June 2020 Fo rw a rd Lo o kin g Sta te m e n ts a n d No n - G A - PDF document

June 2020

Fo rw a rd Lo o kin g Sta te m e n ts a n d No n - G A A P M e a su re s I n ke e ping with the SE C's "Sa fe Ha rb o r" g uide line s, c e rta in sta te me nts ma de during this pre se nta tio n c o uld b e c o nside re d fo rwa rd-lo o king a nd sub je c t to c e rta in risks a nd unc e rta intie s tha t c o uld c a use re sults to diffe r ma te ria lly fro m tho se pro je c te d. Whe n we use the wo rds "will like ly re sult," "ma y," "a ntic ipa te ," "e stima te ," "sho uld," "e xpe c t," "b e lie ve ," "inte nd," o r simila r e xpre ssio ns, we inte nd to ide ntify fo rwa rd-lo o king sta te me nts. Suc h fo rwa rd-lo o king sta te me nts inc lude , b ut a re no t limite d to , o ur b usine ss a nd inve stme nt stra te g y, o ur unde rsta nding o f o ur c o mpe titio n, c urre nt ma rke t tre nds a nd o ppo rtunitie s, pro je c te d o pe ra ting re sults, a nd pro je c te d c a pita l e xpe nditure s. T he se fo rwa rd-lo o king sta te me nts a re sub je c t to kno wn a nd unkno wn risks a nd unc e rta intie s, whic h c o uld c a use a c tua l re sults to diffe r ma te ria lly fro m tho se a ntic ipa te d inc luding , witho ut limita tio n: g e ne ra l vo la tility o f the c a pita l ma rke ts a nd the ma rke t pric e o f o ur c o mmo n sto c k; c ha ng e s in o ur b usine ss o r inve stme nt stra te g y; a va ila b ility, te rms a nd de plo yme nt o f c a pita l; a va ila b ility o f q ua lifie d pe rso nne l; c ha ng e s in o ur industry a nd the ma rke t in whic h we o pe ra te , inte re st ra te s o r the g e ne ra l e c o no my, the de g re e a nd na ture o f o ur c o mpe titio n, le g isla tive a nd re g ula to ry c ha ng e s, inc luding c ha ng e s to the I nte rna l Re ve nue Co de o f 1986, a s a me nde d (the “Co de ”), a nd re la te d rule s, re g ula tio ns a nd inte rpre ta tio ns g o ve rning the ta xa tio n o f RE I T s; a nd limita tio ns impo se d o n o ur b usine ss a nd o ur a b ility to sa tisfy c o mple x rule s in o rde r fo r us to q ua lify a s a RE I T fo r fe de ra l inc o me ta x purpo se s. T he se a nd o the r risk fa c to rs a re mo re fully disc usse d in the c o mpa ny's filing s with the Se c uritie s a nd E xc ha ng e Co mmissio n. E BI T DA is de fine d a s ne t inc o me b e fo re inte re st, ta xe s, de pre c ia tio n a nd a mo rtiza tio n. E BI T DA yie ld is de fine d a s tra iling twe lve mo nth E BI T DA divide d b y the purc ha se pric e o r de b t a mo unt. A c a pita liza tio n ra te is de te rmine d b y dividing the pro pe rty's ne t o pe ra ting inc o me b y the purc ha se pric e . Ne t o pe ra ting inc o me is the pro pe rty's funds fro m o pe ra tio ns minus a c a pita l e xpe nse re se rve o f e ithe r 4% o r 5% o f g ro ss re ve nue s. Ho te l E BI T DA flo w-thro ug h is the c ha ng e in Ho te l E BI T DA divide d b y the c ha ng e in to ta l re ve nue s. E BI T DA, F F O, AF F O, CAD a nd o the r te rms a re no n-GAAP me a sure s, re c o nc ilia tio ns o f whic h ha ve b e e n pro vide d in prio r e a rning s re le a se s a nd filing s with the SE C o r in the a ppe ndix to this pre se nta tio n. T he c a lc ula tio n o f implie d e q uity va lue is de rive d fro m a n e stima te d b le nde d c a pita liza tio n ra te (“Ca p Ra te ”) fo r the e ntire po rtfo lio using the c a pita liza tio n ra te me tho d. T he e stima te d Ca p Ra te is b a se d o n re c e nt Ca p Ra te s o f pub lic a lly tra de d pe e rs invo lving a simila r b le nd o f a sse t type s fo und in the po rtfo lio , whic h is the n a pplie d to Ne t Ope ra ting I nc o me (“NOI ”) o f the c o mpa ny’ s a sse ts to c a lc ula te a T o ta l E nte rprise Va lue (“T E V”) o f the c o mpa ny. F ro m the T E V, we de duc t de b t a nd pre fe rre d e q uity a nd the n a dd b a c k wo rking c a pita l to de rive a n e q uity va lue . T he c a pita liza tio n ra te me tho d is o ne o f se ve ra l va lua tio n me tho ds fo r e stima ting a sse t va lue a nd implie d e q uity va lue . Amo ng the limita tio ns o f using the c a pita liza tio n ra te me tho d fo r de te rmining a n implie d e q uity va lue a re tha t it do e s no t ta ke into a c c o unt the po te ntia l c ha ng e o r va ria b ility in future c ash flo ws, po te ntia l sig nific a nt future c a