Untitled document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment No.)
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ x ]
Check the appropriate box:
[x ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
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(Name of Registrant as Specified In Its Charter):
Ashford Hospitality Trust, Inc.
(Name of Person(s) Filing Proxy Statement, if other than
the Registrant):
UNITE HERE
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction
applies:
80,969,542 shares of common stock outstanding
and entitled to vote (3/11/2014)<FNi> ;
3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 11 (set forth
the amount on which the filing fee is calculated and state how
it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
UNITE HERE
275 Seventh Ave.
New York NY 10001
; REVISED PRELIMINARY COPY SUBJECT TO
COMPLETION
DATED July 7, 2014
SOLICITATION STATEMENT
TO SHAREHOLDERS OF ASHFORD HOSPITALITY TRUST INC.
IN SUPPORT OF REQUEST FOR SPECIAL MEETING OF SHAREHOLDERS
THIS SOLICITATION IS NOT BEING MADE ON BEHALF OF ASHFORD
MANAGEMENT
Released to Shareholders:
July __ , 2014
Re: Shareholder Request to Call a Special Meeting of
Ashford Hospitality Trust, Inc. for the purpose of voting on the
proposed spin-off of Ashford Inc.
To Fellow
Ashford Hospitality Trust shareholders:
Ashford Hospitality Trust ("AHT") plans to spin off its
advisor as a separate, publicly-traded entity named Ashford Inc.
Shareholders of AHT will also become shareholders of Ashford
Inc., and AHT will become externally-advised by Ashford Inc.
Ashford Inc. intends to put in place a number of anti-takeover
measures and barriers to shareholder control that have not been
put forward to a vote by shareholders.
The spin-off creates new risk for
shareholders of AHT. Currently, AHT is a self-managed
REIT which receives a stream of revenues from its subsidiary,
Ashford Inc. Ashford Hospitality Prime, a hotel REIT spun off
from AHT last year, is externally- advised by Ashford Inc and
pays advisory fees to AHT as the parent of Ashford Inc. In the
aftermath of the spinoff of Ashford Inc, AHT will itself become
externally- managed. Thus, AHT shareholders will both lose this
revenue stream and begin paying fees to Ashford Inc.
The external management structure for publicly- traded
equity REITs remains controversial.<FN ii> Ashford's own
pro forma financial statements suggest that in 2012, it might
have been more expensive to manage the Prime portfolio
externally.<FN iii> Moreover, the valuations of
externally- managed publicly traded equity REITs appears to
trail those of self-managed peers consistently (see Exhibit 1).
A closer look at the proposed spin-off reveals a disturbing
pattern: a contraction of shareholder rights, and growth of
contracts with related parties. First, shareholders of Ashford
Inc. will lose a number of rights currently enjoyed under AHT,
including annual election of all directors and the ability to
remove directors without cause. Ashford Inc. will also be
burdened by a mutual exclusivity agreement with Remington
Lodging and Hospitality LLC ("Remington"), a company owned by
AHT's Chair/CEO. The exclusivity agreement thus secures a steady
stream of future business for Ashford insiders, "even if the
utilization of Remington for such property management may not be
the most advantageous for such future clients" (see section II
below). Finally, important aspects of the advisory agreement's
fee structure are in our view disadvantageous to AHT
shareholders: for example, AHT is required to pay the highest
of three alternative base fees for Ashford Inc's services (see
section III below).
We are therefore soliciting your support to call a special
meeting of AHT shareholders for the purpose of voting on a
resolution encouraging the Board to put the proposed Ashford
Inc. spinoff to a vote by shareholders. Additional resolutions
to be voted on include measures strengthening the corporate
governance of Ashford Inc., permitting the REIT to engage in
open bidding for management contracts, and amending the fee
structure of the advisory agreement.
Due to sharp restrictions on shareholder rights contemplated
for Ashford Inc., including supermajority
voting standards and staggered multi-year terms for directors,
this special meeting in our view represents AHT
shareholders' single best opportunity to strengthen
shareholder rights at Ashford Inc. prior to a spinoff.
