Skift Take
Strategic holds one of the most impressive collection of properties in the industry, especially for a public company, but a negative cash flow and lack of profitability may make it a hard sale in the end.
Strategic Hotels & Resorts Inc., the owner of luxury lodgings from New York’s Essex House to the Ritz-Carlton Half Moon Bay in California, is turning into a takeover candidate after its founder’s abrupt exit.
Strategic Hotels said this month that Chief Executive Officer Laurence Geller was leaving after leading the $1.2 billion company since its formation in 1997. Geller’s departure from the Chicago-based owner of resorts run by the Four Seasons and Ritz-Carlton chains could open the door for potential acquirers, according to KBW Inc. The announcement sent the stock up 13 percent, the most in 31 months.
“There’s always been this kind of backdrop of, ‘Is Strategic a takeout?,’ and it’s always because it just has a unique portfolio of these kind of Ritz-Carlton assets,” Smedes Rose, a New York-based analyst at KBW, said in a telephone interview. “Laurence Geller being replaced sort of suddenly and by surprise, some investors are looking at that as a catalyst to the company now being sold.”
Strategic Hotels commands the highest average daily rate of any U.S. hotel real estate investment trust valued at more than $500 million, according to data compiled by Bloomberg. A buyer could offer $8 a share, a 32 percent premium, and still obtain the company’s luxury hotels at a discount to their net asset value, according to JMP Securities LLC. Potential acquirers could include private-equity firms or Host Hotels & Resorts Inc., another REIT, said Raymond James Financial Inc.
Buyer interest
Raymond “Rip” Gellein, Strategic Hotels’s chairma
