11/30/2011

AREA Checks Out 15 Hotels Owned by FelCor

An AREA Property partnership is negotiating to buy a hotel portfolio from FelCor Lodging for roughly $300 million.

The off-market deal would involve 15 properties — mostly Embassy Suites, along with a few Sheratons and Holiday Inns — totaling 4,000-4,500 rooms. AREA, a New York fund operator, is teamed up with hotel management firm Aimbridge Hospitality of Plano, Texas.

The specific hotels are unclear. But apparently they are older properties in need of refurbishment, with less-than-ideal locations. Their sale would be consistent with FelCor’s ongoing efforts to upgrade its holdings. The Irving, Texas, REIT owns interests in 78 hotels, predominantly operated under such brands as Embassy Suites, Holiday Inn and DoubleTree. It is pursuing a strategy of pruning older, second-tier properties from its portfolio and acquiring high-quality hotels in prime markets.

Last year, FelCor paid $98.5 million, or $257,000/room, for the 383-room Fairmont Boston Copley Plaza. In May, it entered the Manhattan luxury market, buying the 168-room Royalton and the 113-room Morgans New York for a combined $140 million, or $500,000/room. The seller, New York-based Morgans Hotel Group, continues to manage the two properties under a 15-year agreement.

FelCor has said it may sell as many as 40 “nonstrategic” hotels as part of its repositioning strategy. In the last five months, the REIT has shed four properties, in Texas and Florida. Its most recent quarterly filing identified five hotels it plans to sell: the 278-room Galleria Sheraton Suites and the 232-room Airport Embassy Suites in Atlanta; the 342-room Crescent Sheraton in Phoenix; the 277-room Baymeadows Embassy Suites in Jacksonville; and the 208-room Downtown Embassy Suites in St. Paul, Minn. It also is looking to unload two Toronto properties.

AREA, which has been actively pursuing hotel deals, partnered with Aimbridge a year ago to pay Hyatt Hotels $51 million for three suburban Chicago properties: the 316-room Hyatt Lisle, the 301-room Hyatt Deerfield and the 206-room Hyatt Rosemont.

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