Candace Carlisle | CoStar News
Ashford Hospitality Trust, a financially troubled real estate investment trust with a portfolio of 100 hotels in the United States, is seeking to sell some of its properties while in the process of handing back the keys of 19 hotels to lenders to help pay back more than $100 million in financing by next year.
The Dallas-based REIT has been working for months to hand back the keys of 19 hotels tied to three loans that matured in June in which the trust opted not to pay the $255 million required to extend those loans. The decision to hand back the keys was announced in July, but executives told investors on an earnings call Wednesday it hasn’t happened yet.
“Everything these days just seems to be taking longer transaction-wise,” Ashford’s Chief Financial Officer Deric Eubanks told investors during the call. “Hopefully, by the end of the year, all 19 of those hotels will be transferred to the lender.”
The anticipated exit of the 19 hotels from Ashford’s real estate portfolio is expected to bump its revenue per available room by 3%, Eubanks said. The paring down of the portfolio comes as the REIT sold 79 units and a public space at WorldQuest resort in Orlando, Florida, for $14.8 million. Another six lodging properties in the REIT’s portfolio are on the market, with anticipated call-to-offer dates coming up in the next few weeks.
If needed, President and CEO Rob Hays told investors, they could sell additional hotels depending on what kind of properties are having traction with investors and the capital stack on each property.
“We’ve got a smaller asset that will hopefully be done here shortly,” Hays said, referencing the REIT’s upcoming asset sales. “Some of the bigger assets we are contemplating are in process and, to the extent we move forward with those, it will be a first-quarter close because those have been taking longer.”
The proceeds of the asset sales are earmarked to pay off the $200 million of so-called strategic corporate financing taken on by Ashford in January 2021 from Oaktree Capital Management. Hays said there is about $107 million left to pay off, which the trust hopes to do by next year. The goal, he said, is to have enough capital to improve the REIT’s portfolio and continue to deleverage its balance sheet over time.
Ashford has a total of $3.6 billion in loans with a blended average interest rate of 7.9% at the close of the third quarter on Sept. 30. This excludes the loans that weren’t extended earlier this year.
For the third quarter, Ashford reported a net loss of $68.6 million. The REIT’s comparable revenue per available room for its hotels increased 4% to $131.67 during the quarter, with a 1.7% increase in occupancy.
The company has 12 of its hotel properties in cash traps, meaning any excess cash flow generated by the hotels would be held by the lender and not available for corporate purposes. In early 2022, about 93% of the hotels in the company’s portfolio were in cash traps.
Ashford plans to continue its investments at certain hotels moving into next year. Hays declined to give specific guidance for capital expenditures for 2024 but said it would likely be comparable to or less than the amount of investment this year.
Nine hotels in its portfolio this year received or are expected to receive significant upgrades, including the Crowne Plaza La Concha Key West, Embassy Suites Crystal City, Hampton Inn Evansville, Le Pavillon New Orleans, Marriott Sugar Land, Residence Inn Hartford Manchester, Residence Inn Phoenix Airport, Ritz-Carlton Atlanta and SpringHill Suites Buford Mall of Georgia.
During the third quarter, Ashford entered into an agreement with Marriott International to convert its Le Pavillon Hotel in New Orleans to a Tribute-branded hotel. The conversion is expected to occur in the first quarter with upgrades to the hotel’s lobby bar, “extensive exterior work,” as well as upgrades to its restaurant, guest rooms and corridors. Hays told investors the investment is likely to be between $16 million and $20 million, with increased revenue per available room expected once the work is complete.
The REIT is also planning to convert its Crowne Plaza La Concha Hotel in Key West, Florida, into a Marriott Autograph Collection hotel in 2024. At that time, it will be rebranded La Concha Key West, an Autograph Collection hotel.
The planned conversion is expected to cost $35 million in renovations, with a transformation of the lobby, bar and restaurant, as well as upgrades to the guest rooms, corridors and amenity spaces, including the pool and meeting space. An underutilized spa at the hotel will also be converted into rooftop suites.
Hays said the REIT is expected to continue to deploy capital into hotels that the trust thinks could lead to significant improvements to revenue per available room on properties that are “great long-term holds” in its portfolio.