Ashford Hospitality Trust Acquires Mezzanine
Loans Totaling $11.0 Million
Existing relationship
with first mortgage lender and borrower leads to investment opportunity
Ashford Hospitality Trust,
Inc. (NYSE: AHT) today announced it has closed on two junior mezzanine loans
totaling $11.0 million that are secured by interests in the Hilton Suites
Galleria in Dallas and the Wyndham Dallas North. The hotels were recently
acquired by an affiliate of American Property Management Company (APMC),
which have assumed management of the properties.
The $7.0 million loan on the Hilton Suites Galleria bears interest at a rate
of LIBOR plus 650 basis points for a term of three years with two one-year
extension options. The loan is interest only and locked from prepayment for
the first 18 months. The loan structure also includes a $2.2 million interest
reserve. Financing on the Hilton Suites Galleria includes a $32.0 million
first mortgage loan originated by Countrywide Commercial Real Estate Finance
and the $7.0 million junior mezzanine loan. Ashford will receive an origination
fee of 0.75%. The first year unleveraged yield on the loan is expected to
be 11.9%. Based on trailing 12-month net cash flow from the property, the
debt service coverage ratio at closing is approximately 0.9x. Ashford's investment
in the capital structure is approximately 55% to 64% loan to value with the
last loaned dollar at $151,163 per key, which is well below replacement cost.
The Hilton Suites Galleria opened in 2003 and has 258 suites and 5,800 square
feet of meeting space. The hotel is located in the heart of the upscale Galleria
sub-market in Dallas adjacent to the Galleria Mall. The property is expected
to be converted to a Le Meridian in 2007 after an $8.5 million renovation.
The $4.0 million loan on the Wyndham Dallas North bears interest at a rate
of LIBOR plus 575 basis points for a term of three years with two one-year
extension options. The loan is interest only and locked from prepayment for
the first 18 months. The loan structure also includes a $200,000 interest
reserve. Financing on the Wyndham Dallas North includes an $18.4 million
loan originated by Countrywide Commercial Real Estate Finance and the $4.0
million junior mezzanine loan. Ashford will receive an origination fee of
0.25%. The first year unleveraged yield on the loan is expected to be 11.1%.
Based on trailing 12-month net cash flow from the property, the debt service
coverage ratio at closing is approximately 0.8x. Ashford’s investment in
the capital structure is approximately 60% to 65% loan to value with a last
loaned dollar of $72,097 per key, which is well below replacement cost. The
Wyndham Dallas North opened in 1979 and has 310 rooms and 14,000 square feet
of meeting space. Located at the northwest corner of I-635 and the North
Dallas Tollway in the Galleria sub-market in Dallas, the hotel is expected
to be converted to a Sheraton in 2007 after a $5 million renovation.
Commenting on the announcement, Monty J. Bennett, President and CEO of Ashford
Hospitality Trust, stated, "We continue to remain selective and disciplined
in our mezzanine investment strategy. Our extensive knowledge of the Dallas
Galleria market, familiarity with the borrower, and relationship with Countrywide
enabled us to move rapidly on this transaction. With the capital expenditures
and brand conversions, we anticipate the debt service coverage to improve
substantially. These loans are another example of our ability to work with
both borrowers and lenders to source attractive new opportunities."
Ashford Hospitality Trust 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, including direct hotel investments,
first mortgages, mezzanine loans and sale-leaseback transactions. Additional
information can be found on the Company's web site 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 expected unleveraged yield, the impact of the
financing 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.
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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