FelCor's $57M Trading Corners Premier Property

For some time, the Irving-based FelCor has been selling non-core product and looking to refill the portfolio with higher-end and resort-style properties. With 29 hotels still tagged for sale, FelCor expects to sell another 10 properties this year, many Holiday Inn-branded. The quartet of sales, including the 160-room Holiday Inn in Plano, TX as previously reported, closed the book on the 131-room Hampton Inn at 10728 L St. in Omaha; the 293-room, Crowne Plaza Medical Center at 6701 Main St. in Houston; and the 354-room Crowne Plaza at 200 E. Amite St. in Downtown Jackson, MS. The hotels went to separate buyers.

Likewise, the Houston-based Westmont and New York City-headquartered Goldman Sachs have been piecemeal selling Holiday Inn properties, most picked up a decade ago from VMS of Chicago. The "to go" list has been pared to the 405-room Holiday Inn LAX and the 204-room flag in Downtown L.A. "It's past the normal holding period. It's a good time for them to sell and take profit," Alan Reay, president of Atlas Hospitality Group in Costa Mesa, CA, tells GlobeSt.com about the closeout.

The Santa Monica purchase is FelCor's first hotel acquisition in nearly two years. "The Santa Monica Holiday Inn is a great piece of real estate and a strong fit with our refined investment strategy," Thomas J. Corcoran Jr., FelCor's president and CEO, says in a press release.

Reay says the Santa Monica property sold for $204,000 per key or just $1 million shy of the $28-million ask despite the fall-out of a few contracts along the way. The high barriers to entry and interest rate-driven demand have spiked hotel prices 4% to 5% in the past year. The record to date is the $232,000 per key or $135 million that was laid on the line in mid-December for the 581-room Beverly Hilton. "Very, very few properties in Santa Monica or on the west side of L.A. become available," Reay explains of the high-price trading.

Jones Lang LaSalle Hotels brokered the Santa Monica sale, a widely marketed and highly chased property tailor-made for business travel with Pacific Ocean views, across the street from the Santa Monica pier and a freeway to the rear. The Ocean Drive hotel was on the market before Sept. 11, 2001 and then pulled until a year ago.

FelCor's plan is to hold the flag and put in InterContinental Hotels Group to manage it. And that will most certainly drive upgrades aside from some work that needs to be done. "My guess is they will easily spend another $5 million in rehab or more. That's just their style," says Teina Tahauri, investment associate in Ontario, CA for Marcus & Millichap's National Hospitality Group.