One of the biggest hotel chain business, Hilton Worldwide Holdings Inc. is planning to spin off its hotel properties into a real-estate investment trust.
Such move is not new in the business scene as it has become popular amongst casinos, restaurants and retail companies. A spinoff happens when a company intends to form a new entity from its existing business sections. The spinoff will cost Hilton a big part of its line of hotels, which will be announced sometime next year.
According to Wall Street Journal, the company is looking forward to the blessing of the Internal Revenue Service for such transaction. Meaning, it could possibly be exempted from the pending legislation that could ban such transaction from happening.
Hilton Worldwide Holdings Inc. owns or leases a total of 147 hotels around the globe. Analysts say that such properties could be worth more than $10 billion.
A Real Estate Investment Trust or REIT, according to Investopedia, is a type of security that invests in real estate through property or mortgages and often trades on major exchanges such as a stock. This allows investors to have an extremely liquid stake in real estate.
In the U.S., there are three types of REITs. These are Equity REITs, Mortgage REITs and Hybrid REITs. Moreover, they also receive special tax considerations and could offer high dividend yields. Many REITs can have dividend yields in excess of 10%.
"REITs are an important part of a mixed-asset portfolio and have been shown to increase returns while lowering risk when added to a portfolio of stocks and bonds," Shawn Howton, a finance professor at Villanova University, told US News. "They provide income, some inflation protection and diversification through low – though increasing – correlations with stocks and bonds, and professional real estate management."
What do you think of the latest possible venture of Hilton Worldwide Holdings Inc?
