AHT Ashford Hospitality Trust Inc

DALLAS, Nov. 9, 2011 /PRNewswire/ -- Ashford Hospitality Trust, Inc. (NYSE: AHT) today reported the following results and performance measures for the third quarter ended September 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 third quarter ended September 30, 2011, with the third quarter ended September 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 5.9% for all Legacy hotels in continuing operations, driven by a 2.8% increase in ADR and a 223 basis point increase in occupancy
• RevPAR increased 5.5% for all hotels in the Highland Hospitality Portfolio, driven by a 1.7% increase in ADR and a 265 basis point increase in occupancy
• Hotel operating profit margin increased 137 basis points for the 80 Legacy hotels not under renovation in continuing operations
• Hotel operating profit margin increased 230 basis points for all 28 hotels in the Highland Hospitality Portfolio (no Highland hotels were under renovation during the third quarter)
• Net loss attributable to common shareholders was $28.6 million, or $0.43 per diluted share, compared with net income attributable to common shareholders of $36.3 million, or $0.71 per diluted share, in the prior-year quarter
• Adjusted funds from operations (AFFO) was $0.39 per diluted share for the quarter as compared with $0.33 from the prior-year quarter
• On a trailing-twelve month basis, AFFO was a record $1.86 per diluted share
• Fixed charge coverage ratio was 1.72x 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.  
• In September, Ashford obtained a new $105 million senior credit facility, the Company's only recourse obligation with currently no outstanding balance
• At the end of the third quarter, Ashford had cash and cash equivalents of $180.9 million

CAPITAL ALLOCATION

• Capex invested in the quarter for the Legacy portfolio was $17.5 million and $45.9 million year to date

CAPITAL STRUCTURE

As previously disclosed, in July 2011, Ashford reissued 7.0 million of the Company's treasury shares at $12.50 per share and received net proceeds of $83.3 million. The net proceeds were used to repay the outstanding borrowings under the senior credit facility and for general corporate purposes, including financing future hotel related investments, capital expenditures, working capital, or repayment of other debt obligations.

On September 26, 2011, the Company announced it had entered into a new $105 million senior credit facility which replaced the Company's previous credit line that was scheduled to mature in April 2012.  The new credit facility provides for a three-year revolving line of credit at 275 to 350 basis points over LIBOR, which is the same as the Company's previous credit line.  There is a one-year extension option subject to the satisfaction of certain conditions.  The new credit facility includes the opportunity to expand the borrowing capacity by up to $45 million to an aggregate size of $150 million.  The financial covenant tests with respect to fixed charge coverage ratio and leverage tests are similar to the Company's previous credit line.  The previous credit line was repaid in full in July 2011.  Since the Company had a zero balance on the previous credit line, no cash was utilized to pay it down upon termination.  

On September 27, 2011, Ashford's Board of Directors authorized the reinstatement of the Company's 2007 Stock Repurchase Program with a $141.6 million increase, bringing the total authorization to $200 million (excluding fees, commissions and all other ancillary expenses).  The plan provides for: (i) the repurchase of shares of the Company's common stock, Series A preferred stock, Series D preferred stock and Series E preferred stock, and /or (ii) discounted purchases of outstanding debt obligations of the Company and its subsidiaries, including debt secured by the Company's hotel assets

Subsequent to the end of the third quarter, on October 12, 2011 the Company priced an underwritten public offering of 1,280,000 shares of its existing 9.00% Series E Cumulative Preferred Stock at $23.47 per share including accrued dividends; receiving net proceeds of $29.1 million after underwriting fees.  The net proceeds from the sale of these securities are being used for general corporate purposes, including, without limitation, repayment of debt or other maturing obligations, financing future hotel-related investments, capital expenditures and working capital.  Net proceeds may also be used for repurchasing shares of common stock under Ashford's repurchase program.  

