Revolution Launches New Luxury Resort Development Company
SAN JOSE, Costa Rica, Aug. 3 /PRNewswire/ -- Revolution LLC, the company created by AOL co-founder Steve Case, today launched Revolution Places, an original approach to sustainable destination resort communities. In support of the launch, Costa Rican President Oscar Arias Sanchez and Revolution Chairman Steve Case jointly announced at a press conference today in Costa Rica the first development, Cacique, Costa Rica, a first-of-its-kind 650-acre luxury resort community scheduled to open in 2010.
Revolution Places will bring together premiere hospitality partners and innovative lifestyle brands to develop a new authentic vacation experience that retains the local environment and culture. With a full complement of sustainability principles and community involvement, Revolution Places will create high-end developments that provide consumers with treasured and limited for-sale vacation real estate. These developments will also feature personalized service and unique amenities for home owners.
"Revolution Places is an entirely new approach to destination resort development," said Steve Case, chairman & CEO of Revolution LLC. "We are bringing together the best of the best to deliver an ownership and guest experience like no other resort in the world. Importantly, we will preserve the local environment and culture when developing resorts like Cacique, Costa Rica to ensure our presence is a positive and welcome contribution."
"I am extremely pleased to welcome Steve Case and Revolution to Costa Rica. I am confident that Mr. Case, like other investors and visitors we have been fortunate to host, will find in our country a place where education and hard work are valued," said President Arias. "With this solid foundation, our economy is growing beyond traditional strengths such as agriculture and tourism to encompass an increasingly diverse array of industries and exports; our country is home to both peace and progress. Furthermore, I recently announced a new initiative, Peace with Nature, which seeks to make our country carbon-neutral by the year 2021. This will ensure that our proud tradition of environmental stewardship grows ever stronger."
Revolution Places is led by a world-class management team that has built exceptional, leading companies. Donn Davis has been named CEO of Revolution Places Group, in addition to his role as executive chairman of Exclusive Resorts, also a Revolution LLC company. Philippe Bourguignon has been named vice chairman of Revolution Places Group and CEO of its development group, Revolution Places Development.
Davis will continue to serve as executive chairman of Exclusive Resorts, a company he has built into the leading luxury destination club and, in doing so, defined an entirely new luxury industry. Bourguignon is a recognized international business leader, having served as co-CEO of the Davos-based World Economic Forum, chairman and CEO of Club Mediterranee, and chairman and CEO of Euro Disney.
Cacique-Costa Rica
The first major destination under development by Revolution Places is Cacique, Costa Rica. The new luxury resort community located on the northwest coast of Guanacaste, Costa Rica spans 650-acres owned by Revolution Places. The $800 million resort development will also feature multiple, synergistic luxury real estate products to open in successive phases beginning in 2010.
"After searching the hemisphere, we have selected Cacique, Costa Rica as the ideal location for our first Revolution Places resort community," said Bourguignon. "We are creating an environment that departs from the gated and manicured environment of conventional developments. Cacique, Costa Rica preserves the essence of the local culture and natural beauty, while offering luxury and wellness. This is a place where people are not only guests, but participants in a uniquely authentic experience."
The development of Cacique, Costa Rica will feature highest-end services and amenities with a focus on intelligent, environmentally friendly designs that reduce energy and water demand and take advantage of spatial, wind and solar patterns to maximize natural ventilation, shade and daylight. Cacique, Costa Rica will establish a comprehensive recycling and solid waste management program to neutralize the impact of this development on the surrounding environment. Additionally, Cacique will create on-site treatment facilities to re-use wastewater and will purchase its electrical power for the community from renewable sources. World-class architecture and design will be integrated with indigenous traditions, environment and materials, to create an experience that is second-to-none and authentically Costa Rican.
"Costa Rica reminds me of Hawaii when I was born there nearly 50 years ago," said Case. "We are aiming to take the things that make authentic Hawaii so special, such as the connections to the local people, restaurants, shops and the spirit of aloha, while bringing together the best brands and applying the best principles and practices of today. Our goal is to break new ground as we strive to make Cacique, Costa Rica the best resort in the world -- and a model for a new kind of resort for the next generation."
Cacique, Costa Rica seamlessly brings together world-class brands to provide owners and guests with a broad range of experiences, services, amenities, and activities to suit their every desire. Cacique, Costa Rica will integrate the following prestigious brands:
-- One&Only Resorts -- Recognized as leaders in luxury, One&Only Resorts
are set in exotic locales around the world and offer guests an
unsurpassed vacation experience. One&Only Cacique, Costa Rica will be
a 120 all-villa property, with each room a large free-standing suite,
situated on its own lush green compound for privacy and featuring
unobstructed views of the Pacific Ocean. The award-winning resort
group will provide guests with an unrivaled level of personalized
services and luxurious amenities for the traveling connoisseur.
-- Miraval: Life in Balance -- As the #1 ranked destination spa, Miraval
Cacique is the first exotic location expansion of this acclaimed brand.
The innovator in living and feeling better, Miraval Cacique will open
to include a full family experience offering 100 adventurous programs
while providing 120 luxurious rooms and 60 villas inspired by the local
surroundings. Guests and owners will relax, reconnect and recharge at
the 50-acre private grounds.
-- Exclusive Resorts -- As the #1 luxury destination club, Exclusive
Resorts has become the preferred way affluent families travel.
Exclusive Resorts has committed to custom design and purchase 30
residences at Cacique, Costa Rica in a private enclave, ensuring its
3,000 and growing membership tremendous access to what looks to become
one of the most demanded resort developments.
-- Tom Doak 18-hole golf course -- Targeting the serious golf enthusiast,
Tom Doak designs are unique and creative alternatives to ubiquitous
signature golf courses. Doak's course designs look to protect and
respect the natural terrain, and are ranked among the top 100 courses
in the world by Golf Magazine, including the highly acclaimed Pacific
Dunes course in Bandon, Oregon and Cape Kidnappers in New Zealand.
-- Agassi-Graf Tennis and Fitness Centers -- Cacique, Costa Rica will be
home to the world's first Agassi /Graf Tennis & Fitness Center, an
entirely new approach that will make tennis and fitness relevant and
fun for families on vacation. These centers designed and programmed
personally by Andre Agassi and Stefi Graf, will be inviting to the
novice and a treat for the expert.
In addition to the two hotel components of the One&Only Resort and the Miraval Destination Resort, Cacique, Costa Rica will offer very select for- sale real estate components. Ownership will be beyond compare, with the entire resort developed with the real estate owner and their guests in mind -- a thoughtfully designed, seamlessly integrated resort living experience with the highest level of personalized services and complete access to resort amenities. There will only be 300 for-sale real estate products on the entire 650-acre peninsula, with each product hand crafted to be the most desired real estate offering imaginable.
The for-sale real estate product will include the purchasers' choice of: estate sites, custom and semi-custom whole ownership residences, resort-loft living, and Exclusive Resorts club memberships. All real estate components will be designed and developed under best-of-breed master architectural and resort community planning standards.
Doing Well While Doing Good
Revolution Places understands that the success of its developments is contingent on the well-being of the local community and the environment. To this end, Revolution Places today announced that it is investing in a series of local Costa Rican community initiatives that initially include:
-- The donation of 1 million trees to the government-chartered Foundation
for the Balance between Conservation and Development
-- The donation of hydro-geological studies of the Panama aquifer and
watershed
-- The donation of computer learning centers to the towns of Filadelfia,
Hermosa, Panama and Sardinal
-- A $1 million investment to encourage and support the development of
local non-profit efforts. Modeled after The Case Foundation's Make it
Your Own Awards, Revolution Places will make grants of up to $35,000 to
individuals and local organizations that develop initiatives to improve
and protect the Costa Rican environment. A panel of judges from the
region will be responsible for selecting those who receive the grants.
Full details of this program will be revealed in the summer of 2008.
With Cacique, Costa Rica the development and operations of the community is expected to create more than 2,000 new local jobs. These jobs will range from construction and maintenance to guest services and managerial roles. In addition, the company expects to partner with local businesses as Cacique, Costa Rica is developed and will maximize purchasing of locally produced goods and services for construction and operations.
About Revolution LLC
Revolution LLC, the Washington, DC-based company launched by Steve Case in 2005, seeks to drive transformative change by shifting power to consumers and building significant, category-defining companies in the process. Revolution's mission is to build companies based on disruptive business models that give people more choice, control and convenience in the important aspects of their lives. Revolution is currently focusing on three market sectors poised for disruptive change -- Health, Resorts and Balanced Living. For more information go to:
Buy Safe Costa Rica Changes The Way You Find Real Estate in Costa Rica
Whether looking for a permanent dwelling, a great deal on a investment property or simply vacationing in Costa Rica, Buy Safe Costa Rica makes searching simple and safe.
Buy Safe Costa Rica Changes The Way You Find Real Estate in Costa Rica
Denver, CO, August 15, 2007 --(PR.com)-- Buy Safe Costa Rica launches its new state-of-the-art Costa Rica real estate website to help people all over the world buy or rent homes in Costa Rica safely and at the best prices.
Buy Safe Costa Rica is not a real estate company. It is a company that promotes trustworthy brokers or owners and matches them up with potential buyers or renters in one easy to use website. At Buy Safe Costa Rica you can search for property for sale or rental property in Costa Rica with a few short clicks. The simple to use search feature allows you to target the perfect home or piece of land in your desired price range and budget every time.
“I love the country of Costa Rica and to be able to provide a quality service to the thousands of people who want to live or travel to Costa Rica is very rewarding,” commented Ryan Huett, the owner of Buy Safe Costa Rica.
The website is full of easy to use features to find homes for sale in Costa Rica a free members area that allows someone to save properties to the favorites and compare them to other homes in their region and budget side by side.
Also, owners and brokers of property in the country of Costa Rica are able to upload their listings in just a few simple clicks including photos and descriptions of the property to begin reaching thousands of potential customers globally on the Internet.
The new website is also full of other valuable information and articles about the country of Costa Rica for anyone wanting to travel to that area. You can learn about the people, the regions, the beaches, the animals and many other interesting facts.
