Strategic Hotels & Resorts: Bill Gates Vs. Goldman Sachs (BEE)

By Douglas A. McIntyre Updated Apr 28, 5:35AM EDT · Published Oct 7, 1:11PM EDT

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Bill_gates_image Following billionaires, activist investors, and even opportunists has been a difficult job in recent weeks. Activists can blame poor management decisions, but they cannot blame management over stock prices in a bear market. This creates an interesting situation with Strategic Hotels & Resorts, Inc. (NYSE: BEE) as we have Bill Gates opposing Goldman Sachs.

Strategic Hotels & Resorts is in a tough spot right now as anowner and operator upscale and luxury hotels in North America andEurope. It is also a REIT and it is no secret that REIT’s have beenunder pressure as the need for capital puts any themat risk since they need to borrow to operate and continue payingdividends. Its current dividend yield today is roughly 15%.

In a filing last night, Bill Gates’ Cascade Investments has become anactivist investor in Strategic Hotels & Resorts. Gates’ totalstake is now 4.069 million shares. Assuming no changes to the June 30levels, this makes Gates one of the top ten holders of this stock.

The filing noted that the Gates’ entity may "engage in discussions with theIssuer’s board of directors and management concerning the business andstrategic direction…." and "may engage in discussions with othershareholders of the Issuer to discuss matters of mutual interest…."

So if Bill Gates is going activist, you’d wonder why Goldman Sachs cutestimates and targets on Strategic in a broad lodging sectordowngrade. Goldman Sachs took its prior $8.20 target down to $5.00 as the outlook for travel and lodging and entertainment spending is weakening rapidly and now expected to go well into 2009.

Shares are up today by 3% at $6.04, but the average trading volume hereis rather light. What Gates is ultimately able to accomplish here isstill unknown. He has invested in hotels before and the entire marketcap is just over $450 million. If he wanted to he could easily buy theentire company.

This stock is down almost 75% from its 52-week highs. Its 52-week trading range is $5.46 to $22.74.

Jon C. Ogg
October 7, 2008

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.