Article Excerpt:
TWST: What is MHI Hospitality?Mr. Folsom: MHI is a half-century old company dedicated to hotel ownership and management. Mr. Edgar Sims founded MHI in 1957 when he purchased the first 12- room motel that the company ever owned, in College Park, Maryland. From those humble beginnings, the company has grown to where it is today, a publicly traded hotel real estate investment trust. We own or have under contract, nine assets, allowing us to control over 2,200 rooms. Our asset value is roughly $200 million. The company's strategy from its beginning has been conservative growth and adherence to strong hotel management practices. In the 1980s, the company pursued multi-unit operations, both as an owner and as a manager, with a view toward fixing problem assets. That is how our current strategy developed: we acquire underperforming assets and provide long-term value creation for shareholders. From the company's beginnings, it has acquired, owned, managed, or disposed of over 30 lodging investments. Predominantly, MHI looks to buy underperforming hotel and resort assets. We define underperforming assets as those that suffer from deferred maintenance, capital deficiencies, poor management, or improper positioning in their respective markets. What MHI tries to do is buy those underperforming assets at attractive prices. We then apply capital, install new management and, if applicable, we try to properly brand the property with a national franchise flag that fits its unique market. We've been successful at this strategy through the years. The company went public in December 2004 with an offering of $60 million in common stock. We are one of the smallest traded REITs in the market right now, but we think our balance sheet structure and high current yield are extremely attractive and position us well for future growth.
TWST: What's the agenda at this point? What are your priorities for the next 12
months? What would make that time frame a success?
Mr. Folsom: Our near-term strategy is to continue to try to find attractive
accretive acquisitions in our markets. We focus on the Southeast and Mid-
Atlantic areas of the country. That's where the company has operated for the
last 50 years. We know these markets and we think the longterm growth prospects
are positive for this area. Right now, the commercial real estate market is
very expensive. Anyone operating in the markets right now understands this, and
although our management team expends a vast amount of time and effort
scrutinizing potential deals, we have found the pool of reasonably priced assets
to be very small. In the near term, then, we are trying to find those diamonds
in the rough that we can buy and fix up.
For the out years, though, we expect the current real estate cycle to end and
that eventuality is what we are positioned for. Our balance sheet is structured
with very little leverage and our credit capacity will allow us to rapidly grow
the company when good opportunities arise.
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