Litt: AHT’s FelCor Bid ‘Woefully Inadequate’

Land and Buildings’ Jonathan Litt; his firm says FelCor is worth $10.50 per share.

STAMFORD, CT—Shareholder Land and Buildings Investment Management weighed in Monday on Ashford Hospitality Trust’s unsolicited bid for FelCor Lodging Trust, with CIO Jonathan Litt calling the proposal “woefully inadequate.” The all-stock AHT bid of approximately $1.27 billion values FelCor at $9.27 per share, compared to Land and Buildings’ NAV estimate of $10.50 per share for the Irving, TX-based FelCor. Land and Buildings owns 6.1% of the hotel REIT’s common stock; AHT owns about 4.5%.

“Given the substantial cash at both AHT and Ashford Inc., the external manager of AHT, totaling approximately $640 million, or nearly $5 per FelCor share, we are struggling to understand why any offer did not include a substantial cash component of at least the cash on hand,” writes Litt, Land and Buildings’ co-founder, in an open letter to FelCor shareholders that was made public on Monday. “We would also note that a full cash offer could be made considering the likely proceeds from the assets being marketed at both companies.” He adds that AHT’s offer “assigns no value to the perpetual management contract the FelCor assets would be encumbered with after the merger, which is likely worth in excess of $300 million, or more than $2 per FelCor share.”