Inland Plans Spinoff of Hotel Business

OAK BROOK, IL—Inland American Real Estate Trust Inc. on Monday filed SEC paperwork in preparation for a potential spinoff of Inland American Lodging Group into a standalone, publicly traded company. Operating as Xenia Hotels & Resorts, the company would be a self-managed REIT trading on the New York Stock Exchange under the symbol XHR.

With Inland Lodging CEO Marcel Verbaas filling the same role at Xenia, the new company is expected to own 46 hotels comprising 12,636 keys across 19 states and the District of Columbia, along with a majority interest in two properties under development, when the spinoff is completed. Its portfolio will focus on the top 25 US lodging markets and key leisure destinations, with an emphasis on premium full service, lifestyle and urban upscale hotels. Inland American is also currently marketing for sale its remaining suburban select service hotels that currently are overseen by the Xenia team.

“Xenia Hotels & Resorts will have a premium collection of properties affiliated with some of the strongest brands in the lodging industry,” including Marriott, Hilton, Hyatt, Starwood, Kimpton, Aston, Fairmont and Loews, says Verbaas. “These assets have performed well as part of Inland American's portfolio, delivering strong cash flows and attractive returns, and as a standalone company, Xenia will have the additional strategic and financial flexibility to continue delivering growth and creating stockholder value.”

Verbaas adds that as a standalone company, “Xenia believes it will be well positioned to effectively grow its business through operational flexibility, efficient deployment of resources and quick decision-making based solely on the needs of Xenia's business. Xenia will also have direct access to the capital markets to issue equity or debt securities,” along with the flexibility to create “a more diverse capital structure” tailored to its strategic goals.

In its SEC filing, Inland American reports that it has spent the past 18 months implementing its long-term strategy of “focusing our portfolio into three asset classes—lodging, multi-tenant retail and student housing. By tailoring, expanding and refining these three components of our portfolio, our goals were to enhance long-term stockholder value and position Inland American to explore various strategic alternatives designed to provide liquidity events for our stockholders.”

To that end, last August the REIT sold its net lease and conventional multifamily assets in two separate assets totaling $2.5 billion. More recently, the company's stockholders approved charter changes, and in March the company switched to self-management, terminating its management agreement with its business manager, Inland American Business Manager & Advisor Inc.

In connection with the spinoff, Goldman Sachs and Morgan Stanley are acting as financial advisors to Inland American, while Latham & Watkins LLP is acting as legal counsel to the REIT. When the spinoff is finalized, Xenia will be headquartered in Orlando.