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The following press release was issued by registrant on May 8, 2001.
FOR: Suburban Lodges of America, Inc.
CONTACT: Greg Lehman
D.F. King & Co., Inc.
212-493-6965
FOR IMMEDIATE RELEASE
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SUBURBAN LODGES RELEASES LETTER TO SHAREHOLDERS
ATLANTA, Georgia, May 8, 2001 - Suburban Lodges of America, Inc. (Nasdaq:SLAM),
owner/franchisor of the Suburban Lodge and GuestHouse International hotel brands
and operator of 65 Company-owned hotels, announced today that it has mailed the
following letter to its shareholders:
May 8, 2001
Dear Fellow Shareholder:
I've just read the letter sent to you by Ray French and Paul Coulson,
who want you to vote for their election to your Company's Board of Directors. To
get what they want, some people will tell you what they think you want to hear -
even when they know, or should know, it isn't true.
FRENCH AND COULSON HAVE NOT PROPOSED ANY NEW INITIATIVES
TO MAXIMIZE SHARE VALUE.
French and Coulson have argued that they are better equipped to
identify, evaluate and pursue opportunities to increase share value than your
Company's Board and management. We disagree.
Long before the French Group purchased many of its shares, we engaged
Salomon Smith Barney to explore options to maximize share value for you,
including the sale of all or parts of the Company to third parties. There is no
buyer that will be unearthed by French and Coulson. There is no merger
opportunity for Suburban that we would overlook in the absence of their "help."
You should know that, in a required filing with the U.S. Securities and
Exchange Commission, French and Coulson admit "there is no assurance that the
election of [French and Coulson], or any change in [Suburban's] policies, will
increase the value of [your shares]." We agree with this admission.
THE BOARD'S DIRECTOR NOMINEES ARE INDEPENDENT ...
Independent directors have controlled the Company's Board since the
Company's inception as a public company in 1996. Jim Kuse and Michael Mcgovern,
the Board's nominees for election as directors, do not have any business
dealings with the Company, directly or indirectly. For that matter, no sitting
director has any business dealings with the Company.*
...AND EXPERIENCED.
Jim Kuse and Michael Mcgovern are highly respected, well-rounded
business professionals known for their integrity. Jim Kuse has served as the
Chairman and CEO of Georgia Gulf, Inc. a public company based in Atlanta that
was spun out of Georgia Pacific. Michael McGovern has spent his working life as
a financial consultant and businessman. Their business knowledge and experience,
together with their combined 433,864 SLAM shares, make them far better choices
to be members of the Suburban Lodges Board than Ray French and Paul Coulson.
Unlike French and Coulson, the Board's nominees for director have
meaningful hotel experience. The Company has benefited repeatedly from the
practical insights provided by Kuse and McGovern.
To our knowledge, neither French nor Coulson have ever managed hotel
properties or worked directly with hotel franchisees. We believe their lack of
relevant hotel management experience is evidenced by what we consider to be a
superficial and misleading presentation of the challenges and opportunities
presented to your Company.
CONSIDER THE FACTS...
French and Coulson know, or should know, that our decision to transform
your Company into a franchise company from a hotel development company has
probably been the single most beneficial decision we have made as a company in
the past three years. And while it is true that our corporate overhead has
increased over this period as we expanded our franchise infrastructure, so has
our franchise revenue, which more than tripled from 1998 to 2000, rising to
$3,525,000 from $1,079,000.
As a result of our decision to remake the Company, we avoided
significantly leveraging our assets these past three years. In contrast, a
number of our hospitality peers have been saddled with too much debt in a very
difficult hospitality environment, and have seen the market price of their
shares decline to below $2.
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Anyone familiar with extended-stay hotels knows that they are managed
with very few employees. Because we operate in the economy sector, Suburban
Lodge hotels tend to have even fewer hotel employees than other extended-stay
brands.
Last year, as part of our continuing efforts to control costs, the
Company completed an aggressive downsizing of its employee base. At hotels we
own or manage, we currently employ on average only eight employees.
To suggest, as French and Coulson have, that, if elected, they can
achieve significant savings through further reductions in our hotel personnel is
alarming. In our opinion, this proposal reveals a superficial grasp of the
realities of our business, which should concern you as you decide who is best
qualified to serve as your directors.
We are equally concerned by the continuing insensitivity of French and
Coulson to the needs and concerns of our franchisees. We already have
experienced difficulties in attracting new franchisees to the Company as a
result of the French Group's actions. Ask yourself, would you like to become a
franchisee of a brand where there is continuing uncertainty about the future of
the parent Company? We believe we will continue to have difficulties attracting
franchisees to the Company if French and Coulson are elected to our Board.
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French and Coulson have argued that our hotel properties can be sold
with the proceeds distributed to shareholders in the form of a special dividend
or an increased share repurchase program without any adverse impact on you.
However, due to certain loan restrictions on 32 of the Company's 65 hotels,
Suburban's hotels cannot be sold more easily than we can sell the entire
Company.
We think it makes sense to sell a few of our unrestricted hotels to
provide liquidity for those shareholders who wish to participate in our share
repurchase program. The Company's share repurchase program, which French and
Coulson now attack, has been supported by most of our other major shareholders
and by each of the Wall Street securities analysts who follow Suburban.
French and Coulson have complained that we did not sell any hotels last
year. Because of high interest rates, buyers were only interested in making
purchases at prices that were far below the hotels' reasonable values. For this
reason, we refused to sell. With interest rates declining, we recently signed
contracts for the sale of two hotels and, if appropriate, additional sales are
anticipated.
