WASHINGTON, DC—Some six years after the first group of hotel rooms transferred to the private sector, the Privatization of Army Lodging program (PAL) is heading into its final stretch.

The New York-based subsidiary of Australian giant Lendlease, which was tasked with this project in 2009, has secured $250 million in additional project debt, for a total of $715 million in senior debt financing. The latest closing will be used for 2,058 hotel rooms located at Fort Lee, VA and Fort Benning, GA.

InterContinental Hotels Group is the PAL hotel operator for these and the other hotels that were moved into the program.

PAL is an Army initiative to move non-core operations -- in this case, hotel facilities located on onsite Army posts -- to the private sector, which would address upgrades and new construction needs as well as take over management of the facilities.

Lendlease was tapped in 2009 to lead the lodging privatization initiative. It assumed ownership of hotels on 10 Army posts in 2009. In 2010, it implemented the second phase of the program, taking on the hotels at an additional 11 posts. The third phase of the PAL program began in October 2011. To date, Lendlease's privatized hotel portfolio includes 12,492 hotel rooms on 41 military installations.

A number of flags are part of the program: 14 Holiday Inn Express hotels, for example, have been delivered and there are another five under renovation. At other forts, five new Candlewood Suites hotels have been delivered, with three under construction. One Staybridge Suites is under construction at Fort Belvoir, VA.

There has been some interesting innovation as well on the part of the participants. At Redstone Arsenal in Alabama, the US' first all-cross laminated timber hotel is under construction per the PAL program. The 58,850 square foot, four-story, 92-key hotel will be branded Candlewood Suites and is expected to open its doors by year-end.

The revenue streams, from service people and their family, go to LendLease, per the typical public-private partnership structure, with excess revenues reinvested in the portfolio.

Instant Insights /

Lendlease's PAL Participation Heads into Final Stretch

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