NASHVILLE, TENN. — Gaylord Entertainment Co. (NYSE: GET) has entered into an agreement to sell the Gaylord Hotels brand and rights to manage its four hotels to Marriott International (NYSE: MAR) for $210 million.
The four hotel properties include the Gaylord Opryland Resort and Convention Center in Nashville; the Gaylord Texan Resort and Convention Center in Grapevine, Texas; the Gaylord Palms Resorts and Convention Center in Kissimmee, Florida; and the Gaylord National Resort and Convention Center in Prince George’s County, Maryland.
Gaylord Hotels will join the Marriott portfolio of brands, and the properties will continue to be managed under their current flags. Marriott’s initial management contract includes a 35-year term with a 2 percent base management fee and an incentive fee linked to improvement in profitability.
“We’re delighted to be able to make this announcement today, and look forward to adding the Gaylord brand to our portfolio,” says Arne Sorenson, president and CEO of Marriott International. “Working with the Gaylord brand, the existing four hotels and a Gaylord team that provides outstanding customer service, we are convinced there is tremendous upside potential for growing hotel revenues and profits and developing careers.”
Following completion of the all-cash transaction, Gaylord will continue to own its hotel properties and will restructure as a real estate investment trust (REIT), starting January 1, 2013.
“We are pleased to be announcing today a transaction we believe allows shareholders the potential to realize maximum long-term value for their shares in Gaylord Entertainment,” says Colin Reed, chairman and CEO of Nashville-based Gaylord. “Our months-long review of various options led us to the conclusion that the REIT structure represents the best pathway to realize the long-term value of our business and to position the Gaylord brand for continued growth.”
The company will be the only lodging REIT focused primarily on group-oriented destination hotels in urban and resort markets. By the end of the year, the company plans to issue its shareholders a special one-time taxable dividend of its undistributed earnings and profits. Gaylord anticipates the amount of earnings and profits distribution to total approximate $415 million to $450 million.
“The REIT structure allows us to benefit from a more efficient tax structure, and establish a platform to grow our distinct asset base through organic growth of our existing portfolio and, in time, through strategic acquisitions,” Reed says. “In addition, we believe we will have a unique competitive position in the hospitality REIT marketplace with a well-capitalized balance sheet and a relatively predictable funds from operations stream.”
Gaylord’s share price closed at $34.48 on May 30, up from $32.25 a year ago. Marriott’s share price closed at $38.29, up from $37.31 a year earlier.
— Savannah Duncan