“The fact that I purchased and built a home in Costa Rica, and I have a real estate license in the United States, has allowed me to be a great asset to anyone who is not familiar or comfortable with the process of buying or renting in the wonderful country of Costa Rica. The Buy Safe Costa Rica mission is to change the way people search, find and ultimately buy and rent real estate in Costa Rica.” Ryan remarked.
For more information regarding Buy Safe Costa Rica or the country of Costa Rica you can contact Ryan directly at 325.280.0868 in Costa Rica at 011.506.869.7954 or by email ryan@buysafecostarica.com.
Canadians opt for Central American Homes
Canadians opt for Central America homes
By Business Edge -
Published: 09/07/2007 - Vol. 3, No. 18
Canadians are flocking to Central America for second homes thanks to a strong currency, tax benefits and lifestyle gains, according to a new poll.
HiFX, a provider of foreign exchange services, surveyed more than 100 agents in Mexico, Nicaragua and Costa Rica. The survey results show nearly 30 per cent of all real estate clients in these regions are Canadian.
Broken out by country, more than 32 per cent of the clients purchasing in Mexico are Canadian, as are 27 per cent of clients purchasing in Nicaragua and 26 per cent in Costa Rica.
"The strength of the Canadian dollar is making purchases in Central America increasingly attractive, and meanwhile you are in some of the most naturally beautiful regions of the world," said Ward Naughton, president of HiFX.
Investors should plan carefully and consider the currency risks associated with buying a property abroad, cautions HiFX.
For example, says the company, if a buyer had considered purchasing a property in Mexico priced at US$500,000 at the beginning of January 2007, it would have cost Cdn$592,000.
But if that same property had been purchased seven months later, it would only have cost Cdn$528,000, an 11-per-cent discount due to currency fluctuations.
Is the Cash Plus /Hilton buyout still on?
Is the Cash Plus /Hilton buyout still on?
Cash Plus's buyout of the Hilton Kingston Hotel may not be a done deal in light of this week's announcement of the US$26-billion buyout of the entire Hilton Hotel international chain by United States private equity firm, Blackstone.
Claudette Kenlock, sales and marketing director of the Hilton Kingston Hotel, told Caribbean Business Report, "In terms of the impact on the sale of the hotel, I can't comment until we have directives from Cash Plus and the Hilton Group." Senior Cash Plus executives, Carlos Hill and Marie Matthews, were said to be in a long management meeting and unable to speak to the press yesterday.
Since 2000, Hilton shares have climbed from US$9.5 to US$34 (257 per cent), and the company had been busy creating international partnerships. Blackstone paid a 32 premium on the Hilton's market value to acquire not just the hotel management business but the real estate held by the company; and this is one of the reasons local commentators say that the Cash Plus deal is in doubt.
According to the Financial Times report on July 4th, "Blackstone made clear it regarded the Hilton deal as a double play, the purchase offering both asset and operational benefits. Arthur de Haast of JLL Hotels said:
"One of the things this deal throws up is a private equity company buying into not just the real estate but the operational entity and a brand. They are a competitor as well as an owner." InvestorGuide.com wrote, "For one, it is unlikely that the company will be dismantled and sold for scrap. Hilton has done better than its competitors over the past five years, and had been forging ahead with several big deals to expand its international reach."
Less than a week after its $4.1-billion initial public offering on the New York Stock Exchange, the purchase of the Hilton Hotel gives Blackstone its choice of 600,000 hotel rooms worldwide.
Hilton operates in three business segments: Hotel Ownership, Managing and Franchising and Timeshare.
Its operations covers 2,357 properties. The hotel brands include Hilton, Hilton Garden Inn, Doubletree, Embassy Suites, Hampton, Homewood Suites by Hilton and Conrad. In addition, the company develops and operates timeshare resorts through Hilton Grand Vacations Company and its related entities.
Besides Jamaica, Hilton has hotel properties in Belgium, Egypt, England, Hong Kong, Ireland, Mexico, Puerto Rico, Singapore, Thailand and Turkey and franchised hotel properties in Canada, Colombia, Costa Rica, Dominican Republic, Ecuador, Mexico, Peru, Puerto Rico and Venezuela.
The Hilton family, trustees to the William B Hilton Trust, own 20 per cent of the company and stand to gain US$900 million out of the deal.
Medical Tourism Takes Flight
Medical Tourism Takes Flight
By Kathleen Doheny
HealthDay Reporter Fri Jul 6, 7:02 PM ET
FRIDAY, July 6 (HealthDay News) -- Soaring U.S. medical costs are causing many Americans to take to the skies on "medical tourism" junkets, looking for high-quality yet low-priced health care at foreign clinics.
In many cases, patients get exactly what they are looking for, but experts also warn that the booming industry does have some risks.
"My own advice would be to look carefully at the accreditation of the hospital and consider the nature of the procedure. Are you sure it is the procedure you need? And is it done well at the place you are going?" said Dr. Ann Marie Kimball, a professor of epidemiology and health services at the University of Washington School of Public Health, in Seattle.
The surge in medical tourism over the past decade is being driven by rising U.S. health-care costs and growing numbers of uninsured or under-insured Americans, said Josef Woodman, the author of a guidebook on the topic called Patients Beyond Borders.
Almost 45 million Americans, or slightly more than 15 percent of the population, are currently uninsured, according to U.S. Census Bureau statistics from 2005, the latest available.
Woodman estimated that more than 150,000 Americans traveled abroad for health care in 2006. The number is projected to double in 2007, he said.
"That 150,000 number is conservative," he said. "Some experts say 400,000." Among the top destinations: Southeast Asia and Mexico, with many other countries, such as Costa Rica, expected to be the next popular destinations for medical care.
Medical tourism companies, in collaboration with special "health travel agents," have sprung up across the country, and some insurance plans are participating in these endeavors, as well.
In California, for instance, Salud con Health Net, a program of Health Net of California, provides access to health care for their insured Latino participants for services conducted across the border in Mexico. And BlueCross/BlueShield of South Carolina and BlueChoice HealthPlan of South Carolina now offer medical care at Bumrungrad International Hospital in Bangkok, Thailand, among treatment options. Bumrungrad treats more than 400,000 international patients every year.
The price savings on cross-border medical care can be dramatic. For example, one commercial medical tourism Web site (www.medicaltourism.com) estimates that a heart bypass in the United States costs $130,000, but just $10,000 in India and $11,000 in Thailand. A hip replacement in the United States would cost $43,000 but just $12,000 in Thailand or Singapore. Hysterectomy costs are about $20,000 here but $3,000 in India.
The medical tourism companies that have sprung up can help travelers find the hospital that provides the procedure or care they need. A growing number of overseas hospitals are accredited under the Joint Commission International, the international arm of the Joint Commission on Accreditation of Healthcare Organization (JCAHO), which accredits U.S. hospitals and other facilities.
As the practice has become more common, medical tourism has evolved, Woodman said. While the practice used to be associated with vacations -- get your facelift, sit on the beach -- and sometimes still is, for most procedures, he recommended separating the surgery from the vacation.
"Even after a minor surgery, there can be swelling," Woodman said. "Most doctors will advise you to stay out of the sun after surgery."
"It's not a 'fun in the sun' gimmick," he added. "People are going overseas and getting serious surgeries."
Medical tourism isn't without some concerns, of course. Experts in the United States worry that consumers might end up getting substandard care i f they don't choose their hospital and physician carefully.
The American Society of Plastic Surgeons has issued a briefing paper on the subject, cautioning potential patients that "it may be difficult to assess the training and credentials of surgeons outside of the United States." The ASPS also stressed that typical vacation activities -- which are sometimes marketed as part of a surgery trip -- should be avoided to allow for proper healing and reduce the risk of complications.
Even when patients select and book medical care abroad through a health travel agent, they must remain critical, informed health-care consumers, Woodman said.
The main thing a patient needs to do, he said, is check out the accreditation of the hospital and the credentials of the surgeon.
Spread of disease is another potential concern, said Kimball, who is also director of the APEC Asia Pacific Emerging Infectious Disease Network and author of Risky Trade: Infectious Disease in the Era of Global Trade.
"Medical tourism is obviously a route for pathogen spread," Kimball said, noting that different hospitals in different regions may have different types of flora. "The extent to which it's a problem versus a theoretical concern is as yet not known," she said. "I can't issue a blank 'go' or 'don't go,'" she added.
Kimball's advice: Look carefully at the accreditation of the hospital concerned and do your homework before you board the plane. "Check out the number of surgeries done, the success rates," Woodman added. It's also key to ask the surgeon you talk to if he or she will perform the operation, not an assistant.
Kimball said she urges potential medical tourists to talk it over with their own physician. As the concept and the practice of medical tourism has evolved, she said, a physician is not likely to automatically rule out the idea.
More information
There's more on medical tourism at the American Society of Plastic Surgeons.
Americans flock to the 'Rich Coast'
Americans flock to the 'Rich Coast'
Sunday, July 1, 2007
By SHANNON ROXBOROUGH
SPECIAL TO THE RECORD
Christopher Columbus, while drifting aimlessly through the Caribbean in 1502, set eyes on a breathtaking stretch of coastline and christened it Costa Rica.
More than 500 years later, the country of just over 4 million tucked between Nicaragua to the north and Panama to the south is experiencing a boom not seen since the 1980s, when American and European retirees arrived in droves to enjoy the good life on a budget. (According to the State Department, more than 20,000 U.S. expatriates live in Costa Rica, though the actual number is closer to 50,000.) Politically stable with a highly literate, cosmopolitan populace, stunning Pacific and Caribbean coastlines and huge swaths of protected rain forests, Costa Rica's tourism is booming, and so is the market for second homes.
Americans are once again flocking to the "Rich Coast," a literal translation of its name. One such newcomer is Amanda Courter, who was born in Manhattan and raised in Atlantic City. Citing burnout from a hectic 9-to-5 workweek, the breakneck pace of our rush-to-get-nowhere society, political discontent and an overall decline of the quality of life in the United States, she arrived in Costa Rica in 2005. She bought a 2-bedroom, 2½-bathroom villa for $390,000 in Punta Dominical, a gated luxury community on the country's southern Pacific Coast.
