Ashford Prime Reports Third Quarter 2017 Results

DALLAS, Nov. 1, 2017 /PRNewswire/ -- Ashford Hospitality Prime, Inc. (NYSE: AHP) ("Ashford Prime" or the "Company") today reported the following results and performance measures for the third quarter ended September 30, 2017.  The performance measurements for Occupancy, Average Daily Rate (ADR), Revenue Per Available Room (RevPAR), and Hotel EBITDA are comparable assuming each of the hotel properties in the Company's hotel portfolio as of September 30, 2017 were owned as of the beginning of each of the periods presented.  Unless otherwise stated, all reported results compare the third quarter ended September 30, 2017, with the third quarter ended September 30, 2016 (see discussion below).  The Company's Ritz-Carlton St. Thomas and Pier House Resort have been included in Hotels Under Renovation for the third quarter given the impact from the recent hurricanes. The reconciliation of non-GAAP financial measures is included in the financial tables accompanying this press release.

STRATEGIC OVERVIEW

• Focused strategy of investing in luxury hotels and resorts
• Targets conservative leverage levels of 45% Net Debt to Gross Assets
• Highly-aligned management team and advisory structure
• Dividend yield of approximately 6.7%

FINANCIAL AND OPERATING HIGHLIGHTS 

• Net loss attributable to common stockholders for the quarter was $2.7 million or $0.09 per diluted share
• Comparable RevPAR for all hotels decreased 5.3% to $211.36 during the third quarter
• Comparable RevPAR for all hotels not under renovation decreased 2.9% to $204.72 during the third quarter
• Comparable Hotel EBITDA Margin for all hotels increased 13 basis points for the quarter
• Comparable Hotel EBITDA flow-through for all hotels was 72% for the quarter
• Adjusted funds from operations (AFFO) was $0.37 per diluted share for the quarter as compared with $0.38 per diluted share from the prior-year quarter
• Adjusted EBITDA was $26.0 million for the quarter reflecting 18.3% growth over the prior year quarter
• During the quarter, the Company announced that it had refinanced a mortgage loan on the Bardessono Hotel and Spa
• Capex invested during the quarter was $11.0 million

UPDATE ON IMPACT FROM HURRICANES
The Company's third quarter 2017 results were impacted by the effects of recent hurricanes at its Ritz-Carlton St. Thomas hotel in St. Thomas, USVI and its Pier House Resort & Spa hotel in Key West, Florida.  

The Company's Ritz-Carlton St. Thomas resort received physical damage from Hurricane Irma and the Company continues to work with its insurers to assess the damage. Three of the six guestroom buildings on the property were damaged, and the Company, along with Ritz-Carlton, will be examining the implementation of a planned renovation program. The resort, which represents 6.8% of Ashford Prime's Hotel EBITDA on a trailing twelve-month basis through the third quarter, remains functioning and currently has 73 of its 180 guest rooms available for those taking part in the recovery effort.

The Company's Pier House Resort & Spa also sustained physical damage from Hurricane Irma. The property represents 7.2% of Ashford Prime's Hotel EBITDA on a trailing twelve-month basis through the third quarter.  The hotel is accepting reservations and has resumed operations with all of its 142 guest rooms available and in service.  The Company continues to work with its insurers to assess the damage and is underway with renovation projects to restore affected areas of the property.

The Company does not expect its uncovered losses from these natural disasters to exceed $5 million and also does not expect its covered losses to exceed its coverage cap.  For purposes of calculating Adjusted EBITDA and Adjusted Funds From Operations, the Company has added back the uninsured costs relating to the hurricanes.

UPDATE ON NON-CORE HOTELS STRATEGY
Consistent with the announcement of its refined strategy of focusing on luxury hotels and resorts, the Company has been exploring opportunities to either reposition its non-core hotels to better fit that strategy or to opportunistically sell them if conditions warrant.

To that end, as previously announced, the Company's Courtyard Philadelphia Downtown hotel is being converted to an Autograph Collection hotel by June 30, 2019 pursuant to a conversion Product Improvement Plan ("PIP") currently estimated to be approximately $23 million - including updates to the guestrooms, guest bathrooms, corridors, lobby, restaurant, and meeting space - which will create a distinctive theme and style for the property that is commensurate with the Autograph Collection product. Marriott will continue to manage the property after the conversion.

Also, on November 1, 2017, the Company announced plans to convert its Courtyard San Francisco Downtown hotel to an Autograph Collection hotel by December 2019 pursuant to a conversion PIP currently estimated to be approximately $30 million incremental to capital projects already underway - including updates to the guestrooms, guest bathrooms, corridors, lobby, restaurant, facade, and meeting space - which will create a distinctive theme and style for the property that is commensurate with the Autograph Collection product. Marriott will continue to manage the property after the conversion.

Additionally, on November 1, 2017, the Company announced that it had completed the sale of its Marriott Plano Legacy hotel in Plano, Texas for $104 million.  The Company also announced that it is in the process of marketing for sale its other non-core hotel, the Renaissance Tampa in Tampa, FL.  

CAPITAL STRUCTURE
At September 30, 2017, the Company had total assets of $1.5 billion.  As of September 30, 2017, the Company had $914 million of mortgage debt of which $48 million related to its joint venture partner's share of debt on the Capital Hilton and Hilton La Jolla Torrey Pines.  The Company's total combined debt had a blended average interest rate of 4.0%.

On August 21, 2017, the Company announced it had refinanced a mortgage loan secured by the Bardessono Hotel and Spa with an existing outstanding balance totaling $40 million.  The new loan totals $40 million and has a five year term.  The loan is interest only and provides for a floating interest rate of LIBOR + 2.55%.   The new loan is expected to result in annual interest savings of approximately $1 million. 

