Officials with the Ashford Hospitality Prime REIT said they hope to pursue a sale of the company following the newest offer from The Weisman Group, but they’re concerned about that company’s unwillingness to sign a nondisclosure agreement.
DALLAS—Ashford Hospitality Prime might soon have new ownership, but executives with the publicly traded real estate investment trust have some major qualms with how their potential buyer is going about the process.
Speaking during the company’s second quarter earnings call Thursday, Monty Bennett, CEO and chairman for the Ashford group of companies, said The Weisman Group substantially increased its offer to buy the company.
The Weisman Group originally made an offer to purchase the company for $20.25 per share in early June that Ashford Hospitality Prime officials said they believed undervalued the company. Bennett said his company was more compelled to listen when The Weisman Group recently upped the offer to $20.58 per share after a $70-million termination fee is paid out to Ashford, Inc.
“The Ashford Prime board has concluded that a sale at this level would be a great result for the shareholders and would like to pursue a transaction at that level or higher,” Bennett said.
But Bennett said a potential sale has hit a roadblock with The Weisman Group’s seeming refusal to sign a nondisclosure agreement before more closely inspecting Ashford’s books and initiating negotiations for a sale agreement. He said getting the agreement in place is important so negotiations don’t leak to the media—which could lead to potential stock manipulation—and to protect Ashford’s confidential data.
Bennett called Weisman’s reluctance to sign “curious.”
“We also want to make sure we’re dealing with a buyer that can close on a deal,” Bennett said. “In our experience, a financing source won’t give a commitment (without an NDA in place).”
Ashford officials conducted a strategic review earlier in the year that ultimately did not suggest a sale of the company, but did identify some assets that should be sold off. That review sparked some infighting among the company’s shareholders and an ultimately unsuccessful bid for control of the company’s board from Sessa Capital, the REIT’s third-largest shareholder.
Weisman might not be the only option for a sale, and Bennett said during the earnings call that multiple other companies have already signed nondisclosure agreements and the REIT has opened a data room to help facilitate a potential sale.
One potential sticking point for a sale might be the $70-million termination fee payable to Ashford, Inc. Bennett said Ashford, Inc. has no interest in buying Ashford Hospitality Prime and no interest in keeping the companies’ advisory agreement in place if the REIT is taken private.
Ashford officials closed the sale of one of the properties identified in the review process in early July. The 250-room Courtyard Seattle Downtown/Lake Union sold for $84.5 million
Company officials said they didn’t plan to pull the remaining assets identified by the review off the market for the time being, but they are going to be deliberate in the sale process in comparing the price they could achieve either by selling individual assets or the company as a whole with those assets intact.
At the end of the second quarter, the company had 12 properties, including the Courtyard Seattle Downtown. Company officials estimated the value of those assets at $1.3 billion.
Comparable revenue per available room for Ashford Hospitality Prime’s hotels increased by 1.6% in the second quarter when compared to Q2 2015. At press time, the company’s stock price was up 9.4% year to date.