IRVING, Texas—The second phase of FelCor Lodging Trust’s portfolio repositioning continued last week with six properties under contract to be sold.
The real-estate investment trust is poised to sell the portfolio, which consists of 1,527 rooms, to an undisclosed buyer. Included in the portfolio are the Holiday Inn San Antonio International Airport; Sheraton Suites Ft. Lauderdale-Cypress Creek in Florida; DoubleTree Guest Suites properties in Raleigh/Durham, North Carolina, and Tampa-Rocky Point, Florida; and Embassy Suites hotels in Boca Raton, Florida, and St. Paul, Minnesota.
The Sheraton Suites Cypress Creek Ft. Lauderdale
FelCor’s portfolio restructuring began in 2006 with the sale of 45 hotels. The REIT is marketing for sale 39 hotels during this second phase, which was delayed because of the recent recession, FelCor’s VP of Strategic Planning and Investor Relations Stephen A. Schafer wrote in an email.
The REIT is targeting for sale those hotels where company officials believe internal rate of return does not exceed weighted average cost of capital, Schafer said. “We also looked at concentration risk (markets where we have more exposure than optimal),” he said. “There would be an opportunity cost of holding those hotels and (the company) wanted to deploy that capital in higher yielding investments.”
Essentially, Schafer said, the company is selling hotels in markets with low barriers to entry that won’t produce a high level of revenue-per-available-room or earnings-before-interest-taxes-depreciation-and-amortization growth as the company’s core hotels. Also, hotels that would require capital expenditures, but aren’t producing solid returns, are being targeted for sale.
Schafer said company officials are confident the hotels on the market will be sold at the prices FelCor wants. The properties, Schafer said, are generating good interest from buyers, which include management companies and private equity firms. FelCor expects further sales this year, he said.
The last group of hotels will be put on the market later this year or in early 2013, Schafer said. Assuming the company sells a hotel a month (excluding any portfolio deals), the sales should be complete by the middle of 2013, he said.
FelCor owns 76 primarily upper-upscale, full-service hotels, flagged under brands such as Fairmont, Hilton, Marriott, Sheraton and Westin.