I. AHT shareholders will lose rights as shareholders of
Ashford Inc.
According to its prospectus and registration statement,
once spun off, Ashford Inc. will have several
anti-takeover measures and other barriers to shareholder control
in place:
* Ashford Inc.'s bylaws and certificate of
incorporation require a three-tiered classified board
of directors. It would take at least two years before Ashford
Inc. shareholders could put in place a majority of independent
directors who were not hand-picked by management.
* Ashford Inc.'s certificate of incorporation
sets restrictions on share ownership, such that no
shareholder will be able to hold more than 9.9% of outstanding
stock. Exceptions to this will be made at the sole discretion of
the board of directors.
* Ashford Inc.'s bylaws prohibit stockholders
from calling a special meeting.
* Ashford Inc. will be subject to a Delaware anti-takeover
statute (Section 203 of the DGCL), having the potential effect
of delaying certain "business combinations."
* Ashford Inc.'s bylaws and declaration of trust
stipulate that directors can only be removed during their 3-year
terms for cause, and by a vote of 80% of all outstanding shares,
requiring a near-consensus of all shareholders to remove a
director from the board.
None of these restrictions have been put to a vote by AHT
shareholders. All of these measures may have the effect of
discouraging offers to acquire Ashford Inc., thereby potentially
suppressing shareholder value. All of the proposals
concerning these restrictions to be voted on in a special
meeting of shareholders would not be binding on AHT's Board of
Directors.
There is evidence that in the REIT sector, good governance has a
measurable financial impact. According to a 2013 report by Green
Street Advisors, "REITs that had an above-average governance
score traded at a premium of 2 percent to asset value . . .
[while] REITs with a below-average rating traded at an average 4
percent discount to asset value." <FN iv>
II. A Remington mutual exclusivity agreement could hold back
growth
In order to create value for shareholders, Ashford Inc. may well
need to expand its client base beyond Ashford affiliates to
competing hotel owners. Unfortunately, Ashford Inc. intends to
sign a ten-year exclusivity agreement with Remington for all
current and future hospitality asset management services.
Remington is privately and wholly owned by Ashford Inc.'s
chairman/CEO and his father ;<FN v> ;, and
manages few hotels for non-Ashford affiliates. <FN
vi> Remington shares executives with
AHT. <FN vii> Fees and reimbursements
paid by Ashford Trust and affiliates to Remington have increased
120% over the last five years (see Exhibit
2). It is unclear whether Ashford Inc. requested bids
from other management companies before selecting Remington.
Over the past decade, major hotel REITs have taken steps towards
greater independence from related operators, including Host
Hotels & Resorts, Sunstone Hotel Investors and Felcor
Lodging Trust. ;<FN viii> ; Earlier this
year, the comparably-sized InnVest Real Estate Investment Trust
responded to calls by investors and eliminated its exclusivity
agreement with its related-party hotel manager, Westmont
Hospitality. ;<FN ix> ; We have called for
Trust and Prime to be released from exclusivity agreements with
Remington so that both REITs have maximum flexibility in
determining management contracts. ;<FN x> ;
In order to
create value for shareholders, Ashford Inc. will need to expand
its client base, possibly reaching out beyond Ashford affiliates
to competing hotel owners. Potential clients who may compete with
Ashford's REITs could balk at using Remington as their property
manager. If this happens, it is unclear how Ashford Inc. will
grow its business beyond related parties.
Ashford Inc. identified this as a risk factor for
investors, writing that " . . . we will be obligated to utilize
Remington as a property manager for future platforms that we
advise, to the extent we have the discretion to do so, even if
the utilization of Remington for such property management may
not be the most advantageous for such future clients."
