Corcoran reflects on FelCor’s RLJ deal, company history
 
Corcoran reflects on FelCor’s RLJ deal, company history
26 APRIL 2017 8:00 AM

Tom Corcoran has been through a number of deals and near-deals in the 26-year history of FelCor Lodging Trust, and looks at the company’s possible merger with RLJ Lodging Trust as a win for shareholders.

Tom Corcoran, FelCor Lodging Trust’s chairman of the board and co-founder, has always been a glass-half-full guy.

That’s why it’s no surprise that FelCor’s chairman of the board and co-founder views Monday’s announcement that the company he helped launch in 1991 plans to merge with RLJ Lodging Trust as a win for everyone involved.

“I’m very optimistic in terms of what it does for FelCor and the shareholders,” said Corcoran during a phone conversation Tuesday afternoon. “The cross section of hotels (RLJ will have if the deal closes), the blend of being the third largest hotel REIT with a platform of very strong hotels … it has a lot more breadth. It feels good, it’s the right timing.”

Though the FelCor name will be retired when the proposed merger closes, Corcoran isn’t fretting.

“I don’t see it as going,” he said. “I actually see it as a continuation in a different form. Our DNA at FelCor will merge into the DNA of RLJ.”

The fact that RLJ swooped in and made the deal despite the moves of long-time suitor Ashford Hospitality Trust was about the only surprise to many industry observers. FelCor’s future had been in question for some time.

“With the dynamics that existed at FelCor, we were in a position where a lot of people were taking a look at it,” said Corcoran. “The alignment of the stars were such that FelCor was looking for a growth strategy that including selling hotels to pay down debt, the CEO retired, shareholder activists emerged, and then came the interest from Ashford.”

Ashford Trust in February announced its first bid to acquire FelCor. The back-and-forth between the companies continued until Monday when the RLJ deal was announced. Ashford Trust on Tuesday responded to the Monday announcement, saying it had revised its offer on 20 April to include more cash.

Despite what appears to be an epic battle for the right to acquire FelCor, Corcoran said he doesn’t anticipate a flurry of activity in the hotel REIT sector.

“I don’t think it’s the start of a big trend,” said Corcoran, who also owns hotels separately from FelCor.

Looking back at the early years
Corcoran, who started his career as a dishwasher at a Holiday Inn in his hometown of Topeka, Kansas, seemed to enjoy reminiscing about FelCor. He and his co-founder, the late Hervey Feldman, launched the company as FelCor Suite Hotels in 1991. Known as the “Suite REIT” when it went public on the NASDAQ stock exchange in 1994, FelCor soon added the DoubleTree Guest Suites and Sheraton Suites brands to its portfolio. But there simply weren’t enough all-suite hotels to satisfy FelCor’s acquisition appetite.

“It became apparent that you couldn’t buy enough all-suite hotels,” Corcoran said.

The company in 1996 changed its name to FelCor Lodging Trust and switched to the New York Stock Exchange. In 1998, Corcoran and Feldman decided to merge with Bristol Hotel Company. Today, thinking back on that deal makes Corcoran wonder if he should have done things differently.

“The pressure back in ’98 was that if you didn’t have a good growth story, you were going to be acquired by somebody,” he recalled. “We fell to the pressure of Wall Street and did the merger.”

The result gave FelCor a number of hotels that it wasn’t used to dealing with--the majority of the properties were not in the all-suites category.

“A lot of the hotels we acquired in ’98 ended up being in secondary and tertiary markets, and those hotels we did eventually sell,” Corcoran said. “I don’t think we had strategically looked at the markets to see how defensible the hotels were.”

The Bristol deal, valued at $1.7 billion, gave FelCor 195 hotels in its portfolio and raised its market cap to $4 billion. It became the largest owner of Crowne Plaza- and Holiday Inn-branded hotels as it had more than 100 properties under the Bass PLC umbrella (which is now known as InterContinental Hotels Group).

Merger thwarted by 9/11
FelCor was poised to make an even bigger splash through a proposed merger with MeriStar Hospitality Corporation (formerly CapStar Hotel Company) in 2001. It was gearing up for a deal that would have raised its market cap to $6 billion until 9/11 happened. Citing a downgraded business climate, the companies mutually agreed to nix the deal.

“We had gone down the road a fair amount,” Corcoran said. “We had raised some debt, had moved some people. We all felt it was a foregone conclusion.”

But it wasn’t meant to be, and Corcoran said he has no regrets that the deal didn’t get done.

“Like a lot of impacts from 9/11, we were one of many business transactions that didn’t occur,” Corcoran said. “I probably stewed about it a lot back in 2001 and 2002, but 9/11 was such an unbelievable event … I never felt sorry for myself or the company because what it did to the country was far bigger than what it did to FelCor.”

Glass-half-full Corcoran made a friend in MeriStar leader Paul Whetsell—a friendship he retains today as Whetsell is vice chairman of Loews Hotels & Resorts.

Corcoran became chairman of FelCor’s board in 2006, and he has spent a lot of time volunteering in various roles for the American Hotel & Lodging Association. In 2015, he was awarded the Stephen W. Brener Silver Plate Award by Hotel News Now for his contributions to the industry.

When asked what he plans to do once the merger is complete, the 68-year-old Corcoran was pretty clear: “Be a piano teacher, buy hotels and continue as chairman of (Dallas-based) Sammons Enterprises.”

So while his glass is always half full, his plate remains completely packed—something you would expect from an accomplished chef.

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