Marriott sells
resort on Kauai

It is part of a deal involving four
properties totaling $101.5 million

---

By Russ Lynch
rlynch@starbulletin.com

The 356-room Kauai Marriott Resort has been sold to a Massachusetts real estate investment trust, in a deal that calls for Marriott International Inc. to continue to manage the property at least through 2019.

Officials of the buyer, Hospitality Properties Trust, and Marriott said there will be no change in the operation of the hotel or in the staff of about 640 because there will be no change in management.

The price was not disclosed but it was part of a package deal for four hotels bought from Marriott for a total of $101.5 million.

That may not seem much for the three mainland hotels and the Kauai resort, but a significant part of the value for Marriott is a long-term operating arrangement it has with the buyer, HPT.

That arrangement includes 31 hotels earlier bought from, and leased back to, Marriott. Many of them are small and the price of the latest package of four is part of the overall picture in which HPT provides financing to Marriott in return for getting an internationally known company to market and manage the businesses.

"We're not hotel operators. We don't know how to do it," Thomas M. O'Brien, chief financial officer of Newton, Mass.-headquartered HPT, said today. "HPT is not so much a hotel operator as we are a financial institution."

To an extent, the management contract is an encumbrance on the property. "I am not free to sell the hotel without the operating agreement," O'Brien said.

In addition to whatever cash HPT is paying Marriott, there is the added value that Marriott also gets in the rights to manage all 35 HPT-owned properties for at least the next 18-plus years.

Another factor in the price of the Kauai property was that HPT is not buying the entire resort, just the hotel. Not included is the 232-unit Marriott's Kauai Beach Club, a timeshare operation on the same resort complex at Kalapaki Beach near Lihue. It is part of the Marriott Vacation Club timeshare operation.

Marriott acquired the property in 1995, after Hurricane Iniki destroyed the Westin Kauai on the site.

Aside from the Kauai Marriott, which was opened by Marriott in 1995, the hotels included in the HPT deal are a new 295-room Courtyard by Marriott in Emeryville, Calif., and two in Renton, Wash. -- a 135-room TownePlace Suites and a 114-room SpringHill Suites.

Stan Brown, Marriott vice president for the Pacific Islands area, said Marriott's day-to-day operation will continue unchanged. "We've had a relationship with (HPT) for quite some time," Brown said.

The Kauai property is the largest, from a revenue perspective, of any of those sold to HPT, he said.