III. Mitigating risk
;The
issue of whether REITs are best managed by management teams
working for the company or outside firms has become a hot one
in the real-estate industry. Investors and analysts increasing
have been raising concerns about possible conflicts.<FN
xi> ;
AHT is proposing to adopt a controversial external
management structure without shareholder approval. Ashford Prime
was spun off from AHT as an externally-managed REIT less than a
year ago; the limited data available do not paint Prime as a
success. In its first five months, Prime lost over a quarter of
its share price; in the first five months of 2014, the stock has
underperformed (-11% vs. Hotel REITs +11%). ;<FN
xii> ;. Ashford's pro-forma financial statements for
2012 suggest that the costs of managing Prime's portfolio
externally could have exceeded internal management costs by a
factor of 2. ;<FN xiii> ;
AHT has the
opportunity to learn from its earlier experiment with
externalization. In addition to allowing shareholders a vote on
Ashford Inc's spin-off and AHT's externalization, AHT can take
several steps to protect shareholder value:
* Creating a pathway to internalization: AHT should
regularly assess and report whether external advisory fees (plus
reimbursements) are exceeding internal management costs. AHT
should lay out a pathway to return to an internally-managed
structure without penalty, should it become financially
advisable.
* Realigning risk in the calculation of base fees:
Currently, the Advisory Agreement stipulates the Advisor be paid
the highest of three possible base fees - one of which
is calculated with reference to the average general &
administrative costs of AHT's peers rather than the AHT's own
enterprise value. By contrast, another large externally-managed
REIT, Commonwealth REIT, provided for the lower of two
alternative base fees to be paid in its advisory agreement,
providing a greater performance incentive (and lowered risk for
the REIT).
* Remove change-in-control termination fees. If the
advisory agreement is terminated due to a change in control,
Ashford Inc is due a change-in-control termination fee. Thus the
current advisory agreement has the properties of a poison pill.
IV. Rights to a Special Meeting
Article 1, Section 3 of AHT's Second Amended and Restated Bylaws
;(filed with the SEC on February 25, 2014) ;
requires AHT to call a Special Meeting of shareholders if not
less than a majority of outstanding shares request such a
meeting, and limits the matters to be acted on a special meeting
to only those matters declared in the notice for the meeting:
Subject
to subsection (b) of this Section 3, a special meeting of
stockholders shall also be called by the secretary of the
Corporation to act on any matter that may properly be
considered at a meeting of stockholders upon the written
request of stockholders entitled to cast not less than a
majority of all the votes entitled to be cast on such matter
at such meeting. ;<FN xiv> ;
UNITE HERE has given notice to AHT pursuant to the Bylaws that
it is soliciting support for a Special Meeting to consider the
following proposals ; below . We are not
requesting your vote on the proposals now. A future
proxy vote on each proposal will be solicited from you if AHT
calls a Special Meeting as a result of shareholders' request. We
will inform you of the meeting record date and solicitation
deadlines when they are set by AHT pursuant to Article 1,
Section 3 of the Bylaws.
The proposed resolutions presented in UNITE HERE's notice
to AHT are:
; A. Resolutions pertaining to Ashford Hospitality
Trust: ;
1.Resolved,
shareholders of Ashford Hospitality Trust recommend to the
Board that the proposed spinoff of Ashford Inc. be put to a
vote by shareholders.
2.Resolved,
shareholders of Ashford Hospitality Trust call on the Board to
take all necessary steps to reinstate shareholders' right to
call a special meeting of shareholders with the support of 25%
of all votes entitled to be cast at such a meeting.
3.Resolved,
shareholders of Ashford Hospitality Trust recommend that the
Board revise its advisory agreement with Ashford, Inc. to:
a. Remove any and all penalties for terminating the
Advisory Agreement and becoming self-managed;
b. Amend the base fee to provide that AHT pay the lowest
alternative base fee;
c. Remove change in control termination fees.
4. Resolved, shareholders of Ashford Hospitality Trust
recommend the Board take all necessary steps to allow open
bidding for all hotel management contracts at its hotels.
