Ashford Hospitality Trust Inc · NYSE:AHT
Ashford Hospitality Trust — Investor Day (May 2012)
77 slides from Ashford Hospitality Trust's investor day presentation, May 8, 2012
Slide 1: Analyst / Investor Day May 2012
JAN. NF Analyst / Investor Day May 2012
Slide 2: Introduction
EOS induction YW ntroaquction Rob Hays 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: Management Team Attending
Management Team Attending 4 Monty Bennett Chief Executive Officer Douglas Kessler President David Brooks Chief Operating Officer & General Counsel David Kimichik Chief Financial Officer Jeremy Welter EVP – Asset Management Rob Hays SVP – Corp. Finance & Strategy Deric Eubanks SVP - Finance
Slide 5: Timeline
Timeline 5 9:05 to 9:50am Economy, Industry & Company Overview Monty Bennett, Chief Executive Officer 9:50 to 10:05am Capital Structure & Balance Sheet David Kimichik, Chief Financial Officer 10:05 to 10:15am Coffee Break & Sign-ups for 1-on-1 meetings 10:15 to 10:35am Perspective on Leverage Dougla
Slide 6: Timeline
Timeline 6 10:35 to 10:50am Highland Hospitality Update Monty Bennett, Chief Executive Officer 10:50 to 11:00am Next Steps for Ashford Monty Bennett, Chief Executive Officer 11:00 to 11:30am Question & Answer Session Management Team 11:30am to 12:30pm Optional Lunch with Management
Slide 7: Ashford Hospitality Trust
UN Ashford Hospitality YW Trust Monty Bennett Chief Executive Officer
Slide 8: Presentation Overview
Presentation Overview 8 There is still significant upside remaining in this lodging cycle Ashford has a strong, covered dividend and invests in high quality, hard assets with inflation protection Ashford has the right capital structure for this part of the cycle Ashford continues to have superior st
Slide 9: Economy, Industry, & Company Overview
pA Economy, Industry, & NY Company Overview
Slide 10: U.S. Starting to Deleverage
0% 50% 100% 150% 200% 250% 300% 350% 400% 450% Home Mortgage Consumer Credit Other Household Debt Nonfinancial Business State & Local Government Federal Government Domestic Financial U.S. Starting to Deleverage Total U.S. Debt as a % of GDP 10 Source: U.S. Federal Reserve & Historical Statistics of
Slide 11: U.S. Population Growth
U.S. Population Growth Total Population in 000s & Average Annual Growth per Decade 11 3.1% 3.2% 2.9% 3.0% 2.9% 3.2% 3.1% 2.4% 2.3% 2.3% 1.8% 1.9% 1.3% 1.3% 0.6% 1.4% 1.7% 1.1% 1.0% 0.8% 1.1% 0.8% - 50,000 100,000 150,000 200,000 250,000 300,000 350,000 Source: U.S. Census Bureau & Historical Statist
Slide 12: U.S. Long-Term Productivity
U.S. Long-Term Productivity Real GDP per Capita & Average Annual Real GDP Growth per Decade 12 -0.4% 4.5% 1.8% 2.9% 2.1% 2.3% 2.1% 0.6% 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 1930 1940 1950 1960 1970 1980 1990 2000 2010 Source: U.S. Dept. of Commerce: BEA, U.S. Census Bureau & Historical Statis
Slide 13: Real GDP Growth
-20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Real GDP Growth % 13 2011 Real GDP Growth: 1.7% Source: U.S. Dept. of Commerce: BEA & Historical Statistics of the United States: - Cambridge
Slide 14: Hotel Demand Driven by Economy
-8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 Real GDP Growth Hotel Demand Growth Hotel Demand Driven by Economy Source: Smith Travel Research & U.S. Dept. of Commerce: BEA Hotel Demand Growth % vs. Real GDP Growth 14 R-squared = 0.61
Slide 15: U.S. Demand Will Outpace Supply
