Could Xenia Hotels & Resorts Issue a Special Dividend of 10% or more with Proceeds from Upcoming Hotel Sales?

Xenia Hotels & Resorts (NYSE: XHR) has an opportunity to provide a significant special dividend to shareholders from proceeds of upcoming hotel sales. Xenia is reportedly seeking a buyer for its seven Kimpton hotels for a potential sale price of $500 million. It also reportedly has sold the Marriott Griffin Gate in Lexington, Kentucky, and put two additional hotels on the market. Total proceeds to Xenia could reach $800 million based on reported asking prices.

Shareholders can reap a high special dividend from these sale proceeds. For example, if Xenia uses fifty percent of the proceeds of the Kimpton portfolio to repay possible debt associated with these properties and distributes $250 million to investors, investors could reap an immediate 10% special distribution. Xenia may be in a position to distribute that much or even more.

With a potential shift in the hotel cycle on the horizon and its substantially repositioned portfolio, now is the time for Xenia to reevaluate its use of sale proceeds. As the hotel cycle wanes, UNITE HERE believes investors are best positioned to decide for themselves how to reinvest the proceeds.

Read the full report here.

Hotel REIT corporate governance woes apparent as industry convenes at hotel on strike 

Corporate governance failures of hotel REITs are centerstage this year as NAREIT gathers for its annual conference at the San Francisco Marriott Marquis, Host Hotels and Resort’s flagship 1,500 room convention hotel where workers have been on strike for nearly a month. 

Around 7,000 hotel workers are on strike at Marriotts in San Francisco, Boston, Hawaii, San Francisco, San Diego, and San Jose. Many of these hotels are high performers for their respective REITs and REITs are highly exposed to the costs of strikes: 

  • Diamondrock’s Westin Waterfront by Marriott in Boston contributed 11% of 2017 EBITDA; 
  • LaSalle’s Westin Copley Place contributed 9% of 2017 EBITDA; 
  • Pebblebrook’s  Westin Gaslamp in San Diego and W Boston combined for 10% of 2017 EBITDA; 
  • Host’s SF Marriott Marquis and Sheraton Boston are a combined 2,720 rooms and 3.8% of 2017 EBITDA; 
  • Braemar’s Courtyard Downtown SF was 10% of 2017 EBITDA; 
  • RLJ’s SF Marriott Union Square was 2% of 2017 EBITDA. 

The main issues are economics and Marriott’s “Make a Green Choice” program that puts housekeepers at greater risk of pain and injury. 

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Pebblebrook shareholders need facts about hotel strikes as they vote on expensive merger

Pebblebrook Hotel Trust has spent a year and considerable financial resources pursuing a merger with LaSalle Hotel Properties, which is on the cusp of being voted on and consummated. But both have high performing properties subject to rare hotel worker strikes at a critical time for the merger.

We think investors should be aware of the following facts in assessing the risks and costs of the ongoing strikes in the context of this merger.

Read more here:

AHLA plan falls short on sexual harassment protection

Industry Group Fails to Acknowledge Hotel Owners’ Responsibility

On September 6, 2018, the American Hotel & Lodging Association (AHLA) announced its “5-Star Promise,” a long overdue response to widespread sexual harassment and assault in the hotel industry.  AHLA’s Promise contained a set of voluntary, non-binding recommendations lacking specific scope or timeframe for adoption and assigned no role or responsibility for hotel REITs, despite the risks and liabilities that sexual harassment holds for them: 

  • In 2018, Host Hotels and Resorts, the world’s largest hotel REIT opposed a shareholder proposal to increase disclosures about the impact on investors of hotel operators’ environmental, human rights, and labor practices. 
  • Sunstone Hotel Investors, another hotel REIT, declined to share information about the costs of and risks to the REIT from sexual harassment claims by hotel employees despite a March 2017 settlement of a lawsuit by two female employees of the hotel alleging sexual harassment and threats of retaliation. 

