Form 8-K Ashford Hospitality Prim For: May 07

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):  May 7, 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 May 7, 2015, Ashford Hospitality Prime, Inc. (the “Company”) issued a press release announcing its financial results for the first quarter ended March 31, 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:  May 7, 2015

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Exhibit 99.1

ASHFORD PRIME REPORTS FIRST QUARTER 2015 RESULTS

10.8% RevPAR Increase for All Hotels for the First Quarter

3rd Straight Quarter of Double-Digit RevPAR Growth

Hotel EBITDA Margin Increase of 149 basis points for All Hotels

Adjusted EBITDA Increased 30%

Adjusted Funds From Operations per Share Increased 44%

DALLAS, May 7, 2015 — Ashford Hospitality Prime, Inc. (NYSE: AHP) (“Ashford Prime” or the “Company”) today reported the following results and performance measures for the first quarter ended March 31, 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.  Unless otherwise stated, all reported results compare the first quarter ended March 31, 2015, with the first quarter ended March 31, 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

·                  RevPAR for all Ashford Prime hotels increased 10.8% to $163.35 during the first quarter, driven by a 4.7% increase in ADR and a 5.8% increase in occupancy

·                  Hotel EBITDA increased $3.3 million or 16.4% for all hotels

·                  Hotel EBITDA flow-through was 44% for all hotels

·                  Adjusted EBITDA increased $4.3 million or 30.0%

·                  Net loss attributable to common stockholders for the Company was $0.2 million, or $0.01 per diluted share, compared with net loss attributable to common stockholders of $2.9 million, or $0.13 per diluted share, in the prior-year quarter

·                  Adjusted funds from operations (AFFO) for the Company was $0.26 per diluted share for the quarter compared with $0.18 from the prior-year quarter representing an increase of 44%

·                  On March 9, 2015, the Company announced it had refinanced its mortgage loan on the 142-room Pier House Resort in Key West, Florida, which had an existing outstanding balance of approximately $69 million, with a new $70 million non-recourse mortgage loan

·                  The Company has repurchased 1.9 million shares of common stock and common units under its share repurchase program in the period from November 4, 2014 up to and including May 1, 2015

CAPITAL EXPENDITURES

·                  Capex invested in the quarter was $4.6 million

CAPITAL STRUCTURE

At March 31, 2015, the Company had total assets of $1.2 billion in continuing operations.  As of March 31, 2015, the Company had $764 million of mortgage debt in continuing operations of which $49.3 million related

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AHP Reports First Quarter Results

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May 7, 2015

to our joint venture partner’s share of debt on the Capital Hilton and Hilton La Jolla Torrey Pines.  Ashford Prime’s total combined debt had a blended average interest rate of 4.77%.

On March 9, 2015, the Company announced it had refinanced its mortgage loan on the 142-room Pier House Resort in Key West, Florida, which had an existing outstanding balance of approximately $69 million.  The loan was refinanced with a new $70 million non-recourse mortgage loan that has a two-year initial term and three, one-year extension options, subject to the satisfaction of certain conditions.  The new loan is interest only and provides for a floating interest rate of LIBOR + 2.25%.  The refinancing resulted in annual interest savings of approximately $1.8 million.

PORTFOLIO REVPAR

As of March 31, 2015, the Ashford Prime Portfolio consisted of direct hotel investments with ten properties classified in continuing operations.  During the first quarter of 2015, nine of the Ashford Prime Portfolio hotels included in continuing operations were not under renovation.

·                  Pro forma RevPAR increased 10.8% to $163.35 for all hotels on a 4.7% increase in ADR and a 5.8% increase in occupancy

·                  Pro forma RevPAR increased 10.8% to $167.06  for all hotels not under renovation on a 4.1% increase in ADR and a 6.5% 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 Ashford Prime 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 Ashford Prime Portfolio hotels included in continuing operations are provided in the table attached to this release.

