Ashford Hospitality Trust CEO Douglas Kessler began the firm’s Q1 2019 earnings call by saying that they are having great success with its ERP initiative with Ashford Inc. “Our strategy throughout our 16-year history have consistently focused on ways to create shareholder value. Any of our diligent efforts have been economically transformational and successful over the years. We believe that the ERP is one of these initiatives and will provide meaningful benefits to improve our competitive position as well as increase shareholder value.”
He explained that “pursuant to the ERP initiative, Ashford Inc. has committed to provide $50 million to the company on a programmatic basis equating to approximately 10% of each new investments acquisition price to be used for the purchase of [indiscernible] property zone by the company.
We believe the ERP has the opportunity to significantly improve returns on hotel acquisitions. The attractiveness of the ERP is to make good deals, great deals. Thus establishing ERP, we have already completed $406 million of high quality acquisitions that have utilized the program which equates to approximately 80% committed utilization of the pledged $50 million of ERP funding. To-date we’ve received approximately $21 million of the $40.6 million that Ashford Inc. is committed to provide us for the four acquisitions under the ERP.”
In January, he noted that the firm’ acquired the Embassy Suites New York, Midtown Manhattan for $195 million. In connection with this acquisition Ashford Inc. committed to provide the REIT with approximately $19.5 million under the terms of the ERP. “We expect this newly constructed 41-storey hotel ideally located near Bryant Park in Times Square to benefit from being the only Embassy Suites in the dynamic Manhattan market.”
Additionally, he said, “as our first direct hotel investment in New York City, we believe the recent positive changes in Manhattan’s hotel metrics point to favorable timing of this addition to our portfolio. While this property is still ramping up operations having only recently opened in early 2018 the hotel performed exceptionally well during the first quarter. In March, the hotel’s penetration index already achieved our underwriting target for the year. Looking ahead, we believe there’s significant upside at the property.”
He assured listeners on the call that underwriting efforts continued to be focused, diligent and with the same high standards to improve our portfolio with the best assets for the best value. “We strongly believe that the ERP provides us not only with a competitive advantage but is also structured to enhance shareholder value.”
The REIT’s actual RevPAR for all hotels for the quarter increased 2.1% while comparable RevPAR for all hotels increased 1.9%. “For the first quarter comparable RevPAR for all hotels not under renovation increased 2.7%. For the first quarter we reported AFFO per share of $0.26 and adjusted EBITDAre of $100.5 million. As for our balance sheet, we believe in the benefits of an appropriate amount of non-recourse leverage to enhance equity returns.”