Read more

Marriott’s Green Program: short-term cuts, long-term problems

“People are the heart and soul of the hotel industry,” says the American Hotel and Lodging Association, but Marriott’s Green Program is a debit against its human capital account. Host Hotels & Resorts recently told investors that Marriott’s so-called ‘Green Choice’ programs are “positively impacting expenses,” but these programs have a damaging impact on hotel housekeepers:

  • Housekeepers say Green Choice rooms are harder to clean and are dirtier than rooms that are cleaned daily.
  • Because the rooms are so dirty, housekeepers report using larger quantities of hazardous chemicals. These products may “cause damage to eyes,” “cause severe irritation to skin,” and “irritate throat and respiratory system.”

  • The Green Choice program has been in practice longer at legacy Starwood hotels. An analysis of 23 legacy Starwood hotels over 9 cities shows that Legacy Starwood hotels had a 49% increase in the number of injuries between 2013 and 2017.
  • A survey of one hotel found 91% of housekeepers with lower seniority have been left off the schedule or lost hours as a result of Green Choice.

Read more

Are Hotel Strikes Smart for Pebblebrook Right Now?

Pebblebrook Hotel Trust has spent a year and considerable financial resources pursuing a merger with LaSalle Hotel Properties, which is on the cusp of being voted on and consummated. But both have high performing properties subject to rare hotel worker strikes at a critical time for the merger.

Moreover, if Pebblebrook is planning to sell large union properties to finance the merger, as is reported, why is it willing to bear a disproportionate share of the current Marriott strikes?

A new UNITE HERE report raises the following issues:

  • LaSalle and Pebblebrook have 9% and 10% of EBITDA respectively in hotels that are on strike
  • Is selling the Westin Copley Place during a strike optimal?
  • Why is Pebblebrook bearing the brunt of strikes if it is selling its largest union properties?
  • Does Pebblebrook need additional risks to the LaSalle deal in the closing days?

Read the full report.

Boston Globe: Union fighting a boardroom battle against Newton firm

Public companies are supposed to be answerable to shareholders, but those answers aren’t always what shareholders want to hear.

Witness the battle that hotel union Unite Here is waging against Hospitality Properties Trust, one of the Newton real estate investment firms overseen by Barry and Adam Portnoy.

The fight has gone on for a few years now. By the time HPT held its annual meeting June 15, Unite Here had key allies, including Institutional Shareholder Services (a major advisory firm for investors) and New York City’s comptroller’s office.  Read more. 

Hospitality Properties Trust board abolishes annual director elections, defying years of investor votes, reports UNITE HERE

Less than two months before Hospitality Properties Trust [Nasdaq: HPT] was to begin annual director elections for its entire board of directors – for the first time in its history – the board abruptly reversed course, reinstating multi-year, staggered terms for directors.

HPT’s move comes as a slap in the face to investors who voted for five years in support of annual director elections, then voted for three years to protect this right from a Maryland state law loophole. Read more

Citing a “Troubling Lack of Responsiveness” at Hospitality Properties Trust, ISS recommends shareholders vote the Blue Card, says UNITE HERE

UNITE HERE announced today that proxy advisory firm Institutional Shareholder Services (ISS) recommends shareholders of Hospitality Properties Trust (NYSE: HPT) vote the BLUE proxy card FOR the UNITE HERE’s proposal to opt out of Maryland’s Unsolicited Takeovers Act (MUTA) and require prior shareholder approval to opt in, thereby securing shareholders’ right to annual director elections at the June 1st annual meeting.

ISS recommends PNK shareholders vote FOR six proposals protecting shareholder rights in the event of a spin-off

NEW YORK–(BUSINESS WIRE)–UNITE HERE announced today that proxy advisory firm Institutional Shareholder Services, Inc. (ISS) recommends shareholders of Pinnacle Entertainment, Inc. [NYSE: PNK] support six shareholder proposals aiming to protect shareholder rights in the event of a spin-off. The proposals address shareholder rights at any spin-off company, including management’s proposal to spin-off real estate assets into a new REIT, or Gaming and Leisure Properties, Inc.’s (NASDAQ: GLPI) alternative plan to spin-off an operating company and then acquire the remaining real estate assets. UNITE HERE submitted the package of corporate governance proposals for the May 19 Annual Meeting.