Ashford Hospitality Trust Inc · NYSE:AHT
Ashford Hospitality Trust — Merger or Acquisition (October 2013)
38 slides from Ashford Hospitality Trust's merger presentation, Oct 1, 2013
Slide 1: Ashford Hospitality Prime Questions & Answers
NS ASHFORD HOSPITALITY PRIME Questions & Answers
Slide 2: Safe Harbor
2 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
Slide 3: Ashford Prime Questions & Answers
3 Ashford Prime Questions & Answers
Slide 4: What was the impetus for the Prime spin-off?
4 Question: What was the impetus for the Prime spin-off? Ashford Response: We had been looking at our company as two portfolios: a high-leveraged portfolio and a low- leveraged portfolio, which led us to thinking about our company in terms of the relative imbedded value of each component of our port
Slide 5: Why is Prime going to be externally-advised?
5 Question: Why is Prime going to be externally-advised? Ashford Response: Our management team and board believe the externally-advised structure for Prime is the best available alternative to maximize value for shareholders. An internally-advised structure would have required this management team,
Slide 6: How is your external advisory agreement different?
6 Question: How is your external advisory agreement different from other external advisory agreements in the REIT space? Ashford Response: The structure of our external advisory agreement is revolutionary. First, the fees are based on market value and total shareholder return outperformance as oppos
Slide 7: How will the management fees work?
7 Question: Can you explain how the management fees will work? Ashford Response: The base management fee will be based on total enterprise value. Prime will pay an annual fee of 0.70% x its total enterprise value (this 0.70% compares to the 9-year average cash G&A to TEV of 0.85% for comparable Hote
Slide 8: Will Prime remain externally advised?
8 Question: Will Prime remain externally advised or is the plan to internalize management once you get to a certain size? Ashford Response: There is no plan to internalize the management of Prime. We believe our external advisory agreement is more shareholder friendly than all other existing Hotel R
Slide 9: Smaller market caps and lower EBITDA multiples?
9 Question: Won't the smaller market caps of both Ashford Trust and Ashford Prime result in lower EBITDA valuation multiples? Ashford Response: We have spent considerable time researching this question and have not found any evidence that market cap impacts EBITDA valuation multiples for Hotel REITs
Slide 10: Correlation between RevPAR and EBITDA multiple
10 • As the chart below shows, there is a very high correlation between RevPAR and EBITDA Multiple for the Hotel REIT universe. Ashford Prime, with its higher RevPAR assets and investment focus, should benefit from this correlation Public Lodging REITs include: AHT, BEE, CHSP, CLDT, DRH, FCH, HPT HT
Slide 11: No correlation between market cap and EBITDA multiple
11 • Conversely, there is no correlation between Market Capitalization and EBITDA Multiple for the Hotel REIT universe. This is further evidence that the overall valuation of Ashford Prime should be based more on its RevPAR focus than its market capitalization Public Lodging REITs include: AHT, BEE,
Slide 12: Correlation across other REIT property types
12 • We also looked at the correlation between EBITDA multiple and market capitalization for other REIT property types. Below are the R-squared (correlation significance) values for those sectors: • With a 0.58 R-squared value - the apartment REIT sector was the only sector with a material correlati
Slide 13: How will current Trust shareholders benefit from Prime?
13 Question: How will current Trust shareholders benefit from Prime? Ashford Response: Current Trust shareholders should benefit from Prime achieving a premium valuation multiple to Trust. Also, Trust shareholders should benefit from the management fee income that Trust will receive from Prime. Ashf
Slide 14: Can a buyer of Prime terminate the advisory agreement?
14 Question: Can a buyer of Prime terminate the advisory agreement? Ashford Response: Yes – the advisory agreement can be terminated on a change of control of Prime for a fee. It's very rare for an advisory agreement to be terminable on a change of control. We thought this feature would be important
Slide 15: Path to 5.0x net debt plus preferred equity to EBITDA
15 Question: For Prime, how will you get from where you are today to 5.0x net debt plus preferred equity to EBITDA? Ashford Response: We expect to get to 5.0x net debt plus preferred equity to EBITDA over time. We plan to get there through acquisitions, equity raises, and increased Hotel EBITDA. Ash
Slide 16: Timing of Pier House and Marriott Gateway acquisitions
16 Question: What is the timing of Prime acquiring the Pier House and the Marriott Gateway? Ashford Response: The determination to exercise the options will be a Prime Board decision. We would expect Prime to exercise its option to buy the Pier House resort sometime between Q4 2013 & Q1 2014 dependi
Slide 17: Do you plan to buy assets in Prime?
17 Question: Do you plan to buy assets in Prime? Ashford Response: Yes – Prime is expected to be a growth vehicle and is well positioned to grow through the existing option and ROFO hotels. Also, the management team has a proven 10-yr track record of growing AHT from a blind pool IPO in 2003 with a
Slide 18: Deciding whether a deal is for Trust or Prime
18 Question: When you are looking at deals, how will you determine if the deal is for Trust or Prime? Ashford Response: Prime will focus on hotels with RevPAR 2x the national average (currently approximately $135) predominantly located in gateway and resort markets. Trust will continue to focus on m
Slide 19: International hotel investments
19 Question: Are you still looking to invest in international hotels? Will this happen in Trust or Prime? Ashford Response: Yes – we continue to analyze international hotel acquisition opportunities. These acquisitions could be in Trust or Prime depending on the RevPAR and market locations. Ashford
Slide 20: What types of hotels are you looking at for Prime?
