Red Lion Hotels Corp. (RLHC) on Tuesday completed a comprehensive transaction with Shelbourne Falcon RLHC Hotel Investors to accelerate the execution of its national growth strategy. Key components include selling a 45% ownership stake in 12 hotels wholly owned by RLHC to a joint venture and concurrently refinancing all of the company’s secured debt.
Three of the hotels in the transaction will be renovated and converted to the recently announced lifestyle, 3-star Hotel RL brand. The remaining nine Red Lion Hotels and Red Lion Inn & Suites will also undergo comprehensive renovations. All 12 hotels will continue to be managed by RLHC’s wholly owned subsidiary, Red Lion Hotels Management.
Total debt and equity proceeds of the transaction are approximately US$99 million, of which the joint venture will use approximately US$26 million for planned renovations to the 12-hotel portfolio occurring over the next 12 to 18 months.
RLHC will maintain a 55% interest in RL Venture LLC, the joint venture that owns the 12 hotels, with the remaining 45% acquired by Shelbourne, an entity which is led by Shelbourne Capital LLC and includes several other institutional real estate investors, including Columbia Pacific Real Estate Fund II, LP, an affiliate of the company’s largest shareholder Columbia Pacific Opportunity Fund, LP. The joint venture also entered into a new US$80 million mortgage loan from Capital Source, a division of Pacific Western Bank, secured by the 12 properties.
RLHC will use proceeds to retire in full the company’s current outstanding secured debt with Wells Fargo Bank with the remaining capital available to fund the company’s growth strategy. In connection with Shelbourne’s investment in the joint venture, RLHC issued approximately 442,000 warrants to Shelbourne.
“This transaction is pivotal to our long-term growth strategy, providing us with significant growth capital to accelerate the establishment of RLHC as a hospitality company with a national footprint,” said RLHC President and CEO Greg Mount. “In addition to being a leader in the management and franchising of great hotel brands, a key tenet of our growth strategy is to continue to invest in hotels through key money franchises and joint ventures. With our equity positions in joint ventures, our intent is to upgrade the properties, manage them, sell them and use the proceeds to further fuel our national expansion.”
The three properties converting to the Hotel RL brand throughout 2013, with an aggregate of 985 rooms, are located in Salt Lake City, Utah, and in Olympia and Spokane, Washington. The other nine properties in the joint venture, with an aggregate of 1,546 rooms, will undergo extensive renovations and include: Eureka and Redding, California; Boise and Post Falls, Idaho; Bend and Coos Bay, Oregon; and Pasco, Port Angeles and Richland, Washington.