FelCor Disposes Non-Core Assets

FelCor Lodging Trust Inc. ( FCH - Snapshot Report ) , a real estate investment trust (REIT) that owns upper-upscale hotels, has recently completed the divesture of 6 non-core assets to an unnamed buyer for $103.0 million, representing a cap rate of 6.8% based on 2011 net operating income.

Comprising 1,527 rooms in aggregate, the divested portfolio includes the Holiday Inn San Antonio-Airport, the Sheraton Suites Ft. Lauderdale-Cypress Creek, Doubletree Guest Suites hotels in Raleigh/Durham and Tampa-Rocky Point, and the Embassy Suites hotels in Boca Raton and St. Paul.

The asset sale is part of the long-term strategy of the company to reposition its portfolio to focus on a diversified asset-base of high-quality hotels in major markets and resort locations that have steep barriers to entry and solid demand to drive healthy return on investments.

At present, FelCor has 39 non-strategic hotels in its portfolio, out of which 16 are currently being offered for sale (including the just-concluded sale of 6 hotels).

The company utilized the proceeds from the divesture to repay about $73 million of secured debt. The remainder of the sale proceeds is expected to be used to pay a portion of its accrued preferred dividends as well as its regular quarterly preferred dividends on July 31, 2012. Going forward, FelCor expects to fund the remaining accrued dividends in 2012 through proceeds from future asset sale.

FelCor presently owns 70 hotels and resorts in 22 states in the U.S. and Canada under globally-recognized brands such as – Embassy Suites Hotels, Doubletree, Hilton, Marriott, Renaissance, Fairmont, Sheraton, Westin and Holiday Inn.

We currently have a Neutral recommendation on FelCor, which has a Zacks #3 Rank that translates into a short-term Hold recommendation. We also have a Neutral recommendation and a Zacks #2 Rank (short-term Buy rating) for Host Hotels & Resorts Inc. ( HST - Analyst Report ) , one of the competitors of FelCor.