8-K: Ashford Hospitality Trust Announces Sale of Residence Inn in Salt Lake City for $19.2 Million

Ashford Hospitality Trust has agreed to sell a 144-room Residence Inn in Salt Lake City for $19.2 million as part of its deleveraging plan.

Summary

• Ashford Hospitality Trust has entered into a definitive agreement to sell the Residence Inn in Salt Lake City for $19.2 million.
• The sale of the 144-room hotel is expected to close in early March, subject to standard closing conditions.
• The sale price represents a 4.6% capitalization rate on 2023 net operating income when adjusted for anticipated capital expenditures.
• Without the capital expenditure adjustment, the cap rate is 6.0% on 2023 net operating income.
• The sale price is 18.2 times the 2023 Hotel EBITDA when adjusted for capital expenditures.
• Excluding the capital spend, the sale price is 14.0 times the 2023 Hotel EBITDA.
• All proceeds from the sale are intended to be used to reduce the company's debt.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive due to the progress on deleveraging and the attractive cap rate achieved on the sale. However, there are risks associated with the completion of the sale and the company's overall debt situation.

Positives

• The sale of the Residence Inn is part of Ashford Trust's deleveraging plan.
• The sale is at an attractive capitalization rate.
• The proceeds from the sale will be used to reduce debt.
• The company has several other assets in the market for sale.

Negatives

• The company provides no assurance that the sale will be completed on the current terms or at all.
• The sale is subject to normal closing conditions, which could introduce uncertainty.

Risks

• The sale of the Residence Inn may not be completed on the anticipated terms or at all.
• The company's ability to raise sufficient capital to pay off strategic debt is a risk.
• The company faces risks related to repaying, refinancing, or restructuring its debt.
• There are risks associated with general volatility in the capital markets and the market price of the company's stock.
• Changes in interest rates or the general economy could impact the company.
• The company faces competition in its industry.

Future Outlook

The company is actively marketing other assets for sale and expects to provide further updates in the coming weeks. The company is focused on deleveraging.

Management Comments

• Rob Hays, Ashford Trust's President and CEO, stated that they are pleased to announce the signed agreement to sell the Residence Inn Salt Lake City at a very attractive cap rate.
• Management indicated they continue to have several assets in the market at various stages of the sales process.

Industry Context

The sale of the Residence Inn is part of a broader trend of hotel companies deleveraging and optimizing their portfolios. The cap rate achieved is a key metric for evaluating the attractiveness of the sale in the current market.

Comparison to Industry Standards

• The capitalization rate of 4.6% (adjusted for capital expenditures) is a key metric to compare against other hotel transactions.
• The 18.2x EBITDA multiple (adjusted for capital expenditures) is a valuation metric that can be compared to similar hotel sales.
• The 6.0% cap rate and 14.0x EBITDA multiple (unadjusted) provide a different perspective on the valuation, and should be compared to similar transactions with similar capital expenditure profiles.
• Comparable companies such as Host Hotels & Resorts and Park Hotels & Resorts may have similar transactions that can be used for comparison.

Stakeholder Impact

• Shareholders will likely view the sale positively as it contributes to the company's deleveraging efforts.
• Creditors will benefit from the reduction in debt.
• Employees at the Residence Inn may experience changes due to the sale.

Next Steps

• The company expects to complete the sale of the Residence Inn in early March.
• The company will use the proceeds from the sale to pay down debt.
• The company will continue to market other assets for sale.
• The company will provide further updates on its sales process in the coming weeks.

Key Dates

Keywords

hotel, real estate, sale, Ashford Hospitality Trust, deleveraging, Residence Inn, capitalization rate, EBITDA, debt reduction