Hospitality firm Ashford plans to save millions of dollars by no longer being a public company in a move that could terminate the trading of its common stock on the New York Stock Exchange.
The Dallas-area company, led by Monty Bennett, plans to end the registration of its common stock after the completion of a proposed reverse stock split transaction and delist its shares of common stock from trading on the NYSE. The move to delist is subject to approval by Ashford's stockholders and could begin this summer, the company said in a press release.
Ashford is taking these steps to "avoid the substantial cost and expense of being a public reporting company" and enhance the long-term stockholder value, the company's executives said. In all, Ashford expects to save more than $2.5 million on an annual basis on the proposal.
Bennett is the founder, chairman and CEO of Ashford as well as founder and chairman of both of the company's affiliated real estate investment trusts. He has more than 30 years of experience in hospitality real estate. Ashford's directors and executive officers owned 37.9% of the company's issued and outstanding shares as of March 25, according to the statement.
For holders of less than 10,000 shares of common stock before the reverse stock split, they will be cashed out at a price of $5 per share. The stock last closed at $4.75 per share. Ashford estimates that 1.1 million shares would be cashed out through this deal. The transaction is expected to cost more than $12 million. Ashford expects to fund the transaction with cash on hand, officials said.
Ashford declined to comment further on the proposed delisting beyond the press release.
Ashford was hit financially hard at the onset of the pandemic. Ashford's affiliated Ashford Hospitality Trust has been parting with some of its U.S. hotel properties to pay back millions of dollars in debt, with five of those properties having been handed back to lenders in December. In all, the REIT's executive team identified 19 hotels to give back to lenders through a deed-in-lieu of foreclosure process.
But it's not easy to hand back the keys to a commercial property. Two hotels were posted again for foreclosure auction in Collin County Tuesday, reminding Ashford Hospitality Trust of the ongoing situation. The properties, both in Plano, Texas, are the Courtyard Dallas Plano in Legacy Park hotel and the Residence Inn Dallas Plano Legacy hotel.
A spokesperson for Ashford Hospitality Trust confirmed the two hotels are part of the REIT's decision to return 19 hotels to its lenders from last July. "Five of the 19 [hotels] have successfully been transferred to lenders, and we are cooperating with our lenders with the other 14 [hotels] and hope to complete those transfers soon," the spokesperson said.
The two Plano hotels owned by Ashford Hospitality Trust did not sell at foreclosure auction and the foreclosure posting could be a negotiation tactic being used by the lender, said Roddy's Foreclosure Listing Service CEO Aaron Amuchastegui, who tracks foreclosures on the courthouse steps in the Dallas-Fort Worth region.
"There are reasons why you would post a property for foreclosure listing and not sell it," Amuchastegui said. "It could be cheaper to foreclose on a property because it wipes all of the other liens from it. It also protects the lender in case the keys don't get handed back because this doesn't happen too often. It's not as simple as handing the keys back to the bank.
"There are a lot of advantages of a deed-in-lieu of foreclosure for the borrower, but not as many for the bank," he added.