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Red Lion Hotels Corporation has closed the sale of its hotel in Seattle. An affiliate of Lowe Enterprises Investors has acquired the property for $71 million. The public sale process was handled by Chris Burdett of CB Richard Ellis Hotels.

While the hived off property will continue to operate under the Red Lion name, managed it will now be managed by Destination Hotels & Resorts, the affiliate of Lowe Enterprises Investors. This 297-room Red Lion Hotel on Fifth Avenue is located in downtown Seattle.

In January, Red Lion Hotels put its Seattle and Denver based hotels up for sale. The idea was to unlock real estate value through selective disposition of asset ownership. In early March, the company announced the same plan for its hotel in Helena. Management intends to use the sale proceeds to restructure the company’s balance sheet that includes paying down debt.

The asset sale is part of Red Lion’s long-term strategy to strengthen financial flexibility, which in turn will maximize shareholder value. A higher concentration of franchise fees reduces earnings volatility and provides a more stable growth profile.

Washington-based Red Lion, which owns, operates and franchises mid-scale full, select and limited service hotels, also believes that refinancing in its namesake brand will position it well for expansion through franchising once the market fully recovers.

Since late 2010, transition to an “asset light” business model has gained momentum in the hotels and REIT industry. Many of Red Lion’s close competitors, Starwood Hotels & Resorts Worldwide Inc. (HOT - Analyst Report), Morgans Hotel Group Co. and Great Wolf Resorts Inc. have embarked on this strategy.

Another long-term initiative of Red Lion is increasing franchise activities. The company expects to add at least 30 to 40 franchised hotels over the next three years. Red Lion currently retains a Zacks #4 Rank, which translates into a short-term Sell rating.

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