DALLAS, June 17, 2013 /PRNewswire/ -- Ashford Hospitality
Trust, Inc. (NYSE: AHT) ("Ashford Trust" or the "Company") today
announced that the Company's Board of Directors approved a plan to
spin-off an 80% ownership interest in an 8-hotel portfolio,
totaling 3,146 rooms (2,912 owned rooms), to holders of Ashford
Trust common stock in the form of a taxable special
distribution. The distribution is expected to be comprised of
common stock in Ashford Hospitality Prime, Inc. ("Ashford Prime"),
a newly formed company to which Ashford Trust plans to transfer the
portfolio interests. This distribution is expected to be made
on a pro rata basis to holders of Ashford Trust common stock as of
the distribution record date. The distribution is expected to
take place toward the end of the third quarter. Ashford Prime
is expected to qualify as a real estate investment trust ("REIT")
for federal income tax purposes, and intends to file an application
to list its shares of common stock on the New York Stock Exchange,
under the symbol "AHP."
Conference Call:
Ashford Trust will conduct a conference call today at
5:00 p.m. ET to discuss the
transaction. The number to call for this interactive teleconference
is (480) 629-9818 or (866) 225-8754, and the conference ID is
4625803. A seven-day replay of the conference call will be
available by dialing (303) 590-3030 or (800) 406-7325 and entering
the confirmation number, 4625803.
The Company will also provide an online simulcast and
rebroadcast of its conference call. The live broadcast of Ashford
Trust's call will be available online at the Company's website,
www.ahtreit.com, on June 17, 2013, beginning at
5:00 p.m. ET. The online replay will
follow shortly after the call and continue for approximately one
year.
Ashford Hospitality Prime:
Ashford Prime will have a focused strategy to invest primarily
in high RevPAR hotels located predominantly in domestic and
international gateway markets. The initial portfolio will
consist of the Hilton La Jolla Torrey Pines, Capital Hilton in
Washington, D.C., Marriott Plano
Legacy Town Center, Seattle Marriott Waterfront, Courtyard San
Francisco Downtown, Courtyard Seattle Downtown, Courtyard
Philadelphia Downtown, and Renaissance Tampa International
Plaza. Ashford Prime also plans to operate at a more
conservative leverage level than Ashford Trust. The high
quality of the Ashford Prime portfolio, as well as the focused
investment strategy and lower leverage profile, have been designed
with the goal to make Ashford Prime attractive to a broad range of
investors and to distinguish itself from Ashford Trust.
Ashford Prime will be externally advised by Ashford Hospitality
Advisors LLC ("Ashford Advisors"), which will be a subsidiary of
Ashford Trust, pursuant to an advisory agreement. Ashford
Trust's operating partnership will retain a 20% ownership interest
in Ashford Prime's operating partnership. For the year ended
December 31, 2012, the initial
Ashford Prime hotels had RevPAR of $140, total revenues of $221.2 million, and Hotel EBITDA of $73.0 million. As of March 31, 2013, the initial portfolio also had
total debt of $628 million and no
debt maturities until 2017. The post-spin-off Ashford Trust
portfolio will look similar to how it looks today. Ashford
Trust will have 115 hotels with a 2012 RevPAR of approximately
$95, which is only $4 less than the portfolio RevPAR
pre-spin-off. Also, the leverage level for Ashford Trust is
expected to reduce slightly post-spin-off.
Ashford Trust's Chairman and Chief Executive Officer,
Monty J. Bennett commented, "We are
constantly searching for ways to maximize stockholder value.
Over the past year, we have made a concerted effort to improve our
transparency and communications with the investor and analyst
community regarding our historical total stockholder return, our
debt management strategy, and asset performance by debt pool.
After analyzing several strategies to maximize stockholder value,
the Board decided to pursue a spin-off of Ashford Prime."
Rationale for the Transaction:
- Creation of Two Focused Companies Creates Clarity: After
the separation, Ashford Prime will focus primarily on luxury,
upper-upscale, and upscale hotels anticipated to generate RevPAR at
least twice the national average (approximately $130 and higher). Ashford Trust will
continue to focus on all segments of the hospitality industry, with
RevPAR criteria outside the Ashford Prime investment
focus.
- Potential for a Higher Aggregate Market Value for
Stockholders: The separation will enable potential investors
and the financial community to evaluate the performance of each
company separately, which may result in a higher aggregate market
value than the value of the existing combined company.