"I love the culture, the food and the water sports. There is something new and exciting every day with a slower pace and lighter level of responsibility than life back home," Courter said. "In so many ways, I feel like a child again, and I can finally breathe."
She is not alone in her praise of this traditional south-of-the-border retreat. "Costa Rica isn't for everyone, but it is very user-friendly for Americans since it has more U.S. citizens per capita than any place outside the United States. There are American movies, malls, food chains and all the familiar brands that make it easy for Americans to live here. They feel at home," said Christopher Howard, author of the book "The New Golden Door to Retirement and Living in Costa Rica," who sponsors relocation tours to Costa Rica.
Howard, a Los Angeles native who traveled throughout Central and South America, and lived and studied in Mexico before settling in Costa Rica in 1982, adds: "We live in a very exciting time. You have Latinos moving to the States to seek a better life and, on the other hand, Americans are moving to Latin America to improve their lives and explore a new, wide-open frontier."
In Costa Rica, a monthly income of $1,000 to $1,500 will afford you a good standard of living, covering the cost of a spacious 3-bedroom, 2-bath home (rental), groceries, utilities (including Internet access, cable TV and a cellphone), and a full-time housekeeper, and leave enough for cultural and recreational pursuits.
Living in Costa Rica also has many tax advantages: Property taxes are reasonable, business taxes are minimal, investors pay no capital gains taxes on real estate and high-interest bank accounts are tax free. Retirees can qualify for a $500-a-year version of Medicare. (Costa Rica has universal health care and one of the best health systems in Latin America, with many U.S.-educated doctors.)
"Since coming here, I have never looked back," Howard said. "I made the right choice by following my dreams, and the country has been very good to me."
Got a second-home story you'd like to share? E-mail Shannon Roxborough at ForeignPassport@aol.com
* * *
Perks
Reasonable real estate, friendly people and low violent crime. With more than a quarter of Costa Rica's total land area composed of national parks, wildlife refuges and biological reserves, the country is a nature lover's paradise with a thriving ecotourism industry. Costa Rica has a tropical climate, but year-round temperatures in the Central Valley (popular with Americans and just a few hours from the capital San Jose) average 72 degrees.
Drawbacks
Navigating red tape is a fact of life in Costa Rica, where almost nothing happens quickly. A simple trip to the bank usually means waiting in line for an hour. Today frequently means tomorrow and next week can mean next month. If you want to bring your car with you, expect hefty import duties on used automobiles (no matter the age, if you already own it, it's used) generally equivalent to 45 percent to 75 percent of the retail value.
Costs
Though Costa Rica is the most expensive country in Central America, the cost of living is still far below that of a comparable lifestyle in the U.S. Ocean-view lots and homes in Costa Rica start at about $200,000 and range up to seven figures. (More modest houses can still be found for $100,000 or less.)
Getting there
Continental has non-stop flights from Newark to San Jose starting at about $500.
Where to stay
The Hotels Costa Rica Web site provides links to dozens of accommodations. Visit hotels.co.cr.
Must see
Guanacaste Province on the northern Pacific Coast is known for its spectacular beaches and water-related activities, including surfing, snorkeling and sport fishing.
For more information
* Christopher Howard's Web site: costaricabooks.com
* Punta Dominical: puntadominical.com
* Punta Leona: vivapuntaleona.com
* Marisol Condos: dreammarisol.com
Spa Man
All’s Well Dept.
Spa Man
by Lillian Ross July 9, 2007
The most convoluted philosophical thinking outside of academe was taking place recently at the Global Spa Summit at the Waldorf-Astoria, with the purpose of fostering “thought leadership” in the forty-billion-dollar-a-year spa industry. One of the keynote speakers was Steve Case, the co-founder of America Online. He now owns a spa in Arizona called Miraval, whose motto is “Life in Balance.” At Miraval, one can indulge in a wild-lime scalp rejuvenator ($65), a marine contouring body wrap ($165), and seven kinds of Oriental bodywork.
In his address, Case said, “Four years ago, I was pushed out of my comfort zone by the revelation of how to transform industries in need of change.” He was wearing Dockers and a blue shirt open at the collar, and he seemed to be in an excellent zone as he continued, “It was a profound moment. I found balanced living. We are the modern healers. I don’t just want to feel better. I want to be better.” (Gerald Levin, who was Case’s counterpart at Time Inc., during its merger with A.O.L., has also made a second career of self-improvement, running a holistic mental-health institute in Los Angeles.)
Case went on, “Remember when the man who started Nike was selling his sneakers from the back of a truck?” He paused. “I want that unique collaboration between real estate and spas. Destination spas! Wellness must go beyond just the facial and the massage. We are building what I call ‘the Nike of Wellness.’ ” When he finished, the participants applauded, though some looked puzzled.
“He said nothing new,” a short, sturdy delegate named Tatyana Meshkova said. “He pontificated. I am thirteen years in Moscow beauty business. I distribute the most chic formulations, all over Russia, to Belarus, even Latvia.” Another Russian delegate agreed. “I do not care about sneakers,” she said. “And facials are important for our market!”
While delegates headed off to panels such as “What the Investment Sector Wants the Spa Industry to Know,” Case hung back. He wanted to make it clear that Miraval is more than a spa. “In fact, we don’t really use the term ‘spa,’ ” he said. “It conjures up pampering.” (He did admit, though, to loving the Thai massage.) He talked about making Miraval into a “life-style brand,” with such projects as Miraval Living in N.Y.C. (“It’s a condo!”), a resort in Costa Rica, and a hybrid resort and primary-living community in Florida. “I met this morning with Oprah,” Case said as he headed off to a meeting with a health-care executive. “I saw several C.E.O.s, too. I handle stress pretty well.”
Ted Ning, a director at Lifestyles of Health and Sustainability, or LOHAS, as it’s called, was talking to some delegates.
“Our new buzzword is ‘authenticity,’ ” another LOHAS employee said. “There is a fundamental disconnect between questions of social justice and the people who sell organic tea and yoga mats, and these should be fiercely connected.”
* from the issue
* cartoon bank
* e-mail this
Ning nodded. “I connect,” he said. “It’s always nice to indulge in some self-giveback. I do daily yoga with my wife. We live in an energy-efficient house with solar-panel appliances.We use organic linens and towels. We try to ride bikes to work. Spa to me means ‘pause and reconnect.’ ” He looked at his watch and said he had to run so he wouldn’t be late for his free convention massage.
Jamie Waring, of Six Senses Spas, held out a coffee-table book entitled “Balancing Senses.” “Look at this,” he said. “Our Evason Hideaway at Hua Hin, in Thailand, modelled on a rural Thai village and built entirely from mud. Our therapists serve detox salads!”
“What about sustainability?” a young man asked, frowning.
“We changed over from fluffy towels to linens during massage, to use less water in laundering,” Waring said.
Daniella Russell, from Cleopatra’s Spa, in Dubai, said that she was an industry pioneer: “We were sidelined for ten years, but we broke into a closed society. We even have an operation in Kabul. In Dubai, we go to ladies in special rooms in the palaces. They love massage, and now they are not afraid to take off their clothes.” ♦
Hudson Street Capital and Kingstown Capital Partners
NEW YORK, July 2 /PRNewswire/ -- Hudson Street Capital and Kingstown Capital Partners announced today that they sent a letter dated July 2, 2007 to the independent Board members of Whitney Information Network, Inc. (Pink Sheets: RUSS).
The full text of the letter follows: July 2, 2007 Independent Members of the Board of Directors Whitney Information Network, Inc. 1612 Cape Coral Parkway East Cape Coral, FL 33904 Attention: Frederick A. Cardin, Director Chester R. Schwartz, Director cc: Russell A. Whitney, Chairman & CEO Ronald A. Simon, Director & COO Stephen A. Cootey, Prides Capital VIA FACSIMILE AND OVERNIGHT DELIVERY Gentlemen:
Hudson Street Capital Management LLC and Kingstown Capital Partners LLC, respectively, manage funds that have an aggregate economic interest equivalent to approximately 4.5% of the outstanding shares of Whitney Information Network ("RUSS" or "the Company"). We are writing to the independent directors to express our concern that the RUSS Board of Directors, as currently configured, lacks independence from Russell Whitney, Chairman of the Board, CEO, and the Company's largest shareholder. We believe that other shareholders' interests have been surrendered to the self-interests and personal enrichment of Mr. Whitney, while shareholder value in general has precipitously eroded.
As such, we strongly urge the independent directors to:
First, remove Russell Whitney from the Board of Directors and CEO position for cause based on a pattern of blatant self-dealing that has enriched him at the expense of Company shareholders as well as his refusal to cooperate with the Special Committee's investigation (a detailed account of these self- dealings and the obstruction is provided in Exhibit I).
Second, immediately elect two outside directors who are representatives of significant shareholders of the Company to create true independence on the Board and adequately protect shareholder interests.
To the extent that the current independent directors do not act quickly and decisively on these suggestions, we intend to take action in two parts. First, we will take action to remove Russell Whitney from his above-stated positions at the Company's next annual meeting of shareholders. As an aside, we note that a definitive proxy has not been filed with the Securities and Exchange Commission (the "SEC") and as such we do not believe that the currently-scheduled meeting can go forward on this date. We would view any attempt by the Company to proceed with the annual meeting as scheduled as an attempt to disenfranchise its shareholders.
Second, we intend to request that Prides Capital (cc'd on this letter) immediately add either a Prides Capital representative or a Hudson Street/Kingstown representative to the Board of Directors as per Prides Capital's contractual right. As documented herein, the previous Prides Capital board seat was occupied by Stephen A. Cootey, who resigned along with another outside director, Anthony Petrelli, in March 2007, thereby making the Prides Capital designee director position available. It is our view, based on an informal polling of the Company's largest institutional investors and certain Directors, that any such action to increase independent representation on the Board of Directors would be ardently supported.
It is our belief that, once free of Russell Whitney's self-dealing and unchecked influence, the Special Committee could more expeditiously resolve the government investigations that hang over the Company and hamper its operating performance on many levels. In fact, the Company's Form 8-K dated May 29, 2007 discloses that "The Department of Justice and/or the SEC may view [Mr. Whitney's refusal to submit to an interview by the Special Committee's consultant WilmerHale] as lack of cooperation towards the Special Committee's efforts to determine the facts in its internal investigation and prolong the SEC's investigation and broaden the Department of Justice's investigation."
