Ashford Hospitality Trust Reports Fourth Quarter and Year End Results 8th Consecutive Quarterly Year Over Year Increase In AFFO Per Share

Record Fourth Quarter AFFO Per Share

Record Full Year AFFO Per Share

DALLAS, Feb. 22, 2012 /PRNewswire/ -- Ashford Hospitality Trust, Inc. (NYSE: AHT) today reported the following results and performance measures for the fourth quarter ended December 31, 2011.  The performance measurements for Occupancy, Average Daily Rate (ADR), Revenue Per Available Room (RevPAR), and Hotel Operating Profit (or Hotel EBITDA) are proforma.  Unless otherwise stated, all reported results compare the fourth quarter ended December 31, 2011, with the fourth quarter ended December 31, 2010 (see discussion below). The reconciliation of non-GAAP financial measures is included in the financial tables accompanying this press release.

FINANCIAL HIGHLIGHTS

  • Adjusted funds from operations (AFFO) was $0.42 per diluted share for the quarter, the Company's 8th consecutive quarterly year over year increase and a record for the fourth quarter
  • Adjusted funds from operations (AFFO) was a record $1.86 per diluted share for the entire year
  • RevPAR increased 5.4% for all Legacy hotels in continuing operations, driven by a 3.5% increase in ADR and a 122 basis point increase in occupancy
  • RevPAR increased 3.3% for the 25 hotels in the Highland Hospitality Portfolio not under renovation in continuing operations, driven by a 2.4% increase in ADR and a 58 basis point increase in occupancy
  • Hotel operating profit margin increased 143 basis points for all Legacy hotels in continuing operations
  • Hotel operating profit margin increased 177 basis points for the 25 hotels in the Highland Hospitality Portfolio not under renovation in continuing operations
  • Net loss attributable to common shareholders was $18.3 million, or $0.28 per diluted share, compared with net loss attributable to common shareholders of $111.5 million, or $2.17 per diluted share, in the prior-year quarter
  • Fixed charge coverage ratio was 1.70x under the senior credit facility covenant versus a required minimum of 1.35x
  • In December, Ashford successfully restructured its $203.4 million mortgage loan and extended the maturity date from December 2011 to March 2014 with a one-year extension option
  • Subsequent to the end of the fourth quarter, the Company increased the size of its senior credit facility from $105 million to $145 million with the option to expand it further to a maximum size of $225 million
  • The Company's only recourse obligation is its senior credit facility, which currently has no outstanding balance
  • At the end of the fourth quarter, Ashford had cash and cash equivalents of $167.6 million
  • In December, the Board of Directors approved a 10% increase in the Company's dividend policy for 2012; Ashford expects to pay a quarterly dividend of $0.11 per share for 2012

CAPITAL ALLOCATION

  • Capex invested in the quarter for the Legacy portfolio was $21.9 million and $67.8 million for the full-year
  • Capex invested in the quarter for the Highland Hospitality Portfolio was $6.1 million and $13.6 million for the full-year

CAPITAL STRUCTURE

As previously disclosed, on October 12, 2011 the Company priced an underwritten public offering of 1,280,000 shares of its existing 9.00% Series E Cumulative Preferred Stock at $23.47 per share including accrued dividends; receiving net proceeds of $28.9 million after underwriting fees.  The net proceeds from the sale of these securities are being used for general corporate purposes, including, without limitation, repayment of debt or other maturing obligations, financing future hotel-related investments, capital expenditures and working capital.  Net proceeds may also be used for repurchasing shares of common stock under Ashford's repurchase program.

On December 12, 2011, Ashford announced it had successfully restructured its $203.4 million mortgage loan and extended the maturity date from December 2011 to March 2014.  There is also a one-year extension option subject to the satisfaction of certain conditions.  The restructuring provides for a new interest rate of LIBOR + 4.50%, with no LIBOR Floor.  At the closing of the restructuring, the Company paid down the loan by $25 million to $178.4 million.  Additionally, terms include that 85% of excess cash flow after debt service, working capital, and approved capital expenditures will be used to pay down the debt balance and thereby further deleverage the portfolio.

Ashford has successfully addressed debt maturities and is well positioned regarding the next few years.  The Company is engaged in negotiations with the existing lenders to restructure and extend the $167.2 million non-recourse portfolio mortgage loan that matures in May 2012.  On a parallel path, the Company is also in discussion with third party lenders to refinance this loan.  There appears to be a high likelihood of a viable restructure or refinance under current market conditions given the level of existing cash held in reserve for a possible debt pay down for this loan.

The Company previously announced entering into a new $105 million revolving credit facility for three years that replaced the Company's pre-existing credit line that was scheduled to mature in April 2012.  Subsequent to the end of the fourth quarter, the company upsized the facility to $145 million with the option to further expand the facility to an aggregate size of $225 million.  The facility is currently undrawn.  All other Company debt is non-recourse.

HIGHLAND HOSPITALITY PORTFOLIO UPDATE  

The Highland Hospitality portfolio experienced RevPAR growth of 2.6% during the fourth quarter of 2011, with RevPAR growth for hotels not under renovation in continuing operations of 3.3%.  This performance was negatively impacted by property manager changes at the Hyatt Regency Windwatch and the Hilton Boston Back Bay.  While this created a short-term revenue disruption during the fourth quarter, these initiatives were part of the continuing integration of the Highland Hospitality Portfolio into the Company's total portfolio and are expected to create long-term value through enhanced productivity and cost savings, as well as higher exit value given removal of brand management encumbrances.    

The Company expects both the revenue and EBITDA performance of the Highland Hospitality Portfolio to continue to improve as the hotels in the Portfolio continue to be fully integrated into Ashford's total portfolio.