HIGHLAND HOSPITALITY PORTFOLIO UPDATE  

The RevPAR growth for the Highland Hospitality portfolio of 5.5% was only slightly lower than RevPAR growth of the Company's legacy portfolio of 5.9% and significantly improved on a sequential basis compared with RevPAR growth of 3.4% experienced during the second quarter of this year.  This improved performance was a direct result of filling sales positions at 17 hotels that had been vacant during the first and second quarter due to a change in property manager as well as the continuing integration of the Highland Hospitality Portfolio into the Company's total portfolio.  Hotel EBITDA Margin increased 230 basis points to 25.1% reflecting a 62% EBITDA flow.  The Company expects both the revenue and EBITDA performance of the Highland Hospitality Portfolio to continue to improve as the hotels in the Portfolio continue to be fully integrated into Ashford's total portfolio.  

DISPOSITION ACTIVITY

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

PORTFOLIO REVPAR

As of September 30, 2011, the Company had a portfolio of direct hotel investments consisting of 96 properties classified in continuing operations.  During the third quarter, 80 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 (80 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 6.2% to $96.12 for hotels not under renovation on a 3.3% increase in ADR and a 209 basis point increase in occupancy
• Proforma RevPAR increased 5.9% to $94.63 for all hotels on a 2.8% increase in ADR and a 223 basis point increase in occupancy
• Proforma RevPAR increased 5.5% to $97.30 for all hotels in the Highland Hospitality Portfolio on a 1.7% increase in ADR and a 265 basis point increase in occupancy (no Highland hotels were under renovation during the third quarter)

HOTEL EBITDA MARGINS AND QUARTERLY SEASONALITY TRENDS

For the 80 hotels as of September 30, 2011, that were not under renovation, Proforma Hotel EBITDA increased 11.1% to $52.1 million. Proforma Hotel EBITDA margin (expressed as a percentage of Total Hotel Revenue) increased 137 basis points to 28.3%.  For all 96 hotels included in continuing operations as of September 30, 2011, Proforma Hotel EBITDA increased 10.9% to $60.4 million and Hotel EBITDA margin increased 126 basis points to 27.8%.  For the Company's 71.74% share of the 28 hotels in the Highland Hospitality Portfolio, Proforma Hotel EBITDA increased 17.0% to $17.5 million.  Proforma Hotel EBITDA margin (expressed as a percentage of Total Hotel Revenue) increased 230 basis points to 25.1%.

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 September 15, 2011, Ashford announced that its Board of Directors had declared a common stock dividend for the third quarter ended September 30, 2011, of $0.10 per diluted share, payable October 17, 2011, for shareholders of record on September 30, 2011.

Monty J. Bennett, Chief Executive Officer, commented, "Ashford continues to report strong AFFO and operating profit growth, including significant sequential improvement in our Highland Hospitality Portfolio.  Our integration process is progressing well and the Highland transaction continues to meet our expectations.  Despite larger macroeconomic uncertainty, our outlook for the remainder of the year remains strong as the fundamentals of our industry continue to improve.  At the same time, we are focused on risk mitigation and strategic opportunities.  We remain conservative in our approach and continue to take steps to enhance our capital structure and liquidity as demonstrated by our recent public offerings, new senior credit facility, and absence of recourse debt.  We continue to evaluate our relative cost of capital and seek out investment opportunities with a disciplined view on shareholder accretion.  We believe this balanced approach will continue to drive improved operating performance and provide substantial returns to our shareholders."  

INVESTOR CONFERENCE CALL AND SIMULCAST

Ashford Hospitality Trust, Inc. will conduct a conference call on Thursday, November 10, 2011, at 11 a.m. ET.  The number to call for this interactive teleconference is (480) 629-9818. A replay of the conference call will be available through Thursday, November 17, 2011, by dialing (303) 590-3030 and entering the confirmation number, 4478474.

The Company will also provide an online simulcast and rebroadcast of its third quarter 2011 earnings release conference call.  The live broadcast of Ashford Hospitality Trust's quarterly conference call will be available online at the Company's web site, www.ahtreit.com on Thursday, November 10, 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.