Adjusted Funds From Operations Per Share Increased 18%
Comparable RevPAR for all Hotels Not Under Renovation Increased 5.8%
Comparable Hotel EBITDA Margin for all Hotels Not Under Renovation Increased 50 bps
Completed Two Public Stock Offerings; Increasing Liquidity and Broadening Shareholder Base
Completed Acquisition of Park Hyatt Beaver Creek Resort & Spa
Announced Agreement to Acquire Hotel Yountville
DALLAS, May 3, 2017– Ashford Hospitality Prime, Inc. (NYSE: AHP) ("Ashford Prime" or the "Company") today reported the following results and performance measures for the first quarter ended March 31, 2017. The performance measurements for Occupancy, Average Daily Rate (ADR), Revenue Per Available Room (RevPAR), and Hotel EBITDA are comparable assuming each of the hotel properties in the Company's hotel portfolio as of March 31, 2017 were owned as of the beginning of each of the periods presented. Unless otherwise stated, all reported results compare the first quarter ended March 31, 2017, with the first quarter ended March 31, 2016 (see discussion below). The reconciliation of non-GAAP financial measures is included in the financial tables accompanying this press release.
STRATEGIC OVERVIEW
- Focused strategy of investing in luxury hotels and resorts
- Targets conservative leverage levels of 45% Net Debt to Gross Assets
- Highly-aligned management team and advisory structure
- Dividend yield of approximately 6%
FINANCIAL AND OPERATING HIGHLIGHTS
- Net loss attributable to common stockholders for the quarter was $1.7 million or $0.07 per diluted share
- Comparable RevPAR for all hotels increased 2.5% to $221.11 during the first quarter
- Comparable RevPAR for all hotels not under renovation increased 5.8% to $284.67 during the first quarter
- Adjusted funds from operations (AFFO) was $0.46 per diluted share for the quarter as compared with $0.39 per diluted share from the prior-year quarter, an increase of 18%
- Adjusted EBITDA was $23.7 million for the quarter
- During the quarter, the Company increased its quarterly common dividend by 33%, from $0.12 per diluted share to $0.16 per diluted share
- During the quarter, the Company announced that it had refinanced three mortgage loans with existing outstanding balances totaling approximately $334 million with a new loan totaling $365 million
- During the quarter, the Company announced it had entered into an amended and restated advisory agreement with Ashford Inc. (NYSE MKT: AINC) to significantly lower the termination fee and address other investor feedback; subject to shareholder approval
- During the quarter, the Company announced it had entered into a settlement agreement with Sessa Capital. As part of the agreement, the Company is adding three new independent directors to its Board, Sessa will not run a slate of director candidates for the Company's Board through 2018, and all litigation between the Company and Sessa will be dismissed.
- During the quarter, the Company announced it has entered into a definitive agreement to acquire the 80-room Hotel Yountville in Yountville, CA for $96.5 million ($1,200,000 per key)
- During the quarter, the Company completed its underwritten public offering of 5,750,000 shares of common stock at a price of $12.15 per share
- The Company completed its underwritten public offering of 2,075,000 shares of 5.50% Series B Cumulative Convertible Preferred Stock at a price of $20.19 per share
- During the quarter, the Company completed the acquisition of the 190-room Park Hyatt Beaver Creek Resort & Spa in Beaver Creek, Colorado for $145.5 million ($766,000 per key). Concurrent with the completion of the acquisition, the Company financed the hotel with a $67.5 million non-recourse mortgage loan.
- Capex invested in the quarter was $9.3 million
REFINED STRATEGY TO ENHANCE SHAREHOLDER VALUE
On January 24, 2017, the Company announced refinements to its strategy in an effort to enhance shareholder value following its newly-appointed CEO, Richard Stockton, having conducted and completed an in-depth strategic review. The review included meeting with investors, inspecting the Company's hotel properties and dialogue with corporate and property level management teams. These refinements, which were unanimously endorsed by the Board of Directors, include the following:
- Focused Portfolio: Going forward, the Company's portfolio will be predominantly focused on investing in the luxury chain scale segment. The Company will continue to target acquisitions of hotels with a RevPAR of at least 2.0x the national average. As a result, four hotels have been designated as non-core to the portfolio, including the Courtyard Philadelphia Downtown Hotel, Courtyard San Francisco Downtown Hotel, Renaissance Tampa Hotel and Marriott Legacy Center Hotel in Plano, Texas. The Company intends to either reposition or opportunistically sell these hotels in the future if conditions warrant. The Company will also simultaneously pursue new acquisitions in order to grow the portfolio consistent with its stated strategy.
- Increased Dividend: The Company's 2017 dividend policy was amended commencing with the first quarter by increasing the quarterly cash dividend for the Company's common stock by 33%, from $0.12 per diluted share to $0.16 per diluted share. This equates to an annual rate of $0.64 per diluted share, representing a yield of approximately 6% based on the closing stock price on May 2, 2017.
- Reaffirming Conservative Leverage: The Company will continue to target conservative leverage, with a target leverage level of 45% Net Debt to Gross Assets.
- Strong Liquidity: The Company will continue to focus on having access to liquidity for both opportunistic investments and as a hedge against economic uncertainty. The Company will target holding 10-15% of its gross debt balance in cash.
UPDATE ON STRATEGIC FOCUS TO INVEST IN LUXURY HOTELS AND RESORTS
On March 1, 2017, the Company announced it had entered into a definitive agreement to acquire the 80-room Hotel Yountville in Yountville, CA for $96.5 million ($1,200,000 per key). The Company intends to finance the property with approximately $50 million of non-recourse mortgage debt. The acquisition is expected to close in the second quarter of 2017, subject to customary closing conditions and the approval of a development agreement by the town of Yountville. Because the acquisition is subject to customary closing conditions, the Company can give no assurance that the transaction will be consummated by such date or at all.
