The Hamister Group, Inc. Annual Report for 2005
Chairman's Message
On behalf of the Board of Directors, the Executive Officer Team, and all of the co-workers who make up every aspect of our company, it is my pleasure to present this 2005 Annual Report on the condition of and prospects for our Company and its affiliates.
The following are quicklinks to the subject headings contained in the report:
General Overview of FY 2005
Our progress as a group of individual and separate companies in FY 2005 represented a mixture of same store improvements, the continuation of the maturing of our formal entry into the hospitality sector and the more than doubling of our hotel assets. We are quite proud of the addition of three Choice Hotels International properties in Tennessee and Kentucky, including our first entry into the extended stay market with a Mainstay Suites property at the Knoxville, Tennessee Airport (Alcoa, TN). These properties were added during the last four months of 2005. Our focus on same store operations for FY 2006 will be on customer service upgrades, followed by new initiatives in the development of top line revenues maximization.
In FY 2005 we also commenced a two-year, ten-million dollar re-building and refurbishment project of Brompton Heights. This project in Amherst, New York will include the total replacement of 74 of the current 165 beds in a new, all-private-room one-floor wing. The facility will also build a new dining room, new recreation spaces, including a first ever fifteen-seat private movie theatre, a new entrance, and other enhancements. We will add a specialized memory impairment unit (20 rooms) and 15 one and two-bedroom independent living apartments. These apartments will have full access to Brompton’s dining and recreation programs on an “as-desired” basis.
In January of 2005, The Hamister Group exited the self storage sector with the sale of Premier Self Storage to Public Storage, Inc. (a publicly traded REIT) for $17,518,326 returning a 37% to 41% IRR to its investors (the range is caused by the timing of entry and the price level of entry of each of its shareholders (those that invested at inception earned a 41% IRR annually and those who entered at later dates earned between 37% and 41% IRR annually). This is the second time that The Hamister Group has delivered exit returns, which exceeded 35% per annum for its shareholders.
Revised Statements of Our Values, Vision, and Mission
Our Company and its affiliates completed an exciting strategic transformation during 2004. The implementation of this new strategic direction began in earnest in 2005 and is summarized as follows:
- We released our revised statements of commitment to Values, Vision and Mission to all co-workers.
- We continued to enforce the Companies commitment to its customers, its co-workers, and its shareholders in all of our activities.
- We continued our commitment to Community.
Core Values:
Companies in the media who are accused of “corporate wrongdoing”, in my opinion, lost their commitment to the right core values. Arrogance, greed, and something as simple as success without effort or hard work can apparently cause some people to disconnect from the most important element of the foundation for sustained success! I am referring to core values such as honesty, integrity, work ethic, character, etc. Our commitment to these and other core values as a society must be absolute and not open to compromise, limitation or interpretation.
At our Companies, our commitment to values is clear and unwavering. There is no room for interpretation or compromise. All of our co-workers sign a copy of this pledge.
Vision:
Our Vision is clear. We are a group of subject matter experts who are skilled at developing and operating real estate ventures with value added “personal” services.
Further, we believe that we are specifically talented in the operation of select types of businesses. We are particularly talented at listening to and responding to the needs, wants and desires of our customers in environments in which they live (on a short or long term basis) or maintain their belongings.
Accordingly, we have defined our real estate based businesses with value added personal services as:
- Providing temporary or long term living environments including:
| |
- Hotels, for people who are traveling and are demanding comfort, a great place to sleep and safety;
- Assisted Living Residences (ALR) and Home Health Care (HHC) for people, who by choice or by necessity seek an environment where they can live, eat, and take recreation in a resort (ALF only) like atmosphere.
|
- Providing temporary or long-term environments for people and/or companies to store their valuables (i.e. self-storage facilities).
Mission:
As we grow the Company, all of our co-workers have committed themselves to our values and delivering our promise of quality to our customers. We are mindful of our customers’ trust in us. To accomplish this important objective the Company is increasing its financial investment in its people. Among the areas targeted for increased investment are: recruitment of the highest quality people available; training and education; and incentive compensation programs. Each of our companies has a mission statement that, while similar, is directed at their specific business segment.
