AHT Ashford Hospitality Trust Inc

DALLAS, Nov. 3, 2010 /PRNewswire-FirstCall/ -- Ashford Hospitality Trust, Inc. (NYSE: AHT) today reported the following results and performance measures for the third quarter ended September 30, 2010.  The proforma performance measurements for Occupancy, Average Daily Rate (ADR), revenue per available room (RevPAR), and Hotel Operating Profit (or Hotel EBITDA) include the Company's 100 hotels owned and included in continuing operations as of September 30, 2010.  Unless otherwise stated, all reported results compare the third quarter ended September 30, 2010, with the third quarter ended September 30, 2009 (see discussion below). The reconciliation of non-GAAP financial measures is included in the financial tables accompanying this press release.

FINANCIAL HIGHLIGHTS AND LIQUIDITY

• RevPAR increased 6.1% for the quarter for the hotels not under renovation
• Operating profit margin increased 192 basis points for the hotels not under renovation
• Net income attributable to common shareholders was $36.3 million, or $0.73 per diluted share, compared with net loss attributable to common shareholders of $33.6 million, or $0.52 per diluted share, in the prior-year quarter
• Adjusted funds from operations (AFFO) was $0.33 per diluted share
• Net debt to gross assets ratio improved to 54.9% compared with 57.8% a year ago
• Fixed charge coverage ratio was 1.83x under the senior credit facility covenant versus a required minimum of 1.25x

CAPITAL ALLOCATION

• Capex invested in the quarter was $13.0 million and $46.5 million year to date

CAPITAL STRUCTURE

On July 9, 2010, the Company restructured its $52.5 million loan with Capmark Bank secured by the JW Marriott San Francisco.  The modification provided a full extension of the loan maturity to March 2013 without tests and maintained the interest rate at 3.75% over LIBOR, subject to a LIBOR floor of 2.5%, in exchange for a reduction in the loan balance of $5.0 million. The loan had been set to mature in March 2011 and had two one-year extension options.  

On September 1, 2010, the Company sold the Hilton Suites in Auburn Hills, Michigan for $5.1 million, and on September 10, 2010, the Company transferred the Westin O'Hare in Rosemont, Illinois to the special servicer via a consensual deed in lieu of foreclosure, which resulted in a gain of $56.2 million in the third quarter and offset a previous impairment taken on the asset in 2009 to the level of non-recourse debt on the property.

On September 3, 2010, the Company entered into an "at-the-market" (ATM) program with JMP Securities to sell from time to time up to $50 million in common stock. No shares were sold during the third quarter pursuant to this program. Proceeds from the ATM program are expected to be used for general corporate purposes or to reduce outstanding borrowings on the Company's senior credit facility.

On September 22, 2010, the Company issued and sold 3,300,000 shares of its 8.45% Series D Cumulative Preferred Stock (liquidation preference $25.00 per share) for a gross price of $23.178 per share. The proceeds from the offering, along with available cash, were used by the Company to reduce outstanding borrowings under its existing senior credit facility from $250 million to approximately $75 million at quarter end.

SUBSEQUENT EVENTS

On October 19, 2010, the Company converted its $1.8 billion interest rate swap to a fixed rate of 4.09%. Under the previous swap, which expires in 2013, the Company received a fixed rate of 5.84% and paid a variable rate of LIBOR plus 2.64%, subject to a LIBOR floor of 1.25%. Under the terms of the new swap transaction, the Company will continue to receive a fixed rate of 5.84%, but will pay a fixed rate of 4.09%. The new transaction results in locked-in annual interest expense savings of approximately $32 million for the remaining term of the swap.

On October 29, 2010, the Company closed on a $105 million refinancing of the Marriott Gateway in Arlington, Virginia. The new loan, which has a 10-year term and fixed interest rate of 6.26%, replaces a $60.8 million loan set to mature in 2012 with an interest rate of LIBOR plus 4.0%. The excess proceeds were used to further reduce outstanding borrowings on the Company's senior credit facility.

PORTFOLIO REVPAR

As of September 30, 2010, the Company had a portfolio of direct hotel investments consisting of 100 properties classified in continuing operations.  During the third quarter, 94 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 100 hotels) and proforma not-under-renovation basis (94 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 100 hotels in continuing operations.  Details of each category are provided in the tables attached to this release.

• Proforma RevPAR increased 6.1% for hotels not under renovation on a 0.7% increase in ADR to $122.88 and a 372 basis point increase in occupancy
• Proforma RevPAR increased 5.1% for all hotels on a 0.6% increase in ADR to $124.15 and a 313 basis point increase in occupancy

HOTEL EBITDA MARGINS AND QUARTERLY SEASONALITY TRENDS

For the 94 hotels as of September 30, 2010 that were not under renovation, Proforma Hotel EBITDA increased 13.3% to $50.5 million. Proforma Hotel EBITDA margin (expressed as a percentage of Total Hotel Revenue) increased 192 basis points to 25.6%. For all 100 hotels included in continuing operations as of September 30, 2010, Proforma Hotel EBITDA increased 11.7% to $55.2 million and Hotel EBITDA margin increased 173 basis points to 25.4%.

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 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 100 hotels included in continuing operations are provided in the tables attached to this release.

Monty J. Bennett, Chief Executive Officer, commented, "We have sustained a sharp focus on improving our balance sheet and enhancing liquidity. The transactions completed during and subsequent to the quarter have reduced our leverage ratio, extended our maturities and locked-in significant interest expense savings. Our capital allocation strategies have also created tremendous shareholder value through the repurchase of over 73 million shares of common stock during a period when most of our peers were issuing equity, and the repurchase and subsequent reissuance of preferred stock at substantial premiums.

"Our asset management strategies have also delivered significant results as our strong flowthrough and operating discipline across the portfolio, continue to leverage improving RevPAR trends. While we are encouraged by the continued traction in lodging fundamentals, we will maintain a cautiously optimistic outlook until we see more clarity in job growth, business travel, and the general economic recovery."

INVESTOR CONFERENCE CALL AND SIMULCAST

Ashford Hospitality Trust, Inc. will conduct a conference call on Thursday, November 4, 2010, at 12 p.m. ET.  The number to call for this interactive teleconference is (212) 231-2901.  A replay of the conference call will be available through Thursday, November 11, 2010, by dialing (402) 977-9140 and entering the confirmation number, 21463991.

The Company will also provide an online simulcast and rebroadcast of its third quarter 2010 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, November 4, 2010, beginning at 12 p.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 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, second 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 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.