DALLAS, Feb. 27, 2017 /PRNewswire/ -- Ashford Hospitality
Trust, Inc. (NYSE: AHT) ("Ashford Trust") today made the following
statements in response to the press release issued by FelCor
Lodging Trust Incorporated (NYSE: FCH) ("FelCor") on February 24, 2017.
Ashford Trust previously announced on February 21, 2017 that it submitted a non-binding
proposal to acquire FelCor for a fixed exchange ratio of 1.192
shares of Ashford Trust per share of FelCor, a total of 400,000
shares of Ashford Inc. (NYSE MKT: AINC) (the "Advisor"), and a
total of 100,000 warrants to purchase Ashford Inc. shares. We
believe that this proposal provides an attractive value to FelCor
shareholders and question what other alternatives would give FelCor
shareholders more value than our offer.
We believe that FelCor's February
24th statements regarding Ashford Trust's value
creating proposal are misguided and misleading. We believe there
are both immediate and longer term strategic and financial benefits
from this combination. In the interest of all shareholders, we
clarify FelCor's statements with our views:
FelCor's claim that the transaction is dilutive to Ashford
Trust is short-sighted and misleading. We project that our proposal
will be accretive to both sets of shareholders.
Ashford Trust evaluates and executes potential transactions
based on long term total shareholder returns as opposed to what we
believe is FelCor's focus on short term earnings accretion. We
believe a short term approach fails to establish strategies to
maximize shareholder value. This transaction, while significantly
accretive to Adjusted FFO on a leverage neutral basis, is expected
to de-leverage Ashford Trust by over 1.0x on a net debt/EBITDA
basis, which may result in slightly lower earnings in the short
term. However, FelCor's estimates of the near term dilution are
misleading and mistaken as these exclude $18
million of guaranteed synergies.
Most importantly, we see the potential of near term sustainable
synergies, $18 million of which will
be guaranteed by Ashford Trust's advisor, Ashford Inc., as
offsetting the premium paid with the possibility for more
significant synergies over the longer term.
Our conviction for value realization of incremental synergies is
rooted in our assessment of historical comparisons with FelCor's
operating results. Our data shows consistent outperformance by
Ashford Trust compared to FelCor in terms of EBITDA flow through by
a wide margin of approximately 21.4 percentage points per year on
average post 2010. We expect to see near term positive impact from
the implementation of our highly capable asset management efforts,
and over time this economic difference can have a significant
compounding effect, which we expect to lead to even greater
accretion opportunities for both shareholders.
FelCor's claim that synergies would be negated by advisory
fees does not add up. In fact, G&A savings would be
significant, even before achieving projected operational
synergies.
FelCor's statements are simply incorrect. The fees to be paid to
Ashford Inc. will replace the current G&A at FelCor, which fees
we expect will be lower by approximately $11
million than the current G&A at FelCor. Ashford Trust
estimates that the base management fees paid to Ashford Inc. will
be approximately $18 million and
estimates incremental G&A costs will be approximately
$3 million, totaling approximately
$21 million. With FelCor's current
total G&A run rate of approximately $32
million, this is a potential G&A savings of $11 million compared to FelCor's G&A.
Additionally, based on our observed operational benchmarking, we
expect significant near term and longer term operating synergies.
We have stated we believe there are potentially $18-$30 million of total G&A and operational
savings resulting from this transaction. These synergies are
expected to be sustainable and recurring and underscore the
benefits of this combination for both sets of shareholders.
With respect to FelCor's claim that hotel management would be
transferred to Remington Lodging & Hospitality, LLC
("Remington"), our understanding is that nearly all of FelCor's
properties are currently brand managed. However, we believe based
upon the historical performance of Remington that improved
operating performance may be generated from a change in hotel
property management if one were to occur. As with the fees
currently paid to the brands for such services, the fees
potentially paid to Remington in such a circumstance would be
consistent with the market fee structure already in place with
Remington. If the pending combination of Remington and Ashford Inc.
occurs, our proposed transaction between Ashford Trust and FelCor
provides for FelCor shareholders to receive Ashford Inc. shares
representing a direct 20% interest in Ashford Inc. in the
aggregate, and thus the ability to participate in the shareholder
benefits of such incremental fees.
