S-11: Ashford Hospitality Trust Seeks to Raise $400 Million Through Preferred Stock Offering

Ashford Hospitality Trust is launching an offering of up to 16 million shares of its Series L or Series M redeemable preferred stock, aiming to raise up to $400 million.

Summary

• Ashford Hospitality Trust is offering a maximum of 12 million shares of Series L or Series M Redeemable Preferred Stock in a primary offering, plus up to 4 million shares through a dividend reinvestment plan.
• The public offering price for both series is $25.00 per share.
• The primary offering is scheduled to terminate by 2027, or when all shares are sold, but may be extended.
• The Series L and Series M Preferred Stock rank senior to common stock regarding dividends and liquidation.
• Holders of the Preferred Stock will have limited voting rights, primarily if dividends are missed for 18 or more months.
• The company reserves the right to reallocate shares between the primary offering and the dividend reinvestment plan.
• The company's common stock trades on the NYSE under the symbol AHT, with a last reported sale price of $8.56 per share on December 12, 2024.
• There is no public trading market for the Preferred Stock, and the company does not expect one to develop.
• The company estimates net proceeds from the primary offering to be between $265.5 million and $286.5 million, depending on the mix of Series L and Series M shares sold.
• The net proceeds will be used for general corporate purposes, including debt repayment, future investments, and capital expenditures.

Sentiment

Score: 6

Explanation: The document presents a balanced view of the offering, highlighting both the potential benefits and risks. While the company is seeking to raise a significant amount of capital, the lack of a public market for the preferred stock and the discretionary nature of dividends introduce some uncertainty. The sentiment is neutral to slightly positive, reflecting the potential for growth but also acknowledging the inherent risks.

Positives

• The preferred stock ranks senior to common stock in terms of dividend payments and liquidation.
• The dividend reinvestment plan allows for automatic reinvestment of dividends at $25.00 per share.
• The company has the option to redeem shares after two years, which could provide liquidity to investors.
• The offering provides a potential source of capital for the company's future growth and debt management.

Negatives

• The preferred stock has no public trading market and limited liquidity.
• Redemption of shares may be limited by the company's available funds and legal restrictions.
• Redemption fees apply to holder-initiated redemptions within a certain timeframe.
• The company may choose to pay the redemption price in shares of common stock, which rank junior to the preferred stock.
• Dividends on the preferred stock are discretionary and not guaranteed.
• The preferred stock is not rated, which may negatively affect its value.

Risks

• The preferred stock has no public trading market, limiting investors' ability to sell their shares.
• Redemption of shares may be limited by the company's available funds and legal restrictions.
• The preferred stock is subordinated to the company's existing and future debt.
• Dividends on the preferred stock are discretionary and not guaranteed.
• The preferred stock has not been rated, which may negatively affect its value.
• The company may redeem shares early, potentially affecting investors' ability to reinvest at comparable yields.
• The offering price is not based on an independent valuation and may not reflect the true market value.
• The company has broad discretion in the use of proceeds, which may not be accretive to results.
• The company's ability to pay dividends and redeem shares may be limited by Maryland law.
• Investors in the preferred stock will not enjoy the protections afforded by state securities laws.
• The dealer manager's relationship with the company may cause a conflict of interest.
• The success of the offering depends on the dealer manager's ability to retain key employees and build a network of broker-dealers.
• Compliance with SEC's Regulation Best Interest may negatively impact the company's ability to raise capital.
• Ownership of the preferred stock is subject to limits in the company's charter.

Future Outlook

The company intends to use the net proceeds from this offering for general corporate purposes, including debt repayment, future hotel-related investments, and capital expenditures. The company believes it will be able to shift its investment strategy to take advantage of new lodging-related investment opportunities as they may develop.

Management Comments

• The company believes that as supply, demand, and capital market cycles change, it will be able to shift its investment strategy to take advantage of new lodging-related investment opportunities as they may develop.
• The board of directors may change the company's investment strategy at any time without stockholder approval or notice.

Industry Context

This offering is taking place in the context of a cyclical hotel industry, where the company seeks to benefit from changing market conditions. The company's strategy is to focus on full-service hotels in the upper upscale segment in domestic markets with RevPAR less than twice the national average.

Comparison to Industry Standards

• The document does not provide specific details on comparable companies or projects.
• However, the company's strategy of focusing on full-service hotels in the upper upscale segment is a common approach in the hospitality industry.
• The company's use of a dividend reinvestment plan is also a common practice among REITs.
• The document does not provide enough information to assess the company's results against global benchmarks.

Related Party Transactions

• The dealer manager of this offering, Ashford Securities LLC, is an affiliate of Ashford Inc.
• Ashford LLC, a subsidiary of Ashford Inc., advises the company through an advisory agreement.
• Remington Lodging & Hospitality, LLC, a subsidiary of Ashford Inc., manages a significant portion of the company's hotel properties.
• The company, Ashford LLC, and other entities advised by Ashford LLC contributed capital to Ashford Securities to fund a portion of its operations.
• The company currently owns 98.8% of the equity interests in Stirling REIT OP, LP, Stirling Inc.'s operating partnership.
• Through contributions to Ashford Securities, the company may pay or be deemed to have paid sales-based compensation to Ashford Securities personnel of up to 1.25% of the gross amount of Stirling Inc. common stock sold by them.

Stakeholder Impact

• Shareholders: The offering may dilute existing shareholders' ownership, but also provides capital for growth and debt management.
• Employees: The offering does not directly impact employees, but the company's financial health may affect job security.
• Customers: The offering does not directly impact customers, but the company's financial health may affect service quality.
• Suppliers: The offering does not directly impact suppliers, but the company's financial health may affect payment terms.
• Creditors: The offering may improve the company's ability to repay debt, benefiting creditors.

Next Steps

• The company will continue to seek ways to benefit from the cyclical nature of the hotel industry.
• The company will evaluate its asset portfolio on a regular basis to determine if it continues to satisfy its investment criteria.
• The company will continue to assess its existing hotel portfolio and make strategic decisions to sell certain under-performing or non-strategic hotels.
• The company will continue to seek ways to benefit from the cyclical nature of the hotel industry.

Key Dates

Keywords

preferred stock, Ashford Hospitality Trust, REIT, dividend reinvestment plan, redeemable preferred stock, real estate investment trust, capital raise, hotel investments, securities offering, non-traded securities