Sessa Capital makes some pretty broad claims in its investor presentation. Yet just how accurate are the statements?
“Sessa’s highly qualified nominees include individuals with:
Experience as a long-time REIT CEO and real estate developer
This refers to Chris D. Wheeler, who didn’t exactly have a stellar record at Gables Residential Trust.
“A short time later Bromley relinquished the CEO position to become executive chairman, leading some in the media to suspect a “palace coup,” a notion dispelled by all the parties involved. Rippel was replaced by Michael Hefley and Bromley, by Chris D. Wheeler, who had joined the REIT as part of the Trammell Crow Residential’s South Florida transaction. In the meantime, the company raised funds for development, drawing $56 million from Fleet Financial Group for three projects located in Atlanta; Weston, Florida; and West Palm Beach, Florida. Gables also entered into a joint venture with J.P. Morgan Investment to develop and manage seven apartment communities located in four of the REIT’s nine markets, budgeted at more than $200 million. Moreover, in 1999 Gables tested a new sector, offering single-family units, aimed at an older demographic, people who might sell their homes for investment purposes but wanted to rent something more substantial than an apartment. The venture was called Palma Vista, a 189-unit development located in Palm Beach County.
At the same time that Gables was spending money on new projects in 1999 it was selling off properties. Although a large portion of the money raised was earmarked for development, almost as much was used to buy back company stock in an effort to reduce the availability of shares. The plan continued into 2000, with Gables beginning to exit some of its previous markets: San Antonio, Memphis, and Nashville. In addition to raising money to buy back stock, management adopted a strategy of concentrating the REIT’s portfolio on six to eight economically diversified markets. Although the company would enjoy less geographic diversity, it still hoped to find a blend of markets that would provide some protection from the vagaries of real estate values. Moreover, it elected to concentrate even more of its resources on infill areas.
In 2000 Bromley resigned as executive chairman and Wheeler assumed the additional post of chairman of the board. He instituted a novel bonus plan that year, one that attempted to link executive compensation with the performance of Gables compared with other REITs. Only if the company outperformed 75 percent of its rivals would executives receive 100 percent of their bonuses. On the other hand, if 75 percent outperformed Gables, then executives received no bonus at all. Although management was confident that Gables would enjoy a strong year, in the end the REIT finished in the middle of the pack, slightly below the sector average. As a result, managers received only half of their bonus. Nevertheless, management believed the plan was worth keeping.
In 2001 Gables continued to sell off properties while acquiring others in order to reposition the portfolio for what it hoped would be optimal performance. All told, the company sold $94 million in real estate assets while spending $117 million to acquire others. Of major importance was Gables’s entry into a new and promising market for its operation, that of Washington, D.C. In September 2001 the company paid $24.2 million for an 82-unit high-rise in the Dupont Circle neighborhood, which was then renamed Gables Dupont Circle. Wheeler’s attempts to reshape the REIT continued in 2002 when he initiated a major shakeup, resulting in the resignation of several top executives. Instead of three regions, the company was now divided into two, East and West.”
It seems that under Wheeler, tenants weren’t happy either.
Class action lawsuits don’t look good on a resumé.