Extended Stay America — Proxy Contest (May 2021)
97 slides from Extended Stay America's proxy contest presentation, May 18, 2021
Slide 1: Extended Stay America: Don't Check Out
I N V E S T O R P R E S E N TAT I O N EXTENDED STAY AMERICA DON’T CHECK OUT P R E S EN T ED B Y TA R S ADI A C A P I TAL | M AY 2 0 2 1
Slide 2: Disclaimers
DISCLAIMERS Tarsadia Capital, LLC (“Tarsadia”), Ravi Bellur, Michael Ching and Vikram Patel (collectively, the “Participants”) have filed with the Securities and Exchange Commission (the “SEC”) a definitive proxy statement and accompanying form of proxy to be used in connection with the solicitation
Slide 3: Table of Contents
TABLE OF CONTENTS Page I Executive Summary 4 II STAY Has Been a Perennial Underperformer 17 III Sale of STAY – Wrong Time 34 IV Sale of STAY – Wrong Price 41 V Sale of STAY – Wrong Sale Process 49 VI Company and Deal Process Suffered from Apparent Fiduciary Disloyalty 70 VII Better Alternatives Exis
Slide 4: Executive Summary
Executive Summary II STAY Has Been a Perennial Underperformer III Sale of STAY – Wrong Time IV Sale of STAY – Wrong Price V Sale of STAY – Wrong Sale Process VI Company and Deal Process Suffered from Apparent Fiduciary Disloyalty VII Better Alternatives Exist VIII Refuting STAY’s Arguments IX Conclu
Slide 5: About Tarsadia Capital
About Tarsadia Capital Tarsadia Capital, LLC is the New York-based investment management company of a family office. Tarsadia Capital has a flexible and long-duration investment mandate that focuses on equities and commodities globally. Our investment process employs deep fundamental research on sec
Slide 6: Extended Stay America (NYSE: STAY) Snapshot
Extended Stay America (NYSE: STAY) Snapshot Extended Stay America, Inc. (“ESA”, “STAY” or the “Company”) is the largest integrated owner/operator of company-branded hotels in North America and operates in the extended-stay segment of the lodging industry Asset Footprint Customer Base – Avg. Length o
Slide 7: Executive Summary
Executive Summary Extended Stay shareholders have The proposed sale of Extended Better alternatives exist and Extended suffered through years of poor Stay comes at the wrong time, with Stay shareholders should oppose the strategic decisions, bad performance the wrong price and after the sale to The
Slide 8: STAY Has Underperformed
STAY Has Underperformed STAY has been the worst performing lodging stock since its IPO in 2013 as its multiple contracted 33% while peers experienced multiple expansion1 Total Shareholder Returns from STAY IPO up to Deal Historical Valuation Multiple (EV / NTM EBITDA)2 Announcement Lodging REITs Lod
Slide 9: Tarsadia's Unsuccessful Attempts to Engage Constructively
Tarsadia’s Unsuccessful Attempts to Engage Constructively Tarsadia has attempted to engage constructively with the Boards and management of STAY May 2020 October 6, 2020 February 11, 2021 March 15, 2021 May 7, 2021 Tarsadia first Tarsadia shares 43-page Tarsadia conducts call with STAY cancels sched
Slide 10: STAY's Sale is the Result of a Board Hiding From Accountability
STAY’s Sale is the Result of a Board Hiding From Accountability Tarsadia’s engagement and nomination of directors led STAY’s Boards to run an abrupt sale process to avoid a shareholder meeting that would remove existing Board members Tarsadia Actions December 22, January 26, 2021 February 11, 2021 F
Slide 11: Historical Price Performance
Historical Price Performance The proposed sale to Blackstone and Starwood at $19.50 per paired share (the “Sale”), if completed, would conclude STAY’s more than seven years as a public company at a price below its original IPO price of $20.00 Historical Price Chart of STAY March 15, 2021: $30.00 Bla
Slide 12: Wrong Time to Sell
Wrong Time to Sell It is the wrong time to sell STAY and end the Company’s existence as a publicly traded company Category Detail Page(s) After experiencing a substantial decline in demand in 2020, industry forecaster Beginning of Lodging Cycle STR, Inc. projects record-setting increases in demand o
Slide 13: Wrong Price at Which to Sell
Wrong Price at Which to Sell The proposed transaction price significantly undervalues STAY and is at a substantial discount to peers Category Detail Page(s) Proposed transaction multiple of 12.0x NTM EBITDA is the lowest in the U.S. Lowest Acquisition Multiple in lodging space in more than 5 years a
