The magnificent Southland Center and Sheraton-Dallas Hotel, right,
as they began to rise in early summer. Finished hotel will be more than
'Me the height of the steelwork pictured here, as only 12 of the 28
ies were up at the time.
asset value applicable to the Company's common
stock, plus any cash distributions to stockholders
made during the year. The trend of "economic
performance" on a per share basis is reported in
the chart on page 6. We believe that these economic performance figures, rather than the relatively small reported earnings, account for the
unusual growth of the Company in recent years.
A "price-performance" ratio which relates the
market value of the Company's shares to the
"economic performance", is tabulated in the last
column of the same chart. This is a somewhat
unorthodox yardstick. It should not be confused
with the more familiar price-earnings ratio which
takes no account of any "unrealized" appreciation.
In determining net asset values necessary for
computing economic performance, Sheraton
officers estimate every six months the market
value of all Sheraton hotels and office buildings.
They arrive at these values by multiplying "free
and clear" earnings (before depreciation and interest charges) by a factor generally varying between 7 and 9; the factor depending principally
on the age of the building, its location, probable
future competition, available financing, and
other conditions which affect the value. Experience indicates that such formulae (with occasional minor adjustments for certain nonrecurring items) provide a surprisingly accurate
measure of the prices at which hotels can be sold,
and therefore make possible an estimate of net
Based, of course, on the accuracy of these yardsticks, Sheraton properties do not appear to have
"depreciated" by the $ 11,919,7 5 9 of reserves which
were set up in fiscal 1957. Instead they appear ,
to have increased in value by several million
dollars over and above the cost of capitalized
improvements made during the year. Perhaps,
however, it would be more accurate to suggest,
that the capitalized improvements were so effective that they added more than their cost to the
indicated value of the properties, thereby more
than offsetting any actual depreciation.
BOARD OF DIRECTORS
During the year nine new directors became members of the Sheraton board, adding materially
to the fund of experience upon which the Company can draw in shaping its future policies. The
president of one of New York's larger banks, the
chief executives of four of the country's largest
industrial companies and one of the country's
largest fife insurance companies, one of the nation's principal authorities on modern management, one of Canada's leading industrialists, and
one of the former heads of the nation's largest
open-end investment trust, — these men can fur-
nisH invaluable guidance to Sheraton in the
years that he ahead.
REPURCHASE OF SHARES
The Company has repurchased relatively few of
its common shares during the past year. Although
an immediate increase in the net asset value of
its shares could result from the purchase of its.
own stock at a discount (currently approximately
50% from indicated asset value), an even greater
advantage may be gained by other use of such
funds. This would be true if the Company's asset
value should more than double in the coming
years. Historically the Company's indicated net
asset value has doubled many times since 1941.
(See chart on page 6.)
During these sixteen years the book value
of the Company's net assets has risen from
less than $2,000,000 to $49,922,000. The latter
figure, however, does not take into account
$80,347,000 of unrealized appreciation (before
capital gains taxes) which would be realized if the
properties were sold at their indicated market
value, as estimated by the officers.