Ashford Hospitality Trust is continuing to deleverage its U.S. hotel portfolio as it grapples with ongoing headwinds in the industry such as a lack of government travel and inflation that has pressured margins.
Stephen Zsigray, president and CEO of the Dallas-based real estate investment trust, told investors during a third-quarter earnings call Wednesday he was pleased with the REIT's financial performance in a quarter hit by "headwinds that pressured margins industry wide."
The REIT reported a net loss of $69 million for the quarter ending Sept. 30. Comparable revenue per available room for its now 70-hotel portfolio decreased 1.5% to $128 during the period.
Room nights tied to government travel were down 18% in Ashford Trust's hotel portfolio for the quarter. About 14% of the portfolio's key count is in the Washington, D.C., market, executives told investors during the earnings call without citing why their government business is down. By excluding the D.C. market from the results, executives said the portfolio's group room business was down only 30 basis points.
Ashford Trust continued its ongoing efforts to deleverage its real estate portfolio. In the third quarter, the REIT parted with two of its non-core assets: the Hilton Houston NASA Clear Lake and the Residence Inn Evansville East in Evansville, Indiana. The Houston-area hotel sold for $27 million and the Evansville property traded for $6 million, the REIT said. Most of the proceeds were used to pay down debt, Zsigray said.
In October, Ashford completed the sale of the Residence Inn San Diego Sorrento Mesa for $42 million, or $280,000 per key.
"We see meaningful potential for additional opportunistic asset sales that will further strengthen and transform our company," Zsigray said. Ashford Trust currently has eight hotels on the market and another two off-market hotels that have potential buyers doing their due diligence, Zsigray said.
"We've identified more potential asset sales," he said, adding the REIT "may not ultimately transact on these" deals. He did not disclose the hotels being marketed both on- and off-market.
In the third quarter, Ashford Trust also extended its Highland mortgage loan secured by 18 hotels by paying the loan down to its current balance of $733.6 million, or about 68% of the appraised value of the properties. The new maturity date is Jan. 9, 2026, with a six-month extension option, subject to certain conditions, until July 9, 2026.
In all, the REIT has $2.6 billion of total loans with a blended average interest rate of 8%. About 5% of its consolidated debt is fixed with the remainder being floating-rate debt.
Some of Ashford's markets, including Atlanta and Dallas, outperformed their peers. The Ritz-Carlton Atlanta hotel saw a 13% increase in earnings before interest, taxes, depreciation and amortization during the quarter. An Embassy Suites hotel near the Galleria in Dallas that is being marketed as part of a three-hotel portfolio also outperformed in the quarter, executives said, with a 22.5% growth in earnings before interest, taxes, depreciation and amortization.