Ashford Hospitality: Global Uncertainties Continue to Pound Share Price

DALLAS – Despite price per shares continuing to be impacted by global economic uncertainties, Ashford Hospitality Trust executives were upbeat during the Q3 earnings conference call on Thursday. Investors were not quite as sanguine however, as the REIT’s stock price dropped from $8.23 per share early in the day to $7.57 per share at the market’s close.

Ashford CEO Monty Bennett acknowledged that “global economic uncertainties have caused investors to pay less attention to the solid performance of lodging fundamentals,” meaning REITs are not as an attractive an investment as they had once been. Bennett went on to introduce an adjusted funds from operations per share of $0.39 (up year over year from $0.33) and a RevPAR increase of 5.8% across the entire portfolio.  The recently acquired Highland Hospitality portfolio, he added, is showing slow and steady growth as well. Furthermore, with limited supply coming online and analysts predicting continued RevPAR growth, AHT is in a good position to take advantage of the growing demand, he added.

Despite all of the positive activity, however, CFO David Kimichik reported a net loss to common shareholders of $38.6 million, though did indicate that the total combined debt of $3.2 billion has a blended interest rate of 3.2%, “clearly one of the lowest among our peers,” he said.

AHT’s president Douglas Kessler pointed out that two loans are coming due within the next 20 months; a $203 million one due to expire next month, and a $167 million loan that will mature in May, 2012. Both loans have been transferred to special servicers, Kessler noted, with proposed restructures requested to extend the maturity. “Although we remain optimistic, we anticipate some form of a pay-down will be required,” he said.

Due to the shifts in financial markets as well as dubious investor perception as it pertains to the lodging market, Ashford Hospitality has been in balance-sheet strengthening mode to boost liquidity. One of the steps taken along those lines was through a capital raise, courtesy of a re-issue of seven million corporate treasury shares at $12.50 per share.  Along those lines, Ashford priced a public offering last month of 1.3 million shares of the existing 9% Series E cumulative preferred stock at $$23.47 per share.  Net proceeds from the activities combined was $112.4 million.

Kessler ended the prepared session of the call by pointing out that Ashford’s strategy would continue to involve shoring up the balance sheet to deal with upcoming maturities and to consider investment opportunities that will boost financial returns. However, at this time, widely marketed hotels are priced a little too high for Ashford’s taste, he noted.