AHT Ashford Hospitality Trust Inc

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (date of earliest event reported):  August 7, 2014

ASHFORD HOSPITALITY TRUST, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code (972) 490-9600

Check the appropriated box if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o                        Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o                        Soliciting material pursuant to Rule 14-a-12 under the Exchange Act (17 CFR 240.14a-12)

o                        Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o                        Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02.  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On August 7, 2014, Ashford Hospitality Trust, Inc. (the “Company”) issued a press release announcing its financial results for the second quarter ended June 30, 2014.  A copy of the press release is attached hereto as Exhibit 99.1.

The information in this Form 8-K and Exhibits attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

ITEM 9.01.  FINANCIAL STATEMENTS AND EXHIBITS

Exhibits

99.1                        Second Quarter 2014 Earnings Press Release of the Company, dated August 7, 2014.

2

SIGNATURE

Pursuant to the requirements of Section 12 of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated:  August 7, 2014

3

Exhibit 99.1

ASHFORD TRUST REPORTS SECOND QUARTER 2014 RESULTS

Strong RevPAR Increase of 7.7% for All Hotels for the Second Quarter

DALLAS, August 7, 2014 —Ashford Hospitality Trust, Inc. (NYSE: AHT) (“the Company” or “Ashford Trust”) today reported financial results and performance measures for the second quarter ended June 30, 2014.  Prior to the third quarter of 2013, the Company reported its Legacy Portfolio and Highland Hospitality Portfolio pro forma hotel operating statistics separately.  In the third quarter 2013, the Company changed its reporting format and now combines the pro forma hotel operating statistics for its Legacy Portfolio and Ashford Trust’s pro rata share of the Highland Hospitality Portfolio as the Ashford Trust Portfolio.  The performance measurements for Occupancy, Average Daily Rate (ADR), Revenue Per Available Room (RevPAR), and Hotel Operating Profit (or Hotel EBITDA) are pro forma.  Unless otherwise stated, all reported results compare the second quarter ended June 30, 2014, with the second quarter ended June 30, 2013 (see discussion below).  The reconciliation of non-GAAP financial measures is included in the financial tables accompanying this press release.

FINANCIAL AND OPERATING HIGHLIGHTS

·                  RevPAR for the Ashford Trust Portfolio hotels increased 7.7% during the quarter

·                  RevPAR for all Ashford Trust Portfolio hotels not under renovation increased 7.8% during the quarter

·                  Hotel EBITDA increased 7.7% for all Ashford Trust Portfolio hotels

·                  Hotel EBITDA Margin increased 56 basis points for all Ashford Trust Portfolio hotels

·                  Net loss attributable to common shareholders for the Company was $10.1 million, or $0.11 per diluted share, compared with net loss attributable to common shareholders of $1.4 million, or $0.02 per diluted share, in the prior-year quarter

·                  Adjusted funds from operations (AFFO) for the Company was $0.39 per diluted share for the quarter as compared with $0.55 from the prior-year quarter

·                  The prior year results include the operations of the Ashford Prime portfolio

·                  At the end of the second quarter 2014, the Company had total net working capital, including its pro rata share of the Highland Hospitality Portfolio net working capital and the market value of its OP Units in Ashford Prime, of $467 million

·                  On July 18, 2014, the Company closed on the $8.0 million acquisition of the 39-room Ashton Hotel in Fort Worth, TX

·                  On August 6, 2014, the Company closed on the $50.0 million acquisition of the 357-room Fremont Marriott Silicon Valley

·                  More recently, the Company announced it had refinanced three mortgage loans with an outstanding balance of $325 million with new loans totaling $469 million resulting in approximately $104 million of excess proceeds after reserves and closing costs; the refinancing also unencumbered two hotels

·                  David Kimichik, the Company’s former Chief Financial Officer and Treasurer, retired on June 13, 2014, following a career spanning over 32 years with the Company and its predecessor; Deric Eubanks, formerly the Company’s Senior Vice President of Finance, succeeded him as Chief Financial Officer and Treasurer reporting to Ashford Trust Chairman and Chief Executive Officer, Monty J. Bennett

-MORE-

CAPITAL EXPENDITURES

·                  Capex invested in the quarter for the Ashford Trust Portfolio was $40 million

CAPITAL STRUCTURE

At June 30, 2014, the Company had total assets of $2.7 billion in continuing operations, and $3.6 billion overall including the Highland Hospitality Portfolio which is not consolidated.  As of June 30, 2014, the Company had $1.8 billion of mortgage debt in continuing operations and $2.6 billion overall including the Highland Hospitality Portfolio.  Ashford Trust’s total combined debt had a blended average interest rate of 5.6%.

