Ashford Hospitality Trust Inc · NYSE:AHT
Ashford Hospitality Trust — Investor Day (May 2011)
101 slides from Ashford Hospitality Trust's investor day presentation, May 11, 2011
Slide 1: Analyst / Investor Day New York City May 11, 2011
Analyst / Investor Day New York City May 11, 2011
Slide 2: Introduction
INTRODUCTION 2 J. Robison Hays III Senior Vice President - Corporate Finance & Strategy
Slide 3: Safe Harbor
Safe Harbor In keeping with the SEC's "Safe Harbor" guidelines, certain statements made during this presentation could be considered forward-looking and subject to certain risks and uncertainties that could cause results to differ materially from those projected. When we use the words "will likely r
Slide 4: Ashford Overview
Ashford Overview Ashford Hospitality Trust, Inc. is a self-administered real estate investment trust listed on the NYSE (symbol: AHT) that invests in the hospitality industry across all segments and at all levels of the capital structure. Ashford differentiates itself from its peers in the hospitali
Slide 5: Timeline
Timeline 9:05am to 9:40am Company & Industry Overview: Monty J. Bennett, Chief Executive Officer 9:40am to 10:00am Capital Structure & Balance Sheet: David J. Kimichik, Chief Financial Officer 10:00am to 10:10am Coffee Break & Sign-Ups for 1-on-1's 10:10am to 10:40am Asset Overview: Monty J. Bennett
Slide 6: Company & Industry Overview
COMPANY & INDUSTRY OVERVIEW 6 Monty J. Bennett Chief Executive Officer
Slide 7: Overview
Overview Based on historical cycles, now is the time to be investing in lodging - it's still early in the cycle Ashford is best positioned to take advantage of the up-cycle: Attractive capital structure Materially reduced share count Best-in-class asset management Reinstated common dividend with 3.3
Slide 8: Historical Occupancy
Historical Occupancy 8 Source: Smith Travel Research (non-seasonally adjusted monthly figures)
Slide 9: Historical Real Room Rates
Historical Real Room Rates 9 Source: Smith Travel Research (non-seasonally adjusted nominal monthly figures)
Slide 10: Real RevPAR is Cyclical
Real RevPAR is Cyclical 10 Source: Smith Travel Research (non- seasonally adjusted nominal monthly figures)
Slide 11: Real RevPAR is Cyclical
Real RevPAR is Cyclical 11 * Assumes 2.4% CPI growth Source: Smith Travel Research (non-seasonally adjusted nominal monthly figures)
Slide 12: PKF's Nominal US RevPAR Forecast
PKF's Nominal US RevPAR Forecast 12 5-Year RevPAR Growth CAGR: 7.0% Source: Smith Travel Research / PKF Research (forecast)
Slide 13: Attractive Supply/Demand Imbalance
Attractive Supply/Demand Imbalance Demand increase is currently expected to outpace supply increase through 2014 13 Source: Smith Travel / PKF Research (forecast)
Slide 14: Potential EBITDA Growth Rates
Potential EBITDA Growth Rates 14 Given the strong potential RevPAR gains in the industry, those companies with high flow-throughs could experience significant EBITDA growth Note: Highlighted box represents PKF's 5-year projection, based on PKF's 5-year RevPAR CAGR and approximate 5-year EBITDA flow
Slide 15: RevPAR Cycle & Stock Returns
RevPAR Cycle & Stock Returns 15 Source: Bloomberg; equally-weighted total return index includes: AHT, BEE, DRH, FCH, HST, HT, LHO, SHO, MAR, HOT & HLT
Slide 16: Industry Summary
Industry Summary Now is the time to be investing in lodging Occupancy still has to grow by about 600 bps to get to previous peaks Real ADR is still well below its long-term average, much less its previous peaks Current forecasts are for nominal RevPAR to grow by 5% to 7% over the next 5 years+ The h
Slide 17: Ashford Snapshot
Ashford Snapshot 17 Portfolio Statistics Total Enterprise Value $4.4 B Total Gross Assets $5.0 B Peer Comparison 2nd Largest # of Hotels 125 # of Owned Rooms 26,257 # of Property Managers 6 $ ADR $131.94 $ RevPAR $92.20 RevPAR Growth % 7.6% Financial Statistics Recent Share Price $11.95 (5/6/11) # F
Slide 18: Significant Industry Dilution
Significant Industry Dilution 18 Source: Bloomberg Peer Stock Price Index # of Common Shares Issued / (Repurchased)
Slide 19: Significant Shareholder Accretion
Significant Shareholder Accretion 19 Source: Bloomberg AHT Stock Price # of Common Shares Issued / (Repurchased)
Slide 20: Significantly Reduced Share Count
Significantly Reduced Share Count 20 Source: Company Filings & Street Research.