20 Question: What types of hotels are you looking at for Prime? What markets, asset characteristics, etc.? Ashford Response: Prime will target high RevPAR, high quality hotels in the major markets. It will focus on luxury and upper upscale hotels in major domestic and international resort and gatewa
Slide 21: Appetite for boutique, non-branded hotels
21 Question: Would Prime have more of an appetite for boutique, non-branded hotels? Ashford Response: Prime will target both branded and non-branded, high RevPAR hotels. Ashford Prime Questions & Answers
Slide 22: Target size for Prime
22 Question: What is the target size for Prime in terms of number of hotels? Ashford Response: There is no target size for Prime. We want all Prime acquisitions to be long-term accretive to shareholders. We expect it to be a growth vehicle through acquisitions so long as we can find accretive invest
Slide 23: Pacing of acquisitions in Prime
23 Question: What kind of pacing do you have in mind for acquisitions in Prime? Ashford Response: We have no specific pacing or timetable to grow Prime. The option hotels and the ROFO hotels provide a great pipeline of growth for Prime, but Prime will also be able to capitalize on other acquisition
Slide 24: State of the hotel transaction market
24 Question: I've heard some comments that the hotel transaction market is getting frothy. What are you seeing? Ashford Response: We expect to see more transaction volume that should provide potential growth opportunities. While the acquisition market is always competitive, this management team has
Slide 25: Will Trust be doing many acquisitions?
25 Question: Will Trust be doing many acquisitions? Ashford Response: Trust will continue to be opportunistic in its investment strategy and will keep searching for accretive acquisition opportunities while being mindful of its high cost of equity capital. Ashford Prime Questions & Answers
Slide 26: Markets you would like to be in
26 Question: Are there any markets that you are not in today that you would like to be in? Ashford Response: We do not make capital allocation decisions based solely on market location. We look for the best risk-adjusted return we can find, while balancing portfolio concentration risk. Ashford Prime
Slide 27: How is group business?
27 Question: How is group business? Ashford Response: Group business continues to lag in this recovery. While STR reports that group RevPAR is up 2.3% year-to-date through the 2nd quarter, our group RevPAR for all of our hotels is up 3.3%, 100 bps higher than the national average. The Prime portfoli
Slide 28: When do you plan to refinance Highland?
28 Question: When do you plan to refinance Highland? Ashford Response: The Highland Portfolio continues to ramp up from the changes in property management and recent capital expenditures we have been making at the hotels. We expect that we will look to re-finance the portfolio sometime over the next
Slide 29: Why not wait until after refinancing?
29 Ashford Prime Questions & Answers Question: Why not wait until after you have refinanced your upcoming debt maturities, including the Highland Portfolio, and then revisit the spin-off strategy as prior re-financings have seemed to be a positive catalyst for the stock? Ashford Response: We had sev
Slide 30: Ashford Trust EBITDA multiple versus peers
30 − As of 6/14/13, the announcement date of Ashford Prime, Ashford Trust traded at about 12.1x 2013 Consensus EBITDA − Our multiple relative to peers dropped over the several months BEFORE the spin-off was announced. Source: Citi Equity Research 2013 Consensus EBITDA Multiple As of 10/26/12 As of 6
Slide 31: When will Highland renovations be completed?
31 Question: When will the renovations in the Highland portfolio be completed? Ashford Response: We keep all of our hotels on a renovation cycle, but the Highland hotels have needed more capex than is typical for hotels in our portfolio given the distressed nature the portfolio was in prior to our a
Slide 32: Will Prime pay a dividend?
32 Question: Will Prime pay a dividend? Ashford Response: Yes. Prime is expected to pay an initial minimum quarterly dividend of $0.01 per Trust share equivalent. Since the exchange ratio is 1 share of Prime for every 5 shares of Trust, this equates to $0.05 per Prime share, per quarter. Ashford Pri
Slide 33: Upcoming renovations in the Prime portfolio
33 Question: Are there any significant upcoming renovations in the Prime portfolio? Ashford Response: We are consistently investing capital in our hotels, but the only major upcoming renovation in the Prime portfolio is at the Courtyard Downtown Philadelphia, which is undergoing a full rooms renovat
Slide 34: Is all of the recent capital raise going to Prime?
34 Question: Is all of the cash from the recent capital raise going to Prime? Ashford Response: Yes – all of the cash from the recent equity raise will go to Prime along with some additional cash. Approximately $160 million of cash and working capital will be distributed to Prime upon the spin- off.
Slide 35: Financing with floating vs. fixed interest rates
35 Question: What are your thoughts on financing with floating vs. fixed interest rates? Ashford Response: As hotel owners we believe it is a natural hedge to finance hotels with floating-rate debt. Interest rates move up and down the with the economy just like hotel profits, providing a natural hed
Slide 36: Earnings guidance for Prime
36 Question: Any thoughts on providing earnings guidance for Prime? Ashford Response: We have discussed providing earnings guidance for Prime. At this time, we do not plan on providing earnings guidance, but we are still open to it and will continue to discuss it. We do plan to be very transparent i
Slide 37: What will the tax burden be to shareholders?
37 Question: What will the tax burden be to shareholders? Ashford Response: Please refer to the Prime Information Statement for more information on the taxability of the spin- off. Ashford Prime Questions & Answers
Slide 38: Ashford Hospitality Prime
NS ASHFORD HOSPITALITY PRIME Questions & Answers
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