On April 9, 2014, the Company announced it had priced its follow-on public offering of 7,500,000 shares of common stock at $10.70 per share.  Settlement of the offering occurred on April 14, 2014, generating total net proceeds of $77 million.  On May 14, 2014, the Company’s underwriters exercised in part their option to purchase an additional 850,000 shares of common stock from the Company in connection with the offering.  In total, the Company sold 8,350,000 shares of common stock for total proceeds of $85.5 million.

On May 1, 2014, the Company closed on a refinancing of the Courtyard Manchester.  The previous $5.0 million loan was refinanced with a $6.9 million loan.  The new loan has a ten year term with a fixed interest rate of 4.99% and 30-year amortization.  The hotel is owned in a joint venture with Interstate Hotels & Resorts where the Company owns 85% and Interstate owns 15%.  The excess proceeds after transaction costs were distributed to the partners on a pro rata basis.

On July 18, 2014, the Company closed on the acquisition of the 39-room Ashton Hotel in Fort Worth, Texas for $8.0 million.  The Ashton Hotel is a luxury, boutique hotel located in downtown Fort Worth, two blocks from the Company’s Hilton Fort Worth.  The Company’s affiliated property management company, Remington Lodging, took over management of the hotel at closing and will complex the executive staff with the Hilton.  During 2013, the Ashton Hotel achieved occupancy of 70% with an Average Daily Rate of $213.  The company financed the hotel with a non-recourse, $5.5 million loan with a term of five years.

On August 6, 2014, the Company closed on its acquisition of the 357-room Fremont Marriott Silicon Valley hotel at a purchase price of $50.0 million.  On a forward 12-month basis, the purchase price represents an estimated cap rate of 8.1% on net operating income, which equates to an expected 10.0x forward EBITDA multiple.  Located in the vibrant Silicon Valley submarket of the Bay Area in Northern California, the hotel features approximately 15,000 square feet of meeting space spread across 19 flexible meeting areas.  The Company financed the property with a $37.5 million non-recourse mortgage loan.  The loan has a term of two years with three, one-year extension options and bears interest at a floating rate of LIBOR + 4.20%.  At closing, the management of the property was transferred to Remington Lodging.

Additionally, the Company recently announced it had successfully refinanced three mortgage loans with an outstanding balance of approximately $325 million.  The three previous mortgage loans that were refinanced include: the $135 million J.P. Morgan Floater loan; the $101 million UBS 1 loan; and the $89 million Merrill Lynch 3 loan.  The new loans total $469 million and include a $301 million loan with a two-year initial term and three one-year extension options that bears interest at a floating rate of LIBOR + 4.35%; a $62.9 million loan with a two-year initial term and three one-year extension options that bears interest at a floating rate of LIBOR + 4.35%; a $67.52 million loan with a ten-year term that bears interest at a fixed rate of 5.20%; a $12.5 million loan with a ten-year term that bears interest at a fixed rate of 4.85%; and a $24.98 million loan with a ten-year term that bears interest at a fixed rate of 4.90%.  In total, the refinancing resulted in excess net proceeds, after closing costs and capital expenditure reserves, of approximately $104 million, and unencumbered two hotels.

2

PORTFOLIO REVPAR

As of June 30, 2014, the Ashford Trust Portfolio consisted of direct hotel investments with 114 properties classified in continuing operations.  During the second quarter of 2014, 100 of the Ashford Trust Portfolio hotels included in continuing operations were not under renovation.  The Company believes reporting its operating metrics for the Ashford Trust Portfolio hotels in continuing operations on a pro forma total basis (all 114 hotels) and pro forma not under renovation basis (100 hotels) is a measure that reflects a meaningful and focused comparison of the operating results in its portfolio.  Details of each category are provided in the tables attached to this release.

·                  Pro forma RevPAR increased 7.7% to $113.40 for all hotels in the Ashford Trust Portfolio on a 4.3% increase in ADR and a 3.3% increase in occupancy

·                  Pro forma RevPAR increased 7.8% to $114.30 for hotels not under renovation in the Ashford Trust Portfolio on a 4.3% increase in ADR and a 3.4% increase in occupancy

HOTEL EBITDA MARGINS AND QUARTERLY SEASONALITY TRENDS

The Company 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 Hotel EBITDA and Hotel EBITDA Margin for the current and certain prior-year periods based upon the number of hotels in the Ashford Trust Portfolio, including its pro-rata share of the Highland Hospitality Portfolio as of the end of the current period.  As the Company’s portfolio mix changes from time to time so will the seasonality for Pro forma Hotel EBITDA and Pro forma Hotel EBITDA margin.  The details of the quarterly calculations for the previous four quarters for the 114 Ashford Trust Portfolio hotels are provided in the table attached to this release.