Slide 21: Common Stock Buybacks $640M Gain
Common Stock Buybacks 21 $640M Gain If we were to reissue the 73.6 million shares repurchased, it would be a gain of nearly $640 million
Slide 22: Preferred Stock Buybacks
Preferred Stock Buybacks 22 When we reissued the 3.1 million preferred shares we repurchased, we realized a gain of $53 million $53M Gain
Slide 23: Share Repurchase Philosophy
Share Repurchase Philosophy 23
Slide 24: Best-in-Class Asset Management
Best-in-Class Asset Management 24 Revenues in line with peers despite larger select- service exposure Better EBITDA flows than peers Better EBITDA margin growth than peers EBITDA in line with peers, despite slightly lower revenue growth
Slide 25: Recently Reinstated Dividend
Recently Reinstated Dividend Ashford reinstated its quarterly common dividend in the 1Q '10 at $0.10 per share, giving it a dividend yield a full 100 bps above the peer average Ashford has nearly the highest dividend yield of the legacy lodging REITs 25 Source: Company filings & Bloomberg.
Slide 26: Consistent Earnings Growth
Consistent Earnings Growth 26
Slide 27: AFFO per Share Outperformance
AFFO per Share Outperformance 27 +27% -73%
Slide 28: Total Shareholder Return - AHT Outperforms Peers
Total Shareholder Return - AHT Outperforms Peers 28 Source: Bloomberg, assumes dividend reinvestment
Slide 29: Total Shareholder Return - AHT Outperforms S&P
Total Shareholder Return - AHT Outperforms S&P 500 29 Source: Bloomberg, assumes dividend reinvestment
Slide 30: Total Shareholder Return - AHT Outperforms RMZ
Total Shareholder Return - AHT Outperforms RMZ 30 Source: Bloomberg, assumes dividend reinvestment
Slide 31: Total Shareholder Return - AHT Outperforms NAREIT
Total Shareholder Return - AHT Outperforms NAREIT 31 Source: Bloomberg, assumes dividend reinvestment
Slide 32: Most Highly-Aligned Management Team
Most Highly-Aligned Management Team 32 Source: Company Filings
Slide 33: Accretive Highland Transaction
Accretive Highland Transaction 33 28 hotel portfolio (19 full-service, 9 select- service) with 8,084 rooms Total consideration of $1.3 billion ($158,000 per key) 2010 EBITDA multiple 13.4x Operational upside 2010 EBITDA flows of 18% vs. AHT's of 104% Remington took over management of 17 assets NOI 3
Slide 34: Hotel REIT EBITDA Multiples
Hotel REIT EBITDA Multiples 34 Source: Company filings, Bloomberg and street research & First Call estimates Ashford currently trades at 13.8x 2012 EBITDA, slightly above the industry average (As of 5/6/11)
Slide 35: Hotel REIT FFO Multiples
Hotel REIT FFO Multiples 35 However, Ashford has materially the lowest FFO/share multiple of the peers Source: Company filings, Bloomberg and street research & First Call estimates (As of 5/6/11)
Slide 36: Company Summary
Company Summary Ashford is best-positioned into the recovery More levered capital structure Significantly reduced share count magnifies EBITDA growth impact to earnings & stock price Very competitive reinstated dividend with growth potential Proven asset management expertise Proven & most-aligned ma
Slide 37: Analyst / Investor Day New York City May 11, 2011
Analyst / Investor Day New York City May 11, 2011
Slide 38: Capital Structure & Balance Sheet
CAPITAL STRUCTURE & BALANCE SHEET 38 David J. Kimichik Chief Financial Officer
Slide 39: Overview
Overview Ashford has a capital structure built for this part of the cycle: Well-laddered maturities Effectively no recourse debt Higher leverage than peers to maximize shareholder returns Continued benefit from interest rate hedges through March 2013 A management team that appreciates the expensive
Slide 40: Current Capital Structure
Current Capital Structure 40 Current ($ Millions) Current ($ Millions) Cash & Cash Equivalents $92.4 Total Debt (AHT Share) $3,186.6 Assets Hotel Gross Assets $4,595.8 Interest Rate Hedges $90.1 Mezz Book Value $3.0 Other $319.6 Total Gross Assets $5,008.5 Equity (# of shares) Common 61.0 OP Units 1
Slide 41: Debt Maturity Schedule
Debt Maturity Schedule AHT Debt Maturity Schedule $1,200,000 $1,000,000 $ Debt (000's) $800,000 $600,000 $400,000 200,000 ] Oo i a = P| 201120122013, 2014 201520162017 Beyond sFixed-Rate _s Floating-Rate
Slide 42: Impact of Interest Rate Hedges in 2011
