DALLAS and TORONTO, Oct. 29,
2019 /CNW/ -- NexPoint Hospitality Trust ("NHT") (TSX-V:
NHT.U) provided an update today on the previously announced
acquisition by merger of Condor Hospitality, Inc. ("Condor") (NYSE
American: CDOR) (the "Merger"). NHT and Condor continue to actively
seek to satisfy customary closing conditions. NHT expects that the
Merger will be completed sometime in the fourth quarter of 2019,
subject to the satisfaction of such closing conditions. As
previously disclosed, shareholders of Condor approved the Merger on
September 23, 2019. All references to
dollar amounts herein are to U.S. dollars.
The Merger is expected to provide a number of benefits to NHT's
existing portfolio, including increased scale, geographic
diversification, brand diversification, more exposure to extended
stay assets with higher occupancy and more stable cash flows, and a
newer portfolio with upside revenue growth potential. Certain
anticipated benefits are summarized in the table below:
|
NHT
|
Condor
|
NHT +
Condor
|
Equity
Value(1) ($MM)
|
~$144
|
~$134
|
~$280
|
Enterprise
Value(1) ($MM)
|
~$390
|
~$303
|
~$730
|
Number of
Hotels
|
11
|
15
|
26
|
Number of
Keys
|
1,607
|
1,908
|
3,515
|
Weighted Avg.
Interest Rate(2)
|
5.8%
|
5.3%
|
4.4%
|
G&A as % of
Enterprise Value(3)
|
1.0%
|
2.1%
|
0.9%
|
Average Age /
Renovation
|
26 Years / 2
Years
|
10 Years / 5
Years
|
16 Years / 3
Years
|
|
Notes:
|
|
1.
|
Assumes estimated
transaction value of Condor post-closing.
|
|
2.
|
Average interest rate
based on LIBOR of 2.40% and estimated combined portfolio
post-closing given current financing commitments.
|
|
3.
|
Combined portfolio is
estimated 2020 budget.
|
Assuming closing of the Merger occurs as planned, NHT is
targeting estimated 2020 revenue of $150-170 million, estimated Net Operating Income
("NOI") of $57-64 million, estimated
Funds from Operations ("FFO") of $32-36 million and estimated Adjusted Funds from
Operations ("AFFO") of $25-30
million. Such 2020 targets are subject to a number of assumptions,
including that NHT will be able to achieve approximately
$6 million of G&A expense savings
following the Merger, and constitute a financial outlook under
applicable securities laws. See "Forward Looking Information"
below for a summary of the assumptions and risks associated with
this financial outlook. NHT is providing this financial outlook in
order to provide guidance to investors on the expected financial
impact on NHT of the acquisition of Condor.
For further information, please see the updated investor
presentation available on NHT's website at
www.nexpointhospitality.com.
About NHT
NexPoint Hospitality Trust is a publicly traded real estate
investment trust, with its units listed on the TSX Venture Exchange
under the ticker NHT.U. NHT is focused on acquiring, owning and
operating well-located hospitality properties in the United States that offer a high current
yield and in many cases, that are underperforming assets with the
potential to increase in value through investments in capital
improvements, a market-based recovery, brand repositioning, revenue
enhancements, operational improvements, reducing expense
inefficiencies, and exploiting excess land or underutilized space.
NHT owns 11 branded properties sponsored by Marriott, Hilton and
InterContinental Hotels Group, located across the U.S.,
specifically in the Seattle,
Portland, Dallas, Nashville and St.
Petersburg markets. NHT is externally advised by NexPoint
Real Estate Advisors VI, L.P. For more information, visit
www.nexpointhospitality.com.
About Condor Hospitality Trust, Inc.
Condor Hospitality Trust, Inc. is a self-administered real
estate investment trust that specializes in the investment and
ownership of upper midscale and upscale, premium-branded,
select-service, extended-stay, and limited-service hotels in the
top 100 Metropolitan Statistical Areas ("MSAs") with a particular
focus on the top 20 to 60 MSAs. Condor currently owns 15 hotels in
eight states. Condor's hotels are franchised by a number of the
industry's most well-regarded brand families including Hilton,
Marriott, and InterContinental Hotels Group.
Forward-Looking Information
This news release contains "forward-looking information" and
"forward looking statements" within the meaning of applicable
securities laws (collectively, "forward-looking statements") which
reflect management's expectations regarding objectives, plans,
goals, strategies, future growth, results of operations,
performance and business prospects and opportunities of NHT. In
some cases, forward-looking statements can be identified by the use
of forward-looking terminology such as "plans", "expects", "does
not expect", "scheduled", "goals", "seek", "strategy", "future",
"estimates", "intends", "anticipates", "does not anticipate",
"projects", "believes" or variations of such words and phrases or
statements to the effect that certain actions, events or results
"may", "will", "could", "would", "should", "might", "likely",
"occur", "be achieved" or "continue". In particular, statements in
this news release as to the expected closing of the Merger with
Condor and the benefits NHT expects to realize therefrom (including
an expanded geographic footprint, reductions in G&A expenses,
valuation and transaction metrics, added stability to the NHT
portfolio and expected benefits to NHT's financial results and the
combined 2020 pro forma earnings profile (including expected 2020
revenues, NOI, FFO and AFFO) constitute forward-looking
information.
