Ashford Hospitality Trust and PREI(R) Form $400 Million Mezzanine Joint Venture
January 23 2008 - 8:00AM
Business Wire
Ashford Hospitality Trust, Inc. (NYSE: AHT) today announced it has
formed a joint venture with Prudential Real Estate Investors (PREI)
to invest in structured debt and equity hotel investments in the
United States. The joint venture, which is expected to be funded
over the next two years, will ultimately be capitalized with $300
million from investors in a fund managed by PREI and $100 million
from Ashford. Joint Venture Structure Ashford and PREI will
contribute the capital required for each mezzanine investment on a
25%/75% basis, respectively, with Ashford entitled to annual
management and sourcing fees, reimbursement of expenses and a
promoted yield. The promote is equal to a current 1.3x the venture
yield subject to maximum threshold limitations, but further
enhanced by an additional promote based upon a total net return to
PREI. PREI�s equity will be in a senior position on each
investment. With limited exceptions, the joint venture will be the
primary vehicle for Ashford�s hotel lending efforts. The joint
venture will have the right of first refusal on all mezzanine
investment opportunities presented by Ashford, provided the
investment meets the criteria noted below. Ashford intends to seed
the joint venture with its recent $21.5 million mezzanine loan
secured by interests in the Westin La Paloma Resort & Spa in
Tucson, Arizona and the Westin Hilton Head Resort in Hilton Head,
South Carolina. Loan Criteria The joint venture will primarily
acquire or originate loans and preferred equity with the following
criteria: Loans � participations in first and second mortgages,
stock secured loans, guarantees, or preferred equity with
maturities of three to five years for floating rate and three to
ten years for fixed rate; Collateral � single hotels, hotel
portfolios and preferred positions in hotel entities; Asset Class �
full-service hotels and resorts in upper-upscale to luxury segments
and branded select-service hotels in upscale and mid-scale segments
along with extended stay and economy assets provided they
constitute a minority position in a portfolio; Location � no
geographic constraints within the United States; Investment Size �
maximum single asset investment of $50 million (with typical range
of $10 to $25 million) and up to $75 million for diversified
portfolio; Capital Structure � typically within the 60% to 85%
loan-to-value range; and Debt Service Coverage � at least 1.0x TTM
coverage unless adequate collateral support is provided. Commenting
on the announcement, Monty J. Bennett, President and CEO of Ashford
Hospitality Trust, stated, "PREI is one of the most sophisticated
long-term real estate investors in the world today, and we are
pleased to establish this new strategic relationship with them. Our
joint venture allows us to pursue the many attractive hotel
structured finance opportunities available in today�s marketplace
on a more significant scale while remaining true to our disciplined
loan criteria. The investment structure is expected to enhance
shareholder returns." James P. Walker, Principal of PREI, noted,
"The ability to leverage the Ashford team�s proven expertise in
underwriting and sourcing hotel debt is very compelling for us. The
displacement in today�s credit markets has created a unique
opportunity to fill in the gap for many hotel borrowers and
lenders. We look forward to partnering with Ashford to capitalize
on the current market conditions." PREI, the real estate investment
management and advisory business of Prudential Financial, Inc.,
offers a broad range of investment opportunities and investment
management services through its specialized operating units in the
United States, Europe, Asia, and Latin America. The company's fund
management operations, located in Parsippany, N.J.; Atlanta, Ga.;
Munich, London, Mexico City and Singapore, are supported by a
network of local offices throughout the world. As of September 30,
2007, PREI managed $40.7 billion in gross assets ($29.4 billion
net) on behalf of more than 400 clients and is ranked among the
largest real estate investment managers. For more information,
visit www.prei.com. 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. 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
expected the impact of the financing 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. 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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