FelCor Sells Two Hotels—Latest Step in Portfolio Restructuring
By Scott Baltic, Contributing Editor
FelCor Lodging Trust Inc., of Irving, Texas, has sold two hotels, the 370-room Embassy Suites – New Orleans-Convention Center and the 296-room Embassy Suites – Nashville-Airport, for an aggregate price of $70 million, the REIT announced Wednesday. It will be using the net proceeds to pay the remaining $37.7 million of accrued preferred dividends from earlier this year (see below) and to repay debt. Further information, including the hotels’ buyer, was unavailable at press time.
As part of a long-term portfolio repositioning strategy, FelCor is selling 39 non-strategic hotels. Including the just-announced sales, FelCor has sold 18 of the 25 hotels it has brought to market since December 2010. The company also has a contract (and a non-refundable cash deposit) to sell a 19th hotel. FelCor is using the proceeds to pay all remaining accrued preferred dividends and to support its balance sheet restructuring plan to reduce its leverage and cost of capital.
As recently as May 2010, Commercial Property Executive reported then, FelCor owned interests in 84 hotel properties. It currently owns 67 primarily upper-upscale, full-service hotels in major and resort markets across 22 states. Flags include Doubletree, Embassy Suites, Fairmont, Hilton, Marriott, Renaissance, Sheraton, Westin and Holiday Inn, as well as independent hotels in New York.
In August, FelCor sold the 222-room Embassy Suites – Anaheim-North for $25.5 million to Urban Commons L.L.C., using the net proceeds to repay a portion of the $88 million balance on a CMBS loan that matures next year.
And last June, the REIT sold for gross proceeds of $103 million a 1,527-room portfolio of six hotels: the Holiday Inn San Antonio-Airport, the Sheraton Suites Ft. Lauderdale-Cypress Creek, Doubletree Guest Suites hotels in Raleigh/Durham and Tampa-Rocky Point, and Embassy Suites hotels in Boca Raton and St. Paul.
The purchase price represented a 6.8 percent cap rate based on the portfolio’s 2011 net operating income. Holliday Fenoglio Fowler and CBRE Hotels represented FelCor in that transaction.
After repayment of $73 million of secured debt and other costs, FelCor planned to use the remaining approximately $30 million to pay accrued preferred dividends (almost half of a then $67.7 million arrearage) when it paid quarterly preferred dividends at the end of July.