Updated: 10:30 a.m., 14 November 2014
Ashford has spun off Ashford, Inc., its hotel asset management operation. The company began trading on the NYSE MKT on Thursday under the symbol AINC at $45.50 per share.
DALLAS—Ashford Hospitality Trust is laying the groundwork for future hotel deals, executives said during the real estate investment trust’s third-quarter earnings call on Friday.
Monty Bennett, chairman and CEO, said the company is entering into transactions engineered to lower cost of debt, increase cash flow and strengthen its balance sheet to aid in making additional hotel deals.
For instance, in July, the company announced it refinanced three mortgage loans, which resulted in net proceeds of approximately $104 million. Further, the REIT used cash from a recent equity raise to acquire for $8 million the 39-room Ashton Hotel in downtown Fort Worth, Texas, and for $50 million the 357-room Fremont Marriott Silicon Valley in California.
Choosing to wait to refinance the portfolio ended up being the best decision, President Douglas Kessler said.
“We try to optimize the lining up of the operating performance with the hotels as well as what’s taking place in the debt and capital markets,” he said. “And over the period of time this year, the debt capital markets have clearly tightened in the favor of borrowers and the performance of this portfolio has increased.”
During the quarter, revenue per available room increased by 12.4% for Ashford Trust hotels. Year to date, the company’s stock price is up 36.5%, while Ashford Hospitality Prime’s stock is down 4.8%. During the same period, the R.W. Baird/STR Hotel Stock Index is up 18.2%.
“Having capital resources readily available is extremely important to us,” Bennett said. As of 30 September, Ashford Trust had 116 hotels comprising 23,090 rooms in its portfolio, according to the company’s earnings release. Ashford Prime’s portfolio consisted of 10 hotels, with 3,472 rooms.
Favorable conditions in the debt markets mean future debt deals are likely for Ashford Trust, Kessler said. Credit spreads are tightening; loan-to-value ratios are rising; and debt yields are shrinking.
“Ashford Trust will likely continue to take a more opportunistic view on leverage and liquidity, while Ashford Prime will be more conservative in its use and structure of leverage,” he said.
The REIT’s deal pipeline is strong, Kessler said.
“We are seeing more portfolio opportunities coming to the market, which is typical at this point in the real estate cycle,” he said.
New businesses
Also during the call, executives discussed the plan to spin off its asset management business, Ashford, Inc. The company will trade on the New York Stock Exchange with the symbol AINC.
In connection with the spinoff, Ashford will enter into a 20-year advisory agreement to advise Ashford Trust and will also continue to advise Ashford Prime.
Bennett said the company is intently focused on boosting its income stream via the growth of existing businesses and potential launches of new ventures. New businesses for the REIT could include a select-service platform, a mortgage lending shop and a real estate hedge fund.
Ashford Trust might also consider starting or buying businesses that offer services or goods to the various hotels owned by Ashford Trust and Ashford Prime, Bennett said.
“We continue to seek out attractive investment opportunities as well as alternative ways to invest in accretive growth for both Trust and Prime,” he said.