PORTFOLIO REVPAR
As of September 30, 2017, the portfolio consisted of thirteen properties.  During the third quarter of 2017, ten of the Company's hotels were not under renovation.  The Company believes reporting its operating metrics for its hotels on a comparable total basis (all 13 hotels) and comparable not under renovation basis (10 hotels) is a measure that reflects a meaningful and focused comparison of the operating results in its portfolio.  Details of each category are provided in the tables attached to this release.

• Comparable RevPAR decreased 5.3% to $211.36 for all hotels on a 1.4% decrease in ADR and a 4.0% decrease in occupancy
• Comparable RevPAR decreased 2.9% to $204.72 for hotels not under renovation on a 1.9% decrease in ADR and 1.0% decrease in occupancy

HOTEL EBITDA MARGINS AND QUARTERLY SEASONALITY TRENDS
The Company believes year-over-year Comparable Hotel EBITDA and Comparable Hotel EBITDA Margin comparisons are more meaningful to gauge the performance of the Company's hotels than sequential quarter-over-quarter comparisons.  Given the substantial seasonality in the Company's portfolio, to help investors better understand this seasonality, the Company provides quarterly detail on its Comparable Hotel EBITDA and Comparable Hotel EBITDA Margin for the current and certain prior-year periods based upon the number of hotels in the Company's portfolio as of the end of the current period.  As the Company's portfolio mix changes from time to time so will the seasonality for Comparable Hotel EBITDA and Comparable Hotel EBITDA Margin.  The details of the quarterly calculations for the previous four quarters for the thirteen hotels are provided in the table attached to this release.

COMMON STOCK DIVIDEND
On September 14, 2017, the Company announced that its Board of Directors declared a quarterly cash dividend of $0.16 per diluted share for the Company's common stock for the third quarter ending September 30, 2017.  The dividend, which equates to an annual rate of $0.64 per share, is payable on October 16, 2017, to shareholders of record as of September 30, 2017.

"While this was a challenging quarter for us on multiple fronts, we remain focused on the execution of our strategies to both grow our portfolio within the luxury chain scale segment as well as find value-enhancing opportunities within our non-core portfolio," commented Richard J. Stockton, Ashford Prime's President and Chief Executive Officer. "During the quarter we faced hurricanes, renovation disruption at our Courtyard San Francisco, and a difficult year-over-year comp at our Courtyard Philadelphia.  While these short term issues impacted our results, we do not believe it impacted the long-term value proposition of our high quality portfolio.  We made significant progress on our non-core hotel strategy as evidenced by our announcements that we will convert the Courtyard San Francisco to an Autograph Collection hotel, that we have sold the Marriott Plano, and that we began marketing for sale the Renaissance Tampa.  Progress on this front demonstrates our commitment to execute on our strategy in a manner that is accretive to long-term shareholder returns."   

INVESTOR CONFERENCE CALL AND SIMULCAST
Ashford Hospitality Prime, Inc. will conduct a conference call on Thursday, November 2, 2017, at 11:00 a.m. ET.  The number to call for this interactive teleconference is (719) 325-4839. A replay of the conference call will be available through Thursday, November 9, 2017, by dialing (719) 457-0820 and entering the confirmation number, 7284152. 

The Company will also provide an online simulcast and rebroadcast of its third quarter 2017 earnings release conference call.  The live broadcast of Ashford Hospitality Prime's quarterly conference call will be available online at the Company's web site, www.ahpreit.com on Thursday, November 2, 2017, beginning at 11:00 a.m. ET.  The online replay will follow shortly after the call and continue for approximately one year.

Substantially all of our non-current assets consist of real estate investments secured by real estate.  Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time.  Since real estate values instead have historically risen or fallen with market conditions, most industry investors consider supplemental measures of performance, which are not measures of operating performance under GAAP, to assist in evaluating a real estate company's operations. These supplemental measures include FFO, AFFO, EBITDA, and Hotel EBITDA.  FFO is computed in accordance with our interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the NAREIT definition differently than us.  None of FFO, AFFO, EBITDA or Hotel EBITDA represents cash generated from operating activities as determined by GAAP and should not be considered as an alternative to a) GAAP net income (loss) as an indication of our financial performance or b) GAAP cash flows from operating activities as a measure of our liquidity, nor are such measures indicative of funds available to satisfy our cash needs, including our ability to make cash distributions.  However, management believes FFO, AFFO, EBITDA, and Hotel EBITDA to be meaningful measures of a REIT's performance and should be considered along with, but not as an alternative to, net income and cash flow as a measure of our operating performance.

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Ashford Hospitality Prime is a real estate investment trust (REIT) focused on investing in luxury hotels and resorts.

Ashford has created an Ashford App for the hospitality REIT investor community.  The Ashford App is available for free download at Apple's App Store and the Google Play Store by searching "Ashford."

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.  Forward-looking statements in this press release include, among others, statements about the implied share price for the Company's common stock.  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 statements are subject to numerous assumptions and uncertainties, many of which are outside Ashford Prime'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; our ability to successfully complete and integrate acquisitions, and manage our planned growth, and the degree and nature of our competition.  These and other risk factors are more fully discussed in Ashford Prime'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 either 4% or 5% of gross revenues.  Hotel EBITDA flow-through is the change in Hotel EBITDA divided by the change in total revenues.  Hotel EBITDA Margin is Hotel EBITDA divided by total 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 of 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.