Ashford Hospitality Trust Reports Fourth Quarter And Year End Results

DALLAS, Feb. 27, 2013 /PRNewswire/ -- Ashford Hospitality Trust, Inc. (NYSE: AHT) today reported the following results and performance measures for the fourth quarter ended December 31, 2012.  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, 2012, with the fourth quarter ended December 31, 2011 (see discussion below).  The reconciliation of non-GAAP financial measures is included in the financial tables accompanying this press release.

FINANCIAL HIGHLIGHTS

• Adjusted EBITDA increased $8.2 million or 10.9% during the fourth quarter and $42.3 million or 14.3% for the full-year 2012
• RevPAR for all hotels in continuing operations, including the Highland Hospitality portfolio, increased 5.3% during the quarter
• RevPAR increased 8.6% for all hotels in the Highland Hospitality portfolio, driven by a 4.8% increase in ADR and a 242 basis point increase in occupancy
• RevPAR increased 4.4% for all Legacy hotels in continuing operations, driven by a 2.5% increase in ADR and a 124 basis point increase in occupancy
• For the full-year 2012, RevPAR for all hotels in continuing operations, including the Highland Hospitality portfolio, increased 5.1%
• Hotel operating profit for all hotels, including the Highland Hospitality portfolio, increased by $8.2 million, or 9.5%
• Hotel operating profit margin increased 133 basis points for all Legacy hotels not under renovation in continuing operations
• Hotel operating profit margin increased 337 basis points for all Highland Hospitality hotels not under renovation in continuing operations
• Net loss attributable to common shareholders was $21.1 million, or $0.32 per diluted share, compared with net loss attributable to common shareholders of $18.3 million, or $0.28 per diluted share, in the prior-year quarter
• Adjusted funds from operations (AFFO) was $0.39 per diluted share for the quarter as compared with $0.42 from the prior-year quarter; Interest Rate Derivative Income decreased by $8.2 million as the benefits from our Flooridor terminated in 2011, impacting AFFO per share by $0.10
• At the end of the fourth quarter 2012, Ashford had cash and cash equivalents of $186 million

CAPITAL ALLOCATION  

• Capex invested in the quarter for the Legacy portfolio was $18.8 million bringing the full-year total to $81.4 million
• Ashford's pro rata share of capex invested in the quarter for the Highland Hospitality portfolio was $6.8 million bringing the full-year total to $26.7 million

CAPITAL STRUCTURE
At December 31, 2012, Ashford had total assets of $3.5 billion in continuing operations, and $4.5 billion overall including the Highland portfolio which is not consolidated.  As of December 31, the Company had $2.3 billion of mortgage debt in continuing operations and $3.1 billion overall including Highland Hospitality.  The Company's total combined debt had a blended average interest rate of 4.5%, with a weighted average debt maturity of 3.7 years.

During the fourth quarter of 2012, Ashford successfully refinanced a $154 million non-recourse mortgage loan with a 12.72% interest rate.  The loan was refinanced with a new $211 million mortgage loan with a two-year initial term and three one-year extension options, subject to the satisfaction of certain conditions.  The new loan is interest only and provides for a floating interest rate of LIBOR + 6.15% with a 0.25% LIBOR Floor.  The refinance resulted in over $50 million of excess proceeds and the annual interest savings will be about $6 million per year, resulting in AFFO per share accretion of approximately $0.07.  This new debt financing was neutral to the company on a net debt basis.  The new loan remains secured by the same five hotels including: the Embassy Suites Crystal City, Embassy Suites Orlando Airport, Embassy Suites Santa Clara, Embassy Suites Portland and the Hilton Costa Mesa. 

On November 27, 2012, Ashford completed the sale of the Doubletree Guest Suites in Columbus, Ohio.  The transaction generated approximately $7.3 million in net proceeds. 

On December 18, 2012, the Company announced that it and its joint venture partner, Prudential Real Estate Investors or PREI^®, closed a $103.0 million loan secured by the Hilton Boston Back Bay Hotel in Boston, Massachusetts.  The Hilton Boston Back Bay is part of the Highland Hospitality Portfolio of which Ashford has a 71.74% ownership interest.  The new financing has a five-year term and bears interest at a fixed interest rate of 4.38%, replacing an existing $63.0 million loan on the property with a fixed interest rate of 5.96%.  At closing, $31.9 million of the excess loan proceeds were used to pay down the mezzanine debt balance on the overall Highland Hospitality Portfolio, which had an average interest rate of 8.4%, thereby achieving annual interest savings of approximately $2.0 million.

On December 19, 2012, the Company transferred ownership of the Hilton El Conquistador in Tucson to the lender as part of a consensual foreclosure agreement previously disclosed.  Transferring this hotel to the lender has served to lower Ashford's overall debt level by $19.7 million while increasing both EBITDA and AFFO.

