Arranges Convertible Preferred Private Placement With Security Capital
to Fund This Transaction and Future Growth
Acquisition Highlights:
- Entire portfolio acquired at trailing twelve-month cap rate of 9.3%,
EBITDA multiple of 8.9x, EBITDA yield of 11.2%, and value per key of
$61,065
- Core portfolio comprised of thirteen upper-upscale and upscale full
service hotels in major markets acquired at trailing twelve-month cap
rate of 10.5%, EBITDA multiple of 8.0x, EBITDA yield of 12.4%, and
value per key of $69,055
- Significant operating partnership unit ownership taken by affiliates of
Fisher Brothers, Gordon Getty Trust, and George Soros
- Ashford management, as minority partners of the selling entity, to take
approximately 100% of their net consideration in the form of operating
partnership units
- Ashford's direct hotel portfolio to increase to 54 assets totaling
9,189 rooms
Convertible Preferred Stock Private Placement:
- Security Capital Preferred Growth to provide up to $75 million in a
two-stage funding transaction
- Provides cost effective source of capital and ability to match issuance
with acquisition closings
DALLAS, Dec. 27 /PRNewswire-FirstCall/ -- Ashford Hospitality Trust, Inc.
(NYSE: AHT) announced the signing of a definitive agreement to acquire for
$250 million, a 21-property, 4,094-room hotel portfolio from entities
controlled by affiliates of the Fisher Brothers, the Gordon Getty Trust, and
George Soros collectively as majority partners, and certain members of
Ashford's senior management team as minority partners. The Company also
announced the execution of a purchase agreement for the closing of a private
placement of up to $75 million in cumulative convertible preferred stock with
Security Capital Preferred Growth Incorporated.
The Board of Directors of Ashford Hospitality Trust formed a Special
Committee solely comprised of independent directors to evaluate this
transaction. The Special Committee was authorized to retain independent
advisors and to review, evaluate, negotiate, and approve the transaction. The
Special Committee retained independent advisors Hogan and Hartson L.L.P. as
legal advisors, and Citigroup Global Markets Inc. as financial advisors. The
Special Committee unanimously approved the acquisition. Morgan Stanley served
as the exclusive financial advisor to the Fisher, Getty, and Soros entities.
The acquisition total consideration of $250 million is comprised of $35.0
million in cash, the issuance of $50.3 million in operating partnership units,
and the assumption of $164.7 million in debt. The purchase price equates to an
8.9x trailing twelve-month EBITDA multiple, an EBITDA yield of 11.2% and a
trailing twelve-month net operating income capitalization rate of 9.3% on the
entire 21-hotel portfolio based on a trailing 12-month NOI of $23.3 million.
The average cost of the debt is 7.4%, which may be reduced to 7.1% following
the expected repayment of approximately a $14.7 million mezzanine loan. The
acquisition is expected to close by February 2005. The operating partnership
units were priced at $10.07 using the 20-day average closing price calculated
5 business days prior to the signing of the documents. Ashford management,
comprising approximately 22% of the selling entity, structured approximately
100% of their net consideration in the form of operating partnership units.
The Fisher, Getty, and Soros entities, comprising approximately 78% of the
ownership interests in the selling entity, structured approximately 50% of
their consideration in cash and 50% in operating partnership units.
The core portfolio consists of 13 hotels across 5 brands and one
independent comprising 3,099 total rooms: Houston Embassy Suites Galleria in
Houston, TX; Houston Hilton NASA/Clearlake in Houston, TX; Fort Worth Radisson
in Fort Worth, TX; St. Petersburg Hilton in St. Petersburg, FL; West Palm
Beach Embassy Suites and Admiralty Office Building in West Palm Beach, FL; Key
West Crowne Plaza LaConcha in Key West, FL; Sheraton Minneapolis West in
Minnetonka, MN; Beverly Hills Crowne Plaza in Los Angeles, CA; Rockland
Radisson Hotel Boston/South Shore in Rockland, MA; Milford Radisson in
Milford, MA; Indianapolis Airport Radisson Hotel in Indianapolis, IN;
Indianapolis Radisson Hotel City Centre in Indianapolis, IN; and the Historic
Inns in Annapolis, MD. Remington Lodging & Hospitality, an affiliate of the
current manager of the properties, will operate the hotels.
The estimated $35-$40 million budgeted capital improvement plan that
commenced earlier in 2004 for these properties remains underway, and will be
completed under Ashford's ownership by early 2006. The scope and completion
dates vary by property, but should largely be completed by the first quarter
2006.
Ashford is evaluating strategic alternatives for eight smaller hotels that
contribute a relatively small portion of NOI to the portfolio. The trailing
12-month NOI contribution of $800,000 equates to less than 3.5% of the total
portfolio's NOI. The strategic alternatives for these smaller assets include a
potential sale, repositioning, and re-branding. These hotels include: Coral
Gables Holiday Inn in Coral Gables, FL; Warner Robins Ramada Inn in Warner
Robins, GA; Yarmouth Gull Wing Suites in South Yarmouth, MA; Hyannis Ramada
Inn Regency in Hyannis, MA; Falmouth Inn on the Square in Falmouth, MA;
Commack Howard Johnson in Commack, NY; Westbury Howard Johnson in Jericho, NY;
and Dallas Best Western in Dallas, TX.