Slide 14: The Sale Process Was Inadequate and Suffered From Fiduciary Disloyalty
The Sale Process Was Inadequate and Suffered From Fiduciary Disloyalty The process to sell Extended Stay suffered from numerous failures Category Detail Page(s) No Other Parties Were Goldman Sachs, STAY’s financial advisor, explicitly noted that it did not solicit Contacted During the 50 – 58 intere
Slide 15: Better Alternatives Exist
Better Alternatives Exist With a credible, independent board aligned with shareholders, STAY will be able to unlock its full potential via both strong standalone execution and a thorough exploration of all strategic alternatives Category Detail Page(s) STAY is well positioned relative to peers to be
Slide 16: Fair Value is Substantially Higher
Fair Value is Substantially Higher The proposed transaction materially undervalues STAY compared to accepted valuation methods, comps and an improved standalone strategy. Please see “Page Detail” for Tarsadia’s analysis Method $15.00 $20.00 $25.00 $30.00 $35.00 Page Detail Comparable Companies $27
Slide 17: STAY Has Been a Perennial Underperformer
I Executive Summary II STAY Has Been a Perennial Underperformer III Sale of STAY – Wrong Time IV Sale of STAY – Wrong Price V Sale of STAY – Wrong Sale Process VI Company and Deal Process Suffered from Apparent Fiduciary Disloyalty VII Better Alternatives Exist VIII Refuting STAY’s Arguments IX Conc
Slide 18: STAY Has Been The Worst Performing Lodging Stock
STAY Has Been The Worst Performing Lodging Stock STAY significantly underperformed its lodging REIT and C-Corp peers from its IPO until its announced deal with Blackstone and Starwood Total Shareholder Returns from STAY IPO up to Deal Announcement(1) Lodging REITs Lodging C-Corps 251% 221% 179% STAY
Slide 19: Current STAY Board Oversaw the Company's Valuation Derating
Current STAY Board Oversaw the Company’s Valuation Derating STAY’s Board argues that the Sale values Extended Stay at a premium to the Company’s historical trading multiple, but that multiple was depressed because of poor performance and oversight STAY’s Boards point out that the Blackstone-Starwo
Slide 20: STAY Was Not Always Valued Below its Lodging Peers
STAY Was Not Always Valued Below its Lodging Peers In December 2013, STAY was valued above or in-line with lodging peers In December 2013, after STAY’s IPO, the Company was valued at 14.0x NTM EBITDA, above nearly all of its lodging REIT peers STAY also was valued just below the C-Corps average
Slide 21: Valuation Multiple Contraction
Valuation Multiple Contraction Between 2013 and 2019, STAY’s EV / EBITDA multiple contracted 33%, whereas select service REITs and C-Corps saw multiple expansion Historical Valuation Multiple (EV / NTM EBITDA)1 +12% STAY Multiple Expansion 18.0x (33)% Multiple 16.3x 16.0x Contraction (7)% +9% Multip
Slide 22: 3 Consecutive Quarters of Reduced Guidance After IPO
3 Consecutive Quarters of Reduced Guidance After IPO In STAY’s first three quarters as a public company, it lowered is full year 2014 net income guidance every quarter, resulting in a 21% decline from the $192mm midpoint of its initial guidance STAY FY 2014 Net Income Guidance History $176 - $207mm
Slide 23: History of Underperforming Industry RevPAR Growth
History of Underperforming Industry RevPAR Growth STAY RevPAR has underperformed its peers in 17 of 24 quarters from its IPO in 2014 through 2019 The only period of outperformance was from Q2 ‘15 to Q4 ‘16, when STAY’s then controlling shareholders (including Blackstone) were selling STAY Relative
Slide 24: History of Underperforming Industry EBITDA Margins
History of Underperforming Industry EBITDA Margins Between 2013 and 2019, STAY saw its EBITDA margins decline 186bps while most peers saw an expansion Lodging REITs - 2013 to 2019 EBITDA Margin Change (bps)1 Select Service Lodging REITs Full Service Lodging REITs 581 314 265 277 247 (86) (186) STAY
Slide 25: STAY Has Failed to Execute its Franchise Strategy
STAY Has Failed to Execute its Franchise Strategy STAY’s franchise efforts have disappointed as franchise unit openings have vastly underperformed targets STAY – 2016 Investor Day New Franchise Strategy Plan At STAY’s June ‘16 investor day, the Company launched a new franchising strategy and set o
