DALLAS—Ashford Hospitality Trust, Inc. intends to list for sale a portfolio of some 23 select-service hotels that are mostly brand-managed and plans to take an opportunistic approach to selling its remaining select-service hotels in the future. In addition, the company will redefine its investment strategy to focus predominantly on upper-upscale, full-service hotels. The company’s advisor, Ashford Inc., may separately pursue sponsoring a select-service platform.
The for-sale 23 select-service hotel portfolio totals 4,308 rooms, is encumbered by approximately $190 million of long-term fixed-rate debt and approximately $187 million of maturing or floating rate debt for total debt of approximately $377 million. The current trailing 12-month NOI for the portfolio is approximately $44 million, and the trailing 12-month RevPAR for the portfolio is approximately $88. It is anticipated that the proceeds from this sale will be redeployed into assets that are consistent with Ashford Trust’s redefined strategy of upper-upscale, full-service hotels.
Other strategic initiatives announced by the company include: it is not planning nor does it expect any future platform spinoffs; it plans to continue working with the research analysts that follow the company to update their models to reflect the approximately $1 billion of acquisitions that the company has either closed on or announced year-to-date; and it is currently not contemplating stock buybacks as the company believes stock buybacks need to provide exceptional returns in order to offset the reduction in float and trading volumes that can negatively impact valuation. In addition, it continues to target a cash and cash equivalents balance equal to 25-35% of its total equity market capitalization for the following purposes: to cover property-level and corporate-level working capital needs, as a hedge against a downturn in the economy or hotel fundamentals, to be prepared to pursue accretive investments, or for stock buybacks should those situations arise.
The company also noted that it filed a new “at the market” equity offering program (ATM), which is similar to the ATM that had been in place since 2010. There are no plans at this time to utilize the ATM; however, the company believes it is appropriate to have this program in place. It will also continue to target net debt to gross assets of 55-60%. As of the end of the first quarter, this metric stood at 58%.
“Beginning in November 2013, with the spinoff of Ashford Prime, the Ashford Trust strategy has been evolving. Over the past several months, the management team has been working on further refining the strategy in order to make it simpler to understand and more defined for our investors. We wanted to take this opportunity to clearly communicate to the investor community what our vision for Ashford Trust will be going forward,” said Monty J. Bennett, Ashford Trust’s chairman and CEO. “We feel that these changes are another step towards our goal with the Ashford group of companies of having very well-defined, distinct strategies within our investment platforms.”