STRICTLY PRIVATE & CONFIDENTIAL
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PROJECT KAHUNA
May 4, 2000
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The information contained in this presentation was obtained solely from Kahuna
management and from public sources. Deutsche Bank Alex. Brown has used and
relied upon such information in the preparation of this presentation and does
not assume responsibility for independent verification of any such
information, and makes no representation or warranty in respect of the
accuracy or completeness of such information.
This presentation is prepared as of May 3, 2000 and reflects information made
available to us prior to such date. It does not include information regarding
all of the assessments made by Deutsche Banc Alex. Brown in arriving at its
conclusions.
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CONTENTS
Section
1 Introduction
2 Preliminary review of alternatives
Appendix
I Analysis of selected comparable transactions
II Analysis of selected companies
INTRODUCTION SECTION 1
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SECTION 1
Introduction
1
INTRODUCTION SECTION 1
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EXECUTIVE SUMMARY
- Kahuna is a diversified group of businesses which lacks the attributes of
an attractive public security and, as a result, has had difficulty
achieving sponsorship in the public equity market
- no active Wall Street coverage
- low liquidity
- not a pure play in a sector
- no earnings/cash flow visibility; no dividend
- ongoing capital investment required to realize asset potential
- long-dated assets
- diverse assets in multiple geographic locations
- cyclicality of business
- sectors out of favor with investors
- Given the pre-offer stock market valuation attributed to Kahuna, DHM
believes that the best long-term option is to take the company private and
allow the current shareholders the opportunity to achieve liquidity at a
significant premium
BENEFITS TO COMPANY
--------------------------------------------------------------
- The private company can focus on strategic opportunities
within each segment
- The private company can be consolidated with other private
holdings held by DHM to realize cost savings and eliminate
conflicts of interest between businesses
BENEFITS TO SHAREHOLDERS
--------------------------------------------------------------
- Shareholders can receive a significant premium to recent
trading prices
- Provides an opportunity for liquidity not otherwise
available to major shareholders
- Avoids uncertainty of future stock price performance in
rising interest rate environment
2
INTRODUCTION SECTION 1
---------------------------------------------
MARKET PERFORMANCE: IPO TO OFFER DATE
SINCE THE SPIN-OFF FROM
DOLE IN DECEMBER OF [graph]
1995, KAHUNA HAS
TRADED WITHIN A TIGHT
PRICE RANGE
3
INTRODUCTION SECTION 1
---------------------------------------------
RELATIVE MARKET PERFORMANCE
OVER THE LAST TWO YEARS
KAHUNA HAS
SIGNIFICANTLY [graph]
UNDERPERFORMED THE
S&P 500 INDEX
4
INTRODUCTION SECTION 1
---------------------------------------------
PRICE VOLUME RELATIONSHIP(1)
APPROXIMATELY
96 PERCENT OF KAHUNA'S
TRADING VOLUME FOR THE
12 MONTHS PRIOR TO
FLEXI-VAN'S OFFER
OCCURRED AT UNDER
$17.00 PER SHARE
100% 100.0%
95.9%
90% 87.6%
80%
71.9%
70%
60%
52.2%
50%
40% 36.5%
30%
20%
34%
10% 16.7% 9.7% 15.7%
0% 1.5% 8.3% 41%
$11.00 $12.00 $13.00 $14.00 $15.00 $16.00 $17.00 $18.00
(1) Source: Factset. For the twelve month period of 3/29/99 - 3/29/00.
