Ashford Hospitality Trust to Acquire 21-Hotel Portfolio for $250 Million
December 27 2004 - 8:00AM
PR Newswire (US)
Ashford Hospitality Trust to Acquire 21-Hotel Portfolio for $250
Million Arranges Convertible Preferred Private Placement With
Security Capital to Fund This Transaction and Future Growth DALLAS,
Dec. 27 /PRNewswire-FirstCall/ -- Ashford Hospitality Trust, Inc.
(NYSE:AHT) announced the signing of a definitive agreement to
acquire for $250 million, a 21-property, 4,094-room hotel portfolio
from entities controlled by affiliates of the Fisher Brothers, the
Gordon Getty Trust, and George Soros collectively as majority
partners, and certain members of Ashford's senior management team
as minority partners. The Company also announced the execution of a
purchase agreement for the closing of a private placement of up to
$75 million in cumulative convertible preferred stock with Security
Capital Preferred Growth Incorporated. The Board of Directors of
Ashford Hospitality Trust formed a Special Committee solely
comprised of independent directors to evaluate this transaction.
The Special Committee was authorized to retain independent advisors
and to review, evaluate, negotiate, and approve the transaction.
The Special Committee retained independent advisors Hogan and
Hartson L.L.P. as legal advisors, and Citigroup Global Markets Inc.
as financial advisors. The Special Committee unanimously approved
the acquisition. Morgan Stanley served as the exclusive financial
advisor to the Fisher, Getty, and Soros entities. The acquisition
total consideration of $250 million is comprised of $35.0 million
in cash, the issuance of $50.3 million in operating partnership
units, and the assumption of $164.7 million in debt. The purchase
price equates to an 8.9x trailing twelve-month EBITDA multiple, an
EBITDA yield of 11.2% and a trailing twelve-month net operating
income capitalization rate of 9.3% on the entire 21-hotel portfolio
based on a trailing 12-month NOI of $23.3 million. The average cost
of the debt is 7.4%, which may be reduced to 7.1% following the
expected repayment of approximately a $14.7 million mezzanine loan.
The acquisition is expected to close by February 2005. The
operating partnership units were priced at $10.07 using the 20-day
average closing price calculated 5 business days prior to the
signing of the documents. Ashford management, comprising
approximately 22% of the selling entity, structured approximately
100% of their net consideration in the form of operating
partnership units. The Fisher, Getty, and Soros entities,
comprising approximately 78% of the ownership interests in the
selling entity, structured approximately 50% of their consideration
in cash and 50% in operating partnership units. The core portfolio
consists of 13 hotels across 5 brands and one independent
comprising 3,099 total rooms: Houston Embassy Suites Galleria in
Houston, TX; Houston Hilton NASA/Clearlake in Houston, TX; Fort
Worth Radisson in Fort Worth, TX; St. Petersburg Hilton in St.
Petersburg, FL; West Palm Beach Embassy Suites and Admiralty Office
Building in West Palm Beach, FL; Key West Crowne Plaza LaConcha in
Key West, FL; Sheraton Minneapolis West in Minnetonka, MN; Beverly
Hills Crowne Plaza in Los Angeles, CA; Rockland Radisson Hotel
Boston/South Shore in Rockland, MA; Milford Radisson in Milford,
MA; Indianapolis Airport Radisson Hotel in Indianapolis, IN;
Indianapolis Radisson Hotel City Centre in Indianapolis, IN; and
the Historic Inns in Annapolis, MD. Remington Lodging &
Hospitality, an affiliate of the current manager of the properties,
will operate the hotels. The estimated $35-$40 million budgeted
capital improvement plan that commenced earlier in 2004 for these
properties remains underway, and will be completed under Ashford's
ownership by early 2006. The scope and completion dates vary by
property, but should largely be completed by the first quarter
2006. Ashford is evaluating strategic alternatives for eight
smaller hotels that contribute a relatively small portion of NOI to
the portfolio. The trailing 12-month NOI contribution of $800,000
equates to less than 3.5% of the total portfolio's NOI. The
strategic alternatives for these smaller assets include a potential
sale, repositioning, and re-branding. These hotels include: Coral
Gables Holiday Inn in Coral Gables, FL; Warner Robins Ramada Inn in
Warner Robins, GA; Yarmouth Gull Wing Suites in South Yarmouth, MA;
Hyannis Ramada Inn Regency in Hyannis, MA; Falmouth Inn on the
Square in Falmouth, MA; Commack Howard Johnson in Commack, NY;
Westbury Howard Johnson in Jericho, NY; and Dallas Best Western in
Dallas, TX. Monty J. Bennett, President and CEO of Ashford
Hospitality Trust, said, "This acquisition is a significant
achievement and has numerous advantages. Once again, we've
demonstrated our ability to source investment opportunities at
attractive yields and per key values as we have done consistently
throughout this past year. This transaction substantially increases
our asset base and market capitalization and reflects strong
investor confidence in our business plan. Our percentage of
full-service, upper-upscale and upscale assets will increase
thereby improving Ashford's position for growth going forward,
while providing additional brand and geographic diversification.