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Finally, to suggest, as French and Coulson have, that they have a
greater incentive than your Company's Board and management to maximize the value
of your shares is, in our opinion, without merit. Collectively, the Company's
officers and independent directors own 3,364,599 shares - - more than four times
the number of shares owned by the French Group. Like you, we care about the
market price of Suburban's shares and have been seeking ways to increase it.
FRENCH AND COULSON AREN'T NECESSARY TO ACCOMPLISH THE SALE OF HOTELTOOLS.
We made our loans to HotelTools because we believed HotelTools'
software would enable us and our franchisees to better manage our hotel
operations. We also recognized that the HotelTools system would be attractive to
third-party owners and operators of multi-property lodging.
We still believe the HotelTools system offers great potential value to
the Company and its shareholders. However, as previously announced, HotelTools
is actively engaged in the process of seeking a buyer.
Your Board and management are mindful of our options regarding
HotelTools. The election of French and Coulson to your Company's Board of
Directors is unnecessary to ensure that the right result occurs with HotelTools.
DO WHAT'S BEST FOR YOU.
As previously noted, your Company's Board and management already have
implemented or are continuing to implement the initiatives promised to you by
French and Coulson. We believe the Board's independent nominees for election as
directors are better qualified to serve on Suburban's Board than either French
or Coulson. Finally, if none of our other attempts to increase shareholder value
are successful, we believe the presence of French and Coulson on the Board would
chill the environment to grow our franchise business.
For these reasons, among others, we strongly urge you to vote FOR the
election of James Kuse and Michael Mcgovern by completing, signing dating and
returning the enclosed WHITE proxy card, using the postage-paid envelope
provided.
If you need assistance in voting your shares, please call D. F. King &
Co., Inc., which is assisting us with the solicitation of your proxy, toll-free
at 1-800-488-8035.
We appreciate your continued support and encouragement.
On behalf of the Board of Directors,
/s/ David E. Krischer
David E. Krischer
Chief Executive Officer
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* In 1998, Jim Kuse's adult son and Michael McGovern sold or agreed to
sell their interests in three Suburban Lodge hotels to the Company. In an effort
to discredit your Board's nominees for election as directors, French and Coulson
have told you that "Mr. McGovern and Mr. Kuse's son, Michael, or corporations
they controlled , . . . received total sales proceeds, including debt
assumption, of over $9,000,000."
The facts are that an entity controlled by Mr. Kuse's adult son and Mr.
McGovern were franchisee owners of Suburban Lodge hotels years before the
Company went public and they continued to develop Suburban Lodge hotels together
with other unrelated third parties immediately after the Company went public in
1996. In 1998, to avoid even the potential appearance of a conflict, the Company
agreed to purchase their interests in such hotels.
In addition to recovering their initial investment, Mr. Kuse's son and
Mr. McGovern each received $125,000 for their respective 25% equity interests in
each of two hotels that they had developed in Texas, and Mr. McGovern received
$100,000 for his 25% equity interest in an Atlanta hotel. As a result, even the
appearance of a conflict has been non-existent for nearly three years, and these
facts have been appropriately disclosed in the Company's filings. We believe
French and Coulson have exaggerated the financial significance of these
transactions to Kuse and McGovern to raise a phony "lack of independence"
argument against Kuse and McGovern.
As French and Coulson know, or should know, Nasdaq has recently adopted
more stringent independence requirements that will be applicable to the members
of our Audit Committee beginning in June of this year. Our nominees already
satisfy those requirements today. And French and Coulson admit there is no
authority--even under the new, more stringent Nasdaq rules--for their position
that historical business relationships such as those of Mr. Kuse and Mr.
Mcgovern should disqualify them from service on the Audit Committee.
ABOUT SUBURBAN LODGES OF AMERICA, INC.
Suburban Lodges of America, Inc. owns, franchises and manages Suburban Lodge
hotels, the nation's largest economy extended stay lodging chain, and franchises
GuestHouse International hotels, the owner-friendly brand of mid-market nightly
hotels.
Forward-Looking Statements
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This news release includes statements concerning the Company's plans, beliefs
and expectations for future periods. These "forward-looking statements" may be
identified by the use of words such as "intends," "contemplates," "believes,"
"anticipates," "expects," "should," "could," "would" and words of similar
import. These forward-looking statements involve known and unknown risks and
uncertainties that could cause actual results to differ materially from the
expectations expressed or implied in such statements. These risks and
uncertainties include, among others, changes in economic conditions, financial
markets or consumer demand for extended stay and other forms of lodging, the
level of competition in the extended stay and other lodging markets, interest
rates, operating performance of Company owned hotels, the Company's ability to
enter into contracts with its franchisees, development risks and zoning delays
for the construction of new hotels by franchisees, the Company's financial
condition and other risks and uncertainties set forth in the Company's filings
with the Securities and Exchange Commission. Forward-looking statements included
in this news release concerning HotelTools are subject to the foregoing risks
and uncertainties affecting the Company and additional risks and uncertainties
including, but not limited to, uncertainty as to HotelTools' ability to operate
within its budget, its future profitability, its ability to meet development
schedules, its ability to develop and implement operational and financial
systems to manage rapidly growing operations, uncertainty as to the demand for
its products and services, the risk that competitors will be able to develop and
market products and services that produce results similar to those produced by
HotelTools' products and services, and the risk that HotelTools may not be able
to obtain financing on acceptable terms and in amounts that are sufficient to
meet its needs.
All forward-looking statements included in this press release are based upon
management's present expectations and the information available at this time.
The Company does not undertake any obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or other factors.
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