5
INTRODUCTION SECTION 1
---------------------------------------------
LIQUIDITY ANALYSIS
KAHUNA IS AN ILLIQUID
STOCK. IN THE ABSENCE
OF A LIQUIDITY EVENT,
POTENTIAL SUPPLY
RETURNING TO THE MARKET
WILL LIKELY HAVE AN
ADVERSE AND SEVERE
IMPACT ON KAHUNA'S
STOCK PRICE
Basic shares outstanding(1) 17,060,000
less: DHM shares(2) (4,501,310)
less: DHM family shares (26,956)
Float 12,531,734
less: largest five investors (6,450,033)
Adjusted float 6,081,701
AVERAGE DAILY TRADING VOLUME(2)
30-day 76,950
60-day 46,805
90-day 37,013
180-day 24,176
AVERAGE DAILY TURNOVER(3)
30-day 0.6%
60-day 0.4
90-day 0.3
180-day 0.2
AVERAGE DAILY ADJUSTED TURNOVER(4)
30-day 1.3%
60-day 0.8
90-day 0.6
180-day 0.4
DIVESTITURE BASED ON 25.0% OF
% TOTAL AVERAGE DAILY TRADING VOLUME
CURRENT SHARES --------------------------------------
SIGNIFICANT INVESTORS(5) HOLDINGS OUT 30-DAY 60-DAY 90-DAY 180-DAY
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Franklin Resources, Inc. 1,700,000 10.0% 88.4 145.3 183.7 281.3
Tisch Brothers(6) 1,637,300 9.6 85.1 139.9 176.9 270.9
Dimensional FD Advisors, Inc. 1,187,900 7.0 61.7 101.5 128.4 196.5
Ingalls & Snyder LLC 1,081,033 6.3 56.2 92.4 116.8 178.9
Donald Smith & Company, Inc. 843,800 4.9 43.9 72.1 91.2 139.6
Taunus Corporation 387,555 2.3 20.1 33.1 41.9 64.1
High Rock Capital LLC 375,300 2.2 19.5 32.1 40.6 62.1
Barclays Bank PLC 318,080 1.9 16.5 27.2 34.4 52.6
California Public Emp. Ret. Sys. 295,633 1.7 15.4 25.3 31.9 48.9
AXA Financial, Inc. 240,700 1.4 12.5 20.6 26.0 39.8
Tweedy, Brown Company, LLC.(7) 206,669 1.2 10.7 17.7 22.3 34.2
8,273,970
(1) Source: Kahuna press release (5/1/00).
(2) Source: Factset (4/10/00).
(3) Average daily turnover = average daily
trading volume/float.
(4) Adjusted daily turnover = average daily
trading volume/adjusted float.
(5) Source: CDA Spectrum (4/10/00) and Proxy
Statement (3/31/00).
(6) Source: Amendment to the 13-D (4/26/00).
(7) Source: Amendment to the 13-D (4/11/00).
6
PRELIMINARY REVIEW OF ALTERNATIVES SECTION 2
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SECTION 2
Preliminary review of alternatives
7
PRELIMINARY REVIEW OF ALTERNATIVES SECTION 2
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SUMMARY OF ALTERNATIVES AND ANALYSIS
- - - - - Option one: going private transaction
- premia paid analysis
- segment valuation analysis
- - - - - Option two: remain public
- segment valuation analysis
8
PRELIMINARY REVIEW OF ALTERNATIVES SECTION 2
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SUMMARY OF FLEXI-VAN LEASING OFFER
(US$mm, except per share data) PRE-OFFER(1) OFFER
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Kahuna share price $12.06 $17.00
52-week high (7/1/99) 17.75 -
52-week low (2/1/99) 11.81 -
Basic shares (mm) 17.1 17.1
Market capitalization $205.8 $290.0
plus: debt(2) 267.5 267.5
less: cash(2) (2.7) (2.7)
TOTAL ENTERPRISE VALUE ("TEV") $470.7 $554.9
IMPLIED MULTIPLES(3)
TEV/EBITDA LTM 10.0x 11.8x
2000E 9.1 10.7
TEV/EBIT LTM 16.7x 19.7x
2000E 14.7 17.3
Price/diluted EPS LTM 13.6x 19.1x
2000E 13.1 18.5
(1) Closing price from 3/29/00.
(2) Balance sheet information as of 12/31/99, per Kahuna 10-K.
(3) LTM financial data as of 1Q2000, per Company press release; forward-looking
financial data per management projections.