-8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 Y ea r- o v e r- Y ea r % G ro w th Supply Growth Demand Growth U.S. Demand Will Outpace Supply 15 PKF Forecast Source: Smith Travel Research & PKF
Slide 16: Total U.S. Demand
Total U.S. Demand 16 Source: Smith Travel Research 55,000,000 60,000,000 65,000,000 70,000,000 75,000,000 80,000,000 85,000,000 90,000,000 95,000,000 Monthly Seasonally-Adjusted Demand TTM Average Demand
Slide 17: Economic & Industry Summary
Economic & Industry Summary 17 Deleveraging & low, steady demand growth Low interest rates for the foreseeable future Fed unlikely to raise interest rates – unlikely that a “normal” recession will occur due to high interest rates Only mild threat is economic shock: war, euro crisis, sovereign debt &
Slide 18: Real RevPAR is Cyclical
$52 $54 $56 $58 $60 $62 $64 $66 $68 $70 $72 $74 Real RevPAR is Cyclical Source: Smith Travel Research & U.S. Dept. of Labor: BLS Seasonally-Adjusted Real RevPAR (2012$, Trailing 3-Mo Average) 18
Slide 19: Real RevPAR is Cyclical
$55.00 $57.00 $59.00 $61.00 $63.00 $65.00 $67.00 $69.00 $71.00 $73.00 $75.00 1992 - 2000 2003 - 2007 2010 - 2016E $72.73 $73.42 $73.08 $62.21 (Current) 17% Real Growth 30% Nominal Growth (6.2% Nominal CAGR)* (8.6 Years) (4.8 Years) (6.7 Years) Real RevPAR is Cyclical * Assumes 2.5% CPI growth. Sourc
Slide 20: RevPAR Forecast - PKF
7.9% 6.1% -2.0% -16.7% 5.4% 8.2% 5.8% 6.6% 6.9% 4.4% 0.4% -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 2006 2007 2008 2009 2010 2011 2012F 2013F 2014F 2015F 2016F Historical RevPAR Growth Forecasted RevPAR Growth RevPAR Forecast - PKF Source: Smith Travel Research & PKF 20 5-Year RevPAR Growth CAGR: 4
Slide 21: Potential Industry EBITDA Growth Rates
Potential Industry EBITDA Growth Rates 21 − With strong potential RevPAR gains, those companies with reasonable flow-throughs could experience significant EBITDA growth − PKF estimates 5-year cumulative EBITDA growth of about 40%* *Based on PKF RevPAR/ADR/Occupancy projections and EBITDA growth resu
Slide 22: Attractive Shareholder Returns
Attractive Shareholder Returns 22 − From current real RevPAR levels to cycle peak stock prices, previous cycles averaged 26% total return CAGRs 26% 27% 26% 0% 5% 10% 15% 20% 25% 30% Oct '92 - May '01 Dec '03 - May '07 Average Source: Smith Travel Research, Bloomberg & U.S. Dept. of Labor: BLS Equal-
Slide 23: Projected Hotel Room Value Growth
Projected Hotel Room Value Growth 23 $100,000 $95,000 $81,000 $56,000 $65,000 $78,000 $90,000 $105,000 $114,000 $121,000 $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 Private Value of US Hotel Room Source: HVS
Slide 24: Advantages of Lodging REITs
Advantages of Lodging REITs Benefits Dividend paying Tax benefits Inflation hedge High- quality real estate retains value Hard asset Not a financial asset Non- recourse debt Liquidity 24
Slide 25: Industry Summary
Real U.S. RevPAR is cyclical and perhaps only 1/3 of the way to the next peak Nominal U.S. RevPAR is forecasted to grow at 5-6% CAGRs over the next 5 years The industry could experience between 40% and 80% EBITDA growth over the next five years Investing at this point in the cycle historically has l
Slide 26: Company Update
Company Update
Slide 27: Asset Overview
Asset Overview 27 124 Hotels 26,195 Rooms 85% Coastal & Texas 73% Top 25 Markets 59% Upper Upscale 85% Hilton & Marriott 72% Transient 50% Franchised As a % of 1Q 2012 TTM EBITDA Franchised Geography Markets Chain Scale Brand Family Demand Mix
