I read the seeking alpha article. Basically the assets other than current are 25 hotels that they have been converting to franchises. The hotels are not generating any type of a margin given the low revpar numbers. While some hotels have been sold for gains others have not. The franchise business is marginally unprofitable as is the entertainment division. They are paying sky high interest rates on the debs which I am guessing they can refinance. Finally they used a bunch of the owned hotels to secure the new financing. The company was shopped recently with no takers at the urging of a large holder. If I were the large holder Id be concerned that this one may be on the path to a flame out. Can anyone explain why this should be bought and not shorted?
they have been selling the hotels at significant discounts to both county assessment values, comparable sales records, and most importantly RLH's own book value
they are taking impairments on the 6 hotels they just put on the block (Pocatello, Kelso, etc. etc.)
they only own 2 properties in Cali where the real estate can fetch prices above $300/square feet. so far, they have been selling stuff at $100-$120/square foot and by my estimates the 19 wholly owned hotels are worth about $150m (21% discount to book). i would note my estimate is fairly conservative, as i have only included the square footage of the rooms and assigned no value to acreage, swimming pools, meeting space, etc.
if anything, the stuff on the books is fairly valued and you are getting the franchising/entertainment businesses for free which could potentially be worth $2-$3/share max, but nothing significant enough for me to be involved