AHT Ashford Hospitality Trust Inc

DALLAS, Aug. 3, 2011 /PRNewswire/ -- Ashford Hospitality Trust, Inc. (NYSE: AHT) today reported the following results and performance measures for the second quarter ended June 30, 2011.  The performance measurements for Occupancy, Average Daily Rate (ADR), Revenue Per Available Room (RevPAR), and Hotel Operating Profit (or Hotel EBITDA) are proforma.  Unless otherwise stated, all reported results compare the second quarter ended June 30, 2011, with the second quarter ended June 30, 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 7.2% for all Legacy hotels in continuing operations, driven by a 4.4% increase in ADR and a 199 basis point increase in occupancy
• RevPAR increased 3.4% for all hotels in the Highland Hospitality Portfolio, driven by a 2.6% increase in ADR and a 58 basis point increase in occupancy
• Approximately 70% of the Company’s hotel revenue from all hotels comes from transient guests (of which approximately 77% is business transient)
• Hotel operating profit margin increased 260 basis points for the 92 Legacy hotels not under renovation in continuing operations
• Hotel operating profit margin increased 209 basis points for the 27 hotels in the Highland Hospitality Portfolio that were not under renovation during the quarter
• Net loss attributable to common shareholders was $29.1 million, or $0.49 per diluted share, compared with net income attributable to common shareholders of $2.0 million, or $0.06 per diluted share, in the prior-year quarter
• Adjusted funds from operations (AFFO) was a quarterly record of $0.66 per diluted share for the quarter as compared with $0.46 from the prior-year quarter
• On a trailing-twelve month basis, AFFO was $1.80 per diluted share, which equates to a dividend coverage of 4.5x assuming an annualized $0.40 dividend per share
• Fixed charge coverage ratio was 1.74x under the senior credit facility covenant versus a required minimum of 1.35x
• The Company has one mortgage maturing in 2011 with an outstanding balance of $203.4 million and one mortgage maturing in 2012 with an outstanding balance of $167.2 million.  The debt is non-recourse and based on the current financing market, the Company has enough cash on hand to paydown and re-finance these loans, if desired
• The Company currently has no recourse debt outstanding and at the end of the second quarter had cash and cash equivalents of $154.2 million

CAPITAL ALLOCATION

• Capex invested in the quarter for the Legacy portfolio was $14.4 million and $28.3 million year to date
• Capex invested in the quarter and year to date for the Highland Hospitality Portfolio was $2.7 million

CAPITAL STRUCTURE

As previously announced, on May 3, 2011, Ashford repurchased 5,854,993 shares of the Company’s Series B-1 Convertible Preferred Stock from Security Capital Preferred Growth Incorporated. The remaining 1,392,872 shares of Series B-1 Preferred Stock owned by Security Capital were converted into shares of the Company’s common stock. Ashford funded the repurchase of the Series B-1 Preferred Stock with proceeds from its offering of 3,350,000 shares of 9.000% Series E Cumulative Preferred Stock at $25.00 per share completed in April 2011.

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.  

On May 25, 2011, the Company swapped $1.18 billion of its existing floating-rate debt to a fixed 1-Month LIBOR rate of 0.2675%. The swap is effective from June 13, 2011 and terminates on January 13, 2012.  There was no upfront cost to Ashford for entering into this swap other than customary transaction costs.  

On June 29, 2011, Ashford priced a public offering of 7,000,000 shares of its common stock at $12.50 per share generating gross proceeds of $87.5 million.  Ashford used $50.0 million of these proceeds to repay all outstanding borrowings under its senior credit facility, leaving the Company with no current recourse debt obligations.  The Company intends to use the additional proceeds for general corporate purposes, including, without limitation, financing future hotel-related investments, capital expenditures and working capital or repayment of other debt or obligations.

ONE-TIME GAIN  

During the second quarter 2011, as previously disclosed, the Company recognized a $4.2 million gain as a credit to impairment charges.  This was attributable to a discounted payoff of $22 million the Company received in April 2011 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. The Company had previously written down its investment in the mezzanine loan by $7.8 million in the fourth quarter of 2010.