Slide 28: High Quality Portfolio
High Quality Portfolio 28 Marriott Bridgewater Hyatt Regency Coral Gables Courtyard Seattle Downtown Capital Hilton Marriott Seattle Waterfront Renaissance Tampa Embassy Suites Portland Embassy Suites Las Vegas Embassy Suites Silicon Valley Renaissance Palm Springs Marriott DFW Airport Marriott Plaz
Slide 29: High Quality Portfolio
High Quality Portfolio 29 Hilton Parsippany The Melrose – D.C. Hyatt Regency Wind Watch Boston Back Bay Hilton Renaissance Nashville Marriott Sugar Land Hyatt Regency Savannah Westin Princeton The Silversmith - Chicago Hilton La Jolla Torrey Pines Courtyard SF Downtown Marriott Suites Dallas Marriot
Slide 30: Best-in-Class Asset Management
Best-in-Class Asset Management 30 Best-in-class asset management Strategic relationship with Remington Analytical rigor − Aligned with owners − Rapid response − Check against brands − Constant focus on performance − Question everything − Avoid traditional thinking − Decisions are quantitative − Opti
Slide 31: Remington Outperformance
Remington Outperformance 31 400 bps 700 bps 1,900 bps - 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 Total Revenue Improvement RevPAR Index Improvement GOP Flow 2007 – 2011 Cumulative Outperformance Remington vs. Non-Remington AHT Managers (bps)
Slide 32: Best-in-Class Asset Management: EBITDA Flow Throughs
Best-in-Class Asset Management 32 − Ashford consistently beats peers in hotel EBITDA flow throughs 39% 8% 49% 41% 50% 51% 37% 53% 104% 63% 0% 20% 40% 60% 80% 100% 120% 2007 2008 2009 2010 2011 Peer Avg AHT Peers include: BEE, CHSP, DRH, FCH, HST, HT, LHO, PEB, SHO Source: Company Filings
Slide 33: Best-in-Class Asset Management: EBITDA Margin Change
Best-in-Class Asset Management 33 − Ashford consistently beats peers in hotel EBITDA margin change 78 (106) (487) 53 132 114 (58) (406) 86 184 (600) (500) (400) (300) (200) (100) - 100 200 300 2007 2008 2009 2010 2011 Peer Avg AHT In basis points Peers include: BEE, CHSP, CLDT, DRH, FCH, HST, HT, LH
Slide 34: 1Q 2012 AHT RevPAR Update
1Q 2012 AHT RevPAR Update 34 7.9% 6.1% 4.0% 3.1% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% Total U.S. AHT MSA's AHT Comp Sets AHT Source: Smith Travel Research
Slide 35: Capex Spend History
Capex Spend History 35 12.8% 11.1% 8.4% 7.4% 6.9% 9.5% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 2007 2008 2009 2010 2011 2012E* − Ashford consistently spends capital to keep the properties in great shape, but refrains from spending optional dollars which do not meet return hurdles Based on our est
Slide 36: Attractive Dividend Yield & Coverage
Attractive Dividend Yield & Coverage 36 − Ashford is the only lodging REIT to have both its dividend yield and AFFO dividend coverage above the peer average 5.3% 5.1% 4.8% 4.4% 3.0% 2.5% 2.0% 1.5% 1.5% - - - 1.4x 4.3x 1.4x 1.6x 2.0x 2.7x 2.1x 3.7x 5.1x - 1.0 2.0 3.0 4.0 5.0 6.0 0.0% 1.0% 2.0% 3.0% 4
Slide 37: Total Shareholder Return
0% -5% 194% -26% -45% -33% -15% 24% -25% -5% 205% 71% -9% 2% 24% 49% -100% -50% 0% 50% 100% 150% 200% 250% 1-Yr 2-Yr 3-Yr 4-Yr 5-Yr 6-Yr 7-Yr 8-Yr Peer Avg. AHT Total Shareholder Return 37 Peer average includes: BEE, CHSP, CLDT, DRH, FCH, HST, HT, LHO, PEB, SHO Trailing Total Shareholder Returns as
Slide 38: Most Highly-Aligned Management