Impact of Interest Rate Hedges in 2011 42 Principal Interest Expense (est.) Interest Rate (est.) Total Debt $3.3 billion $176 million 5.3% Swap Impact ($31.5 million) Flooridor Impact (if Libor stays below 50 bps in 2011) ($40.5 million) TOTAL $3.3 billion $104 million 3.2% Note: Assumes 30-Day Libo
Slide 43: Interest Rate Hedging Strategy
Interest Rate Hedging Strategy 43 In the summer of 2007 we began to explore various ways to hedge against a potential recession After months of thorough analysis, we determined that one of the most highly correlated economic data points to hotel revenues was 30-day LIBOR As a result, we made the dec
Slide 44: LIBOR / RevPAR Correlation (March 2008)
LIBOR / RevPAR Correlation (March 2008) 44 As of March 2008
Slide 45: LIBOR / RevPAR Correlation (Current)
LIBOR / RevPAR Correlation (Current) 45 As of April 2011
Slide 46: Expanding to Flooridors
Expanding to Flooridors 46 Source: San Francisco Federal Reserve
Slide 47: Understanding Flooridor Strategy
Understanding Flooridor Strategy 47 Flooridor # Date Purchased Year Effective Notional Amount LIBOR Range Price Paid Theoretical Maximum Benefit Total Value Received* IRR 1 Dec '08 2009 $1.8B 0.75% - 1.25% $3.0M $9.0M $8.5M 582% 2 Mar '09 2010 $3.6B 0.75% - 1.25% $8.5M $18.0M $18.0M 81% 3 Jul '09 20
Slide 48: Interest Rate Hedge Update
Interest Rate Hedge Update 48
Slide 49: Understanding Swap/Flooridor Strategy
Understanding Swap/Flooridor Strategy 49
Slide 50: How We Manage Leverage / Risk
How We Manage Leverage / Risk Preference for longer duration 50 Maximize non-recourse Ashford is comfortable having leverage of 50% to 60% net debt to cost We believe the relatively higher leverage produces better long-term shareholder returns without adding material risk to the platform We focus on
Slide 51: Ashford's Unique View on Equity
Ashford's Unique View on Equity Ashford does not subscribe to a static, long-term CAPM version of our cost of equity We believe, rather, that the cost of equity can ebb and flow throughout hotel & economic cycles We prefer to look at expected equity returns over the next 3 to 5 years in order to det
Slide 52: Reinstated Dividend w/ Attractive Yield
Reinstated Dividend w/ Attractive Yield Ashford reinstated its quarterly common dividend for the 1st quarter 2011 at $0.10 per share This equates to an annual dividend yield of 3.3% at the current stock price of $11.95 52
Slide 53: Reinstated Dividend w/ Growth Potential
Reinstated Dividend w/ Growth Potential Given the material reduction in our common share count, Ashford is the best positioned lodging REIT to cover and potentially grow its dividend 53 Though Ashford didn't pay a dividend in 2009 & 2010, it could have covered its peak dividend at 1.3x in 2009 & 1.8
Slide 54: Summary
Summa + Ashford thinks about its capital structure differently than its peers — We are comfortable with relatively higher leverage because we actively managed our balance sheet by: » Minimizing recourse debt > Continually pushing out maturities » Laddering our maturities » Have a proper mix of fixed
Slide 55: Analyst / Investor Day New York City May 11, 2011
Analyst / Investor Day New York City May 11, 2011
Slide 56: Asset Overview
ASSET OVERVIEW 56 Monty J. Bennett Chief Executive Officer
Slide 57: Overview
Overview Broadly diversified portfolio with a focus on: Top 25 markets Coastal locations Hilton & Marriott brand families Franchised properties Current valuation is materially lower than replacement cost Best-in-class asset management Remington property management affiliation is a strategic advantag
Slide 58: Significant Growth Since IPO
Significant Growth Since IPO 58
Slide 59: Broad Geography
Broad Geography Ashford's geographic footprint encompasses 30 states and Washington DC 59 WEST COAST MIDDLE AMERICA TEXAS EAST COAST West Coast includes Alaska EBITDA by Region EAST COAST: 50% WEST COAST: 26% TEXAS: 9% MIDDLE AMERICA: 15%
Slide 60: MSA
MSA The vast majority of Ashford's EBITDA comes from top 25 markets, with 90% coming from top 50 markets 60
Slide 61: Chain Scale
Chain Scale Approximately 60% of Ashford's EBITDA comes from luxury & upper upscale assets 61
Slide 62: Brand Family
Brand Family Nearly 85% of Ashford's EBITDA comes from Marriott and Hilton branded assets 62
