Article Excerpt:
TWST: What is Strategic Hotel Capital?Mr. Geller: We started in 1997 as a private company with the objective of being the pre-eminent owner of luxury or high-end hotels in North America and in Europe. We were a private company, where the significant partners originally were Goldman Sachs, Prudential, Security Capital and myself. During the etymology of the whole situation, we bought out Security Capital and ended up with something like over $3 billion of real estate assets. Much of the funds had come in on the basis of a short-term hold, a five- to seven-year hold. From 2001 onward, we started to provide substantial liquidity to our investors and sold down a number of assets. In 2004, we saw the opportunity to provide incremental liquidity by splitting the portfolio into two, into a public entity and a public New York Stock Exchange entity. Some of the assets didn't fit into a public company because their earnings were too low compared to their value; we kept those in a private company for liquidation purposes, which we are currently doing. In June of last year, we went public on the New York exchange with around about $1 billion worth of assets. We've subsequently added about $600 million in assets and have done a follow-on offering for over $200 million in August. Our stock went from an opening IPO number of $14 to where it is today, hovering around $18. In the meantime, the private assets, which we manage for a fee of $5 million a year, are being liquidated. We have just sold the Essex House in New York. The private entity sold that and that gives an indication of why. We took an asset that we bought for around $260 million, and yet when we went public, the hotel's earnings would have not substantiated even that value. Yet we knew it was worth a lot more and it's recently been sold for a number well north of $400 million. Essentially, we believe we are the pre-eminent asset managers of hotels run by some of the best brands such as Four Seasons, Ritz- Carlton, Hyatt, Hilton, Loews, InterContinental and Marriott. We provide very sophisticated and intense asset management services with a view of adding value to those services that the chains will buy, so we think we are the blue ribbon or blue chip, if you will, of the asset management business. Certainly, we have pioneered the industry and are recognized as leading edge. We have three assets in Europe, two in Mexico and the balance of our portfolio is in the United States.
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