Mr. Whitney's removal from the Company along with moving to resolve these legal matters and investigations would pave the way for the Company to explore a host of value-maximizing strategic alternatives. We believe any of these alternatives would result in the creation of shareholder value in excess of $10 per share. As such, we would encourage the newly constituted Board to engage a qualified investment bank to review all strategic alternatives that would include, in our opinion, the following possibilities at a minimum:
-- An immediate sale of non-core assets that could result in net cash proceeds in excess of $6.00 per share as detailed in Exhibit II. This process could be undertaken before the government investigations are resolved and proceeds could be immediately distributed to shareholders in the form of a dividend. -- A restructuring of the Company under new leadership that facilitates market-comparable operating margins. We believe that the Company should at least be able to return to its previously achieved 2005 level of 12% cash flow margins (approximately half those of its competitors) once expenses are reduced. Applying the midpoint of the historic free cash flow multiple range of Investools during 2005-2006 when it was solely an investor education company (7.5x) implies a value of $16.50 per RUSS share, excluding the value of non-core asset sales. -- A sale or separation of the real estate and financial markets education business units that yields net cash proceeds in excess of $10 per share, excluding the value of non-core asset sales.
A more detailed description of these alternatives and related valuation calculations is provided in Exhibit III.
It has also come to our attention that Mr. Whitney had previous plans for a take-private transaction during the second half of 2006, though he did not immediately inform the Board of Directors of his intent. If Mr. Whitney wants to continue to run the Company as a personal enterprise, then we would suggest that he make an offer to take the Company private at a price which reflects the intrinsic value of the Company. Mr. Whitney could use the proceeds from the sale of the Company's non-core assets to fund such a transaction.
In light of the steep decline of the stock price to $3.65, the closing price of the shares on June 29, 2007, from over $10.00 as recently as November 2006, we believe that all of RUSS' shareholders-including Russell Whitney- would ultimately welcome progress towards any of the above possible outcomes as opposed to the continued deterioration of market value related to the current circumstances. We believe the Company has tremendous business prospects and our aim is to allow the Company's stockholders to benefit from these prospects while enabling all of the Company's talented employees and students to prosper. To this end, we look forward to a prompt reply from the Board of Directors.
Sincerely, Guy Shanon Michael Blitzer Hudson Street Capital Management LLC Kingstown Capital Management LLC Managing Partner Managing Partner
EXHIBIT I - Current Board Lacks Independence from Russell Whitney and is Unduly Coerced by Mr. Whitney
The current Board is comprised of the following four individuals: Russell A. Whitney, chairman and CEO; Ronald A. Simon, Co-President, COO, and director; Frederick A. Cardin, director; and Chester P. Schwartz, director. Per the 2007 Preliminary Proxy, Messrs. Cardin and Schwartz have no material relationships with the Company and are therefore deemed to be independent. It is our view that the current Board is unduly coerced by the interests and demands of Mr. Whitney. Specific examples include:
2006 Compensation. The compensation committee is currently comprised of the Board's two remaining outside directors: Fred Cardin and Chester Schwartz. The Company's 2007 Preliminary Proxy filed April 27, 2007 details a base salary of $600K for Mr. Whitney and an incentive award of $562K for total compensation of $1.16M, or approximately 2.7% of the Company's stock market capitalization, in a year in which the Company's stock declined nearly 50% from a height of $10 to approximately $5 (the stock has since fallen approximately another 40% to as low as $3.39 in 2007). The Preliminary Proxy also disclosed that in setting 2006 compensation, the Compensation Committee had reviewed data from and met with its outside consultant, Mercer Human Resources, and concurred with its recommendations. But the Proxy goes on to state that:
"In discussions with the Management at a Board meeting in March 2007, and taking into consideration the extra workload and stressful environment resulting from parallel investigations in 2007, coupled with individual performance and retention considerations, the Board and Management compromised on an annual incentive payout which was substantially higher than previously contemplated by the Compensation Committee."
Such a "compromise" seems unusual for a board of directors of a public company since the entire purpose of having compensation reviewed and set by outside board members is to prevent inside directors from enriching themselves with corporate assets at the expense of other shareholders. The Board's decision here seems even more unusual when one considers that the supposed reason for the compromise - the stressful environment related to parallel investigations - was brought on, in our belief, by the activities of Russell Whitney and the management team in the first place. It is not often in corporate America that a manager is awarded additional compensation for stresses incurred through government investigations relating to corporate activities that took place directly under that manager's watch. We also find it noteworthy that these decisions by the Board seem to coincide with the resignation of the Chairman of the Compensation Committee, Mr. Cootey, and of an additional independent board member, Mr. Anthony B. Petrelli, both in March 2007.
Corporate Aircraft. In its 2006 Form 10-K, the Company disclosed that it had purchased a corporate aircraft for $6.9M in early 2007. Our research indicates that this aircraft is a Cessna Citation jet; it has received approximately $300K of upgrades subsequent to purchase; and is used almost entirely by Russell Whitney, often for what we believe are non-business related trips. The value of this aircraft represents approximately 18% of RUSS's capitalization around the time that it was purchased and nearly 50% of the Company's 2006 free cash flow as measured by adjusted EBITDA. Given the significant size of this capital investment and that it has little to do with and is unnecessary for the Company's business, it is hard to understand how a Board that is acting in the best interests of its shareholders could approve it. In fact, our conversations with former Company executives indicate that the aircraft may have been purchased without the prior knowledge of the Board. If this is in fact the case, it highlights an even more alarming state of affairs concerning the corporate governance of the Company.
Government Investigations & Special Committee. As previously disclosed in public filings, the Company is being investigated by both the SEC and the Department of Justice's United States Attorney's Office for the Eastern District of Virginia. The Company has provided its shareholders with little information about these investigations, but has stated that it has been subpoenaed, a grand jury has been convened, documents have been supplied by the Company, investigations are ongoing and that such investigations generally concern the Company's marketing practices and its acquisition of other companies. These investigations clearly hamper the Company's operations through (1) substantial legal expense and management distraction, (2) uncertainty regarding the future of the Company that makes it difficult to recruit and retain key personnel, and (3) a legal taint that makes potential customers skeptical of the value of the Company's products-this last factor is well documented by numerous recent articles in local newspapers highlighting the Company's legal woes.
The Company appointed a Special Committee comprised of independent directors to conduct its own internal review of both the SEC and DOJ investigations. In a Form 8-K filed May 29, 2007 the Company disclosed that on May 14, 2007 it had received a copy of a letter from the legal counsel of Mr. Whitney, addressed to WilmerHale, counsel to the Special Committee, indicating that Mr. Whitney, upon advice of his counsel, would not be submitting to an interview at this time with WilmerHale. As of the date of this letter, the Board has not taken any action related to Mr. Whitney's obstruction of the Special Committee's investigation. The May 29th 8-K states that "The Department of Justice and/or the SEC may view [Mr. Whitney's refusal to submit to an interview with WilmerHale] as lack of cooperation towards the Special Committee's efforts to determine the facts in its internal investigation and prolong the SEC's investigation and broaden the Department of Justice's investigation." We believe Mr. Whitney should be removed from his management and Board positions for his obstruction of the investigations that will likely lead to increased legal expenses and increased exposure for the Company. What is abundantly clear is that Mr. Whitney's interests and the Company's interests are not only misaligned, but are directly antithetical. Our only conclusion is that the current Board as structured is unable to take actions contrary to the wishes of Mr. Whitney.
In addition to the ongoing SEC and Department of Justice investigations and other lawsuits against the Company and its subsidiaries, the Company was served with yet another complaint on March 22, 2007, alleging that a group of defendants, which includes the Company and Mr. Whitney, breached certain of their fiduciary duties to the plaintiffs and committed constructive and common law fraud and other violations. We do not think it a coincidence that Messrs. Cootey and Petrelli resigned on that day and the following day, respectively. We presume that their resignations are related to their ever-increasing exposure to liability as directors of the Company.
Self-dealing and Related Party Transactions. There are other indications that Mr. Whitney treats the Company more like a personal "piggybank" than an enterprise that protects and serves the interests of all of its stakeholders. The Company is rife with related party transactions and conflicts which illustrate a clear pattern of Mr. Whitney managing the Company for his own personal gain.
There are three corporate leases whereby the Company pays annual rents of $267,672 to an entity controlled by Mr. Whitney and his wife. We question whether there was ever a proper bidding process in place at the time these rents were secured and we have no way of knowing whether these values represent fair market rents. In any event, this strikes us as a glaring conflict of interest.
Russell Whitney's two children and wife are also employees of the Company, earning collectively over $500,000 in salary in fiscal 2006 alone. While it is entirely possible that Mr. Whitney's children and wife are high-value employees, we find such nepotism to be unusually extensive for a publicly-held company. We have also learned through discussions with former employees that they believe that significant expenses which appear to be unnecessary for the Company's business and therefore personal to Russell Whitney are consistently run through the P&L of the Company without reimbursement. In fact, one senior-level former employee has indicated that the operating margin of the business would be 2-3%+ higher without these expenses. Could this explain why operating margins of a very similar public competitor have been consistently higher at similar revenue levels on a historical basis?
There are also a number of instances where Mr. Whitney has commingled corporate and personal investments. Specifically, Mr. Whitney and Mr. Simon own financial interests, including the Company's Costa Rica real estate assets detailed in Exhibit II, in which the Company has invested in excess of $3M. We believe the Company has no business purpose for owning real estate in Costa Rica and also incurs significant expenses supporting Mr. Whitney's travel to Central America. Additionally, we question Mr. Whitney's marketing of real estate and time-share units in which he has personal financial interests to paid real estate education students. The Company has no such financial interests in these real estate assets and this once again shows Mr. Whitney's preoccupation with his own enrichment at the expense of the Company and its customers. In sum, we can only wonder if the energies of management and the Board are focused on maximizing value for all shareholders or whether the vast majority of the Company's activities and investments are focused on enriching Mr. Whitney and his family.
