Ashford Hospitality Trust(AHT) - 2019 Q4 - Annual Report

PART I Business Ashford Hospitality Trust is an externally-advised REIT investing in upper upscale U.S. hotels, owning 117 properties as of year-end 2019 Portfolio Overview as of December 31, 2019 | Metric | Value | | :--- | :--- | | Consolidated Hotel Properties | 117 | | Total Rooms | 24,943 | | Net Rooms (excluding partner's share) | 24,916 | | Hotel Condominium Units (WorldQuest) | 90 | - The company operates as a REIT, utilizing taxable REIT subsidiaries (Ashford TRS) to lease and own its hotel properties, which are then managed by hotel management companies like Remington Hotels[9] - The company is externally advised by Ashford LLC, a subsidiary of Ashford Inc., and has no direct employees; Remington Hotels, also an Ashford Inc. subsidiary, manages 80 of the 117 hotel properties[9] - Key business strategies include acquiring accretive hotels, disposing of non-core properties, preserving capital, and enhancing liquidity, with an investment focus on upper upscale full-service hotels[12] - The company's 2020 dividend policy of $0.06 per share quarterly is expected to be reconsidered, with a potential elimination or significant reduction due to the business impact of COVID-19[15] Risk Factors The company faces significant risks from economic conditions like the COVID-19 pandemic, high indebtedness, and conflicts of interest with its external advisor - The lodging industry's performance is closely linked to the general economy, and pandemics like COVID-19 can lead to declines in occupancy and room rates, harming operating performance[29][59] - The company has a significant amount of debt ($4.1 billion as of Dec 31, 2019), with $3.8 billion being variable-rate, exposing it to interest rate and refinancing risks[50][51] - Significant conflicts of interest exist due to the relationship with its external advisor, Ashford Inc., and its subsidiaries, as key agreements were not negotiated on an arm's-length basis[73][77] - Failure to qualify as a REIT would subject the company to corporate income tax, substantially reducing cash available for distributions and adversely affecting security values[106] - The company's charter and Maryland law contain provisions, such as a 9.8% ownership limit, which may delay or prevent a change of control[130][135] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments as of the report date[146] Properties As of year-end 2019, the company's portfolio consisted of 117 hotel properties located entirely within the United States Total Portfolio Performance (Year Ended Dec 31, 2019) | Metric | Value | | :--- | :--- | | Total Properties | 117 | | Total Rooms | 24,943 | | Occupancy | 76.34% | | Average Daily Rate (ADR) | $168.06 | | Revenue Per Available Room (RevPAR) | $128.29 | - The portfolio includes 113 fee simple properties and 4 properties subject to ground leases, all located in the United States[149][151] Legal Proceedings The company is involved in several legal proceedings, including a class action lawsuit with potential damages up to $11.9 million - In the Pedro Membrives class action lawsuit concerning improper retention of service charges, an unfavorable outcome could result in damages ranging from $5.8 million to $11.9 million plus attorneys' fees[153] - The long-standing Palm Beach Florida Hotel litigation is substantially resolved, with approximately $504,000 accrued for potential remaining legal fees as of December 31, 2019[151] Mine Safety Disclosures This item is not applicable to the company - Not applicable[153] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the NYSE, with all 2019 distributions characterized as a return of capital for tax purposes Dividend Per Common Share | Year | Dividend per Share | | :--- | :--- | | 2019 | $0.30 | | 2018 | $0.48 | - For tax purposes, 100% of the distributions paid on common and preferred stock in 2019 and 2018 were characterized as a return of capital[156] - A stock repurchase program authorizing up to $200 million was in place, but no shares were purchased under this program during the fourth quarter of 2019[160][161] Selected Financial Data The company reported total revenue of approximately $1.5 billion and a net loss of $113.6 million for the year ended December 31, 2019 Selected Financial Data (in thousands, except per share data) | Metric | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Total Revenue | $1,502,759 | $1,430,789 | $1,439,270 | | Operating Income (Loss) | $114,729 | $90,414 | $149,035 | | Net Income (Loss) attributable to the Company | $(113,635) | $(126,966) | $(67,008) | | Diluted Loss per Common Share | $(1.58) | $(1.75) | $(1.30) | | Total Assets (at year-end) | $4,691,348 | $4,685,954 | $4,669,850 | | Indebtedness, net (at year-end) | $4,106,518 | $3,927,266 | $3,696,300 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the significant negative impact of the COVID-19 pandemic on operations and liquidity, which has prompted debt restructuring requests - The COVID-19 pandemic has had a significant negative impact on room demand, occupancy, and RevPAR since