Following the Blackstone Group's $39 billion blockbuster takeout of Equity Office Properties at the beginning of 2007, many additional REITs went private—a trend especially evident among lodging companies.

John Arabia, senior REIT analyst at Green Street Advisors, says the "takeout euphoria" culminated in early July when The Blackstone Group purchased Hilton Hotels for $26 billion, including debt. He says that this is the result of disconnect between public and private hotel asset pricing.

"Public hotel companies, on average, have traded at a 5 percent to 15 percent discount to net asset value (NAV) over the past year," Arabia says. "Public hotel companies have been trading at less than what their assets are worth if sold in private market transactions."

Lodging assets trade at lower multiples of cash flow, meaning higher returns for acquirers than can be gotten from industrial, retail or apartment properties, says Nap Overton, first vice president and REIT analyst at Morgan Keegan Company, Inc. "Private companies are attracted to the lodging sector as a means to maximize income."

In addition to the Blackstone/Hilton deal, Equity Inns, Inc. (NYSE: ENN) agreed in late June to be acquired by an affiliate of Whitehall Street Global Real Estate Limited Partnership for approximately $2.2 billion, including debt. Additionally, Inland American Real Estate Trust Inc. agreed to acquire Apple Hospitality Five Inc., a non-listed REIT that owns upscale, extended-stay and other hotels, for $14.05 per share for a total of approximately $709 million in late July.

Including the pending deals for Equity Inns and Apple Hospitality, Blackstone's $2 billion takeout of Extended Stay America, Ashford Hospitality's purchase of a portion of CNL Hotels & Resorts' lodging portfolio, JER Partners' acquisition of Highland Hospitality Corporation, Apollo Investment Corporation's acquisition of Innkeepers USA, ING Clarion Partners' purchase of Apple Hospitality II and Inland Capital Markets Group merger with Winston Hotels, Inc., all totaled approximately $36.7 billion for lodging REIT acquisitions in 2007.

"We'll continue to see these types of privatization deals," Arabia says. "Only when the current NAV discounts narrow will fewer lodging REITs look to exit the listed space."