IRVING, Texas—FelCor Lodging Trust Incorporated announced that it will re-brand, renovate, and reposition eight Holiday Inn properties to the Wyndham Hotels and Resorts brand effective on March 1. Wyndham Hotel Group will manage the hotels under long-term management agreements with a performance guaranty.
These core hotels are located in strategic markets for FelCor. The properties in Boston, Houston, New Orleans, Philadelphia, Pittsburgh, San Diego, and Santa Monica will be converted to Wyndham Hotels and Resorts properties, and The Mills House in Charleston will become a Wyndham Grand hotel.
This agreement includes a $100 million guaranty from Wyndham Worldwide Corporation over the 10-year term of the agreement, with an annual guaranty of up to $21.5 million that ensures a minimum annual NOI for the eight hotels. It also provides a management fee structure more consistent with prevailing industry practices, and FelCor expects to save approximately $50 million in management fees over the term. In effect, this agreement protects approximately 20 percent of FelCor’s EBITDA from future lodging cycle fluctuations, in addition to providing a return on investment that is superior to the hotels’ historical performance.
“Today’s announcement further demonstrates our efforts to execute our long-term value creation strategy, which includes moving our portfolio into the upper-upscale segment. Over the past year, we have delivered on our commitments to drive operational improvement, sell non-core assets and strengthen our balance sheet. This agreement is focused on repositioning our portfolio in order to improve our portfolio quality, increase hotel operating income and create and protect long-term value for our stockholders,” said Richard A. Smith, president and CEO of FelCor. “We have a great partner in Wyndham Hotel Group, a company with a strong track record of managing upper-upscale hotels, and our long-standing rapport with Wyndham Hotel Group’s management team provides a strong foundation for our relationship.”
In conjunction with the renovation and repositioning of the eight hotels, FelCor will spend approximately $34 million over the next three years, net of $10 million in key money from Wyndham, in comparison to the existing $27 million capital plans over the same period.
“These prime, center-city locations are significant and strategic additions to our Wyndham Hotels and Resorts portfolio,” said Wyndham Hotel Group President and CEO Eric Danziger. “This is a great opportunity for Wyndham Hotel Group to significantly increase our presence without significant capital outlays. We are very excited to align with FelCor and to bring the Wyndham name to these gateway cities across the country, where we will offer guests best-in-class service and accommodations.”
InterContinental Hotels Group and FelCor will maintain their close business relationship going forward, as Holiday Inn will continue to flag and manage five consolidated FelCor properties located in San Francisco, Nashville, Toronto, Santa Barbara and Orlando. FelCor will pay $30.7 million to terminate its management agreements at the eight hotels.