9
PRELIMINARY REVIEW OF ALTERNATIVES SECTION 2
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SELECTED VALUATION METRICS AND PREMIUM ANALYSIS
AT $17.00 PER SHARE, PROPOSED TRANSACTION AT MEDIAN FOR TRANSACTIONS WITH
FLEXI-VAN'S OFFER $17.00(1) SIGNIFICANT SHAREHOLDERS(2)
REPRESENTS A ----------------------------------------------------------------------------------------
40.9 PERCENT PREMIUM
TO THE PREVIOUS DAY'S 1 day 40.9% 18.9%
CLOSE. THIS OFFER
PREMIUM IS VERY 5 days 36.7 25.5
GENEROUS TO THE PUBLIC
SHAREHOLDERS AS 60 days 39.5 36.5
COMPARED TO THE
MEDIAN FOR OTHER GOING (1) Transaction proposed on 3/29/00.
PRIVATE TRANSACTIONS. (2) Source: Factset and SDC. Premia based on trading prices 1 day, 5 trading
THE OFFER IS ALSO VERY days and 60 trading days prior to announcement of the relative transaction.
FAVORABLE WHEN
COMPARED WITH TEV/
VALUATIONS OF OTHER LTM EBITDA
PUBLIC COMPANIES AND ----------------------------------------------------------------------------------------
IN CHANGE OF CONTROL
TRANSACTIONS Selected valuation metrics:
Kahuna at offer price ($17.00) 11.8x
Public companies: (median valuations)
Homebuilders 4.3x
REITs 7.5
Diversified real estate 9.8
Selected transactions: (median valuations)
Homebuilders 7.6x
REITs and diversified real estate 12.6
10
PRELIMINARY REVIEW OF ALTERNATIVES SECTION 2
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PREMIA PAID ANALYSIS
RECENT GOING PRIVATE
TRANSACTIONS HAVE
BEEN ACHIEVED AT LOWER
PREMIA TO THE PRE-OFFER
PRICE THAN THE FLEXI-
VAN OFFER
DEALS $250 MILLION TO $1,500 MILLION WITH ACQUIROR HOLDING 20 PERCENT TO 50
PERCENT PRIOR TO TRANSACTION
% OF
SHARES
% OF OWNED PREMIUM TO ANNOUNCEMENT(1)
SHARES AFTER ----------------------------
ANNOUNCED TARGET ACQUIROR ACQUIRED TRANSACTION 1 DAY 5 DAYS 60 DAYS
-------------------------------------------------------------------------------------------------------------------------
06/03/1996 Univar Corp Pakhoed Holding NV 72.0% 100.0% 57.2% 54.1% 80.9%
10/28/1996 Loctite Corp Henkel KgaA 65.0 98.0 31.9 36.7 39.8
01/30/1997 AST Research Inc Samsung Electronics Co Ltd. 51.0 100.0 16.8 8.0 16.8
07/30/1997 Amdahl Corp Fujitsu Ltd 58.0 100.0 5.0 22.5 33.2
09/12/1997 Western National Corp American General Corp 55.3 100.0 9.6 7.4 14.7
10/20/1997 Ticketmaster Group Inc HSN Inc 55.4 100.0 32.0 28.4 74.7
11/19/1997 Telemundo Group Inc Investor Group 65.8 100.0 19.7 29.1 32.2
12/11/1997 TriMas Corp MascoTech Inc 63.0 95.6 12.7 10.0 14.0
11/25/1998 Sbarro Inc Investor Group 65.0 100.0 18.1 17.8 44.7
06/08/1999 VWR Scientific Products Corp Merck E(Merck AG) 51.1 100.0 32.7 30.7% 60.9
MEAN 23.5% 24.5% 41.2%
MEDIAN 18.9 25.5 36.5
HIGH 57.2% 54.1% 80.9%
LOW 5.0 7.4 14.0
(1) Premium to announcement relative to trading days prior to announcement.
Source: sdc. search criteria: domestic mergers; date announced: 04/01/95 to
3/29/00; deal value: $250mm to $1,500mm; deal status: completed; percent of
shares held by acquiror at announcement: 20% to 50%.
Deals presented only where sufficient data is available.