On March 31, 2017, the Company completed the acquisition of the 190-room Park Hyatt Beaver Creek Resort & Spa in Beaver Creek, Colorado for $145.5 million ($766,000 per key). Concurrent with the completion of the acquisition, the Company has financed the hotel with a $67.5 million non-recourse mortgage loan. This loan is interest only and provides for a floating interest rate of LIBOR + 2.75% with a two-year term and three, one-year extension options subject to the satisfaction of certain conditions. The property will continue to be operated as a Park Hyatt under a management agreement with Hyatt.
AMENDED ADVISORY AGREEMENT WITH ASHFORD INC.
On January 24, 2017, the Company announced it had entered into an amended and restated advisory agreement with Ashford Inc. (NYSE MKT: AINC) to significantly lower the termination fee and address other investor feedback. Highlights of the amended agreement include the following:
- Removal of the tax gross-up provision and the 1.1 times multiple from the calculation of the termination fee.
- The revenues and allocated expenses of Ashford Inc. used to calculate the termination fee will be publicly disclosed on a quarterly basis. A full calculation of the termination fee under both the existing third amended and restated advisory agreement and the proposed fourth amended and restated advisory agreement was included in the proxy statement that was filed by the Company with the SEC on February 21, 2017 in connection with obtaining stockholder approval of the amended agreement.
- The termination provisions of the advisory agreement have been amended and, specifically, a change in a majority of the Company's incumbent directors no longer triggers a termination fee.
- The advisor's right under the existing advisory agreement to appoint a "Designated Chief Executive Officer" has been eliminated. The role of the recently appointed CEO of Ashford Prime, Richard Stockton, is not impacted by the removal of this provision, and he will continue to serve as CEO in the same capacity as he has since his appointment on November 14, 2016.
- In addition to the termination fee, a payment of $45 million would be owed to Ashford Inc. in the event the amended agreement is terminated prior to any incremental growth in the hotel portfolio. This amount will reduce ratably to zero over time based on incremental asset growth.
- At the effective date of the amended agreement, the Company will pay Ashford Inc. $5.0 million in cash.
The Company's Board of Directors, acting upon the unanimous recommendation of a special committee of independent directors, unanimously approved the amended agreement, and resolved to recommend that the Company's stockholders approve the amended agreement. The special committee exclusively negotiated the amended agreement on behalf of the Company with the assistance of independent legal and financial advisors. The amended agreement will not become effective unless it is approved by the Company's stockholders.
A summary of the terms of the amended agreement and the complete amended agreement can be found in the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 25, 2017.
CAPITAL STRUCTURE
At March 31, 2017, the Company had total assets of $1.5 billion. As of March 31, 2017, the Company had $865 million of mortgage debt of which $48 million related to its joint venture partner's share of debt on the Capital Hilton and Hilton La Jolla Torrey Pines. The Company's total combined debt had a blended average interest rate of 3.9%.
On January 24, 2017, the Company announced that it had refinanced three mortgage loans with existing outstanding balances totaling approximately $334 million. The previous mortgage loans that were refinanced had final maturity dates in April 2017. The new loan totals $365 million and has a two-year initial term with five one-year extension options, subject to the satisfaction of certain conditions. The loan is interest only and provides for a floating interest rate of LIBOR + 2.58%. The loan is secured by five hotels: Plano Marriott Legacy Town Center, Seattle Marriott Waterfront, Tampa Renaissance, San Francisco Courtyard Downtown and Philadelphia Courtyard Downtown. The new loan contains flexible release provisions should the Company decide to sell any of the hotels. The Company expects to realize approximately $12 million in annual savings in interest and principal payments based on the current forward LIBOR curve.
In March 2017, the Company completed its underwritten public offering of 5,750,000 shares of the Company's common stock at a price to the public of $12.15 per share. Total net proceeds from the offering, after deducting the underwriters' discounts and commissions and estimated offering expenses, were approximately $67 million.
The Company completed its underwritten public offering of 2,075,000 shares of the Company's 5.50% Series B Cumulative Convertible Preferred Stock at a price to the public of $20.19 per share. Dividends on the preferred stock will accrue at a rate of 5.50% per annum on the liquidation preference of $25.00 per share. Total net proceeds from the offering, after deducting the underwriters' discounts and commissions and estimated offering expenses, were approximately $41 million.
PORTFOLIO REVPAR
As of March 31, 2017, the portfolio consisted of twelve properties. During the first quarter of 2017, eight of the Company's hotels were not under renovation. The Company believes reporting its operating metrics for its hotels on a comparable total basis (all 12 hotels) and comparable not under renovation basis (8 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.
- Comparable RevPAR increased 2.5% to $221.11 for all hotels on a 1.5% increase in ADR and a 1.0% increase in occupancy
- Comparable RevPAR increased 5.8% to $284.67 for hotels not under renovation on a 2.9% increase in ADR and a 2.8% increase in occupancy
HOTEL EBITDA MARGINS AND QUARTERLY SEASONALITY TRENDS The Company believes year-over-year Comparable Hotel EBITDA and Comparable 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, to help investors better understand this seasonality, the Company provides quarterly detail on its Comparable Hotel EBITDA and Comparable Hotel EBITDA Margin for the current and certain prior-year periods based upon the number of hotels in the Company's 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 Comparable Hotel EBITDA and Comparable Hotel EBITDA Margin. The details of the quarterly calculations for the previous four quarters for the twelve hotels are provided in the table attached to this release.
To view full financial release and corresponding tables please click the PDF icon or visit: http://www.snl.com/Cache/1001223542.PDF?O=PDF&T=&Y=&D=&FID=1001223542&iid=4384791