Slide 63: Transient vs. Group vs. Contract
Transient vs. Group vs. Contract Our customers are predominantly transient, with a strong emphasis on corporate business 63
Slide 64: Replacement Cost per Key
Replacement Cost per Key 64 Source: Estimated based on JP Morgan Research Report Note: Total excludes recently purchased WorldQuest asset At current price of $11.95, AHT trades for approximately $167,000 per key - a 28% discount to replacement cost
Slide 65: Best-in-Class Asset Management
Best-in-Class Asset Management What makes Ashford's asset management team different? 65
Slide 66: Best-in-Class Asset Management - RevPAR
Best-in-Class Asset Management - RevPAR Despite Ashford having 1/3 of its portfolio select-service, its average annual RevPAR growth is just 38 bps lower than its peers, which focus primarily in full-service assets 66 Source: Company filings
Slide 67: Best-in-Class Asset Management - RevPAR Yield
Best-in-Class Asset Management - RevPAR Yield Despite a weak year in 2010, Ashford has still been able to grow its market share over the past several years Better branded assets have a more difficult time maintaining share in the early stages of a recovery 67 Source: Company filings
Slide 68: Best-in-Class Asset Management - Flows
Best-in-Class Asset Management - Flows Ashford consistently beats its peers in hotel EBITDA flow-throughs, and on average ranks #1 among peers over the past four years Ashford's affiliate manager, Remington, gives it a competitive advantage in managing costs over its peers 68 Source: Company filings
Slide 69: Best-in-Class Asset Management - Margins
Best-in-Class Asset Management - Margins Ashford's EBITDA margin change consistently outperforms its peers, and on average ranks #1 among peers over the past four years Ashford is the only hotel REIT whose 2010 margins were higher than they were in 2006 69 Source: Company filings
Slide 70: Best-in-Class Asset Management - EBITDA
Best-in-Class Asset Management - EBITDA Ashford's asset management expertise allows it to have EBITDA growth in line with peers despite lower revenue growth 70 Source: Company filings
Slide 71: Advantages of Remington
Advantages of Remington 71 Share best practices across brands Reacts rapidly to real-time changes Aligned with ownership Immediate attention Keeps project management in-house Operate the hotels as if they owned them More owner- friendly cost structure Constant accessibility Additional brand advocate
Slide 72: Remington Company "Drivers"
Remington Company "Drivers" 72
Slide 73: Remington Outperformance
Remington Outperformance 73
Slide 74: Capex Spend History
Capex Spend History 74 We consistently spend much more than the FF&E reserve to keep our properties in good shape, but refrain from spending any optional dollars which don't meet return hurdles * Estimate based on capex planned spend and PKF forecasted 2011 US RevPAR growth of 7.1%
Slide 75: Capital Management Strategy
Capital Management Strategy 75
Slide 76: Case Study - Hilton Fort Worth
Case Study - Hilton Fort Worth Rebranded from Radisson to Hilton 1Q06 after $10.5 million renovation ($36,000 per key) Reduced room count by taking 220-room east tower out of hotel inventory and sold it as an office building for $4.1 million Following renovation, guest mix shifted from group to high
Slide 77: Case Study - Hilton Fort Worth Before and After
Case Study - Hilton Fort Worth 77 Before T12 Apr '05 After T12 Apr '07 Current 2010 Total Revenue $15.0M $13.7M $14.8M NOI $2.6M $1.9M $3.1M RevPAR Index 84% 98% 127% NOI Margin 17.4% 13.8% 20.7% Before & After Renovation:
Slide 78: Highland Potential
Highland Potential In 2010, the Highland portfolio achieved EBITDA flow of only 18%, compared to Ashford's flow of 104% Had Highland achieved Ashford's flow, an additional $8.7 million of EBITDA would have been realized Replacing Crestline management with Remington provides significant upside potent
Slide 79: Summary
Summary Broadly diversified portfolio with a focus on: Top 25 markets Coastal locations Hilton & Marriott brand families Franchised properties Current valuation is materially lower than replacement cost Best-in-class asset management Remington property management affiliation is a strategic advantage
