Ashford Hospitality Trust, Inc. AHT announced plans to sell a portfolio of around 23 select-service hotels, so as to focus mainly on its upper-upscale, full-service hotels. The company also intends to opportunistically sell the left over select-service hotels in the future.
However, this Dallas, TX-based real estate investment trust (“REIT”) disclosed that it has no plans for a platform spin-off similar to the formation of Ashford Hospitality Prime, Inc. AHP in 2013. The company is also not considering any stock buybacks at present. These revelations comes as part of the company’s strategy build-ups that would be easy to understand and more distinct for its investors.
Specifically, the for-sale portfolio of 23 select-service hotels is mostly brand-managed, comprising 4,308 rooms. This portfolio is laden with a total debt of approximately $377 million. On a trailing 12-month basis, RevPAR for the portfolio stands at approximately $88, while NOI totals about $44.0 million.
Besides the sale initiative, Ashford Hospitality has undertaken a host of other strategic efforts. That includes a target to achieve net debt to gross assets of 55–60%, and cash and cash equivalents balance equal to 25–35% of its total equity market capitalization.
The cash and cash equivalents target is aimed at covering the firm’s property-level and corporate-level working capital requirements, to act as a hedge against any economic downturn or hotel fundamentals deterioration, and to support accretive investments or buy back stocks as and when required. Notably, the company has an acquisition pipeline of $1.0 billion, either closed or announced year to date.
For Ashford Hospitality, which had cash and cash equivalents of around 31% of total equity market capitalization and net debt to gross assets of 58% as of the end of the first quarter, we believe these strategic measures would help it ride on the growth curve. The stock climbed 3.42% during the regular session on the NYSE on Friday, Jun 26.
Ashford currently carries a Zacks Rank #3 (Hold). Investors interested in the lodging/hotel REIT industry may consider stocks like Strategic Hotels & Resorts, Inc. BEE and Pebblebrook Hotel Trust PEB. Both stocks sport a Zacks Rank #1 (Strong Buy).
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