Fund targets NY's Royalton Hotel owner as activists swarm REITs

(Reuters) - FelCor Lodging Trust FCH.N is under attack from activist investor Jonathan Litt, who is pushing the real estate investment trust to buy back shares, reduce debt and consider selling itself.

The company replied on Thursday that it was already putting a strategic plan in place that involved key property sales and a $100 million stock buyback that commenced last month.

“We began implementing virtually the same plan last fall,” FelCor said in a statement, referring to what Litt announced earlier in the day.

Shares of FelCor rose 7.5 percent to $6.77 on Thursday after Litt’s Land and Buildings hedge fund released a letter outlining its recommendations.

Land and Building’s latest campaign is among several activist efforts targeting REITs, whose stock prices trade at a substantial discount to their net asset values. In some cases, activists have also challenged the companies’ corporate governance and asset management structures.

Land and Buildings said FelCor, which has a market valuation of $903 million, should immediately consider selling its New York City hotels, which include the Knickerbocker, Royalton and Morgans New York.

The hedge fund also said FelCor, whose shares fell 33 percent last year, should add new board members and hold annual elections for all directors rather than continue with staggered terms. FelCor said it has begun to de-stagger its board and was in the process of selling the New York properties that Litt pointed to.

FelCor however is resisting Land and Building’s push to have the entire REIT sold, a move the hedge fund, which owns around 4 percent of the company, wants it to consider.

Activist investors waged a record number of campaigns last year, targeting companies with heavy cash piles, poor stock performance and management teams that lacked the support of institutional investors.

The relatively small real estate sector was a popular target last year, with activists targeting 17 U.S. REIT and real estate-related companies, up from 10 in 2014, according to Thomson Reuters data.

Ashford Hospitality Trust AHT.N is under attack by Rambleside Holdings, and Ashford Hospitality Prime AHP.N, which Ashford Trust spun off in 2013, is the target of Sessa Capital.

Land and Buildings is also leading a campaign to urge NorthStar Asset Management Group Inc NSAM.N to consider folding itself back into former parent NorthStar Realty Finance Corp NRF.N.

FelCor said that after the asset sales, its debt leverage levels will drop and more than $700 million in cash will be available.

Reporting by Michael Flaherty; Editing by Lisa Von Ahn and Tom Brown