Strategic Objectives for 2006 and Beyond
The Company is actively pursuing acquisitions in the Hospitality and Assisted Living Residence sectors. Due to the current environment, which includes abnormally low cap rates (ergo high purchase prices) combined with over supply (ergo lower occupancies) in some markets and the quality of physical plants (most targets are old and no longer competitive); we believe that it is unlikely that we will expand our Assisted Living Residence businesses in the near term. We are committed to maintaining our discipline for the right combination of characteristics that will minimize risk and maximize returns for the stakeholders. We will nonetheless maintain a watchful eye for the right opportunities in this segment.
The lodging (hotel) industry sector is expected to be the Company’s primary focus for the next few years. The factors of market valuation, RevPAR (Revenue Per Available Room) revenue measurement (i.e. the combination of occupancy and average daily rates, in other words “revenue per available room”), quality brands and growing markets in many geographic areas of this country make this an attractive growth target in the near term. The objectives for FY 2006 and beyond in the hotel sector are:
- In FY 2006 to acquire or build:
| |
- three to six quality limited service hotels in stable and growing markets
- One full service hotel in a stable and growing market.
|
- In FY 2006 or FY 2007 to launch our management services division to manage hotels for other parties.
The acquisition criteria that we will employ to carry our strategic growth objectives can be best described by opportunities, which meet one or more, or the following characteristics (not presented in order of importance):
- Medium to Smaller population markets (including suburban markets of larger urban markets), where the competitive set is likely to be limited, with strong travel attractions which are stable and growing including (i.e. military installations, major industry or commercial businesses which drive transient overnight traffic, major tourist attractions which are growing and drive significant transient overnight traffic).
- Medium population markets, where the competitive set is likely to be significant, with at least two to three major drivers to travel (i.e. commerce, tourism, conventions, gateways to drivers of overnight traffic, etc.) which are growing.
- Airport hotels with significant and growing deplanements.
- Major resort (tourism) destinations in stable and/or growing markets.
We have concluded to specifically avoid urban hotels in top twenty markets at this time. We believe that the risk factors in these markets are inconsistent with our objectives and present skill sets.
The Company intends to commence new construction of hotels by the end of 2006 or early 2007. By 2010, the Company may be building as many as five to ten hotels per year.
We intend to adjust our specific plans based upon then present business cycles as well as our best projections of those business cycles for the years ahead. As the convergence of factors, which affect the business’ performance, dictates, we will moderate or accelerate our goals.
Commitment to Community
At The Hamister Group, we are strongly committed to community. The Company encourages its officers and business unit general managers to volunteer to serve on not-for-profit boards and to contribute to the betterment of their communities. We believe that such service adds to the health of our communities (ergo also our businesses). We also believe that such environments help to sharpen the skills of our people.
Our goal is to work in partnership with our communities. If the private sector can work in harmony together on the communities most important challenges, good results can accrue to everyone. Furthermore, we believe that the great results of this partnership will be accelerated by the cooperation of elected officials and private sector leadership.
In short, we believe that such involvement is good business!
Conclusion
I believe that the long-term success of our company is directly related to the character of our co-workers. I am confident that we now have the right people in the majority of key positions and that they will all contribute to the positive results of the company by working together as a team. The market conditions are trending up, the business segments are generally strong, and the valuations of the businesses that we are in are all excellent. Furthermore, our customers continue to demonstrate loyalty to our company and we have strong financial partners. All of these factors put us in a position to continue to achieve above-benchmark results.
Mark E. Hamister
Chairman and CEO
This message is intended for use by all of our affiliates. The Hamister Group, Inc. is not a holding company. It is a management company that contracts with similarly owned companies to provide central services in an efficient manner. All of its affiliates are separate companies. While ownership may be similar, they maintain their individual corporate integrity. We offer a this joint annual message because the directions and strategic plans of all Hamister Group affiliates are coordinated.
|