;B . Resolutions pertaining to Ashford Inc.,
currently a subsidiary of Ashford Hospitality Trust ;
1. Resolved, shareholders of Ashford Hospitality Trust,
as the future shareholders of Ashford Inc., call on Ashford Inc.
to take all necessary steps to allow for the annual election
of all directors.
2.Resolved, shareholders of Ashford Hospitality Trust, as
the future shareholders of Ashford Inc., call on Ashford Inc. to
take all necessary steps to remove the restrictions on
individual stock ownership.
3.Resolved, shareholders of Ashford Hospitality Trust, as
the future shareholders of Ashford Inc., call on Ashford Inc. to
take all necessary steps to reinstate shareholders' right to
call a special meeting of with the support of 25% of all votes
entitled to be cast at such a meeting.
4.Resolved, shareholders of Ashford Hospitality Trust, as
the future shareholders of Ashford Inc., call on Ashford Inc. to
take all necessary steps to allow for the removal of
directors without cause by the vote of a majority of all votes
entitled to be cast.
5.Resolved, shareholders of Ashford Hospitality Trust, as
the future shareholders of Ashford Inc., call on Ashford Inc. to
take all necessary steps to allow for annual advisory votes
on executive compensation regardless of statutory
requirements.
6.Resolved, shareholders of Ashford Hospitality Trust, as
the future shareholders of Ashford Inc., call on Ashford Inc. to
take all necessary steps to opt out of the Delaware
anti-takeover statute.
;This solicitation for a Special Meeting of AHT
shareholders has been undertaken while Ashford Inc remains a
subsidiary of AHT. According to AHT's bylaws, a majority of
voting shares is sufficient to conduct business at an annual or
special meeting of shareholders. These resolutions, if passed,
would be advisory, and would not bind the Board of Directors. If
a spin-off is completed before the Special Meeting is held,
Ashford Inc will be legally distinct from Ashford Trust. In this
case, the six proposed resolutions pertaining to Ashford Inc
would be beyond the power of the Board of Directors of Ashford
Hospitality Trust to implement in such capacity.
UNITE HERE will present the results of this proxy solicitation
to AHT if a majority of outstanding shares join the call for a
Special Meeting.
V. Participation in solicitation
This solicitation is conducted by UNITE HERE, which
beneficially owns 765 shares of AHT stock and represents workers
at four hotels owned by Ashford for collective bargaining
purposes. The persons proposed as proxies are UNITE HERE
researchers. There is a long-standing labor dispute at the
Ashford-owned Sheraton Anchorage Hotel in Alaska. We do not seek
your support in labor matters. If you provide us a consent or
proxy vote we will carry out your wishes regardless of any
developments on labor matters. ; If you provide us a
consent or proxy vote we will carry out your wishes regardless
of any developments on labor matters. UNITE HERE will
bear all solicitation costs (anticipated at $10,000) and will
not seek reimbursement from the Company.
VI. Additional Information
The authority granted by the enclosed request form can
be rescinded at any time prior to its counting by AHT by a
shareholder sending notice to AHT and/or UNITE HERE. There is no
record date for this solicitation (a separate record date will
be set for the meeting by AHT management upon its receipt for
requests for special meeting from holders of a majority of
stock).
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<FN i>AHT Def 14-A filed March 11, 2014,
http://www.sec.gov/Archives/edgar/data/1232582/000104746914003757/a2219499zdef14a.htm.
<FN ii> Robbie Whelan, "REIT answers critics of outside
managers," Wall Street Journal, September 3, 2013; See also
Barry Critchley, "Externally managed companies still
controversial," Financial Post, January 29, 2013: "External
management agreements became a controversial subject in the
heyday of royalty and income trusts because of their potential
to create a non-alignment of interests with unitholders . . .
the issue of externally managed companies is still alive years
later." See also Alby Gallun, March 13, 2014, "Inland American
moves closer to a cash-out," Crains Chicago Business, March 13,
2014: "But Wall Street analysts and institutional investors shun
externally managed REITs, which is why most [unlisted REITs]
bring their management companies in-house before a listing." See
also Brian Louis, "Lucrative fees behind real estate management
spur fights," Bloomberg News, May 3, 2013: "Instead, both real
estate investment trusts have been run by outside managers who
are paid to choose properties to buy and at what prices, and
which ones to sell and when. That has raised criticism from some
investors, who say a management company may make decisions for
its own benefit -- decisions not necessarily right for REIT
shareholders."
