DALLAS, June 26, 2018 /PRNewswire/ --
Highlights:
- Ashford Inc. to provide Ashford Trust with funding of a
maximum of $50 million in connection
with up to $500 million of future
Ashford Trust hotel acquisitions
-
- Designed to enhance Ashford Trust shareholder
returns
- Estimated to increase asset level internal rates of
return by 700 - 1,200 basis points1
- Programmatic commitment effectively reduces amount of
equity funding by Ashford Trust on investments
- Ashford Trust currently holds $286
million in excess corporate cash
- Ashford Inc. to commit $11.1
million to Ashford Trust in connection with the expected
$111 million acquisition of the
Hilton Alexandria Old Town and based upon modeling
assumptions:
-
- Adjusted trailing 12-month cap rate on NOI would increase
to 8.3% from 7.5%2
- Effectively would reduce Ashford Trust equity
contribution by 38%
- Expected to improve 5-year leveraged IRR by approximately
1,130 basis points3
Ashford Hospitality Trust, Inc. (NYSE: AHT) ("Ashford
Trust" or the "Company") announced today that it has entered into
an Enhanced Return Funding Program (the "Program" or "ERFP")
agreement with Ashford Inc. (NYSE American: AINC).
Overview of the ERFP
Subject to the terms of the two-year programmatic agreement,
Ashford Inc. has committed to effectively fund amounts equal to 10%
of the purchase price of Ashford Trust hotel acquisitions, up to an
amount of $50 million in aggregate
funding. The Program has the potential to be upsized to
$100 million based upon mutual
agreement.
The Company believes the ERFP will result in a competitive
advantage when bidding on hotel acquisitions and thereby could
promote asset growth given that the Program would initially be
available for up to $500 million of
new acquisitions. Ashford Trust currently holds $286 million of excess corporate cash which could
be available in conjunction with the Program for hotel investments.
The Company anticipates the ERFP may result in enhanced
returns for Ashford Trust's shareholders by effectively reducing
the total amount of equity required for investment purposes.
The Program is structured to improve the 5-year internal rate
of return for new hotel acquisitions at Ashford Trust and may
achieve estimated increases of 700 to 1,200 basis
points1. Ashford Trust believes that access to the ERFP
sets Ashford Trust apart from other lodging REIT peers and
demonstrates another benefit of the alignment that the Company has
with its advisor.
Overview of Hilton Alexandria Old Town Acquisition
Ashford Trust is also pleased to announce that it has signed a
definitive agreement to acquire the 252-room Hilton Alexandria Old
Town located in Alexandria,
Virginia, for total consideration of $111 million.
The key features of the acquisition of the Hilton Alexandria Old
Town are:
- 252-room hotel with 12,967 square feet of meeting and function
space
- Opened in 2000 with $9.6 million
in renovations since 2013
- Trailing 12-month occupancy, ADR and RevPAR of 85%,
$190 and $161, respectively
- Strong location near office and retail demand generators
- Limited new supply
- Adjacent to Metro station
In conjunction with the transaction, the Company expects to
enter into a non-recourse mortgage loan of $73.5 million at closing. The loan is
expected to have a term of five years and bear interest at a rate
of LIBOR + 2.45%.
Impact of the ERFP on the Hilton Alexandria Old Town
Acquisition
This acquisition of the Hilton Alexandria Old Town is expected
to be Ashford Trust's first hotel acquisition to benefit from the
Enhanced Return Funding Program. In connection with this
acquisition and subject to the terms of the ERFP, Ashford Inc. has
committed to provide Ashford Trust with approximately $11.1 million of cash via the future purchase of
hotel furniture, fixtures, and equipment ("FF&E") at Ashford
Trust properties. Inclusive of the funds provided by Ashford
Inc. under the Program in relation to the Hilton Alexandria Old
Town acquisition and assuming the Ashford Inc. funding were to
occur at closing, the adjusted net purchase price per key equates
to approximately $396,000, and
represents, as of May 31, 2018, an
estimated trailing 12-month capitalization rate on net operating
income of 8.3% and a trailing 12-month EBITDA multiple of 10.9x
according to the Company's estimates based upon unaudited financial
data provided by the sellers2. The Company
believes the ERFP would improve the estimated leveraged internal
rate of return of the transaction by approximately 1,130 basis
points3, assuming leverage of 66% on the acquired
hotel4. The acquisition is expected to close prior
to June 305.
"This anticipated purchase of the Hilton Alexandria is
particularly attractive on its own merits, and we believe the
returns for our shareholders should be significantly improved via
the Enhanced Return Funding Program with Ashford Inc.," said
Douglas A. Kessler, Ashford Trust's
President and Chief Executive Officer. "We expect this programmatic
funding arrangement should increase stockholder value from the
investments we make on future acquisitions, and believe this will
provide a clear competitive advantage for us."
Additional details of the Enhanced Return Funding Program will
be provided in a Company 8-K filing and in a Company presentation
that will be posted on its website, including related amendments to
the Company's advisory agreement with Ashford Inc. The
Program, including the ERFP funding in connection with the Hilton
Alexandria Old Town acquisition, is subject to the closing of the
Ashford Inc. and Remington project management transaction.
The Company will conduct a conference call on Wednesday, June 27, 2018 at 10:00 a.m. ET to discuss the Program in more
detail along with the Hilton Alexandria Old Town acquisition. The
number to call for this interactive teleconference is (201)
493-6779. A replay of the conference call will be available
through July 4, 2018 by dialing (412)
317-6671 and entering the confirmation number, 13681050. The live
audio broadcast of this call will also be available online at the
Company's website, www.ahtreit.com, by clicking the Investors tab,
or by visiting http://public.viavid.com/index.php?id=130219. The
Company encourages analysts and investors to listen to the call or
webcast and review the presentation slides which discuss the ERFP
and the Hilton Alexandria Old Town investment.
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."
- Assumes approximately 15% to 20% levered returns on hotel
acquisitions without Program funding, between 25-40% equity per
acquisition, and ERFP funding at end of year one.
- Without ERFP funding, the capitalization rate would be 7.5% and
the Hotel EBITDA multiple would be 12.1x.
- Assumes property-level mortgage financing of 66%, 10% of
purchase price funded by AHT corporate preferreds, closing/other
costs of 2.5% of purchase price, and funding of ERFP at end of year
one.
- Ashford Inc. is not expected to acquire FF&E on the closing
date of Hilton Alexandria Old Town, therefore the capitalization
rate, the internal rate of return, and the Hotel EBITDA multiple
will depend upon the timing of ERFP funding.
- The Program and expected funding of approximately $11.1 million for Hilton Alexandria Old Town is
contingent upon the consummation of the Remington Project
Management transaction with Ashford Inc.
Ashford
Hospitality Trust
|
Hilton Alexandria
Old Town
|
Reconciliation of
Hotel Net Income to Hotel EBITDA and Hotel Net Operating
Income
|
(Unaudited, in
millions)
|
|
|
12
Months
|
|
Ended May 31,
2018
|
Hotel Net
Income
|
$
4.8
|
|
|
Adjustment:
|
|
Depreciation and
amortization
|
$
-
|
Interest
expense
|
$
4.4
|
|
|
Hotel
EBITDA
|
$
9.2
|
|
|
Adjustment:
|
|
Capital
reserve
|
$
(0.8)
|
|
|
|
|
Hotel Net Operating
Income
|
$
8.3
|
All information in this table is based upon unaudited operating
financial data for the prior twelve month period ended May 31, 2018. This data has not been
audited or reviewed by the Company's independent registered public
accounting firm. The financial information presented could
change.
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.