The result of the hotel sale? The company couldn’t get the sale of the Philadelphia Courtyard or any other hotels completed. It still owns the Philadelphia Courtyard, but now the incumbent directors have repackaged the hotel with three other hotels in their latest advertised plan to sell assets.
How about the stock repurchase program? Never completed. The $50 million stock repurchase program announced by the incumbent directors isn’t even a new program – it is part of the old, unfinished program the incumbent directors trumpeted in 2014.
Furthermore, two of the “initiatives” announced by the incumbent directors are not initiatives at all, but rather a reversal of related party arrangements that should have never been approved by the incumbent directors in the first place. The company announced it would liquidate its investment in a hedge fund created by Ashford Inc and Ashford Prime’s Chairman and CEO, Monty Bennett. But from the beginning the conflicts of interest related to investing in Chairman Bennett’s hedge fund would have been clear to a strong, shareholder-oriented board.
The incumbent board also shelved its effort to sell preferred stock for a penny per share to company insiders. The penny preferred plan should never even have been considered. The withdrawal of the plan is consistent with what we said in February immediately after the plan was announced – that adopting the plan in the midst of a proxy contest was a breach of fiduciary duties by the incumbent directors and that the plan violated New York Stock Exchange rules requiring shareholder approval of the penny preferred. It appears to us that the incumbent directors were so intent on gaining an advantage in the upcoming election that they failed to do their homework before approving their plan. We worked to protect all shareholders from the possibility of a harmful NYSE delisting and are glad to see the company withdraw the plan.
If the incumbent Ashford Prime directors are truly proud of their record, including the conduct and results of the strategic review process, they should be willing to run on the merits of their record in a fair and competitive election. Instead, the incumbents continue to hide behind the threat of the proxy penalty – an arrangement the incumbent directors installed in June that would penalize the company if shareholders elect directors that the incumbents don’t approve. And the incumbents continue to spend shareholder money on lawsuits in an attempt to disqualify our nominees. With a lackluster total shareholder return since inception and a disappointing strategic review process, the incumbent directors appear to be hanging their hopes of re-election on the threat of the proxy penalty and litigation tactics, rather than running on their record in a fair, competitive election at this year’s annual meeting on June 10.
Ashford Prime’s shareholders are overwhelmingly comprised of institutional investors (89%) who have a legal obligation to vote shares in the best interests of their constituents or clients. We believe these shareholders, in this election like every other director election, have the ability and knowledge to properly vet and evaluate the director candidates. An election process in which the incumbents decide if anyone can run against them is not a fair process. If the company’s sophisticated and knowledgeable shareholders elect our nominees over the incumbent slate, shareholder demands for governance change should be respected by the incumbent directors, who have the power to neutralize the proxy penalty but who we believe are instead ‘gaming’ the election with their continued threats to trigger the proxy penalty.
We call especially on the company’s supposedly independent directors, former Texas State Representative Stefani Carter, Curtis McWilliams, Michael Murphy, Texas State Representative Matthew Rinaldi and Andrew Strong, to explain to Ashford Prime shareholders how potentially taking in excess of $200 million of the shareholders’ money and giving it to a related party controlled by Chairman Bennett – and getting nothing in return – is consistent with their fiduciary duty obligations to Ashford Prime shareholders. We renew our calls upon the incumbent directors to comply with their duties to shareholders by neutralizing the proxy penalty so shareholders can vote for directors without the coercive specter of handing over more than half their company’s market cap to Chairman Bennett’s external manager.
As a significant, 8.2% holder of Ashford Prime shares, our interests are aligned with yours. We need your support in electing our nominees so that they can make sure your interests and the interests of ALL shareholders are the priority at Ashford Prime. Your vote is extremely important, no matter how many or how few shares you own. Whether or not you plan to attend the annual meeting, you have an opportunity to elect directors committed to protecting your investment in Ashford Prime by voting the WHITE proxy card. Vote the WHITE card TODAY to elect our slate of nominees and ensure that the Ashford Prime Board of Directors is working for YOU, not THEMSELVES!
We urge you to vote the WHITE proxy card for our proposed slate of five board nominees, who possess significant experience in the areas of real estate investing, lodging industry management, capital markets and corporate governance.
Sincerely,
John Petry, Managing Member”
