Ashford Trust Reports Second Quarter 2018 Results

DALLAS, Aug. 2, 2018 /PRNewswire/ -- Ashford Hospitality Trust, Inc. (NYSE: AHT) ("Ashford Trust" or the "Company") today reported financial results and performance measures for the second quarter ended June 30, 2018. The performance measurements for Occupancy, Average Daily Rate (ADR), Revenue Per Available Room (RevPAR), and Hotel EBITDA are comparable assuming each of the hotel properties in the Company's hotel portfolio as of June 30, 2018 were owned as of the beginning of each of the periods presented.  Unless otherwise stated, all reported results compare the second quarter ended June 30, 2018 with the second quarter ended June 30, 2017 (see discussion below).  The reconciliation of non-GAAP financial measures is included in the financial tables accompanying this press release.

STRATEGIC OVERVIEW

• Opportunistic focus on upper upscale, full-service hotels
• Targets moderate debt levels of approximately 55 - 60% net debt/gross assets
• Highly-aligned management team and advisory structure
• Attractive dividend yield of approximately 6.1%
• Targets cash and cash equivalents at a level of 25 - 35% of total equity market capitalization for the purposes of:
• working capital needs at property and corporate levels
• hedging against a downturn in the economy or hotel fundamentals
• being prepared to pursue accretive investments or stock buybacks as those opportunities arise

FINANCIAL AND OPERATING HIGHLIGHTS

• Net loss attributable to common stockholders was $29.0 million or $0.30 per diluted share for the quarter
• Comparable RevPAR for all hotels increased 1.6% to $137.53 during the quarter
• Comparable RevPAR for all hotels not under renovation increased 2.3% to $134.36 during the quarter
• Adjusted EBITDAre was $120.7 million for the quarter
• Adjusted funds from operations (AFFO) was $0.42 per diluted share for the quarter
• The Company's common stock is currently trading at an approximate 6.1% dividend yield
• During the quarter, the Company entered into a new Enhanced Return Funding Program agreement with Ashford Inc.
• During the quarter, the Company completed the acquisition of the 252-room Hilton Alexandria Old Town for $111 million
• During the quarter, the Company refinanced eight mortgage loans on 56 hotels for $2.3 billion
• During the quarter, the Company completed the sale of the SpringHill Suites Centreville for $7.5 million
• During the quarter, the Company completed the sale of the Residence Inn Tampa Downtown for $24 million
• Capex invested during the quarter was $53.7 million

ENHANCED RETURN FUNDING PROGRAM & HILTON ALEXANDRIA ACQUISITION

On June 26, 2018, the Company announced that it had entered into an Enhanced Return Funding Program ("ERFP") with Ashford Inc. (NYSE American: AINC).  Subject to the terms of the two-year programmatic agreement, Ashford Inc. has committed to effectively fund amounts equal to 10% of the purchase price of Ashford Trust hotel acquisitions, up to an amount of $50 million in aggregate funding.  The Program has the potential to be upsized to $100 million based upon mutual agreement.   The Program is structured to significantly improve the 5-year internal rate of return for new hotel acquisitions at Ashford Trust.

On June 29, 2018, the Company completed the acquisition of the 252-room Hilton Alexandria Old Town located in Alexandria, Virginia, for total consideration of $111 million. The Hotel, with a trailing 12-month RevPAR of $161, opened in 2000, has 12,967 square feet of meeting space, and is well located near office and retail demand generators.

The purchase of the Hilton Alexandria Old Town is expected to be the Company's first hotel acquisition to benefit from the ERFP. In connection with this acquisition and subject to the terms of the ERFP, Ashford Inc. has committed to provide Ashford Trust with approximately $11.1 million of cash via the future purchase of hotel furniture, fixtures, and equipment at Ashford Trust properties. Concurrent with the completion of the acquisition, the Company financed the hotel with a $73.5 million non-recourse mortgage loan. The interest-only loan has a term of five years and bears interest at a rate of LIBOR + 2.45%. The property will continue to be operated as a Hilton under a management agreement with Hilton.

CAPITAL STRUCTURE

At June 30, 2018, the Company had total mortgage debt of $4.0 billion with a blended average interest rate of 5.5%.

On April 9, 2018, the Company announced that it had refinanced a mortgage loan, secured by 22 hotels, with an existing outstanding balance totaling approximately $972 million. The previous mortgage loan that was refinanced was the Highland Pool loan with a final maturity date in April 2021. The new loan totals $985 million, has a two-year initial term and five one-year extension options, subject to the satisfaction of certain conditions. The loan is interest only and provides for a floating interest rate of LIBOR + 3.20%. This refinancing is expected to result in annual interest savings of approximately $11 million as compared to the previous loan terms.

