REIT Ashford Looks At Selling A Dozen Hotels To Pay Off Debts
Ashford Hospitality Trust has a new plan to pay off its maturing debt, and it is sending stock prices up.
The Dallas-based REIT shared its strategy for taking care of the $2.6B of debt coming due at the beginning of 2026, including selling off some hotels and refinancing loans, according to a press release issued Wednesday.
Shares of Ashford Hospitality Trust rose 32% since Wednesday morning to $1.77 at the close of Thursday trading after being down 74% for the past 12 months.
A dozen properties are listed for sale, most in urban areas along the Eastern Seaboard. They include the 444-room Ritz-Carlton Atlanta, the 390-room Hilton in Boston's Back Bay neighborhood and Florida's 350-room Residence Inn Orlando at SeaWorld. Ashford said it is unlikely to sell all 12 hotels and instead will select the properties with the best valuations and that will bring in enough net proceeds to pay off its debt balances.
The REIT has also identified four loans to refinance: its Morgan Stanley pool loan with 17 hotels across the country, a loan secured by the Renaissance Nashville Hotel, the loan for the Marriott Gateway in Arlington, Virginia, and the loan for the Hotel Indigo Atlanta Downtown. The company said it hopes the Renaissance loan will provide a substantial part of the capital it needs.
“Between the excess proceeds from planned asset sales, excess proceeds from planned property refinancings, and proceeds from our non-traded preferred capital raise, we believe we have a viable path to pay off our strategic financing this year,” Ashford CEO Rob Hays said in a release. “Our hotel portfolio also continues to benefit from its geographic diversification, and I believe we are well-positioned to continue to outperform.”
Ashford hasn't been having the best couple of years. During the pandemic's height, it sold its only Manhattan hotel to keep lenders happy and borrowed another $200M to stay above water. In July, it agreed to transfer 19 hotels in a $982M mortgage pool to lenders to clean up its balance sheet. In November, Ashford's creditors requested a court-appointed receiver take over another seven properties.
The REIT reported its revenue per available room in the third quarter was up 4% compared to the previous year, but its falling stock made it one of the worst-performing REITs in 2023.
The hospitality industry is set to make a recovery in 2024. Investors are expected to invest up to 25% more in the sector, adding a much-needed boost after 2023's global investment volume amounted to a measly $50.5B, as opposed to about $73B the two years prior, according to JLL data. Construction starts are reaching new heights as well. There were 5,964 projects in the pipeline at the end of last year, beating the record 5,883 set in 2008. The extra rooms are coming at a great time, as CBRE expects overall occupancy rates to increase by 1.2% to a record level and the average of filled rooms to increase 3% this year.
