Lodgian Inc. is selling three Portland-area hotels to Sunstone Hotel Investors LLC as part of a $132 million, 10-hotel deal to offload underperforming properties. The all-cash deal includes five Holiday Inns, two Hilton Garden Inns, one Sheraton, one Courtyard by Marriott and one Marriott, a total of 2,135 rooms. The hotels are located in Alaska, California, Idaho, New Mexico and Oregon. Lodgian officials say markets in these areas have been “experiencing some level of weakness as a result of recent, significant additions to supply.”

The purchase price reflects an approximate 11% capitalization rate, after capital reserves and management fees, of the 2000 estimated cash flow of the hotels to be sold or a multiple of 8x earnings before interest, taxes, depreciation and amortization (Ebitda). Upon closing, Lodgian will reduce its annual interest expense by more than $11 million, based on current interest rates.

Proceeds of the sale will be used substantially to pay down debt. The closing of the deal, which is subject to customary closing conditions, is expected to occur no later than September 30. The Portland-area hotels include the Marriott City Center, the Hilton Garden Inn in Lake Oswego and the Holiday Inn Select south of Wilsonville.

The company expects to record a pre-tax loss associated with the sale of approximately $50 million. There are other potential transactions in various stages disposition pipeline that could result in gains that would somewhat offset this loss, the company said.

Lodgian (NYSE:LOD) currently owns or manages 128 hotels in 35 states and Canada. Most of the hotels are affiliated with hospitality brands such as Holiday Inn, Crowne Plaza, Marriott, Sheraton, Hilton, Doubletree and Westin. Lodgian stock was up 12.5 cents to $2.69 in noontime trading Wednesday.

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