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Host Hotels' CFO loss is Morgan Stanley's gain

Morgan Stanley is looking to land more lodging deal assignments with the addition of an investment banking veteran who spent the last two years as CFO of Host Hotels & Resorts Inc.

Host said Michael Bluhm, who joined the real estate investment trust in late 2017, will step down at the end of 2019 to become managing director and global head of lodging at Morgan Stanley. He plans to act as a senior adviser to Host through Feb. 15, 2020.

Bluhm previously worked at Morgan Stanley for more than a decade, including as managing director, head of western region real estate, and global head of lodging and leisure investment banking. A Morgan Stanley spokesperson said he is expected to rejoin the firm in the coming months.

During Bluhm's first stint there, Morgan Stanley advised Morgans Hotel Group Co. on an exploration of strategic alternatives that culminated in the company's $805 million sale to SBE Entertainment Group LLC in November 2016. The deal yielded Morgan Stanley an advisory fee of $8 million. The firm also advised Dolce Hotels and Resorts Inc. on its $52 million sale to Wyndham Hotel Group LLC in January 2015, and Apollo Global Management Inc. on the $268.2 million purchase of Great Wolf Resorts Inc. in 2012.

Morgan Stanley has completed more than $1 billion of lodging M&A deals since the Morgans Hotel transaction. The firm was also an adviser to The Blackstone Group Inc. on its canceled $4.8 billion acquisition of LaSalle Hotel Properties in 2018.

The firm is advising a lodging-oriented nontraded REIT, Carey Watermark Investors 2 Inc., in its merger with Carey Watermark Investors Inc., another nontraded REIT that shares the same management team. Morgan Stanley is expected to earn a $5 million fee for the deal, which was announced Oct. 22.

As a capital markets underwriter, Morgan Stanley served in 2019 as a book manager or co-manager on debt offerings by Host, Service Properties Trust and MGM Growth Properties LLC, and on a pair of equity offerings by MGM Growth Properties. Since Bluhm's departure, the firm has earned deal credit as an underwriter on only one lodging operator capital raise: a $4.82 billion equity offering by Hilton Worldwide Holdings Inc. in 2018, for which it was a book manager.

After speaking with Host executives, Evercore ISI analyst Rich Hightower wrote that Bluhm's move was amicable and was partly motivated by a desire to be closer to his home in Los Angeles, where he will be based at Morgan Stanley. Host is headquartered in the Washington, D.C., area.

Bluhm, now 50, joined the REIT less than a year after the promotion of current President and CEO Jim Risoleo, who is 63 and has worked at Host in various roles since 1996. The company said it is conducting a "comprehensive" search for a replacement CFO.

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Bluhm's experience at Host could give Morgan Stanley a closer relationship with a major company in the hotel REIT space. Host is the largest publicly traded lodging REIT, with a market capitalization of approximately $13.36 billion as of the close of trading on Dec. 19.

Despite its scale, Host has largely shied away from M&A in recent years, and many observers perceived it as a reluctant dealmaker even before Risoleo and Bluhm joined the C-suite.

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The company has little debt scheduled to mature until 2023, when $850 million in senior debt comes due. In August it refinanced its revolving credit facility with a new $1.50 billion facility maturing in January 2024, with up to two six-month extension options, and refinanced two $500.0 million term loan facilities with facilities maturing in 2024 and 2025. Host had no outstanding borrowings on the facility as of Sept. 30.

Morgan Stanley is one of six sales agents on Host's $500 million at-the-market equity offering facility.