11
PRELIMINARY REVIEW OF ALTERNATIVES SECTION 2
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SUMMARY SEGMENT VALUATION ANALYSIS - GOING PRIVATE
A SEGMENT ANALYSIS
SUGGESTS THAT, BASED
ON SELECTED VALUATION
METRICS, FLEXI-VAN'S
OFFER IS AT THE HIGH END
OF FAIR VALUE
(US$mm, except per share data)
VALUATION METRIC(S) VALUE MULTIPLE RANGE IMPLIED TEV
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Homebuilding LTM EBITDA multiple $24.1 5.0x - 6.5x $120.5 - $156.7
Resort operations Per key analysis 351.0 $0.310 - $0.460 108.8 - 161.5
Commercial and other operations Capitalization rate(1) 24.5 10.5% - 9.5% 233.2 - 257.7
Less: LTM SG&A (5.1) 5.0x - 7.0x (25.5) - (35.7)
IMPLIED TOTAL ENTERPRISE VALUE $437.0 - $540.1
Less net debt (264.9)
IMPLIED EQUITY VALUE $172.1 - $275.3
IMPLIED PRICE SHARE $10.09 - $16.14
PREMIUM/(DISCOUNT) TO (16.4%) - 33.8%
PRE-OFFER STOCK PRICE
(1) NOI calculation assumes maintenance capex (4% of segment revenues) taken
from EBITDA.
SOURCE: ALL KAHUNA FINANCIALS FROM COMPANY 10-K (12/31/99).
12
PRELIMINARY REVIEW OF ALTERNATIVES SECTION 2
------------------------------------------------------------------
SEGMENT VALUATION ANALYSIS - GOING PRIVATE
(US$mm, except per room data) PER KEY ANALYSIS
-----------------------------------------------------------------------------
RESORT OPERATIONS:
Rooms 351 rooms
Value per room $0.310 - $0.460
Implied TEV $108.8 - $161.5
(US$mm, except per room data) TEV AS A MULTIPLE OF LTM EBITDA CAPITALIZATION RATE
---------------------------------------------------------------------------------------------------------------------
COMMERCIAL AND OTHER OPERATIONS:
Value $27.0 $24.5
Valuation Metric 9.0x - 11.0x 10.5% - 9.5%
Implied TEV $243.2 - $297.3 $233.2 - $257.7
13
PRELIMINARY REVIEW OF ALTERNATIVES SECTION 2
---------------------------------------------------
SUMMARY SEGMENT VALUATION ANALYSIS - REMAIN PUBLIC
USING PUBLIC MARKET
VALUATION METRICS
APPLIED TO THE
BUSINESS SEGMENTS OF
KAHUNA WOULD INDICATE
THAT THE GOING FORWARD
STOCK VALUE OF KAHUNA
AS A PUBLIC COMPANY
WOULD NOT LIKELY
EXCEED FLEXI-VAN'S
OFFER. KAHUNA HAS NOT
TRADED ON THE BASIS OF
STANDARD VALUATION
METRICS (P/E RATIO,
EBITDA MULTIPLE,
DIVIDEND YIELD) BUT
RATHER ON THE BASIS OF A
DISCOUNT TO A FUTURE
LIQUIDITY EVENT
(US$mm, except per share data)
VALUATION METRIC(S) VALUE MULTIPLE RANGE IMPLIED TEV
------------------------------------------------------------------------------------------------------
Property sales LTM EBITDA multiple $24.1 3.5x - 5.0x $84.4 - $120.5
Resort operations Per key analysis 351.0 $0.130 - $0.150 45.6 - 52.7
Commercial and other operations Capitalization rate 24.5 10.5% - 9.5% 233.2 - 257.7
Less: LTM SG&A (5.1) 5.0x - 7.0x (25.5) - (35.7)
IMPLIED TOTAL ENTERPRISE VALUE $337.7 - $395.2
Less net debt (264.9)
IMPLIED EQUITY VALUE $72.8 - $130.3
IMPLIED PRICE SHARE $4.27 - $7.64
PREMIUM/(DISCOUNT) TO (64.6%)- (36.7%)
PRE-OFFER STOCK PRICE
(1) N.O.I. calculation assumes maintenance capex (4% of segment revenues) taken
from EBITDA.
Source: All Kahuna Financials from Company 10-K (12/31/99).
