COREPOINT LODGING, A lodging REIT, resolved its dispute with Wyndham Hotels & Resorts over CorePoint’s claim that Wyndham was in default of its management agreement with the REIT.
Wyndham, doing business as LQ Management, manages CorePoint Lodging’s hotels.
Wyndham in May 2018 acquired the La Quinta brand from La Quinta Holdings, including its franchise and management business. La Quinta’s corporate-owned portfolio of more than 300 hotels spun off into CorePoint Lodging, and Wyndham signed on as property manager, doing business as LQ Management.
CorePoint Lodging on July 30 informed LQ Management it was in default of its management agreement.
In a second-quarter earnings call on Aug. 13, CorePoint CEO Keith Cline said the integration of Wyndham’s operating systems and other technology programs negatively impacted the REIT’s business and “contributed to our lower occupancy and average daily rate as well as the loss in market share.” CorePoint’s EBITA was $46 million in 2Q19, down 34 percent from a year ago quarter.
In response to Cline’s statement, Wyndham issued its own statement saying LQ Management continued “to work closely with CorePoint to optimize their portfolio performance.”
A week before Wyndham’s third-quarter earnings report was released on Oct. 29, CorePoint announced the two companies had reached a $20 million settlement over the dispute.
Besides the payment, Wyndham agreed to install revenue management software programs and other technologies for the call center and to manage corporate and group bookings. The technology, said CorePoint, is “at least reasonably equivalent to the legacy systems.”
Wyndham also agreed to give the REIT $17 million from its purchase price which Wyndham had retained for tax purposes. It also agreed on criteria involved in the transfer of franchise licenses on hotels CorePoint sells.
“We are pleased to reach this settlement and come to an agreement on what we believe are key revenue management and other functionalities to be implemented over the next year that are necessary for our hotels to deliver the level of performance they are capable of achieving over time,” Cline said in a statement on Oct. 23.
“We look forward to collaborating with our third-party manager to improve the operating performance of our portfolio. Moreover, the clarification and agreement on transfer approval criteria should better facilitate our disposition strategy to drive shareholder value.”
During the earnings call, Wyndham CEO Geoff Ballotti included the news of the settlement in his statement, adding, “We will also work with CPLG to help identify and support the sale of their noncore hotels to buyers, whom we look forward to working with especially as they renovate and elevate these assets under the property’s 20-year franchise agreements with us.”
As part of its strategy to enhance value, CorePoint has earmarked more than 70 “non-core” hotels for sale. At the time of its August earnings report, the REIT had sales agreements for 27 hotels. It had sold 13 properties in the first eight months of 2019, according to SEC documents.