tions that by nature tend to have a concentrated value in certain high-quality assets while
other less-desirable assets can also be included in the transaction,” Hurwitz says. “Our
renewed focus will not be on the short-term financial reward of portfolio-driven transac-
tions, but rather the portfolio management aspect of whether the asset is complementary
to our prime portfolio and enhances long-term shareholder value.”
In conjunction with the company’s succession plan, Developers Diversified separated
the responsibilities of chairman and CEO, a move that is becoming more common in
the REIT industry and across corporate America. “Separation of chairman and CEO
is best practice from a governance perspective,” Hurwitz says. “Boards are engaged now
more than ever in company business through activities in audit, compensation and gov-
ernance committees. As a result, the task of managing the day-to-day business of the
board has become a full-time job.”
Scott A. Wolstein, who preceded Hurwitz as CEO and also served as chairman, became
executive chairman of the board when Hurwitz was elevated to president and CEO.
Under Hurwitz, the company is also refocusing on its core operations, the “
blocking and tackling” of the real estate business. “Over the last 18 months, the emphasis in
our industry has been focused on capital structure and balance sheet metrics,” he says.
“However, company operations couldn’t be more important as we navigate the current
environment. Re-leasing vacant space and enhancing asset quality are at the forefront of
our operations initiatives.”
MICHAEL D. BARNELLO: Continuity Counts
ho Tel opera Tors have Been battling horrendous business conditions since the terrorist attacks of Sept. 11, 2001. The Great Recession has worsened conditions in degree,
but it has not changed them in kind.
That’s one reason Michael D. Barnello, who took over as CEO on Sept. 14, 2009, rates
the degree of difficulty of the succession at LaSalle Hotel Properties as being pretty mild.
Barnello and his predecessor Jon E. Bortz (see sidebar, this page) were both there
when the company was founded in 1998. Both were involved in the initial public offering. Bortz became CEO, president and chairman; Barnello
became COO.
“Jon, our CEO, Hans Weger (the CFO) and I worked
together for 14 years and formulated the strategy and tactics
for the company,” Barnello says. “I was involved in buying
all the hotels ( 31 upscale, full-service hotels) and managing
them. So, there has been no learning curve, and the strategy
changes have amounted to little more than tinkering.”
performance rankings in the hospitality industry.
The changeover went so smoothly that Bortz actually left early. LaSalle’s board announced the succession plan in the middle of 2008. It initially called for Bortz to stay on
as CEO through June 2010. At that point, Bortz would resign as CEO and take over as
chairman exclusively.
“We were 15 months into that when Jon decided to accelerate the plan so he could do
other things,” Barnello says.
Bortz resigned about 10 months early, and Barnello took over.
“The only real changes have involved tinkering with dividends, debt levels, and the
outlook for recovering demand,” Barnello says. “None of these things represent a change in
strategy. Our job today is to navigate the company in a difficult economic environment.”
Re-Upping
The recent run of REIT IPOs has done more than just brought
new companies into the fold; it has
brought some familiar faces back to
the industry. One of those is Jon E.
Bortz. Bortz resigned as CEO from
LaSalle Hotel Properties in September 2009, looking toward a second
career. “After 30 years in real estate, I
wanted to try another field,” he says.
Bortz planned his departure carefully. He named Michael Barnello,
the firm’s COO, as his successor a
year before his resignation.
The recession, however, changed
things. Bortz spent his last year with
LaSalle helping Barnello shore up
the REIT against economic turmoil.
In the meantime, the hotel industry
started to crumble.
By the time he resigned, he believed the economy offered a once-in-a-lifetime opportunity for hotel
investors. Upon resigning, he literally
walked next door and joined Pebblebrook Hotel Trust, which was just getting organized.
“We filed in October, and in December our IPO raised $400 million,”
says Bortz, who by that time had been
named chairman, president and CEO.
“I was sad to leave LaSalle,” he
adds. “But this is fun. It’s where we
started at LaSalle. We’re building a
new team, negotiating credit facilities
and setting a new strategy.”
Pebblebrook’s strategy calls for
investing in “upper upscale” hotels
and a limited number of “upscale”
properties in 20 major cities. Sounds
a lot like LaSalle’s strategy, right?
“It’s similar,” Bortz says with a
chuckle, adding that Pebblebrook targets slightly different types of hotels
and is looking at more cities.
Pebblebrook hasn’t bought any-
thing yet, but Bortz says the firm is
actively pursuing acquisitions. “There
are lots of opportunities,” Bortz says.
“It’s exciting. The distress in our
space will create buying opportunities
for years. That’s our premise.”
And, for Bortz, it’s the promise.
