CNL Hospitality, Interstate Team Up To Acquire Hotels

ORLANDO and PITTSBURGH— CNL Hospitality Corp. (CNL) and Interstate Hotels Corp. have formed a partnership to jointly own and operate U.S. hotels, starting with the acquisition of two existing Connecticut properties, totaling $22 million. The 90-room Courtyard by Marriott and the 96-room Residence Inn by Marriott, both located in the Hartford, CT area, represent the first transactions of the new partnership, which is expected to team up for an additional five to 10 hotels within the next year, according to Charlie Muller, COO of CNL. CNL will own a majority interest in the properties and Interstate will operate the two hotels under long-term management agreements, retaining a minority interest. “We’ve been discussing opportunities with Interstate for a couple of years…The partnership is good because it’s structured to serve both of our needs. They grow their management company and we grow our ownership company,” said Muller. He noted the two companies have been working on the Connecticut hotel deals since June. “These transactions were opportunistically driven. Interstate found the two hotels and thought they would be a good fit for them management-wise, and we believed in the long-term value of the properties,” he added. The partnership was set up specifically for the acquisition of the Hartford hotels, “with the intention to grow the partnership further with additional future opportunities,” stated Muller. CNL and Interstate, however, are not limiting their partnership to acquisition opportunities. The companies are also looking for future ventures that include distress sales opportunities and new construction properties. “The relationship we have with Interstate is no different than the relationship we have with Marriott or Hilton,” said Muller. In fact, the Interstate partnership marks CNL’s fifth partnership with a management company, building on existing relationships with Marriott International, Hilton Hotels Corp. Wyndham International, and Crestline Hotels and Resorts. Muller said CNL is focused on owning and developing hotel assets and that the company “is always looking to expand its number of operating partners.” He expects CNL to team up with two additional management companies within the next couple years. Currently, CNL has 37 hotels in its portfolio, totaling $1.6 billion, with an additional four properties under construction and eight in the acquisition pipeline.