Ashford Hospitality Trust Reports First Quarter Results (United States)
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Ashford Hospitality Trust Reports First Quarter Results (United States)
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Category: North America & West Indies / Carribean islands - United States - Industry economy -
Figures / Studies
This is a press release selected by our editorial committee and published online for free on 2011-05-09
Ashford Hospitality Trust, Inc. (NYSE:AHT) today reported the following results and performance measures for the first quarter ended March 31, 2011. The proforma performance measurements for Occupancy, Average Daily Rate (ADR), Revenue Per Available Room (RevPAR), and Hotel Operating Profit (or Hotel EBITDA) include the Company's 97 hotels owned and included in continuing operations as of March 31, 2011, but does not include the 28 recently acquired Highland Hospitality hotels. Unless otherwise stated, all reported results compare the first quarter ended March 31, 2011, with the first quarter ended March 31, 2010 (see discussion below). The reconciliation of non-GAAP financial measures is included in the financial tables accompanying this press release.
FINANCIAL HIGHLIGHTS
RevPAR increased 8.8% for the hotels not under renovation
Operating profit margin increased 280 basis points for the hotels not under renovation
Net income attributable to common shareholders was $31.3 million, or $0.46 per diluted share, compared with net income attributable to common shareholders of $305,000, or $0.01 per diluted share, in the prior-year quarter
Adjusted funds from operations (AFFO) was $0.41 per diluted share for the quarter as compared with $0.31 from the prior-year quarter
Fixed charge coverage ratio was 1.70x under the senior credit facility covenant versus a required minimum of 1.25x
CAPITAL ALLOCATION
Capex invested in the quarter was $13.9 million
ACQUISITION ACTIVITY
On March 10, 2011, the Company together with an institutional partner took ownership of the 28-hotel Highland Hospitality portfolio. The acquisition and restructuring were completed through a consensual foreclosure for total consideration of $1.277 billion, which equates to a purchase price of $158,000 per key. Based on 2010 results, the purchase price equates to an EBITDA multiple of 13.4x and a capitalization rate of 6.1% utilizing NOI that is approximately 36% below its peak levels. Ashford invested $150 million and owns 71.74% of the joint venture. The new money investment from Ashford and the institutional partner was utilized to reduce debt and to fund projected capital expenditures. Ashford funded its contribution from available cash. As a result of equal control provisions, the joint venture is not consolidated in Ashford’s financial statements.
Also on March 10, 2011, Ashford acquired 96 units at the World Quest Resort Hotel in Orlando, Florida, for $12.0 million in cash, or a total investment of $125,000 per key. The purchase includes 62 furnished units, 34 unfurnished units and developable land for up to 179 additional units. The hotel, which was developed in 2006, is located between two major convention hotels and in close proximity to Walt Disney World.
DISPOSITION ACTIVITY
On February 24, 2011, Ashford completed the sale of the JW Marriott San Francisco for $96.0 million in cash to an affiliate of Thayer Lodging Group. Ashford used the proceeds from the sale to payoff a $47.5 million loan secured by the hotel that was maturing in March 2013 and to reduce borrowings on its credit facility.
On March 7, 2011, the Company completed the sale of the Hilton Rye Town in Rye Brook, New York for $35.5 million in cash to an investment group spearheaded by Lodging Capital Partners. Ashford used the proceeds from the sale to reduce borrowings on its credit facility.
On March 14, 2011, the Company completed the sale of the Hampton Inn Houston Galleria in Houston, Texas, for $20.3 million in cash to an undisclosed buyer. Ashford used the proceeds from the sale to pay off a $2.7 million mortgage secured by the hotel, pay the joint venture partner $2.7 million and to reduce borrowings on its credit facility. The sales of these three hotels equated to an NOI capitalization rate of 2.5% on a trailing twelve month basis.
CAPITAL STRUCTURE
On April 7, 2011, the Company received a discounted payoff of $22 million on its $25.7 million mezzanine loan secured by interests in a portfolio of limited service hotels owned by affiliates of Goldman Sach’s Whitehall Funds, representing a debt yield of approximately 6.9% on the Company’s last dollar of investment in the loan. The Company had previously written down its investment in the mezzanine loan by $7.8 million in the fourth quarter of 2010. The discounted payoff will result in a $4.2 million gain recognized as a credit to impairment charges in the second quarter of 2011.
