Ashford Trust Reports Second Quarter 2014 Results; RevPAR Increase of 7.7% for Hotel Portfolio
August 8, 2014 10:27am
FINANCIAL AND OPERATING HIGHLIGHTS
At June 30, 2014, the Company had total assets of $2.7 billion in continuing operations, and $3.6 billion overall including the Highland Hospitality Portfolio which is not consolidated. As of June 30, 2014, the Company had $1.8 billion of mortgage debt in continuing operations and $2.6 billion overall including the Highland Hospitality Portfolio. Ashford Trust's total combined debt had a blended average interest rate of 5.6%.
On April 9, 2014, the Company announced it had priced its follow-on public offering of 7,500,000 shares of common stock at $10.70 per share. Settlement of the offering occurred on April 14, 2014, generating total net proceeds of $77 million. On May 14, 2014, the Company's underwriters exercised in part their option to purchase an additional 850,000 shares of common stock from the Company in connection with the offering. In total, the Company sold 8,350,000 shares of common stock for total proceeds of $85.5 million.
On May 1, 2014, the Company closed on a refinancing of the Courtyard Manchester. The previous $5.0 million loan was refinanced with a $6.9 million loan. The new loan has a ten year term with a fixed interest rate of 4.99% and 30-year amortization. The hotel is owned in a joint venture with Interstate Hotels & Resorts where the Company owns 85% and Interstate owns 15%. The excess proceeds after transaction costs were distributed to the partners on a pro rata basis.
On July 18, 2014, the Company closed on the acquisition of the 39-room Ashton Hotel in Fort Worth, Texas for $8.0 million. The Ashton Hotel is a luxury, boutique hotel located in downtown Fort Worth, two blocks from the Company's Hilton Fort Worth. The Company's affiliated property management company, Remington Lodging, took over management of the hotel at closing and will complex the executive staff with the Hilton. During 2013, the Ashton Hotel achieved occupancy of 70% with an Average Daily Rate of $213. The company financed the hotel with a non-recourse, $5.5 million loan with a term of five years.
On August 6, 2014, the Company closed on its acquisition of the 357-room Fremont Marriott Silicon Valley hotel at a purchase price of $50.0 million. On a forward 12-month basis, the purchase price represents an estimated cap rate of 8.1% on net operating income, which equates to an expected 10.0x forward EBITDA multiple. Located in the vibrant Silicon Valley submarket of the Bay Area in Northern California, the hotel features approximately 15,000 square feet of meeting space spread across 19 flexible meeting areas. The Company financed the property with a $37.5 million non-recourse mortgage loan. The loan has a term of two years with three, one-year extension options and bears interest at a floating rate of LIBOR + 4.20%. At closing, the management of the property was transferred to Remington Lodging.
Additionally, the Company recently announced it had successfully refinanced three mortgage loans with an outstanding balance of approximately $325 million. The three previous mortgage loans that were refinanced include: the $135 million J.P. Morgan Floater loan; the $101 million UBS 1 loan; and the $89 million Merrill Lynch 3 loan. The new loans total $469 million and include a $301 million loan with a two-year initial term and three one-year extension options that bears interest at a floating rate of LIBOR + 4.35%; a $62.9 million loan with a two-year initial term and three one-year extension options that bears interest at a floating rate of LIBOR + 4.35%; a $67.52 million loan with a ten-year term that bears interest at a fixed rate of 5.20%; a $12.5 million loan with a ten-year term that bears interest at a fixed rate of 4.85%; and a $24.98 million loan with a ten-year term that bears interest at a fixed rate of 4.90%. In total, the refinancing resulted in excess net proceeds, after closing costs and capital expenditure reserves, of approximately $104 million, and unencumbered two hotels.