Most Highly-Aligned Management 38 21% 15% 5% 3% 3% 2% 2% 1% 1% 1% 1% 0% 5% 10% 15% 20% 25% AHT HT CLDT FCH HST CHSP SHO DRH BEE LHO PEB Insider ownership % Source: Company Filings
Slide 39: Replacement Cost per Key
Replacement Cost per Key 39 Estimate based on JP Morgan research report. $278,000 $142,000 $223,000 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 Full-Service (15,476 Keys) Select-Service (10,719 Keys) Total (26,195 Keys) − At current stock prices AHT trades for approximately $153k per key, a
Slide 40: Company Summary
Franchised, full-service preferred Best-in-class asset management Remington advantage Strong dividend yield & coverage Highly-aligned management team Attractive price per key Company Summary 40
Slide 41: Capital Structure & Balance Sheet
WN Capital Structure & YW Balance Sheet David Kimichik Chief Financial Officer
Slide 42: Capital Structure Overview
Capital Structure Overview 42 − Ashford has a capital structure built for this part of the cycle Higher leverage than peers No recourse debt outstanding Well-laddered maturities Available liquidity
Slide 43: Current Capital Structure
Current Capital Structure 43 Equity (# of shares) Common 68.2 OP Units 17.6 Total Diluted Shares 85.8 Preferred Series A,D & E (par value) $386.4 As of 1Q 2012 ($ Millions) Assets Hotel Gross Assets $4,454.8 Interest Rate Hedges $30.0 Mezz Book Value $4.0 Other $417.9 Total Gross Assets $4,906.8 Cas
Slide 44: Debt Maturity Schedule
Debt Maturity Schedule 44 $0 $200 $400 $600 $800 $1,000 $1,200 2012 2013 2014 2015 2016 2017 Beyond D e b t ($ M ) Fixed-Rate Floating-Rate Source: Company Filings
Slide 45: Refinancing in Process
Refinancing in Process 45 $23 million of restricted cash available for paydown One hotel to be unencumbered No material amount of unrestricted cash needed Only loan due in 2012 − $167 million Wachovia floater refinancing due in May
Slide 46: Upcoming Maturities & Debt Yields
Upcoming Maturities & Debt Yields 46 − Upcoming maturities through 2014 include: − TTM March 2012 weighted average debt yields on these maturities are 13.1% (excluding Hilton El Conquistador, which has negative NOI) Prudential Torrey Pines / Capital Hilton $144.7M Matures Aug 2013 13.2% TTM Debt Yie
Slide 47: Debt Maturities
Debt Maturities 47 • $1.4B of debt • Refinanceable today with a blended debt yield of 11% Portfolio A • $1.7B of debt • Highland and most of CNL • Blended debt yield of 8% • Blended cost of debt of 5.7% • Excess cash flow of 2.3% on debt balance • Blended maturity of 4.4 years with strong EBITDA gro
Slide 48: Available Liquidity
Available Liquidity 48 Available Liquidity Undrawn $145m credit facility $150m of unrestricted cash at end of Q1 ‘12 Preferred equity ATM facility Common equity ATM facility Potential refinancing proceeds Excess cash flow
Slide 49: Capital Structure Summary
Higher leverage than peers No recourse debt outstanding Well-laddered maturities Available liquidity Debt through 2016 is refinanceable today Capital Structure Summary 49
Slide 50: Minute Break
10 Minute Break
Slide 51: Perspective on Leverage
WN Perspective on YW Leverage Douglas Kessler President
Slide 52: Leverage Perspective Overview
Leverage Perspective Overview 52 • 50% to 60% net debt to cost • Produces better long-term shareholder returns without adding material risk to platform Leverage Level • Maximize non-recourse debt • Preference for longer duration • Have proper mix of fixed vs. floating • Ladder the maturities How to
