Ashford Hospitality Trust Reports Second Quarter Results
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Ashford Hospitality Trust Reports Second Quarter Results
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Category: Worldwide - Industry economy
- Figures / Studies
This is a press release selected by our editorial committee and published online for free on 2009-08-06
Ashford Hospitality Trust, Inc. (NYSE: AHT) today reported the following results and performance measures for the second quarter ended June 30, 2009. 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 103 hotels owned and included in continuing operations as of June 30, 2009. Unless otherwise stated, all reported results compare the second quarter ended June 30, 2009, with the second quarter ended June 30, 2008, and include the impact of non-cash impairment charges (see discussion below). The reconciliation of non-GAAP financial measures is included in the financial tables accompanying this press release.
FINANCIAL HIGHLIGHTS AND LIQUIDITY
-- Corporate unrestricted available cash at the end of the quarter was
$236.6 million
-- Total revenue decreased 21.7% to $239.9 million from $306.5 million
-- Net loss to common shareholders was $165.9 million or $2.34 per share
-- Excluding the impairment charges as well as the unrealized loss on our
swap, net loss available to common shareholders was $9.2 million, or
$0.13 per diluted share, compared with a net income of $17.5 million, or
$0.15 per diluted share, in the prior-year quarter
-- Adjusted funds from operations (AFFO) was $0.31 per diluted share
-- Cash available for distribution (CAD) was $0.22 per diluted share
-- Fixed charge ratio was 1.63x under the senior credit facility covenant
versus required minimum of 1.25x
-- Repurchased 5.7 million common shares in the quarter for a total of
$17.7 million
-- Capex invested in the quarter totaled $13.7 million
IMPAIRMENT CHARGES
On June 15, 2009, the Company received notice that Extended Stay Hotels LLC ("ESH") was seeking Chapter 11 bankruptcy protection from its creditors. The Company holds a $164 million par value mezzanine loan participation that is secured by interests in 681 hotels held by Extended Stay, which was initially scheduled to mature June 12, 2009, with three 1-year renewal options. Prior to Extended Stay's bankruptcy filing, all payments on this loan were current; however, the Company anticipates that Extended Stay, through its bankruptcy filing, may attempt to impose a plan of reorganization that eliminates the Company's and all the other mezzanine creditors' investment. Accordingly, the Company has elected to write off the full amount of its investment, $109.4 million as of June 30, 2009, resulting in a non-cash impairment charge of $1.18 per diluted share, in the second quarter of 2009. The cash impact to the Company of this write-off with current LIBOR is less than $5.5 million per year. The Company is a member of the ESH creditors' committee.
During the second quarter of 2009, the Company also elected to write off one-half of the full amount of its $18.2 million first mortgage participation in the Four Seasons Nevis, the full amount of its $4.0 million mezzanine loan secured by interests in the Sheraton Dallas and the full amount of its $7.0 million mezzanine loan secured by interests in the Le Meridien Dallas. These three write off's resulted in a non-cash impairment charge of $20.1 million, or $0.22 per diluted share, in the second quarter of 2009.
In June 2009, the Company notified the servicer, who administers the $29.1 million first mortgage on the Company's Hyatt Regency Dearborn, that the Company would not make its June loan payment and would fully cooperate with the lender for a consensual foreclosure or a deed in favor of lender in lieu of foreclosure. As a result, the company took a non-cash impairment charge of $10.9 million, or $0.12 per diluted share, in the second quarter of 2009.
In summary the Company took impairments totaling $140.3 million in the second quarter. Looking ahead with RevPAR at historically low levels on a comparative basis and the current general operating environment for hotels, more write downs are possible.
CAPITAL STRUCTURE
On June 8, 2009, the Company extended its $55.0 million first mortgage loan secured by the JW Marriott San Francisco to March 2011 with two 1-year extensions remaining with the final maturity March 2013 and paid down the loan balance by $2.5 million.
At June 30, 2009, the Company's net debt to total gross assets (defined by the corporate credit facility) was 57.3%. As of June 30, 2009, the Company had $2.8 billion of gross debt with a blended average interest rate of 3.3% (including the benefit of the swap and flooridors). Including its $1.8 billion interest rate swap, 97% of the Company's debt is variable-rate debt. The Company's weighted average debt maturity including extension options is 5.5 years.
