Ashford Hospitality Trust Inc · NYSE:AHT
Ashford Hospitality Trust — Investor Day (May 2013)
76 slides from Ashford Hospitality Trust's investor day presentation, May 21, 2013
Slide 1: Investor & Analyst Day – May 2013
Investor & Analyst Day – May 2013 1 Follow Monty Bennett on Twitter: @MBennettAshford
Slide 2: Introduction
Introduction Deric Eubanks Senior Vice President - Finance 2
Slide 3: Safe Harbor
Safe Harbor 3 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
Slide 4: Management Team Attending
Monty Bennett Chairman & Chief Executive Officer Douglas Kessler President Jeremy Welter EVP – Asset Management David Brooks Chief Operating Officer & General Counsel David Kimichik Chief Financial Officer Rob Hays SVP – Corp. Finance & Strategy Deric Eubanks SVP - Finance 4 Management Team Attendin
Slide 5: Timeline
Timeline 9:05 to 9:45am Economy, Industry & Company Overview Monty Bennett, Chairman & Chief Executive Officer 9:45 to 9:55am Management Team Overview David Brooks, Chief Operating Officer & General Counsel 9:55 to 10:05am Capital Structure & Balance Sheet Update David Kimichik, Chief Financial Offi
Slide 6: Timeline
Timeline 10:15 to 10:25am Risk & Return Rob Hays, Senior Vice President-Corporate Finance /Strategy 10:25 to 10:45am Asset Management Overview Jeremy Welter, Executive Vice President - Asset Management 10:45 to 11:00am Recent Acquisitions & Highland Update Doug Kessler, President 11:00 to 11:30am Qu
Slide 7: Presentation Overview
Presentation Overview Monty Bennett Chairman & Chief Executive Officer 7 Follow Monty Bennett on Twitter: @MBennettAshford
Slide 8: Presentation Overview
8 Presentation Overview Ashford has delivered superior shareholder returns There is still significant upside remaining in this lodging cycle Ashford has a strong, covered dividend and invests in hard assets with inflation protection Ashford has demonstrated capital markets skill throughout cycles As
Slide 9: Total Shareholder Return
Total Shareholder Return 9 17% 50% 22% 16% 18% -19% -40% -29% -8% 44% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% 1-Yr 2-Yr 3-Yr 4-Yr 5-Yr 6-Yr 7-Yr 8-Yr 9-yr AHT Peer Avg 70% 80% 350% 294% 154% Peer average includes: BEE, CHSP, CLDT, DRH, FCH, HST, HT, INN, LHO, PEB, RLJ, SHO Trailing Total
Slide 10: Total Shareholder Return - Volatility
Total Shareholder Return - Volatility 10 20% 30% 40% 50% 60% 70% 80% 1-Yr 2-Yr 3-Yr 4-Yr 5-Yr 6-Yr 7-Yr 8-Yr 9-yr AHT Peer Avg Peer average includes: BEE, CHSP, CLDT, DRH, FCH, HST, HT, INN, LHO, PEB, RLJ, SHO Trailing Volatility as of 5/9/13 Source: Bloomberg − Ashford's volatility has been lower t
Slide 11: Economic & Industry Overview
Economic & Industry Overview 11
Slide 12: Historical US Debt Balances
Historical US Debt Balances 12 0% 50% 100% 150% 200% 250% 300% 350% 400% 450% U.S. Debt Balances as a % of GDP Home Mortgage Consumer Credit Other Household Debt Nonfinancial Business State & Local Government Federal Government Domestic Financial Foreign Borrowing in the U.S.
