NexPoint Hospitality Trust Provides Update On Acquisition Of Condor Hospitality Trust, Inc.
DALLAS and TORONTO, Oct. 29, 2019 /CNW/ -- NexPoint Hospitality Trust ("NHT") (TSX-V: NHT.U) provided an update today on the previously announced acquisition by merger of Condor Hospitality, Inc. ("Condor") (NYSE American: CDOR) (the "Merger"). NHT and Condor continue to actively seek to satisfy customary closing conditions. NHT expects that the Merger will be completed sometime in the fourth quarter of 2019, subject to the satisfaction of such closing conditions. As previously disclosed, shareholders of Condor approved the Merger on September 23, 2019. All references to dollar amounts herein are to U.S. dollars.
The Merger is expected to provide a number of benefits to NHT's existing portfolio, including increased scale, geographic diversification, brand diversification, more exposure to extended stay assets with higher occupancy and more stable cash flows, and a newer portfolio with upside revenue growth potential. Certain anticipated benefits are summarized in the table below:
NHT |
Condor |
NHT + Condor |
|
Equity Value(1) ($MM) |
~$144 |
~$134 |
~$280 |
Enterprise Value(1) ($MM) |
~$390 |
~$303 |
~$730 |
Number of Hotels |
11 |
15 |
26 |
Number of Keys |
1,607 |
1,908 |
3,515 |
Weighted Avg. Interest Rate(2) |
5.8% |
5.3% |
4.4% |
G&A as % of Enterprise Value(3) |
1.0% |
2.1% |
0.9% |
Average Age / Renovation |
26 Years / 2 Years |
10 Years / 5 Years |
16 Years / 3 Years |
Notes: |
||
1. |
Assumes estimated transaction value of Condor post-closing. |
|
2. |
Average interest rate based on LIBOR of 2.40% and estimated combined portfolio post-closing given current financing commitments. |
|
3. |
Combined portfolio is estimated 2020 budget. |
|
Assuming closing of the Merger occurs as planned, NHT is targeting estimated 2020 revenue of $150-170 million, estimated Net Operating Income ("NOI") of $57-64 million, estimated Funds from Operations ("FFO") of $32-36 million and estimated Adjusted Funds from Operations ("AFFO") of $25-30 million. Such 2020 targets are subject to a number of assumptions, including that NHT will be able to achieve approximately $6 million of G&A expense savings following the Merger, and constitute a financial outlook under applicable securities laws. See "Forward Looking Information" below for a summary of the assumptions and risks associated with this financial outlook. NHT is providing this financial outlook in order to provide guidance to investors on the expected financial impact on NHT of the acquisition of Condor.
For further information, please see the updated investor presentation available on NHT's website at www.nexpointhospitality.com.
About NHT
NexPoint Hospitality Trust is a publicly traded real estate investment trust, with its units listed on the TSX Venture Exchange under the ticker NHT.U. NHT is focused on acquiring, owning and operating well-located hospitality properties in the United States that offer a high current yield and in many cases, that are underperforming assets with the potential to increase in value through investments in capital improvements, a market-based recovery, brand repositioning, revenue enhancements, operational improvements, reducing expense inefficiencies, and exploiting excess land or underutilized space. NHT owns 11 branded properties sponsored by Marriott, Hilton and InterContinental Hotels Group, located across the U.S., specifically in the Seattle, Portland, Dallas, Nashville and St. Petersburg markets. NHT is externally advised by NexPoint Real Estate Advisors VI, L.P. For more information, visit www.nexpointhospitality.com.
About Condor Hospitality Trust, Inc.
Condor Hospitality Trust, Inc. is a self-administered real estate investment trust that specializes in the investment and ownership of upper midscale and upscale, premium-branded, select-service, extended-stay, and limited-service hotels in the top 100 Metropolitan Statistical Areas ("MSAs") with a particular focus on the top 20 to 60 MSAs. Condor currently owns 15 hotels in eight states. Condor's hotels are franchised by a number of the industry's most well-regarded brand families including Hilton, Marriott, and InterContinental Hotels Group.
Forward-Looking Information
This news release contains "forward-looking information" and "forward looking statements" within the meaning of applicable securities laws (collectively, "forward-looking statements") which reflect management's expectations regarding objectives, plans, goals, strategies, future growth, results of operations, performance and business prospects and opportunities of NHT. In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects", "does not expect", "scheduled", "goals", "seek", "strategy", "future", "estimates", "intends", "anticipates", "does not anticipate", "projects", "believes" or variations of such words and phrases or statements to the effect that certain actions, events or results "may", "will", "could", "would", "should", "might", "likely", "occur", "be achieved" or "continue". In particular, statements in this news release as to the expected closing of the Merger with Condor and the benefits NHT expects to realize therefrom (including an expanded geographic footprint, reductions in G&A expenses, valuation and transaction metrics, added stability to the NHT portfolio and expected benefits to NHT's financial results and the combined 2020 pro forma earnings profile (including expected 2020 revenues, NOI, FFO and AFFO) constitute forward-looking information.