EXHIBIT II - Non-Core Asset Sales - Detail
Company assets have been wastefully diverted into a number of unrelated and non-core assets and investments, many with ties to personal interests of Mr. Whitney. We believe the sale of these assets combined with existing cash on the balance sheet would provide shareholders over $70M of net cash equaling more than $6 per share, nearly twice the current share price. A summary of the fair value of these assets, which we believe have been conservatively estimated after all selling/transaction costs, include:
Table I - Non-Core Assets Asset $M $ Per Share Excess cash 38.9 3.32 Note receivable 7.0 0.60 Florida land under contract 4.2 0.36 Assets held for sale 4.7 0.40 Corporate HQ 13.0 - 16.0 1.11 - 1.37 Costa Rica real estate 3.6 - 5.0 0.31 - 0.43 Aircraft 5.5 0.47 Debt (6.1) (0.52) Total 70.8 - 75.2 6.05 - 6.43 Sources: Form 8-K filed March 29, 2007, Form 10-K filed April 4, 2007 (1) Share count: 11.7M shares
Asset sales in total would provide between $6.05 - $6.43 per share as of March 31, 2007 per the Company's Form 8-K, which listed 11.7M shares outstanding. Since 70% of the total proceeds comprise cash or receivable equivalents (assets held for sale or under contract), the proceeds of these sales would be available to be disbursed to shareholders. Total capital gains on asset sales will likely have offsetting capital losses but note that the Company's $29M net operating loss carryforward would offset additional gains should certain assets sell for more than we have estimated.
Asset-By-Asset Detail. -- $38.9M of excess cash provided by $43.9M of cash and equivalents (including restricted cash related to credit card receivables) reported as of March 31, 2007 less $5M for working capital and/or funding of future losses. The Company's working capital has historically been a source of cash so it is possible that more than $38.9M could be used in the special dividend. -- $7.0M note receivable relating to the sale of an office building in Orlando, Florida in 2005 which was unrelated to core operations. -- $4.7M book value of assets held for sale including European headquarters and first corporate aircraft based on actual proceeds as follows: European headquarters was sold in April, 2007 for net proceeds of $3.5M after selling costs, first corporate aircraft was sold in May, 2007 for net proceeds of $1.2M after selling costs and repairs. -- $4.2M Florida land investment currently under contract with Gulf Gateway Enterprises, representing The Company's 50% ownership interest in Tranquility Bay of Southwest Florida, a joint venture established in 2004 which owns 74 acres of land zoned for residential development in Southwest Florida. -- $13-$16M for Company owned headquarters based on guidance from the Company's CFO and independent real estate appraisals, after selling commissions. The Company owns the land and building of its executive offices in Cape Coral, Florida which includes 40,000 square feet of office space and 4.5 acres of land with water access to the Gulf of Mexico via the west coast of Florida. We assume the Company would lease back space in the building, or find alternative space to lease at a cost of less than $800K per year (say $20 PSF), which would be absorbed by reduced legal fees and other cost-cutting measures going forward. -- $3.6M - $5M market value of various Costa Rica real estate investments based on estimated book value of $3.6M and capital appreciation since 2002. Investments include a 30% interest in a Panamanian entity with ownership of 394 acres of undeveloped land on the Pacific coast of Costa Rica and an interest in a beachfront land concession adjacent to a hotel property; an 8% interest in a second Panamanian entity with ownership of approximately 445 acres of Costa Rican undeveloped land and an interest in a beachfront land concession; a 51% interest in a third Panamanian entity that owns a beach front land concession and owns a hotel; and a fourth entity which holds a 100% interest in a 7,200 square foot conference center in Monterey, Costa Rica built in 2002 and the land on which it is situated. We believe this estimate could prove conservative as independent local appraisals and management comments in past conference calls indicate these assets have appreciated in value since purchase. We note though that the Company has never had any operations in Costa Rica or Central America and that the CEO is personally invested in at least two of these properties. -- $5.5M market value of newly-purchased Cessna Citation corporate aircraft estimated at 80% of book value at March 31, 2007. We note that his aircraft has had $300K of custom upgrade that is not included in our valuation. Also, we have not included any potentially reimbursable expenses related to use of the first corporate aircraft for personal travel prior to March 2007 when, per the 2007 Preliminary Proxy filed April 27, 2007, Russell Whitney began reimbursing the Company for such use. -- ($6.1M) of net debt including $3.0M related to the Orlando note receivable, $2.1M related to mortgage on the European headquarters which was paid off in April, 2007, $1M related to financing on the original corporate plane which was paid off in May, 2007. EXHIBIT III - Strategic Alternatives and Valuations - Detail Alternative #1: Restructuring of business under new leadership.
We believe the Company's core education business has significant value which could be restored in a restructuring led by new management. This value has been overshadowed by spending on legal representation and wasteful overhead. Adjusted EBITDA for the Company as a percentage of sales transaction revenue has averaged just 7.2% over the last 5 years and has declined to 1.6% or $835,000 from 15.0% in the first quarter of 2006. Despite deterioration in margins and a reduction in sales transaction volume, the Company continues to maintain a bloated cost structure.
Table II - RUSS Historic Margins ($M) 1Q07 1Q06 FY06 FY05 FY04 FY03 FY02 Sales 51.5 57.3 223.0 196.4 164.1 109.3 62.7 Adjusted EBITDA 0.8 8.6 15.6 23.4 (6.9) 9.6 7.9 Margin % 1.6 15.0 7.0 11.9 (4.2) 8.8 12.6 Sources: Form 8-K filed March 29, 2007, RUSS Form 10-K's.
(1) Adjusted EBITDA equals cash sales minus direct costs, selling, G&A, and other adjustments including changes in deferred revenues and other non-cash items.
We contrast this with the Company's closest public competitor, Investools, Inc which has a similar level of sales transactions revenue but has achieved adjusted EBITDA margins of 20.9% in 2006 and 15.8% in 2005 despite similar levels of sales. We compare 2006 spending levels at Whitney and Investools and note the difference in efficiency between the two businesses, which we believe to be largely due to a lack of focus on expense management at the Company.
Table III - RUSS vs Investools - 2005 & 2006 Margins Investools RUSS Difference (%) ($M) 2006 % 2005 % 2006 % 2005 % 2006 2005 Cash sales 252.9 176.1 223.1 163.1 Direct costs 121.3 48.0 92.2 52.4 111.9 50.2 94.8 58.1 Selling costs 52.9 20.9 37.3 21.2 64.1 28.7 49.8 30.5 G&A 32.7 12.9 24.2 13.8 34.8 15.6 27.7 17.0 Adjusted EBITDA 52.9 20.9 27.8 15.8 15.6 7.0 23.4 11.9 13.90 3.90 Sources: RUSS and SWIM 2005, 2006 Form 10-K's
We believe adjusted EBITDA to be a relevant proxy of free cash flow at the Company for a number of reasons, specifically:
-- Timing differences between GAAP expense and revenue recognition whereby expenses are recognized upfront while revenues are not recognized for several months or years after cash has been received. Since the Company's deferred revenue account requires very little, if any cash expenditures to be fully realized, adjusted EBITDA is a more appropriate proxy of the Company's cash flows. -- The Company has no interest expense other than on debt related to its non-core investments. -- The Company has very little capital investment requirements. The Company has spent only $700K per year in 2005 and 2006 on capital investment not including a $6.9M purchase of a corporate aircraft which we do not believe to be core to operations. -- The Company has paid virtually no cash taxes due to its significant NOL valued at $29M as of its Form 10-K filed on April 2, 2007.
In total, we estimate that over 95% of adjusted EBITDA is available for free cash flow and believe that the Company should at least be able to return to its previously achieved 2005 level of 12% cash flow margins (approximately half those of its competitors) once expenses are reduced. Using trailing twelve months cash sales of $217M, this would represent $26M of free cash flow or more than $2.20 per share. Applying the midpoint of the historic free cash flow multiple range of Investools during 2005-2006 when it was solely an investor education company (7.5x) implies a value of $16.50 per RUSS share, excluding the value of non-core assets.
Alternative #2: Sale or Separation of Business Units.
The Company operates in two primary business segments, financial markets education and real estate education. The profitability of these segments differs significantly. Real estate education has been operated by the Company since 1992, when it was founded by Mr. Whitney. This business reported 2006 revenues of $95M, down approximately 9% from 2005. While operating earnings are not disclosed for this business, our research indicates that this business has struggled to earn any cash flow and likely constitutes a use of cash predominately due to its bloated cost structure. This is supported by financial disclosures in the Company's Form 10-K which indicate the business achieved gross margins of just 12% in 2005, less than the operating margins of many of its peers. Still, we believe this business would be of value to a larger education business operator that would be able to manage the business with more appropriate financial discipline. Informal queries of potential strategic buyers have shown interest at approximately 50% of reported sales or $50M, or $4+ per share.
We believe the value of the Company's financial markets education business is significant and has largely been obscured by the underperforming real estate business. The financial markets education business, which was managed under separate leadership until the end of 2006, reported revenues of $112M in 2006, an increase of 138% over 2005. While the Company does not report cash flow by segment, an S-1 filed on May 22, 2006 related to a proposed IPO of this business (see below) indicated that it generated $13.5M of adjusted EBITDA in 2005 and $76.5M of transaction sales for a margin of 17.6%. Our belief is that margins and cash flow in 2006 were significantly higher and that the financial business achieved peak margins in 2006 and constituted a significant portion of the Company's total cash flow during that year.
We believe management's recognition of the value of the financial markets education business was the motivation behind its 2006 planned IPO of this segment under the EduTrades, Inc. brand. Prior to canceling the registration, the Company's financial advisors, Kaufman Bros., L.P. and Noble International Investments, Inc. valued EduTrades, Inc. at a post-IPO value of $116M, valuing the Company's stake at $84M or $7.15 per RUSS share. We have since learned that later in the year, Craig Hallum, another investment bank, and Kaufman Bros. raised the estimated valuation of the Company's stake to $114M or $9.74 per RUSS share as the business continued to grow its cash flows.
