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Ashford Hospitality Trust Reports First Quarter Results |
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The proforma performance measurements for Occupancy, Average Daily Rate (ADR), revenue per available room (RevPAR), and Hotel Operating Profit (or Hotel EBITDA) include the Company's 65 hotels owned as of March 31, 2007, which excludes 14 hotel assets held for sale as of that date. |
Unless otherwise stated, all reported results compare the first quarter ended March 31, 2007, with the first quarter ended March 31, 2006. The reconciliation of non-GAAP financial measures is included in the financial tables accompanying this press release.
FINANCIAL HIGHLIGHTS
• Total revenue increased 52% to $153.3 million from $101.0 million
• Net income available to common shareholders increased 84% to $8.7 million compared with $4.7 million
• Diluted net income available to common shareholders was $0.12 per share compared with $0.09 per share
• Adjusted funds from operations (AFFO) increased 48% to $28.5 million, or $0.31 per diluted share
• Cash available for distribution (CAD) increased 44% to $25.9 million, or $0.28 per diluted share
• Declared quarterly common dividend of $0.21 per diluted share
• CAD dividend coverage was 133% for the quarter
STRONG INTERNAL GROWTH
• Proforma RevPAR increased 11.1% for hotels not under renovation on an 8.7% increase in ADR to $133.80 and a 160-basis point improvement in occupancy
• Proforma RevPAR increased 8.6% for all hotels on an 8.2% increase in ADR to $135.91 and a 32-basis point improvement in occupancy
• Proforma same-property Hotel Operating Profit for hotels not under renovation improved 22%
• Proforma same-property Hotel Operating Profit margin for hotels not under renovation improved 286 basis points
CAPITAL RECYCLING AND ASSET ALLOCATION
• Two hotels sold in first quarter for $31.5 million with a net gain of $1.4 million
• Three hotels sold to date in second quarter with 10 other assets under contract
• Capex invested in first quarter totaled $20 million
• Capex for 2007 now estimated to reach $140 million
PORTFOLIO REVPAR GROWTH
As of March 31, 2007, the Company had a portfolio of direct hotel investments consisting of 65 properties classified in continuing operations. During the first quarter, 54 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 65 hotels) and proforma not-under-renovation basis (54 hotels) is a measure that reflects a meaningful and more focused comparison of the operating results in its direct hotel portfolio. The Company's reporting by region and brand includes the results of all 66 hotels. Details of each category are provided in the tables attached to this release.
• RevPAR growth by region was led by: New England (2 hotels) with a 37.1% increase; West South Central (5) with 29.3%; Pacific (10) with 15.3%; Mountain (4) with 10.3%; West North Central (3) with 7.0%; Middle Atlantic (4) with 5.0%; South Atlantic (27) with 3.5%; East North Central (8) with 1.9%; and East South Central (2) with a 0.7% decrease.
• RevPAR growth by brand was led by: Hilton (22 hotels) with 13.5%; Hyatt (2) with 12.8%; InterContinental (2) with 11.8%; Starwood (6) with 9.4%; Marriott (28) with 4.7%; Radisson (3) with 3.6%; and independents (2) with a 10.6% decrease.
HOTEL EBITDA MARGINS AND QUARTERLY SEASONALITY TRENDS
For the 54 hotels as of March 31, 2007 that were not under renovation, Proforma Hotel EBITDA (adjusted as if all hotels were included in both periods) increased 22% to $35.6 million. Proforma Hotel EBITDA margin (expressed as a percentage of Total Hotel Revenue) improved 286 basis points to 29.2%. For all 65 hotels included in continuing operations as of March 31, 2007, Hotel EBITDA increased 16% to $42.3 million and Hotel EBITDA margin increased 209 basis points to 28.3%.
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 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. Investors and analysts are encouraged to carefully consider our seasonality table when forecasting our quarterly results. Details of the quarterly calculations for the 2006 quarters for the current core portfolio, including the 51 hotels acquired April 11, 2007, from CNL Hotels and Resorts, are provided in tables attached to this release.
Monty J. Bennett, President and CEO, commented, "The continued strong performance growth in RevPAR and hotel operating margin contributed significantly to our solid year-over-year improvement in AFFO performance and CAD. We once again point to higher returns from our value-added capital investments and an intense focus on internal growth strategies as the primary reasons for this 286-basis point improvement in margins. We have high expectations for the remaining $120 million in capital investments we have budgeted for the year. We are committed to extracting the greatest value from these properties with our asset management strategies."
FINANCING ACTIVITY
At March 31, 2007, the Company's net debt (defined as total debt less cash) to total enterprise value (defined as net debt plus the market value of all common shares, preferred shares and operating partnership units outstanding) was 46% based upon the Company's closing stock price of $11.94. As of March 31, 2007, the Company's $1.1 billion debt balance consisted of 79% of fixed-rate debt, with a total weighted average interest rate of 5.9%. The Company's weighted average debt maturity is 7.4 years.
FIRST QUARTER INVESTMENT ACTIVITY
On February 6, 2007, the Company sold the Marriott Trumbull in Trumbull, Connecticut, for approximately $28.3 million. As the Company acquired this property on December 7, 2006, no gain or loss was recognized on the sale.
On February 8, 2007, the Company sold the Fairfield Inn in Princeton, Indiana, for approximately $3.2 million. In connection with this sale, the Company expects to recognize a gain of approximately $1.4 million, the income tax effects of which will be deferred through a 1031 like-kind exchange.
SUBSEQUENT FINANCING AND INVESTMENT ACTIVITY
Subsequent to the end of the first quarter, the Company completed the sale of the Radisson Hotel Indianapolis Airport in Indianapolis, Indiana, the Embassy Suites Phoenix Airport in Phoenix, Arizona, and the Fairfield Inn Evansville West in Evansville, Indiana. The Company also has its portfolio of seven TownePlace Suites along with two other hotels and one office building under contract for sale, all of which are expected to close in the second quarter of 2007.
On April 11, 2007, the Company acquired interests in a 51-property hotel portfolio from CNL Hotels and Resorts for approximately $2.4 billion in cash and assumed debt. The debt-financed portion included approximately $928.5 million of ten-year fixed-rate CMBS debt; approximately $555.1 million of two-year, floating-rate CMBS debt; and a one-year $325.0 million variable rate term loan. The Company also assumed approximately $436.9 million of fixed-rate debt, not including the portions of debt attributable to minority partners in joint ventures in which it acquired a majority interest. The acquisition was partially funded with the private placement of 8.0 million shares of Series C Cumulative Redeemable Preferred Stock for $200.0 million at a rate of LIBOR plus 2.5%.
On April 24, 2007, the Company closed a follow-on offering of 48,875,000 shares of common stock at $11.75 per share. The offering raised net proceeds of approximately $549 million, which was used to pay off the following debt associated with the purchase of 51 hotels from CNL Hotels and Resorts: a $325 million term loan, $180 million of floating-rate CMBS and $45 million of existing debt.
INVESTMENT OUTLOOK
Mr. Bennett concluded, "We believe we are well positioned to continue outpacing the industry in RevPAR growth and to sustain year-over-year margin improvement. With our portfolio heavily concentrated in the major metropolitan and coastal markets with the strongest brands in the upper-upscale and upscale segments, we have a significant opportunity and much larger platform to execute on what we do best. We continue to accomplish what we've set out to do in terms of growth and performance. With the stated de-leveraging goal achieved and the intense focus on internal growth, we look forward to reporting on our continued progress throughout the rest of the year."
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