NHT and Condor may not be able to complete the Merger on the
terms described herein or other acceptable terms or at all because
of a number of factors, including without limitation, the
following: (i) the occurrence of any event, change or other
circumstances that could give rise to the termination of the merger
agreement; (ii) unknown, underestimated or undisclosed commitments
or liabilities; and (iii) the failure to satisfy the closing
conditions to the Merger. Further, the expected benefits of
the Merger may not be achieved due to: (i) risks related to
disruption of management's attention from NHT's and Condor's
ongoing business operations due to the Merger; (ii) the effect of
the announcement of the Merger on the ability of the parties to
retain and hire key personnel, maintain relationships with their
franchisors, management companies and suppliers, and maintain their
operating results and business generally; (iii) the risk of
exceeding the expected costs of the Merger; (iv) adverse changes in
U.S. and non-U.S. governmental laws and regulations; (v) the risk
of litigation, including shareholder litigation in connection with
the Merger, and the impact of any adverse legal judgments, fines,
penalties, injunctions or settlements; (vi) changes in U.S. lodging
industry and related market trends that may adversely impact
expected room revenues, food & beverage revenues and hotel
operating costs; and (vii) any increase in anticipated expenses
and/or business costs (including G&A expenses and interest
costs).
These forward-looking statements and other forward-looking
statements are based on NHT's due diligence conducted on Condor and
NHT's opinions, estimates and assumptions in light of management's
experience and perception of historical trends, current conditions
and expected future developments, as well as other factors that
management currently believes are appropriate and reasonable in the
circumstances. In particular, the completion of the Merger with
Condor assumes that all closing conditions are satisfied and NHT's
equity and debt financing is available pursuant to commitment
letters NHT has entered into. Forward-looking statements regarding
the expected benefits of the Merger as well as the 2020 pro forma
targets included in this news release assume that the operating
performance of NHT, Condor and the U.S. lodging industry as a whole
continue consistent with historical results. Such forward-looking
statements are also subject to the risks generally associated with
NHT's business and the industry in which it operates, which are
outlined in NHT's prospectus dated March 27,
2019 and Management's Discussion and Analysis dated
August 27, 2019, which are available
on SEDAR (www.sedar.com).
There can be no assurance that the underlying opinions,
estimates and assumptions will prove to be correct. Such
forward-looking statements are qualified in their entirety by the
inherent risks, uncertainties and changes in circumstances
surrounding future expectations which are difficult to predict and
many of which are beyond the control of NHT.
All forward-looking statements are based only on information
currently available to NHT and are made as of the date of this news
release or the date indicated. Except as expressly required by
applicable Canadian securities laws, NHT assumes no obligation to
publicly update or revise any forward-looking statement, whether as
a result of new information, future events or otherwise.
Non-IFRS Measures and Industry Metrics
This news release makes reference to non-IFRS measures,
including "AFFO" and "FFO". This news release also makes reference
to "NOI", which is a financial and operating metric used in NHT's
industry. These non-IFRS measures and industry metrics do not have
standardized meanings prescribed by IFRS and therefore may not be
comparable to similar measures presented by other issuers. They are
used to provide investors with supplemental measures of NHT's
operating performance and thus highlight trends in NHT's core
business that may not otherwise be apparent when relying solely on
IFRS measures. Management believes that these measures are helpful
to investors because they are widely recognized measures of a real
estate investment trust's performance and provide a relevant basis
for comparison among real estate entities. NHT also believe that
securities analysts, investors and other interested parties
frequently use non-IFRS measures and industry metrics in the
evaluation of issuers. Management also uses non-IFRS measures and
industry metrics in order to facilitate operating performance
comparisons from period to period, to prepare annual operating
budgets and forecasts and to determine components of management
compensation.
"AFFO" means adjusted funds from operations, or Core FFO with
certain adjustments in order to arrive at a more refined measure of
the operating performance of the portfolio. AFFO adjusts Core FFO
to remove items such as equity-based compensation expense and the
amortization of deferred financing costs incurred in connection
with obtaining long-term debt financing, and to account for the
ongoing maintenance requirements of NHT's properties by reducing
Core FFO for a capital expenditure reserve.
"Core Funds from Operations" or "Core FFO" means FFO with
certain adjustments which are either not likely to occur on a
regular basis or are otherwise not representative of the ongoing
operating performance of NHT's portfolio. Core FFO adjusts FFO to
remove items such as losses on extinguishment of debt and
modification costs (includes prepayment penalties incurred and the
write-off of unamortized deferred financing costs and fair market
value adjustments of assumed debt related to the retirement of debt
and costs incurred in connection with a debt modification that are
expensed), casualty-related expenses and recoveries, the
amortization of deferred financing costs incurred in the current
period, and the non-controlling interests related to these
items.
"FFO" means net income (loss) and comprehensive income (loss)
calculated in accordance with IFRS, excluding: (i) depreciation of
depreciable real estate assets and amortization of customer
relationships and intangible assets arising from a business
combination; (ii) gains (or losses) from sales of hotel properties
and equipment; (iii) deferred income tax expense (recovery); (iv)
impairment losses or reversals recognized on land and depreciable
real estate properties; (v) transaction costs expensed as a result
of the purchase of a hotel property being accounted for as a
business combination; (vi) fair value adjustments to certain
financial instruments; and (vii) the non-controlling interests in
respect of the above. FFO has been prepared consistently with the
definition presented in the White Paper on funds from operations
prepared by the Real Property Association of Canada for all periods presented.
"NOI" means total revenues from properties (being the sum of
revenues from rooms, food and beverage and other revenue) less
hotel operating expenses as presented in the combined statements of
income prepared in accordance with IFRS.
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of
this release.
Contact:
Jackie
Graham
Investor Relations
972-419-6213
SOURCE NexPoint Hospitality Trust