DALLAS—Ashford Hospitality Trust, headquartered here, and Prudential Real Estate Investors have signed an agreement for AHT to acquire the remaining 28.26% of ownership interest in the Highland Hospitality portfolio. The REIT will pay a value-add fund managed by PREI $250.1 million in cash to consolidate its ownership in the 28-property portfolio, which is valued at $1.735 billion.

The purchase price AHT is paying for the remaining ownership interest equates to a forward 12-month cap rate of 7.4% and a forward EBITDA multiple of 11.6x, and a trailing 6.9% cap and EBITDA multiple of 12.5x. The deal is expected to close in the first quarter of 2015.

Included in the Highland Hospitality portfolio, which AHT and PREI have owned since 2011, are 19 full-service hotels and nine select-service properties, with a concentration in major brands such as Hilton, Marriott, Hyatt and Starwood. The two companies first partnered with a $70-million mezzanine loan in the sixth tranche position on the portfolio in 2008.

“With the strong hotel fundamentals the industry is experiencing, we expect to benefit from further upside in this portfolio and believe this as a very attractive investment opportunity,” says Monty Bennett, AHT's chairman and CEO. He adds that through the life of the joint venture, “PREI has been a valued partner, contributing extensively to the value creating initiatives implemented over the past few years.  Looking ahead, we intend to continue to work to maximize our investment in the portfolio.”

GlobeSt.com reported in March of '11 that AHT and PREI paid $1.3 billion, including the assumption of $786 million in debt, in a consensual foreclosure for the 8,082-key, 13-state portfolio of Highland Hospitality Corp., which was taken private in 2007. At the time, AHT said the total consideration equated to a purchase price of $158,000 per key compared with $244,000 per key before capital improvement funding when the portfolio taken private.

“The very attractive attributes of this joint venture and restructured debt will be difficult for any competitor to replicate,” Bennett said during an investor conference call after the March '11 purchase was announced. It marked AHT's first acquisition since '07, and positioned it as the second largest REIT in its space with 26,411 keys.

The acquisition gave AHT greater exposure to “the luxury and upper-upscale segments,” Bennett said at the time. It also increased the company's geographic spread, giving it a presence in markets including Boston, the New York City metro area, Denver, San Antonio and Nashville, while expanding the company's footprint in key markets such as Washington, DC.

AHT's consolidation of its ownership this month occurs shortly after PKF Hospitality Research predicted broad-based increases in RevPAR over the next few years. “No matter what hotel performance indicator you look at for any type of hotel, we foresee extremely favorable movements the next few years,” said R. Mark Woodworth, president of Atlanta-based PKF-HR, a CBRE company. “Our firm is projecting demand growth to outpace changes in supply in the US through 2016. That will result in industry wide occupancy levels at, or above, all-time record levels through 2017.”