On December 27, 2012 the Company, along with its joint venture partner, Prudential Real Estate Investors or PREI^®, closed a $112.6 million loan secured by the Renaissance Hotel in Nashville, Tennessee and the Westin Hotel in Princeton, New Jersey.  These hotels are part of the Company's Highland Hospitality Portfolio of which Ashford has a 71.74% ownership interest.  The new financing, which has a five-year term and bears interest at a fixed interest rate of 4.44%, replaces two existing loans with a combined balance of $76.8 million and a weighted average interest rate of 6.05%.  At closing, $30 million of the excess loan proceeds were deposited into reserve accounts to be used predominantly for future capital expenditures and $3.8 million were used to pay down the mezzanine debt balance on the overall Highland Hospitality Portfolio.

Subsequent to the end of the fourth quarter, the Company refinanced its sole remaining 2013 debt maturity, which was set to mature in August.  The prior $142 million loan was refinanced with a new $200.0 million loan that matures in February of 2018.  The new loan provides for a floating interest rate of LIBOR + 3.50%, with no LIBOR Floor and continues to be secured by the Capital Hilton in Washington, DC and the Hilton La Jolla Torrey Pines in La Jolla, CA.  Ashford has a 75% ownership interest in the properties, with Hilton holding the remaining 25%.  The excess loan proceeds above closing costs and reserves were distributed to the partners on a pro rata basis.  Ashford's share of the excess loan proceeds was approximately $40.0 million, which was added to the Company's unrestricted cash balance.  As a result, the refinancing was neutral to the Company on a net debt basis.

PORTFOLIO REVPAR
As of December 31, 2012, the Company's Legacy portfolio consisted of direct hotel investments with 94 properties classified in continuing operations.  During the fourth quarter of 2012, 75 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 94 hotels) and proforma not under renovation basis (75 hotels) is a measure that reflects a meaningful and focused comparison of the operating results in its direct hotel portfolio.  Details of each category are provided in the tables attached to this release.

• Proforma RevPAR increased 4.4% to $91.16 for all hotels in the Legacy portfolio on a 2.5% increase in ADR and a 124 basis point increase in occupancy
• Proforma RevPAR increased 5.1% to $94.02 for hotels not under renovation in the Legacy portfolio on a 2.4% increase in ADR and a 184 basis point increase in occupancy
• Proforma RevPAR increased 8.6% to $98.91 for all hotels in the Highland Hospitality portfolio on a 4.8% increase in ADR and a 242 basis point increase in occupancy
• Proforma RevPAR increased 9.3% to $98.08 for hotels not under renovation in the Highland Hospitality portfolio on a 5.2% increase in ADR and a 253 basis point increase in occupancy

HIGHLAND HOSPITALITY PORTFOLIO UPDATE 
The Highland Hospitality portfolio experienced RevPAR growth of 8.6% during the fourth quarter of 2012, with RevPAR growth for hotels not under renovation in continuing operations of 9.3%.  The Highland Hospitality portfolio continued to experience strong EBITDA flow-through during the fourth quarter as a result of improved RevPAR growth, strong property management and the benefits of capital expenditures previously completed.  For all 28 hotels in the Highland Hospitality portfolio, Hotel EBITDA Margin increased 295 bps and Hotel EBITDA flow-through was 77%.  For the 20 hotels not under renovation during the third quarter 2012, Hotel EBITDA Margin increased 337 basis points and Hotel EBITDA flow-through was 76%.  Hotel EBITDA increased 18.4% in the fourth quarter for all hotels in the Highland Hospitality portfolio, and 13.7% for the full-year 2012. 

HOTEL EBITDA MARGINS AND QUARTERLY SEASONALITY TRENDS
During the quarter, Hotel operating profit (Hotel EBITDA) for all Legacy hotels increased 7.0% to $72.2 million.  For the 75 hotels that were not under renovation, Proforma Hotel EBITDA increased 9.4% to $60.6 million. Proforma Hotel EBITDA margin (expressed as a percentage of Total Hotel Revenue) increased 133 basis points to 30.9% for the 75 Legacy hotels not under renovation.  For all 94 Legacy hotels included in continuing operations, Proforma Hotel EBITDA margin increased 85 basis points to 30.2%.

For the Company's 71.74% share of all hotels in the Highland Hospitality portfolio, Hotel operating profit (Hotel EBITDA) increased 18.4% to $22.6 million.  For the 20 hotels in the Highland Hospitality portfolio that were not under renovation, Proforma Hotel EBITDA increased 21.7% to $16.0 million.  Proforma Hotel EBITDA margin (expressed as a percentage of Total Hotel Revenue) increased 337 basis points to 28.0% for the 20 Highland Hospitality hotels not under renovation.  For all 28 Highland Hospitality hotels included in continuing operations, Proforma Hotel EBITDA margin increased 295 basis points to 28.4%.

Starting with its second quarter 2012 financial results, the Company added additional disclosure information regarding property level trailing 12-month Hotel EBITDA by debt pool.  The Company believes this additional disclosure will assist the investment community in analyzing Ashford and help analysts and investors see the benefits of the non-recourse nature of its property level debt.  Prior to providing this information, the investment community could only reference the Company's total EBITDA and total debt when applying a valuation multiple.