On June 15, 2018, the Company announced that it had refinanced seven mortgage loans, secured by 34 hotels, with existing outstanding balances totaling approximately $1.07 billion. The previous mortgage loans that were refinanced were the MIP Portfolio loan with a final maturity date in February 2019, the Morgan Stanley Pool A loan with a final maturity date in August 2019, the Morgan Stanley Pool B loan with a final maturity date in August 2019, the Marriott Memphis loan with a final maturity date in April 2020, the Lakeway Resort loan with a final maturity date in May 2020, the W Atlanta Downtown loan with a final maturity date in July 2020, and the JP Morgan 17-Pack loan with a final maturity date in October 2022.  The new financing is comprised of six separate mortgage loans with an average size of approximately $211.7 million that together total approximately $1.27 billion and each has a two-year initial term with five one-year extension options, subject to the satisfaction of certain conditions.  The loans bear interest at a combined weighted average rate of LIBOR + 3.83%, which is 74 basis points lower than the previous mortgage loans. After the closing of this financing, the weighted average maturity of the Company's debt is 6.1 years. The next hard debt maturity for the Company is in July 2019.

Subsequent to the end of the quarter, the Company repurchased approximately $56 million of junior mezzanine debt on one of the loan pools.  The junior mezzanine debt is priced at LIBOR + 9.00%. 

During the quarter, the Company completed the sale of the 136-room SpringHill Suites Centreville in Centreville, Virginia for $7.5 million.

On May 14, 2018, the Company announced it had completed the sale of the 109-room Residence Inn Tampa Downtown in Tampa, Florida for $24 million ($220,000 per key). The sales price represented a trailing twelve-month cap rate of 7.6% on net operating income and an 11.8x Hotel EBITDA multiple as of March 31, 2018. 

PORTFOLIO REVPAR

As of June 30, 2018, the portfolio consisted of 118 properties.  During the second quarter of 2018, 105 of the Company's hotels were not under renovation. The Company believes reporting its operating metrics for its hotels on a comparable total basis (all 118 hotels) and comparable not under renovation basis (105 hotels) is a measure that reflects a meaningful and focused comparison of the operating results in its portfolio.  Details of each category are provided in the tables attached to this release.

• Comparable RevPAR increased 1.6% to $137.53 for all hotels on a 2.7% increase in ADR and a 1.1% decrease in occupancy
• Comparable RevPAR increased 2.3% to $134.36 for hotels not under renovation on a 2.3% increase in ADR and a 0.0% change in occupancy

HOTEL EBITDA MARGINS AND QUARTERLY SEASONALITY TRENDS

The Company believes year-over-year Comparable Hotel EBITDA and Comparable Hotel EBITDA Margin comparisons are more meaningful to gauge the performance of the Company's hotels than sequential quarter-over-quarter comparisons.  Given the substantial seasonality in the Company's portfolio and its active capital recycling, to help investors better understand this seasonality, the Company provides quarterly detail on its Comparable Hotel EBITDA and Comparable Hotel EBITDA Margin for the current and certain prior-year periods based upon the number of hotels in the Company's portfolio as of the end of the current period.  As the Company's portfolio mix changes from time to time so will the seasonality for Comparable Hotel EBITDA and Comparable Hotel EBITDA Margin.  The details of the quarterly calculations for the previous four quarters for the 118 hotels are provided in the table attached to this release.

COMMON STOCK DIVIDEND

On June 5, 2018, the Company announced that its Board of Directors had declared a quarterly cash dividend of $0.12 per diluted share for the Company's common stock for the second quarter ending June 30, 2018, payable on July 16, 2018, to shareholders of record as of June 29, 2018.

"We continue to see the operational and value-added benefits from our high quality, diverse portfolio," commented Douglas A. Kessler, Ashford Trust's President and Chief Executive Officer. "Year-to-date, we have been able to complete several capital markets transactions that strengthened our balance sheet, extended our loan maturity schedule and reduced loan spreads. As for our transactions, we are pleased with the sale of two lower RevPAR select-service hotels at a combined cap rate below where we are currently trading.  As for acquisitions, we are enthusiastic about the Hilton Alexandria Old Town, as it is not only an accretive addition to our portfolio, but it is also the first transaction expected to benefit from the new Enhanced Return Funding Program with Ashford Inc. Looking ahead, we are very excited about this ERFP program and expect this funding arrangement will be a clear competitive advantage as we continue to look for opportunities to accretively grow our platform and increase stockholder value.

INVESTOR CONFERENCE CALL AND SIMULCAST

Ashford Hospitality Trust, Inc. will conduct a conference call on Friday August 3, 2018, at 11:00 a.m. ET.  The number to call for this interactive teleconference is (323) 794-2423.  A replay of the conference call will be available through Friday, August 10, 2018, by dialing (719) 457-0820 and entering the confirmation number, 6148262.