14
PRELIMINARY REVIEW OF ALTERNATIVES SECTION 2
------------------------------------------------------------------
SEGMENT VALUATION ANALYSIS - REMAIN PUBLIC
(US$mm, except per room data) PER KEY ANALYSIS
------------------------------------------------------------------------------
RESORT OPERATIONS:
Rooms 351 rooms
Value per room $0.135 - $0.311
Implied TEV $47.4 - $109.0
(US$mm, except per room data) TEV AS A MULTIPLE OF LTM EBITDA CAPITALIZATION RATE
----------------------------------------------------------------------------------------------------------------
COMMERCIAL AND OTHER OPERATIONS:
Value $27.0 $24.5
Valuation metric 8.5x - 11.2x 10.5% - 9.5%
Implied TEV $229.7 - $302.7 $233.2 - $257.7
15
ANALYSIS OF SELECTED COMPARABLE TRANSACTIONS Appendix I
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APPENDIX I
Analysis of selected comparable transactions
16
ANALYSIS OF SELECTED COMPARABLE TRANSACTIONS Appendix I
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ANALYSIS OF SELECTED COMPARABLE HOMEBUILDERS TRANSACTIONS
TEV AS A MULTIPLE OF: EQUITY VALUE AS A MULTIPLE OF:
($000) ---------------------- --------------------------------
ACQUIRER/ PUBLIC/ EQUITY ENTERPRISE LTM LTM LTM NET BOOK TANGIBLE
TARGET PRIVATE ANNOUNCED VALUE VALUE REVENUE EBITDA INCOME VALUE BOOK VALUE
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Lennar Corp. Public 2/16/00 $490,000 $1,134,000 0.62x 6.39x 6.76x 0.84x 0.84x
U.S. Homes
Standard Pacific Public 01/31/00 27,400 53,917 0.73 11.25 11.18 1.28 1.28
Writer Corp.(1)
Technical Olympic Public 10/04/99 107,500 260,409 0.55 6.49 6.71 1.06 1.65
Newmark Homes
Centex Private 09/02/98 48,100 70,687 1.04 11.16 NM NM NM
Calton Homes(2)
(Division of Calton)
DR Horton Public 12/19/97 350,738 633,831 0.86 8.73 12.25 1.98 2.09
Continental Homes
Lennar Corp. Public 06/11/97 216,100 379,744 0.68 5.35 7.43 1.25 NA
Pacific Greystone(3)(4)
MEAN 0.75X 8.23X 8.87X 1.28X 1.47X
MEDIAN 0.71 7.61 7.43 1.25 1.47
HIGH 1.04X 11.25X 12.25X 1.98X 2.09X
LOW 0.55 5.35 6.71 0.84 0.84
(1) Certain purchase multiples for Writer Corp. may be overstated in light of
recent land purchases by Writer Corp. These purchases are not reflected in
LTM revenue, EBITDA and net income, because they cannot be calculated on a
pro forma basis.
(2) Calton Inc. sold its single family homebuilding subsidiary Calton Homes to
Centex. LTM net income excluded from summary statistics.
(3) Pacific Greystone 9/30/97 10Q does not break out Other Assets.
(4) Equal to 1.138 x Lennar closing share price of $16.25 on 10/31/97 (which
equals Pacific Greystone closing price of 10/31/97).
17
ANALYSIS OF SELECTED COMPARABLE TRANSACTIONS APPENDIX I
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SELECTED TRANSACTIONS - RESORT HOTELS
HOTEL DATE ROOMS SALE PRICE PRICE/ROOM
- - - - ---------------------------------------------------------------------------------------------------------------------------------
Arizona Biltmore Dec-97 620 $288,500,000 $465,323
Lodge at Vail Oct-97 61 23,000,000 377,049
Ritz Carlton Amelia Island Sep-97 449 136,000,000 302,895
The Buttes Hotel Sep-97 353 63,600,000 180,170
Ritz Carlton Laguna Nigel Aug-97 393 86,027,700 218,900
Lodge at Ventana(1) Jan-97 49 25,526,984 520,959
Carmel Valley Ranch(1) Jan-97 100 52,095,885 520,959
Boulders Resort(1) Jan-97 160 83,353,416 520,959
The Peaks at Telluride(1) Jan-97 177 92,209,716 520,959
Canyon Ranch-Tuscon Aug-96 179 57,000,000 318,436
Canyon Ranch-Lenox Aug-96 120 27,000,000 225,000
MEAN $326,091
MEDIAN 310,666
HIGH $520,959
LOW 180,170
(1) Portfolio acquisition by Patriot American Hospitality.
