The Newton, MA-based REIT picked up 304 rooms at 950 NW LeJeune Rd. near Miami International Airport and 445 rooms at 1800 Market St. in Philadelphia's center city. The REIT will invest another $7.1 million into a three-year renovation plan. In sync with the free-and-clear acquisition, the hotels were added to a 25-year management agreement with two 15-year renewal options that the REIT has with InterContinental Hotels Group plc's Atlanta-based division. Hospitality Properties' management pact includes escrowed reserves for planned capital expenditures and a limited guarantee for certain minimum returns, according to the REIT's press release. The two hotels were part of a $196.2-million, nine-property pick-up, but the closings were delayed because of due diligence, the REIT says.
From the HPT REIT's side of the deal, it's projecting annual minimum returns, guaranteed by InterContinental, totaling $5.04 million this year, $5.6 million in 2007 and $5.8 million in 2008. The post-renovation guarantee is $6 million annually. Other conditions will deliver a non-guaranteed return based on a percentage of gross revenue increases, beginning in 2008, and net cash flows after management fees are paid.
From Felcor's perspective, it's pruned 10 non-strategic hotels from the portfolio so far this year, realizing $226 million from the sales. Another 25 hotels are ticketed for sale this year and next.
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