On July 1, 2009, the Company purchased two, one-year "flooridors." The first flooridor, which is for a notional amount of $1.8 billion, is for the period commencing December 14, 2009 and ending December 13, 2010. Under this flooridor, the counterparty will make payments to the Company when LIBOR is below 1.75% but only down to LIBOR of 1.25% such that the counterparty's liability is capped at LIBOR of 1.25%.
The second flooridor, which is also for a notional amount of $1.8 billion, is for the period commencing December 13, 2010, and ending December 13, 2011. Under this flooridor, the counterparty will make payments to the Operating Partnership when LIBOR is below 2.75% but only down to LIBOR of 0.50% such that the counterparty's liability is capped at LIBOR of 0.50%.
The Company paid a total of $22.3 million in upfront costs for the two flooridors and has no further liability under the flooridors to the counterparties.
The Company has no debt maturing in 2009 and $104.1 million due in 2010, of which $29.1 million is secured by the Hyatt Regency Dearborn, Michigan. The Company is currently actively seeking to refinance the $75 million loan due next year which is secured by the Embassy Suites Arlington, Virginia, the Embassy Suites Orlando, Florida, the Embassy Suites Santa Clara, California and the Hilton Rye Town, New York.
PORTFOLIO REVPAR
As of June 30, 2009, the Company had a portfolio of direct hotel investments consisting of 103 properties classified in continuing operations. During the second quarter, 101 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 103 hotels) and proforma not-under-renovation basis (101 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 103 hotels in continuing operations. Details of each category are provided in the tables attached to this release.
-- Proforma RevPAR decreased 20.6% for hotels not under renovation on a
10.9% decrease in ADR to $129.87 and an 844-basis point decline in
occupancy
-- Proforma RevPAR decreased 21.0% for all hotels on a 11.1% decrease in
ADR to $129.83 and an 859-basis point decline in occupancy
-- Proforma RevPAR Yield Index increased 140-basis points for all hotels to
118.9%
HOTEL EBITDA MARGINS AND QUARTERLY SEASONALITY TRENDS
For the 101 hotels as of June 30, 2009, that were not under renovation, Proforma Hotel EBITDA decreased 35.8% to $61.3 million. Proforma Hotel EBITDA margin (expressed as a percentage of Total Hotel Revenue) declined 599 basis points to 26.1%. For all 103 hotels included in continuing operations as of June 30, 2009, Proforma Hotel EBITDA decreased 36.6% to $62.1 million and Hotel EBITDA margin decreased 612 basis points to 25.7%.
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. The details of the quarterly calculations for the previous four quarters for the current portfolio of 103 hotels included in continuing operations are provided in the tables attached to this release.
Monty J. Bennett, Chief Executive Officer, commented, "Every decision we make is based on our primary goals of long-term sustainability and enhanced long-term shareholder value. The ongoing decline of the lodging market dictates disciplined capital allocation to ensure actions taken in this environment today will enhance the Company's future. We believe our capital allocation, asset management strategies and disciplined stock buyback strategy, which are in some cases different than the capital market philosophy prevalent today, will best position us to achieve our goals over the long term."
INVESTOR CONFERENCE CALL AND SIMULCAST
Ashford Hospitality Trust, Inc. will conduct a conference call on Thursday, August 6, 2009, at 11 a.m. ET. The number to call for this interactive teleconference is (212) 231-2908. A replay of the conference call will be available through August 13, 2009, by dialing (402) 977-9140 and entering the confirmation number, 21428096.
The Company will also provide an online simulcast and rebroadcast of its second quarter 2009 earnings release conference call. The live broadcast of Ashford's quarterly conference call will be available online at the Company's website at www.ahtreit.com on Thursday, August 6, 2009, beginning at 11:00 a.m. ET. The online replay will follow shortly after the call and continue for approximately one year. A direct link to the live broadcast can be found at: http://www.videonewswire.com/event.asp?id=59525.
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, Hotel Operating Profit, and CAD. 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, Hotel Operating Profit, nor CAD 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, Hotel Operating Profit, and CAD 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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