Petrocelli and his wife Beverly effectively own 74.7%. I am leading off this brief analysis pointing out this control as it is important for potential investors to know that Mr. Petrocelli has substantial influence. While I prefer to see management with a stake in the business, this type of control can be worrisome to investors. Many investors are concerned that decisions will be made for the benefit of management and not the minority shareholders; especially when it comes to executive pay, benefits, stock options and related party transactions.
I will start with executive pay. Mr. Petrocelli seems compensated very well at $1.6 million in base salary and bonuses. However, it is important to note that his base salary and annual bonus has only increased 18.5% since 1991. The other three executives have base salaries and bonuses in a range of $390K to $425K. There are also substantial stock options outstanding, many of which have an exercise price at less than half of the current market value of the stock. Most of the outstanding options are held by the company's Chairman and CEO.
In 2008, Mr. Petrocelli made an offer to acquire all outstanding shares of the stock for $23.00 per share. At the time, this represented a 17% premium over the average trading price of the stock for the five trading days leading up to the offer date. According to the press release, the offer was made in the best interest of the shareholders due to an unexplained decline in the stock price. However, many believe this opportunity was being used to get undervalued assets cheap. The offer was withdrawn two weeks later, citing improved market conditions.
If you are hoping that Mr. Petrocelli with retire soon and relinquish some control to outsiders, think again. Petrocelli.
If you can get past some of the lucrative perks of insiders, this tightlycontrolled, diversified company with interests in commercial real estate, hotel operations and engineered product manufacturing has made what appear to be sound investments over the last few years for the benefit of all shareholders. Below I have summarized each segment along with recent performance data.