<FN iii> Ashford Hospitality Prime Inc and subsidiaries
unaudited pro forma combined consolidated statement of
operations FYE December 31, 2012, p. F-7 and notes., Ashford
Hospitality Prime, Registration Statement dated January 21,
2014, note 3, p. 22.
<FN iv> Charles Keenan, "REIT Governance: The capital of
transparency." REIT.com, May 19, 2014, accessed 6/24/2014.
<FN v> Ashford Form 10 Information statement, Filed with
the SEC on July 2, 2014, p. 10.
<FN vi> Comparing property lists for Remington Lodging
(http://www.remingtonhospitalityservices.com/properties.php),
Ashford Hospitality Trust
(http://www.ahtreit.com/portfolio/region-portfolio.aspx) and
Ashford Hospitality Prime
(http://www.ahpreit.com/portfolio.aspx), we identified five (5)
properties managed by Remington not owned by AHT or AHP.
According to its website, Remington hotels manages 79
properties.
<FN vii> Archie Bennett, Chairman Emeritus of Ashford
Hospitality Trust, and Monty Bennett, Chair/CEO of Ashford
Hospitality Trust:
http://www.remingtonhospitalityservices.com/management-team.php,
accessed 7/7/2014.
<FN viii> (NYSE:HST): Host Marriott to buy 38 Starwood
Hotels, The Associated Press, November 15, 2005; (NYSE:SHO)
Sunstone Hotel Investors Provides Business Updates, Bloomberg,
January 7, 2010; (NYSE:FCH) FelCor announces agreement with
Intercontinental Hotels, the "New FelCor." PR Newswire, January
25, 2006.
<FN ix> InnVest REIT announces settlement with Orange
Capital and introduces KingSett Capital as Strategic Capital
Partner, Canadian Newswire, March 13, 2014.
<FN x>
http://www.unlock-ashford.org/why-have-major-hotel-owners-moved-away-from-related-party-managers/,
accessed July 3, 2014.
<FN xi> Robbie Whelan, "REIT answers critics of outside
managers," Wall Street Journal, September 3, 2013;
<FN xii> Andrew Didora, B of A Merrill Lynch,
Ashford Hospitality Prime: Initial Opinion, June 2 2014.
<FN xiii> Ashford Hospitality Prime Inc and
subsidiaries unaudited pro forma combined consolidated statement
of operations FYE December 31, 2012, p. F-7 and notes., Ashford
Hospitality Prime, Registration Statement dated January 21,
2014, note 3, p. 22;
(FN xiv>
http://www.sec.gov/Archives/edgar/data/1232582/000123258214000011/aht-8xksecondarbylawsandco.htm
<PAGE>
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; PRELIMINARY FORM OF ; WRITTEN
REQUEST
OF SHAREHOLDERS OF ASHFORD HOSPITALITY TRUST INC.
SOLICITED BY UNITE HERE
TO CALL A SPECIAL MEETING OF SHAREHOLDERS
THIS SOLICITATION IS NOT BEING MADE ON BEHALF OF
ASHFORD MANAGEMENT
Each of the undersigned hereby constitutes and appoints JJ
FUESER and ELLIOTT MALLEN, with full power of substitution, the
agent of the undersigned (said agent, together with each
substitute appointed, if any, collectively, the "Designated
Agents") in respect to all shares of common stock of Ashford
Hospitality Trust, Inc. (the "Company") owned by each of the
undersigned to do any or all of the following, to which each of
the undersigned hereby consents:
A. The demand of the call of a special meeting of shareholders
of the Company pursuant to the Company's Bylaws for the purpose
of voting on the following proposals:
< ;Resolutions pertaining to Ashford
Hospitality Trust:
1. Resolved, shareholders of Ashford
Hospitality Trust recommend to the Board
that the proposed spinoff of Ashford Inc. be put to a vote
by shareholders.
