Xenia Hotels & Resorts

Xenia Hotels & Resorts
Public
Traded as NYSE: XHR
Industry Commercial Real Estate
Founded 2014
Headquarters 200 S. Orange Ave, Suite 1200, Orlando, Florida
Website http://xeniareit.com

Xenia Hotels & Resorts is the Orlando-based[1] lodging arm for Inland American Real Estate Investment Trust,[2] a non-traded REIT. It owns 46 full service hotels in 19 states and the District of Columbia.[3] On August 11, 2014, Inland American announced its intention to spin-off Xenia through a public listing.[4] Xenia began trading on NYSE under the ticker XHR on February 4, 2015.[5] Marcel Verbaas, the former President and Chief Executive Officer of Inland American Lodging Advisor, heads Xenia.[6]

Inland American was formed in 2004.[7] It has marketed the proposed spin-off as a liquidity event[8] for its 183,000 investors.[9] As of the company’s latest share valuation, long-time investors have seen their shares plummet 30% [10] from their original, buy-in price.

As part of the proposed transaction, Inland American investors will receive Xenia stock as a taxable distribution.[11] Pent up demand to sell, low trading volumes and higher trading price volatility are key risk factors identified in Xenia’s registration statement.[12]

Hotel Portfolio

Xenia owns 46 full service hotels spread across 19 states and the District of Columbia.[13] The properties are managed by brands including Hyatt, Hilton, Loews, Marriott, and Starwood.[14]

Xenia has said it will focus on the top 25 U.S. hotel markets.[15] An analyst at MLV & Co has called Xenia’s portfolio “mediocre,” and raised concerns about the strategy of focusing on a wider range of markets than is typical of publicly traded REITs.[16]

Public Listing

Xenia’s intended public listing was announced in August 2014,[17] and the company began trading February 4, 2015.[18] Existing Inland American shareholders received a distribution of Xenia shares proportionate to their Inland shares. The offering was taxable for existing investors, who will be taxed at the same rate as if they had received a cash distribution equal to the stock value.[19]

Pent up demand to sell, low trading volumes and higher trading price volatility are key risk factors identified in Xenia’s registration statement.[20]

Controversies

In addition to the risks outlined by Xenia’s public filings, questions have been raised about Xenia’s substandard corporate governance compared to its peers,[21] whether the offering will attract institutional investors, and if existing Inland American investors will get back their original investment.[22]

Inland American has been a controversial investment vehicle: plagued with a depressed estimated share valuation,[23] an SEC investigation into related party transactions,[24] and questions from state regulators.[25]

In 2014 Inland American faced months of questions from the California Department of Business Oversight regarding share price discrepancies, related party transactions, and compliance with the California Code of Regulations.[26] After attempting for months to have its securities registration renewed in California, Inland American withdrew its application on October 16, 2014.[27]

In October 2014 the Illinois state securities regulator issued a subpoena regarding the REIT’s transactions with Inland Bank, an institution that is majority controlled by the founder of the Inland Group.[28] Questions have been raised as to whether Inland American investors unknowingly covered bank losses.[29]

In February 2015, in response to allegations made by shareholders, Inland American’s Special Litigation Committee (SLC) determined that certain related parties breached their fiduciary duties to Inland American.[30]

The following month, The Wall Street Journal dubbed Inland American a “zombie REIT.” The article concluded that, “Inland American Real Estate Trust Inc. is the kind of property company that gives some investors bad dreams.“ It goes on to note Inland American’s failure to unwind, the plunge in value of its holdings, and the drastic cut to distributions.[31]

In May 2015 the founder of the Inland Group disclosed a hedge on 65% of a $1.7 million stake in Xenia.[32] A report by UNITE HERE questioned if the put amounted to a vote of no confidence in Xenia.[33] The report urged investors to consider the hedge in light of the current hotel cycle, as well as Xenia’s track record, growth strategy and corporate governance.[34]

Leadership

Marcel Verbaas is President and Chief Executive Officer of Xenia.[35] From 2007 until he joined Xenia, he served as President of Inland American Lodging Advisor,[36] a wholly owned subsidiary of Inland American.[37] For seven years prior to his tenure with Inland, Verbaas worked at CNL, another family of non-traded REITs, notably CNL Hotels and Resorts.[38] In 2004 CNL Hotels and Resorts announced an IPO, and then withdrew the offering several months later.[39]