FelCor's claim that neither FelCor nor Ashford Trust
shareholders would share in the potential upside to Ashford Inc. is
incorrect. FelCor shareholders will be granted 20% direct ownership
in Ashford Inc. and will own 25% in total through their ownership
of Ashford Trust.
As part of our proposal, we have offered a total 400,000 shares
of Ashford Inc. to FelCor shareholders representing 20% direct
ownership in Ashford Inc. Furthermore, on a combined basis, FelCor
shareholders will own an even greater percentage of the Advisor
(approximately 25% in total) through Ashford Trust's additional
ownership of Ashford Inc. As Ashford Inc. publicly highlighted, it
remains committed to supporting this transaction and will provide
warrants to FelCor shareholders to capture the impact of future
value creation in the portfolio. Ashford Inc. is also standing
behind the synergies, further providing value to both sets of
shareholders.
FelCor's position on leverage does not enhance value. Ashford
Trust has a proven debt strategy that can deliver superior
shareholder
value.
Ashford Trust has a prudent debt strategy for the pro forma
combined company and has successfully executed its leverage policy,
strategically using debt to maximize shareholder returns. We do not
believe that lower leverage is the panacea to generate better
shareholder returns as evidenced by Ashford Trust's total
shareholder return performance versus the peers including lodging
REITs that considerably deleveraged their balance sheets. Compared
to these REITs, Ashford Trust has delivered significant total
shareholder return outperformance over the last 10 years. Ashford
Trust plans for the combined company to maintain Ashford Trust's
leverage target of 55-60% net debt to gross assets and to
opportunistically remove recourse bonds and replace them with
non-recourse, property-level debt. While the leverage of the pro
forma company would be different from FelCor's current debt
strategy, Ashford Trust believes its planned debt structure would
generate superior returns. Furthermore, there is approximately 67%
institutional cross shareholder ownership in the two companies,
which further supports the case for strong shareholder acceptance
of Ashford Trust's approach to managing leverage.
FelCor's claim that it should have greater board
representation is without merit. The proposal is appropriate when
considering the premium offered and the FelCor board track
record.
Our proposal to accommodate three FelCor board members is
generous to FelCor when considering the premium being paid, which
is significantly more than the approximately 10-15% premium
customary in REIT transactions. Our offer represented a 28% premium
over FelCor's closing price for the trading day prior to our public
announcement, which price already included takeover speculation.
Furthermore, in our opinion the inferior FelCor shareholder returns
under the stewardship of the current Board do not make a strong
case for greater representation on the combined company board.
We strongly disagree with FelCor's statement that the Advisor
would be unaccountable to shareholders. FelCor shareholders will
have a direct 20% equity ownership in Ashford Inc. and the Advisor
is prepared to appoint one current FelCor director to its Board of
Directors. Given that Ashford Inc. is a publicly traded company,
shareholders are welcome to buy more stock.
Shareholders of FelCor should take note of the significant
alignment of interest at Ashford Trust. Management and
insiders currently have an approximately 18% ownership of Ashford
Trust's shares, representing the highest level of insider ownership
in the lodging REIT sector. Even after a merger with FelCor, the
pro forma ownership level would be approximately 7%, more than
three times the lodging REIT average. Furthermore, management has
higher economic exposure to Ashford Trust than to Ashford Inc.
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."
