FelCor Offloads Non-Strategic Asset

FelCor Lodging Trust Inc. (FCH - Snapshot Report), a real estate investment trust (REIT) that owns upper-upscale hotels, has recently sold the Embassy Suites – Anaheim-North hotel in California for $25.5 million. The non-strategic asset was sold to Urban Commons, LLC – a private real estate investment firm based in Los Angeles, California.

The 222-room Embassy Suites – Anaheim-North hotel is located in close proximity to the Disneyland Resort. The all-suite hotel is also located at an easy commutable distance from John Wayne Airport – the only commercial service airport in Orange County, California; and Los Angeles International Airport – the primary airport serving the Greater Los Angeles Area. Besides its locational advantage, the hotel also boasts of an outstanding reputation for its food and beverage selections, with multiple options to accommodate every budget and taste.

The company intends to utilize the proceeds from the divestiture to repay about $88 million of debt outstanding under a commercial mortgage-backed security (CMBS) loan scheduled to mature in 2013.

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 up for sale in its portfolio, out of which a total of 16 hotels were sold since December 2010. The last-concluded asset sale transaction included the sale of six non-core assets in the second quarter of 2012 for $103.0 million.

FelCor currently owns 69 hotels and resorts in 22 states in the U.S. under globally recognized brands such as – Embassy Suites Hotels, Doubletree, Hilton, Marriott, Renaissance, Fairmont, Sheraton, Westin and Holiday Inn.

We 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.