As of June 30, 2014, the Ashford Trust Portfolio consisted of direct hotel investments with 114 properties classified in continuing operations. During the second quarter of 2014, 100 of the Ashford Trust Portfolio hotels included in continuing operations were not under renovation. The Company believes reporting its operating metrics for the Ashford Trust Portfolio hotels in continuing operations on a pro forma total basis (all 114 hotels) and pro forma not under renovation basis (100 hotels) is a measure that reflects a meaningful and focused comparison of the operating results in its portfolio. Details of each category are provided in the tables attached to this release.
The Company 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 Hotel EBITDA and Hotel EBITDA Margin for the current and certain prior-year periods based upon the number of hotels in the Ashford Trust Portfolio, including its pro-rata share of the Highland Hospitality Portfolio as of the end of the current period. As the Company's portfolio mix changes from time to time so will the seasonality for Pro forma Hotel EBITDA and Pro forma Hotel EBITDA margin. The details of the quarterly calculations for the previous four quarters for the 114 Ashford Trust Portfolio hotels are provided in the table attached to this release.
ASHFORD, INC. SPIN-OFF
As previously disclosed on February 27, 2014, Ashford Trust's Board of Directors unanimously approved a plan to spin-off its asset management business into a separate publicly traded company in the form of a taxable distribution. The distribution will be comprised of common stock in Ashford, Inc. ("Ashford Inc."), a newly formed or successor company of the Company's existing advisor subsidiary, Ashford Hospitality Advisors LLC, which currently advises Ashford Hospitality Prime, Inc. (NYSE: AHP) ("Ashford Prime"). The Company plans to file a listing application for Ashford Inc. with the NYSE MKT Exchange. This distribution is anticipated to be declared during the third quarter of 2014; however, it remains subject to the review of the registration statement on Form 10 filed with the Securities and Exchange Commission ("SEC") on April 7, 2014, the approval of the listing of shares by the applicable exchange, and other legal requirements. The Company cannot be certain this distribution will proceed or proceed in the manner as currently anticipated.
RETIREMENT AND NAMING OF NEW CHIEF FINANCIAL OFFICER
On June 13, 2014, David Kimichik, the Company's former Chief Financial Officer and Treasurer, retired following a career spanning over 32 years with the Company and its predecessor. Deric Eubanks, formerly the Company's Senior Vice President of Finance, succeeded him as Chief Financial Officer and Treasurer reporting to Ashford Trust Chairman and Chief Executive Officer, Monty J. Bennett.
Prior to his role as Senior Vice President of Finance, Mr. Eubanks was Vice President of Investments and was responsible for sourcing and underwriting hotel investments including direct equity investments, joint venture equity, preferred equity, mezzanine loans, first mortgages, B-notes, construction loans, and other debt securities. Before joining Ashford Trust, Mr. Eubanks was a Manager of Financial Analysis for ClubCorp, where he assisted in underwriting and analyzing investment opportunities in the golf and resort industries. Mr. Eubanks earned a BBA from Southern Methodist University and is a CFA charterholder.
COMMON STOCK DIVIDEND
On June 13, 2014, the Company announced that its Board of Directors had declared a quarterly cash dividend of $0.12 per diluted share for the Company's common stock for the second quarter ending June 30, 2014, payable on July 15, 2014, to shareholders of record as of June 30, 2014.
"We made substantial progress during the second quarter and subsequent period in strengthening our capital structure while also enhancing our hotel portfolio. Our accomplishments include our equity raise in April, the recently completed loan refinancing, and our recent hotel acquisitions. These accomplishments speak to the nature of Ashford Trust's strategy to capitalize on opportunistic lodging investments and capital market conditions," commented Monty J. Bennett, Ashford Trust's Chairman and Chief Executive Officer. "We continue to pursue investment opportunities that we believe are accretive to long-term shareholder returns and will also continue to stay in front of our debt maturities by strategically refinancing loans and capitalizing on the current attractive debt market conditions."
To view all tables corresponding to this release please visit:
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q2 2014 results
Contact: Deric Eubanks, Chief Financial Officer
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