Ashford Hospitality Trust plans to sell more of its U.S. hotels in a so-called disciplined way after paying off some debt as capital markets begin to ease.
That's what executives for the Dallas-based real estate investment trust with a portfolio spanning 73 hotels and 17,644 hotel rooms told Wall Street during an earnings call Wednesday.
Ashford Hospitality reported a net loss for the fourth quarter of $131.1 million, or $23.83 per diluted share. The full year 2024 net loss totaled $82.5 million, or $17.54 per diluted share. The financial losses come as Ashford Trust reported a 3.1% increase to its revenue per available room in the fourth quarter to $126.
Ashford Trust President and CEO Stephen Zsigray told investors the REIT was ready to begin its next chapter and "move on from past challenges of the COVID era" after paying off its strategic financing. The company used the proceeds from a massive refinancing of some of the hotels in its portfolio to pay down the debt as the capital markets and transaction markets continued to ease.
"We plan to focus on performance, profitability and the ongoing deleveraging of the business as the industry benefits from limited supply growth in the coming years," Zsigray, who took on his role in June, told investors during the earnings call.
The REIT unveiled an initiative in mid-December to help drive earnings and improve shareholder value by reducing corporate overhead, maximizing revenue through aggressive sales efforts and driving efficiency. Some of the measures outlined by Ashford Trust include slashing management and board compensation, negotiating to reduce professional fees and reducing payroll expense through "recently completed reductions in force and upcoming changes" to its paid-time-off policies, according to the company.
Ashford Trust closed on a $580 million refinancing secured by 16 hotels after the fourth quarter ended and used $72 million in excess proceeds to pay off its strategic financing, including an exit fee, according to a statement.
The new non-recourse financing has a two-year term with three one-year extension options and bears interest at a floating interest rate. The financing represented a loan-to-value ratio of about 67%, the REIT said, based on the as-is appraised values of the hotels. The trust also refinanced its mortgage loan securing the 703-room Marriott Crystal Gateway Hotel in Arlington, Virginia, during the fourth quarter.
The REIT also extended its mortgage loan tied to Le Pavillon Hotel in New Orleans that it converted to a Tribute portfolio property through a $16 million renovation to upgrade the hotel rooms and reimagine some of the common areas, including the lobby bar.
The New Orleans hotel saw a 10% to 20% jump in revenue per available room after the renovation was completed with four sold-out nights during the Super Bowl, executives said on the call. In the fourth quarter, Ashford Trust also converted its Key West, Florida, hotel to a Marriott Autograph Collection property with significant hotel upgrades. It is now called the Autograph La Concha and saw similar revenue per available room premiums after the conversion, the Ashford executives said.
Both converted hotels in Key West and New Orleans are "significantly outperforming" the company's underwriting, Zsigray said.
Ashford Trust also unveiled on Wednesday that it secured a mortgage loan extension tied to the Hotel Indigo Atlanta Midtown. The loan, which has a current balance of $12.3 million, has been extended with an initial maturity date of February 2026, with a one-year extension option to February 2027.
Seeking to deleverage
The REIT still remains indebted to its lenders. As of the end of fiscal 2024, Ashford Trust has $2.6 billion in total loans with a blended average interest rate of 7.9%. About 23% of its consolidated debt is fixed, and the remaining is effectively floating.
During the fourth quarter, Ashford Trust completed a reverse split of the company's common stock at a ratio of 1-for-10 that became effective after the close of business on Oct. 25, 2024. The REIT plans to close its non-traded preferred stock offering, called Series J and Series K, on March 31. The stock offering helped Ashford Trust raise about $195 million in gross proceeds during what has been a challenging few years in the capital markets, Zsigray said.
"We've definitely seen an improvement in the financing markets, driven by the optimism that 2025 will be a better year for transactions," he added during the earnings call. "We expect to continue to sell additional assets, but we are going to continue to be very disciplined and make sure we are getting the optimal value for sales. There's still a large bid-ask spread in some markets."
The REIT sold the Courtyard Boston downtown hotel after the end of the quarter for $123 million, or $390,500 per key. Ashford Trust did not immediately share what hotels it might be marketing this year with CoStar News.
Ashford Trust expects to continue to deleverage by selling hotels as it makes sense to improve its balance sheet, Zsigray said.
"We expect this to be a transformational year," Zsigray said.