pita l e xpe nditure s, the inte nde d ho ld pe rio d o f the a sse t, o r a c ha ng e in the future risk pro file o f a n a sse t. T his o ve rvie w is fo r info rma tio na l purpo se s o nly a nd is no t a n o ffe r to se ll, o r a so lic ita tio n o f a n o ffe r to b uy o r se ll, a ny se c uritie s o f Ashfo rd Ho spita lity T rust I nc . o r a ny o f its re spe c tive a ffilia te s, a nd ma y no t b e re lie d upo n in c o nne c tio n with the purc ha se o r sa le o f a ny suc h se c urity. Our b usine ss ha s b e e n a nd will c o ntinue to b e ma te ria lly a dve rse ly a ffe c te d b y the impa c t o f, a nd the pub lic pe rc e ptio n o f a risk o f, a pa nde mic dise a se . I n De c e mb e r 2019, a no ve l stra in o f c o ro na virus (COVI D-19) wa s ide ntifie d in Wuha n, China , whic h ha s sub se q ue ntly spre a d to o the r re g io ns o f the wo rld, a nd ha s re sulte d in inc re a se d tra ve l re stric tio ns a nd e xte nde d shutdo wn o f c e rta in b usine sse s in a ffe c te d re g io ns, inc luding in ne a rly e ve ry sta te in the Unite d Sta te s. Sinc e la te F e b rua ry, we ha ve e xpe rie nc e d a sig nific a nt de c line in o c c upa nc y a nd Re vPAR a nd we e xpe c t the sig nific a nt o c c upa nc y a nd Re vPAR re duc tio n a sso c ia te d with the no ve l c o ro na virus (COVI D-19) to like ly c o ntinue a s we a re re c o rding sig nific a nt re se rva tio n c a nc e lla tio ns a s we ll a s a sig nific a nt re duc tio n in ne w re se rva tio ns re la tive to prio r e xpe c ta tio ns. T he c o ntinue d o utb re a k o f the virus in the U.S. ha s a nd will like ly c o ntinue to furthe r re duc e tra ve l a nd de ma nd a t o ur ho te ls. T he pro lo ng e d o c c urre nc e o f the virus ha s re sulte d in he a lth o r o the r g o ve rnme nt a utho ritie s impo sing wide spre a d re stric tio ns o n tra ve l o r o the r ma rke t impa c ts. T he ho te l industry a nd o ur po rtfo lio ha ve a nd we e xpe c t will c o ntinue to e xpe rie nc e the po stpo ne me nt o r c a nc e lla tio n o f a sig nific a nt numb e r o f b usine ss c o nfe re nc e s a nd simila r e ve nts. At this time tho se re stric tio ns a re ve ry fluid a nd e vo lving . We ha ve b e e n a nd will c o ntinue to b e ne g a tive ly impa c te d b y tho se re stric tio ns. Give n tha t the type , de g re e a nd le ng th o f suc h re stric tio ns a re no t kno wn a t this time , we c a nno t pre dic t the o ve ra ll impa c t o f suc h re stric tio ns o n us o r the o ve ra ll e c o no mic e nviro nme nt. I n a dditio n, e ve n a fte r the re stric tio ns a re lifte d, the pro pe nsity o f pe o ple to tra ve l a nd fo r b usine sse s to ho ld c o nfe re nc e s will like ly re ma in b e lo w histo ric a l le ve ls fo r a n a dditio na l pe rio d o f time tha t is diffic ult to pre dic t. We ma y a lso fa c e inc re a se d risk o f litig a tio n if we ha ve g ue sts o r e mplo ye e s who b e c o me ill due to COVI D-19. As suc h, the impa c t the se re stric tio ns ma y ha ve o n o ur fina nc ia l po sitio n, o pe ra ting re sults a nd liq uidity c a nno t b e re a so na b ly e stima te d a t this time , b ut the impa c t will like ly b e ma te ria l. Additio na lly, the pub lic pe rc e ptio n o f a risk o f a pa nde mic o r me dia c o ve ra g e o f the se dise a se s, o r pub lic pe rc e ptio n o f he a lth risks linke d to pe rc e ive d re g io na l fo o d a nd b e ve ra g e sa fe ty ha s ma te ria lly furthe r a dve rse ly a ffe c te d us b y re duc ing de ma nd fo r o ur ho te ls. Curre ntly, no va c c ine s ha ve b e e n de ve lo pe d, a nd the re c a n b e no a ssura nc e tha t a n e ffe c tive va c c ine c a n b e disc o ve re d in time to pro te c t a g a inst a po te ntia l pa nde mic . T he se e ve nts ha ve re sulte d in a susta ine d, sig nific a nt dro p in de ma nd fo r o ur ho te ls a nd c o uld ha ve a ma te ria l a dve rse e ffe c t o n us. Prio r to inve sting in Ashfo rd Ho spita lity T rust, I nc . po te ntia l inve sto rs sho uld c a re fully re vie w Ashfo rd Ho spita lity T rust, I nc .’ s pe rio dic filing s ma de with the Se c urity a nd E xc ha ng e Co mmissio n, inc luding b ut no t limite d to Ashfo rd Ho spita lity T rust I nc .’ s mo st c urre nt F o rm 10-K , F o rm 10-Q a nd F o rm 8-K ’ s, inc luding the risk fa c to rs inc lude d the re in. 2