DALLAS, Jan. 23, 2019 /PRNewswire/ --
Acquisition Highlights:
- Newly-constructed, 310-room, fee-simple, full-service hotel
located in the dynamic Midtown section of Manhattan near Times Square and Bryant
Park
- Uniquely positioned as the only Embassy Suites hotel in
Manhattan
- Exceptional amenities including three F&B outlets, 4,000
square feet of flexible meeting space, attractive outdoor sky-lawn,
47-space garage, and state-of-the-art fitness center
- Revenue per available room (RevPAR) of $254 for the 3 months ended December 31, 2018
- Property is in excellent physical condition with limited capex
needs
- In connection with this acquisition, Ashford Inc. has committed
to provide Ashford Trust with approximately $19.5 million under the terms of the Enhanced
Return Funding Program ("ERFP")
Ashford Hospitality Trust, Inc. (NYSE: AHT) ("Ashford
Trust" or the "Company") today announced that it has completed the
acquisition of the 310-room Embassy Suites by Hilton New York
Midtown Manhattan (the "Property") for $195
million ($629,000 per
key). In connection with this transaction, the Company
entered into a $145 million
non-recourse mortgage loan at closing. The loan has a
three-year initial term with two one-year extension options,
subject to the satisfaction of certain conditions. The loan is
interest only and bears interest at a rate of LIBOR + 3.90%. As
part of this transaction, the Company received an ERFP commitment
of an estimated $19.5 million from
Ashford Inc. Based upon announced or recently closed
transactions, including the Property, Ashford Trust has achieved
approximately 80% committed utilization of the pledged $50 million of ERFP funding from Ashford
Inc.
This newly-constructed, 41-story hotel is ideally located in
Midtown Manhattan near Bryant Park and Times Square on
37th Street between 5th and 6th
Avenues and benefits from an excellent location in the vibrant
Manhattan market. Both the
Times Square and Bryant Park areas continue to grow as commercial
and entertainment zones, and there are several significant new
projects that are expected to fuel more demand growth in
Midtown. Additionally, the Property is located within minutes
of the key transportation hubs of Penn Station, Grand Central
Terminal, and the Port Authority Bus Terminal. Furthermore,
the Property has an enhanced market position in Manhattan as it is the only Embassy Suites by
Hilton, a brand that over the last two years has achieved an
average overall RevPAR Penetration Index of 122%. With its
strong brand affiliation, superb location, and exceptional
amenities, this new Property is well-positioned to accelerate
performance and gain market share in this high-growth
corridor.
As the Company's first direct hotel investment in the
Manhattan market, this acquisition
is being made at an opportune time given the recent positive
changes in Manhattan hotel
metrics. After several years of increasing supply growth, in
2018, according to STR, the number of new hotel rooms that opened
decelerated by 32% compared to 2017 and rising construction costs
should continue to slow that growth. Furthermore, according
to STR, demand growth outpaced supply growth in both 2017 and 2018
in Manhattan, which was the first
time that occurred since 2013, leading to year-to-date through the
third quarter of 2018 occupancy of 90.4%, the highest year-to-date
occupancy in over 24 years according to PWC. Additionally,
2018 saw the first positive ADR and RevPAR growth in the
market since 2014. There is more opportunity for room demand
growth in New York City as the
area hosted a record 65.2 million visitors in 2018, the
8th consecutive record-breaking year. The market
should benefit from multiple infrastructure improvements including
the $8 billion expansion of LaGuardia
Airport, which will add 2.7 million square feet, an additional 37
gates and improved transportation access.
Embassy Suites Manhattan by Hilton New York Midtown Manhattan
opened in January 2018 and has 310
suites, including 6 patio suites, with a majority of rooms offering
exceptional views of the Manhattan
skyline. The Property also provides a broad range of amenities,
including The Heist Restaurant & Lounge, the Skylawn Bar and
Social Space which can accommodate up to 230 people, the Embassy
Lounge, 4,000 square feet of flexible meeting space,
state-of-the-art fitness center, business center and 24-hour guest
convenience shop. Additionally, the Embassy Suites brand standard
offerings of free made-to-order breakfast and manager's evening
reception are a value-added benefit for guests. The
transaction also includes a 47-space attached parking garage that
is currently leased to a third party operator on a triple net
basis. The Property is in excellent physical condition due to
its recent construction and has minimal capex needs. Remington
Lodging took over management of the Property upon
closing.
On a trailing 3-month basis as of December 31, 2018, the Property achieved RevPAR
of $254, with 92% occupancy and an
average daily rate (ADR) of $276.
Inclusive of the funds provided by Ashford Inc. under the
ERFP, and assuming the ERFP funding were to occur at
closing1, the Company's estimated adjusted net purchase
price equates to approximately $566,000 per key, and the equity contribution by
the Company will be effectively reduced by 39%. The Company
currently forecasts the five-year, leverage-neutral IRR on this
investment to be approximately 23%2, which is an
estimated 600 basis points greater than without ERFP funding based
upon various underwriting, pricing, and timing assumptions, which
are subject to change, and include among other factors
property-level mortgage financing, equity investment and ERFP
funding.
"We are very pleased to complete the acquisition of the Embassy
Suites by Hilton New York Midtown Manhattan, our first direct hotel
investment in New York City," said
Douglas A. Kessler, Ashford Trust's
President and Chief Executive Officer. "The hotel is a
high-quality, well-positioned asset that we expect will benefit
from the positive trends occurring in the dynamic Manhattan market. Having recently opened in
2018, the property is still ramping up operations, and we believe
there is significant growth and upside to occur.
Additionally, we believe the ERFP contribution resulting from this
investment significantly increases the returns for our
shareholders."
Ashford Hospitality Trust is a real estate investment trust
(REIT) focused on investing opportunistically in the hospitality
industry in upper upscale, full-service hotels.
Ashford has created an Ashford
App for the hospitality REIT investor community. The Ashford
App is available for free download at Apple's App Store and the Google Play Store by searching
"Ashford."
- ERFP funding did not occur upon acquisition but is expected to
be funded over time; therefore the forecasted internal rate of
return will depend upon the timing of ERFP funding.
- Assumes leverage-neutral property-level mortgage financing,
closing costs and funding of ERFP at end of year one.
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 statements are subject to
numerous assumptions and uncertainties, many of which are outside
Ashford Trust'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 Trust'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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SOURCE Ashford Hospitality Trust, Inc.