- Tailored Capital Structure More Efficient: Each company
will have the flexibility to create a capital structure tailored to
its strategic goals and consistent with its stockholders'
interests. In addition, these tailored capital structures
should facilitate each company's ability to grow through
acquisitions and strategic alliances, possibly using units of the
operating partnerships as currency. The spin-off should
result in a lower cost of capital for Ashford Prime which should
enable it to pursue and acquire accretive transactions.
- Conservative Capital Structure: Ashford Prime will
emphasize a low-leverage capital structure over time, with a target
net debt and preferred equity / EBITDA level of 5.0x or
lower. This should allow it to capitalize on favorable
acquisition and investment opportunities.
Monty J. Bennett continued, "We
are excited to announce this spin-off transaction of Ashford Prime
and we look forward to the opportunities this spin-off could
provide. Meanwhile, the Ashford Trust portfolio continues to
offer stockholders the same opportunistic approach that we've
implemented for the past decade. Further, we believe Ashford
Prime and Ashford Trust will both be well positioned to grow
through acquisitions and capitalize on the attractive industry
fundamentals we expect to experience for the next several
years."
Ashford Prime will enter into option agreements with Ashford
Trust to acquire the Pier House Resort and the Crystal Gateway
Marriott. Ashford Prime will have the right to exercise the
Crystal Gateway Marriott option, after a 6-month lock-out, for a
period of twelve months, and the Pier House Resort option for a
period of 18 months after the date of the distribution. The
697-room Crystal Gateway Marriott is located in Crystal City, VA, just outside Washington, D.C. The purchase price for
the Crystal Gateway Marriott will be determined based on fair
market value at the time of acquisition determined by an
independent appraiser. If Ashford Prime exercises the option
to acquire the Crystal Gateway Marriott, the purchase price will be
payable in the form of operating partnership units. The Pier
House Resort is a 142-room luxury hotel located in Key West, FL that was recently acquired by
Ashford Trust. During the first six months of the option
period, the purchase price for the Pier House Resort will be
Ashford Trust's actual acquisition price plus closing costs of
approximately $90.6 million plus any
owner-funded capital expenditures. If Ashford Prime exercises
the option to acquire the Pier House Resort, the purchase price
will be payable in either cash or operating partnership units of
Ashford Prime's operating partnership, at Ashford Trust's
election. Ashford Trust will also enter into a right of first
offer ("ROFO") agreement with Ashford Prime regarding certain
hotels currently owned by Ashford Trust that satisfy the investment
criteria of Ashford Prime. The right of first offer will give
Ashford Prime the first right to acquire each of the ROFO hotels to
the extent the board of directors of Ashford Trust determines it is
appropriate to market and sell the ROFO hotels, subject to certain
prior rights granted to the hotel managers and limitations on
hotels that are held in a joint venture. Consideration for
the ROFO hotels could be cash or operating partnership units.
Advisory Agreement:
Prior to the distribution of Ashford Prime common stock to
Ashford Trust stockholders, Ashford Prime will enter into an
advisory agreement with Ashford Advisors. This agreement will
require Ashford Advisors to manage the day-to-day operations of
Ashford Prime in conformity with its investment guidelines.
The advisory agreement will have an initial term of five years and
will be automatically renewed, subject to certain conditions, for
one-year terms thereafter. Ashford Advisors will be entitled
to a base management fee of 0.70% of the total enterprise value of
Ashford Prime, subject to a floor. Ashford Advisors will also
be entitled to an incentive fee based on Ashford Prime's total
annual stockholder return outperformance compared to its defined
peers. The advisory agreement has been structured to ensure
close management alignment with stockholders. The base
management fee is based upon total enterprise value rather than
gross assets and the incentive fee is based on total stockholder
return outperformance of Ashford Prime compared to a defined peer
group. Additionally, insider ownership, directly or
indirectly, together with related parties of approximately 21% of
Ashford Prime will be significantly above the average lodging REIT
insider ownership of 2% and establishes a clear and close alignment
of management's interest with stockholders. Another example
of the close management alignment with stockholders is that Ashford
Trust will own 20% of Ashford Prime's operating partnership.
A significant amount of the insider ownership and all of the
external advisor's ownership will be partnership units which will
not have any voting power on matters voted on by
stockholders. Unlike many privately held management advisors,
Ashford Advisors will be a subsidiary of Ashford Trust, a publicly
traded, NYSE listed company. Upon completion of the Ashford
Prime spin-off, the initial stockholders in Ashford Prime will own
an interest in Ashford Advisors via their ownership of shares in
Ashford Trust.
