Ashford Prime Reports Third Quarter 2016 Results

DALLAS, Nov. 2, 2016 /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, 2016.  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, 2016 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, 2016, with the third quarter ended September 30, 2015 (see discussion below).  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 in resort and gateway markets
• Targets conservative leverage levels of Net Debt/EBITDA of 5.0x or less
• Highly-aligned management team and advisory structure
• Dividend yield of approximately 3.8%

FINANCIAL AND OPERATING HIGHLIGHTS

• Net income attributable to common stockholders was $15.9 million or $0.55 per diluted share
• Comparable RevPAR for all hotels increased 4.3% to $217.11 during the third quarter
• Adjusted EBITDA was $22.0 million
• Adjusted funds from operations (AFFO) was $0.38 per diluted share for the quarter
• Capex invested in the quarter was $10 million
• During the quarter, the Company completed the sale of the 250-room Courtyard Seattle Downtown/Lake Union for $84.5 million in cash ($338,000 per key), which represented a trailing 12-month cap rate of 6.8% on net operating income

WEISMAN GROUP OFFER UPDATE

• The Company intends to provide an update on the unsolicited offer it received from the Weisman Group as well as other strategic matters on tomorrow's conference call

ADVISORY AGREEMENT NEGOTIATION WITH ASHFORD INC.

• A special committee of independent directors of the board has been formed to negotiate with a special committee of independent directors from the Ashford Inc. board regarding amending the advisory agreement with a focus on the size of the termination fee and change of control provisions; however, no assurances can be given that progress will be made on these fronts

RICHARD J. STOCKTON APPOINTED AS CEO

Today, the Company announced that its Board of Directors has appointed Richard J. Stockton as the Chief Executive Officer of the Company, effective November 14, 2016.  Richard will be attending several upcoming investor conferences including NAREIT's REITWORLD Convention in Phoenix, AZ on November 15-17, the FBR Investor Conference in New York, NY November 29^th, and the SunTrust Lodging & Leisure Conference in Boston, MA on December 1^st.  Richard brings a wealth of real estate experience and accomplishments to the Company.  He spent over 15 years at Morgan Stanley in real estate investment banking where he rose from an Associate to Managing Director and regional group head.  At Morgan Stanley, he was head of EMEA Real Estate Banking in London, executing business across Europe, the Middle East, and Africa, and as co-head of the Asia Pacific Real Estate Banking Group, he was responsible for a team of over 20 real estate investment bankers in Hong Kong, Singapore, Sydney and Mumbai.  He left Morgan Stanley in 2013 to become President & CEO-Americas for OUE Limited, a publicly-listed Singaporean property company with over $5 billion in assets.  Most recently, Richard served as Global Chief Operating Officer, Real Estate at Carval Investors, a subsidiary of Cargill with approximately $1 billion in real estate investments and operations in the U.S., Canada, United Kingdom and France.  At Carval, he developed a strategic plan for their real estate business and oversaw capital formation, marketing and operations while also serving as a member of the Global Real Estate Investment Committee.

CORPORATE GOVERNANCE ENHANCEMENTS

After initiating significant outreach and feedback from shareholders, the Company announced that its Board of Directors took a series of actions which are intended to enhance the Company's corporate governance.  The enhanced governance measures include:

• Adoption of a majority voting standard for uncontested director elections and a plurality voting standard in contested director elections to be voted on at the next shareholder meeting;
• Separate the roles of Chairman and CEO;
• Prohibit share recycling with respect to share forfeitures, stock options and stock appreciation rights under the Company's stock plan by executives and directors;
• Implementation of a mandatory equity award retention period for executives and directors;
• Adoption of a proxy access resolution which would enable a shareholder, or a group of not more than 20 shareholders, who have continuously owned 3% or more of the Company's common stock for a minimum of 3 years to include nominees in its proxy materials for the greater of two or 20% of the Board; and
• Addition of up to two independent directors to the Board, one of which, Ken Fearn, was announced during the quarter

