FelCor, IHG Ink New Five-Year Pact

IRVING, TX-FelCor Lodging Trust Inc. and InterContinental Hotels Group (IHG) have ended nearly seven months of negotiations to restructure their longstanding owner-manager contract in the wake of an ongoing disposition of non-core assets that began early this year. The settlement comes on the eve of a five-hotel sale.

Under the revision, IHG, with its US headquarters in Atlanta, gains another five years on the management side while FelCor, headquartered in Irving, gets $25 million of breathing room before it is required to buy out the operator’s contract in order to apply gain to overall debt reduction. To date this year, FelCor has sold 14 hotels, valued at $100 million, in the 33-property disposition brought to market in February. IHG’s management contract encompassed 58 FelCor hotels, including the 14 sold properties.

Richard J. O’Brien, FelCor’s executive vice president and CFO, tells GlobeSt.com that the “greatest benefit is the increased flexibility in allowing us to dispose of non-strategic hotels…and use sale proceeds to pay down debt instead of reinvesting.” Under the prior contract, FelCor was required to buy again and put in IHG as the manager or negotiate and pay liquidated damages within a year of the sale.