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LONDON-Intercontinental Hotels has sold seven hotels in Europe to Morgan Stanley Real Estate Funds for euro 634 million ($804 million). The portfolio has been on the market since January and the price includes a premium of euro 80 million ($101 million) over the net book value.

IHG officials say that they had retained management contracts for 30 years on the hotels, with potential extensions up to 50 years, and that the fund will invest about euro 60 million ($76 million) in the portfolio. This influx will fuel implementation of new brand initiatives and add facilities. Normalized management fees are expected to generate about euro 10 million a year ($12.7 million).

“This deal is a significant step for IHG as we near the conclusion of our asset disposal program,” says IHG chief executive Andrew Cosslett. “IHG is fully focused on its growth target of adding 50,000 to 60,000 rooms to our portfolio on a net and organic basis by the end of 2008.”

He adds that the proceeds of the transaction, which is expected to close in the third quarter, would be used for investment, managing debt and returns to shareholders. As part of its strategy to reduce asset ownership and develop its managed and franchised business, IHG has sold 175 hotels with a net asset value of more than euro 4.1 billion ($5.2 billion) since its separation from Six Continents in April 2003.

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