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 Hospitality 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 94 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.

BOARD OF DIRECTORS
On December 24, 2012, Ashford announced that former Chairman Archie Bennett, Jr. would retire on his 75th birthday, January 18, 2013, consistent with the Company's Corporate Governance Guidelines.  On January 19, 2013, he assumed the role of Chairman Emeritus and advisor to the Company providing his expertise and insights to the Company on various initiatives and projects.  Monty J. Bennett, who has served as Director and Chief Executive Officer of the Company since its formation in August 2003, succeeded him in his role as Chairman, effective January 19, 2013.

The Company also announced that the Board of Directors had appointed W. Michael Murphy as its new lead Director, replacing Mr. Martin L. Edelman.  Mr. Murphy, the Head of Lodging and Leisure Capital Markets for First Fidelity Companies, has been a Director since the Company's formation in August 2003.

In connection with these events, the Board of Directors modified the Company's Corporate Governance Guidelines to increase the size of the Board from seven to nine members and to rotate several members and chairmanships of the Board's committees.  Effective as of January 19, 2013, Mr. Douglas A. Kessler, Ashford's President, and Mr. Kamal Jafarnia were appointed to the Board.  Mr. Kessler continues to serve the Company as President, as he has done since January 2009.  Prior to being appointed President, Mr. Kessler was Ashford's Chief Operating Officer and Head of Acquisitions since the Company's formation.  Mr. Jafarnia, who holds a B.A. from the University of Texas, a J.D. from Temple University School of Law, and an L.L.M. from Georgetown University Law Center, has over 15 years of experience in the real estate and financial services industry as an attorney, owner, principal, compliance officer and executive.  Mr. Jafarnia is currently counsel in the Financial Services & Products Group and a member of the REIT Practice Group in the New York office of Alston & Bird, LLP.

Effective January 19, 2013, Ashford announced that the Board's Committees will be comprised of the following members:

• Audit Committee:  Thomas E. Callahan – Chairman, W. Michael Murphy, Philip S. Payne
• Nominating/Corporate Governance Committee: Martin L. Edelman – Chairman, Benjamin J. Ansell, Kamal Jafarnia
• Compensation Committee:  Benjamin J. Ansell – Chairman, Thomas E. Callahan, Kamal Jafarnia

On January 24, 2013, the Board of Directors appointed Alan L. Tallis to fill the last vacancy on the Board.  From March 2008 through February 2011, Mr. Tallis served as Executive Vice President, Asset Management for Ashford.  From February 2011 through January 2012, Mr. Tallis continued to serve as a consultant to the Company.  Prior to joining the Company in March 2008, Mr. Tallis served as a senior advisor to Blackstone Real Estate Advisors following their acquisition of La Quinta Corporation from June 2006 to May 2007.  From July 2000 until May 2006, Mr. Tallis served in various positions with La Quinta Corporation, most recently serving as President and Chief Development Officer of LQ Management LLC and President of La Quinta Franchising LLC.  With the appointment of Mr. Tallis, Ashford's Board of Directors consists of nine members, six of whom are independent. 

COMMON STOCK DIVIDEND
On December 17, 2012, Ashford announced that its Board of Directors had declared a quarterly cash dividend of $0.11 per diluted share for the Company's common stock for the fourth quarter ending December 31, 2012, payable on January 15, 2013, to shareholders of record as of December 31, 2012.

The Board also approved the Company's dividend policy for 2013.  The Company expects to pay a quarterly cash dividend of $0.12 per share for 2013, or $0.48 per share on an annualized basis.  The Company believes a conservative approach to its dividend policy is prudent during the continuing global economic uncertainty and our nation's continuing economic recovery.  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. 

"Our fourth quarter results demonstrate the significant progress we have made in improving our operating performance and unlocking the value of our Highland Hospitality portfolio through increased EBITDA growth driven by strong revenue growth and significant cost savings," commented Monty J. Bennett, Ashford's Chairman and Chief Executive Officer.  "Further, our capital market strategies have successfully addressed all of our near-term debt maturities while improving our liquidity position.  We believe we are well positioned from a cash and liquidity standpoint in terms of both safety and growth should opportunities to capitalize on accretive investments appear.  Finally, on behalf of the Company and the Board of Directors, I want to thank my father, Archie Bennett, Jr., for his many years of service and leadership to Ashford.  It has been a privilege to have him as our Chairman these past nine years and we look forward to his continued contributions to our success as Chairman Emeritus."

INVESTOR CONFERENCE CALL AND SIMULCAST
Ashford Hospitality Trust, Inc. will conduct a conference call on Thursday, February 28, 2013, at 11:00 a.m. ET.  The number to call for this interactive teleconference is (480) 629-9692.  A replay of the conference call will be available through Thursday March 7, 2013, by dialing (303) 590-3030 and entering the confirmation number, 4590417.

The Company will also provide an online simulcast and rebroadcast of its fourth quarter 2012 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 28, 2013, 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.

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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. 

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.