Red Roof Past Distress, Now Talking Growth and Acquisitions

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The same day Andrew Alexander took over as president of Red Roof Inns in May of 2009, the company defaulted on loans securing nearly 200 corporate-owned properties. It took more than two years, but the Columbus, OH-based company has put both the financial and emotional distress behind it.

This week in rainy Orlando, Alexander and Red Roof executives spoke confidently about the recent recapitalization and optimistically about the future growth of the brand. Those 200 properties are no longer Red Roof-owned, but those assets still remain in the system, now as franchised and corporate-managed locations for new financial partners, Five Mile Capital Partners and Dune Real Estate Partners.

The recent capitalizations include significant funding for renovations: $20 million for the 51 properties now owned by a partnership between Dune and Westmont Hospitality, part of the group that bought Red Roof from Accor in 2007 for $1.3 billion, and $70 million for the 143 properties owned by Five Mile and Westmont.

Red Roof unveiled a new prototype Tuesday — Next Gen II, updates to its recent Next Gen prototype —and announced plans for system-wide renovations, already underway at some of the corporate-managed properties. Also, the entire system will have new flat-screen TVs by the end of 2012.

Alexander said he expects to have 50 new properties by the end of 2012, and said Red Roof's new financial partners are hospitality savvy, opportunistic and “active investors.” He said acquisitions, of even “smaller portfolios or independent-like brands and chains in the U.S. and Canada,” are being considered.

Alexander admitted in a perfect world Red Roof would have been able to maintain those 200 properties, but in the end, this recapitalization puts the company on solid footing and provides a clean slate. Instead of talking about distress, or not talking at all, Alexander and Red Roof were shining bright in dreary Orlando this week.

Check out LHonline.com later this week for a more thorough report on the Red Roof conference.

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