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La Quinta Holdings (LQ) is selling their franchised business to Wyndham and spinning off their owned hotels into a newly created REIT. This opportunity offers over a 50% potential return according to value investor and the Head of Research for Rangeley Capital, Andrew Walker.

He explains his investing thesis during this in-depth conversation on HedgeyeTV with Hedgeye’s Gaming, Lodging & Leisure analyst Todd Jordan.

According to Walker, the historic financials of the new REIT, CorePoint Holdings, are messy and the deal structure incentivizes management to sandbag the REIT’s valuation until after the spin-off is complete.

After the $8.40 per share in cash is returned through the sale to Wyndham, investors are paying ~$11 for an asset that should be worth over $16 per share on a standalone basis, and over $18 to an acquirer in a consolidating industry.

Watch the video above for the full conversation.

Winner of Sohn Idea Contest Explains Why La Quinta Could Gain +50% - investing ideas