Slide 53: Leverage & Equity Returns
Leverage & Equity Returns 53 − At this point in the lodging cycle higher leverage can provide significantly higher equity returns ($Millions) Company A Company B EBITDA 100.0$ 100.0$ EBITDA Multiple 12.0x 12.0x TEV 1,200.0$ 1,200.0$ Debt (600.0) (900.0) Equity Value 600.0$ 300.0$ Debt to EBITDA 6.0x
Slide 54: Leverage Misconceptions
Leverage Misconceptions 54 Frequently heard leverage criticisms Leverage increases earnings volatility Leverage increases stock volatility Leverage lowers EBITDA multiples Leverage risks the entire company Leverage leads to lost opportunity
Slide 55: Leverage & Earnings Volatility
Leverage & Earnings Volatility 55 $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 $160,000 $180,000 $200,000 2007 2008 2009 2010 2011 $000’ s AFFO w/o Debt Management Debt Management − Ashford demonstrated that the earnings impact of a severe recession can be mitigated through proactiv
Slide 56: Earnings Volatility vs. Peers
Earnings Volatility vs. Peers 56 − The earnings of Ashford have been materially less volatile than its peers despite its higher leverage TTM AFFO per Share (2007 Q2 = 100%) Source: SNL & Company Filings Peers include: BEE, DRH, FCH, HST, HT, LHO & SHO 0% 20% 40% 60% 80% 100% 120% 140% 160% Ashford P
Slide 57: Leverage & Stock Volatility
Leverage & Stock Volatility 57 − Leverage may impact the volatility of a stock in the short-term, but not necessarily over the long-term Includes all REITs with their multiples normalized across property types Source: Bloomberg 5-year Avg Debt / EBITDA vs. Normalized 5-year Volatility R² = 0.09 0.0x
Slide 58: Leverage & EBITDA Multiples
0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x 18.0x 0.0x 5.0x 10.0x 15.0x 20.0x 25.0x 30.0x Leverage & EBITDA Multiples 58 − Leverage has NO impact on EBITDA multiples Debt / EBITDA vs. Normalized EBITDA Multiples* as of 4/30/12 Includes all REITs with their multiples normalized across property t
Slide 59: Leverage & EBITDA Multiples
Leverage & EBITDA Multiples 59 − Leverage has NO impact on EBITDA multiples Debt / Gross Assets vs. Normalized EBITDA Multiples* as of 4/30/12 Includes all REITs with their multiples normalized across property types Source: Citigroup research – 4/30/12 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0.0
Slide 60: Leverage & Company Risk
Leverage & Company Risk 60 • Most companies get in trouble not for leverage, but for paying too much for assets • It is difficult to experience financial stress at 50% to 60% debt to cost if you are buying right • Ashford has an expertise in capital allocation Paying too much • Not all debt is creat
Slide 61: Safety & Optionality
Safety & Optionality 61 • ~90% of current equity value • $1.4 billion of debt • Positive cash flow • Weighted average maturity of 3.2 years • All debt non-recourse Portfolio A: Safety • ~10% of current equity value • Highland and most of CNL acquisition • $1.7 billion of debt • Positive cash flow •
Slide 62: Leverage & Lost Opportunity
Leverage & Lost Opportunity 62 − Having higher leverage has not prevented Ashford from completing one acquisition or transaction it wanted to Acquisitions • CNL – 2007 • Highland - 2011 Capital Markets • Common stock buybacks • Preferred stock buybacks • Hedging • Preferred stock issuance • Common s
