IHG (InterContinental Hotels Group) announces the sale of two hotels, the 121-room Staybridge Suites Denver Cherry Creek and the 143-room Holiday Inn Atlanta-Gwinnett Place, for a combined total of US$17 million to Summit (Summit Hotel Properties Inc.) a US-based real estate investment trust.
IHG will continue to manage the Holiday Inn under a long term management agreement, while the Staybridge Suites will continue to operate under a long term license agreement with IHG. The sale is subject to customary closing requirements and conditions and is expected to complete by early May.
The hotels generated gross revenues of US$6.9m with EBITDA of $2.2m and EBIT of $1.5m in 2010 and had a net book value of US$13.4m as of 31 December 2010. Summit will invest approximately $2.5m in capital improvements.
Richard Solomons, IHG’s Chief Financial Officer and Head of Commercial Development, said, “The sale of the hotels to Summit is a further example of our asset strategy in action. We have sold the hotels above net book value, giving us capital we can re-invest to develop our brands. We are delighted our relationship with Summit has driven a great result for the business so quickly and look forward to working with them on future deals.”
In February, IHG formed a strategic relationship with Summit a US hotel real estate investment trust focused on premium-branded select service hotels in the upscale and midscale without food and beverage sectors. In connection with Summit’s initial public offering, which closed on 14 February 2011, IHG purchased 1,274,000 shares of Summit common stock, representing approximately 4.7%, for a purchase price of $11.6m.
Of Summit’s 65 properties seven already carry IHG’s brands, and under a sourcing agreement, Summit will provide IHG an exclusive right for a period of five years, of first offer to franchise or manage any unbranded hotel bought by them which they want to brand.
Since 2003, IHG has released $5.6 billion of capital through the sale of 185 owned hotels and the divestment of equity stakes and over the same period returned almost $6 billion to shareholders. Following the sale of the InterContinental Buckhead Atlanta, IHG had 15 owned hotels at the end of 2010. This new agreement reduces the number of owned hotels to 13 with the flagship InterContinental New York Barclay currently on the market.