February 2020, leading to substantial erosion in hotel cash flow[169] - Due to cash flow insufficiency from COVID-19, the company has informed lenders for an 8-hotel portfolio of a substantial risk of imminent payment default and has requested loan restructuring[169] Key Performance Indicators (All Properties) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | RevPAR | $127.22 | $123.62 | | Occupancy | 76.26% | 76.32% | | ADR | $166.84 | $161.99 | Comparison of Financial Results (2019 vs. 2018, in millions) | Line Item | 2019 | 2018 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $1,502.8 | $1,430.8 | $72.0 | | Operating Income | $114.7 | $90.4 | $24.3 | | Net Loss Attributable to Company | $(113.6) | $(127.0) | $13.4 | Cash Flow Summary (in millions) | Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $177.2 | $181.6 | | Net Cash used in Investing Activities | $(253.2) | $(329.6) | | Net Cash from Financing Activities | $34.4 | $115.8 | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate exposure from its significant variable-rate debt, which totals $3.8 billion - As of December 31, 2019, the company had $4.1 billion in total debt, of which $3.8 billion was variable-rate debt[218] - A hypothetical 25-basis point (0.25%) change in interest rates would result in an approximate $9.4 million annual impact on results of operations[218] - The company utilizes credit default swaps (notional amount of $212.5 million) and interest rate floors (notional amount of $12.0 billion) to hedge against financial and market risks[218] Financial Statements and Supplementary Data This section contains the company's audited consolidated financial statements and the independent auditor's report for the years 2017-2019 - The financial statements were audited by BDO USA, LLP, which issued an unqualified opinion on the consolidated financial statements and internal controls as of December 31, 2019[222][223] Consolidated Balance Sheet Highlights (as of Dec 31, 2019) | Account | Amount (in thousands) | | :--- | :--- | | Total Assets | $4,691,348 | | Total Liabilities | $4,352,212 | | Total Stockholders' Equity | $268,762 | Consolidated Statement of Operations Highlights (Year ended Dec 31, 2019) | Account | Amount (in thousands) | | :--- | :--- | | Total Revenue | $1,502,759 | | Operating Income | $114,729 | | Net Loss | $(142,679) | | Net Loss Attributable to Common Stockholders | $(156,212) | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - There were no disagreements with accountants on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure[383] Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2019 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2019[384] - Management assessed internal control over financial reporting using the COSO framework and concluded it was effective as of December 31, 2019, an assessment audited by BDO USA, LLP[385][388] - There were no material changes in internal control over financial reporting during the fourth quarter of 2019[386] Other Information The company reports no other information for this item - None[394] PART III Directors, Executive Officers and Corporate Governance Required information is incorporated by reference from the company's 2020 Annual Meeting Proxy Statement - The required information is incorporated by reference from the Proxy Statement for the 2020 Annual Meeting of Stockholders[395] Executive Compensation Required information is incorporated by reference from the company's 2020 Annual Meeting Proxy Statement - The required information is incorporated by reference from the Proxy Statement for the 2020 Annual Meeting of Stockholders[396] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Required information is incorporated by reference from the company's 2020 Annual Meeting Proxy Statement - The required information is incorporated by reference from the Proxy Statement for the 2020 Annual Meeting of Stockholders[396] Certain Relationships and Related Transactions, and Director Independence Required information is incorporated by reference from the company's 2020 Annual Meeting Proxy Statement - The required information is incorporated by reference from the Proxy Statement for the 2020 Annual Meeting of Stockholders[396] Principal Accountant Fees and Services Required information is incorporated by reference from the company's 2020 Annual Meeting Proxy Statement - The required information is incorporated by reference from the Proxy Statement for the 2020 Annual Meeting of Stockholders[397] PART IV Exhibits, Financial Statement Schedules This section lists the financial statement schedules and exhibits filed as part of the Form 10-K, including material contracts and certifications - The report includes Schedule III – Real Estate and Accumulated Depreciation, with all other schedules omitted as they are not required or the information is disclosed elsewhere[398] - A comprehensive list of exhibits is provided, including governance documents, material agreements, and required SEC certifications[400][401][402] Form 10-K Summary The company reports no Form 10-K summary - None[408]