Press Release: Boykin Lodging Company
January 15, 2002
CLEVELAND, OH -- Boykin Lodging Company (NYSE: BOY), a hotel real estate investment trust (``REIT''), yesterday
announced that it has acquired leasehold interests for 28 of its hotels from two of its operators, Boykin Management
Company (``BMC'') and Meristar Hotels & Resorts (NYSE: MMH; ``Meristar''). The structural change was made under
the REIT Modernization Act, which became effective January 1, 2001. Under the Act, REIT's are now permitted to
lease hotels to a subsidiary that qualifies as a taxable REIT subsidiary (``TRS'').
The company acquired leasehold interests in 25 of the hotels by issuing BMC 1.4 million limited partnership units
of Boykin's operating partnership, and assuming from BMC $1.6 million of liabilities in excess of assets related
to one of the lessee entities. The company entered into management agreements for BMC to operate 15 of the 25 hotels,
and took over BMC's contract with Hilton Hotels Corporation (NYSE: HLT - news) for Hilton's operation of the remaining
10 Doubletree branded hotels.
The company also restructured its relationship with Meristar by acquiring or canceling Meristar's leasehold interests
for 3 hotels and signing management agreements with Meristar to operate those hotels.
Following the transaction, 31 of Boykin Lodging's 33 hotel properties now have management contracts under the TRS
structure. The company expects to record a $15 million primarily non-cash charge to earnings in the fourth quarter
of 2001 relating to the acquisition and termination of the leases.
``We are very pleased to have completed this transaction in our continuing effort to augment long-term shareholder
value,'' stated Richard Conti, President and Chief Operating Officer. ``The key benefit is that our operators now
have a greater alignment of financial interests with ours. In addition, we believe that our flexibility has been
significantly enhanced because the new management agreements with BMC and Meristar are terminable by us without
penalty (e.g., upon a sale of the property), whereas the previous percentage leases provided for significant termination
penalties. Over the long run, the new structure will improve profitability, but we do expect a short-term earnings
dilution. We believe this structure is critical to improve our long- term financial performance.''
Because the company's chairman, Robert Boykin, controls BMC, the board of directors established a special committee
of independent directors to evaluate and negotiate the terms of the transactions with BMC. The special committee
was advised by independent counsel and financial advisors, and received the opinion of Houlihan, Lokey, Howard
& Zukin Financial Advisors, Inc. that the transactions with BMC are fair to the company from a financial point
of view. The special committee also received advice from the HVS International division of Hotel Appraisals LLC
as to the prevailing terms and conditions of hotel management contracts.
Additional details related to the transactions can be obtained from the Company's 8-K filing made today with the
Securities and Exchange Commission.
Boykin Lodging Company is a real estate investment trust that focuses on the ownership of full-service, upscale
commercial and resort hotels. The company currently owns 33 hotels containing a total of 9,249 rooms located in
nineteen states, and operating under such internationally known brands as Doubletree, Marriott, Hilton, Radisson
and Embassy Suites, among others. For more information about Boykin Lodging Company, visit the company's web site
at www.boykinlodging.com .
This news release contains ``forward-looking statements'' within the meaning of Section 21E of the Securities Exchange
Act of 1934 regarding the Company, including those statements regarding the Company's and management's beliefs
and expectations concerning the expected benefits from the new TRS structure, Company's future performance or anticipated
financial results, among others. Except for historical information, the matters discussed in this release are forward-looking
statements that involve risks and uncertainties that may cause results to differ materially from those set forth
in those statements. Among other things, factors that could cause actual results to differ materially from those
expressed in such forward-looking statements include financial performance, real estate conditions, execution of
hotel acquisition programs, changes in local or national economic conditions, and other similar variables and other
matters disclosed in the Company's filings with the SEC, which can be found on the SEC's website at http://www.sec.gov
.
SOURCE: Boykin Lodging Company