- Outstanding co-shareholders. These partners in success have shown great understanding of the “speed bumps” that occur in business and have demonstrated extreme patience as we have dealt with them. Our co-shareholders have been rewarded for their patience with above average returns over the term of their investment.
- Committed co-workers. Our people—with their passion, positive attitudes, and problem-solving abilities—have helped us meet the challenges of our business sectors.
- Dedication to meeting and exceeding the wildest expectations of our customers. We actively and intently listen to the needs, wants, and desires of our customers. We pay special attention to concerns that evoke an emotional response. This focus on customer service has enabled our affiliated businesses to reach the upper 10% of the markets and segments in which they operate.
- Foundation in Values. Another contributing factor to the high performance of The Hamister Group is strict adherence to our system of values. We believe in honesty, integrity, strong work ethic, continuous quality innovation, clear communications, and individual responsibility. We believe in hiring upstanding people who share these values.
- Willingness to sell an individual property or group of properties when the time is right. Such timing can be dictated by market conditions (i.e. extremely high valuations), future market projections, the length of time of the hold, and an honest evaluation of our ability to succeed. If we feel that a property cannot be successful, we may come to the conclusion that the best course of action is to sell and minimize losses. The Hamister Group is focused on the wealth development of shareholders, its vision, and its co-workers. We therefore continually re-evaluate the status of all business units in order to determine right time to sell any of our individual or groups of assets. Such decisions are always made with the goal of maximizing shareholder value.
The above factors have enabled The Hamister Group and its affiliated companies to achieve better long-term results than other companies in our business sectors. We will continue to uphold the principles that have made us strong over the past 30 years.
At the close of FY 2006, we completed the 3rd year of our present 7-year strategic plan. It was an exciting year in almost all aspects of our growth and operations. We established a firm foundation for the future long-term mutual success of our customers, co-workers, and shareholders.
Our progress as a group of individual and separate companies in FY 2006 represented a mixture of same store improvements, the continuation of the growth of our hospitality sector assets, and the re-development of a few underperforming properties. I will discuss these subjects in detail later in this report.
EQUITY PARTNER
 The Hamister Group determined to seek an equity partner in order to broaden its long-term capability of acquiring a larger base of hotels. The most important reason for this decision was our belief that shareholder value would be enhanced if we were able to package large quantities of hotel assets together in one portfolio for sale. We observed cap rates as much as 100 to 150 basis points higher for transactions exceeding 100 million in portfolio size. We also concluded that such assets should be developed in at least 3 to 4 regional groups of market concentration. The multiple regional markets gave the package greater value since it lowered the risk of a single market event. The concentrations of each single market within the package provided for efficiencies and collaboration that generally improved individual performance. In addition to any properties being packaged for sale, our Company desires to be able to have in development or in the early stages of assimilation into our systems at least 20 hotels at any one time. The combination of these strategic factors indicated that greatly expanding our equity base with a partner would help us realize our Company’s vision.
The Company interviewed several candidates who expressed a serious interest in becoming our partners. Our search focused on shared values, a complimentary approach to business development, and the value-added expertise that a partner could bring to the table. During 2006 the Company entered into an agreement with HSBC Capital to become equity partners on hotel transactions going forward. We have been very pleased with the relationship with HSBC Capital. They co-invested with our Shareholders in the acquisition of 5 hotels in the Pittsburgh, PA marketplace. HSBC has a right of 1st refusal to co-invest alongside of the Hamister Family on all hotel transactions (i.e. acquisitions and new builds).
ACQUISITIONS AND RENOVATIONS
We are proud of the addition of 5 more hotels, including 3 Hampton Inns by Hilton, one Residence Inn by Marriott, and one Holiday Inn Express by Intercontinental Hotels. These properties, located in suburbs of Pittsburgh, PA, were acquired during the last 3 months of 2006. During the 1st half of FY 2007 we will focus on customer service upgrades at these properties, followed by new initiatives in the development of top line revenues maximization in FY 2007/2008.
In late December 2006 Brompton Heights Assisted Living Residence in Williamsville, NY completed the 1st phase of its 2-year, 11.5 million dollar (including the $1.5 budget overruns) re-building and refurbishment. This project included the total replacement of 74 of the previous165 beds private rooms in an all new 1-floor wing. The facility’s total capacity expanded to 174 beds. The 1st phase of this project included a new dining room, new recreation spaces, a 15-seat move theatre, new entrance, and a memory impairment unit (20 beds).
Phase 2 is scheduled to be completed in late 2007. It includes 15 1- and 2-bedroom independent living apartments. Their residents will have full access to Brompton’s dining and recreation programs on an as-desired basis.
During 2006, we started or completed major refreshes at several hotel properties, spending in excess of $ 1,859,000. These activities included: the complete refresh of the Fairfield Inn & Suites in Smyrna, TN; the renovation of the Louisville, KY Sleep Inn and its conversion to Sleep Inn & Suites; and the refresh of the Pittsburgh Airport, Green Tree, and Cranberry Township Hampton Inns. All of these activities were completed by early 2007.
In 2007, we anticipate that 3 more hotels (Cranberry Township Residence Inn, Cranberry Township Holiday Inn Express, and Knoxville Mainstay Suites) will undergo a major refresh.