Slide 26: Revolving Door of Senior Executives
Revolving Door of Senior Executives Between July 2014 and September 2020, STAY employed 4 different CEOs and 4 different CFOs The constant executive turnover led to confusion over the Company’s long-term strategic goals and questions about the Company’s governance by public investors The three p
Slide 27: STAY Underperformed the Board's Own EBITDA Target Every Year
STAY Underperformed the Board’s Own EBITDA Target Every Year For 7 years, the Board set a low bar for performance and yet the Company missed these lowered targets EBITDA performance missed the Boards’ targets / expectations every year from 2013 to 2019 Nevertheless, the Board lowered its compens
Slide 28: STAY Has Missed Out on Major Lodging Industry Trends
STAY Has Missed Out on Major Lodging Industry Trends Over the past 7 years, lodging companies have used one of three well understood strategies to enhance value, but STAY has not adopted any of these approaches The major lodging industry strategic trends over the past 1 2 3 several years have incl
Slide 29: Missed Strategy Opportunity: Franchise Unit Growth
Missed Strategy Opportunity: Franchise Unit Growth 1 Since the launch of STAY’s franchise program in 2018, the Company has opened 5 new development franchise units through Q4 ‘20, while competitor Choice Hotels’ Woodspring brand has opened 50 units over that same period Cumulative Organic New Franch
Slide 30: Missed Strategy Opportunity: M&A or Capital Recycling Programs
Missed Strategy Opportunity: M&A or Capital Recycling Programs 2 Many lodging companies have either pursued M&A or undertaken multi-billion dollar capital recycling programs M&A Activity Capital Recycling Acquirer Target Company Asset Recycling Activity $3.3bn of dispositions and $1.8bn of acquisiti
Slide 31: Missed Strategy Opportunity: Splitting the Brand from Real Assets
Missed Strategy Opportunity: Splitting the Brand from Real Assets 3 Since 2017, several lodging companies have separated their brands from their real assets Date Jan 2017 Feb. 2018 May 2018 June 2018 Transaction Opco / Propco Opco / Propco Opco / Propco Opco / Propco Woodspring sold brand LaQuinta b
Slide 32: STAY Has Become an Orphan in the US Lodging Landscape
STAY Has Become an Orphan in the US Lodging Landscape 3 The US lodging market has bifurcated itself into two groups: C-Corps (brand owners) and REITs (property owners) Extended Stay America and Hyatt (a controlled company) are the only remaining major lodging companies that own brand and propertie
Slide 33: STAY's New Brand Launch Was Inadequately Planned
STAY’s New Brand Launch Was Inadequately Planned The Premier Suites brand launch had no execution plan and is indicative of poor planning and bad execution On February 26, 2021, STAY announced the launch of a new brand “Extended Stay America Premier Suites” and renaming the core brand “Extended St
Slide 34: Sale of STAY – Wrong Time
I Executive Summary II STAY Has Been a Perennial Underperformer III Sale of STAY – Wrong Time IV Sale of STAY – Wrong Price V Sale of STAY – Wrong Sale Process VI Company and Deal Process Suffered from Apparent Fiduciary Disloyalty VII Better Alternatives Exist VIII Refuting STAY’s Arguments IX Conc
Slide 35: U.S. Lodging Industry Demand is Cyclical
U.S. Lodging Industry Demand is Cyclical The U.S. lodging industry is characterized by long periods of demand expansion and short, sharp contractions Since 1972, there have been five extended periods of relatively robust room demand growth After experiencing a substantial decline in demand in 20
Slide 36: STAY Hotel EBITDA / Key Grows Significantly During Cyclical Recoveries
STAY Hotel EBITDA / Key Grows Significantly During Cyclical Recoveries STAY Hotel EBITDA / key has rebounded between 46% to 108% in prior lodging cycles and STAY management projects it to rebound 57% this cycle STAY Annual Property Level EBITDA / Key ($) 2002-2007 2010-2019 STAY – Mgmt Projections L
Slide 37: Lodging Stock Returns Are Best After a Significant Contraction
Lodging Stock Returns Are Best After a Significant Contraction U.S. lodging stocks generate the highest returns in the first two years after a lodging recession, and are followed by an additional 2 to 3 years of positive returns U.S. Lodging Stocks Annual Share Performance (%)1 During prior cycles,
