After a strategic review suggested a sale of the company early in 2016, officials with Ashford Hospitality Prime decided to take a different tact by hiring new CEO Richard Stockton and planning to grow by acquiring properties in 2017.
LOS ANGELES—Ashford Hospitality Prime took a hard left turn late in 2016.
Only months after a strategic review suggested the sale of the company, Ashford Prime announced that Richard Stockton would take over as CEO in November. Stockton brought a long history in real estate and investment banking, most recently working as global COO of real estate at CarVal Investors.
Until that point, the company, like the others in the Ashford group, had been led by Monty Bennett, who remains CEO of Ashford Hospitality Trust, Ashford Inc., and serves as chairman of the Ashford Prime Board of Directors.
Richard Stockton, CEO, Ashford Hospitality Prime
Stockton said he’s visited “almost all” of Ashford Prime’s properties and met with general managers.
“That’s helped me get a sense of the state of the business and helps form future strategy,” he said.
Stockton said he’s also met with most of the company’s largest shareholders, although he was careful to note that he has not met investors with which the company has “a legal situation”—likely referring to activist groups like Sessa Capital.
“I wanted to hear (investors’) views on the company and any issues that might concern them,” Stockton said. “And it’s really just to let them know I’m available so we can have a dialogue.”
Stockton quickly established that his plan for the company is not to sell it or its individual assets, but instead look for opportunity to acquire more luxury hotels and expand the size of the real estate investment trust’s portfolio.
“The alternative to a sale is to grow the business, so that’s really what I’ve been focused on coming in,” he said. “As I meet with shareholders, that is the most recurring question: ‘What are your views on growth, and how do you achieve that?’”
Making a splash
Stockton said he expects Ashford to be an active buyer in the near future, despite what he described as worries about the company’s ability to make acquisitions due to its stock price.
“We’ve got a lot of tools in our arsenal,” he said. “We’ve got over $110 million of excess cash on the balance sheet. We’ve got a $100-million revolving credit facility that’s completely undrawn. And we demonstrated last year we have access to the convertible preferred market to raise capital as well.”
In terms of number of assets, Ashford Prime remains one of the smaller players in the lodging REIT space, with 11 properties scattered across the U.S. and Caribbean with assets of roughly $1.3 billion as of the third quarter of 2016. At the same time, Ashford Hospitality Trust had 126 properties and more than $4.8 billion in assets.
Stockton said this makes it easier for Ashford Prime to make a splash relative to its size, and means even if they’re on the lookout for deals they won’t be forced to grow for growth’s sake.
“It doesn’t take much because we have 11 assets,” he said. “So if we acquire one asset, that moves the needle. And if we acquire two, uh oh, watch out.”
Stockton said that ability to quickly change the company’s direction was appealing to him.
“I viewed this as quite an entrepreneurial opportunity because it had such a solid base in terms of the existing business but also a lot of ways we can take it to the next level,” he said.
Company officials recently announced what they described as a refined strategy for the company with four major bullet points:
- Focus on acquiring high-revenue luxury hotels and reposition or sell off noncore assets, which includes The Courtyard Philadelphia Downtown Hotel, the Courtyard San Francisco Downtown Hotel, the Renaissance Tampa Hotel and the Marriott Legacy Center Hotel in Plano, Texas.
- Increase the company’s dividend.
- Target conservative leverage down to 45% net debt to gross assets.
- Maintain and increase liquidity to guard against economic turbulence and by holding up to 15% of gross debt balance in cash.
Stockton said he’s confident he will be able to help Ashford Prime grow in size and in relevance to investors.
“My background, which is in a lot of real estate investment management, private equity, we’re aiming to (grow) in a way that’s financially accretive,” he said. “At the end of the day, we’re trying to generate value.”
Stockton acknowledged that this new modus operandi is a departure from 2016, when the company spent the year largely on the sidelines in terms of deals and spent a lot of time and energy coping with activist investors and redefining its strategy.
He also said the restructuring at the company will have benefits to the larger Ashford group because it will give Bennett more time to focus on the other Ashford REIT and Ashford, Inc.
“Our chairman is the chairman of three publicly listed companies, and he’s CEO of two of them,” Stockton said. “Now that he’s no longer CEO (of Ashford Prime), frankly from a bandwidth perspective I think that’s the best way to maximize his talents. It helps to bring someone in like me who can take responsibility for some of the more kind of day-to-day, CEO-type decisions.”