Real Estate Forum - August 2008

I cover Red Lion and Interstate, which are both owner/operators, and in Red Lion’s case, it’s also a brand company. Marcus Corp. is another one that owns and operates. They’re getting no respect today.

MENDELL: That’s because of the real estate drag. It doesn’t mean it’s not a good model. It’s just not good for the public markets. LOEB: The public markets are paying a slight premium for the brand companies that remain since there are fewer than there used to be.

“You won’t see significant discounts that might otherwise occur if there wasn’t this level of equity waiting on the sidelines.”

BRIAN H. TRESS ERNST & YOUNG

MENDELL: I would, too, if I were a retail investor. What you would want is the model of a management and franchise business because there’s stable growth. You have less volatility, and it’s easier to underwrite and understand. You don’t have to deal with asset appreciation. As a private investor, I would say the opposite is true. Real estate does well in the private model.

LOEB: During the good times when money flows into hotel companies in the public markets, the brands will have much higher

multiples. And they ought to. If you look at Marriott as a pure brand company, why should it be valued any differently than Ralph Lauren, Coke or Pepsi? It is a global brand entity with long-term fee revenue, and it’s trading at a low-teens multiple. GOLDMAN: It’s an interesting point because the people at Blackstone, when asked why they acquired Hilton, that was exactly one of their premises—that the hotel brands haven’t been recognized in the same way as other global, well-known, well-established names.

“The brand management and franchise business is actually a very good business in a downturn because you have operating leverage.”

STEVEN R. GOLDMAN HILTON HOTELS CORP.

WOOD: In the last downturn, one of the tactics that hoteliers used was to slash room rates. Is that happening this time around? GOLDMAN: I saw a presentation by Mark Lomanno of Smith Travel Research showing the Four Seasons was the only company early in this decade that didn’t cut rates, and they didn’t really lose share the way one might think. They also came back a lot faster than everyone else.

THOUSAND ISLANDS COUNTRY CLUB
Wellesley Island, New York
This extraordinary property, formerly a part of the George Boldt
estate, consists of 976± acres and 22,434± feet of frontage on the St.
Lawrence River and Lake of the Isles, two 18-hole golf courses, a 103-
slip marina, restaurant, clubhouses, 20 hotel-style rental units and all
the support systems required. Substantial development potential in
a sophisticated summer recreational area with excellent proximity
to the US/Canadian border. $14,950,000 USD
Vincent McClelland 518-576-2297
Wade B.C. Weathers, Jr. 802-651-5392