The Company will also provide an online simulcast and rebroadcast of its second quarter 2018 earnings release conference call.  The live broadcast of Ashford Hospitality Trust's quarterly conference call will be available online at the Company's web site, www.ahtreit.com on Friday, August 3, 2018, beginning at 11:00 a.m. ET.  The online replay will follow shortly after the call and continue for approximately one year.

Substantially all of our non-current assets consist of real estate investments secured by real estate.  Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time.  Since real estate values instead have historically risen or fallen with market conditions, most industry investors consider supplemental measures of performance, which are not measures of operating performance under GAAP, to assist in evaluating a real estate company's operations. These supplemental measures include FFO, AFFO, EBITDA, EBITDAre, Adjusted EBITDAre, and Hotel EBITDA.  FFO and EBITDAre are computed in accordance with our interpretation of standards established by NAREIT, which may not be comparable to how these measures reported by other REITs that do not define the term in accordance with the current NAREIT definitions or that interpret the NAREIT definitions differently than us.  None of FFO, AFFO, EBITDA, EBITDAre, Adjusted EBITDAre, or Hotel EBITDA represents cash generated from operating activities as determined by GAAP and should not be considered as an alternative to a) GAAP net income (loss) as an indication of our financial performance or b) GAAP cash flows from operating activities as a measure of our liquidity, nor are such measures indicative of funds available to satisfy our cash needs, including our ability to make cash distributions.  However, management believes FFO, AFFO, EBITDA, EBITDAre, Adjusted EBITDAre, and Hotel EBITDA to be meaningful measures of a REIT's performance and should be considered along with, but not as an alternative to, net income and cash flow as a measure of our operating performance.

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Ashford Hospitality Trust is a real estate investment trust (REIT) focused on investing opportunistically in the hospitality industry in upper upscale, full-service hotels.

Ashford has created an Ashford App for the hospitality REIT investor community.  The Ashford App is available for free download at Apple's App Store and the Google Play Store by searching "Ashford."

Certain statements and assumptions in this press release contain or are based upon "forward-looking" information and are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Forward looking statements in this press release may include, among others, statements about the Company's strategy and future plans.  These forward-looking statements are subject to risks and uncertainties.  When we use the words "will likely result," "may," "anticipate," "estimate," "should," "expect," "believe," "intend," or similar expressions, we intend to identify forward-looking statements.  Such statements are subject to numerous assumptions and uncertainties, many of which are outside Ashford Trust's control.

These forward-looking statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated, including, without limitation:  general volatility of the capital markets and the market price of our common stock; changes in our business or investment strategy; availability, terms and deployment of capital; availability of qualified personnel; changes in our industry and the market in which we operate, interest rates or the general economy; our ability to successfully complete and integrate acquisitions, and manage our planned growth, and the degree and nature of our competition.  These and other risk factors are more fully discussed in Ashford Trust's filings with the Securities and Exchange Commission.  EBITDA is defined as net income before interest, taxes, depreciation and amortization.  EBITDA yield is defined as trailing twelve month EBITDA divided by the purchase price.  A capitalization rate is determined by dividing the property's annual net operating income by the purchase price.  Net operating income is the property's funds from operations minus a capital expense reserve of either 4% or 5% of gross revenues.  Hotel EBITDA flow-through is the change in Hotel EBITDA divided by the change in total revenues.  Hotel EBITDA Margin is Hotel EBITDA divided by total revenues.  Funds from operations ("FFO"), as defined by the White Paper on FFO approved by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT") in April 2002, represents net income (loss) computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains (or losses) from sales of properties and extraordinary items as defined by GAAP, plus depreciation and amortization of real estate assets, and net of adjustments for the portion of these items related to unconsolidated entities and joint ventures.  EBITDAre and Adjusted EBITDAre are non-GAAP financial measures. The Company computes EBITDAre in accordance with standards established by the National Association of Real Estate Investment Trusts, or NAREIT, which may not be comparable to EBITDAre  reported by other REITs that do not compute EBITDAre in accordance with the NAREIT definition, or that interpret the NAREIT definition differently than the Company does. The White Paper on EBITDAre approved by the Board of Governors of NAREIT in September 2017 defines EBITDAre as net income (loss) (computed in accordance with GAAP), plus interest expense, plus income tax expense, plus depreciation and amortization, plus (minus) losses and gains on the disposition of depreciated property, plus impairment write-downs of depreciated property and investments in unconsolidated joint ventures, plus adjustments to reflect the entity's share of EBITDAre of unconsolidated affiliates.

The forward-looking statements included in this press release are only made as of the date of this press release.  Investors should not place undue reliance on these forward-looking statements.  We are not obligated to publicly update or revise any forward-looking statements, whether as a result of new information, future events or circumstances, changes in expectations or otherwise.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SOURCE Ashford Hospitality Trust, Inc.