The profitability of the financial markets education business has recently declined coinciding with some key executive departures and its increased oversight by Mr. Whitney. However, we do not see any reason why it would not be able to return to past levels of profitability under more focused management. The mid-point of valuation projections related to the business' IPO was approximately $8.50 per RUSS share using 2006 figures. Combined with a potential sale of the real estate business ($4 per share) and the sale of non-core assets ($6 per share), we believe the entire Company's assets may be worth in excess of $18 per share in an auction process.
EXHIBIT IV - Prides Capital Director Designee
The Board seat that was vacated by Stephen Cootey was granted to Prides Capital in connection with the Company's 2006 equity offering and Prides Capital has the right to designate a successor to serve on the Board. The Company's Registration Statement on Form S-1 filed Jan 11, 2006 and the Stockholders Agreement dated December 12, 2005 by and among the Company, Prides Capital, EduTrades, Inc. and Mr. Whitney details this Board arrangement:
"If at any time any Purchaser Designee ceases to serve on the Company Board or the EduTrades Board, as the case may be (whether by reason of death, resignation, removal or otherwise), Purchaser shall be entitled to designate a successor director to fill the vacancy created thereby, the Company and EduTrades shall use its best efforts without any undue delay to cause such successor to become a director of the Company and EduTrades, respectively, and Whitney shall vote all of the Voting Stock owned or held of record by Whitney so as to elect any such director."
We will be furnishing Prides Capital with a copy of this letter. In the event that our request for a seat on the Board is denied by the Company, we intend to follow up with Prides Capital to offer to fill its vacancy on the Board. Hudson Street Capital; Kingstown Capital Partners
CONTACT: Guy Shanon of Hudson Street Capital, +1-212-763-3763; or
Michael Blitzer of Kingstown Capital Partners, +1-212-319-1309
Investor Profited on Sales to Himself
Investor profited on sales to himself
As Daniel Prewett sits in an Italian jail on drug charges, client lawsuits and bank foreclosures stack up in U.S.
By MICHAEL BRAGA
michael.braga@heraldtribune.com
Daniel Prewett, who is sitting in an Italian jail awaiting extradition to the United States on drug-trafficking charges related to a cocaine deal, thought he had the Midas touch when it came to investing in real estate.
During the past 10 years, he laid out $39 million of his own and investors' money to buy 97 Southwest Florida properties. He then sold 55 of them at a $14 million profit.
The profits alone prove that Prewett was a savvy investor, but former investment clients claim in lawsuits that Prewett engaged in numerous questionable transactions along the way.
The most questionable, they say, was the deal in which Prewett sold the 46-unit Bermuda Apartments to an investment team led by Prewett's former property manager and business associate, Warren Hickernell, for $10.23 million.
That sale came just nine months after Prewett paid $5 million for the property, and the inflated price tag allowed Hickernell to get a $9.4 million loan from Sarasota's Bank of Commerce -- a loan that is now in default.
But the Bermuda Apartments deal was not the only questionable transaction Prewett was involved in.
Lawsuits filed by his investment clients point to four more deals involving homes in the Phillippi Gardens neighborhood of Sarasota.
At one point, those homes belonged to Sarasota developer Melissa Demarco. But Demarco had trouble making interest payments on her more than $2.7 million loans in 2004, so Prewett agreed to help out.
In return for receiving title to her properties at no cost, Prewett agreed to pay Demarco's outstanding debt, cover ongoing construction costs and split profits from the ultimate sale of the properties.
Though no cash changed hands between Prewett and Demarco, deeds filed at the Sarasota County Court show the properties were transferred at a value of $2 million.
Court records also show that Prewett used new appraisals for all four properties to get a $3 million line of credit from Peoples Community Bank in Sarasota.
Then, on May 4, 2006, Prewett transferred one of the four properties into his own name.
Property records show that he paid $700,000 for the property and received a $630,000 mortgage from RBC Centura Bank.
Investors claim Prewett had no right under joint venture agreements to transfer property himself.
"Prewett directly received proceeds from a pattern of criminal activity by conveying properties originally purchased under the joint venture agreements with joint venture funds from JH Investment Services (Prewett's company) to his name and then either selling them or removing all equity from the property by mortgage and converting the same for personal use," said Steven Wieder in a lawsuit filed March 19.
Following the money
A search through court records reveals that Prewett made a habit of transferring property to himself over the years at no charge, completing a dozen such transactions since 1999.
In October 2005, for example, JH Investment bought two condo units at Blackburn Harbor for $1.5 million. The company transferred the units to Prewett in June 2006 at no charge, and Prewett got two loans totaling $1.65 million from the First Bank of Arizona.
On other occasions, Prewett sold properties to himself in order to generate profits.
In 1999, he garnered $251,500 by selling three of 11 lots in on Beneva Road to himself before reselling the lots to JH Investments.
At the same time, Prewett engaged in numerous deals with clients and business partners that yielded large profits in short periods of time.
On Oct. 4, 2002, Graphic Property Holdings, a company owned by Prewett's chief accountant at JH Accounting Services, Natalie Swaney, sold two building lots at University Park of Commerce to Prewett's company for $475,000.
Prewett's company sold the property two weeks later for $699,000, netting a $224,000 profit.
Since February, clients have won a series of judgments against Prewett, demanding repayment of of $19 million in invested funds.
At the same time, eight lenders -- Deutsche Bank, Peoples Community Bank, Century Bank, Aurora Loan Services, Citibank, LaSalle Bank, RBC Centura and the Guardian Limited Partnership -- have won $14 million more as the result of successful foreclosure proceedings.
Fortunately for creditors, Prewett and his company still own 42 parcels of land in Southwest Florida that were purchased for about $21 million.
Lawsuits filed by investors say that Prewett also bought golf course property in California and mountaintop home sites in Costa Rica and North Carolina that are not included in the $21 million figure.
But one investor, New York resident Dimitrios Pistikos, questions whether Prewett ever used money raised from investors to buy properties outside the state.
He either did not buy the properties or "those properties were transferred to Prewett or companies controlled by him for his own personal enrichment," Pistikos' April 3 lawsuit states.
Cascadas Del Mar – The “Anti-Development”
Cascadas Del Mar – The “Anti-Development”
Costa Rican Project Cascadas Del Mar Employs a “No Stone Turned” Approach to Rainforest Development
Source: Americas Media Group
Jun 06, 2007 13:23:38 Click to see PDF Version of this Press Release
(PRLog.Org) – Miami, FL – June 6, 2007 Set in a lush emerald-green region of the Costa Rican rainforest on the Osa Peninsula, Cascadas del Mar is a one-of-a-kind development that offers luxury residences, resort amenities, secluded beaches, ocean views, natural-spring waters, and crystal clear tributaries for the environmentally conscious buyer. The project, set to break-ground in June, provides a breathtaking, affordable housing opportunity in a region National Geographic described as "the most biologically-intense place on Earth.”
Cascadas del Mar offers a unique experience for investors and second home buyers seeking an affordable alternative in an area of the world known for its sport-fishing, surfing, hiking, rafting, whale-watching, and other activities that celebrate the regions stunning natural surroundings. Located in the southern region of Costa Rica, Cascadas Del Mar directly overlooks the “Tail of the Whale” at Ballena National Marine Park. This location is where whales come from around the world to mate upon a group of Coral Reefs which, in an ironic twist of fate, have formed into what looks like the shape of giant whale’s tail. Phase One of the property’s master plan is the Cascadas Del Mar Rainforest. This phase will feature panoramic tree top views from spacious living quarters with a built-in 200 foot waterfall and all the best amenities. All segments of the Cascadas Del Mar master plan will share amenities and natural attractions with the other parts of the large Luxury Resort Community.
With great respect for the existing environment as well as future growth, Cascadas Del Mar underwent exhaustive research and development before actual plans were drafted. Joseph L Flores, President and CEO, explains the concerns upon purchase of the land, “I looked at Paradise, and thought - how do you protect and respect what you have. Not cut up and destroy the land.” Maintaining the pristine environment surrounding the recreational condominiums and penthouses is of paramount importance in the planning of this real estate venture. The developers and architects worked closely with Costa Rican officials and a powerful team of environmental experts to ensure the area and its wide array of plants and wildlife went undisturbed.
Plans to preserve the environment as well as enhance the community came in forms both big and small. During the first stages of the planning process, Flores and the project’s investors decided not to knock down a single tree and build only on grassy areas; creating walkways and massage gazebos along lush waterfalls, creeks, and rivers between the various structures. The resulting land availability presented a spatial challenge which the architects overcame by building up rather than out, resulting in as small of a footprint as possible. The buildings were set on a slope, with the roof of one unit providing the foundation for the other. Flores explains, “all the buildings are one-story units from the profile view, each unit touches the dirt a little bit – but the vast majority are situated on top of each other creatively to result in a visually stunning image while protecting and healing the rainforest”.
Cascadas Del Mar has now gone beyond any traditional environmental planning and taken “environment” into consideration on a community level as well. With a new international airport opening in a matter of years, tourism to this region will soon increase greatly. Cascadas Del Mar seeks to provide the necessary additional housing in the most respectful way possible while benefiting the local citizens. “One can’t just declare that they love nature”, professes Flores, “communities also need economic growth. Developers must take into account economic affects such as job creation as well as social affects such as access to schools, roads, etc.” Furthermore, Cascadas Del Mar is officially partnering with government agencies to help future developers understand how to follow the same pattern of environmental protection.
“We fully realize the environmental concerns of the local government, Costa Rican citizens, and buyers who seek to experience the beauty of this region without disturbing its appeal for future generations,” says Flores. “The result is a first of its kind: a luxury resort community with residences specifically designed to directly maintain and heal the surrounding rainforest, while offering access to all the activities popularized by eco-tourism.” Investor Shawn West expressed his feelings to Flores, “Cascades Del Mar has gone from a simple web site to a full-fledged international investment venture. Joseph, you continue to do the work necessary to bring value to this blossoming ‘Rich Coast’ still held close by Mother Nature, which has been protected by father time. The non-profit projects and eco-friendly solutions you have presented show you're concern for the region and its future.”