ASHFORD, INC. SPIN-OFF

As previously disclosed on February 27, 2014, Ashford Trust’s Board of Directors unanimously approved a plan to spin-off its asset management business into a separate publicly traded company in the form of a taxable distribution.  The distribution will be comprised of common stock in Ashford, Inc. (“Ashford Inc.”), a newly formed or successor company of the Company’s existing advisor subsidiary, Ashford Hospitality Advisors LLC, which currently advises Ashford Hospitality Prime, Inc. (NYSE: AHP) (“Ashford Prime”).  The Company plans to file a listing application for Ashford Inc. with the NYSE MKT Exchange.  This distribution is anticipated to be declared during the third quarter of 2014; however, it remains subject to the review of the registration statement on Form 10 filed with the Securities and Exchange Commission (“SEC”) on April 7, 2014, the approval of the listing of shares by the applicable exchange, and other legal requirements. The Company cannot be certain this distribution will proceed or proceed in the manner as currently anticipated.

RETIREMENT AND NAMING OF NEW CHIEF FINANCIAL OFFICER

On June 13, 2014, David Kimichik, the Company’s former Chief Financial Officer and Treasurer, retired following a career spanning over 32 years with the Company and its predecessor.  Deric Eubanks, formerly the Company’s Senior Vice President of Finance, succeeded him as Chief Financial Officer and Treasurer reporting to Ashford Trust Chairman and Chief Executive Officer, Monty J. Bennett.

Prior to his role as Senior Vice President of Finance, Mr. Eubanks was Vice President of Investments and was responsible for sourcing and underwriting hotel investments including direct equity investments, joint venture equity, preferred equity, mezzanine loans, first mortgages, B-notes, construction loans, and other debt securities.  Before joining Ashford Trust, Mr. Eubanks was a Manager of Financial Analysis for ClubCorp, where he assisted in underwriting and analyzing investment opportunities in the golf and resort industries.  Mr. Eubanks earned a BBA from Southern Methodist University and is a CFA charterholder.

3

COMMON STOCK DIVIDEND

On June 13, 2014, the Company announced that its Board of Directors had declared a quarterly cash dividend of $0.12 per diluted share for the Company’s common stock for the second quarter ending June 30, 2014, payable on July 15, 2014, to shareholders of record as of June 30, 2014.

“We made substantial progress during the second quarter and subsequent period in strengthening our capital structure while also enhancing our hotel portfolio.  Our accomplishments include our equity raise in April, the recently completed loan refinancing, and our recent hotel acquisitions.  These accomplishments speak to the nature of Ashford Trust’s strategy to capitalize on opportunistic lodging investments and capital market conditions,” commented Monty J. Bennett, Ashford Trust’s Chairman and Chief Executive Officer.  “We continue to pursue investment opportunities that we believe are accretive to long-term shareholder returns and will also continue to stay in front of our debt maturities by strategically refinancing loans and capitalizing on the current attractive debt market conditions.”

INVESTOR CONFERENCE CALL AND SIMULCAST

Ashford Hospitality Trust, Inc. will conduct a conference call on Friday, August 8, 2014, at 11:00 a.m. ET.  The number to call for this interactive teleconference is (913) 981-5551.  A replay of the conference call will be available through Friday, August 15, 2014, by dialing (719) 457-0820 and entering the confirmation number, 7335033.

The Company will also provide an online simulcast and rebroadcast of its second quarter 2014 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 Friday, August 8, 2014, beginning at 11:00 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 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 the United States.

Follow Chairman and CEO Monty Bennett on Twitter at www.twitter.com/MBennettAshford or @MBennettAshford.

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.”

4

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; the degree and nature of our competition; and the satisfaction of conditions to, or the completion of, the proposed spin-off of Ashford Inc.  These and other risk factors are more fully discussed in Ashford Trust’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.  Hotel EBITDA flow-through is the change in Hotel EBITDA divided by the change in total revenues.  Hotel EBITDA Margin is Hotel EBITDA divided by total 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.

5

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

-MORE-

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

-MORE-

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

RECONCILIATION OF NET INCOME (LOSS) TO EBITDA

(in thousands)

(unaudited)

(1)         Other income, primarily consisting of income from interest rate derivatives and net realized gain/loss on marketable securities in both periods, is excluded from Adjusted EBITDA. 

RECONCILIATION OF NET INCOME (LOSS) TO FUNDS FROM OPERATIONS (“FFO”)

(in thousands, except per share amounts)

(unaudited)

(1)         Other income, primarily consisting of net realized gain/loss on marketable securities in both periods, is excluded from Adjusted FFO.

-MORE-

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

ASHFORD TRUST (INCLUDING 71.74% PRO RATA SHARE OF HIGHLAND HOSPITALITY PORTFOLIO)

SUMMARY OF INDEBTEDNESS

JUNE 30, 2014

(dollars in thousands)

(unaudited)