Inland American Real Estate Trust Terminates its Management Agreements and Will Become Self-Managed
Inland American Real Estate Trust, Inc. (the "REIT," "we," "our" or "Inland American") today announced that functions previously performed by its business manager are now being performed by the REIT. The REIT and its business manager, Inland American Business Manager & Advisor, Inc., agreed to terminate the management agreement, and the REIT hired all of its business manager's employees and acquired the assets of its business manager necessary to perform the day-to-day operations that its business manager previously provided on its behalf, for no fee, thus becoming self-managed.
responsibility for performing certain of their significant functions, including property-level accounting, lease administration, leasing, marketing and construction functions; and amended our property management agreements to reduce our property management fees as a result of our assumption of such responsibilities. Furthermore, we have agreed with our property managers that, subject to the satisfaction of specified closing conditions, effective on December 31, 2014 we will take over the remaining property management functions performed by our property managers, terminate our property management agreements, hire the remaining property manager employees and acquire the assets necessary to conduct the remaining functions performed by the property managers for no fee.
The REIT will not pay an internalization fee or self-management fee in connection withthe self-management transactions. Effective February 1, 2014, the self-management transactions eliminate the management and advisory fees paid by the REIT to the business manager. At the end of 2014, we expect to eliminate the fees paid to our property managers when we terminate our property management agreements. In connection with the self-management transactions, the REIT will pay the business manager fee for January 2014 and reimburse its business manager and property managers for certain transaction and employee related expenses. We expect that becoming self-managed will positively impact our net income and funds from operations. We cannot, however, estimate the impact due to uncertainties regarding the anticipated transition-related expenses, including the terms and conditions of employment arrangements with individuals we are hiring from our business manager and property managers, as well as other infrastructure and information technology costs associated with becoming self-managed.
In order to help ensure a successful transition to self-management, the REIT will retainaffiliates of The Inland Group, Inc. for consulting services and for ongoing IT services, investor relations and other back-office services, which were previously provided to the REIT through our business manager. The self-management transaction agreements were negotiated on behalf of the REIT by a special committee of independent directors of the REIT's board of directors, and were unanimously approved by the REIT's board of directors.
The REIT's management team remains unchanged. Members of the executive team,previously employed by the business manager on behalf of the REIT, have now become employees of the REIT, including Thomas McGuinness, president, Jack Potts, treasurer and principal financial officer, Anna Fitzgerald, principal accounting officer, and Scott Wilton, secretary.
"This announcement marks an important milestone for Inland American," said Mr.McGuinness. "This transition is the next step in Inland American's life cycle and becoming self-managed shows the board's confidence in Inland American's personnel, expertise and growth as a company. Effective February 1, 2014, the REIT will no longer pay a quarterly advisory fee to its business manager."
"The decision to become self-managed is the result of a thorough process conducted byour board's special committee of independent directors," added Mr. McGuinness. "Inland American's board and management team are committed to driving value for stockholders and look forward to completing Inland American's transition to full self- management."
Additional details regarding the self-management agreements can be found in ourCurrent Report on Form 8-K filed with the Securities and Exchange Commission on March 13, 2014.
As part of the process, the special committee of the REIT's board of directors engagedSkadden Arps Slate Meagher & Flom LLP as legal counsel and Moelis & Company as financial advisor.
About Inland American Lodging Advisor, Inc.
Inland American Lodging Advisor, Inc., located in Orlando, FL, focuses on acquiring and managing a diversified portfolio of lodging properties on behalf of Inland American Real Estate Trust, Inc. Inland American Lodging Advisor, Inc. currently oversees 91 hotels branded under various Marriott, Hilton, Starwood, Hyatt, Fairmont, and IHG brands that are managed either by the brand managers or independent third-party management companies. For further information regarding Inland American Lodging Advisor, please refer to the company website at www.inlandamericanlodging.com.
About Inland American Real Estate Trust, Inc.
Inland American Real Estate Trust, Inc. focuses on acquiring and developing a diversified portfolio of commercial real estate located in the United States. The company also invests in joint ventures, development projects, real estate loans and marketable securities. As of December 31, 2012 Inland American owned, directly or indirectly through joint ventures in which it has a controlling interest, 794 properties, representing approximately 46 million square feet of retail, industrial and office properties, 10,523 multi-family units and 16,345 lodging rooms. Inland American is one of six REITs that are, or have been, sponsored by affiliates of The Inland Real Estate Group of Companies, Inc. For further information regarding Inland American, please refer to the company website at www.inlandamerican.com.