NHT and Condor may not be able to complete the Merger on the terms described herein or other acceptable terms or at all because of a number of factors, including without limitation, the following: (i) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; (ii) unknown, underestimated or undisclosed commitments or liabilities; and (iii) the failure to satisfy the closing conditions to the Merger. Further, the expected benefits of the Merger may not be achieved due to: (i) risks related to disruption of management's attention from NHT's and Condor's ongoing business operations due to the Merger; (ii) the effect of the announcement of the Merger on the ability of the parties to retain and hire key personnel, maintain relationships with their franchisors, management companies and suppliers, and maintain their operating results and business generally; (iii) the risk of exceeding the expected costs of the Merger; (iv) adverse changes in U.S. and non-U.S. governmental laws and regulations; (v) the risk of litigation, including shareholder litigation in connection with the Merger, and the impact of any adverse legal judgments, fines, penalties, injunctions or settlements; (vi) changes in U.S. lodging industry and related market trends that may adversely impact expected room revenues, food & beverage revenues and hotel operating costs; and (vii) any increase in anticipated expenses and/or business costs (including G&A expenses and interest costs).
These forward-looking statements and other forward-looking statements are based on NHT's due diligence conducted on Condor and NHT's opinions, estimates and assumptions in light of management's experience and perception of historical trends, current conditions and expected future developments, as well as other factors that management currently believes are appropriate and reasonable in the circumstances. In particular, the completion of the Merger with Condor assumes that all closing conditions are satisfied and NHT's equity and debt financing is available pursuant to commitment letters NHT has entered into. Forward-looking statements regarding the expected benefits of the Merger as well as the 2020 pro forma targets included in this news release assume that the operating performance of NHT, Condor and the U.S. lodging industry as a whole continue consistent with historical results. Such forward-looking statements are also subject to the risks generally associated with NHT's business and the industry in which it operates, which are outlined in NHT's prospectus dated March 27, 2019 and Management's Discussion and Analysis dated August 27, 2019, which are available on SEDAR (www.sedar.com).
There can be no assurance that the underlying opinions, estimates and assumptions will prove to be correct. Such forward-looking statements are qualified in their entirety by the inherent risks, uncertainties and changes in circumstances surrounding future expectations which are difficult to predict and many of which are beyond the control of NHT.
All forward-looking statements are based only on information currently available to NHT and are made as of the date of this news release or the date indicated. Except as expressly required by applicable Canadian securities laws, NHT assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Non-IFRS Measures and Industry Metrics
This news release makes reference to non-IFRS measures, including "AFFO" and "FFO". This news release also makes reference to "NOI", which is a financial and operating metric used in NHT's industry. These non-IFRS measures and industry metrics do not have standardized meanings prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers. They are used to provide investors with supplemental measures of NHT's operating performance and thus highlight trends in NHT's core business that may not otherwise be apparent when relying solely on IFRS measures. Management believes that these measures are helpful to investors because they are widely recognized measures of a real estate investment trust's performance and provide a relevant basis for comparison among real estate entities. NHT also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures and industry metrics in the evaluation of issuers. Management also uses non-IFRS measures and industry metrics in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation.
"AFFO" means adjusted funds from operations, or Core FFO with certain adjustments in order to arrive at a more refined measure of the operating performance of the portfolio. AFFO adjusts Core FFO to remove items such as equity-based compensation expense and the amortization of deferred financing costs incurred in connection with obtaining long-term debt financing, and to account for the ongoing maintenance requirements of NHT's properties by reducing Core FFO for a capital expenditure reserve.
"Core Funds from Operations" or "Core FFO" means FFO with certain adjustments which are either not likely to occur on a regular basis or are otherwise not representative of the ongoing operating performance of NHT's portfolio. Core FFO adjusts FFO to remove items such as losses on extinguishment of debt and modification costs (includes prepayment penalties incurred and the write-off of unamortized deferred financing costs and fair market value adjustments of assumed debt related to the retirement of debt and costs incurred in connection with a debt modification that are expensed), casualty-related expenses and recoveries, the amortization of deferred financing costs incurred in the current period, and the non-controlling interests related to these items.
"FFO" means net income (loss) and comprehensive income (loss) calculated in accordance with IFRS, excluding: (i) depreciation of depreciable real estate assets and amortization of customer relationships and intangible assets arising from a business combination; (ii) gains (or losses) from sales of hotel properties and equipment; (iii) deferred income tax expense (recovery); (iv) impairment losses or reversals recognized on land and depreciable real estate properties; (v) transaction costs expensed as a result of the purchase of a hotel property being accounted for as a business combination; (vi) fair value adjustments to certain financial instruments; and (vii) the non-controlling interests in respect of the above. FFO has been prepared consistently with the definition presented in the White Paper on funds from operations prepared by the Real Property Association of Canada for all periods presented.
"NOI" means total revenues from properties (being the sum of revenues from rooms, food and beverage and other revenue) less hotel operating expenses as presented in the combined statements of income prepared in accordance with IFRS.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Contact:
Jackie Graham
Investor Relations
972-419-6213
SOURCE NexPoint Hospitality Trust
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