Business context and reporting period
The supplied filing is Ashford Hospitality Prime, Inc.’s unaudited Form 10-Q for the quarter ended September 30, 2017; this does not match the request metadata naming Braemar Hotels & Resorts Inc. Verify the issuer before relying on this summary. Ashford Prime was a REIT investing in luxury hotels. At quarter-end it owned interests in 13 hotels with 3,978 total rooms (3,743 net rooms); two 2017 acquisitions added Park Hyatt Beaver Creek and Hotel Yountville.
Financial performance and liquidity
| Metric | Q3 2017 | Q3 2016 | Nine months 2017 | Nine months 2016 |
|---|---|---|---|---|
| Total revenue | $108.1 million | $99.7 million | $321.5 million | $311.9 million |
| Operating income | $9.6 million | $11.2 million | $29.2 million | $33.2 million |
| Net income (loss) attributable to common stockholders | $(2.7) million | $15.9 million | $(7.0) million | $16.0 million |
| Operating cash flow | — | $46.6 million | $46.9 million | |
| Adjusted EBITDA | $26.0 million | $22.0 million | $80.5 million | $79.8 million |
| Adjusted FFO available to Company and OP unitholders | $15.6 million | $13.1 million | $53.2 million | $49.0 million |
GAAP operating margin was approximately 8.9% in Q3 2017 versus 11.3% a year earlier, and 9.1% for the first nine months versus 10.7%. Net loss attributable to the Company was $1.0 million for Q3 and $1.9 million for the nine-month period, before preferred dividends and other common-stockholder allocations.
At September 30, cash and cash equivalents were $126.8 million; restricted cash was $31.6 million. Total indebtedness was $914.1 million gross ($906.8 million net of deferred loan costs), versus $767.0 million gross at year-end 2016. Debt was predominantly variable-rate: $906.0 million. The company had no revolver borrowings and reported compliance with debt covenants. Its revolving facility had $100 million capacity. A 25-basis-point rate increase was estimated to add about $2.3 million in annual interest expense.
Operating cash flow was nearly flat year over year. Investing used $274.1 million, principally for hotel acquisitions and capital improvements; financing provided $221.3 million, including debt and equity issuance. Cash, cash equivalents and restricted cash totaled $158.4 million at period-end, down from $164.6 million at the start of 2017.
Material changes versus prior comparable periods
- Q3 revenue rose 8.5%, but operating income declined 14.8%; the company shifted from $21.3 million net income to a $0.2 million net loss. The prior-year quarter included a $26.4 million hotel-sale gain.
- For the first nine months, revenue rose 3.1%, while operating income fell 12.0%; common-stockholder results moved from $16.0 million income to a $7.0 million loss. The prior-year period also included the $26.4 million sale gain.
- Comparable-hotel Q3 RevPAR fell to $205.42 from $217.11, with occupancy down to 83.59% from 86.89% and ADR down to $245.75 from $249.86. For the nine-month comparable portfolio, RevPAR was $210.84 versus $212.76.
- Acquisitions of Park Hyatt Beaver Creek ($145.5 million) and Hotel Yountville ($96.5 million) expanded the portfolio and contributed revenue, while increasing depreciation and debt. The company also issued common and preferred equity in 2017.
- Quarter-end hotel impairment charges were $1.0 million related to hurricane damage. The company also recorded $3.6 million of remediation and other costs net of anticipated insurance recoveries, and recognized a $19.0 million insurance receivable, net of deductibles.
Outlook, commentary, risks and unusual items
- Management’s stated strategy was to focus the portfolio on luxury hotels, target leverage of 45% net debt to gross assets, and hold cash equal to 10–15% of gross debt. It announced a 2017 common dividend target of $0.16 per quarter, up from $0.12; the filing does not provide a new earnings or revenue forecast.
- After quarter-end, the company completed the sale of Plano Marriott Legacy Town Center on November 1, 2017 for $104.0 million cash and repaid approximately $85.0 million of related mortgage debt. It also announced plans to convert two Courtyard properties to Autograph Collection and listed Tampa Renaissance for sale.
- The amended advisory agreement became effective June 21, 2017 and included a $5.0 million payment, a fixed 0.70% base management fee, and a long initial term with renewal options. It also sets a minimum-net-worth covenant and may require an additional payment if terminated. Several termination rights were narrowed or eliminated.
- Hurricanes Irma and Maria affected properties in St. Thomas, Key West and Tampa. Insurance recovery for business-interruption losses would not be recognized until known and realizable.
- Risks include hotel seasonality, renovations and property-level performance, access to capital, refinancing and covenant requirements, rising floating interest rates, and cash-trap provisions that can restrict property cash flows. A shareholder derivative case was dismissed with prejudice as to the plaintiff, but a fee petition ruling remained pending; management said other proceedings were not expected to materially affect results, though outcomes are uncertain.
Most important facts for investors to verify
- Confirm the issuer: the supplied filing is for Ashford Hospitality Prime, not Braemar Hotels & Resorts.
- Assess comparable-hotel operating trends, especially occupancy and RevPAR declines, and separate acquisition effects from underlying performance.
- Review debt maturities, floating-rate exposure, hedge coverage, covenant headroom and the use of proceeds from the post-quarter hotel sale.
- Evaluate whether hurricane insurance receivables and business-interruption claims are ultimately collected, and whether further property costs arise.
- Examine the amended advisory agreement’s termination economics, net-worth and dividend constraints, and related-party governance implications.
- Reconcile GAAP losses with management’s adjusted EBITDA and AFFO, which exclude specified items and are not substitutes for cash flow or GAAP earnings.