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WHAT GELLER'S EXIT MEANS

New York
WHAT GELLER'S EXIT MEANS
Since Laurence Geller—Strategic Hotels founder, CEO, and savior—stepped down suddenly at 4pm on Friday, analysts have conjectured that the company's proud papa could be moving to buy the company with an institutional partner.
WHAT GELLER'S EXIT MEANS
We'll know more once the separation agreement is made public later this week. Laurence, whom we snapped in his Chicago office earlier this year, was not on Strategic's investor conference call Friday to discuss the change because, as new CEO Rip Gellein noted, he is no longer an officer or director with the company. Rip, who doesn't yet have an employment contract and will remain chairman, says the board approved a succession plan two years ago that would place him at the helm should Laurence leave. Rip also says the senior management team will otherwise stay intact and Q3 earnings (also to be released this week) will reaffirm 2012 guidance. Shares, which traded at a 52-week high of $7.02, are up since Friday's close to $6.25 as of noon today.

Essex House
Rip says Strategic will continue the strategy that he, Laurence, and the board have used to turn the company around in the past two years (more deleveraging and more acquisitions). This morning, SNL Financial's Jason Lail told us Strategic has decreased its leverage more than 5% from Q2 '11 to Q2 '12, better equipping it to finance acquisitions like its Q3, JV buy of the 509-room NYC icon Essex House (a re-entry to the East Coast). Jason says Strategic has $331M in liquidity available now. Still the REIT's assets trade at a 22% discount to NAV, compared with the 12% median for hotel REITs and 3% for all equity REITs, so there's still trapped value in its 18-hotel, 8,271-key portfolio.
The Last Resort
The company says Laurence will advise Rip for the rest of the year before moving on to other adventures (like last month's release of his latest novel, above). Jason tells us the REIT's market cap is $1.3B, so there would be heavy weight on an institutional partner to make a buyout a reality. The three largest institutional owners in the REIT now: Vanguard with 9.5% (19.5M shares), RREEF with 6.5%, and Cascade Investment with 6%. Laurence owned 1.1% of the company (2.2M shares) as of April.