Slide 38: Blackstone's Investing History in the Lodging Cycle With STAY
Blackstone’s Investing History in the Lodging Cycle With STAY Blackstone has already purchased STAY twice (2004 and 2010) at the beginning of a lodging cycle and sold at a substantial gain near the end of the lodging cycle, after Hotel EBITDA / key had recovered Date May 2004 April 2007 May 2010 Nov
Slide 39: STAY Board Guidance is a Contrarian Indicator to Blackstone Actions
STAY Board Guidance is a Contrarian Indicator to Blackstone Actions It is an odd coincidence that Blackstone has taken the opposite approach to the Boards’ guidance at major inflection points in STAY’s history… and Blackstone has always been right IPO Investor Day Current Date November 2013 June 201
Slide 40: Boards of U.S. Real Estate Companies Are Rejecting Cash Deals
Boards of U.S. Real Estate Companies Are Rejecting Cash Deals Boards are accepting equity transactions because cash deals do not allow shareholders to participate in the potential stock appreciation of a post-COVID recovery Of the other 7 real estate related M&A situations that we reviewed since C
Slide 41: Sale of STAY – Wrong Price
I Executive Summary II STAY Has Been a Perennial Underperformer III Sale of STAY – Wrong Time IV Sale of STAY – Wrong Price V Sale of STAY – Wrong Sale Process VI Company and Deal Process Suffered from Apparent Fiduciary Disloyalty VII Better Alternatives Exist VIII Refuting STAY’s Arguments IX Conc
Slide 42: Lowest Lodging Cash Acquisition Multiple in Recent History
Lowest Lodging Cash Acquisition Multiple in Recent History Proposed transaction multiple of 12.0x NTM EBITDA is the lowest cash acquisition multiple in the U.S. lodging space in more than 5 years and lower than prior acquisition of STAY by Blackstone Historical Lodging Cash Acquisitions (EV / NTM Ad
Slide 43: Acquisition Multiple is at a Discount to Public Peers
Acquisition Multiple is at a Discount to Public Peers The acquisition multiple of STAY at 11.6x FY ‘22E EBITDA still values the Company at a 32% discount to its REIT peers Lodging Industry Comparables (EV / FY ‘22E EBITDA) Lodging REITs Lodging C-Corps 20.1x 19.6x 18.8x 18.9x Avg = 17.8x 18.5x 18.2x
Slide 44: Buybacks Were Conducted Above $19.50 Deal Price
Buybacks Were Conducted Above $19.50 Deal Price For 8 out of the first 9 months in 2018, the STAY board endorsed share buybacks that averaged above the $19.50 deal price Over the course of 2018, STAY’s Boards authorized the repurchase of $68mm in stock at a price above $19.50 Average Price of Shar
Slide 45: Real Estate Appraisal from 2007 Indicates Inadequate Value
Real Estate Appraisal from 2007 Indicates Inadequate Value In 2007, HVS International, performed an appraisal on STAY’s assets; even assuming no appreciation in 14 years, the 2007 appraisal implies a real estate value of $27.37 per share value In 2007, HVS International (“HVS”), a division of H&R
Slide 46: 2007 Appraisal is Conservative
2007 Appraisal is Conservative STAY has executed on 4 deals and is under contract to sell an additional 4 units at attractive values well above the 2007 real estate appraisal In 2018 and 2020, STAY sold two assets for valuations 2.2x to 3.0x above the 2007 appraised values STAY recently disclose
Slide 47: New Independent Appraisal Suggests Value is Higher than 2007 Appraisal
New Independent Appraisal Suggests Value is Higher than 2007 Appraisal An independent appraisal company, Berkadia, that we engaged, valued 6 properties at $227mm (+51% higher than the 2007 appraised values) and indicated there would be significant interest in STAY’s real estate portfolio While STA
Slide 48: Real Estate Liquidation Value Substantially Higher than Deal Price
Real Estate Liquidation Value Substantially Higher than Deal Price Our real estate liquidation value implies a share price of $28 to $31 per paired share We have estimated that STAY’s real estate values have increased between 15% to 25% in the 14 years since the 2007 appraisal We have also assum
Slide 49: Sale of STAY – Wrong Sale Process
I Executive Summary II STAY Has Been a Perennial Underperformer III Sale of STAY – Wrong Time IV Sale of STAY – Wrong Price V Sale of STAY – Wrong Sale Process VI Company and Deal Process Suffered from Apparent Fiduciary Disloyalty VII Better Alternatives Exist VIII Refuting STAY’s Arguments IX Conc