SOURCE: HOSPITALITY VALUATION SERVICES.
18
ANALYSIS OF SELECTED COMPARABLE TRANSACTIONS APPENDIX I
- - - - ------------------------------------------------------------------------------
SELECTED TRANSACTIONS - REITS
TEV AS A MULTIPLE OF EBITDA:
EQUITY ENTERPRISE ----------------------------
ACQUIROR TARGET ANNOUNCED VALUE VALUE LTM 2000E 2001E
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Investors Phillips International Realty 04/19/2000 $182.3 $361.1 13.3x 11.4x 10.1x
Equity Office Properties Trust Cornerstone Properties 02/11/2000 2,726.7 4,517.5 11.9 12.1 11.5
Olympus Real Estate Corp. Walden Residential Properties 09/24/1999 789.4 1,766.6 11.5 11.6 11.4
Kranzco Realty Trust CV REIT 12/13/1999 70.4 222.4 9.2 N.A N.A
Health Care Property Investors American Health Properties 08/04/1999 501.5 892.7 9.9 9.5 8.1
SHP Acquisition, LLC(1) Sunstone Hotel Investors, Inc. 07/13/1999 411.1 876.1 10.6 9.8 9.1
Equity Residential Trust Lexford Residential Trust 07/01/1999 200.4 720.6 8.3 8.7 8.4
Berkshire Holdings(2) Berkshire Realty Co., Inc. 04/14/1999 571.1 1,308.9 14.3 11.4 N.A
Metropolitan Partners LLC(3) Tower Realty Trust 12/09/1998 388.1 672.1 13.5 10.5 7.6
The Irvine Company(4) Irvine Apartment Comm. 12/04/1998 1,468.1 2,342.1 16.9 17.7 14.6
Prologis Trust Meridian Industrial Trust Inc. 11/17/1998 840.6 1,369.8 16.1 15.8 12.8
Public Storage Inc. Storage Trust Realty 11/12/1998 361.4 541.8 11.2 10.5 8.9
Equity Residential Prop Merry Land & Investment Co. 07/08/1998 1,070.0 2,113.2 14.3 12.2 10.0
Healthcare Realty Trust Inc. Capstone Capital Corporation 06/08/1998 544.0 877.7 14.2 10.2 8.2
Bradley Real Estate, Inc. Mid-America Realty Investments 06/01/1998 69.7 111.4 7.4 N.A N.A
Capstar Hotel Company(5) American General Hospitality 03/16/1998 783.1 903.1 NM 7.4 5.0
Kimco Realty Corp. Price REIT 01/14/1998 537.5 836.0 14.5 N.A N.A
PRICE AS A MULTIPLE OF FFO:
-----------------------------
ACQUIROR LTM 2000E 2001E
- - - - ------------------------------------------------------------------
Investors 9.5x 8.5x NA
Equity Office Properties Trust 11.5 10.5 9.6x
Olympus Real Estate Corp. 9.4 9.4 8.8
Kranzco Realty Trust 7.8 2.5 2.4
Health Care Property Investors 7.8 7.7 7.3
SHP Acquisition, LLC(1) 8.9 7.1 6.5
Equity Residential Trust 5.8 5.1 4.7
Berkshire Holdings(2) 10.4 10.5 9.7
Metropolitan Partners LLC(3) 11.2 10.1 9.5
The Irvine Company(4) 16.7 14.1 12.4
Prologis Trust 11.6 12.2 11.2
Public Storage Inc. 10.4 9.8 8.8
Equity Residential Prop 11.2 10.7 9.8
Healthcare Realty Trust Inc. 10.8 11.0 10.1
Bradley Real Estate, Inc. 8.6 8.3 N.A
Capstar Hotel Company(5) 14.5 12.3 10.6
Kimco Realty Corp. 11.3 11.8 N.A
MEAN: 12.3X 11.3X 9.7X
MEDIAN: 12.6 10.9 9.1
HIGH: 16.9X 17.7X 14.6X
LOW: 7.4 7.4 5.0
MEAN: 10.4X 9.5X 8.7X
MEDIAN: 10.4 10.1 9.5
HIGH: 16.7X 14.1X 12.4X
LOW: 5.8 2.5 2.4
(1) SHP Acquisition, LLC is an affiliate of Westbrook Partners and certain
members of Sunstone's senior management.
