St. Regis Aspen IPO deviates from traditional offerings

The real estate investment trust aiming for a $33.5 million initial public offering of the St. Regis Aspen Resort hotel not only is testing the waters for new investors, but also entering rarely chartered waters in the stock market.

That’s according to a professor at the University of Denver, who noted last week that both the single-asset REIT like the one seeking an IPO for the St. Regis, as well as its Regulation A-plus offering, “are a little bit unusual.”

According to an offering circular filed Nov. 13 with the Securities and Exchange Commission, Maryland-based Aspen REIT Inc. “has been formed to own the St. Regis Aspen Resort in Aspen, Colorado. We are a single-asset REIT and currently intend to own only the St. Regis Aspen Resort. Therefore, an investment in our common stock is an investment in the St. Regis Aspen.”

Because REITs traditionally have more than one asset, the investment risk in them is lower than a single-asset REIT because “one property could not be doing so well and the others are doing well. In this case, you’re completely taking the risk on Aspen and the St. Regis because there’s no diversity,” explained Dr. Mac Clouse, a professor of finance at the University of Denver’s Daniels College of Business.

A Regulation A-plus IPO would allow anyone to invest in the St. Regis, whose stock would be listed on the New York Stock Exchange under the ticker symbol “AJAX.” Borne out of the Jumpstart Our Businesses Startups Act, or JOBS Act, which was signed into law in 2012, Regulation A-plus IPOs are more inclusive to investors while small start-up companies face less-stringent regulations for them to raise capital.

“One thing that happens with IPOs is it’s not easy for an individual to get into the IPO in the first round of sales,” Clouse said. “The stocks generally goes more to the institutional investors and the people who are friends of the issuing firm, and the public doesn’t get in there until the second or third round of buying, so it’s not something that investors can usually get into in the beginning of the process.

“The upside for the company is that the IPO is a little quicker and not much of the regulatory process that goes on with the normal IPO, and it’s giving a smaller entity to make this happen on a quicker basis and cheaper basis.”

Because Regulation A-plus IPOs occur quicker than traditional ones, Clouse cautioned investors to become as familiar as they can with the company stock they are eying. In a recent interview, Stephane De Baets, who heads Aspen REIT Inc., said “my good feeling” is the IPO of 1.675 million stocks at $20 per share would take place in December.

Aspen REIT currently is focused on the IPO and does not have future rounds of selling under consideration, he said.

Aspen REIT was formed Dec. 22, 2016, in Maryland and is managed by a subdivision of Elevated Returns LLC, a New York-based real estate asset management and advisory firm also controlled by De Baets.

Represented by De Baets’ Bangkok-based OptAsia Capital Co. Ltd, 315 Dean Associates Inc. acquired the five-star St. Regis for $70 million in September 2010. Dean Associates currently is funding $1.6 million in renovations at the 179-guestroom hotel, which opened in 1992 as a Ritz-Carlton Hotel before being converted to the St. Regis in 1998.

Maxim Group LLC would be the lead agent in selling the shares and would receive 7 percent of gross proceeds in the IPO from Dean Associates, according to the circular.

Unlike normal investments, a REIT is required to make quarterly distributions to shareholders.

“There is that benefit,” Clouse said. “It’s not your normal investment in a stock. REITs are different that way.”

Aspen REIT’s circular notes both the pros and cons of investing in the St. Regis, and it also references the 104-room W Hotel being built on East Durant Avenue at the base of Aspen Mountain. With a projected opening in 2019, W Hotel will replace the 90-room Sky Hotel, which was torn down in the spring. W Hotel is a luxury-hotel division of Starwood Hotels & Resorts Worldwide, based in Stamford, Connecticut.

Starwood merged with Marriott International in September 2016. The St. Regis Aspen is managed by a subsidiary of Marriott.

“We also compete with existing and new hotels operated under various brand names,” the circular said. “Three new hotels are scheduled to open in Aspen in the next five years, including another hotel affiliated with Starwood, which would compete directly with the St. Regis Aspen Resort for loyalty rewards program business.”

Neither Marriott nor Starwood have an ownership interest in the St. Regis Aspen, nor does the residential component of the St. Regis.

For the nine months that ended Sept. 30, St. Regis registered $22.9 million in room revenue, according to the circular. For the year that ended Dec. 31, 2016, it had room revenue of $28.7 million.

Total revenue for the first nine months of this year were $34.9 million and $42.6 million for all of 2016.

Total operating expenses were $16.8 million from January through Sept. 30, and $20.2 million for the entire 2016.

The circular also notes, “Upon the completion of this offering and the contribution transactions, our only long-term debt is expected to be a $120 million mortgage on the St. Regis Aspen Resort.”

Editor’s note: This story has been updated.


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