Red Lion Hotels to Sell Assets - Analyst Blog

Red Lion Hotels Corporation (RLH) that owns, operates and franchises midscale full, select and limited service hotels, recently announced its plan to put its Seattle and Denver based hotels up for sale. Red Lion intends to unlock real estate value through selective disposition of asset ownership. Sale proceeds will be used to restructure the company's balance sheet, including paying down debt.

The 297-room Red Lion Hotel on Fifth Avenue is located in downtown Seattle.  The public sale process will be handled by Chris Burdett of CB Richard Ellis Hotels. Red Lion plans to structure the Seattle transaction to continue operating the hotel under the Red Lion brand.

The same plans holds good for Red Lion's Denver property. The company prefers to maintain the hotel's Red Lion affiliation, either as a managed or franchised property. 

The asset sale is part of Red Lion's long-term strategy to strengthen financial flexibility, which in turn will maximize shareholder value. Spokane, Washington based Red Lion also believes that refinancing in its namesake brand will position the company well for expansion through franchising once the market fully recovers.

A higher concentration of franchise fees reduces earnings volatility and provides a more stable growth profile. Red Lion is working with its financial advisor, CSCA Capital Advisors to accomplish its asset sale program.  

One of Red Lion's close competitors, Starwood Hotels & Resorts Worldwide Inc. (HOT) also embarked on an asset light model. Starwood remains committed to reducing its exposure to owned real estate and timeshare businesses. During its third quarter, Starwood sold one St. Regis Aspen in accordance with a long-term management contract for gross proceeds of $70 million.

Another long-term initiative of Red Lion is increasing franchise activities. The company expects to add at least 30 to 40 franchised hotels over the next three years. Red Lion currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

 
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