Stakeholder wants Red Lion sale

Red Lion Hotels Corp.’s largest shareholder is urging the Spokane company’s directors to sell off more hotels or the entire company so that investors can earn better returns.

Seattle-based Columbia Pacific Opportunity Fund owns 5.49 million common shares of publicly traded Red Lion — about 29 percent of the company’s common stock.

The Seattle firm has sent two letters in the past four months to Red Lion’s board expressing a desire to see more of the hotel chain’s assets sold off.

The Feb. 28 letter from Columbia Pacific states: “Recently, several financial and strategic parties have notified us that they have an interest in evaluating purchasing either assets of Red Lion or the entire company if a sale or liquidation were considered.”

The investment management company also asked Red Lion’s board to find a reputable financial adviser to assist in selling off some properties or the entire company “to deliver full value to shareholders.”

Public documents show that Columbia Pacific Opportunity Fund is managed by Columbia Pacific Advisers LLC, an investment firm with stakes in several other public companies. Alexander Washburn is the fund manager.

Red Lion has 48 hotels in nine Western states and British Columbia. The company owns 30 of those hotels and has franchised the other 18.

Last year it sold off its largest property, the Red Lion Fifth Avenue in Seattle, for $71 million. It then reopened the hotel as one of its franchises.

Red Lion is also trying to sell four hotels in Denver, Helena, Missoula and Medford.

Jon Eliassen, Red Lion’s CEO and president, said the company’s formal response to Columbia Pacific is: “We value and encourage feedback from our shareholders. The Red Lion management team and the board continue to work toward creating greater long-term shareholder value.”

He added that the Seattle Red Lion sale allowed the company to reduce its debt by $28 million.

Attempts on Tuesday to contact principals with Columbia Pacific were not successful.

While Columbia Pacific is pushing Red Lion to liquidate all or part of the assets, the Seattle firm also has been buying more Red Lion stock — 29,700 additional shares since Jan. 1, according to documents filed with the U.S. Securities and Exchange Commission.

That’s still a tiny portion of the approximately 19.1 million common shares outstanding.

The second-largest shareholder is Don Barbieri, former CEO and chairman of the company’s board, who owns about 1 million shares.

Columbia Pacific’s continued stock-buying shows that company’s managers feel there’s still value in Red Lion’s assets, said Will Marks, a hotel industry analyst with JMP Securities, based in San Francisco.

But it’s also clear, he added, that Columbia Pacific feels the assets of the company would be worth more sold off or acquired outright by a larger company.

“They’re saying in those letters to the board that they feel Red Lion is not adding value to the company,” he said.

In June 2008 Columbia Pacific Advisors tried to buy Red Lion for $9.50 per share, but withdrew the offer. The stock on Tuesday closed at $7.51 per share.

Smedes Rose, a lodging industry analyst with New York-based investment firm Keefe, Bruyette & Woods, Inc., said Red Lion’s board has already begun addressing the concerns of Columbia Pacific.

Rose said selling off the Fifth Avenue Seattle location amounts to selling off “the company’s crown jewel.”

Plus, the company is addressing its debt and liquidating some assets as the market allows, he said.

He noted that it’s not common to see a major investor send direct requests for liquidation to a company board.

“It’s fairly uncommon, but you may see it from time to time,” he said.