The majority of the assumed debt will be fixed-rate, increasing our
ratio of fixed to floating rate debt with only a minimal increase
to our overall cost of debt. This transaction also increases
management's ownership interest in Ashford. "The ability to
complete this transaction with the issuance of such a large
percentage of OP units to high caliber, sophisticated real estate
investment entities controlled by the Fisher Brothers, the Gordon
Getty Trust, and George Soros is a further testament to the
investment interest in Ashford's business strategy. "We are pleased
with the opportunity to convert a large portion of our ownership in
this high quality portfolio to an equity interest in Ashford's more
diversified lodging platform," stated Richard L. Fisher, the
seller's managing general partner. "We've had a long, successful
relationship with this management team and have high confidence in
their ability to create value for shareholders throughout lodging
cycles." The private placement of Series B cumulative convertible
preferred stock to Security Capital Preferred Growth is a two-stage
transaction for up to $75 million in proceeds. The liquidation
preference is set at $10.07 per share, which is the same as the
operating partnership unit pricing for the 21- property hotel
acquisition. The conversion ratio is at 1:1 with a three-year call
option, or a two-year "soft call" subject to achieving performance
thresholds. The preferred dividend is set at the greater of $0.14
per share per quarter or the prevailing quarterly common stock
dividend. The first tranche is for $20 million, with an initial $10
million to be funded prior to December 31, 2004, and the remainder
available for disbursement by June 30, 2005. The second tranche is
for $55 million and its availability is contingent upon the closing
of the announced 21-property acquisition, provided the closing
occurs prior to March 31, 2005. Initially, $14.7 million will be
funded at Security Capital's election at the closing of the
acquisition, with another $20 million by June 30, 2005, and the
remainder available for disbursement by December 23, 2005. Proceeds
from the issuance may be used specifically for this 21-property
acquisition or drawn over time for new acquisitions or debt
repayment. Mr. Bennett added, "The importance of this transaction
with Security Capital cannot be underestimated. We have been able
to secure an attractive and very cost effective source of capital
that provides significant flexibility for funding our acquisition
of this 21-hotel portfolio as well as future investment
opportunities over the next year. This structure enables Ashford to
access funds on an as-needed basis concurrent with transaction
closings and removes capital market risk for this 21-property
acquisition by locking in capital in advance. We are pleased with
the low cost of this transaction and most importantly the funding
options it affords Ashford over time. In addition, Security Capital
has established a long track record of successful real estate
investing, particularly with publicly traded REITs, and we are very
pleased to have them as a long-term shareholder." "We are delighted
to become a significant equity investor in Ashford," said Anthony
R. Manno, Jr., CEO of Security Capital Research & Management
Incorporated, the investment advisor to Security Capital Preferred
Growth. "Since 1997, Security Capital Preferred Growth has been a
leading provider of growth capital to dynamic real estate
companies. Ashford's outstanding management team and unique
business model have positioned this company to be a leader in the
lodging sector, and we view this investment as the beginning of a
long and mutually-rewarding relationship." 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 http://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 expectation that the
transaction will= close in February 2005, 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 4% 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. Contact:
Douglas Kessler Chief Operating Officer and Head of Acquisitions
(972) 490-9600 or Tripp Sullivan Corporate Communications, Inc.
(615) 254-3376 DATASOURCE: Ashford Hospitality Trust, Inc. CONTACT:
Douglas Kessler, Chief Operating Officer and Head of Acquisitions
of Ashford Hospitality Trust, Inc., +1-972-490-9600; or Tripp
Sullivan of Corporate Communications, Inc., +1-615-254-3376 Web
site: http://www.ahtreit.com/
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