HIGHLAND HOSPITALITY PORTFOLIO UPDATE  

The second quarter was the first full quarter to incorporate the financial results from the Highland Hospitality portfolio.  The RevPAR growth for the portfolio of 3.4% came in below the RevPAR growth of the Company’s legacy portfolio of 7.2%.  This underperformance was a direct result of vacant sales positions at the 17 hotels that experienced a change in property manager.  As of the end of the second quarter, all but a few of these sales positions had been filled.  Hotel EBITDA Margin increased 193 basis points to 31.2% reflecting a 79% EBITDA flow.  The Company expects both the revenue and EBITDA performance of the Highland Hospitality Portfolio to continue to improve as the hotels become fully integrated into the Company’s total portfolio.  

DISPOSITION ACTIVITY

On July 29, 2011, Ashford completed the sale of the Hampton Inn Jacksonville for $10.0 million in cash.  The hotel was unencumbered by debt.

PORTFOLIO REVPAR

As of June 30, 2011, the Company had a portfolio of direct hotel investments consisting of 96 properties classified in continuing operations.  During the second quarter, 92 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 96 hotels) and proforma not-under-renovation basis (92 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 96 hotels in continuing operations.  Details of each category are provided in the tables attached to this release.

• Proforma RevPAR increased 7.2% to $100.27 for hotels not under renovation on a 4.4% increase in ADR and a 196 basis point increase in occupancy
• Proforma RevPAR increased 7.2% to $100.22 for all hotels on a 4.4% increase in ADR and a 199 basis point increase in occupancy
• Proforma RevPAR increased 3.4% to $105.16 for all hotels in the Highland Hospitality Portfolio on a 2.6% increase in ADR and a 58 basis point increase in occupancy

HOTEL EBITDA MARGINS AND QUARTERLY SEASONALITY TRENDS

For the 92 hotels as of June 30, 2011, that were not under renovation, Proforma Hotel EBITDA increased 14.7% to $71.1 million. Proforma Hotel EBITDA margin (expressed as a percentage of Total Hotel Revenue) increased 260 basis points to 31.8%.  For all 96 hotels included in continuing operations as of June 30, 2011, Proforma Hotel EBITDA increased 14.6% to $74.6 million and Hotel EBITDA margin increased 254 basis points to 31.9%.  For the Company’s 71.74% share of the 28 hotels in the Highland Hospitality Portfolio, Proforma Hotel EBITDA increased 10.9% to $24.1 million.  Proforma Hotel EBITDA margin (expressed as a percentage of Total Hotel Revenue) increased 193 basis points to 31.2%.

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 its 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 96 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.

COMMON STOCK DIVIDEND

On June 15, 2011, Ashford announced that its Board of Directors had declared a common stock dividend for the second quarter ended June 30, 2011, of $0.10 per diluted share, payable July 15, 2011, for shareholders of record on June 30, 2011.

Monty J. Bennett, Chief Executive Officer, commented, “This was an exceptional quarter in Ashford’s history, demonstrated by our record AFFO and operating margin growth.  We continue to benefit from our operating strategy and active portfolio management which leverages improving lodging market fundamentals.  Our recently acquired Highland Hospitality portfolio has performed well within our expectations even as we make operational improvements.  We also continue to concentrate on enhancing our balance sheet, as evidenced by our recent equity offering which was used to repay our credit facility.  Moving along these parallel paths, we are confident in our continued ability to drive operating results and deliver increased shareholder returns.”

INVESTOR CONFERENCE CALL AND SIMULCAST

Ashford Hospitality Trust, Inc. will conduct a conference call on Thursday, August 4, 2011, at 11 a.m. ET.  The number to call for this interactive teleconference is (480) 629-9722.  A replay of the conference call will be available through Thursday, August 11, 2011, by dialing (303) 590-3030 and entering the confirmation number, 4456769.

The Company will also provide an online simulcast and rebroadcast of its second 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 Thursday, August 4, 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 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.  Additional information can be found on the Company's website 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 timing for closing, 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 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.