Hotel Investors Will Sell 35 Inns for $201 Million
Hotel Investors, a management and investment company in Woodland Hills, said Tuesday that it has agreed to sell 35 hotels for $201 million to two buyers, including the American affiliate of Tokyo-based EIE International.
EIE is buying 32 of the hotels for $189 million through Park Plaza, its Dallas-based subsidiary, which owns and operates more than 70 Park Plaza and Park Inn hotels nationwide. The other three hotels are being sold to a second buyer, who was not identified.
EIE owns more than two dozen resort hotels around the world, include three major hotels in Tahiti. It is also one of several firms reported to be interested in buying Hilton Hotels, whose management put the company up for auction several months ago. A Hilton spokesman declined comment.
Investors reacted favorably to the sale. Hotel Investors shares closed at $7.375, up 37.5 cents, on exceptionally heavy volume of 222,500 shares.
The Hotel Investors sale involved inns in 14 states, including California, operating under such familiar names as Holiday Inn, Ramada and Hilton. The company’s Los Angeles-area properties are Vagabond Inns in Woodland Hills and Rosemead.
Hotel Investors said it expects to lose $35 million on the sale, including a writeoff of $25 million on the book value of the hotels and another $10 million in expenses connected to the sale.
About $154 million from the sale will be used to pay off company expenses and long-term debts, while the other $47 million is expected to be distributed to shareholders, according Jeffrey C. Lapin, company vice president.
Hotel Investors is made up of two different operating companies--Hotel Investors Trust and Hotel Investors Corp.--whose stocks trade together on the New York Stock Exchange under the symbol HOT.
Hotel Investors Trust is the real estate investment arm, known as a real estate investment trust or REIT, while Hotel Investors Corp. is the operating company that manages the properties.
Many REITs were created in the 1970s as a way for small investors to invest in real estate, but they got in financial trouble during the severe real estate downturn of the mid-1970s.
Stung by its own losses in recent months, Hotel Investors announced in October that it wanted to sell its hotel properties. Strong competition and overbuilding have cut profit margins in the mid-priced hotel markets where the firm operates.
On Tuesday, Hotel Investors added that it may sell its remaining assets, which include a small interest in a hotel in Omaha and two casino hotels in Las Vegas. It also has management contracts to run another 11 hotels.
