DALLAS, June 26, 2018 /PRNewswire/
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Program Highlights:
- New $50 million Enhanced Return
Funding Program provides capital to Ashford Trust to potentially
grow Ashford's assets under management by as much as $500 million
- Estimated incremental fees and tax savings from ERFP result in
a cash-on-cash return of approximately 50% on invested capital in
the first year of funding(1)
- Attractive estimated 35%+ returns on invested capital over five
years(2)
- Ashford's first ERFP investment of approximately $11.1 million is expected to be made in
connection with Ashford Trust's purchase of the Hilton Alexandria
Old Town and is expected to add approximately $0.70 to year one Adjusted Net Income per Share
in year one(3)
- Potential to improve five year internal rates of return for new
hotel acquisitions at Ashford Trust by up to 700 to 1,200 basis
points(4), thereby increasing base advisory fees,
incentive fees, and revenues from other products and services
payable to Ashford
Ashford Inc. (NYSE American: AINC) ("Ashford" or the "Company")
today announced that it has entered into an agreement with Ashford
Hospitality Trust, Inc. (NYSE: AHT) ("Ashford Trust") for the new
Enhanced Return Funding Program ("ERFP" or the "Program").
Under the Program, Ashford has agreed to provide $50 million to Ashford Trust in connection with
the acquisition by Ashford Trust of additional hotels. Ashford will
provide 10% of the price of each hotel acquired by Ashford Trust,
helping Ashford Trust grow its assets by as much as $500 million. The Company will target funding the
Program with approximately 50% cash on hand and 50% debt. The
Program will replace Ashford's legacy Key Money concept and has the
ability to be upsized based upon mutual agreement.
The Program is expected to generate attractive returns on
invested capital for Ashford via incremental base advisory fees,
potential incentive fees, fees for various products and services
offered, and tax savings, with year one cash-on-cash returns
estimated at 50%(1) and five year internal rates of
return estimated at over 35%(2). Ashford estimates that
the ERFP investment made in connection with the Hilton Alexandria
Old Town will add an estimated $0.70
to its Adjusted Net Income per Share in year one(3).
The Program has potential to improve the five year internal rate
of return for each new hotel acquisition at Ashford Trust by up to
700 to 1,200 basis points(4) as well as increase assets
under management for Ashford. Subject to the terms of the
ERFP agreement, Ashford has agreed to provide approximately
$11.1 million to Ashford Trust in
connection with its purchase of the Hilton Old Town Alexandria for
$111 million. The Company
believes the Program should improve Ashford Trust's estimated
leveraged internal rate of return on the acquisition from 18.2% to
29.5%, a 62% increase in returns with over 1,100 basis points in
absolute improvement(5).
The Company anticipates funding the Program with existing cash
on its balance sheet, its existing credit facility and with ongoing
cash flow. The Company currently has approximately $38 million of cash and cash equivalents on hand
and its credit facility has $35
million of available capacity with upsize potential to
$75 million using its accordion
feature.
"We are extremely pleased with the opportunity to utilize our
Enhanced Return Funding Program to partner with Ashford Trust on
its acquisition of the Hilton Old Town Alexandria. This
revolutionary program is one of the newest strategic initiatives at
Ashford that should help create value for our shareholders and the
shareholders of Ashford Trust alike," said Monty J. Bennett, Ashford's Chairman and Chief
Executive Officer.
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 Trust. The Program,
including the ERFP funding in connection with the Hilton Alexandria
Old Town acquisition, is subject to the closing of the Company's
pending 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 further
detail. 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.ashfordinc.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 discussing the
Program.
Ashford provides global asset management, investment management,
and related services to the real estate and hospitality sectors.
Ashford Trust is a real estate investment trust (REIT) focused on
investing opportunistically in the hospitality industry in upper
upscale, full-service hotels.
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."
Footnotes:
(1)
Assumes 50% of ERFP funding from credit facility at L+300,
incremental EBITDA of 94.5 bps of purchase price, expensing and/or
100% accelerated depreciation of FF&E purchase in year one, and
a 21% federal income tax
rate.
(2) Estimated five
year IRRs assume 50% of ERFP funding from credit facility at L+300,
incremental EBITDA of 94.5 bps of purchase price, a year five exit
multiple of 10x EBITDA, and funding of ERFP at end of year
one.
(3) Assumes ERFP
funding within the first year post-acquisition by
AHT.
(4) Assumes
approximately 15% to 20% levered returns without ERFP funding
over five years, between 25% and 40% required equity amounts
per acquisition, and funding of ERFP at end of year
one.
(5) 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.
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," "may," "anticipate," "estimate," "should," "could,"
"expect," "believe," "intend," "potential," 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'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.
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 Inc.