Contacts
Ashford Hospitality
Trust
|
Media
|
MacKenzie Partners,
Inc.
|
Deric
Eubanks
Chief Financial
Officer
(972)
490-9600
Jordan
Jennings
Investor
Relations
(972)
778-9487
|
Lex
Suvanto
(212)
729-2463
Lex.suvanto@edelman.com
Kara
Brickman
(212)
729-2443
Kara.brickman@edelman.com
|
Paul Schulman/Bob
Marese
(212)
929-5500
(800) 322
-2885
|
Forward Looking Statements
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; risks that
Ashford Trust will ultimately not pursue a transaction with FelCor
or FelCor will reject engaging in any transaction with Ashford
Trust; if a transaction is negotiated between Ashford Trust and
FelCor, risks related to Ashford Trust's ability to complete the
acquisition on the proposed terms; the possibility that competing
offers will be made; risks associated with business combination
transactions, such as the risk that the businesses will not be
integrated successfully, that such integration may be more
difficult, time-consuming or costly than expected or that the
expected benefits of the acquisition will not be realized; risks
related to future opportunities and plans for the combined company,
including uncertainty of the expected financial performance and
results of the combined company following completion of the
proposed acquisition; disruption from the proposed acquisition,
making it more difficult to conduct business as usual or maintain
relationships with customers, employees, managers or franchisors;
and the possibility that if the combined company does not achieve
the perceived benefits of the proposed acquisition as rapidly or to
the extent anticipated by financial analysts or investors, the
market price of Ashford Trust's shares could decline. 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.
Additional Information
This communication does not constitute an offer to buy or
solicitation of any offer to sell securities. This communication
relates to a proposal which Ashford Trust has made for a business
combination transaction with FelCor. In furtherance of this
proposal and subject to future developments, Ashford Trust (and, if
a negotiated transaction is agreed, FelCor) may file one or more
registration statements, prospectuses, proxy statements or other
documents with the SEC. This communication is not a substitute for
any registration statement, prospectus, proxy statement or other
document Ashford Trust or FelCor may file with the SEC in
connection with the proposed transaction. INVESTORS AND SECURITY
HOLDERS OF ASHFORD TRUST AND FELCOR ARE URGED TO READ CAREFULLY THE
REGISTRATION STATEMENT(S), PROSPECTUS(ES), PROXY STATEMENT(S) AND
OTHER DOCUMENTS THAT MAY BE FILED WITH THE SEC IF AND WHEN THEY
BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION
ABOUT ASHFORD TRUST, FELCOR AND THE PROPOSED TRANSACTION. Investors
and security holders may obtain free copies of these documents (if
and when they become available) and other related documents filed
with the SEC at the SEC's web site at www.sec.gov or by directing a
request to Ashford Trust's Investor Relations department at Ashford
Hospitality Trust, Inc., Attention: Investor Relations, 14185
Dallas Parkway, Suite 1100, Dallas,
Texas 75254 or by calling Ashford Trust's Investor Relations
department at (972) 490-9600. Investors and security holders may
obtain free copies of the documents filed with the SEC on Ashford
Trust's website at www.ahtreit.com under the "Investor" link, at
the "SEC Filings" tab.
Certain Information Regarding Participants
Ashford Trust and Ashford Inc. and their respective directors
and executive officers may be deemed participants in the
solicitation of proxies in connection with the proposed
transaction. You can find information about Ashford Trust's
directors and executive officers in Ashford Trust's definitive
proxy statement for its most recent annual meeting filed with the
SEC on April 25, 2016. You can find
information about Ashford Inc.'s directors and executive officers
in Ashford Inc.'s definitive proxy statements for its most recent
annual meeting and special meeting filed with the SEC on
April 28, 2016 and October 7, 2016, respectively. You can find
information about FelCor's directors and executive officers in
FelCor's definitive proxy statement for its most recent annual
meeting filed with the SEC on April 14,
2016. These documents are available free of charge at the
SEC's web site at www.sec.gov and (with respect to documents and
information relating to Ashford Trust) from Investor Relations at
Ashford Trust, as described above. Additional information
regarding the interests of such potential participants will be
included in one or more registration statements, proxy statements,
tender offer statements or other related documents filed with the
SEC if and when they become available.
Non-GAAP Financial Measures
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 EBITDA. 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
EBITDA 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 EBITDA 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.
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SOURCE Ashford Hospitality Trust, Inc.