Our long-term strategic plan is to own a diversified portfolio of high quality, upscale hotels flagged under leading brands and then increase shareholder value and return on invested capital by maximizing the use of our real estate and enhancing cash flow. We continually examine our portfolio to address issues of market supply and concentration of risk. In order to achieve our strategic objectives, we have identified four goals:
Portfolio Repositioning and Debt Reduction
At the beginning of 2006, we amended our management agreement with InterContinental Hotels Group (IHG) which allowed us to sell all of our non-strategic hotels including all of our Holiday Inn hotels located in secondary and tertiary locations, and use the proceeds along with excess cash to reduce debt, fully renovation our portfolio and maximize our real estate and excess land through the investment of redevelopment projects. We have almost $1 billion available to reinvest in our portfolio and pay down debt.
We identified 45 hotels as non-strategic. Total gross proceeds are expected to be approximately $715 million. To date, we have sold 34 hotels for total gross proceeds of $530 million. Due to the very strong demand for hotels and lack of new supply, our disposition program was a success. Total proceeds were more than expected and the program has progressed faster than expected.
We have substantially completed the debt reduction goal of $400 million this year using proceeds from asset sales. Our leverage has been reduced from over eight times EBITDA at the end of 2004 to less than five times at the end of 2006.
Internal Growth
We believe FelCor has a unique opportunity for significant future growth and significant increase in shareholder value relative to our peers. The plan consists of three prongs: Renovation program, Redevelopment projects and a new Asset management approach. We expect high returns from these initiatives and are already seeing very good results.
In 2006, we finalized the scope and scheduling of the renovation plans and the work is well underway. We finalized the list of redevelopment projects and are beginning work on several of those. The realignment of asset management is complete.
After the completion of the plan, FelCor will have a fully renovated portfolio of mainly upper upscale hotels located in major markets with high barriers to entry that will deliver above average RevPAR and EBITDA growth.
External Growth
We regularly consider hotel acquisitions that will improve the overall quality of our portfolio, further diversify our portfolio by market and customer type, and/or improve future EBITDA growth. However, we take a disciplined approach to any acquisitions, which must meet strict criteria, including minimum rates of return.
Moreover, we believe our reduced debt levels will ensure that we will have sufficient borrowing capacity to fund acquisitions when opportunities arise.
