ASHFORD HOSPITALITY TRUST ANNOUNCES PROGRESS IN DELEVERAGING PLAN WITH SALE OF THE RESIDENCE INN SALT LAKE CITY

Rhea-AI Summary

Ashford Hospitality Trust, Inc. (AHT) announced the sale of the Residence Inn in Salt Lake City for $19.2 million, reflecting a 4.6% capitalization rate on 2023 net operating income. The proceeds were used to pay down debt, with future updates on more asset sales expected.

Real Estate Investment Analyst

The disposal of the Residence Inn in Salt Lake City by Ashford Hospitality Trust at a 4.6% capitalization rate post-adjustment for anticipated capital expenditures is a strategic move that can be interpreted as a positive signal to the market. The capitalization rate, or cap rate, is a key metric in real estate investment that indicates the return on investment assuming the property is paid for in cash. A cap rate of 4.6% is relatively low, which often suggests that the property is less risky or that it's located in a more desirable market. However, this figure must be compared against the average cap rates within the specific market segment of upper upscale hotels to gauge its attractiveness accurately.

Turning to the financial implications, the 18.2x Hotel EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) multiple pre-adjustment and 14.0x post-adjustment is indicative of the premium that Ashford Trust was able to command for this asset. EBITDA multiples provide insight into how many years it would take for the investment to pay for itself in profit, assuming no growth or decline. The use of all proceeds to pay down debt will likely improve the company's leverage ratios, potentially leading to a more favorable credit rating and reduced interest expense, which in turn could enhance shareholder value.

Hospitality Industry Analyst

The sale of the Residence Inn reflects a broader trend within the hospitality industry where REITs are optimizing their portfolios for better financial health and strategic positioning. The transaction allows Ashford Trust to reallocate resources and focus on assets that align more closely with their strategic objectives. The reference to 'several assets in the market at various stages of the sales process' suggests a proactive approach to portfolio management, which can be crucial in the highly cyclical hospitality sector. This sector is significantly influenced by economic factors, travel trends and consumer preferences, all of which require REITs to remain agile and responsive.

Moreover, the mention of the sale's 'very attractive cap rate' by Ashford Trust's President and CEO underlines the company's confidence in the deal's value. This could be a signal to investors that the management is adept at capitalizing on market conditions to negotiate favorable terms, which is a critical competency in the competitive hospitality market. Such transactions can also serve as a benchmark for valuing similar properties within the industry, offering insights into asset valuations and investment opportunities.

Debt Analyst

From a debt management perspective, the use of sale proceeds to pay down debt is a prudent financial strategy that can significantly impact a company's balance sheet and overall financial stability. By reducing debt, Ashford Trust is likely aiming to lower its debt-to-equity ratio, a move that is generally well-received by investors as it indicates a stronger equity position and may reduce the risk profile of the company. Furthermore, the reduction in debt can lead to lower interest expenses, which can improve net income and cash flow available for distribution to shareholders or reinvestment into the business.

However, it is also important to consider the potential impact of such a sale on the company's future revenue streams. The sold property will no longer contribute to Ashford Trust's income, which could have a dilutive effect on earnings if not offset by the benefits of reduced debt and interest expenses or by reinvesting the capital in higher-yielding opportunities. The company's strategy and ability to execute further asset sales or acquisitions will be crucial in determining the long-term effects of this transaction on its financial health and performance.

DALLAS, March 11, 2024 /PRNewswire/ -- Ashford Hospitality Trust, Inc. (NYSE: AHT) ("Ashford Trust" or the "Company") today announced that it has closed on the sale of the 144-room Residence Inn located in Salt Lake City, Utah (the "Hotel") for $19.2 million.  When adjusted for the Company's anticipated capital expenditures, the sale price represented a 4.6% capitalization rate on 2023 net operating income, or 18.2x 2023 Hotel EBITDA.  Excluding the anticipated capital spend, the sale price represented a 6.0% capitalization rate on 2023 net operating income, or 14.0x 2023 Hotel EBITDA.  All of the proceeds from the sale were used to pay down debt.

"We are pleased to announce the sale of the Residence Inn Salt Lake City at a very attractive cap rate," commented Rob Hays, Ashford Trust's President and Chief Executive Officer. "We continue to have several assets in the market at various stages of the sales process and look forward to providing more updates in the coming weeks."

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Ashford Hospitality Trust is a real estate investment trust (REIT) focused on investing predominantly in upper upscale, full-service hotels.

Forward-Looking Statements

Certain statements and assumptions in this press release contain or are based upon "forward-looking" information and are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements in this press release include, among others, statements about the Company's strategy and future plans. These forward-looking statements are subject to risks and uncertainties. When we use the words "will likely result," "may," "anticipate," "estimate," "should," "expect," "believe," "intend," "could," "plan," or similar expressions, we intend to identify forward-looking statements. Such statements are subject to numerous assumptions and uncertainties, many of which are outside of Ashford Trust's control.

These forward-looking statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated, including, without limitation: our ability to raise sufficient capital to pay off our strategic debt; our ability to repay, refinance, or restructure our debt and the debt of certain of our subsidiaries; anticipated or expected purchases or sales of assets; our projected operating results; completion of any pending transactions; our understanding of our competition; market trends; projected capital expenditures; the impact of technology on our operations and business; general volatility of the capital markets and the market price of our common stock and preferred stock; availability, terms and deployment of capital; availability of qualified personnel; changes in our industry and the markets in which we operate, interest rates or the general economy; and the degree and nature of our competition. These and other risk factors are more fully discussed in Ashford Trust's filings with the Securities and Exchange Commission.

The forward-looking statements included in this press release are made only as of the date of this press release. Such forward-looking statements are based on our beliefs, assumptions, and expectations of our future performance taking into account all information currently known to us. These beliefs, assumptions, and expectations can change as a result of many potential events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity, results of operations, plans, and other objectives may vary materially from those expressed in our forward-looking statements. You should carefully consider these risks when you make an investment decision concerning our securities. Investors should not place undue reliance on these forward-looking statements. The Company can give no assurance that these forward-looking statements will be attained or that any deviation will not occur. We are not obligated to publicly update or revise any forward-looking statements, whether as a result of new information, future events or circumstances, changes in expectations, or otherwise, except to the extent required by law.

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SOURCE Ashford Hospitality Trust, Inc.

What did Ashford Hospitality Trust announce regarding the Residence Inn in Salt Lake City?

Ashford Hospitality Trust announced the sale of the 144-room Residence Inn in Salt Lake City for $19.2 million.

What was the capitalization rate on 2023 net operating income for the sale?

The sale represented a 4.6% capitalization rate on 2023 net operating income.

How were the proceeds from the sale utilized?

All proceeds from the sale were used to pay down debt.

What kind of company is Ashford Hospitality Trust?

Ashford Hospitality Trust is a real estate investment trust (REIT) focused on investing in upper upscale, full-service hotels.