MEMPHIS, Tenn.--(BUSINESS WIRE)--Jan. 3, 2001--RFS Hotel Investors, Inc. (NYSE:RFS) today announced that the Company has completed its previously announced transaction with Hilton Hotels Corporation (NYSE:HLT) whereby RFS has terminated, effective January 1, 2001, its operating lease and management contract relationships with Hilton.
Randy Churchey, president and chief operating officer of RFS, said, This deal consists of two related transactions. First, RFS paid Hilton approximately $60 million for the termination of 52 long-term operating lease relationships and four management contract relationships on hotels owned by RFS. Second, the Company redeemed, for $13 million, 973,684 shares of RFS convertible preferred stock owned by Hilton. Although we cancelled these leases, all of our hotels continue to operate under the same franchise affiliation as prior to the lease termination.
The $73 million in payments to Hilton were financed as follows:
-- Sale of two hotels during 2000 for proceeds of $25 million;
-- Placement, with Banc of America Mortgage Capital Corporation, of a new issue of $25 million of non-convertible, preferred stock with a 12.5% dividend; and
-- Approximately $23 million borrowed under the Company's line of credit.
This was an important strategic transaction that was accomplished without compromising the strength of the Company's balance sheet, explained Kevin Luebbers, executive vice president and chief financial officer of RFS. On a pro forma basis, total debt equates to only 42% of the cost of our assets (including the $60 million termination payment) and we expect earnings before interest, taxes, depreciation and amortization (EBITDA) to equal approximately 3.7 times our interest costs in 2001. These ratios are consistent with historical levels. Current borrowings (after the Hilton transaction) under our $140 million line of credit are approximately $102 million. Additionally, approximately 81% of our total debt has a fixed interest rate, Luebbers added.
Under the REIT Modernization Act, which became effective January 1, 2001, RFS is permitted to lease its hotels to wholly-owned subsidiaries, provided that the subsidiary lessees engage a third-party management company to manage the hotels. The Company announced, on November 29, 2000, that simultaneous with the termination of these leases, newly-formed subsidiaries of RFS would enter into new management contracts with Flagstone Hospitality Management Company (Flagstone). Flagstone is a newly-formed company jointly owned by Angie Mock, its CEO and formerly executive vice president of RFS, and MeriStar Hotels and Resorts (NYSE:MMH), the nation's largest hotel management company. Flagstone has employed substantially all of the former employees of the subsidiary of Hilton, which previously managed the hotels. Effective January 1, 2001, Flagstone will manage 53 of the Company's 60 hotels and the remaining seven hotels will be managed by four other third-party management companies. Only five of the Company's hotels will be operated under long-term leases with third parties.
Robert Solmson, chairman and chief executive officer of RFS, said, We have been pointing toward this transaction since December 1999, when legislation was enacted permitting hotel REITs to own their lessees beginning January 1, 2001. As I have said before, this has significant strategic, operational and financial advantages, which should accrue to the benefit of our shareholders for many years to come. We are fortunate that a confluence of circumstances, including our strong balance sheet, the terms of our leases with Hilton and the fact that we were able to retain the operating personnel who previously worked for Hilton, enabled us to conclude this transaction.
RFS Hotel Investors, Inc. (RFS) is a real estate investment trust (REIT) that owns 60 hotels with approximately 8,700 rooms located in 24 states. RFS's hotel portfolio is diversified by geography, brand and segment. Leading brands under which RFS hotels are operated include Sheraton(R), Residence Inn by Marriott(R), Hilton(R), Doubletree(R), Holiday Inn(R), Hampton Inn(R), and Homewood Suites by Hilton(R). By segment, RFS receives approximately 45% of its EBITDA from full service hotels, 30% from extended stay hotels, and 25% from limited service hotels. Additional information can be found on the Company's website at www.rfshotel.com.
Certain matters within this press release are discussed using forward-looking language as specified in the 1995 Private Securities Litigation Reform Law, and, as such, may involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance to differ from those projected in the forward-looking statement. From time to time, these risks are discussed in the Company's filings with the Securities and Exchange Commission.
CONTACT: RFS Hotel Investors, Inc.
Mimi Hall, 901/682-1360
|
Post Release
Get Content
Email News Brief
Saved Articles
Advertising
Handheld
XML/RSS
Post News