Slide 63: Unique View on Equity
Unique View on Equity 63 − 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 +/- 5 years in order to deter
Slide 64: Leverage Perspective Summary
50% to 60% net debt to cost plus capital allocation expertise Better long-term returns without adding material risk – not all debt is equal Proactively manage leverage through non- recourse, longer duration, floating-rate debt with laddered maturities Leverage does not necessarily increase earnings
Slide 65: Highland Hospitality Update
UN Highland Hospitality YW Update Monty Bennett Chief Executive Officer
Slide 66: Highland Transaction Rationale
Highland Transaction Rationale 66 $1.3 billion 28 Hotels 8,804 Rooms $158k per key Accretive to FFO & stock price now & over long- term Upper- upscale & urban upscale assets Key markets (NY/NJ, Boston, Chicago, Wash DC) Strong brands Franchised assets Operational upside
Slide 67: Highland Opportunities
Highland Opportunities 67 Franchise properties • Looking for opportunities to create long-term value and operational efficiency through Remington management • Hilton Back Bay, Hyatt Windwatch and two more in process Operating flow throughs • Right-sizing the cost structure • Bringing best practices
Slide 68: Highland Year One GOP Flows
Highland Year One GOP Flows 68 25.20% 102.70% 0% 20% 40% 60% 80% 100% 120% One Year Pre-Takeover One Year Post-Takeover
Slide 69: Highland Brand-Managed GOP Flows
Highland Brand-Managed GOP Flows 69 -48% -75% 15% 40% 71% 75% 78% 44% 67% 270% 114% 65% 52% 288% 144% -100% -50% 0% 50% 100% 150% 200% 250% 300% 350% Pre-Ashford Takeover Post-Ashford Takeover
Slide 70: Highland NOI Exceeds Underwriting
Highland NOI Exceeds Underwriting 70 $79 $82 $86 $88 $91 $87 $72 $74 $76 $78 $80 $82 $84 $86 $88 $90 $92 Mar 2011 TTM Jun 2011 TTM Sep 2011 TTM Dec 2011 TTM Mar 2012 TTM U/W for Mar 2012 NOI $ (in m il lion s )
Slide 71: Significant Operational Upside
Significant Operational Upside 71 60% 65% 70% 75% 80% 85% 90% 95% 100% 2007 2008 2009 2010 2011 TTM Mar 2012 Legacy Highland 700 bps Opportunity % of Peak EBITDA − If Highland EBITDA was same % of peak level as Legacy, its EBITDA would be nearly $10 million higher ($1.40 of equity value at 12x multi
Slide 72: Key Highland Capex
Key Highland Capex 72 Property Project Scheduled Start Date Budget Courtyard Denver Lobby Bistro Complete $875,000 The Churchill Lobby & Restaurant Complete $871,000 Marriott San Antonio Guestrooms & Corridors Complete $3,815,000 Ritz-Carlton Atlanta Meeting Space Complete $757,000 Courtyard Savanna
Slide 73: Highland Summary
Achieving flow through goals Leaving no stone unturned on improving revenues Portfolio is exceeding underwriting expectations Strategic capital will help revenues Significant upside still exists Highland Summary 73
Slide 74: Next Steps for Ashford
WN Next Steps for YW Ashford Monty Bennett Chief Executive Officer
Slide 75: Next Steps for Ashford
• Focus on growing Highland revenues • Growing EBITDA is best way to create shareholder value Intense operational focus to grow EBITDA • Build cash balance in preparation for next downturn Grow cash balance • Must be long-term accretive to stock price • Franchised, full-service preferred • Domestic
Slide 76: Question & Answer Session
IN Question & Answer YW Session Ashford Management Team
Slide 77: Analyst / Investor Day May 2012
JAN. NF Analyst / Investor Day May 2012