Corporate Governance Structure:
Ashford Prime will have a corporate governance structure that
will provide transparency to investors and promote the long-term
interests of stockholders. Some of the significant features
of Ashford Prime's corporate governance structure include:
- External advisor owned by a publicly traded company.
- Board of directors elected annually, which is expected to have
five of seven independent members, including an independent lead
director.
- Four of the independent directors, including the lead director,
will have no prior affiliation with Ashford Trust.
- Corporate governance policy requires that the board consist of
at least two-thirds independent directors at all times when the
chairman is not independent.
- Charter provision and corporate governance policy that address
potential conflicts.
- Opt out of certain Maryland
law antitakeover provisions.
- No stockholder rights plan unless stockholders approve or
ratify the plan.
- Base management fee calculated on market-based total enterprise
value.
- Incentive fee based upon total stockholder return
outperformance compared to a peer group.
- Significant advisor and employee ownership, the majority of
which will be partnership units which will not have any voting
power on matters voted on by stockholders.
Financial Advisor:
BofA Merrill Lynch served as financial advisor to Ashford Trust
in connection with the spin-off.
Form 10 Registration Statement:
Ashford Prime has filed a registration statement on Form 10 with
the Securities and Exchange Commission ("SEC") with respect to the
planned spin-off. The special distribution is anticipated to
be declared toward the end of the third quarter of 2013; however,
it remains subject to the SEC reviewing and declaring effective
Ashford Prime's registration statement, as well as the satisfaction
of a number of other conditions, including receipt of third-party
consents. We cannot be certain this distribution will proceed
or proceed in a manner as currently anticipated.
Ashford
Hospitality Prime
|
($ in
thousands)
|
|
|
|
|
|
|
|
Initial
Portfolio:
|
|
|
|
|
|
|
Hotel
|
Location
|
Ownership %
|
Total
Rooms
|
Owned
Rooms
|
2012
RevPAR
|
2012
Hotel
EBITDA(1)
|
Hilton La Jolla
Torrey Pines
|
La Jolla,
CA
|
75%
|
394
|
296
|
$
126.19
|
$
8,898
|
The Capital
Hilton
|
Washington,
D.C.
|
75%
|
544
|
408
|
176.09
|
15,285
|
Marriott Plano Legacy
Town Center
|
Plano, TX
|
100%
|
404
|
404
|
107.91
|
8,392
|
Seattle Marriott
Waterfront
|
Seattle,
WA
|
100%
|
358
|
358
|
155.64
|
10,521
|
Courtyard San
Francisco Downtown
|
San Francisco,
CA
|
100%
|
405
|
405
|
176.66
|
10,135
|
Courtyard Seattle
Downtown
|
Seattle,
WA
|
100%
|
250
|
250
|
107.02
|
4,860
|
Courtyard
Philadelphia Downtown
|
Philadelphia,
PA
|
100%
|
498
|
498
|
125.56
|
9,805
|
Renaissance Tampa
International Plaza
|
Tampa, FL
|
100%
|
293
|
293
|
120.57
|
5,144
|
Total
|
|
|
3,146
|
2,912
|
$
140.20
|
$
73,040
|
|
|
|
|
|
|
|
Option
Hotels:
|
|
|
|
|
|
|
Pier House Resort
& Spa
|
Key West,
FL
|
100%
|
142
|
142
|
$
275.50
|
|
Crystal Gateway
Marriott
|
Arlington,
VA
|
100%
|
697
|
697
|
136.97
|
|
|
|
|
|
|
|
|
ROFO
Hotels:
|
|
|
|
|
|
|
Crowne Plaza Beverly
Hills
|
Beverly Hills,
CA
|
100%
|
260
|
260
|
$
133.00
|
|
Embassy Suites
Crystal City
|
Arlington,
VA
|
100%
|
267
|
267
|
156.81
|
|
Crowne Plaza Key
West
|
Key West,
FL
|
100%
|
160
|
160
|
177.08
|
|
Hyatt Coral
Gables
|
Coral Gables,
FL
|
100%
|
242
|
242
|
133.98
|
|
One Ocean
Jacksonville
|
Jacksonville,
FL
|
100%
|
193
|
193
|
108.41
|
|
Houston Embassy
Suites
|
Houston,
TX
|
100%
|
150
|
150
|
134.86
|
|
Portland Embassy
Suites
|
Portland,
OR
|
100%
|
276
|
276
|
131.83
|
|
Ritz-Carlton
Atlanta*
|
Atlanta,
GA
|
72%
|
444
|
319
|
123.60
|
|
Hilton Boston Back
Bay*
|
Boston, MA
|
72%
|
390
|
280
|
184.47
|
|
Courtyard Boston
Downtown*
|
Boston, MA
|
72%
|
315
|
226
|
133.64
|
|
The
Churchill*
|
Washington,
D.C.
