Inland American move signals possibility of sale

Inland American Real Estate Trust is absorbing the company that runs its portfolio, a key move toward an eventual sale of Inland American or a listing of its shares on a stock exchange, Chicago Business writes.

The non-traded REIT and its business manager, Inland American Business Manager & Advisor, Inc., agreed to terminate the management agreement, and the REIT hired all of its business manager’s employees and acquired the assets of its business manager necessary to perform the day-to-day operations that its business manager previously provided on its behalf, for no fee, thus becoming self-managed.

The internalization, as the process is called, allows Inland American to position itself for a transaction that would allow its shareholders to cash out. Since Inland American is an unlisted REIT, and its shares not traded on an exchange, investors have few opportunities to sell their stock.

As Chicago Business writes, "after assembling a portfolio, unlisted REITs will create that opportunity either by selling to another company or by listing their shares. But Wall Street analysts and institutional investors shun externally managed REITs, which is why most bring their management companies in-house before a listing."

"This announcement marks an important milestone for Inland American,” said Thomas McGuinness, president of Inland American. “This transition is the next step in Inland American’s life cycle and becoming self-managed shows the board’s confidence in Inland American’s personnel, expertise and growth as a company. The decision to become self-managed is the result of a thorough process conducted by our board’s special committee of independent directors. Inland American’s board and management team are committed to driving value for stockholders and look forward to completing Inland American’s transition to full self-management."

Inland American has been an active player in the hospitality arena of late. One of its bigger buys last year was the August acquisition of two Westin hotels in the Houston area for $220 million. In the fall of 2013, Inland acquired the Loews New Orleans for $74.5 million and also three Kimpton properties for a sum of $189 million.

And already this year, Inland announced it formed two new joint venture agreements with Kessler Enterprises for a combined $68.5-million investment to develop two boutique hotels in Charleston, S.C., and Mountain Brook, Ala. Both will affiliate with Marriott International's Autograph Collection.