Ashford Finalizes $267M Portfolio Takeover

DALLAS-In keeping with its plan, Ashford Hospitality Trust Inc. has closed on a seven-property, 2,004-key portfolio in a $267.2-million deal with Oakhill Capital Partners, Blackstone Group and Interstate Hotels & Resorts Inc. As the keys turned, Ashford returned two of the lot to the sales block.

Interstate retains management of the for-sale properties--a 323-room Marriott at 180 Hawley Lane in Trumbell, CT and 234-key Sheraton at 210 S. Dubuque St. in Iowa City, IA--while Ashford affiliate, Remington Management LP, takes over the balance. The "holds" of the deal are the 375-room Sheraton at 401 E. 6th Ave. in Anchorage, AL; 300-room Hilton Minneapolis Airport at 3800 E. 80th St. in Bloomington, MN; 263-room Embassy Suites at 900 Bartram Ave. at the Philadelphia Airport; 260-room Sheraton San Diego Mission Valley at 1433 Camino del Rio South in San Diego; and 249-room Embassy Suites at 1345 Treat Blvd. in Walnut Creek, CA.

As part of the exchange, the flags were renewed for 15- to 20-year terms, according to Kyle Jeffers, senior vice president of the Calabasas, CA-based Countrywide Commercial Real Estate Finance, which provided a $247-million loan for the deal to close.

Ashford will invest $40 million into upgrades, of which $35 million is a hold-back in the Countrywide loan. The renovations are slated for completion in 18 to 24 months. The financing has a five-year shelf life, including extensions.

Ashford has labeled the deal as a three-year term, with interest-only payments at Libor plus 172 basis points. There is no prepayment penalty for 18 months to allow for the two sales. The Ashford team says the purchase price of $133,333 per key represents a trailing 12-month cap rate of 6% on net operating income, a 7.5% EBITDA yield and 13.4x EBITDA multiple.

"Ashford has prepayment flexibility on those two assets and can pay it down at par," Jeffers tells GlobeSt.com. "It was one of the smoothest transactions we've had, given the size of the deal." The rest of the package is cross collateralized, he adds.

Monty Bennett, Ashford president and CEO, says the value-add play "will enhance both top and bottom-line performance." With the "attractive financing" with flexibility and two flips, he says "we fully expect that these well-branded, full-service hotels will generate returns consistent with previous portfolios we have acquired and aggressively asset managed."

Jeffers says the portfolio's occupancy is 75%. The hotels, ranging from 10 to 15 years old, have an average daily room rate of $115. "It's a good acquisition for Ashford," Jeffers stresses. "They are good flags in good primary markets."