DALLAS—Ashford Inc. said Thursday afternoon it had adopted the “key money” concept to help its managed REITs fund two acquisitions. The two deals, AINC's first to utilize the concept, were among three that the Dallas-based company and its REITs announced Thursday, totaling more than $200 million.

Key money figured in Ashford Hospitality Trust's $62.5-million acquisition of the 226-key Le Pavillon Hotel in New Orleans and in Ashford Hospitality Prime's $85-million acquisition of the 62-room Bardessono Hotel and Spa in Yountville, CA. AINC provided $4 million in key money for the New Orleans property and $2 million for the California asset. AHT also bought the W Atlanta Downtown for $56.8 million; however, no key money was provided for that acquisition.

“Key money” is a common method used by hotel brands, in which the brand provides a one-time up-front payment in return for branding the hotel. AINC notes that this arrangement provides additional fee income under the brands' long-term franchise or management agreement, and that the company believes that the concept will provide additional fee income under its advisory agreements.

It's expected that the managed REITs will have no obligation to pay back the key money, unless the particular property is sold within a specified period, in which case the managed REIT would pay back a portion of the key money. “This key money will only be used on a very selective basis and only when Ashford Inc. believes the REITs would not otherwise be able to acquire a particular asset or group of assets,” says chairman and CEO Monty J. Bennett.

Most of the managed REITs' future acquisitions will be made without key money, AINC says. “By selectively using our balance sheet to help our managed REITs grow, we will be able to increase our assets under management in scenarios where we otherwise would not be able to,” Bennett says. “This growth should result in incremental value creation for our shareholders.”

Remington Lodging, for which Bennett is also CEO, is managing both properties acquired with the help of key money. Starwood Hotels will manage the W property.