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Commercial Property Executive: RLJ, FelCor to Merge in $1.2B All-Stock Deal

According to Commercial Property Executive:

The all-stock, $1.2 billion planned merger of RLJ Lodging Trust and FelCor Lodging Trust Inc. has left a few people guessing. The deal, which would create the third-largest pure-play lodging REIT, with a total enterprise value of $7 billion, would see FelCor folded into RLJ, a move that was deemed a “head scratcher” by at least two analysts.

“Strategically, the deal is a head scratcher given RLJ’s higher-quality, select-service heavy portfolio and FelCor’s lower-quality, full-service portfolio,” noted Green Street Advisors analysts Lukas Hartwich and David Guarino, who described a combination of the two REITs’ portfolios as an “awkward mix” in a research note provided to Commercial Property Executive.

The two lodging REITs made the announcement this week, two months after FelCor rejected a proposal from Ashford Hospitality Trust that it apparently deemed “unenticing,” according to Hartwich and Guarino.

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The companies said the merger would have an expected annual G&A savings of approximately $22 million, but the Green Street Advisor analysts described the savings as “only marginally beneficial.”

“On the operational front, while there are similarities in operating select-service and compact full-service hotels, it’s not clear what advantage is gained from combining these two portfolios,” Hartwich and Guarino wrote.

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To read the full article from the Commercial Property Executive, click here.