8-K: Ashford Hospitality Trust Reports Mixed Third Quarter 2024 Results Amid Strategic Restructuring

Ashford Hospitality Trust reported a net loss for the third quarter of 2024, while making progress on its strategic financing plan through asset sales and capital raising.

Summary

• Ashford Hospitality Trust announced its financial results for the third quarter of 2024, which ended September 30, 2024.
• Comparable RevPAR decreased by 1.4% to $133, driven by a 1.7% increase in ADR and a 3.0% decrease in occupancy.
• The company reported a net loss attributable to common stockholders of $63.2 million, or $12.39 per diluted share.
• Adjusted EBITDAre was $52.4 million, and adjusted funds from operations (AFFO) was $(1.71) per diluted share.
• Comparable Hotel EBITDA was $70.4 million for the quarter.
• The company ended the quarter with $119.7 million in cash and cash equivalents, and $114.3 million in restricted cash.
• The company has raised approximately $173 million through the issuance of non-traded preferred stock.
• Total loans stood at $2.7 billion with a blended average interest rate of 8.0%, with 83% effectively fixed and 17% floating.
• The company did not pay a dividend on its common stock for the third quarter but is current on preferred stock dividends.
• The company completed a 1-for-10 reverse stock split on October 25, 2024.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative. While the company is making progress on its strategic financing plan, the financial results for the quarter were weak, with a net loss and declining RevPAR. The forward-looking statements are cautiously optimistic, but the risks and uncertainties remain significant.

Positives

• The company has made significant progress in reducing its strategic financing loan balance, which is down almost 60% from the original balance.
• The company has successfully raised $173 million through the issuance of non-traded preferred stock.
• Two hotel properties are on track for rebranding, which is expected to enhance financial performance.
• The company is current on its preferred stock dividends.
• The company has a plan to pay off its strategic financing before the end of the year.

Negatives

• Comparable RevPAR decreased by 1.4% due to a decline in occupancy.
• The company reported a net loss of $63.2 million, or $12.39 per diluted share.
• Adjusted funds from operations (AFFO) was negative at $(1.71) per diluted share.
• The company did not pay a dividend on its common stock for the third quarter.

Risks

• The company's ability to repay, refinance, or restructure its debt is subject to risks and uncertainties.
• The company's operating results are subject to market trends and competition.
• The company's capital raising plans may not be successful.
• The company's forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially.

Future Outlook

The company believes its high-quality, geographically diverse portfolio remains well-positioned to outperform as it looks to the remainder of 2024 and into 2025. The company also expects enhanced financial performance from the upcoming conversions of La Concha and Le Pavillon later this year.

Management Comments

• Stephen Zsigray, Ashford Trust's President and Chief Executive Officer, stated he is very pleased with the progress made related to the plan to pay off the strategic financing.
• Mr. Zsigray added that operationally, the company remains focused on maximizing the value of its assets and looks forward to realizing enhanced financial performance from the upcoming conversions of La Concha and Le Pavillon later this year.

Industry Context

The hotel industry is currently experiencing mixed performance, with some markets showing strength while others are facing challenges. Ashford's results reflect these trends, with a slight decrease in RevPAR despite an increase in ADR, indicating potential occupancy issues. The company's strategic focus on asset sales and capital raising is a common strategy for REITs looking to deleverage and improve their financial position in a fluctuating market.

Comparison to Industry Standards

• Comparing Ashford's RevPAR decline of 1.4% to industry benchmarks, some major hotel REITs have reported similar or slightly better performance in Q3 2024, with some showing flat or slight growth in RevPAR.
• For example, Host Hotels & Resorts (HST) and Park Hotels & Resorts (PK) have reported mixed results, with some properties outperforming and others underperforming, similar to Ashford's diverse portfolio.
• In terms of EBITDA margins, Ashford's comparable hotel EBITDA margin of 25.92% is within the range of other full-service hotel REITs, but some competitors with more upscale portfolios may have higher margins.
• The company's debt-to-EBITDA ratio is higher than some of its peers, reflecting its ongoing strategic financing challenges.
• The capital raising through non-traded preferred stock is a less common approach compared to traditional equity or debt offerings, which may indicate a need for more flexible financing options.

Stakeholder Impact

• Shareholders are impacted by the net loss and the lack of a common stock dividend, but may be encouraged by the progress on strategic financing.
• Employees may be affected by the ongoing restructuring and asset sales.
• Customers may experience changes due to the rebranding of hotel properties.
• Creditors are impacted by the company's debt reduction efforts and refinancing activities.

Next Steps

• The company will continue to execute its plan to pay off its strategic financing through asset sales, mortgage debt refinancings, and non-traded preferred capital raising.
• The company will complete the rebranding of the Crowne Plaza La Concha and Le Pavillon Hotel by the end of 2024.
• The company will conduct a conference call on November 6, 2024, to discuss the results.
• The Board of Directors will continue to monitor the situation and assess future quarterly common dividend declarations.

Key Dates

Keywords

Ashford Hospitality Trust, AHT, REIT, Hotel, RevPAR, EBITDA, AFFO, Preferred Stock, Debt, Strategic Financing, Reverse Stock Split, Asset Sales