During April 2011, the Company completed an offering of 3,350,000 shares of 9.000% Series E Cumulative Preferred Stock at $25.00 per share. The annual dividend for the preferred stock is $2.25 per share, payable quarterly.
On May 3, 2011, Ashford used $73 million of the net proceeds of the Series E offering to repurchase 5,854,993 shares of the Company’s Series B-1 Cumulative Preferred Stock, all of the shares of which were held by Security Capital Preferred Growth Incorporated. In addition, Security Capital Preferred Growth Incorporated converted the remaining 1,392,872 shares of its Series B-1 Preferred Stock to common stock.
On May 5, 2011, Ashford closed a three-year extension on the Company’s $5.8 million mortgage secured by the Courtyard in Manchester, Connecticut. Basic terms for the loan, which now matures in May 2014, remain unchanged.
PORTFOLIO REVPAR
As of March 31, 2011, the Company had a portfolio of direct hotel investments consisting of 97 properties classified in continuing operations. During the first quarter, 85 of the hotels included in continuing operations were not under renovation. The Company believes reporting its operating metrics for continuing operations on a proforma total basis (all 97 hotels) and proforma not-under-renovation basis (85 hotels) is a measure that reflects a meaningful and focused comparison of the operating results in its direct hotel portfolio. The Company's reporting by region and brand includes the results of all 97 hotels in continuing operations. Details of each category are provided in the tables attached to this release.
Proforma RevPAR increased 8.8% for hotels not under renovation on a 4.6% increase in ADR to $130.08 and a 271 basis point increase in occupancy
Proforma RevPAR increased 7.6% for all hotels on a 4.3% increase in ADR to $131.94 and a 209 basis point increase in occupancy
HOTEL EBITDA MARGINS AND QUARTERLY SEASONALITY TRENDS
For the 85 hotels as of March 31, 2011, that were not under renovation, Proforma Hotel EBITDA increased 19.1% to $54.1 million. Proforma Hotel EBITDA margin (expressed as a percentage of Total Hotel Revenue) increased 280 basis points to 30.1%. For all 97 hotels included in continuing operations as of March 31, 2011, Proforma Hotel EBITDA increased 15.3% to $62.8 million and Hotel EBITDA margin increased 219 basis points to 29.2%.
Ashford 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 and its active capital recycling, to help investors better understand this seasonality, the Company provides quarterly detail on its Proforma Hotel EBITDA and Proforma Hotel EBITDA margin for the current and certain prior-year periods based upon the number of core hotels in the portfolio as well as it’s pro-rata share of the Highland portfolio as of the end of the current period. As Ashford’s portfolio mix changes from time to time so will the seasonality for Proforma Hotel EBITDA and Proforma Hotel EBITDA margin. The details of the quarterly calculations for the previous four quarters for the current portfolio of 97 hotels included in continuing operations together with Ashford’s pro-rata share of the Highland portfolio are provided in the table attached to this release.
Monty J. Bennett, Chief Executive Officer, commented, “We executed well on all aspects of our business strategies. Our asset management efforts succeeded in driving RevPAR and operating margin growth within our portfolio. With the strong trends in the lodging market, we will look to continue this improvement over the balance of the year. The transformational acquisition of the former Highland Hospitality portfolio, combined with over $150 million of dispositions, $81.1 million of net proceeds from our Series E preferred offering and the retirement of the Company’s Series B-1 preferred stock, should propel our growth even further.”
INVESTOR CONFERENCE CALL AND SIMULCAST
Ashford Hospitality Trust, Inc. will conduct a conference call on Monday, May 9, 2011, at 11 a.m. ET. The number to call for this interactive teleconference is (212) 231-2912 . A replay of the conference call will be available through Monday, May 16, 2011, by dialing (402) 977-9140 and entering the confirmation number 21520625.
The Company will also provide an online simulcast and rebroadcast of its first quarter 2011 earnings release conference call. The live broadcast of Ashford's quarterly conference call will be available online at the Company's website at www.ahtreit.com on Monday, May 9, 2011, beginning at 11 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 and debt 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 Trust is a self-administered real estate investment trust focused on investing in the hospitality industry across all segments and at all levels of the capital structure, including direct hotel investments, first mortgages, mezzanine loans and sale-leaseback transactions.
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