ADDITION OF KEN FEARN TO THE BOARD OF DIRECTORS

During the quarter, the Company announced that Ken Fearn has joined the Board of Directors bringing the total number of directors to eight and the total number of independent directors to six.  Ken brings over 21 years of real estate and hospitality experience to the Board.  Currently, he is the founder and Managing Partner of Integrated Capital, a private equity real estate firm with a focus on hospitality assets in markets in the U.S.  Prior to founding Integrated Capital, he was Managing Director and Chief Financial Officer of Maritz, Wolff & Co., a private equity firm engaged in real estate acquisition and development that managed three private equity investment funds totaling $500 million focused on acquiring luxury hotels and resorts.  Prior to Maritz, Wolff, he was with McKinsey & Company in Los Angeles, where he worked with Fortune 200 companies to address issues of profitability and develop business strategies.  Ken's extensive contacts in the hospitality and commercial real estate industries will be beneficial in his service on the Board of Directors.

UPDATE ON THE BARDESSONO HOTEL & SPA PERFORMANCE

During the first full year of ownership of the Bardessono Hotel & Spa, RevPAR increased 7.2%, Hotel EBITDA increased 32.7%, Hotel EBITDA Margin increased 546 basis points, and Hotel EBITDA flow-through was 159%.

CAPITAL STRUCTURE

At September 30, 2016, the Company had total assets of $1.3 billion.  As of September 30, 2016, the Company had $769 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 4.7%.

COMPLETES SALE OF COURTYARD SEATTLE DOWNTOWN HOTEL

On July 1, 2016, the Company completed the sale of the 250-room Courtyard Seattle Downtown/Lake Union for $84.5 million in cash ($338,000 per key), which represented a trailing 12-month cap rate of 6.8% on net operating income.  The Company realized approximately $15 million in net proceeds from the disposition following the repayment of approximately $65 million of debt and other transaction costs. 

PORTFOLIO REVPAR

As of September 30, 2016, the portfolio consisted of direct hotel investments with eleven properties.  During the third quarter of 2016, 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 11 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 increased 4.3% to $217.11 for all hotels on a 2.5% increase in ADR and a 1.8% increase in occupancy
• Comparable RevPAR increased 6.1% to $212.12 for hotels not under renovation on a 4.0% increase in ADR and a 2.0% increase 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 eleven hotels are provided in the table attached to this release.

COMMON STOCK DIVIDEND

On September 15, 2016, the Company announced that its Board of Directors declared a quarterly cash dividend of $0.12 per diluted share for the Company's common stock for the third quarter ending September 30, 2016.  The dividend, which equates to an annual rate of $0.48 per share, is payable on October 17, 2016, to shareholders of record as of September 30, 2016.

"During the quarter, we continued to make progress on our strategic initiatives through the sale of the Courtyard Seattle at an attractive valuation for our shareholders," said Monty J. Bennett, Ashford Prime's Chairman of the Board.  "We believe these initiatives have been successful.  Additionally, we took meaningful steps to strengthen our corporate governance practices, including adding another independent director, Ken Fearn, to our Board of Directors.  We are also pleased to announce the appointment of Richard Stockton as the Company's new CEO.  We believe Richard's background and skillset are well-suited for leading Ashford Prime, and we will continue to focus on delivering strong operational results and maximizing shareholder value."

INVESTOR CONFERENCE CALL AND SIMULCAST

Ashford Hospitality Prime, Inc. will conduct a conference call on Thursday, November 3, 2016, at 11:00 a.m. ET.  The number to call for this interactive teleconference is (719) 325-2355. A replay of the conference call will be available through Thursday, November 10, 2016, by dialing (719) 457-0820 and entering the confirmation number, 2763832. 

The Company will also provide an online simulcast and rebroadcast of its third quarter 2016 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 3, 2016, 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.  Neither FFO, AFFO, EBITDA, nor 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.

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

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.