Ashford Hospitality Trust to Acquire 51-Hotel Portfolio for $2.4 Billion
January 19 2007 - 7:00AM
Business Wire
Ashford Hospitality Trust, Inc. (NYSE: AHT): Acquisition
Highlights: Comprised of 24 full-service, upper-upscale hotels and
27 premium select-service hotels in 31 markets across 18 states,
the District of Columbia and Canada Significantly diversifies
Ashford�s asset portfolio in terms of geography, brand and
management company mix Expands Ashford�s exposure to upper-upscale
assets in major metropolitan and coastal markets with above average
RevPAR growth potential Acquisition price implies a projected
forward 12-month NOI cap rate of approximately 7.6% and an
estimated forward EBITDA yield of 9.0% Price per key of
approximately $215,000 for full service hotels and $125,000 for
select service hotels Acquisition consideration is all cash with
fully committed debt and preferred equity financing in place;
Ashford�s deleveraging plan includes asset sales, joint ventures
and capital markets strategies Ashford to become one of the largest
lodging REITs Ashford Hospitality Trust, Inc. (NYSE: AHT) announced
it has signed definitive agreements to acquire a 51-hotel,
13,524-room (net after joint venture adjustment) hotel portfolio
for approximately $2.4 billion in cash ($177,000 per key). This
transaction is in connection with Morgan Stanley Real Estate�s
acquisition of CNL Hotels and Resorts, a public, non-listed hotel
REIT for a combined cash consideration of $20.50 per share. The
transaction is expected to close in the second quarter of 2007.
This transaction is subject to customary closing conditions
including approval by the stockholders of CNL Hotels and Resorts.
With this transformational investment, Ashford will become one of
the nation�s largest lodging REITs and may benefit from: value
added portfolio management strategies on a broader scale, enhanced
access to accretive investments, greater access to capital markets,
stronger brand relationships, increased interest from potential
joint venture partners and institutional capital, improved terms
with lenders and investment banks, and possible market multiple
expansion with greater awareness of Ashford among investors. The
portfolio will enhance Ashford�s existing asset base with the
addition of hotels such as: Marriott Seattle Waterfront, Marriott
Legacy Center, Renaissance Tampa, Hyatt Regency Montreal, Hilton El
Conquistador, Hilton Torrey Pines, Hilton Costa Mesa, and Capital
Hilton. Monty J. Bennett, President and CEO of Ashford Hospitality
Trust, said, "This portfolio of well-located and strong-performing
assets is one of the best hotel collections we�ve seen in the past
decade, and we are extremely pleased to acquire it with a structure
that is accretive to shareholders in the first year of ownership.
The majority of these markets are experiencing sizable RevPAR
gains, and we see this transaction as a continuation of our efforts
to position Ashford�s assets in the path of growth. This
transaction gives us the opportunity to extend our proven
investment and portfolio management strategies on a much larger
platform." Ashford was advised in the transaction by Wachovia
Securities and Eastdil Secured. Wachovia Securities has provided
Ashford with fully-committed debt and equity financing to close on
the transaction. Portfolio The portfolio is comprised of
full-service, upper-upscale hotels that account for 65% of trailing
EBITDA and premium select-service hotels totaling 35% of trailing
EBITDA. The 24 full-service, upper-upscale hotels contain 7,953
rooms with such brand names as Hilton, Embassy Suites, JW Marriott,
Marriott, Doubletree, Renaissance and Hyatt. The balance of the
portfolio, 27 premium select-service hotels totaling 5,571 rooms,
features brands such as Courtyard by Marriott, Residence Inn by
Marriott, SpringHill Suites by Marriott, Fairfield Inn by Marriott,
TownePlace Suites by Marriott and Hampton Inn. The well maintained
hotels in the portfolio have an average age of 14.5 years. For
2006, the portfolio's RevPAR was $99.90, resulting in a portfolio
wide RevPAR yield penetration of 116%. The trailing 12-month
through November 2006 ADR of $137 exceeds Ashford�s portfolio by
14%. The trailing twelve month Gross Revenues for the portfolio
equal $681 million. The transaction further concentrates Ashford�s
overall portfolio EBITDA in higher growth markets and solidifies
its position in the upper-upscale and upscale chain segments with
60% upper-upscale, 34% upscale, 5% midscale and 1% luxury pro forma
for the acquisition. Ashford�s portfolio EBITDA by brand will
include the industry�s strongest performers with 50% in the
Marriott brand family, 31% in Hilton, 8% in Hyatt and 6% in
Starwood. Geographic diversification by EBITDA will be enhanced
with 36% South Atlantic (including Washington, D.C.), 24% Pacific,
11% North Central, 11% South Central, 9% Mid-Atlantic, 7% Mountain,
1% New England and 1% Canada. All but five of the 51 hotels are
managed by their respective brands under long-term contracts. On a
combined basis, Ashford will have a total of eight different
property managers with the largest being Marriott at 44% of the
overall portfolio EBITDA, Remington Hotels at 21%, Hilton at 18%
and Hyatt at 8%. Eighteen hotels in the acquisition are owned in
joint ventures with ownership interests ranging from 70% to 89%.