Slide 50: STAY Made No Effort to Invite Potential Acquirors Into the Process
STAY Made No Effort to Invite Potential Acquirors Into the Process Since July of 2017, the STAY Boards have instructed its financial advisers to reach out to a total of 2 potential acquirers other than Blackstone and Starwood The supposed two “potential” acquirers that the STAY Board and its finan
Slide 51: No Solicitation of Bids Since July 2018
No Solicitation of Bids Since July 2018 Goldman Sachs was retained as STAY’s financial adviser on June 1, 2020, but did not reach out to a single party about acquiring the Company Goldman Sachs was not requested to solicit, and did not solicit, interest from other parties with respect to an acquisit
Slide 52: STAY's Approach Differs Markedly From Its 2007 Process
STAY’s Approach to this Sale Process Differs Markedly From Its 2007 Process When Blackstone controlled the sale process of Extended Stay in 2007, the Company conducted a very different and thorough process Despite the deal being $2 billion smaller in 2021 than in 2007, the Company is claiming ther
Slide 53: In Recent Lodging Transactions, There Has Always Been Significant Outreach and Interest
In Recent Lodging Transactions, There Has Always Been Significant Outreach and Interest Other sale processes involved substantial outreach and bidder interest, as indicated in the proxy statements of prior transactions The number of parties contacted range from 17 to 180 When Blackstone sold STA
Slide 54: Low Rate Environment Makes STAY Attractive to Investors
Low Rate Environment Makes STAY Attractive to Investors With record low interest rates and compressed credit yields, STAY’s durable free cash flow should be attractive to a broad set of institutional investors and pension funds US 10-Year Treasury Rate (%) US Credit Spreads (bps) 1 2500 6.00% 5.00%
Slide 55: Private Equity Dry Powder For Acquisitions Has Increased
Private Equity Dry Powder For Acquisitions Has Increased Private equity has over $1.9 trillion in dry powder available to make acquisitions and should have been contacted about STAY’s sales process Global Private Equity Dry Powder ($USD bn) N. America Private Equity Dry Powder ($USD bn) $2,000 $1,00
Slide 56: STAY's Sale Process Was Rushed
STAY’s Sale Process Was Rushed STAY’s sale process was the shortest of any lodging company since at least 2015 The median duration of comparable lodging sale processes was 174 days, 3.2x as long as the abridged 55 day process that STAY’s Boards oversaw Duration of Sale Process (Days) 614 217 200 M
Slide 57: Removal of Go-Shop Provision For De Minimis Value
Removal of Go-Shop Provision For De Minimis Value After not reaching out to any potential competing acquirers, the STAY Boards’ gave up the “go-shop” provision for 25 cents per paired share, a de minimis 1% increase in the deal price At the March 6, 2021 meeting when it was decided that STAY would
Slide 58: Starwood Capital Has Strong Strategic Interest in Acquiring STAY
Starwood Capital Has Strong Strategic Interest in Acquiring STAY Starwood is a strategic buyer that can generate synergies from an acquisition of STAY, but the Boards’ allowed Starwood to partner with Blackstone rather than soliciting Starwood as a competing bidder Starwood History in Extended Stay
Slide 59: Boards Did Not Negotiate a Good Price
Boards Did Not Negotiate a Good Price The Boards’ “negotiated” increase in the deal price lagged the performance of publicly traded peers The Boards claim they “thoroughly negotiated with Blackstone and Starwood to reach this offer value”1 Blackstone increased its offer value 15% from its initia
Slide 60: Buyers Are Receiving $1.00 per share Windfall
Buyers Are Receiving $1.00 per share Windfall Over $175mm in capital returns will be paid to the Company in the next several months via contractual asset sales and a federal tax return During STAY’s Q4 ‘20 earnings call on February 26, 2021, the Company noted that it would be receiving “a federal
Slide 61: Accretive Asset Sales Alternative Not Thoroughly Vetted
Accretive Asset Sales Alternative Not Thoroughly Vetted The Boards did not perform a thorough assessment of the strategic value of STAY’s real estate assets, which could generate $1.6bn to $2.1bn in gross proceeds According to the Company’s Proxy Statement, at a February 5, 2021 board meeting foll