Slide 13: Impact of Quantitative Easing
Impact of Quantitative Easing 13 Cash Bonds Stocks Risk Ass e t V a lu e − Quantitative Easing is pushing up asset values
Slide 14: Real RevPAR Growing
Real RevPAR Growing 14 Source: U.S. Dept. of Commerce: BEA & Historical Statistics of the United States: - Cambridge $54.00 $56.00 $58.00 $60.00 $62.00 $64.00 $66.00 $68.00 $70.00 $72.00 $74.00 $76.00 Seasonally-Adjusted Real RevPAR (as of March 2013) Average 3-mo Avg
Slide 15: Hotel Demand Driven by Economy
Hotel Demand Driven by Economy 15 -8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 Real GDP Growth Hotel Demand Growth R-squared = 0.58 Source: Smith Travel Research & U.S. Dept. of Commerce: BEA
Slide 16: Historically Low Supply Growth
Historically Low Supply Growth 16 (1.0) 0.0 1.0 2.0 3.0 4.0 5.0 Supply Growth Supply Growth Y e a r- o v e r- Y e ar % Gr o w th Source: Smith Travel Research & PKF * PKF Forecast
Slide 17: Historical Stock Returns
Historical Stock Returns 17 − Historically, attractive returns from this point in the cycle 0% 50% 100% 150% 200% 250% 300% 350% 0 12 24 36 48 60 72 84 96 108 Months from Peak to Peak 1989-1997 1997-2007 2007-? Index includes AHT, BEE, DRH, FCH, HST, HT, LHO, and SHO. * Companies are included in the
Slide 18: RevPAR Forecast - PKF
7.7% 6.1% -2.0% -16.7% 5.4% 8.2% 6.8% 6.1% 8.4% 7.3% 5.1% 2.6% -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% Historical RevPAR Growth Forecasted RevPAR Growth RevPAR Forecast - PKF 18 5-Year RevPAR Growth CAGR: 5.9% Source: Smith Travel Research & PKF
Slide 19: Potential Industry EBITDA Growth Rates
Potential Industry EBITDA Growth Rates 19 − With strong potential RevPAR gains, those companies with reasonable flow-throughs could experience significant EBITDA growth − PKF estimates 2-year cumulative EBITDA growth of about 25%* COMPOUNDED 2-YEAR REVPAR GROWTH RATE COMPOUNDED 2-YEAR REVPAR GROWTH
Slide 20: Projected Hotel Room Value Growth
Projected Hotel Room Value Growth 20 $99,000 $95,000 $81,000 $56,000 $65,000 $78,000 $94,000 $106,000 $122,000 $133,000 $132,000 $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 Private Value of US Hotel Room Source: HVS
Slide 21: Advantages of REITs
Advantages of REITs 21 Benefits Dividend paying Tax benefits Inflation hedge High-quality real estate retains value Hard asset Not a financial asset Non- recourse debt Liquidity Transparency Daily Valuation
Slide 22: Company Highlights
Company Highlights A ASHFORD
Slide 23: Portfolio Overview
Portfolio Overview 23 2% 59% 2% 37% Chain Scale* Luxury Upper Upscale Upper Midscale Upscale 30% 4% 5% 53% 4% 4% Brand Family* Hilton Hyatt Starwood Marriott IHG Independent 24% 4% 23% 49% Segmentation** Group Contract Leisure Transient Corporate Transient 74% 16% 10% MSA* Top 25 Top 50 Other *TTM 3
Slide 24: Remington Outperformance
Remington Outperformance 24 354 bps 406 bps 1,124 bps - 200 400 600 800 1,000 1,200 Total Revenue Improvement RevPAR Index Improvement GOP Flow 2007 – 2012 Cumulative Outperformance Remington vs. Non-Remington AHT Managers (bps) NOTE: Legacy portfolio only
Slide 25: Asset Management Outperformance
Asset Management Outperformance 25 39% 8% 49% 41% 50% 53% 51% 37% 53% 104% 63% 65% 0% 20% 40% 60% 80% 100% 120% 2007 2008 2009 2010 2011 2012 Peer Avg AHT − Ashford consistently beats peers in hotel EBITDA flow throughs Peers include: BEE, CHSP, DRH, FCH, HST, HT, LHO, PEB, SHO Source: Company Filin
Slide 26: Margin Change vs. Peers
Margin Change vs. Peers 26 78 (106) (487) 53 132 145 114 (58) (406) 86 184 160 (600) (500) (400) (300) (200) (100) - 100 200 300 2007 2008 2009 2010 2011 2012 Peer Avg AHT − Ashford consistently beats peers in Hotel EBITDA margin change Peers include: BEE, CHSP, DRH, FCH, HST, HT, LHO, PEB, SHO Sour
Slide 27: Capex Spend
