In continued efforts to pay down debt, Ashford Hospitality Trust sold three hotels for $71.8 million in the third quarter, according to officials on the company’s third-quarter earnings call.
DALLAS—Ashford Hospitality Trust continued to reduce leverage during the third quarter, selling off $71.8 million in assets and using the proceeds to pay down debt, officials said on the company’s third-quarter conference call.
The company sold the 251-room Marriott Plaza San Antonio in San Antonio, Texas, on 5 August for $34 million. Ashford also sold the 156-room Courtyard Savannah Downtown in Savannah, Georgia, as well as the 128-room Hilton Garden Inn Wisconsin Dells, Wisconsin, on 15 August for a combined sales price of $37.8 million, according to the company’s Q3 earnings release.
“Proceeds from the sales were used to pay down debt,” said Douglas Kessler, president and CEO of AHT. “Note that the sales (earnings before interest, taxes, depreciation and amortization) multiples are significantly higher than where (the) overall portfolio is publicly valued in spite of our portfolio having higher (revenue per available room) than each of these sold hotels. We strongly believe this is indicative of a greater intrinsic value of our assets when compared to current market metrics.”
Kessler added that the company is still not considering acquisitions at this time.
The company’s portfolio consisted of 118 hotels at the end of the quarter, five of which were under renovation.
RevPAR for all of Ashford’s hotels rose 1.4% to $129.64 during the quarter, according to the company’s earnings release. For all hotels not under renovation, RevPAR increased 1.7% to $128.76.
Ashford has spent above industry averages on capital expenditures to have well-positioned hotels “and we expect to see tailwinds from that impact of refreshed properties relative to their competitive set,” Kessler said.
The company’s capital-expenditure spend was $207 million last year. This year, AHT is aiming to spend around $150 million, he said, adding that 2020 should also fall in that range.
“We're excited about what we’ve completed on our hotels,” Kessler said, adding that he’s excited about additional opportunities such as the conversion of a Crowne Plaza Key West La Concha property in Key West, Florida, into Marriott International’s Autograph Collection.
The project has a property-improvement plan valued at $13.7 million, and the property should be converted by July 2022. The hotel will continue to be managed by Remington Lodging.
Another project in the works is the conversion of the Hilton Alexandria in Alexandria, Virginia, to a franchised property to also be managed by Remington. The management conversion went into effect on 1 October.
Positive results for group, government and transient
Group and government demand were both healthy in the third quarter, COO Jeremy Welter said. Group RevPAR growth grew at “just under 5% for the quarter,” adding that government demand should help the company’s hotels in Washington, D.C.
“You look at the market, D.C. stood out as a non-performer for us in the quarter,” he said. “We also think our D.C. exposure is going to help us in tougher times in the lodging cycle.”
But transient business increased 1% in the quarter, Welter said.
“When you segment that out, our negotiated (rate) was up slightly and our leisure was down slightly,” he said.
While Ashford doesn’t give official guidance, Welter said the company “sees some healthy potential increases in negotiated rate” going forward.
“We’re in that process now,” he said. “I would estimate that we’re going to land somewhere between 2% to 3% year-over-year increase in our special corporate negotiated rates.”
As of press time, Ashford stock was trading at $2.78 a share, down 37.1% year to date. The Baird/STR Hotel Stock Index was up 9.6% for the same time period.