In a move that overnight will take Ashford Inc.-owned Remington Hotels to a more than 40% third-party management platform from 20%, it has acquired privately held management company Chesapeake Hospitality and its 30 properties. The combined company will now have 121 hotels under management with another five or six in development.
Remington President and CEO Sloan Dean told HOTELS on Monday that the company should cross the 130-hotel threshold by the end of 2022. In the next year or two, he added, Remington’s third-party portfolio will be well over 50%.
Ashford is acquiring Chesapeake for US$15.75 million, payable with US$6.3 million in cash and US$9.45 million of a new Series CHP Convertible Preferred Unit, which will pay a 7.28% annual dividend and have a US$117.50 conversion price per share. Chesapeake can also earn up to US$10.25 million based on its base management fee contribution for the trailing 12-month periods ending March 2024 and March 2025 for potentially US$26 million. Should Chesapeake’s performance result in the full earnout for the seller, Ashford expects US$5.3 million of EBITDA contribution for the full year of 2024, which would represent an acquisition multiple of 4.9x EBITDA.
While increasing its third-party reach was a key consideration in the deal, Dean said it was not the first consideration. “The alignment of culture was the first primary driver of the deal,” he said. “’Experience what’s possible’ melded perfectly with ‘We are the Place Where Passionate People Thrive.’”
Dean even more emphatically stated this deal was not made in response to the competitive third-party management landscape, which has seen more than its share of mergers and acquisitions in the past year. “No, not at all,” he said in response to the question about growing to stay competitive. “We are focused on being the best operator, not the biggest. Many of our competitors are simply focused on growing EBITDA of the management company and moving toward an IPO. That is fine for them but many of them have lost sight of actually operating day-to-day or taking great care of their associates along the way.”
Dean noted that Remington is already publicly held and is “not chasing some liquidity event in the future, and we were already growing organically as fast as anyone else.” He said this deal to acquire Chesapeake Hospitality just made a ton of sense regardless of what others are doing. “At Remington, our only competition is ourselves,” he added. “We (I) don’t compare ourselves to others. We just don’t… If we become the biggest because we are the best, then so be it.”
The deal also serves to expand Remington’s geographic footprint to complementary Midwestern markets, including Pittsburgh, Milwaukee, Detroit, and St. Louis. Further, the acquisition adds several IHG Hotels & Resorts to its portfolio, as well as the 877-key Showboat Atlantic City, which will be the largest hotel in Remington’s portfolio.
“We had zero overlap of ownership groups and zero overlap of hotels,” Sloan said. “Having zero conflicts in a deal allows us to truly say ‘one plus one equals three’ here.”
Chris Green, former President and CEO of Chesapeake will become the newly appointed divisional president of Remington Hotels, which will remain based in Dallas. Upon integration, all former Chesapeake managed hotels reportedly will remain under the same teams.
Dean said his role at Remington remains unchanged. “I just get to help deliver for 16 new owners and over 1,100 new associates,” he said. “I will still lead the entire company day-to-day, and I’m very excited to have Chris Green join the Remington Executive Committee. Chris is one of the most talented executives in the business, and he was a big part of me wanting to this deal.”