During 2006 we continued the installation of video teleconferencing capabilities within our business centers. This was done in response to our customers’ desire to have improved contact with their families while traveling. We also sell the corresponding equipment (for guests who do not have it already) and ship it promptly to their home addresses. The response to this new amenity has been overwhelmingly positive.
SHARED FOCUS ON VALUES, VISION, AND MISSION
During 2006, we continued our deliberate focus on our Core Values, Vision, and Mission.
Our Core Values are the foundation for everything we do; 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.
Our Vision and Mission are based on the following goals: attracting and retaining outstanding co-workers; meeting or exceeding our customer’s wildest expectations; and achieving shareholder returns in the upper 10% of our business sectors.
OUR BUSINESS NICHE
The present business niches of The Hamister Group and its affiliated companies are mainly real estate based businesses with value-added personal services. They provide temporary or long-term living environments:
- Hotels for travelers who seek comfort, a great place to sleep, and safety.
- Assisted Living Residences (ALF) for individuals who require help with daily living. We provide a resort-like environment where our customers can live, eat, and recreate with dignity.
The business niche of The Hamister Group also includes:
- Home Health Care (HHC) for people who require nursing and personal care in the comfort of their own homes.
STRATEGIC OBJECTIVES FOR 2007 AND BEYOND
The Company is actively pursuing acquisitions in the Hospitality and Assisted Living Residence sectors.
Since we are committed to maintaining our discipline for the right combination of characteristics that will minimize risk and maximize returns for the stakeholders, we believe that it is unlikely that we will expand our Assisted Living Residence businesses in the near term. Abnormally low cap rates have created high purchase prices and over-supply has led to lower occupancies in some markets. The poor quality of physical plants (most are old and uncompetitive) also prevents us from considering many targets. We will, however, pursue Assisted Living Residence acquisitions that meet our strict criteria.
The hotel sector is expected to be the Company’s primary focus for the next few years. The following factors make the hotel sector an attractive growth target in the near term: market valuation, RevPar revenue measurement (“Revenue Per Available Room,” the combination of occupancy and average daily rates), quality brands, and growing markets in many geographic areas of the U.S. The objectives for FY 2007 and beyond in the hotel sector are:
- In FY 2007 to acquire:
- 3 to 6 quality limited service hotels in stable and growing markets.
- 1 full service hotel in a stable and growing market.
- In FY 2007 to launch our management services division to manage hotels for other parties.
- In FY 2007 to start the construction of our 1st new build hotel and to plan the construction of at least 3 more to start in 2008.
We will consider hotel acquisitions that have one or more of the following characteristics (not presented in order of importance):
- Medium population markets (including suburban markets of larger urban markets) where: the competitive set is likely to be slightly more limited than large urban markets; there are strong, stable, and growing travel attractions (such as military installations, major industry, commercial businesses that drive transient overnight traffic, and major or growing tourist attractions which drive significant transient overnight traffic).
- 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 the top 20 markets at this time. We believe that the risk factors in these markets are inconsistent with our objectives and present skill sets.
Among our strategic priorities, we are constantly focused on the following principles:
- Shareholder Wealth Development. We desire to obtain returns for our shareholders in the upper 10% of comparable sectors.
- Co-Worker Advancements. This includes career ladders and personal economic growth for peak performers to the upper 10% of comparable positions.
- Quality Customer Relationships. Our team understands the Company’s vision to consistently meet and exceed our customers’ wildest expectations. We may make mistakes, but we will constantly strive to satisfy our customers’ practical and emotional needs, wants, and desires. We will obtain significantly higher levels of customer satisfaction than our competition. Our commitment to customer service is the means by which we will achieve shareholder wealth development and co-worker advancements.
We intend to adjust our specific plans based upon present business cycles and our best projections of future business cycles. We will moderate or accelerate our goals after a careful consideration of factors affecting business performance.
COMMITMENT TO COMMUNITY
The Hamister Group is committed to Community. The Company encourages its officers and business unit general managers to volunteer their service 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 and subsequently to all of our businesses. We also believe that such activities sharpen our managers’ skills.
We also believe that the private sector should work in partnership with communities. Elected officials can be more effective if they work together with private sector leadership work together on important issues. We therefore believe that such involvement is good business.
IN CONCLUSION
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 2006 Annual Report on the condition of and prospects for our Company and its affiliates.
We understand that the shareholder groups are unique for each of these businesses. We hope that this message has been relevant to the businesses in which you have a stack. We encourage you to refer to the attached individual statements relative to your investments.
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Jack A. Turesky | John P. Havrilla |
While there are many factors beyond our control, I believe that the foundation of success is having the right people in the right positions. I am now confident that key positions are filled by committed individuals. 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. We have outstanding co-workers, loyal customers, and great financial partners. I believe that we will continue to achieve above benchmark results and to assure the long-term success of our Company and its affiliates.
Thank you for your support!
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. Rather it is the management company, which contracts with similarly owned companies to provide central services in an efficient manner. All of the affiliates are separate companies. While ownership may be similar, they maintain their individual corporate integrity. Since the message of our direction is, like our strategic plan, coordinated, we offer this joint annual message.
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