The company acquired leasehold interests in 25 of the hotels by issuing BMC 1.4 million limited partnership units of Boykin's operating partnership and assuming from BMC $1.6 million of liabilities in excess of assets related to one of the lessee entities. The company entered into management agreements for BMC to operate 15 of the 25 hotels and took over BMC's contract with Hilton Hotels Corp. for Hilton's operation of the remaining 10 Doubletree branded hotels.
The company also restructured its relationship with Meristar by acquiring or canceling Meristar's leasehold interests for three hotels and signing management agreements with Meristar to operate those hotels.
Following the transaction, 31 of Boykin Lodging's 33 hotel properties now have management contracts. The company expects to record a $15-million primarily non-cash charge to earnings in the fourth quarter of 2001 relating to the acquisition and termination of the leases.
Because company chairman Robert Boykin controls BMC, the board of directors established a special committee of independent directors to evaluate and negotiate the terms of the transactions with BMC. The special committee was advised by independent counsel and financial advisors. It also received the opinion of Houlihan, Lokey, Howard & Zukin Financial Advisors, Inc. that the transactions with BMC are financially fair to the company. The special committee also received advice from the HVS International division of Hotel Appraisals LLC as to the prevailing terms and conditions of hotel management contracts.
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