Slide 80: Analyst / Investor Day New York City May 11, 2011
Analyst / Investor Day New York City May 11, 2011
Slide 81: Transactions Overview
TRANSACTIONS OVERVIEW 81 Douglas A. Kessler President
Slide 82: Overview
Overview Ashford is disciplined and thorough in how it approaches its transactions Proactive in thinking about today's impact and the range of future possibilities Despite its size, Ashford is not just a property aggregator, but frequently trades out of assets, selling over a billion dollars of asse
Slide 83: Ashford Underwriting
Ashford Underwriting Ashford Underwriting 83 Ashford's underwriting process is a highly focused one that ensures both the qualitative and quantitative goals of the company are met
Slide 84: Qualitative Underwriting
Qualitative Underwriting 84
Slide 85: Quantitative Underwriting
Quantitative Underwriting 85
Slide 86: Quantitative Underwriting
Quantitative Underwriting 86
Slide 87: Capital Recycling
Capital Recycling Capital recycling is an essential part of our overall strategy Sold more than $1 billion of assets since its IPO in 2003 Potential reasons for dispositions: 87 Non-Core Market Non-Core Brand Supply Growth Debt Maturity Better Use of Capital Seller's Market Market Concentration Port
Slide 88: Capital Recycling
Capital Recycling 88 7 Assets 10 Assets 23 Assets 10 Assets 2 Assets 3 Assets 56 Assets 1 Asset
Slide 89: Highland Transaction Background
Highland Transaction Background 89 Crowne Plaza Atlanta-Ravinia Hyatt Regency Long Island The Melrose (D.C.) Renaissance Palm Springs Sugar Land Marriott $2.2 billion privatization in 2007 Ashford $17.5 JV (25/75) with Prudential in mezz 6 tranche $1.5 billion debt senior, $172 million debt junior B
Slide 90: Highland Transaction Summary
Highland Transaction Summary 90 Hilton Boston Back Bay Nashville Renaissance Ritz-Carlton Atlanta Hyatt Savannah Plaza San Antonio Marriott The Churchill (D.C.) Transformational 28-hotel, $1.3 billion acquisition with 8,084 rooms Ashford had two competitive advantages in the deal: 1) existing mezz l
Slide 91: Highland Transaction Portfolio
Highland Transaction Portfolio 91 Name Location Rooms Manager Renaissance Palm Springs Palm Springs, CA 410 Remington The Melrose Washington, DC 240 Remington The Churchill Washington, DC 173 Remington Hilton Tampa Westshore Tampa, FL 238 Remington Crowne Plaza Ravinia Atlanta, GA 495 Remington The
Slide 92: Legacy Ashford vs. Highland 2010 EBITDA Concentration
Legacy Ashford vs. Highland 2010 EBITDA Concentration 100.0% 90.0% 80.0% 73% 75% 76% 70.0% 67% 6% 63% 60.0% 57% 50.0% 40.0% 30.0% 24% 20.0% 10.0% 0.0% Top 25 Markets Luxury /Upper- Full-Service Urban Upscale = Legacy Ashford = Highland ee MN
Slide 93: Highland Transaction - Price Per Key Comparison
Highland Transaction - Price Per Key Comparison 93 Source: Real Capital Analytics & company filings.
Slide 94: Replacement Cost per Key
Replacement Cost per Key 94 Source: Estimated based on JP Morgan Research Report Highland was purchased for $158,000 per key - a 44% discount to replacement cost
Slide 95: Transaction Conclusions
Transaction Conclusions Disciplined and thorough in underwriting transactions Proactive in thinking about today's impact and longer range goals Capital recycling is an essential part of our strategy Carefully monitor real-time trends in the capital and lodging markets Assess qualitative issues, but
Slide 96: Analyst / Investor Day New York City May 11, 2011
Analyst / Investor Day New York City May 11, 2011
Slide 97: Conclusion
CONCLUSION 97 Monty J. Bennett Chief Executive Officer
Slide 98: Historical averages
historical averages * Historically, investing at this point in the cycles yielded 30%+ 5-year IRRs * Whether GDP growth is rapid or slow, as long as it’s positive, hotel REITs should perform well mot aw
Slide 99: Conclusion highlights
¢ Potential Highland accretion ¢ Reinstated dividend with room to grow ¢ Levered capital stock should amplify EBITDA growth * Share count has been cut in half ¢ Proven asset management abilities with Remington affiliation ¢ Highly-aligned management team
Slide 100: Q&A Session
Q&A SESSION 100
Slide 101: Analyst / Investor Day New York City May 11, 2011
Analyst / Investor Day New York City May 11, 2011