Cascadas Del Mar still offers the finest amenities one would expect from an upscale resort, with the additional piece of mind that every dollar spent on this project helps to protect the environment. Go to www.cascadasdelmar.com for more information. Press Contact: Becky Manuel, becky@americasmediagroup.com
The home-buying-abroad craze
The home-buying-abroad craze
Published Wed, 6 Jun 2007 12:00:00 GMT
Despite real estate slowdown, vacation homes are still hot
Tom Kelly
Inman News
Nearly every day, we read about the increasing popularity of second homes in a remote Mexican seaside town, or the lure of buying a Tuscan villa or the exotic real estate possibilities in Panama. But how many North Americans are actually rolling the dice and choosing to purchase a second home outside the U.S.?
Accurate, tangible data on Americans buying abroad is nearly impossible to find, and the recent National Association of Realtors' annual Investment and Vacation Home Buyers Survey did nothing to help consumers who seek international second-home statistics. While the survey revealed that domestic vacation-home sales increased 4.7 percent in 2006 to a record 1.07 million, the poll did not contain any questions targeting international purchases.
While NAR indicated that it was possible that some of the 1,412 respondents surveyed in April purchased outside of U.S. borders, "the size of the survey wouldn't have provided enough meaningful responses."
According to the U.S. State Department, more than 4 million Americans live abroad, excluding military and government personnel. Mexico is by and far the largest with 25 percent, or 1 million American transplants, followed by Canada with more than 688,000. Central America is not far behind. In fact, an Urban Land Institute study on tourism developments estimated that up to 100,000 Americans live in Costa Rica alone.
However, international Realtors, residential developers and others providing second-home market services now say those numbers are outdated because of the torrid purchasing activity over the past 18 months.
Amada Sturges, director of Escapehomes.com, an online marketplace for buyers and sellers of second homes and resort properties, said the number of Americans interested in purchasing second homes in foreign countries jumped considerably on the site last year.
"More than ever people are looking for better value and natural beauty, both of which are often difficult to find in the U.S.," Sturges said. "Many international countries, such as Mexico and Nicaragua, are great alternatives and are now making it easier for foreigners to buy and live within their borders."
Austin, Texas-based HomeAway Inc., an online company specializing in vacation rentals, said its revenue from owner listings was up 50 percent domestically the past year and about 40 percent in Europe. About 18 percent of buyers of vacation homes who participated in the survey stated that they wanted to rent their property to others. That number was up from 13 percent in 2005, according to the NAR report.
"The vacation-home market has been extraordinarily robust here in the States and in Europe over the past four to five years," said Brian Sharples, founder and CEO of HomeAway. "We thought there would be more of a downturn because the appreciation had not been as high in early 2006 as in previous years, but people are still buying and building."
HomeAway, which raised a record $160 million last year for acquisitions and marketing, predicts the number of second homes available as vacation rentals will continue to grow rapidly. The company's portfolio of vacation rental sites includes HomeAway.com, VRBO.com, CyberRentals.com, A1Vacations.com and GreatRentals.com in the U.S., plus Europe's Holiday-Rentals.co.uk (UK), HolidayRentals.fr (France), Abritel.fr (France), FeWo-direkt.de (Germany) and HomeAway.es (Spain).
"The demographics for second homes are really in the sweet spot for the next few years," Sharples said. "The boomers' ages are in the area where they are hitting the top of their incomes and they have been enjoying considerable gains on these types of properties the past few years."
The NAR survey showed that the typical vacation-home buyer in 2006 was 44 years old, had a median household income of $102,200, and purchased a property that was a median of 215 miles from his or her primary residence. About 42 percent of U.S. vacation homes were closer than 100 miles, and 32 percent were 500 miles or further.
"The NAR survey also did not touch on the number of U.S. vacation homes and resorts that are purchased by Europeans," Sharples said. "We are seeing a phenomenal number of people from the UK and Germany buying in Florida and in other areas of the East Coast. The demographics are very similar to the age and income brackets in the states.
"However, while we might be thinking our resort prices are expensive, Europeans are looking at us as a bargain. Their pound is now worth close to two bucks. If you can get close to double your money in real estate here, you start to understand that it makes a lot of sense."
That's true even if the information is anecdotal. Real estate data that charts purchases by foreigners -- anywhere -- simply is difficult to find.
To get even more valuable advice from Tom, visit his Second Home Center.
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What's your opinion? Send your Letter to the Editor to opinion@inman.com.
Hilton Hotels Corporation Announces Three Major Development Alliances
Hilton Hotels Corporation Announces Three Major Development Alliances
Deals Will Facilitate Opening Approximately 55 New Hotels in Key Markets Through 2012
LONDON & BEVERLY HILLS, Calif.--(BUSINESS WIRE)--Hilton Hotels Corporation (NYSE:HLT) today announced that the company will form three major development alliances with the intention to introduce more than 15 new hotels in the Caribbean and Central America, 25 hotels in Russia and at least 15 hotels in the U.K. throughout the next five years.
HHC has agreed to work with Caribbean Property Group for development within Central America & the Caribbean; London & Regional Properties Limited in Russia; and Shiva Hotels Limited in the U.K. and Ireland. The three development alliances follow the partnership deals recently announced in India and China, which are expected to result in 100 new hotels in those markets throughout the next five to seven years.
“These important alliances will reinforce our position as the premier global hotel company and underscore our strategy to sign large deals with major investors to develop a significant number of hotels in key growth markets around the world,” said Matthew J. Hart, president and chief operating officer, Hilton Hotels Corporation. “We are well on our way to achieving our stated goal of at least 1,000 hotels outside of North America over the next 10 years.”
Caribbean & Central America
Through a strategic alliance agreement with Caribbean Property Group (CPG), a New York-based, major property investment group, HHC will work actively with CPG to develop focused-service, franchised hotels within certain defined markets in Central America and the Caribbean. Initially, targeted markets include major cities and destinations in Puerto Rico, Costa Rica, Panama, the Dominican Republic and Trinidad. CPG will receive certain preferred development rights in return for meeting certain goals and timetables.
“This agreement ideally supports our international development strategy to bolster the Hilton Family of Hotels presence in growing markets where our brands are either underrepresented or absent,” said Tom Keltner, Chief Executive Officer – Americas & Global Brands, Hilton Hotels Corporation. “CPG is a well respected developer with invaluable insight in these markets, and we are confident that they will help us achieve these goals.”
The company initially will focus on the Hilton Garden Inn brand, with plans to develop additional projects under the Hampton by Hilton and Homewood Suites by Hilton flags, eventually.
HHC began its business relationship with CPG with the recent signing of management agreements for two existing full-service hotels in Costa Rica owned by a joint venture in which CPG holds an 85 percent ownership interest. Currently undergoing major renovations, the hotels will be re-branded and re-opened in the 2008 first quarter as the Hilton Papagayo and the Doubletree by Hilton Puntarenas, in Guanacaste and Puntarenas, Costa Rica, respectively.
“The region is ripe for focused service hotel development,” said Barry Breeman, vice chairman, Caribbean Properties Group. “The economies have strengthened in the region over the past five years. Today, there is a good base of first-class, full-service hotels and resorts, but a very limited number of mid-market, focused service hotels, especially in the premium branded sector. In addition to these markets and this segment being significantly underserved, we believe developing under the established Hilton Family of Hotels will give instant credibility to the projects. And as these projects succeed, we believe they will act as catalysts to help further strengthen local economies and development of other real estate classes.”
Russia
In Russia, which is a priority international development market for the company, HHC will enter into a ‘Preferred Development Alliance’ with London & Regional Properties Limited (L&R). This agreement is expected to result in the development of at least 25 new hotels in an initial period of five years, encompassing selected brands within the Hilton Family of Hotels, including Conrad, Hilton, Doubletree by Hilton, Hilton Garden Inn and Hampton by Hilton hotels, all of which HHC will manage.
“Russia is an outstanding market in which to pursue hotel development given the powerful combination of improving economics and favourable demographics,” said Ian Carter, chief executive of Hilton’s International Operations. “There is almost a total absence of internationally branded properties throughout the regional cities of Russia.
In London & Regional, we have a blue-chip owner; Hilton has enjoyed a long-standing trading relationship with this company that is comprised of highly experienced developers with a strong appetite for growth. With their support, we aim to become the market leading international hotel company in Russia.”
“The Hilton name is a powerfully strong brand and Russia offers tremendous potential as there are 11 major cities with a population of more than 1 million people,” said Ian Livingston of London & Regional. “With the multi-brand approach that Hilton Hotels Corporation now has, the company is able to offer solutions in all travel sectors.”
The development focus in Russia will be in Moscow and St. Petersburg as well as key regional cities. The first hotel expected to be included in the deal will be in the centre of Novosibirsk (Russia’s third largest city) where L&R currently is developing a mixed-use hotel and office project that features a 186-room Doubletree by Hilton. This hotel is expected to open in the second quarter of 2008.
In addition, and separate from this deal, HHC’s first Hilton hotel in Russia will be the 275-room Hilton Moscow Leningradskaya, which opens later this year.
U.K. & Ireland
In the U.K. and Ireland, also is a priority development market for HHC, the company will enter into a preferred development alliance with Shiva Hotels Limited, representing its first U.K. hotel franchise deal with a major property partner. The agreement is expected to result in the addition of at least 15 new hotels and will focus on the following Hilton Family of Hotels: Hilton, Doubletree by Hilton, Hilton Garden Inn and Hampton by Hilton.
Shiva, a privately owned company, is looking to expand its existing interests in the hotel sector and has four hotel sites under development that are expected to be included in this agreement. Two of the new sites will be Hampton by Hilton hotels, representing the brand’s first introduction in the U.K.
Rishi Sachdev, managing director of Shiva hotels, said "I am excited by the opportunity to develop and grow the business in partnership with Hilton, which has a strong, international presence and an excellent reputation. I believe that combining the Hilton family of brands with our development experience and operational expertise is a winning formula."
The four sites under development are a 350-room Hilton near Heathrow Terminal 5, a 200-room Hilton and a 120-room Hampton Inn by Hilton in Leeds, and a 120-room Hampton by Hilton in Derby.
