8-K: Ashford Hospitality Trust Reports Mixed Q1 2024 Results Amid Strategic Asset Sales

Ashford Hospitality Trust reported a decrease in comparable RevPAR and a net income of $67.4 million for the first quarter of 2024, while making progress on strategic financing payoff through asset sales and capital raising.

Summary

• Ashford Hospitality Trust's comparable RevPAR decreased by 0.9% to $128.55 in the first quarter of 2024, driven by a 2.4% decrease in occupancy, despite a 1.6% increase in average daily rate.
• The company reported a net income attributable to common stockholders of $67.4 million, or $0.60 per diluted share.
• Adjusted EBITDAre was $59.5 million, and adjusted funds from operations (AFFO) was $(0.35) per diluted share.
• Comparable Hotel EBITDA was $74.3 million for the quarter.
• The company ended the quarter with $112.7 million in cash and cash equivalents, and $135.7 million in restricted cash.
• Capital expenditures for the quarter totaled $33.9 million.
• Ashford has made progress on its plan to pay off its strategic financing, which has a final maturity date in January 2026, through asset sales, mortgage debt refinancings, and non-traded preferred capital raising.
• The company sold the Residence Inn in Salt Lake City for $19.2 million, the Hilton Boston Back Bay for $171 million, and the Hampton Inn in Lawrenceville, Georgia for $8.1 million.
• Approximately $122 million has been raised through the issuance of non-traded preferred stock.
• The company transferred control of hotel properties securing the KEYS A and B Loan Pools to a court-appointed receiver.
• The company did not pay a dividend on its common stock for the first quarter but is current on preferred stock dividends.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to the decrease in RevPAR, negative AFFO, and the transfer of hotel properties to a receiver. However, the company is making progress on debt reduction and has a plan to address its strategic financing, which provides some positive outlook.

Positives

• The company achieved a net income of $67.4 million attributable to common stockholders.
• The company has made significant progress in reducing its strategic financing balance.
• The company successfully sold three hotel properties, generating $198.3 million in proceeds.
• The company has raised $122 million through the issuance of non-traded preferred stock.
• The company is current on its preferred stock dividends.
• The company has a plan to pay off its strategic financing through a combination of asset sales, mortgage debt refinancings, and non-traded preferred capital raising.

Negatives

• Comparable RevPAR decreased by 0.9% due to a decline in occupancy.
• Adjusted funds from operations (AFFO) was negative at $(0.35) per diluted share.
• The company did not pay a dividend on its common stock for the first quarter.
• The company transferred control of hotel properties securing the KEYS A and B Loan Pools to a court-appointed receiver, indicating financial distress in those assets.
• The company's first quarter operating performance was negatively impacted by a soft March due to the Easter Holiday shift.

Risks

• The company's ability to repay, refinance, or restructure its debt is a significant risk.
• The company's performance is subject to market trends and the general economy.
• The company's ability to complete pending transactions and asset sales is uncertain.
• The company faces competition in the hospitality industry.
• The company's future performance is subject to numerous assumptions and uncertainties, many of which are outside of its control.

Future Outlook

The company believes it has a viable path to pay off its strategic financing this year through asset sales, refinancings, and non-traded preferred capital raises, and that its high-quality, geographically diverse portfolio remains well-positioned to outperform.

Management Comments

• Rob Hays, Ashford Trust's President and Chief Executive Officer, stated that he is very pleased with the progress made in paying off the strategic financing.
• Mr. Hays noted that the outstanding loan balance is down almost 50% from the original balance.
• Mr. Hays mentioned that the first quarter operating performance was negatively impacted by a soft March due to the Easter Holiday shift, but they have seen a marked improvement for April.
• Mr. Hays believes that the company has a viable path to pay off its strategic financing this year.

Industry Context

The report reflects the ongoing challenges and strategic shifts within the hospitality REIT sector, where companies are actively managing debt and optimizing portfolios through asset sales and capital raising. The focus on deleveraging and improving operational performance is a common theme among peers.

Comparison to Industry Standards

• The decrease in RevPAR is concerning as many hotel REITs have been reporting positive growth in this metric, such as Host Hotels & Resorts (HST) and Park Hotels & Resorts (PK) who have seen RevPAR growth in recent quarters.
• The negative AFFO per share is a significant underperformance compared to peers like Ryman Hospitality Properties (RHP) and Pebblebrook Hotel Trust (PEB), which have reported positive AFFO.
• The strategic financing payoff plan is similar to strategies employed by other REITs facing debt challenges, but the reliance on asset sales and non-traded preferred stock may be viewed as less favorable than traditional refinancing.
• The transfer of hotel properties to a receiver is a negative event, indicating potential issues with asset quality and debt management, which is not a common occurrence among well-performing hotel REITs.

Stakeholder Impact

• Shareholders will be impacted by the lack of a common stock dividend and the negative AFFO.
• Employees may be affected by the asset sales and potential restructuring.
• Customers may experience changes in hotel operations due to the asset sales and transfers.
• Creditors are impacted by the company's debt reduction efforts and the transfer of hotel properties to a receiver.
• Suppliers may be affected by changes in hotel ownership and operations.

Next Steps

• The company plans to continue its strategy of asset sales, mortgage debt refinancings, and non-traded preferred capital raising to pay off its strategic financing.
• The company will determine which assets are capturing the most attractive valuations for sale.
• The Board of Directors will continue to monitor the situation and assess future quarterly common dividend declarations.
• The company will conduct a conference call on May 8, 2024, to discuss the results.

Key Dates

Keywords

Ashford Hospitality Trust, REIT, hotel, RevPAR, EBITDA, AFFO, asset sales, debt reduction, preferred stock, strategic financing