Form 8-K Ashford Hospitality Prim For: Aug 06

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (date of earliest event reported):  August 6, 2015

ASHFORD HOSPITALITY PRIME, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code (972) 490-9600

Check the appropriated box if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o                        Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o                        Soliciting material pursuant to Rule 14-a-12 under the Exchange Act (17 CFR 240.14a-12)

o                        Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o                        Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02.  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On August 6, 2015, Ashford Hospitality Prime, Inc. (the “Company”) issued a press release announcing its financial results for the second quarter ended June 30, 2015.  A copy of the press release is attached hereto as Exhibit 99.1.

The information in this Form 8-K and Exhibits attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

ITEM 9.01.  FINANCIAL STATEMENTS AND EXHIBITS

(d)                                 Exhibits

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SIGNATURE

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated:  August 6, 2015

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Exhibit 99.1

ASHFORD PRIME REPORTS SECOND QUARTER 2015 RESULTS

9.0% RevPAR Increase for All Hotels for the Second Quarter

The Company Increased its Common Dividend by 100% During the Quarter

Adjusted Funds from Operations per Share Increased 33%

DALLAS, August 6, 2015 — Ashford Hospitality Prime, Inc. (NYSE: AHP) (“Ashford Prime” or the “Company”) today reported the following results and performance measures for the second quarter ended June 30, 2015.  The performance measurements for Occupancy, Average Daily Rate (ADR), Revenue Per Available Room (RevPAR), and Hotel Operating Profit (or Hotel EBITDA) are pro forma assuming each of the hotel properties in the Company’s hotel portfolio as of June 30, 2015 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, 2015, with the second quarter ended June 30, 2014 (see discussion below).  The reconciliation of non-GAAP financial measures is included in the financial tables accompanying this press release.

FINANCIAL AND OPERATING HIGHLIGHTS

·                  The Company’s common stock is currently trading at a trailing 12-month NOI cap rate of approximately 9.4%, while similar assets to those in its portfolio are trading in the private market at an approximate average trailing 12-month NOI cap rate of 6.50%.  A 6.50% cap rate implies a share price for the Company’s common stock of $27.60

·                  RevPAR for all hotels increased 9.0% to $200.86 during the second quarter, driven by a 7.6% increase in ADR and a 1.3% increase in occupancy

·                  Hotel EBITDA increased $3.2 million or 10.5% for all hotels

·                  Adjusted funds from operations (AFFO) was $0.60 per diluted share for the quarter compared with $0.45 from the prior-year quarter representing an increase of 33%

·                  During the quarter, the Company’s Board of Directors increased its quarterly common dividend by 100%

·                  During the quarter, the Company closed a private placement of its Series A Cumulative Convertible Preferred Stock in a 144A offering for $65.0 million in gross proceeds.  The Company also closed a private placement under Regulation D under the Securities Act of 1933 of 200,000 shares of the Company’s common stock at a price of $15.52 per share for gross proceeds of $3.1 million

·                  Subsequent to quarter end, the Company announced it had completed the acquisition of the leasehold interest in the award-winning 62-room Bardessono Hotel and Spa in Yountville, CA for total consideration of $85.0 million.  Ashford Inc. provided $2.0 million in key money consideration for the acquisition

·                  Capex invested in the quarter was $4.1 million

CAPITAL STRUCTURE

At June 30, 2015, the Company had total assets of $1.3 billion in continuing operations.  As of June 30, 2015, the Company had $762 million of mortgage debt in continuing operations of which $49.2 million related to its joint venture partner’s share of debt on the Capital Hilton and Hilton La Jolla Torrey Pines.  Ashford Prime’s

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total combined debt had a blended average interest rate of 4.53%.

On June 11, 2015, the Company announced it had closed a private placement of its Series A Cumulative Convertible Preferred Stock in a 144A offering for $65 million in gross proceeds.  The initial conversion price is $18.90 per share.  The Company also closed a private placement under Regulation D under the Securities Act of 1933 of 200,000 shares of the Company’s common stock at a price of $15.52 per share for gross proceeds of $3.1 million.  Net proceeds from these offerings were used to finance the acquisition of the Bardessono Hotel and Spa as well as for general corporate purposes.

Subsequent to quarter end, on July 9, 2015, the Company announced it had closed on the previously-announced acquisition of the leasehold interest in the award-winning 62-room Bardessono Hotel and Spa in Yountville, CA for a total consideration of $85.0 million.  Ashford Inc. provided $2.0 million in key money consideration for the acquisition.

PORTFOLIO REVPAR

As of June 30, 2015, the Company’s hotel portfolio consisted of direct hotel investments with ten properties classified in continuing operations.  During the second quarter of 2015, all hotels included in continuing operations were not under renovation.

·                  Pro forma RevPAR increased 9.0% to $200.86 for all hotels on a 7.6% increase in ADR and a 1.3% increase in occupancy

HOTEL EBITDA MARGINS AND QUARTERLY SEASONALITY TRENDS

The Company believes year-over-year Hotel EBITDA and 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, to help investors better understand this seasonality, the Company provides quarterly detail on its Hotel EBITDA and 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 Pro forma Hotel EBITDA and Pro forma Hotel EBITDA Margin.  The details of the quarterly calculations for the previous four quarters for the ten hotels included in continuing operations are provided in the table attached to this release.

