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:
<R>80,969,542 shares of common stock outstanding and
entitled to vote (3/11/2014)<FNi></R>
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
<R> REVISED </R> PRELIMINARY COPY SUBJECT TO
COMPLETION
DATED <R> July 7, 2014</R>
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:
<R<July</R> __ , 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 <R></R> creates new risk for
shareholders of AHT. <R>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).</R>
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., <R> including
supermajority voting standards and staggered multi-year
terms for directors, this special meeting in our
view</R> 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.
<R>According to its prospectus and
registration statement, once spun off, </R>Ashford
Inc. will have several anti-takeover measures and other
barriers to shareholder control in place:
* <R>Ashford Inc.'s bylaws and
certificate of incorporation require</R> 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.
* <R>Ashford Inc.'s certificate of
incorporation </R> 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.
* <R>Ashford Inc.'s bylaws
</R>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."
* <R>Ashford Inc.'s bylaws and
declaration of trust</R? 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.
<R>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.</R>
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<R><FN
v></R>, and manages few hotels for non-Ashford
affiliates.<R><FN vi></R> Remington shares
executives with AHT.<R><FN vii></R> Fees
and reimbursements paid by Ashford Trust and affiliates to
Remington have increased 120% over the last five years
<R> (see Exhibit 2).</R> 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.<R><FN
8></R> 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.<R><FN ix></R> 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.<R><FN x></R>
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
<R>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></R>
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%). <R><FN xii></R>. 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.<R><FN xiii></R>
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 <R>(filed with the SEC on February
25, 2014)</R> 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.<R><FN
iv></R>
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 <R> below
</R>. We are not requesting your vote on the proposals
now. <R>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.</R>
The proposed resolutions presented in UNITE
HERE's notice to AHT are:
<R> A. Resolutions pertaining to Ashford
Hospitality Trust:</R>
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.
<R>B . Resolutions pertaining to Ashford
Inc., currently a subsidiary of Ashford Hospitality
Trust</R>
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.
<R>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.</R>
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.<R> If you provide us a consent or proxy vote
we will carry out your wishes regardless of any developments
on labor matters.</R> UNITE HERE will bear all
solicitation costs (anticipated at $10,000) and will not
seek reimbursement from the Company.
VI. Additional Information
<R>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).</R>
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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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<R> PRELIMINARY FORM OF</R> 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:
<R>Resolutions
pertaining to Ashford Hospitality Trust:</R>
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.
<R>Resolutions pertaining to Ashford Inc.,
currently a subsidiary of Ashford Hospitality Trust
</R>
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: <R>(312) 986-3950</R>
Via email to:<R>emallen@unitehere.org</R>