(2) Berkshire Holdings, LP is a partnership formed by the Chairman, Dougals
Krupp, and affiliates of Blackstone Real Estate Advisors and Whitehall
Street Real Estate LP XI (an affiliate of Goldman, Sachs & Co.).
(3) Metropolitan Partners is an entity controlled by Reckson, in which Crescent
holds and interest.
(4) The Irvine Company owned 17.9% of the common shares of the Company as of
12/31/98, and 55.2% of the common LP units of Irvine Apartment Communities,
LP.
(5) American General Hospitality shareholders received .8475 shares of Capstone
less the value of their management company at $3.00 per share.
19
ANALYSIS OF SELECTED COMPARABLE TRANSACTIONS APPENDIX II
- - - - ------------------------------------------------------------------------------
APPENDIX II
Analysis of selected companies
20
ANALYSIS OF SELECTED COMPANIES APPENDIX II
- - - - ------------------------------------------------------------------------------
MEDIUM AND SMALL CAPITALIZATION HOMEBUILDERS
TEV AS A MULTIPLE OF LTM P/E
EQUITY ENTERPRISE ------------------------------ -------------------------------- EQUITY/
COMPANY VALUE VALUE REVENUES EBITDA EBIT LTM FY+1 FY+2 BOOK
- - - - --------------------------------------------------------------------------------------------------------------------------------
Standard Pacific Corp.(1) $291.5 $614.0 0.5x 4.3x 4.3x 4.3x 4.2x 4.3x 0.76x
Ryland Group, Inc.(2) 272.8 733.0 0.4 4.3 5.2 4.0 4.3 3.9 0.72
NVR Inc.(3) 571.0 615.3 0.3 2.6 2.8 4.9 5.4 5.3 2.58
M.D.C. Holdings, Inc. 428.8 721.0 0.5 3.4 3.7 4.4 4.9 4.8 1.10
Hovnanian Enterprises, Inc.(4) 130.0 488.8 0.5 5.7 6.2 4.6 3.4 3.3 0.54
Beazer Homes USA, Inc.(5) 167.8 477.8 0.3 4.8 5.2 4.1 4.0 3.6 0.69
Engle Homes Inc. 105.6 322.5 0.4 4.5 4.9 3.7 3.7 3.4 0.55
MEAN 0.4X 4.2X 4.6X 4.4X 4.3X 4.1X 0.99X
MEDIAN 0.4 4.3 4.9 4.4 4.2 3.9 0.72
HIGH 0.5X 5.7X 6.2X 5.1X 5.4X 5.3X 2.58X
LOW 0.3 2.7 2.9 4.0 3.4 3.3 0.54
Note: Share price as of 4/28/00. EBITDA includes non-homebuilding activities.
Financial services segments contribution to EBITDA is net of related
interest expense. EBITDA adds back asset impairment charges. LTM net
income is income from continuing operations before extraordinary items
but after asset impairment charges. Total Firm Value equals market value
of equity plus preferred plus net debt. Financial services debt and
special purpose subsidiary debt is excluded from firm value.
(1) Standard Pacific balance sheet information not available in latest press
release, but detailed earnings information with EBITDA calculation is
available, so earnings are updated to reflect the current press release,
but shares outstanding and balance sheet information is assumed to be equal
to FYE 12/31/99.
(2) Ryland preferred valued at minimum guaranteed value of $25.25 ($8.8mm).
Depreciation and amortization and interest expensed to COGS assumed to be
the same percent of total revenue as FYE 12/31/99. Number of shares
outstanding not included in latest press release, so assumed equal to FYE
12/31/99. LTM net income excludes preferred dividends.
(3) NVR depreciation and amortization and shares outstanding not included in
the latest company press release so D&A is assumed to be the same percent
of total revenue as FYE 1999 and shares outstanding is assumed equal to FYE
12/31/99.
