FelCor Portfolio: Out With The Old, In With The New?

IRVING, TX— FelCor Lodging Trust has put nearly three dozen hotels on the block— lending substance to recent contentions by Executive VP/Chief Investment Officer Mike DeNicola that the lodging REIT is determined to be “a net seller in 2003.” In the course of an exclusive discussion with HOTEL BUSINESS®, DeNicola said FelCor “expects to sell-off between $50 million and $75 million in small-market hotels [and other non-core assets],” with the 33 properties now officially on the block being clearly indicative of that overall game plan. To that end, the REIT has already retained a broker to market these hotels— one-third of which are located in Texas, an area in which the company is looking to cut back on its property holdings, he said. “Our plan is to dispose of smaller hotels in low-growth markets [and]re-invest most of the proceeds in newer, larger and higher quality assets— primarily in urban and resort locations that have higher growth rates and barriers to competition,” said Tom Corcoran, FelCor president/CEO. In line with this course of action, he said: “We expect to improve the overall quality and growth potential of our hotel portfolio while preserving our strategic brand relationships.” FelCor indicated during the course of a recent earnings call that it does not anticipate too much of a problem shedding these properties over the course of the next 36 months. “There is a lot of money out there today looking at hotel transactions… a lot of available money in private markets,” Corcoran said. Speaking from the seller’s point of view, DeNicola said one of the most important considerations for FelCor will be “connecting with the right buyer [or buyers]. At this juncture, he said, “price is not really our main concern.” It is estimated FelCor’s hotel disposition would likely bring in something in the range of $35,000 per room. Peeking ahead, DeNicola said the company would probably look to retain a heavy focus on all-suite product, in terms of buying as well as holding properties. Sharpening that focus, he identified full-service and upper upscale hotels— particularly in larger, urban markets— as being front-and-center on the organization’s radar screen. Explaining why FelCor plans to continue adding hotels to its portfolio, even while disposing of a considerable number of locations in its current 183-property line-up, DeNicola said one reason is because the company’s brain trust basically agrees with the belief that— in the REIT universe— “bigger is necessarily better.” However, he warned there would be “no growth just for growth’s sake. “We’re not about consolidation; we’re about quality of properties. Accordingly, if the right opportunity comes up to add to that quality [either through buying or building], we would definitely be interested,” DeNicola said.