above $30 for most of the year.

The company was founded in 1919 when Conrad Hilton purchased his first hotel in Cisco, Texas. Shares held by the current family patriarch, Barron Hilton, will be worth $990 million if the deal is approved by shareholders. If approved, the deal is expected to close late this year.

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