AshfordHospitality Prime Inc.'s independent directors have concluded thereview of strategicalternatives for the company, outlining five immediate structuralchanges and longer-term initiatives for the group.
The review entailed an evaluation of all potential optionsincluding a sale of the company, sales of individual assets, joint ventures,mergers, various recombination opportunities with other Ashford entities, sharerepurchases and capital raising across different structures.
The company said April 8 that it secured indications ofinterests from a number of potential financial and strategic buyers to buy thecompany. However, the independent directors, after consulting with theirindependent adviser, believed that none of the indications were at levels thatwould provide adequate value to stockholders.
Following feedback from the investor community and theanalysis completed through the strategic review process, the company said itwill use up to $50 million to commence a stock repurchase program, which willbe covered by its current outstanding share repurchase authorization of about$75 million. Ashford Prime said it would take "several months" tofully deploy the capital and that it will continue to review future sharerepurchase programs.
Second, the company said that it will amend its 2016dividend policy starting with the second quarter by boosting the quarterly cashdividend for the company's common stock by 20% to 12 cents per diluted sharefrom 10 cents per share. The change equates to an annual rate of 48 cents perdiluted share, or a 4.4% yield based on the company's closing stock price onApril 7.
The Ashford Prime board noted that it will continue to reviewthe company's dividend policy on a quarterly basis and that the adoption ofsuch a policy does not commit the board to declare future dividends or theamount thereof.
In addition, the company is liquidating its investment inthe AIM Real Estate Hedged Equity investment fund and will use the cashproceeds to fund the share repurchase plan.
Another initiative is that Ashford Prime will"immediately" unwind its operating partnership unit enfranchisementpreferred equity transaction for the company's operating partnership unit holders,previously announced Feb. 2.
The company also said it is launching the sales process forup to four of its assets, namely the Courtyard Philadelphia Downtown Hotel,Courtyard Seattle Downtown Hotel, Renaissance Tampa Hotel and Marriott LegacyCenter Hotel in Plano, Texas. These hotels do not meet the RevPAR level and theproduct quality in accordance with Ashford Prime's long-term vision.
Ashford Prime will also proceed with divesting assets thatwill help the company achieve attractive pricing and deal terms. It will alsoconsider different transaction structures, including individual and group assetsales, joint ventures or other opportunistic strategies. The net proceeds fromthe planned asset sales will be used for repayment of debt, share repurchasesor special distributions to stockholders.
The company also reaffirmed its focused strategy ofinvesting in luxury hotels in resort and gateway markets while targeting aconservative leverage level of net debt/EBITDA of 5.0x or less.
"After a thorough review of all strategic alternativesavailable to the company, we believe executing on these value-enhancinginitiatives is the best path forward to maximize value for all stockholders ofAshford Prime," said Curtis McWilliams, Ashford Prime's lead independentdirector.
Monty Bennett, Ashford Prime's chairman and CEO, said theplanned divestments and the other outlined capital strategies are "thebest way for us to create near-term value for our stockholders while wecontinue to execute on our long-term strategy."
Ashford Prime retained Cadwalader Wickersham & Taft LLPas legal counsel. Deutsche Bank Securities Inc. acted as independent financialadviser in connection with the strategic review process, while Moelis & Co.LLC acts as financial adviser to the company in relation to activistshareholder Sessa Capital's proxy contest.