PORTFOLIO REVPAR

As of December 31, 2011, the Company's Legacy portfolio consisted of direct hotel investments with 96 properties classified in continuing operations.  During the fourth quarter, 63 of the hotels included in continuing operations were not under renovation.  The Company believes reporting its operating metrics for continuing operations on a proforma total basis (all 96 hotels) and proforma not-under-renovation basis (63 hotels) is a measure that reflects a meaningful and focused comparison of the operating results in its direct hotel portfolio.  The Company's reporting by region and brand includes the results of all 96 hotels in continuing operations.  Details of each category are provided in the tables attached to this release.

  • Proforma RevPAR increased 5.4% to $86.66 for all hotels in the Legacy portfolio on a 3.5% increase in ADR and a 122 basis point increase in occupancy
  • Proforma RevPAR increased 4.6% to $83.03 for hotels not under renovation in the Legacy portfolio on a 2.1% increase in ADR and a 161 basis point increase in occupancy
  • Proforma RevPAR increased 3.3% to $91.82 for hotels not under renovation in the Highland Hospitality Portfolio on a 2.4% increase in ADR and a 58 basis point increase in occupancy
  • Proforma RevPAR increased 2.6% to $91.11 for all hotels in the Highland Hospitality Portfolio on a 2.4% increase in ADR and an 11 basis point increase in occupancy

Through December 1, 2011, one hotel property held by a joint venture in which Ashford had an ownership interest of 89% was leased on a triple-net lease basis to a third-party tenant who operated the hotel property. Effective December 2, 2011, Ashford converted its 89% interest in a triple-net lease to a 100% ownership position and the triple-net lease was converted to a long-term management contract at no cost to the Company. The Company recognized a gain of $9.7 million for this transaction, consisting of the assignments of an $8.1 million note receivable and $1.6 million security deposits, which is included in "Other income" in the consolidated statements of operations.

HOTEL EBITDA MARGINS AND QUARTERLY SEASONALITY TRENDS

Hotel operating profit (Hotel EBITDA) for all Legacy hotels increased 11.0%, for the quarter.  For the 63 hotels that were not under renovation, Proforma Hotel EBITDA increased 10.4% to $39.8 million. Proforma Hotel EBITDA margin (expressed as a percentage of Total Hotel Revenue) increased 127 basis points to 28.1%.  For all 96 Legacy hotels included in continuing operations as of December 31, 2011, Proforma Hotel EBITDA increased 11.0% to $67.1 million and Hotel EBITDA margin increased 143 basis points to 28.3%.

For the Company's 71.74% share of the 25 hotels in the Highland Hospitality Portfolio that were not under renovation, Proforma Hotel EBITDA increased 10.0% to $17.7 million.  Proforma Hotel EBITDA margin (expressed as a percentage of Total Hotel Revenue) increased 177 basis points to 25.5%.  For all 28 hotels in the Highland Hospitality Portfolio, Proforma Hotel EBITDA increased 6.4% to $19.0 million.  Proforma Hotel EBITDA margin (expressed as a percentage of Total Hotel Revenue) increased 114 basis points to 25.4%.  

Ashford 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 Proforma Hotel EBITDA and Proforma Hotel EBITDA margin for the current and certain prior-year periods based upon the number of core hotels in the portfolio as well as its pro-rata share of the Highland portfolio as of the end of the current period.  As Ashford's portfolio mix changes from time to time so will the seasonality for Proforma Hotel EBITDA and Proforma Hotel EBITDA margin.  The details of the quarterly calculations for the previous four quarters for the current portfolio of 96 Legacy hotels included in continuing operations together with Ashford's pro-rata share of the Highland portfolio are provided in the table attached to this release.

COMMON STOCK DIVIDEND

On December 15, 2011, Ashford announced that its Board of Directors had declared a common stock dividend for the fourth quarter ended December 31, 2011, of $0.10 per diluted share, payable January 16, 2012, for shareholders of record on December 31, 2011.

The Board also approved the Company's dividend policy for 2012.  The Company expects to pay a quarterly cash dividend of $0.11 per common share for 2012, or $0.44 per common share on an annualized basis.  While this policy results in ample dividend coverage on a historical basis, the Company believes a more conservative approach is prudent during this time of global economic uncertainty.  The adoption of a dividend policy does not commit the Board of Directors to declare future dividends or the amount thereof. The Board will continue to review its dividend policy on a quarter-to-quarter basis.  

Monty J. Bennett, Chief Executive Officer, commented, "This was a record quarter and year for Ashford in several respects.  It represents seven out of eight years of record AFFO per share performance, including our eighth consecutive quarterly year over year AFFO per share increase and another record fourth quarter of AFFO per share.  We believe significant upside exists given the early stages of the economic recovery, improving macroeconomic fundamentals and the lack of new supply over the next few years.  Further, we continue to maintain a conservative approach to capital and liquidity so that we are prepared for economic uncertainties, while positioning ourselves to take advantage of opportunistic investments as they arise.  Our strategic approach has served us well during this economic environment, but our focus on improved operating performance and maximizing shareholder returns remains a constant."

INVESTOR CONFERENCE CALL AND SIMULCAST

Ashford Hospitality Trust, Inc. will conduct a conference call on Thursday February 23, 2012, at 11 a.m. ET.  The number to call for this interactive teleconference is (480) 629-9722. A replay of the conference call will be available through Thursday, March 1, 2012, by dialing (303) 590-3030 and entering the confirmation number, 4508934.

The Company will also provide an online simulcast and rebroadcast of its fourth quarter 2011 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 Thursday February 23, 2012, beginning at 11 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.

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Ashford is a self-administered real estate investment trust focused on investing in the hospitality industry across all segments and at all levels of the capital structure.  Additional information can be found on the Company's website at www.ahtreit.com.

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.  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.  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.