Inland American spinning off lodging business

Inland American Real Estate Trust, a nontraded real estate investment trust, plans to spin off its lodging subsidiary into a publicly traded company called Xenia Hotels & Resorts Inc., which will own 46 hotels in 19 states and D.C., and a majority stake in two properties under development, the Oak Brook, Ill.-based company said. The hotels include brands such as Hyatt, Hilton and Marriott.

The wheels of this move began spinning in March.

The company is seeking to enter the public markets as stocks continue to touch record highs. Marcel Verbaas, who led Inland American’s lodging investments, will become Xenia’s president and CEO.

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“These assets have performed well as part of Inland American’s portfolio, delivering strong cash flows and attractive returns,” Verbaas said in the statement. “As a standalone company, Xenia will have the additional strategic and financial flexibility to continue delivering growth and creating stockholder value.”

The entity will be based in Orlando, Fla., and will apply to list its shares on the New York Stock Exchange under the symbol XHR. Inland American expects to complete the spinoff in the next four to eight months, pending approval of its board.

“Over the past 18 months, Inland American has been implementing its long-term strategy of focusing our portfolio into three asset classes — lodging, multi-tenant retail and student housing,” President Thomas P. McGuinness said. “By doing so, we believed we would enhance long-term stockholder value and position Inland American to explore various strategic alternatives designed to provide liquidity events for our stockholders. We believe the potential spin-off is an important and significant step toward achieving these goals.”

Inland American shareholders will receive an undetermined number of shares of Xenia common stock, according to the statement. Goldman Sachs Group Inc. and Morgan Stanley are the financial advisers, and Latham & Watkins LLP is acting as legal counsel to Inland American.

Formerly known as Inland American Lodging Group, the new independent REIT will own and continue to invest primarily in premium, full-service upscale hotels in the nation’s top 25 lodging and key leisure markets.

Inland American has been an active buyer in recent times. 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.

 

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