Ashford Trust selling 3 hotels for $69.5M

DALLAS — Dallas-based REIT Ashford Hospitality Trust has signed definitive agreements to sell three hotels: the 226-key Le Pavillon, New Orleans, a Tribute Portfolio Hotel in Louisiana; the Embassy Suites by Hilton Austin Arboretum in Austin, Texas; and the Embassy Suites by Hilton Houston Near the Galleria in Houston, to undisclosed buyers for almost $70 million.

Ashford Trust said the three sales are expected to generate $69.5 million in aggregate gross proceeds. Based on current mortgage interest rates, the REIT expects more than $2 million in annual cash flow improvement and $14.5 million in future capital expenditure savings following the sales.

The sale of the Le Pavillon property in New Orleans is for $42.5 million, or $188,000 per key. The sale is expected to be completed in December and is subject to customary closing conditions. The price represents a 2.6% capitalization rate on NOI, or a multiple of 27.2 times hotel EBITDA for the 12 months ending September 30.

The agreement for the hotels in Austin and Houston (300 keys) is for a single buyer and is priced at $27 million, or $90,000 per key. The sale is expected to be completed in January. Ashford Trust said that when adjusted for the company’s anticipated capital expenditures of $14.5 million, the sale price represents a 2.2% capitalization rate on NOI or a multiple of 29.9 times hotel EBITDA for the 12 months ending September 30. Excluding the anticipated capital spend, the combined sale price represents a 3.3% capitalization rate on NOI or a multiple of 19.5 times hotel EBITDA for the twelve months ending September 30.

Ashford President and CEO Stephen Zsigray said these sales are an essential part of the REIT’s plan to grow EBITDA and its value to investors. 

“Strategic asset sales will continue to play an important part in our plan to deleverage Ashford Trust while also improving cash flow and liquidity,” he said. “We believe that the attractive cap rates achieved on these divestitures reflect the value within our portfolio. The majority of proceeds will be deployed immediately to retire mortgage debt, improving cash flow after debt service while eliminating sizeable future capital expenditure obligations. This disciplined approach will better position the company for sustained value creation.”