Capex Spend 27 12.8% 11.1% 8.4% 7.4% 6.9% 8.8% 10.1% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 2007 2008 2009 2010 2011 2012 2013 FC % of Total Revenues − Consistently invest in our hotels above the traditional FF&E reserve
Slide 28: Attractive Dividend Yield & Coverage
4.6% 4.3% 4.0% 4.0% 3.6% 3.5% 3.2% 3.0% 2.7% 2.3% 2.2% - - - 1.7x 1.9x 1.7x 1.4x 3.5x 2.3x 2.2x 2.6x 2.4x 2.4x 4.4x - 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% CLDT INN CHSP HT AHT RLJ DRH LHO Peer Avg PEB HST BEE FCH SHO A F F O C ove ra g e Divid e n d Yiel d
Slide 29: Most Highly-Aligned Management
Most Highly-Aligned Management 29 22% 5% 4% 4% 3% 3% 2% 2% 2% 1% 1% 1% 1% 1% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% AHT CLDT HT FCH RLJ INN HST Peer Avg CHSP SHO DRH PEB BEE LHO Insider ownership % Source: Company Filings & SNL
Slide 30: Replacement Cost per Key
Replacement Cost per Key 30 $296,128 $147,003 $233,631 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 Full-Service (14,857 Keys) Select-Service (10,719 Keys) Total (25,576 Keys) − At the current stock price AHT trades for approximately $173k per key, a 26% discount to estimated replac
Slide 31: Compelling Valuation
Compelling Valuation 31 − Ashford currently trades at about 12.2x 2013 Consensus EBITDA − Multiple discount relative to peers has expanded over the past several months Source: Citi Equity Research 2013 Consensus EBITDA Multiple As of 10/26/12 As of 5/10/13 Ashford 11.2x 12.2x Hotel REIT Peer Avg. 11
Slide 32: Compelling Valuation
Compelling Valuation 32 − Ashford currently trades at about 12.2x 2013 Consensus EBITDA − Similar hotels are trading in the private market at around 13.5x forward EBITDA 12.2x 13.5x 11.0x 12.0x 13.0x 14.0x AHT Multiple Private Market Multiple
Slide 33: Summary
33 Summary Ashford has delivered superior shareholder returns There is still significant upside remaining in this lodging cycle Ashford has a strong, covered dividend and invests in hard assets with inflation protection Ashford has demonstrated capital markets skill throughout cycles Ashford managem
Slide 34: Management Team Overview
Management Team Overview David Brooks Chief Operating Officer & General Counsel 34
Slide 35: Industry Experience
Industry Experience 35 Senior Executives each have over 20 years of experience in Lodging and Real Estate All Executives that took Ashford public 10 years ago are still here Proven track record of creating value through multiple hotel cycles Hotel operations & capital markets expertise
Slide 36: Capital Markets Experience
Capital Markets Experience 36 Asset diversification Interest rate swaps Deep Brand Relationships Common stock buybacks Preferred stock buybacks Hedging derivatives Mezzanine lending Large portfolio transactions Joint ventures Seasoned Management Team with Breadth of Experience
Slide 37: Transactions
Transactions 37 − History of large portfolio acquisitions: RTC Portfolios $1.0 billion (1992-1994) FGSB Portfolio $250 million (2004) CNL Portfolio #1 $465 million (2005) MIP Portfolio $270 million (2006) CNL Portfolio #2 $2.4 billion (2007) Highland Hospitality Portfolio $1.3 billion (2011)
Slide 38: Total Shareholder Return
Total Shareholder Return 38 +132% +31% 0% 50% 100% 150% 200% 250% 300% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 YTD* AHT Peer Avg Peer average includes: BEE, CHSP, CLDT, DRH, FCH, HST, HT, INN, LHO, PEB, RLJ, SHO Trailing Total Shareholder Returns as of 5/9/13 Source: Bloomberg (12/31/
Slide 39: Management Team Summary
Management Team Summary 39 Close alignment with shareholders through significant insider ownership Innovative strategies to maximize shareholder value Proven history of complex transactions Experienced and stable management team
Slide 40: Capital Structure & Balance Sheet Update
