IRVING, Texas—Continuing to reposition the company’s assets is top of mind for executives of FelCor Lodging Trust.
After selling 10 of its hotels for $207.2 million and signing a deal to rebrand eight of its Holiday Inn properties to Wyndham hotels in 2012, much of the company’s activity this year will focus on continued efforts to increase shareholder value, according to Richard Smith, FelCor’s president and CEO.
Throughout 2013, the focus will be on selling remaining non-strategic hotels; completing redevelopment projects at the Morgans Hotel and the Knickerbocker Hotel, both in New York; completing the transition process for its eight Wyndham hotels; and reporting strong operating performance at its core hotels.
Asset sales
FelCor’s plan to sell 39 non-strategic hotels to pay down debt is ongoing, Smith said Tuesday during the company’s fourth-quarter earnings call with analysts.
“As of January 2013, we are marketing 11 additional hotels, most of which we expect to sell this year,” he said. Gross proceeds from these hotels are expected to be approximately $275 million.
Smith said the market conditions are in FelCor’s favor. “Interest from private equity buyers remains strong, and transaction volume is picking up. Financing, especially the (commercial mortgage-backed securities) market is robust for operating properties, which is providing additional tailwinds.”
The company has two more assets that will soon go under contract with a buyer, Smith said. Executives also received a lot of interest at last month’s Americas Lodging Investment Summit from buyers for an additional four properties FelCor was marketing last year.
“We feel really good about the asset-sale process,” Smith said.
Rebranding and redevelopment activity
The eight properties FelCor will rebrand from InterContinental Hotels Group’s Holiday Inn brand to the Wyndham Hotel Group umbrella will transition on 1 March, Smith said.
Seven of the hotels will be rebranded as Wyndham Hotel and Resort properties, while one will become a Wyndham Grand Hotel. Renovation at four of the properties will begin this year, he said.
The company also plans to make progress on the redevelopment of the Morgans Hotel and the Knickerbocker Hotel, both in New York.
“We initially expected to finish Morgans in 2012. However, delays beyond our control pushed the completion date to April (2013),” Smith said.
As for the Knickerbocker, the effects of Hurricane Sandy pushed the project back approximately two months, he said, adding he expects the hotel to be open in the first quarter of 2014.
Smith said the company expects to spend approximately $65 million on normal renovation activity and $40 million in connection with converting the Wyndham hotels and completing the redevelopment at the Morgans property.
Strong operating performance
The company’s core markets continue to produce strong revenue-per-available-room growth, Smith said.
Executives expect that to continue in the future. However, disruptions from renovations and the transition of the eight hotels to the Wyndham brand will slightly affect performance, he said.
During 2013, the company’s portfolio will experience the disruption of 70,000 roomnights, compared with approximately 35,000 in 2012.
“This net difference equates approximately 1.5% of RevPAR, but we expect that will be more than recaptured in 2014,” Smith said.
That said, the company expects its RevPAR will grow between 5% and 6% in 2013. During the month of January, RevPAR increased 6.3%, Smith said.
For the fourth quarter of 2012, FelCor reported a 5.2% increase in average daily rate and 4.8% growth in RevPAR.
