RED LION HOTELS CORPORATION (NYSE:RLH) Files An 8-K Completion of Acquisition or Disposition of Assets

RED LION HOTELS CORPORATION (NYSE:RLH) Files An 8-K Completion of Acquisition or Disposition of Assets
Item 2.01. Completion of Acquisition or Disposition of Assets.

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On February28, 2018, RL Pasco, LLC completed the sale of the Red Lion Hotel in Pasco, Washington and an adjacent lot to JODH’s Development, LLC, a Washington limited liability company, and RRR Investment, LLC, a Washington limited liability company (collectively, the “Pasco Purchasers”). The purchase price for the hotel and adjacent property was $13.1million, which was paid in cash at closing. At closing, Sunrise Hotel’s, LLC, an affiliate of the Pasco Purchasers, entered into a franchise agreement with Red Lion Hotels Franchising, Inc., a wholly owned subsidiary of Red Lion Hotels Corporation (“RL Franchising”), and will continue to operate the Pasco hotel under the Red Lion brand. The franchise agreement provides for a 20 year term and the payment of monthly royalty and program fees set at a percentage of the hotel’s gross room revenue. Either party may terminate the franchise agreement without penalty on the 10th anniversary of the hotel’s opening date, by providing at least 180 days’ notice of termination. Termination of the franchise agreements by RL Franchising upon default of the franchisee, or termination of the agreement by the franchisee without cause, will require the franchisee to pay a termination fee. The obligations of the franchisee under the franchise agreement has been guaranteed by its manager, Kamaljit Singh, and his wife Sukhbans Shahi.

On February28, 2018, RL Boise, LLC completed the sale of the Red Lion Hotel in Boise, ID to Boise Downtowner Hospitality, LLC, an Idaho limited liability company, and RL Richland, LLC completed the sale of the Red Lion Hotel in Richland, WA to Hanford House Hospitality, LLC, a Washington limited liability company, in related transactions. The purchase price for the two hotels was $16.75million, which was paid in cash at closing. At closing, each purchaser entered into a franchise agreement with RL Franchising and will continue to operate the hotels under the Red Lion brand. The franchise agreements each provide for a 20 year term and the payment of monthly royalty and program fees set at a percentage of the hotel’s gross room revenue. Either party may terminate the franchise agreement without penalty on the 5th or 10th anniversary of the hotel’s opening date, by providing at least 180 days’ notice of termination. Termination of the franchise agreements by RL Franchising upon default of the franchisee, or termination of the agreement by the franchisee without cause, will require the franchisee to pay a termination fee. The obligations of Boise Downtowner Hospitality under the franchise agreement have been guaranteed by Sukhbir and Rajbir Sandhu, husband and wife, and owners of Boise Downtowner Hospitality. The obligations of Hanford House Hospitality, LLC under the franchise agreement have been guaranteed by Gurbir Sandhu, its owner. Both Sukhbir Sandhu and Gurbir Sandhu are existing franchisees of Red Lion, owning and franchising the Red Lion Hotel Wenatchee and Red Lion Hotel Columbia Center, Kennewick. Gurbir Sandhu also owns and franchises the Red Lion Hotel and Suites, Kennewick.

Each of RL Pasco, LLC, RL Richland, LLC and RL Boise, LLC is a wholly owned subsidiary of RL Venture, LLC. RL Venture, LLC is a variable interest entity in which Red Lion Hotels Corporation holds a 55% interest, and therefore the registrant consolidates the assets, liabilities and results of operations of this entity.

Item 2.01 Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement

Immediately following the sale of the three hotels described in Item 2.01, RL Venture, LLC repaid $22.8million in principal balance outstanding under its loan agreement with Pacific Western Bank, as required by the terms of that agreement.

Item 2.01. Regulation FD Disclosure.

A copy of the company’s press release, dated March6, 2018, announcing the completion of the sale is furnished as Exhibit 99.1 hereto.

Non-GAAP Financial Measures

The following is a reconciliation of pro forma Adjusted EBITDA to amounts previously reported, to reflect (i)the deconsolidation of the TicketsWest business, including WestCoast Entertainment, (comprising the Entertainment reportable segment), (ii) the sale of two hotel assets on February21, 2018, as previously reported, and (iii)the sale of three hotel assets as described in Item 2.01 of this filing:

NineMonthsEnded September30, 2017 Year Ended December31,
(in thousands)

Adjusted EBITDA from continuing operations- as previously reported

$ 19,683 $ 19,472 $ 12,463 $ 13,350

Less: Deconsolidation of the Entertainment Segment

(2,243 ) (986 ) (2,348 )

Less: Redding and Eureka asset sales

(1,430 ) (1,800 ) (1,453 ) (1,493 )

Less: Assets sold with this filing

(2,674 ) (3,495 ) (3,604 ) (3,662 )

Pro Forma Adjusted EBITDA

$ 15,579 $ 11,934 $ 6,420 $ 5,847

EBITDA is defined as net income (loss), before interest, taxes, depreciation and amortization. We believe it is a useful financial performance measure due to the significance of our long-lived assets and level of indebtedness. Adjusted EBITDA is an additional measure of financial performance. We believe that the inclusion or exclusion of certain special items, such as gains and losses on asset dispositions and impairments, is necessary to provide the most accurate measure of core operating results and as a means to evaluate comparative results. provide the most accurate measure of core operating results and as a means to evaluate comparative results. Refer to our previously filed 10-Q (filed on November6, 2017) and 10-Ks (filed on March31, 2017, March1, 2016, February27, 2015, respectively) for the reconciliation from net income to adjusted EBITDA and further discussion of Non-GAAP measures.

Item 2.01. Financial Statements and Exhibits.

(b) Pro Forma Financial Information.

Attached hereto as Exhibit 99.2 and incorporated by reference herein is unaudited pro forma consolidated financial information of the registrant that gives effect to (i)the sale of the entertainment division as described in the 8-K and related proforma financials statement filed on October10, 2017, (ii) the sale of two hotels and the entry into the related franchise agreements and the repayment of principal under the registrant’s loan agreement with Pacific Western Bank as described in the 8-K and related proforma financial statements filed on February27, 2018, (iii) the sale of the three hotels and the entry into the related franchise agreements described in Item 2.01 of this Form 8-K, and (iv)the repayment of principal under the registrant’s loan agreement with Pacific Western Bank described in Item 2.01 of this Form8-K.


Red Lion Hotels CORP Exhibit
EX-99.1 2 d528635dex991.htm EX-99.1 EX-99.1 Exhibit 99.1   RLH CORPORATION CLOSES SALE OF THREE ADDITIONAL HOTELS FOR $29.9 MILLION Red Lion Hotels in Boise,…
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About RED LION HOTELS CORPORATION (NYSE:RLH)

Red Lion Hotels Corporation (RLHC) is a hospitality and leisure company. The Company is engaged in the franchising, management and ownership of hotels under the brands, including Hotel RL, Red Lion Hotel, Red Lion Inn & Suites, GuestHouse and Settle Inn & Suites (collectively the RLHC Brands). The RLHC brands represent upscale, midscale and economy hotels. The Company’s segments include company operated hotel segment, franchised hotels segment, entertainment segment and other. The hotels segment is engaged in guest room rentals, and food and beverage operations at its operated hotels. The franchised hotels segment is engaged in licensing its brands to franchisees. It offers various programs, which include its reservation system, guest loyalty program, national and regional sales, revenue management tools, quality inspections, advertising and brand standards. The entertainment segment consists of its WestCoast Entertainment and TicketsWest operations.

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