Capital Structure & Balance Sheet Update David Kimichik Chief Financial Officer 40
Slide 41: Capital Structure
Capital Structure 41 As of Q1 2013 - $ in millions Stock Price $13.00 Fully Diluted Shares Outstanding (mm) 87.2 Equity Value $1,133.4 Preferred Equity (Par Value) 393.9 Legacy Debt 2,339.7 Share of Highland Debt 807.2 Less: Cash & Marketable Securities (234.2) Total Enterprise Value $4,439.9
Slide 42: Low Risk on Balance Sheet
Low Risk on Balance Sheet 42 Strong liquidity • Excess cash flow • Undrawn $165m credit facility • $234m of unrestricted cash & marketable securities at the end of Q1 Highest leveraged loans have longest time to maturity Upcoming maturities have solid debt yields • No remaining 2013 maturities • 201
Slide 43: Debt Maturity Schedule
Debt Maturity Schedule 43 110.0 249.4 280.7 921.3 265.3 173.2 654.2 346.0 206.4 - 200.0 400.0 600.0 800.0 1,000.0 1,200.0 1,400.0 2013 2014 2015 2016 2017 Beyond D e b t ( $ in m il lio n s) Fixed-Rate Floating-Rate
Slide 44: Upcoming Debt Maturities
Upcoming Debt Maturities 44 GEMSA Manchester 1 Hotel May 2014 $5.2 million 10.1% TTM EBITDA Debt Yield UBS Pool 1 8 Hotels December 2014 $104.0 million 11.5% TTM EBITDA Debt Yield BoA MIP 5 Hotels March 2015 $172.4 million 10.6% TTM EBITDA Debt Yield Merrill Pool 1 10 Hotels July 2015 $151.9 million
Slide 45: Available Liquidity
Available Liquidity 45 Available Liquidity Undrawn $165m credit facility $234m of cash & marketable securities at end of Q1 Preferred equity ATM facility Common equity ATM facility Potential refinancing proceeds Excess cash flow
Slide 46: Coffee Break
10 Minute Coffee Break Sign up for 1–on-1s 46
Slide 47: Risk & Return
Risk & Return Rob Hays Senior Vice President – Corporate Finance & Strategy 47
Slide 48: Definition
Definition 48 RISK = VARIABILITY OF RETURNS
Slide 49: Understanding Risk
Understanding Risk 49 0% 10% 20% 30% 40% 50% 60% 70% 80% Pr o bab il ity % Expected Returns 10% MEAN 1 STDEV = 68% 2 STDEV = 95% 3 STDEV = 99.7%
Slide 50: Higher Returns Preferred
Higher Returns Preferred 50 0% 10% 20% 30% 40% 50% 60% 70% 80% Pr o bab il ity % Expected Returns All else being equal (risk), higher returns are better 10% 15% Example: Highland
Slide 51: Lower Risk Preferred
Lower Risk Preferred 51 0% 10% 20% 30% 40% 50% 60% 70% 80% Pr o bab il ity % Expected Returns 10% All else being equal, lower volatility (risk) is better Example: Hedges
Slide 52: Weighing Higher Risk & Returns
Weighing Higher Risk & Returns 52 0% 10% 20% 30% 40% 50% 60% 70% 80% Pr o bab il ity % Expected Returns Higher returns, slightly higher risk 10% 25% Example: Buybacks
Slide 53: Weighing Higher Risk & Returns
Weighing Higher Risk & Returns 53 0% 10% 20% 30% 40% 50% 60% 70% 80% Pr o bab il ity % Expected Returns Slightly higher returns, higher risk 10% 12% Example: Passed deals
Slide 54: Risk & Return Analysis Process
Risk & Return Analysis Process 54 Understand Expected Returns •Underwriting & due diligence Quantify Variability of Expected Returns (Risk) •Stress testing & scenario analysis •Determine sensitivity of assumptions / inputs Weigh the risk/reward opportunity •Translate vast amounts of data into unders
Slide 55: Asset Management Overview
Asset Management Overview Jeremy Welter Executive Vice President – Asset Management 55
Slide 56: Best in Class Asset Management
Best in Class Asset Management 56 Best-in-class asset management Strategic relationship with Remington Analytical rigor Persistence
Slide 57: Asset Management Best Practices
Asset Management Best Practices 57 6.8% Rooms 2.1% Rooms 42.0% Rooms : 48.4% Rooms 0.7% Rooms Balanced Approach • Strong flows & margins – because make it a priority • Implement Ashford/Remington best practices across portfolio • Operational & financial strengths • Thoughtful & diligent • Utilize op