Slide 62: Potential Upside from Accretive Asset Sales
Potential Upside from Accretive Asset Sales The asset sale scenarios discussed would result in adjusted funds from operations (“AFFO”) accretion of 16% to 42% and would potentially have a material impact on the resting share price Performing a scenario analysis of the Boards’ ($mm) Pre-Deal Scenar
Slide 63: The STAY Board Relied Upon a Flawed Fairness Opinion
The STAY Board Relied Upon a Flawed Fairness Opinion Goldman Sachs, STAY’s financial adviser, failed to conduct a comparison of STAY’s valuation to publicly traded peers or precedent transactions In each of the six significant acquisitions of U.S. lodging companies It is also notable that when S
Slide 64: Goldman Sachs Deviated from Its Typical Methodology
Goldman Sachs Deviated from Its Typical Methodology In every fairness opinion issued by Goldman in cash deals for real estate companies since 2017, Goldman used a precedent transaction analysis or comparable companies analysis The only exception in the last 4 years of Goldman Sachs fairness opinio
Slide 65: STAY Recognizes the Relevance of Peer Comparisons for Pay and rTSR
STAY Recognizes the Relevance of Peer Comparisons for Pay and rTSR It is customary to compare a proposed deal’s value to the trading multiples of peer companies; STAY uses peer comparisons for compensation purposes, but its financial advisor failed to analyze the proposed deal compared to the valuat
Slide 66: Illustrative Precedent Transaction and Comparable Companies Analysis
Illustrative Precedent Transaction and Comparable Companies Analysis Performing a basic precedent transaction and comparable companies’ analysis arrives at values ranging from $27.90 to $33.96 per STAY paired share Selected Precedent Transaction Analysis Comparable Companies Analysis We reviewed t
Slide 67: Excluded Comparable Valuation Analysis Reveals Higher Values
Excluded Comparable Valuation Analysis Reveals Higher Values Performing a comparable companies and selected precedent transaction analysis leads to implied prices of $27.90 to $33.96, significantly higher than the other analyses included in Goldman’s fairness opinion Fairness Opinion – Summary of Va
Slide 68: Woodspring Sale is a Private Transaction Comp that STAY Overlooked
Woodspring Sale is a Private Transaction Comp that STAY Overlooked STAY is a more attractive asset than Woodspring and valued at a 9.0% to 8.0% cap rate implies a per share value of $21.90 to $26.28 Woodspring Suites is an extended stay focused brand that had a total of 241 units as of 2017 (102 o
Slide 69: The Sale Process Was Fatally Flawed
The Sale Process Was Fatally Flawed With so many process errors, shareholders should reject the proposed deal Summary of Sale Process Grade Only reached out to 2 other potential acquirers over past 4 years Did not solicit any potential acquirers since July 2018 No staple financing offered desp
Slide 70: Company and Deal Process Suffered from Apparent Fiduciary Disloyalty
I Executive Summary II STAY Has Been a Perennial Underperformer III Sale of STAY – Wrong Time IV Sale of STAY – Wrong Price V Sale of STAY – Wrong Sale Process VI Company and Deal Process Suffered from Apparent Fiduciary Disloyalty VII Better Alternatives Exist VIII Refuting STAY’s Arguments IX Conc
Slide 71: The STAY Boards Are Conflicted
The STAY Boards Are Conflicted The STAY Boards continue to be comprised of private equity appointed directors, and their associates, rather than truly non-conflicted directors Several directors are holdovers from Blackstone’s prior ownership period and have recruited their associates to the Boards
Slide 72: Douglas Geoga – A Conflicted Chairman
Douglas Geoga – A Conflicted Chairman We believe Mr. Geoga’s undisclosed relationships with Blackstone disqualifies him from independently representing public shareholders Conflict Summary Undisclosed Background Information Mr. Geoga was appointed to the board of December 2004: Hyatt Corporation
Slide 73: Thomas O'Toole – Former Employee of Mr. Geoga
Thomas O’Toole – Former Employee of Mr. Geoga We believe Mr. O’Toole’s prior role as a subordinate to Mr. Geoga compromises his ability to represent independent shareholders in the board room Conflict Summary Undisclosed Background Information Mr. O’Toole’s prior working relationship Mr. O’Toole
