[IMGCAP(1)]DALLAS-Ashford Hospitality Trust Inc., getting bruised by spiking Libor rates, has secured a 3.75% cap as an insurance policy for another $800 million. The one-year tax hedge with French bank Calyon will cost $1.77 million in cash, but is a safety net for a REIT strategy that went into play earlier this year when it swapped fixed rates for floating.

The publicly traded REIT’s team did not respond to requests for an interview about the SEC filing. Of the 10 traditional hotel REITs, Dallas-based Ashford has substantially more floating rate debt than its peers, with 90% of its $2.69-billion debt tied to Libor. In the first quarter, Ashford moved $1.8 billion of fixed-rate debt to a one-month Libor structure, which was 2.64% at the time. A three-year cap at 3.75% was embedded in the deal.

Since then, the Libor rate, which resets monthly, has topped 4%, driving the REIT to explore options to safeguard its strategy for its other floating-rate vehicles. [IMGCAP(2)]“They saw how the market perceived the risk and they wanted to limit their exposure,” explains David Loeb, senior real estate research analyst and managing director of Milwaukee-based RW Baird & Co. “It’s a prudent thing to do.”

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