Slide 58: Asset Management: Revenue Strategies
Asset Management: Revenue Strategies 58 Ancillary Revenue Initiatives Long-Term Top Line DRIVE On-Going Group Funnel Review Transient RevMAX • Banquet and catering • Premium room upgrades • Parking opportunities • Audio and visual • Real estate and antenna leases
Slide 59: Asset Management: Cost Cut Initiatives
Asset Management: Cost Cut Initiatives 59 Post takeover Ashford Asset Management conducts "Deep Dive” Benchmarking On-site Organizational Review Profit Improvement Plan
Slide 60: Washington DC Portfolio Overview
Washington DC Portfolio Overview 60 SpringHill Suites Gaithersburg Courtyard Gaithersburg Embassy Suites Dulles SpringHill Suites Centerville Residence Inn Fairfax Courtyard Crystal City Marriott Crystal Gateway Embassy Suites Crystal City The Melrose The Churchill Capital Hilton
Slide 61: Crystal City – BRAC Update
Crystal City – BRAC Update 61 − AHT owns 3 hotels with 1,236 rooms in Crystal City Short-Term: 2013 (Bottomed- out) Mid-Term: 2014-2015 (Strengthening) Long-Term: 2016-Beyond (Improved Mkt.) Market Outlook • Strategic location • Changes in market dynamics Strong Fundamentals in Crystal City
Slide 62: Recent Acquisitions & Highland Update
Recent Acquisitions & Highland Update Doug Kessler President 62
Slide 63: Pier House Resort & Spa Acquisition Highlights
Pier House Resort & Spa 63 Acquisition Highlights: • Purchase Price of $90 million • $634,000/key • 6.2% TTM Cap Rate After Operational Synergies/Remington Mgmt: • Pro forma 8.4% Cap Rate • Pro forma 10.5x EBITDA Multiple
Slide 64: Pier House Resort & Spa
Pier House Resort & Spa 64 • Hotel has been owner-managed • Remington manages 3 other hotels in Key West Operational Synergies • Hotel had $275 RevPAR in 2012 • Recently renovated; very little capex needed High Quality Asset • Key West has 2nd highest RevPAR in US • Very high barriers to entry Great
Slide 65: Highland Hospitality Portfolio
Highland Hospitality Portfolio 65 What is it? • Transformational 28-hotel, $1.3 billion acquisition • Completed in March 2011 with joint venture partner • Ashford owns 72% How did we buy it? • Invested in the mezzanine debt in 2008 via joint venture • Consensual foreclosure & restructuring of the de
Slide 66: Highland EBITDA Flow Through
Highland EBITDA Flows Pe 100% 93.8% 90% 83.0% 80% 70% 60% + 50% 40% 32.7% One Year Pre-Takeover One Year Post-Takeover 2012 ASI FORD
Slide 67: Highland Revenues
Highland Revenues 67 $388 $426 $380 $385 $390 $395 $400 $405 $410 $415 $420 $425 $430 $ in m ill io ns TTM Total Revenues* * Represents 100% of Highland Joint Venture Revenues.
Slide 68: Highland NOI Exceeds Underwriting
Highland NOI Exceeds Underwriting 68 $82 $86 $88 $91 $93 $95 $100 $106 $98 $75 $80 $85 $90 $95 $100 $105 $110 Jun 2011 TTM Sep 2011 TTM Dec 2011 TTM Mar 2012 TTM Jun 2012 TTM Sep 2012 TTM Dec 2012 TTM Mar 2013 TTM U/W for Mar 2013 NO I ($ i n m il li o n s)
Slide 69: Renaissance Nashville Hotel
Renaissance Nashville Hotel 69
Slide 70: Hilton Boston Back Bay
Hilton Boston Back Bay 70
Slide 71: The Melrose – Washington D.C.
The Melrose – Washington D.C. 71 BEFORE AFTER
Slide 72: Highland Debt
Highland Debt 72 Loan Tranche Loan Balance Interest Rate TTM EBITDA Debt Yield Wells Senior $380.2 3.2% 17.2% Mezz 1 93.8 7.0% 13.9% Mezz 2 89.3 8.0% 12.1% Mezz 3 76.5 10.5% 11.0% Mezz 4 13.2 2.2% 10.8% Boston Back Bay 73.7 4.4% 12.3% Nashville/Princeton 80.6 4.4% 15.5% TOTAL / Avg. $807.2 5.1% 15.5
Slide 73: Acquisition Preferences
Acquisition Preferences 73 Focus on Full Service Hotels Major Market Locations Ability to Franchise Must be Accretive
Slide 74: Q & A
Q & A 74
Slide 75: Lunch with Management
Lunch with Management A ASHFORD
Slide 76: Investor & Analyst Day – May 2013
Investor & Analyst Day – May 2013 76