Monty J. Bennett, President and CEO of Ashford Hospitality Trust, said,
"This acquisition is a significant achievement and has numerous advantages.
Once again, we've demonstrated our ability to source investment opportunities
at attractive yields and per key values as we have done consistently
throughout this past year. This transaction substantially increases our asset
base and market capitalization and reflects strong investor confidence in our
business plan. Our percentage of full-service, upper-upscale and upscale
assets will increase thereby improving Ashford's position for growth going
forward, while providing additional brand and geographic diversification. The
majority of the assumed debt will be fixed-rate, increasing our ratio of fixed
to floating rate debt with only a minimal increase to our overall cost of
debt. This transaction also increases management's ownership interest in
Ashford.
"The ability to complete this transaction with the issuance of such a
large percentage of OP units to high caliber, sophisticated real estate
investment entities controlled by the Fisher Brothers, the Gordon Getty Trust,
and George Soros is a further testament to the investment interest in
Ashford's business strategy.
"We are pleased with the opportunity to convert a large portion of our
ownership in this high quality portfolio to an equity interest in Ashford's
more diversified lodging platform," stated Richard L. Fisher, the seller's
managing general partner. "We've had a long, successful relationship with this
management team and have high confidence in their ability to create value for
shareholders throughout lodging cycles."
The private placement of Series B cumulative convertible preferred stock
to Security Capital Preferred Growth is a two-stage transaction for up to $75
million in proceeds. The liquidation preference is set at $10.07 per share,
which is the same as the operating partnership unit pricing for the 21-
property hotel acquisition. The conversion ratio is at 1:1 with a three-year
call option, or a two-year "soft call" subject to achieving performance
thresholds. The preferred dividend is set at the greater of $0.14 per share
per quarter or the prevailing quarterly common stock dividend.
The first tranche is for $20 million, with an initial $10 million to be
funded prior to December 31, 2004, and the remainder available for
disbursement by June 30, 2005. The second tranche is for $55 million and its
availability is contingent upon the closing of the announced 21-property
acquisition, provided the closing occurs prior to March 31, 2005. Initially,
$14.7 million will be funded at Security Capital's election at the closing of
the acquisition, with another $20 million by June 30, 2005, and the remainder
available for disbursement by December 23, 2005. Proceeds from the issuance
may be used specifically for this 21-property acquisition or drawn over time
for new acquisitions or debt repayment.
Mr. Bennett added, "The importance of this transaction with Security
Capital cannot be underestimated. We have been able to secure an attractive
and very cost effective source of capital that provides significant
flexibility for funding our acquisition of this 21-hotel portfolio as well as
future investment opportunities over the next year. This structure enables
Ashford to access funds on an as-needed basis concurrent with transaction
closings and removes capital market risk for this 21-property acquisition by
locking in capital in advance. We are pleased with the low cost of this
transaction and most importantly the funding options it affords Ashford over
time. In addition, Security Capital has established a long track record of
successful real estate investing, particularly with publicly traded REITs, and
we are very pleased to have them as a long-term shareholder."
"We are delighted to become a significant equity investor in Ashford,"
said Anthony R. Manno, Jr., CEO of Security Capital Research & Management
Incorporated, the investment advisor to Security Capital Preferred Growth.
"Since 1997, Security Capital Preferred Growth has been a leading provider of
growth capital to dynamic real estate companies. Ashford's outstanding
management team and unique business model have positioned this company to be a
leader in the lodging sector, and we view this investment as the beginning of
a long and mutually-rewarding relationship."
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 http://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 expectation that the transaction will= close in
February 2005, the impact of the transaction 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. EBITDA is defined as net income before interest, taxes,
depreciation and amortization. EBITDA yield is defined as trailing twelve
month EBITDA divided by the purchase price. A capitalization rate is
determined by dividing the property's annual net operating income by the
purchase price. Net operating income is the property's funds from operations
minus a capital expense reserve of 4% of gross revenues. Funds from operations
("FFO"), as defined by the White Paper on FFO approved by the Board of
Governors of the National Association of Real Estate Investment Trusts
("NAREIT") in April 2002, represents net income (loss) computed in accordance
with generally accepted accounting principles ("GAAP"), excluding gains (or
losses) from sales or properties and extraordinary items as defined by GAAP,
plus depreciation and amortization of real estate assets, and net of
adjustments for the portion of these items related to unconsolidated entities
and joint ventures.
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.
Contact: Douglas Kessler
Chief Operating Officer and Head of Acquisitions
(972) 490-9600
or
Tripp Sullivan
Corporate Communications, Inc.
(615) 254-3376
SOURCE Ashford Hospitality Trust, Inc.
-0- 12/27/2004
/CONTACT: Douglas Kessler, Chief Operating Officer and Head of
Acquisitions of Ashford Hospitality Trust, Inc., +1-972-490-9600; or Tripp
Sullivan of Corporate Communications, Inc., +1-615-254-3376 /
/Web site: http://www.ahtreit.com /
(AHT)
CO: Ashford Hospitality Trust, Inc.; Fisher Brothers; Gordon Getty Trust;
Security Capital Preferred Growth Incorporated; George Soros
ST: Texas
IN: RLT FIN TRA LEI
SU: TNM
AA
-- NYM018 --
6799 12/27/200408:00 ESThttp://www.prnewswire.com