Slide 74: Kapila Anand – Former Contractor to Mr. Geoga
Kapila Anand – Former Contractor to Mr. Geoga We believe Ms. Anand’s prior role as a contractor working for Mr. Geoga at Hyatt compromises her ability to represent independent shareholders in the board room Conflict Summary Undisclosed Background Information Ms. Anand’s prior working relationship
Slide 75: Jodie McLean – CEO of Blackstone Portfolio Company
Jodie McLean – CEO of Blackstone Portfolio Company We believe Ms. McLean’s position as CEO of a Blackstone portfolio company should have required her to recuse herself from voting on the proposed transaction Conflict Summary Undisclosed Background Information Ms. McLean is the CEO of EDENS, a De
Slide 76: Lisa Palmer – Legacy Blackstone Relationship
Lisa Palmer – Legacy Blackstone Relationship We believe Ms. Palmer’s transaction history and overlapping board tenure with Blackstone compromises her ability to represent independent shareholders Conflict Summary Undisclosed Background Information Ms. Palmer sold a portfolio of assets to a Augus
Slide 77: 2 of 5 Truly Independent Directors Voted AGAINST Deal
2 of 5 Truly Independent Directors Voted AGAINST Deal Neil Brown and Simon Turner voted against the deal as directors of ESH Extended Stay America, Inc. (C-Corp) ESH Hospitality, Inc. (REIT) Disqualifying Disqualifying Name Relationship Board Status Name Relationship Board Status Bruce Haase Bruce H
Slide 78: Independent Directors Against Deal
Independent Directors Against Deal Neil Brown and Simon Turner not only voted against the deal, but detailed the specific reasons why STAY shareholders should oppose the transaction Neil Brown Simon Turner Category Detailed Concern from Dissenting Directors1 “The approximately 15% premium to the pai
Slide 79: STAY's Boards Increased the CEO's Change-in-Control Payments Twice During Negotiations
STAY’s Boards Increased the CEO’s Change-in-Control Payments Twice During Negotiations During merger negotiations with Blackstone, the STAY board first awarded CEO Bruce Haase additional shares that would increase his compensation upon a change in control, then gave him a valuable tax gross-up Acc
Slide 80: STAY Board Previously Had a Policy AGAINST Tax Gross-Ups
STAY Board Previously Had a Policy AGAINST Tax Gross-Ups In STAY’s 2019 annual proxy, STAY outlined its compensation practices, specifically noting that STAY had no “tax gross-ups” Section from STAY Most Recent Annual Proxy1 STAY pre-deal approach to tax gross-ups 1) Filed April 23, 2020 80
Slide 81: Bruce Haase Outlook – Before & After Merger Agreement Part 1
Bruce Haase Outlook – Before & After Merger Agreement Part 1 Bruce Haase’s outlook for STAY after the merger agreement (and his enhanced compensation arrangements) represent a complete reversal of the views he expressed to shareholders just weeks earlier Q4 ‘20 Earnings Transcript – February 26, 202
Slide 82: Bruce Haase Outlook – Before & After Merger Agreement Part 2
Bruce Haase Outlook – Before & After Merger Agreement Part 2 Bruce Haase’s outlook for STAY after the merger agreement (and his enhanced compensation arrangements) represent a complete reversal of the views he expressed to shareholders just weeks earlier Q4 ‘20 Earnings Transcript – February 26, 202
Slide 83: STAY is Using the New Brand Launch to Scare Shareholders
STAY is Using the New Brand Launch to Scare Shareholders STAY management has created a false narrative that the Company will require an incremental $245mm of immediate capex spend between 2021 and 2022 to support the new Premier Suites brand strategy Over the course of 46 days between the initial
Slide 84: Better Alternatives Exist
I Executive Summary II STAY Has Been a Perennial Underperformer III Sale of STAY – Wrong Time IV Sale of STAY – Wrong Price V Sale of STAY – Wrong Sale Process VI Company and Deal Process Suffered from Apparent Fiduciary Disloyalty Better Alternatives Exist VIII Refuting STAY’s Arguments IX Conclusi
Slide 85: Future Lodging Trends From Which STAY Will Benefit
Future Lodging Trends From Which STAY Will Benefit STAY is well positioned relative to peers to benefit from a number of emerging themes in the lodging space that will play out over several years Unfortunately, the current board and management team do not share in our excitement for the substantia
