Hotel Online  Special Report


Eagle Hospitality Selling Hotel Under Circumstances
Advantageous To Buyer
Analysis by UNITE HERE Advises Prospective Buyers to be Fully Aware
of Facts Before Considering an Acquisition from Eagle Hospitality 
October 16, 2006  - Hotel REIT Eagle Hospitality Properties (NYSE: EHP) may be selling at least one Midwestern hotel in the near future- under circumstances that could be very advantageous for prospective buyers, according to an analysis completed by UNITE HERE. 

Key to UNITE HERE’s findings is the fact that Eagle may sell at least one hotel prior to January 17, 2007 in order to avoid paying capital gains tax on a disposition. The Company purchased the Embassy Suites Boston at Logan International Airport in July, 2006 and identified the hotel as a replacement property under Section 1031 of the Internal Revenue Code.  To complete the tax-free exchange, Eagle must sell a like-kind property within 180 days in order avoid capital gains tax on the sold property. 

“A timely sale is critical to Eagle securing the substantial tax savings,” said Kirsten Isaacson, Research Analyst with UNITE HERE, “Before settling on an acquisition price we think that prospective buyers should be fully aware of the facts.”

Because Eagle’s portfolio is heavily concentrated in the Midwest it’s likely that they will sell a Midwest property in order to help diversify their portfolio. Multiple stock analysts have speculated that Eagle will sell one of the following properties:

  • Hilton Cincinnati Airport in Florence, KY 306 rooms
  • Embassy Suites Columbus/Dublin in Dublin, OH 284 rooms
  • Embassy Suites Cleveland/Rockside in Independence, OH 271 rooms
UNITE HERE’s analysis also warns buyers to be wary of Commonwealth Hotels, current operator of all Eagle hotels in the Midwest. Citing Eagle’s poor stock performance in 2005, the study concludes that Commonwealth’s performance has been disappointing. Eagle has contracted with operating companies other than Commonwealth in their last three hotel acquisitions. Stock analysts have welcomed Eagle’s move away from Commonwealth.

Commonwealth is viewed as an affiliated manager. Eagle’s Chairman, Mr. William Butler, is also the Chairman and majority owner of Commonwealth. Prior to Eagle’s IPO, the two companies, both controlled by Mr. Butler, entered into a “strategic alliance” agreement under which Commonwealth has a general “right of first refusal” to operated any future hotels acquired by Eagle. 

For more information regarding UNITE HERE’s research into hotel dispositions by Eagle Hospitality Properties, please call 866-678-6741.

1. Eagle Hospitality Properties 10-Q filed with the SEC on August 7, 2006. Page 21.

2. According to Eagle’s Registration Statement, Commonwealth does not have a “Right of first refusal” if “the acquisition opportunity was not known to us and has been brought to us by another management company or a majority of our independent directors decides in good faith for valid business reasons to use another management company.”


Kirsten Isaacson
(213) 250-8730



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