|
72%
|
173
|
124
|
122.99
|
|
The
Melrose*
|
Washington,
D.C.
|
72%
|
240
|
172
|
122.00
|
|
|
|
|
|
|
|
|
* These hotels
are owned by a joint venture in which Ashford hold an approximate
72% common equity interest and a $25 million preferred
equity interest. To the extent
Ashford has the opportunity to acquire the entire interest in these
hotels or controls the right to sell these hotels,
the right of first offer agreement
between Ashford Prime and Ashford will extend to these
properties.
|
(1)Represents total
Hotel EBITDA, not pro rata share.
|
|
Year Ended December
31, 2012
|
|
The Capital
Hilton
|
Hilton La Jolla Torey
Pines
|
Courtyard San
Francisco Downtown
|
Courtyard Seattle
Downtown
|
Marriott Plano Legacy
Town Center
|
Seattle Marriott
Waterfront
|
Renaissance Tampa
International Plaza
|
Courtyard
Philadelphia Downtown
|
Hotel
Total
|
Corporate /
allocated(1)
|
Ashford Hospitality
Prime, Inc.
|
Net income
attributable to the Company
|
$5,144
|
$2,592
|
$7,363
|
$3,037
|
$5,045
|
$6,724
|
$2,950
|
$4,337
|
$37,192
|
($41,373)
|
($4,545)
|
Income from
consolidated entities attributable to non-controlling
interest
|
1,824
|
966
|
-
|
-
|
-
|
-
|
-
|
-
|
2,790
|
-
|
2,790
|
Net income
|
6,968
|
3,558
|
7,363
|
3,037
|
5,045
|
6,724
|
2,950
|
4,337
|
39,982
|
(41,373)
|
(1,755)
|
Non Property
Adjustments
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
13,512
|
13,512
|
Interest
income
|
(1)
|
(2)
|
(3)
|
(1)
|
(1)
|
(2)
|
-
|
(2)
|
(12)
|
(16)
|
(28)
|
Interest
expense
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
2,096
|
2,096
|
27,821
|
29,917
|
Amortization of loan
costs
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
33
|
33
|
-
|
33
|
Depreciation and
amortization
|
7,474
|
4,855
|
2,773
|
1,778
|
3,338
|
3,783
|
2,193
|
3,356
|
29,550
|
(2,925)
|
26,626
|
Income tax
expense
|
572
|
484
|
-
|
-
|
-
|
-
|
-
|
(17)
|
1,039
|
3,345
|
4,384
|
Non-Hotel EBITDA
ownership expense
|
272
|
3
|
2
|
46
|
10
|
16
|
1
|
2
|
352
|
-
|
352
|
Hotel EBITDA
(including amounts attributable to non-controlling
interest)
|
$15,285
|
$8,898
|
$10,135
|
$4,860
|
$8,392
|
$10,521
|
$5,144
|
$9,805
|
$73,040
|
-
|
$73,040
|
Less Hotel EBITDA
attributable to noncontrolling interest
|
(3,821)
|
(2,225)
|
-
|
-
|
-
|
-
|
-
|
-
|
(6,046)
|
-
|
(6,046)
|
Hotel EBITDA
attributable to the Company
|
$11,464
|
$6,673
|
$10,135
|
$4,860
|
$8,392
|
$10,521
|
$5,144
|
$9,805
|
$66,994
|
-
|
$66,994
|
(1) Represents
expenses not recorded at the individual hotel property
level.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ashford Hospitality Trust is a real estate investment trust
(REIT) focused on investing opportunistically in the hospitality
industry across all segments and at all levels of the capital
structure primarily within in the United States. Additional
information can be found on the Company's website at
www.ahtreit.com.
Follow Chairman and CEO Monty
Bennett on Twitter at www.twitter.com/MBennettAshford or
@MBennettAshford.
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. Hotel EBITDA is adjusted EBITDA for the hotel
properties before corporate general and administrative expense,
before corporate-level property taxes, insurance and other items
and after other adjustments. EBITDA yield is defined as
trailing twelve month EBITDA divided by the purchase price.
EBITDA multiple is defined as the purchase price divided by the
annual EBITDA. 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.
SOURCE Ashford Hospitality Trust, Inc.