References

  1. ↑ http://xeniareit.com/
  2. ↑ SEC filing Inland American Real Estate Trust form 8K August 14, 2014
  3. ↑ “Inland American Announces Intent to Spin Off Its Lodging Subsidiary” Inland American public release, August 11th 2014
  4. ↑ SEC filing Inland American Real Estate Trust form 8K August 14, 2014
  5. ↑ Inland American Press Release 2/4/15
  6. ↑ SEC filing Xenia Hotels and Resorts form 10-12B/A October 9, 2014, p152
  7. ↑ SEC filing Inland American Real Estate Trust form 10Q November 7, 2014, p7
  8. ↑ SEC filing Inland American Real Estate Trust form 8K August 14, 2014, Exhibit 99.1
  9. ↑ SEC filing Inland Real Estate Income Trust form 424B3 July 2, 2014, p8
  10. ↑ SEC filing Inland American Real Estate Trust form DEFA 14A January 13, 2014
  11. ↑ SEC filing Xenia Hotels and Resorts form 10-12B August 11, 2014
  12. ↑ SEC filing Xenia Hotels and Resorts form 10-12B/A October 9, 2014, p59
  13. ↑ Inland American to spin off lodging arm SNL Real Estate Daily (North American Edition), August 12 2014
  14. ↑ www.xeniareit.com
  15. ↑ SEC filing Xenia Hotels and Resorts form 10-12B August 11, 2014, p1
  16. ↑ Inland American hotel spinoff targets secondary markets, raising skepticism SNL Real Estate Daily (North American Edition), August 14 2014
  17. ↑ SEC filing Inland American Real Estate Trust form 8K August 14, 2014, Exhibit 99.1
  18. ↑ Inland American Press Release 2/4/15
  19. ↑ SEC filing Xenia Hotels and Resorts form 10-12B/A, October 9, 2014, p70
  20. ↑ SEC filing Xenia Hotels and Resorts form 10-12B/A, October 9, 2014, p59
  21. ↑ “Substandard Corporate Governance in a crowded REIT space” Unite Here
  22. ↑ Lots of Sellers, Who Will Buy? UniteHere, October 20 2014
  23. ↑ SEC filing Inland American Real Estate Trust form DEFA 14A January 13, 2014
  24. ↑ SEC probes Inland REIT: Investigation casts shadow over segment of industry not publicly traded, Wall Street Journal, May 10, 2012
  25. ↑ Letters dated April 14th, 2014, July 16th and July 29th, 2014 addressed to a representative of Inland American Real Estate Trust from the California Department of Business Oversight, "IL Securities Regulator Subpoenas Records from Inland American" UniteHere Public Release 12/1/14
  26. ↑ Letters dated April 14th, 2014, July 16th and July 29th, 2014 addressed to a representative of Inland American Real Estate Trust from the California Department of Business Oversight
  27. ↑ Letter dated October 16th 2014 addressed to the California Department of Business Oversight from a representative of Inland American Real Estate Trust
  28. ↑ "IL Securities Regulator Subpoenas Records from Inland American" UniteHere Public Release 12/1/14
  29. ↑ UniteHere letter to the SEC Shareholder Kenneth Mills' letter to Inland American
  30. ↑ Unite Here letter to Inland American shareholders
  31. ↑ “Property investors’ latest horror: zombie REITs—formerly popular non-traded REITs fall on hard times” Wall Street Journal, March 24,2015
  32. ↑ [Goodwin Daniel L, 13F-HR, May 12, 2015]
  33. ↑ "Why Does Inland Founder Have a Put on XHR Stake? Asks UNITE HERE in New Report"
  34. ↑ "Why does Inland founder have a put on Xenia shares?” UNITE HERE
  35. ↑ “Inland American Announces Intent to Spin Off Its Lodging Subsidiary” Inland American public release, August 11th 2014
  36. ↑ SEC filing: Xenia Hotels & Resorts, Inc., 10-12B/A, October 9, 2014, p152
  37. ↑ SEC filing: Xenia Hotels & Resorts, Inc., 10-12B/A, October 9, 2014, p160
  38. ↑ SEC filing: Xenia Hotels & Resorts, Inc., 10-12B, August 11, 2014, p150-1
  39. ↑ CNL Hotels Postpones Its IPO at the Last Minute, Wall Street Journal, August 4 2004

External links

Notes

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