Ashford To Acquire Project Management Company

DALLAS—Ashford Inc. has signed a definitive agreement to acquire the project management business of privately held Remington Holdings LP, a hotel property and project management company. The transaction, which is expected to close during the third quarter of 2018, is subject to approval by the company's stockholders and customary closing conditions. Upon the unanimous recommendation of the special committee, the independent and disinterested members of the company's board of directors unanimously approved the transaction and recommended its approval by the company's stockholders.

Ashford provides asset management, investment management and related services to the real estate and hospitality sectors. Under the terms of the agreement, the company will acquire Remington's project management business for a total transaction value of $203 million. The purchase price will be paid by issuing voting, convertible preferred stock to the sellers. The newly created convertible preferred stock will have a conversion price of $140 per share (a 45% premium to the current trading level) and, if converted immediately after the consummation of the transaction, would convert into 1.45 million shares of common stock.

Dividends on the convertible preferred stock are payable at an annual rate of 5.5% in the first year, 6% in the second year and 6.5% in the third year and each year thereafter. Voting rights of the convertible preferred stock will be on an as-converted basis and the holders of the convertible preferred stock will have a voting limit of 25% of the company's voting securities for five years. Upon closing of the transaction, the sellers will have the right to nominate two directors to the company's board of directors. The transaction does not require a private letter ruling from the Internal Revenue Service.

“The proposed acquisition of Remington's high-margin project management business will immediately add scale, diversification and an enhanced competitive position in the hospitality industry while also expanding the breadth of services we offer to our managed REITs,” says Monty J. Bennett, Ashford's chairman and chief executive officer. “With deep industry experience and long-term contracts in place, we believe this transaction represents a compelling opportunity for Ashford to diversify its earnings stream and, moving forward, the potential to expand business to other third-party clients.”

Remington's project management provides comprehensive and cost-effective design, development and project management services for both Remington managed hotels as well as external partners. It provides project oversight, coordination, planning and execution of renovation, capital expenditure or ground-up development projects. Its operations are responsible for managing and implementing substantially all capital improvements at Ashford Hospitality Trust Inc. and Ashford Hospitality Prime Inc. Additionally, it has extensive experience working with many of the major hotel brands in areas of renovating, converting, developing or repositioning hotels.

In 2017, Remington Project Management had revenues of approximately $29 million and adjusted earnings before interest, taxes, depreciation and amortization of approximately $16.3 million. Remington is currently owned by Bennett and his father, Archie Bennett Jr. The company's board of directors therefore formed a special committee of independent and disinterested directors to analyze and negotiate the transaction on behalf of the company and deliver a recommendation to the company's board of directors with respect to the transaction.

The company's special committee was advised by Janney Montgomery Scott LLC as financial advisor and Norton Rose Fulbright US LLP acted as its legal advisor. Robert W. Baird & Co. Inc. acted as Remington's financial advisor and Baker Botts LLP acted as Remington's legal advisor.

In 2015, Ashford entered a combination agreement with Remington Holdings LP to create a new subsidiary structure that acquired an 80% stake in Remington and all of Ashford's existing business, while the Remington sellers retained a 20% interest in Remington, GlobeSt.com learns. The transaction was completed in 2016.

In 2013, the previously announced spin-off of Ashford Hospitality Prime Inc. from Ashford Hospitality Trust Inc. was completed. On November 20, 2013, the company began trading on the New York Stock Exchange under the ticker symbol AHP, GlobeSt.com learns.

Ashford Trust completed the spin-off with a pro-rata taxable distribution of the company's common stock to Ashford Trust stockholders of record as of November 8, 2013. One share of the company's common stock was distributed to stockholders of record for every five shares of Ashford Trust common stock held by such stockholders on the record date.

In connection with the spin-off, the company and its subsidiaries entered into several definitive agreements with Ashford Trust, Remington Lodging and Hospitality LLC and certain other parties that, among other things, secured future financing for the company and provided a framework for relationships with Ashford Trust and Remington after the spin-off.

The company is now an independent publicly traded real estate investment trust focused on investing in high RevPAR full-service and urban select-service hotels, and resorts located predominantly in domestic and international gateway markets. The company is externally advised by Ashford Hospitality Advisors LLC, a subsidiary of Ashford Trust.

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Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.