2.Resolved, shareholders of Ashford Hospitality
Trust call on the Board to take all necessary steps to reinstate
shareholders' rights to call a special meeting of
shareholders with the support of 25% of all votes entitled
to be cast at such a meeting,
3.Resolved, shareholders of Ashford Hospitality
Trust recommend that the Board revise its advisory agreement
with Ashford Inc. to:
a.Remove any and all penalties for terminating the
Advisory Agreement and becoming self-managed;
b.Amend the base fee to provide that AHT pay the lowest
alternative base fee;
c.Remove change in control termination fees.
4.Resolved, shareholders of Ashford Hospitality
Trust recommend the Board take all necessary steps to allow
open bidding for all hotel management contracts at its
hotels.
Resolutions pertaining to Ashford Inc.,
currently a subsidiary of Ashford Hospitality Trust
;
1. Resolved, shareholders of Ashford Hospitality
Trust, as the future shareholders of Ashford Inc., call on
Ashford Inc. to take all necessary steps to allow for
the annual election of all directors.
2.Resolved, shareholders of Ashford Hospitality
Trust, as the future shareholders of Ashford Inc., call on
Ashford Inc. to take all necessary steps to remove the
restrictions on individual stock ownership.
3.Resolved, shareholders of Ashford Hospitality
Trust, as the future shareholders of Ashford Inc., call on
Ashford Inc. to take all necessary steps to reinstate
shareholders' right to call a special meeting of with the
support of 25% of all votes entitled to be cast at such a
meeting.
4.Resolved, shareholders of Ashford Hospitality
Trust, as the future shareholders of Ashford Inc., call on
Ashford Inc. to take all necessary steps to allow for the removal
of directors without cause by the vote of a majority of
all votes entitled to be cast.
5.Resolved, shareholders of Ashford Hospitality
Trust, as the future shareholders of Ashford Inc., call on
Ashford Inc. to take all necessary steps to allow for annual
advisory votes on executive compensation regardless of
statutory requirements.
6.Resolved, shareholders of Ashford Hospitality
Trust, as the future shareholders of Ashford Inc., call on
Ashford Inc. to take all necessary steps to opt out of the
Delaware anti-takeover statute.
B. The exercise of any and all rights of each of the
undersigned incidental to calling the special meeting and
causing the purposes of the authority expressly granted herein
to the Designated Agents to be carried into effect; provided,
however, that nothing contained in this instrument
shall be construed to grant the Designated Agents the right,
power or authority to vote any shares of Common Stock owned by
the undersigned at the special meeting or at any other
shareholders meeting.
The undersigned hereby authorizes and designates the
Designated Agents to collect and deliver this request to the
Company, and to deliver any other information required in
connection therewith.
Print Name in Which Stock
Held:____________________________________________________
Signature:________________________________________________________________
Signature (if held
jointly):______________________________________________
Title (only if shares are held by an
entity):_____________________________
Dated:______________________________________________________
Please sign exactly as your shares are registered. When
shares are held by joint tenants, both should sign. When signing
as an attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please sign in
full corporation name by a duly authorized officer. If a
partnership, please sign in partnership name by authorized
person. This demand will represent all shares held in all
capacities.
PLEASE COMPLETE, SIGN, DATE AND MAIL
IN THE ENCLOSED POSTAGE-PAID ENVELOPE AS PROMPTLY AS
POSSIBLE
Or return via fax to: (312) 986-3950 ;
Via email to:<R>emallen@unitehere.org</R>