Thank you for sharing!

Your article was successfully shared with the contacts you provided.

(To read more on the debt and equity markets, click here.)

DALLAS-Ashford Hospitality Trust Inc. has closed the first of two financial deals with UBS Real Estate Investments Inc. in an ongoing push to realign its capital structure before interest rates go up again. The just-closed deal is a $212-million, fixed-rate financing in two loans.

In closing the transaction, Ashford now has 93% of its current debt locked into fixed rates. “We think our capital structure is one of the best among our peer group,” says Douglas Kessler, COO and acquisitions director for the Dallas-based hotel REIT. “We think that locking in right now is the thing to do in the cycle. We will continue to have floating rate debt for acquisitions and repositioning.” The floating rate debt builds in time for Ashford to weigh all options for new acquisitions and later roll into permanent financing, much like it plans to do with the Hyatt Dulles in Washington, DC, which is under consideration for an expansion.

Kessler tells GlobeSt.com that the second component to the high-powered arrangement with the New York City-based UBS will close this quarter. Ashford courted the capital markets with both components, the second of which will replace the credit line for the mezzanine program.

The $212-million financing consists of a nine-year loan for $111 million at a fixed-rate interest of 5.75%, with interest-only payments for four years, and a $101-million vehicle, with a 5.7% fixed rate, 10-year term and five years of interest-only payments. The UBS loans are secured by 16 hotels, part of last year’s 25-hotel acquisition. Ashford retired a $210-million, floating rate loan with the deal and simultaneously freed up nine hotels that are now banked for resale or future collateral, Kessler says. The deal also retired another $6.2 million, with a 7.08% fixed rate, against a single hotel.

Key to the UBS terms is Ashford’s built-in ability to substitute other assets or carve out an assumable loan to sell a hotel in the 16-property pool. The other sweet spot to the terms is Ashford will be able to provide buyers of any pool assets with mezzanine funding from its in-house platform.

This year, Ashford has reworked about $1 billion of financing “at a time in the market where there’s no question that the index has been the lowest, the spreads have been the lowest and terms of the debt are more flexible,” Kessler says. “We are capital recyclers as opposed to an asset aggregator.” The REIT will take a one-time hit of $4.9 million in the fourth quarter for an exit fee and write-off of unamortized loan costs.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?


Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.