ASHFORD HOSPITALITY TRUST ANNOUNCES PROGRESS IN DELEVERAGING PLAN WITH AGREEMENT TO SELL THE RESIDENCE INN SALT LAKE CITY
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Insights
The sale of the Residence Inn by Ashford Hospitality Trust for $19.2 million is a strategic move that reflects the company's focus on liquidity and balance sheet optimization. The disclosed capitalization rate of 4.6% post-capital expenditures is a critical metric, as it provides insight into the yield an investor can expect from the property based on its net operating income (NOI). In real estate, a capitalization rate, or 'cap rate,' is used to estimate the potential return on an investment. The cap rate here appears to be in line with current market trends for similar upper upscale, full-service hotels, suggesting a fair valuation.
By electing to pay down debt with the proceeds, Ashford Trust is likely aiming to improve its financial leverage and creditworthiness. This could potentially lead to lower interest expenses and a stronger financial position, which are important factors for REIT investors. The sale at an 'attractive cap rate' as stated by the CEO implies that the transaction could be accretive to the trust's value, signaling management's confidence in their asset management and disposition strategy.
The transaction involving the Residence Inn Salt Lake City is indicative of the hospitality industry's recovery trajectory post-pandemic. The 144-room property's sale at a 6.0% capitalization rate before capital expenditure adjustments is particularly noteworthy. This figure is a more traditional measure of the property's income potential and suggests robust performance and a healthy market for hotel properties in Salt Lake City. The multiplier of 18.2x 2023 Hotel EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is also significant, as EBITDA multiples provide a snapshot of the business's profitability and are commonly used in the valuation of hospitality assets.
Moreover, the CEO's remarks about having several assets in the sales process at various stages reinforce the notion that Ashford Trust is actively managing its portfolio. This could indicate a strategy shift or a focus on divesting non-core assets to concentrate on more profitable opportunities, which may have implications for the company's future growth and market positioning within the hospitality sector.
From a financial perspective, the sale of the hotel asset by Ashford Hospitality Trust has several implications for the company's stock valuation. The use of proceeds to pay down debt is a prudent financial decision that may be well-received by the market, as it directly impacts the company's risk profile and cost of capital. A lower debt load can lead to improved financial ratios, such as debt-to-equity and interest coverage ratios, which are key indicators of financial health observed by investors and analysts.
The timing of the sale and the forward-looking statement about providing more updates in the coming weeks suggest that Ashford Trust might be in a strategic transition phase. This could lead to increased investor interest as the market anticipates further portfolio optimization and potential positive impact on the company's revenue streams and profitability. The stock market tends to react favorably to such strategic moves, especially when they align with broader industry trends and investor expectations for the sector.
"We are pleased to announce the signed agreement to sell the Residence Inn Salt Lake City at a very attractive cap rate," commented Rob Hays, Ashford Trust's President and Chief Executive Officer. "We continue to have several assets in the market at various stages of the sales process and look forward to providing more updates in the coming weeks."
Ashford Hospitality Trust is a real estate investment trust (REIT) focused on investing predominantly in upper upscale, full-service hotels.
Forward-Looking Statements
Certain statements and assumptions in this press release contain or are based upon "forward-looking" information and are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements in this press release include, among others, statements about the Company's strategy and future plans. These forward-looking statements are subject to risks and uncertainties. When we use the words "will likely result," "may," "anticipate," "estimate," "should," "expect," "believe," "intend," "could," "plan," or similar expressions, we intend to identify forward-looking statements. Such statements are subject to numerous assumptions and uncertainties, many of which are outside of Ashford Trust's control.
These forward-looking statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated, including, without limitation: our ability to complete the sale of the Residence Inn Salt Lake City on the terms currently anticipated or at all; our ability to raise sufficient capital to pay off our strategic debt; our ability to repay, refinance, or restructure our debt and the debt of certain of our subsidiaries; anticipated or expected purchases or sales of assets; our projected operating results; completion of any pending transactions; our understanding of our competition; market trends; projected capital expenditures; the impact of technology on our operations and business; general volatility of the capital markets and the market price of our common stock and preferred stock; availability, terms and deployment of capital; availability of qualified personnel; changes in our industry and the markets in which we operate, interest rates or the general economy; and the degree and nature of our competition. These and other risk factors are more fully discussed in Ashford Trust's filings with the Securities and Exchange Commission.
The forward-looking statements included in this press release are made only as of the date of this press release. Such forward-looking statements are based on our beliefs, assumptions, and expectations of our future performance taking into account all information currently known to us. These beliefs, assumptions, and expectations can change as a result of many potential events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity, results of operations, plans, and other objectives may vary materially from those expressed in our forward-looking statements. You should carefully consider these risks when you make an investment decision concerning our securities. Investors should not place undue reliance on these forward-looking statements. The Company can give no assurance that these forward-looking statements will be attained or that any deviation will not occur. We are not obligated to publicly update or revise any forward-looking statements, whether as a result of new information, future events or circumstances, changes in expectations, or otherwise, except to the extent required by law.
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SOURCE Ashford Hospitality Trust, Inc.
FAQ
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