COMMON STOCK DIVIDEND

On June 15, 2015, the Company announced that its Board of Directors had declared a quarterly cash dividend of $0.10 per diluted share for the Company’s common stock for the second quarter ending June 30, 2015, payable on July 15, 2015, to shareholders of record as of June 30, 2015.  This reflects the Company’s revised cash dividend policy announced on May 13, 2015, when Ashford Prime’s Board of Directors increased its quarterly cash dividend from $0.05 to $0.10 per diluted share for the Company’s common stock, representing a 100% increase.

The Company also provided some financial and market metrics that are pertinent to the valuation of the platform as well as the disconnect between the current public market valuation of the Company and private market values.  Ashford Prime’s common stock is currently trading at a trailing 12-month NOI cap rate of approximately 9.4%.  Based on deals the Company has seen trade and other market information from industry consultants, the Company believes similar assets to those in its portfolio are trading in the private market at an approximate average trailing 12-month NOI cap rate of 6.50% which would imply a share price for Ashford Prime common stock of $27.60, which is approximately 97% higher than the current trading price of Ashford Prime common stock.

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“The Prime portfolio had another quarter of strong performance marked by solid RevPAR, EBITDA and AFFO growth,” commented Monty J. Bennett, Ashford Prime’s Chairman and Chief Executive Officer.  “Investing in high quality, high RevPAR assets in gateway and resort markets is core to our strategy and to that end, we are thrilled to add the award-winning Bardessono Hotel in Napa Valley to our growing Prime portfolio.”

INVESTOR CONFERENCE CALL AND SIMULCAST

Ashford Hospitality Prime, Inc. will conduct a conference call on Friday, August 7, 2015, at 11:00 a.m. ET.  The number to call for this interactive teleconference is (719) 325-2308.  A replay of the conference call will be available through Friday, August 14, 2015, by dialing (719) 457-0820 and entering the confirmation number, 8880718.

The Company will also provide an online simulcast and rebroadcast of its second quarter 2015 earnings release conference call.  The live broadcast of Ashford Hospitality Prime’s quarterly conference call will be available online at the Company’s web site, www.ahpreit.com on Friday, August 7, 2015, 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, and Hotel Operating Profit.  FFO is computed in accordance with our interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the NAREIT definition differently than us.  Neither FFO, AFFO, EBITDA, nor Hotel Operating Profit 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, and Hotel Operating Profit 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 Prime is a conservatively capitalized real estate investment trust (REIT) focused on investing in high RevPAR full-service and urban select-service hotels and resorts located predominantly in domestic and international gateway and resort markets.

Follow Chairman and CEO Monty Bennett on Twitter at www.twitter.com/MBennettAshford or @MBennettAshford.

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 include, among others, statements about the implied share price for the Company’s common stock.  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 Prime’s control.

These forward-looking statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ

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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 Prime’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.

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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ASHFORD HOSPITALITY PRIME, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

(unaudited)

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ASHFORD HOSPITALITY PRIME, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

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 ASHFORD HOSPITALITY PRIME, INC. AND SUBSIDIARIES

 RECONCILIATION OF NET LOSS TO EBITDA AND ADJUSTED EBITDA

 (in thousands)

 (unaudited)

(1)              Other income, primarily consisting of net realized gain/loss on marketable securities is excluded from Adjusted EBITDA.  

 RECONCILIATION OF NET LOSS TO FUNDS FROM OPERATIONS (“FFO”) AND ADJUSTED FFO

 (in thousands, except per share amounts)

 (unaudited)

(1)              Other income, primarily consisting of net realized gain/loss on marketable securities is excluded from Adjusted FFO. 

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ASHFORD HOSPITALITY PRIME, INC. AND SUBSIDIARIES

SUMMARY OF INDEBTEDNESS

JUNE 30, 2015

(dollars in thousands)

(unaudited)

All indebtedness is non-recourse with the exception of the senior credit facility.

(1) This credit facility has two one-year extension options subject to advance notice, certain conditions and a 0.25% extension fee beginning November 2016.

(2)  On March 7, 2015, we refinanced our $69.0 million mortgage loan due September 2015 with a $70.0 million loan due March 2017 with three one-year extension options.  The new loan provides for a floating interest rate of LIBOR + 2.25%. 

(3) This mortgage loan has three one-year extension options beginning March 2016, subject to satisfaction of certain conditions.

(4) This mortgage loan has two one-year extension options beginning November 2019, subject to satisfaction of certain conditions. 

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ASHFORD HOSPITALITY PRIME, INC. AND SUBSIDIARIES

 INDEBTEDNESS BY MATURITY ASSUMING EXTENSION OPTIONS ARE EXERCISED

 JUNE 30, 2015

 (in thousands)

 (unaudited)

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ASHFORD HOSPITALITY PRIME, INC. AND SUBSIDIARIES

KEY PERFORMANCE INDICATORS - PRO FORMA

(unaudited)