La Quinta Amasses $400M for 2002 Deal Making

"We are not in a rush to spend the money," La Quinta's president and CEO Francis W. "Butch" Cash said in yesterday's earnings call. "All acquisitions will be reviewed...for a strategic fit."

Mum's the word as to whether talks are under way with any prospects at this time. The chain's "always looking," says Temple Weiss, investor relations director. He tells GlobeSt.com that La Quinta's definition of a strategic fit could be a hotel chain of 20 to 30 properties that is heavier on real estate than branding or a mid-market competitor with brand-name value and a network of 100 to 150 properties.

La Quinta's first-quarter numbers aren't as rosy as corporate leaders would like. But, everyone recognizes that it's still transitioning from a health-care REIT to a lodging industry player. The transformation will be completed this year as remaining health-care assets, a major drain on the coffer, are sold. Also on the market are 16 hotels, with a net value of $45.5 million, in scattered locations. All will be sold by year's end, Weiss confides.

A buyer has plunked down a $13-million, nonrefundable option for 12 health-care facilities. The unidentified buyer has 180 days to get to the closing table. Another $96 million of asset values are up for grabs. The Meditrust Corp. sell-off has pumped $146 million in gross proceeds into La Quinta's coffer.

To date, La Quinta also sold nine of 25 targeted hotels. Three sales--Knoxville, Nashville and Little Rock--closed in the first quarter, bringing in $7.8 million.

La Quinta is looking to its franchise program to be the growth engine. Cash says 80 franchise hotels will be in hand before the year closes. In the first quarter, 32 franchise sites opened, pushing the total to 3,270 rooms in 43 properties. The biggest boost to La Quinta's rollout was a 31-hotel pact struck with the Hospitality Associates for the Pacific Northwest. The pipeline holds 34 contracts to add another 3,000 rooms.

As announced earlier, La Quinta took a double hit in non-recurring charges totaling $456 million due to accounting changes and restructuring. First quarter revenue was $138.7 million, down 27% from 2001. Amortization EBITDA dropped 51% to $46.5 million while earnings available to common shareholders came in at a negative $459.8 million. Debt is $975 million, of which $33 million matures this year. Its $225-million revolving credit line is free and clear and cash on hand totaled $255 million at April's end.

The Q1 close is the last time La Quinta will isolate health-care assets in its earnings report. The final look-see shows revenue plummeted 81% to $7 million and EBITDA plunged 87% to $4.4 million.

La Quinta's lodging numbers reflects a 12.6% drop in RevPAR. Occupancy stood at 59.1% and room rates dipped 4.1% to $61.09. Lodging EBITDA tallied $42 million, down 31.9% for the same period in 2001.