COMMON STOCK DIVIDEND

On March 13, 2015, the Company announced that its Board of Directors had declared a quarterly cash dividend of $0.05 per diluted share for the Company’s common stock for the first quarter ending March 31, 2015, payable on April 15, 2015, to shareholders of record as of March 31, 2015.  At its next meeting in May, the Board will revisit the dividend policy as it appears that at the current level, our dividend will not be enough to satisfy the 90% income distribution requirement.

SHARE REPURCHASE PROGRAM

The Company today provided an update regarding its share repurchase program announced on October 27, 2014.  The Company reported it has repurchased 1.9 million shares of common stock and common units in the period from November 4, 2014 up to and including May 1, 2015, for total consideration of $32.0 million.  As of May 1, 2015, the Company’s fully diluted share count was approximately 32.7 million shares.  The Company has slowed down its share repurchase activity.  We have concluded that the Company’s stock would trade much better with greater liquidity.  So while the stock is trading at a great value, repurchasing it could be counterproductive to maximizing shareholder value.

“This marked the third consecutive quarter of double-digit RevPAR growth for Ashford Prime which was driven by the continued success of our revenue optimization strategies as well as the positive market dynamics we are seeing throughout our portfolio,” commented Monty J. Bennett, Ashford Prime’s Chairman and Chief

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AHP Reports First Quarter Results

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May 7, 2015

Executive Officer.  “Our outstanding operating results also speak to the superb quality of our assets and our original rationale for creating Ashford Prime.  We believe this portfolio is well-positioned to continue to capitalize on positive industry fundamentals and deliver strong results.”

INVESTOR CONFERENCE CALL AND SIMULCAST

Ashford Hospitality Prime, Inc. will conduct a conference call on Friday, May 8, 2015, at 11:00 a.m. ET.  The number to call for this interactive teleconference is (719) 325-2464.  A replay of the conference call will be available through Friday, May 15, 2015, by dialing (719) 457-0820 and entering the confirmation number, 6009183.

The Company will also provide an online simulcast and rebroadcast of its first 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, May 8, 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.

*  *  *  *  *

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 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.  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 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; and the degree and

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AHP Reports First Quarter Results

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May 7, 2015

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

MARCH 31, 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

MARCH 31, 2015

(in thousands)

(unaudited)

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ASHFORD HOSPITALITY PRIME, INC. AND SUBSIDIARIES

KEY PERFORMANCE INDICATORS - PRO FORMA

(dollars in thousands)

(unaudited)

NOTES:

(1)    The above pro forma table assumes the ten hotel properties owned and included in the Company’s operations at March 31, 2015 were owned as of the beginning of each of the periods presented.

NOTES:

(1)  The above pro forma table assumes the nine hotel properties included in the Company’s operations at March 31, 2015, but not under renovation for the three months ended March 31, 2015 were owned as of the beginning of each of the periods presented.

(2)  Excluded Hotels Under Renovation:
Courtyard Seattle

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ASHFORD HOSPITALITY PRIME, INC. AND SUBSIDIARIES

PRO FORMA HOTEL OPERATING PROFIT MARGIN

(unaudited)

THE FOLLOWING PRO FORMA EBITDA MARGIN TABLE REFLECTS THE TEN HOTELS INCLUDED IN THE COMPANY’S OPERATIONS AS IF THESE HOTELS WERE OWNED AT THE BEGINNING OF THE FIRST COMPARATIVE REPORTING PERIOD.

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ASHFORD HOSPITALITY PRIME, INC. AND SUBSIDIARIES

SELECTED PRO FORMA FINANCIAL AND OPERATING INFORMATION BY PROPERTY

(in thousands, except operating information)

(unaudited)

THE FOLLOWING TABLE PRESENTS SELECTED FINANCIAL AND REPORTING INFORMATION BY PROPERTY FOR THE TEN PROPERTIES INCLUDED IN THE ASHFORD PRIME PORTFOLIO.