DALLAS-After struggling during Q1 2012, Ashford Hospitality Trust's Q2 earnings prompted an almost palpable sigh of relief among executives at the REIT's Aug. 2 conference call. The Highland Hospitality Portfolio, which has been somewhat of a "problem child" for awhile because of capital expenditures, did well with a 7.6% RevPAR growth year-over-year (for hotels not under renovation) and a 206 basis point improvement in EBITDA.
Meanwhile, RevPAR increased 6.2% for the REIT's Legacy hotels in continuing operations, helped along by a 3.7% increase in average daily rate and a 182 basis point occupancy increase. Though net loss to common shareholders stood in negative territory at $13.3 million, this was a far better figure than the $29.1 million reported in the prior-year quarter. Capex invested in the Legacy portfolio stood at $20.8 million, while Highland portfolio capex was $7 million.
"Last quarter was difficult for us," acknowledges Ashford CEO Monty J. Bennett during the call. "If you recall on the phone call and in our NAREIT presentation, as we went through our results, we were exasperated because we couldn't find anything systemic about the performance." The reason for the first quarter's poor performance, he continues, was due to a series of one-time events, such as downturns in airport markets. "Here, in the second quarter, it wasn't so much as a one-time event that helped us, but it wasn't all those one-time events that hurt us. It was more a removal of the one-off events that happened in the first quarter."
Even better news for analysts was Ashford Realty's willingness to show a little more transparency as it pertains to its debt. In Q2, the REIT refinanced its only 2012 debt maturity, a $167.2 million loan that matured in May, 2012 – this was refinanced with $135 million of debt – complete with 6.5% over LIBOR and secured by nine hotels -- that will mature in May, 2014. Ashford is working to refinance the $101 million worth of loans in the Highland Hospitality Portfolio, which will mature in early 2013.
One problem child the REIT still has in its portfolio, however, is the Hilton El Conquistador Resort in Tucson. The company's efforts to rid itself of the property have been unsuccessful, and it is in discussions with the lender for a potential deed-in-lieu or consensual foreclosure and receivership transaction. Ashford was forced to take a $4.1 million impairment charge on the asset. "We hung onto it for too long," Bennett notes. The REIT is also marketing the Doubletree Guest Suites in Columbus, OH for sale.
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