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

Ashford Hospitality Trust has finalized the sale of the Residence Inn Salt Lake City for $19.2 million, using all proceeds to pay down debt.

Summary

• Ashford Hospitality Trust sold the Residence Inn Salt Lake City on March 6, 2024, for $19.2 million in cash.
• The sale was completed with PEG Properties, LLC, as per an agreement dated December 14, 2023.
• The sale price represents a 4.6% capitalization rate on 2023 net operating income, or 18.2x 2023 Hotel EBITDA, when adjusted for anticipated capital expenditures.
• Excluding the anticipated capital spend, the sale price represents a 6.0% capitalization rate on 2023 net operating income, or 14.0x 2023 Hotel EBITDA.
• All proceeds from the sale were used to reduce the company's debt.
• The company also repaid approximately $19.0 million on the mortgage loan, inclusive of defeasance costs, of which the Residence Inn SLC was one of three hotels securing the mortgage loan.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive due to the successful sale of an asset and the use of proceeds to reduce debt. However, the company still faces risks related to its overall debt and market conditions.

Positives

• The sale of the Residence Inn Salt Lake City was completed at an attractive capitalization rate.
• The proceeds from the sale were used to reduce the company's debt, which is a positive step towards deleveraging.
• The company is actively pursuing further asset sales, indicating a continued focus on deleveraging.

Risks

• The company's ability to raise sufficient capital to pay off strategic debt is a risk.
• There are risks associated with the company's ability to repay, refinance, or restructure its debt.
• The company's projected operating results and the completion of pending transactions are subject to uncertainty.
• General volatility of the capital markets and the market price of the company's stock are risks.
• Changes in interest rates or the general economy could impact the company.

Future Outlook

The company has several assets in the market at various stages of the sales process and anticipates providing more updates in the coming weeks. The company is focused on deleveraging.

Management Comments

• We are pleased to announce the sale of the Residence Inn Salt Lake City at a very attractive cap rate, commented Rob Hays, Ashford Trusts 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.

Industry Context

The sale of the Residence Inn Salt Lake City is part of a broader trend of hotel companies optimizing their portfolios and deleveraging their balance sheets. This is a common strategy in the current economic environment.

Comparison to Industry Standards

• The capitalization rate of 4.6% (adjusted for capex) and 6.0% (excluding capex) is within the range of recent hotel transactions, but the specific attractiveness depends on the location, condition, and brand of the hotel.
• The EBITDA multiples of 18.2x (adjusted for capex) and 14.0x (excluding capex) are also within the range of recent hotel transactions, but the specific attractiveness depends on the location, condition, and brand of the hotel.
• Comparable companies such as Host Hotels & Resorts and Park Hotels & Resorts have also been actively managing their portfolios, but the specific details of their transactions vary.

Stakeholder Impact

• Shareholders will benefit from the debt reduction and the company's focus on deleveraging.
• Employees at the sold hotel will likely be impacted by the change in ownership.
• Customers of the hotel will experience a change in management.

Next Steps

• The company will continue to pursue the sale of other assets.
• The company will provide further updates on its asset sales in the coming weeks.

Key Dates

Keywords

hotel sale, asset disposition, deleveraging, capitalization rate, EBITDA, debt reduction, real estate investment trust, REIT, Ashford Hospitality Trust, Residence Inn