(4) Hovnanian homebuilding debt excludes $10.1 million of non-recourse land
mortgages.
(5) Beazer cash balance and number of shares outstanding are not disclosed in
latest press release so they are assumed unchanged since FYE 12/31/99. LTM
net income excludes preferred dividends.
21
ANALYSIS OF SELECTED COMPANIES APPENDIX II
- - - - ------------------------------------------------------------------------------
REIT TRADING COMPARABLES
(US$mm) PRICE AS A
TEV/EBITDA(2) MULTIPLE OF FFO(3):
SHARE SHARE EQUITY ENT. --------------------- TEV/ ------------------------
PRICE(1) OUT. VALUE VALUE LTM 2000E ROOM LTM 2000E
- - - - ---------------------------------------------------------------------------------------------------------------------------------
Boykin Lodging Co $12.56 18.4 $231 $529 7.5x 7.7x $0.060 4.8x 4.8x
Equity Inns Inc 6.63 38.0 251 701 7.2 7.2 0.056 4.1 4.5
Felcor Lodging Tr Inc 19.63 58.6 1,149 3,294 7.8 7.7 0.067 4.0 4.9
Hospitality Properties Trust 22.25 56.5 1,256 1,670 7.5 7.5 0.055 6.5 5.6
Host Marriott Corp 10.69 285.2 3,048 8,312 8.8 7.9 0.135 7.1 6.1
Innkeepers USA Trust 9.00 36.2 326 681 6.6 6.7 0.080 4.1 5.1
Jameson Inns Inc 7.38 11.4 84 314 NM 8.3 0.054 5.1 4.6
Lasalle Hotel Properties 15.13 18.5 279 530 8.8 8.0 0.117 6.3 6.1
Meristar Hospitality Corp 19.75 52.4 1,036 2,710 8.6 8.0 0.088 4.7 4.9
RFS Hotel Investors Inc 12.13 27.1 329 624 7.4 7.1 0.003 5.2 5.2
Winston Hotels Inc 7.69 18.2 140 386 7.4 NM 0.046 4.3 4.5
MEAN: 7.8X 7.6X 0.069 5.1X 5.1X
MEDIAN: 7.5 7.7 0.060 4.8 4.9
HIGH: 8.8X 8.3X $0.135 7.1X 6.1X
LOW: 6.6 6.7 0.003 4.0 4.5
(1) Stock prices as of 4/28/00.
(2) EBITDA projections from analyst reports for respective companies.
(3) EPS projections from I/B/E/S.
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ANALYSIS OF SELECTED COMPANIES APPENDIX II
- - - - ------------------------------------------------------------------------------
DIVERSIFIED REAL ESTATE
PRICE AS A MULTIPLE OF
(US$mm) TEV AS A MULTIPLE OF LTM: EPS/FFO:(1)
EQUITY ENTERPRISE ------------------------------------ ----------------------------------
VALUE VALUE REVENUE EBITDA EBIT FY+1 FY+2 FY+3
- - - - --------------------------------------------------------------------------------------------------------------------------------
Highwoods Properties Inc. $1,565 $3,297 5.6x 8.5x 11.9x 6.1x 5.7x 5.3x
Carramerica Realty Corp. 1,736 3,287 6.6 10.6 17.3 8.5 7.7 7.0
Mack Cali Realty Corp. 1,724 3,206 5.8 9.0 11.9 7.3 6.7 6.2
St. Joe Co. 2,642 2,717 3.6 18.8 28.6 NA NA NA
Catellus Development Corp. 1,389 2,230 4.3 11.2 13.9 9.6 8.1 6.6
Great Lakes REIT Inc. 247 457 4.8 9.1 13.2 7.2 6.7 6.2
MEAN 5.1X 11.2X 16.1X 7.7X 7.0X 6.3X
MEDIAN 5.2 9.8 13.5 7.2 6.7 6.2
HIGH 6.6X 18.8X 28.6X 9.6X 8.1X 7.0X
LOW 3.6 8.5 11.9 6.1 5.7 5.3
Note: Stock prices as of 4/28/00.
(1) EPS/FFO multiples from I/B/E/S.
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