Transaction Pricing At closing, the estimated forward NOI cap rate
will be 7.6% and the EBITDA yield is expected to be 9.0% resulting
in an 11.1x EBITDA multiple. On a trailing 12-month basis at the
time of closing, the transaction�s projected NOI cap rate is 7.0%
with an EBITDA yield of 8.4% equating to an 11.9x EBITDA multiple.
Assuming the proposed transaction financing, the acquisition is
expected to add approximately $0.35 per share in FFO (Funds from
Operations) on an annualized basis in the first year. Capital
Structure The transaction will be funded with a $2.5 billion
(including transaction costs) combination of existing debt and a
financing package of debt and equity capital provided by Wachovia
Securities. The Wachovia funding is comprised of 10-year and 5-year
fixed-rate CMBS financing, variable-rate CMBS financing, a
variable-rate term loan, and preferred equity. The proportional
breakdown of each piece of capital funding implies an expected
blended all-in cost of capital of approximately 6.3% and weighted
average maturities of 7.7 years. In addition, Wachovia is providing
a new $150 million revolving credit facility. Mr. Bennett, noted,
�We secured the funding for this transaction with favorable
structures and rates. While short-term Ashford will have higher
debt levels, we expect to achieve our targeted sub-60% debt level
range within twelve months of closing through a combination of
joint ventures, capital recycling and the appropriate use of the
capital markets. We look forward to implementing strategies that
we�ve used successfully on other portfolio transactions to create
additional shareholder value on this transformational investment.�
Capital Expenditure Plan Ashford expects to invest approximately
$55 million in owner funded capital improvements above the normal
reserves for these assets in the first year to improve the physical
product of the hotels and further enhance RevPAR yield penetration.
Investor Conference Call, Simulcast, and Website Presentation
Ashford Hospitality Trust, Inc. will conduct a conference call at
9:00 a.m. EST on January 19, 2007, to discuss the transaction. The
number to call for this teleconference is 913-981-5543. A seven-day
replay of the conference call will be available by dialing
719-457-0820 and entering the confirmation number, 2213427. The
Company website at www.ahtreit.com contains a presentation that
provides highlights of this transaction. The Company will also
provide an online simulcast and rebroadcast of its conference call.
The live broadcast of Ashford's call will be available online at
the Company's website at www.ahtreit.com as well as on
http://www.videonewswire.com/event.asp?id=37437 on January 19,
2007, beginning at 9:00 a.m. EST. The online replay will follow
shortly after the call and continue for approximately one year.
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. Additional information can
be found on the Company's web site at www.ahtreit.com. Wachovia
Securities is the trade name for the corporate and investment
banking services of Wachovia Corporation and its subsidiaries,
including Wachovia Capital Markets, LLC, member NYSE, NASD, and
SIPC, and Wachovia Bank, N.A. 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 forward-looking statements include, but are not
limited to, the timing for closing in the second quarter of 2007,
the expectation that deleveraging will occur and in the timeframe
projected, the impact of the transaction on our business and future
financial condition, our business and investment strategy, our
understanding of our competition and current market trends and
opportunities and projected capital expenditures. Such statements
are subject to numerous assumptions and uncertainties, many of
which are outside Ashford'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 nature of our competition. These and other risk factors
are more fully discussed in Ashford'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. 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 or 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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