Ashford Hospitality Trust, a real estate investment trust parting with some of its U.S. hotel properties to help pay back millions of dollars in debt, has agreed to sell the Hilton Boston Back Bay in the city's central business district in a $171 million deal.
The proposed sale of the 390-room upscale hotel at 40 Dalton St. is expected to close next month to an undisclosed buyer. The deal is expected to bring $70 million of net proceeds to the REIT's bottom line, putting Dallas-based Ashford in a comfortable place in paying off a loan from Oaktree Capital Management, Ashford Hospitality President and CEO Rob Hays said during an earnings call Thursday morning.
Ashford borrowed $200 million from Oaktree in January 2021 to fund its financially troubled operations and the loan matures in January 2026, Hays said.
The Boston hotel is one of six that the REIT expects to sell from its U.S. portfolio, which now includes 90 properties. Ashford has purchase agreements with five hotels and a letter of intent for one additional hotel, Hays said, adding there are no assurances the deals will close as expected.
"Given how choppy the sales markets have been, we've had a few assets previously under [letter-of-intents] that have fallen through," Hays told investors. "It does seem like the odds of getting deals across the finish line are increasing as financial markets are improving, from what we can see of several loans and refinancing deals in the market."
Hays isn't the only real estate executive who thinks capital markets could improve this year as loan maturities and required capital investments force deals to close. Hotel industry executives speaking at the recent Americas Lodging Investment Summit said they think there will be more active buyers this year. Last year, hotel transaction volume fell 40% year over year as the cost of capital dampened deal volume.
The sales of Ashford's six properties under varying contracts total $225 million combined, Hays told investors. Ashford also plans to sell the 144-room Residence Inn in Salt Lake City in a deal expected to total $19.2 million. The hotel is expected to close next month. The four other properties were not disclosed.
Until the deals close, Ashford plans to keep its options open, Hays said.
"Typically, the falling out of deals have been financing related," Hays said during the earnings call. "Sometimes, people get a little aggressive in locking up a deal, but once they get into it a bit more, they notice they have gotten in over their skis. But all of these deals have their own story.
"We are not executing on just one or two deals, we are trying to be much more aggressive and thoughtful in putting lines in the water," he added. "We want to create value quicker."
Looking for Loans
Ashford also could pay down debt by refinancing some of its loans.
The REIT has begun working with lenders on four loans, with one being secured by Renaissance Nashville. That loan is expected to have "substantial excess proceeds" earmarked to help pay off its debt, the REIT said.
Ashford also is reworking loans secured by the Indigo Atlanta hotel in Atlanta; the Marriott Gateway in Arlington, Virginia; and a loan backed by Morgan Stanley that includes 17 hotels in several states. Additional details on the loans, including the amount of the proposed loans, were not immediately available Thursday.
The REIT's move to raise funds through selling hotels and refinancing loans comes as Ashford reported a net loss of $31.3 million, or 90 cents per diluted share, for the fourth quarter. The REIT had $209 million of net working capital at the close of the year.
In the fourth quarter, Ashford completed the transfer of ownership of the hotels secured in its Keys F loan pool to the lender. In addition, the REIT is working with the lender on Keys A and Keys B loan pools on its consensual transfer of ownership of those hotels to the lender. The REIT announced it had decided to hand back the hotels to these loan pools last year.
For the full year, Ashford reported a net loss of $193.7 million, or $5.61 per diluted share.