Slide 86: Substantial Standalone Value Creation Opportunities Exist
Substantial Standalone Value Creation Opportunities Exist With the right board composition, management team and strategy, STAY has a variety of value levers across asset sales, franchise growth, capital structure and redeployment of capital With the support of a board including independent, experi
Slide 87: Tarsadia Has Recruited World Class Candidates for the Board
Tarsadia Has Recruited World Class Candidates for the Board When the deal is voted down, Tarsadia intends to run a partial or full slate of directors for election to the Board Tarsadia previously nominated three exceptional lodging executives to the Board to bring the required expertise to evaluat
Slide 88: Refuting STAY's Arguments
I Executive Summary II STAY Has Been a Perennial Underperformer III Sale of STAY – Wrong Time IV Sale of STAY – Wrong Price V Sale of STAY – Wrong Sale Process VI Company and Deal Process Suffered from Apparent Fiduciary Disloyalty VII Better Alternatives Exist Refuting STAY’s Arguments IX Conclusio
Slide 89: Extended Stay's Claims About Tarsadia and the Merits of the Sale are False
Extended Stay’s Claims About Tarsadia and the Merits of the Sale are False Category STAY’s Assertion The Truth • Tarsadia warned that the Company was vulnerable to a vulture acquisition offer at $17.00 and that STAY needed to articulate a business strategy that would bolster shareholder confidence a
Slide 90: Extended Stay's Claims About Tarsadia and the Merits of the Sale are False
Extended Stay’s Claims About Tarsadia and the Merits of the Sale are False Category STAY’s Assertion The Truth • In December 2013, after STAY’s IPO, the Company was valued above its peers at 14x EBITDA • Under the Boards’ stewardship, the Company has delivered shareholders a history of earnings “Ove
Slide 91: Conclusion
I Executive Summary II STAY Has Been a Perennial Underperformer III Sale of STAY – Wrong Time IV Sale of STAY – Wrong Price V Sale of STAY – Wrong Sale Process VI Company and Deal Process Suffered from Apparent Fiduciary Disloyalty VII Better Alternatives Exist VIII Refuting STAY’s Arguments Conclus
Slide 92: Conclusion
Conclusion Extended Stay shareholders have The proposed sale of Extended Better alternatives exist and Extended suffered through years of poor Stay comes at the wrong time, with Stay shareholders should oppose the strategic decisions, bad performance the wrong price and after the Sale to Blackstone
Slide 93: Long Term Public Holders Are Also Opposing the Deal
Long Term Public Holders Are Also Opposing the Deal Since Tarsadia’s announcement in opposition to the Blackstone-Starwood transaction, five other shareholders have also publicly opposed the deal The five other shareholders reportedly own 10.6% of STAY’s outstanding shares and have been holders of
Slide 94: Contact Information
CONTACT INFORMATION INVESTORS: Morrow Sodali Mike Verrechia / Bill Dooley Shareholders Call Toll Free: (800) 662-5200 Email: [email protected] PRESS / MEDIA: Sloane & Company Dan Zacchei / Joe Germani Email: [email protected] / [email protected] 94
Slide 95: Appendix; Extended Stay's Paired-Share Structure
I Executive Summary II STAY Has Been a Perennial Underperformer III Sale of STAY – Wrong Time IV Sale of STAY – Wrong Price V Sale of STAY – Wrong Sale Process VI Company and Deal Process Suffered from Apparent Fiduciary Disloyalty VII Better Alternatives Exist VIII Refuting STAY’s Arguments IX Conc
Slide 96: Paired Share Corporate Structure
Paired Share Corporate Structure Under the Company’s structure, ownership of a “Paired Share” represents an ownership interest in its hotel properties through ESH REIT and an ownership interest in its franchising and hotel management business, including the operation of its owned hotels, through the
Slide 97: Lodging Industry 2022E Net Leverage
Lodging Industry 2022E Net Leverage Lodging Industry Net Leverage (Net Debt / FY ‘22E EBITDA) Lodging REITs Lodging C-Corps 8.3x 8.5x 7.3x 7.3x 6.3x Average = 5.9x 5.9x 4.6x 4.7x 4.8x 4.1x Average = 3.2x 3.5x 3.7x 3.3x 2.1x 2.2x STAY SHO HST XHR APLE RLJ DRH INN RHP PEB PK CHH MAR WH HLT Source: Blo