Hotel real estate owner cutting ties with InterContinental

The InterContinental San Juan is one of Service Properties Trust’s IHG-branded hotels.
The InterContinental San Juan is one of Service Properties Trust’s IHG-branded hotels.

Hotel real estate owner Service Properties Trust has followed through on its threat to cut ties with InterContinental Hotels Group (IHG), announcing plans to reflag all 103 of its IHG-branded properties to Sonesta brands after the hospitality group allegedly failed to make good on missed payments.

Service Properties Trust accused IHG of failing to pay approximately $8.4 million in guaranteed returns in July, demanding payment of the full sum plus interest by Aug. 24 in order to avoid termination of all operating agreements on Nov. 30. Another $17.4 million in guaranteed returns was set to come due Aug. 1, according to the real estate group. 

Service Properties Trust's IHG-branded stable includes 22 full-service and 81 extended stay hotels across the U.S., Canada and Puerto Rico. Notable full-service properties include the InterContinental San Juan, the InterContinental Toronto Yorkville, the Kimpton Hotel Palomar Washington D.C. and the Kimpton Hotel Allegro Chicago.

In an emailed statement, an IHG spokesperson confirmed that Service Properties Trust "has indicated its intent to terminate the management agreement with IHG, effective Nov. 2020."

"IHG is committed to remaining in sound financial condition by reducing costs and protecting cash flow, ensuring our management agreements are in line with this approach," the spokesperson added. "As we noted in in our half-year results earlier this month, we are well-capitalized and maintain a total available liquidity of $2 billion."

Under Service Properties Trust's reflagging effort, all 103 of its IHG properties are set to transition to the Sonesta International Hotels Corp. portfolio on or around Nov. 30. The company said in July it planned to flag its properties under Sonesta's Royal Sonesta, Sonesta and Sonesta ES Suites brands.

Service Properties Trust holds a 34% stake in Sonesta. 

Service Properties Trust also reported that 16 former IHG hotels that the company had previously transitioned to the Sonesta portfolio in 2012 have fared well, collectively seeing a 14.4% and 10.3% improvement in total annual revenue and hotel earnings before interest, taxes, depreciation and amortization, respectively, after the change. 

The transaction will grow Sonesta's footprint to 160 properties in the U.S. and nearly 200 properties globally. The expansion will also mark the company's first foray into Washington; San Diego; Seattle; Salt Lake City; Denver; Louisville, Ky.; Raleigh, N.C.; San Juan; and Ontario, Canada.


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