ASHFORD HOSPITALITY TRUST ANNOUNCES PROGRESS IN PLAN TO PAY OFF STRATEGIC FINANCING WITH AGREEMENT TO SELL THE HILTON BOSTON BACK BAY
- The sale of Hilton Boston Back Bay for $171 million is a significant move for Ashford Hospitality Trust, Inc.
- The net proceeds after repayment of mortgage debt and closing costs are expected to be around $70 million.
- The sale price represents a 7.3% capitalization rate on 2023 net operating income or 12.3x 2023 Hotel EBITDA.
- The Company plans to use the net proceeds for general corporate purposes, including paying off strategic financing.
- The sale is part of the Company's strategy to optimize its asset portfolio and strengthen its financial position.
- None.
Insights
The sale of the Hilton Boston Back Bay by Ashford Hospitality Trust represents a strategic divestiture within the hospitality real estate sector. The transaction price of $171 million, or $438,000 per key, is indicative of the current market conditions within the upscale hotel space. The disclosed capitalization rates and EBITDA multiples provide insight into the valuation metrics that are driving transactions in this industry.
From a real estate investment perspective, the 7.3% capitalization rate on adjusted net operating income is a critical figure, as it suggests a moderate yield on investment. This rate is slightly above the historical average for prime urban hotel properties, reflecting a potentially cautious investor sentiment or a premium for the property's location and brand. The EBITDA multiple of 12.3x, when adjusted for capital expenditures, falls within a reasonable range for this asset class, although it is on the higher end, which could indicate a bullish outlook on the hotel's future cash flows or a scarcity of comparable investment opportunities in the area.
The net proceeds of approximately $70 million will bolster Ashford Trust's liquidity, allowing for the repayment of mortgage debt and potentially reducing leverage on their balance sheet. The intended use of funds for paying down strategic financing aligns with prudent financial management practices, especially in an environment where interest rates may be volatile.
The sale of the Hilton Boston Back Bay provides a window into the operational performance of upscale, full-service hotels. With a net income of $2.3 million and a net operating income of $14.9 million for the trailing twelve months of 2023, the hotel has demonstrated profitability in a post-pandemic landscape. This performance is further emphasized by a Hotel EBITDA of $16.7 million, which is a solid indicator of the hotel's ability to generate earnings before the deduction of interest, taxes, depreciation and amortization.
When evaluating the impact of this sale on the broader hospitality market, it is important to consider the capital reserve adjustments and the implications of the anticipated capital expenditures. The adjustments to the capitalization rate and EBITDA multiple upon excluding the anticipated capital spend suggest that the hotel may require significant investment to maintain its competitive position and potentially to comply with brand standards set by Hilton.
This transaction may signal confidence in the hospitality sector's recovery, as well as a continued interest in premium real estate assets. The successful completion of the sale could serve as a benchmark for similar properties and influence pricing and investment strategies in the sector.
From a financial analysis standpoint, the sale of the Hilton Boston Back Bay has several implications for Ashford Hospitality Trust's financial strategy and the broader hotel investment market. The anticipated capital expenditures reflect a forward-looking approach to maintaining the hotel's value and market position, which is a common practice in the industry to ensure competitiveness.
The company's decision to use net proceeds for general corporate purposes, including the paydown of strategic financing, is a move towards deleveraging and optimizing the capital structure. This is particularly significant given the current economic climate, where many companies are seeking to strengthen their balance sheets in anticipation of potential market shifts.
Investors and stakeholders will be interested in the transaction's completion and the actual use of proceeds, as these factors will directly affect the company's financial health and future strategic options. The sale's impact on earnings, debt levels and liquidity ratios will be key metrics to watch in the subsequent quarters following the transaction.
For the trailing twelve months ended December 31, 2023, the Hotel's net income was
"We are pleased to announce the planned sale of the Hilton Boston Back Bay for a very attractive value," commented Rob Hays, Ashford Trust's President and Chief Executive Officer. "This sale is an early step toward the recently announced plan to pay off our strategic financing. 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."
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Ashford Hospitality Trust is a real estate investment trust (REIT) focused on investing predominantly in upper upscale, full-service hotels.
Ashford Hospitality Trust, Inc. | ||
Hilton Boston Back Bay | ||
Reconciliation of Hotel Net Income to Hotel EBITDA and Hotel Net Operating Income | ||
(Unaudited, in millions) | ||
12 Months Ending | ||
December 31, 2023 | ||
Net income (loss) | $ 2.3 | |
Interest expense | 8.9 | |
Amortization of loan costs | 0.5 | |
Depreciation and amortization | 4.7 | |
Non-hotel EBITDA ownership expense | 0.3 | |
Hotel EBITDA | $ 16.7 | |
Capital reserve | (1.8) | |
Hotel Net Operating Income | $ 14.9 | |
_________________ | ||
All information in this table is based upon unaudited operating financial data for the twelve month | ||
EBITDA is defined as net income (loss), computed in accordance with generally accepted accounting | ||
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, including its plans to raise capital through a combination of asset sales, mortgage debt refinancings and non-traded preferred capital raising and to pay off its strategic financing. 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 Hilton Boston Back Bay 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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