“The U.K. & Ireland is a very important market for Hilton, given the strength of the economy and our already strong presence with 75 properties,” said Carter. “The introduction of additional brands within the Hilton Family of Hotels for the first time gives us the ability to attract new owners and operate across a number of market segments from luxury to mid-price, appealing to guests at different price points.
“These significant alliances are indicative of how we would like to grow internationally. We aim to make a big impact in each of our core development markets and achieve market leadership across major hotel segments through ventures with large ownership groups.”
About London & Regional(L&R)
L&R is one of the largest private property companies in Europe with investments, developments and business interests exceeding Eur 10 billion in over 12 countries including the UK, Scandinavia, Germany, Poland, South Africa, Russia and Panama. Within their property investment portfolio, L&R own over 50 hotels including London Hilton on Park Lane, The Trafalgar in London and the Hilton Frankfurt. In Russia, L&R has invested over Eur 500 million in the commercial property market since 2005 including prime office buildings, retail centres, hotels, logistics facilities and pipeline development schemes.
About Shiva
Shiva is owned by Rishi Sachdev, Managing Director and Ramesh Sachdev, Director. Rishi graduated from Cambridge University and joined Lehman Brothers as a derivatives trader. He left in 2001 to pursue a more entrepreneurial career, initially focusing on mixed use commercial property developments. Having developed a number of successful schemes in the UK, he recognized the growth potential in the branded mid-market hotel sector and started Shiva Hotels in 2003.
About Caribbean Property Group (CPG)
CPG is focused on making investments in primary real estate assets in the Caribbean and Central America. The company owns approximately $2 billion in real estate assets in Puerto Rico, including 5.8 million square feet of retail space, 2.2 million square feet of warehouse space and 300,000 square feet of office space. CPG also owns two major hotel-casinos, both in San Juan. CPG, along with joint venture partners, focuses on acquiring income-producing, fixed real estate assets in the Caribbean and Central America across four platforms—hotel, retail, office and industrial.
About Hilton Hotels Corporation (HHC)
HHC is the leading global hospitality company, with more than 2,800 hotels and 480,000 rooms in 76 countries and territories, including 100,000 team members worldwide.
The company owns, manages or franchises a hotel portfolio of some of the best known and highly regarded brands, including Hilton®, Conrad® Hotels & Resorts, Doubletree®, Embassy Suites Hotels®, Hampton Inn®, Hampton Inn & Suites®, Hilton Garden Inn®, Hilton Grand Vacations™, Homewood Suites by Hilton® and The Waldorf=Astoria Collection®.
The Hilton Family of Hotels adheres to founder Conrad Hilton’s philosophy that, “It has been, and continues to be, our responsibility to fill the earth with the light and warmth of hospitality.” The company put a name to its unique brand of service that has made it the best known and most highly regarded hotel company: be hospitable®. The philosophy is shared by all brands in the Hilton Family of Hotels, and is the inspiration for its overarching message of kindness and generosity.
For more information about our company, please visit www.hiltonworldwide.com, and to learn more about our be hospitable philosophy, please visit www.behospitable.com.
Contacts
Hilton Hotels Corporation Communications
310-205-4545
Kathy Shepard, kathy_shepard@hilton.com
Kendra Walker, kendra_walker@hilton.com
http://www.hiltonworldwide.com
Hilton Hotels to Boost Global Expansion
Hilton Hotels to Boost Global Expansion
Reuters
NEW YORK -- Hilton Hotels has signed deals with three real estate groups to develop more than 55 properties in Russia, Britain and parts of Central America, The Wall Street Journal reported Sunday.
The report said the partners were projected to cover the full construction costs, estimated at $1.7 billion, as part of Hilton's plan to accelerate its drive to franchise new hotels and expand its brands outside the United States.
The newspaper cited president and chief operating officer Matthew Hart, who will become the hotel group's chief executive on Jan. 1, when current CEO Stephen Bollenbach retires. The move follows partnerships Hilton announced last year envisioning construction of as many as 100 new hotels throughout India and China, the newspaper said.
In Russia, Hilton said it linked up with a long-standing partner, closely held London & Regional Properties, which already owns marquee hotels in London and Frankfurt. The aim is to focus not only on Moscow and St. Petersburg, but to develop properties in large regional centers with few foreign hotels.
Hart was quoted as saying the latest ventures underscore Hilton's determination to pick partners with deep pockets and a strong track record of local development. "We want to roll these [projects] out as quickly as we can," he said, the newspaper reported.
In Britain and Ireland, the partner is Shiva Hotels, another closely held real estate firm. The third agreement, covering the Caribbean and Central America, calls for Caribbean Property Group, based in New York, to concentrate projects initially in population centers in Puerto Rico, Costa Rica, Panama, the Dominican Republic and Trinidad, the newspaper said.
Wal-Mart Builds on Plans to Drive U.S. Store Returns
Wal-Mart Builds on Plans to Drive U.S. Store Returns
Posted : Fri, 01 Jun 2007 15:14:00 GMT
Author : Wal-Mart Stores, Inc.
Category : PressRelease
BENTONVILLE, Ark., June 1 /PRNewswire-FirstCall/ -- Wal-Mart Stores, Inc. announced plans today at its annual Shareholders' meeting to leverage capital resources through a strategy designed to improve returns, productivity and sales within its U.S. stores. The plans include moderating the growth of its U.S. supercenters.
The strategy announced today builds on both the Company's plan to balance returns and growth that was announced at its October 2006 meeting for analysts and investors, as well as the Wal-Mart U.S. three-year road map to improve customer relevancy and returns. This plan is intended to result in higher U.S. return on investment, reduced capital expenditures and higher U.S. comparable store sales. In addition, the Board of Directors approved a new share repurchase program that increases the Company's authorization to $15 billion.
"We are committed to improving return on investment, while continuing to grow in the United States," said Lee Scott, Wal-Mart Stores, Inc. president and chief executive officer, in addressing the Company's shareholders at its 37th annual meeting. "Today's announcement of this strategy and the share repurchase program underscores Wal-Mart's commitment to returning value to our shareholders.
"In addition to the share repurchase program, Wal-Mart is returning more than $3.6 billion to shareholders in the form of dividends this year," Scott added. "Wal-Mart has increased its dividend every year since its first declared dividend of five cents per share in March 1974."
As previously announced, the Company increased its annual dividend 31 percent this fiscal year.
Details on U.S. Supercenter Growth
The result of this strategy will be a growth program of between 190 and 200 new U.S. supercenters during this fiscal year and approximately 170 supercenters each year for the next three fiscal years.
"While we feel comfortable with these estimates, we will continue to review and evaluate our expansion strategy on an annual basis," said John Menzer, Wal-Mart Stores, Inc. vice chairman and chief administrative officer.
For fiscal year 2008, the 190 to 200 range includes approximately 70 relocations and 40 expansions of discount stores into supercenters. In October 2006, the Company had announced that its fiscal year 2008 growth plans included between 265 and 270 supercenters in the United States. Approximately 80 of the supercenters originally scheduled to open in January 2008 now will open in early fiscal year 2009.
The Company estimates that its consolidated square footage growth rate will be approximately 6 percent for fiscal years 2008 and 2009. The Wal-Mart U.S. square footage growth rate is expected to range from 4 to 5 percent during these same fiscal years.
Efforts Continue to Improve Store Productivity
Under the leadership of Eduardo Castro-Wright, president and chief executive officer for Wal-Mart Stores U.S., a three-year plan is being implemented to drive returns and sales through a strategic approach to improve customer relevancy in operations and merchandise. This is the second year of the three-year plan.
"Through our strategy, we are pursuing high return opportunities by focusing on markets where our customer segmentation approach offers the best opportunity to create a more competitive position for Wal-Mart and drive higher comparable store sales," said Castro-Wright. "In addition, our U.S. plan includes a variety of initiatives designed to improve labor productivity and enhance margins."
More Rigorous Real Estate Process
Since October 2006, Wal-Mart's real estate projects have been subject to a more rigorous prioritization process as they are reviewed by the Company's Real Estate Committee.
"The priority for a potential store is selecting a location that makes the most efficient use of capital resources and aligns with market growth priorities," explained Menzer. "We also have been focused this year on reducing cannibalization of existing stores via our more strategic selection of U.S. real estate projects."
Reduction in Capital Expenditures
This strategy is expected to reduce capital expenditures for fiscal year 2008 to approximately $15.5 billion, down from the previously projected $17 billion, according to Tom Schoewe, executive vice president and chief financial officer for Wal-Mart Stores, Inc.
"The capital we are freeing up by this plan, combined with our existing debt capacity, will fund the share repurchase program," Schoewe said.
The $15 billion share repurchase program replaces the $3.3 billion remaining of the previous $10 billion program that was announced in September 2004. The remaining authorization was as of April 30, 2007, the end of the first quarter. Under this program, repurchased shares are constructively retired and returned to unissued status.
The strategy announced today does not affect the capital investment plans for the Company's Sam's Club or International operations. Sam's Club continues to be focused on deepening its relevance to all of its members, while building on its small business foundation. The International operating segment will continue its strategy of targeting those opportunities with the greatest returns and growth potential.
Wal-Mart Stores, Inc. operates Wal-Mart discount stores, supercenters, Neighborhood Markets and Sam's Club locations in the United States. The Company operates in Argentina, Brazil, Canada, China, Costa Rica, El Salvador, Guatemala, Honduras, Japan, Mexico, Nicaragua, Puerto Rico and the United Kingdom. The Company's common stock is listed on the New York Stock Exchange under the symbol WMT. More information about Wal-Mart can be found by visiting http://www.walmartstores.com/. Online merchandise sales are available at http://www.walmart.com/ and http://www.samsclub.com/.
This release contains statements that Wal-Mart believes are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that are intended to enjoy the protection of the safe harbor for forward-looking statements provided by that act. These forward-looking statements include a description of our revised U.S. supercenter growth strategy, capital expenditure plan and our new share repurchase program, as well as our expectations for the impact of the plans discussed above on our return on investment, comparable store sales and capital expenditures. These forward-looking statements are subject to risks, uncertainties and other factors, including the availability and price of shares under our share repurchase program, our ability to effectively defer real estate projects and deploy and allocate resources and the normal risks associated with our real estate expansion plans as described more fully in the risk factor
