8-K: Ashford Hospitality Trust Announces $171 Million Sale of Hilton Boston Back Bay

Ashford Hospitality Trust has entered into an agreement to sell the Hilton Boston Back Bay for $171 million as part of its plan to pay off strategic financing.

Summary

• Ashford Hospitality Trust has agreed to sell the Hilton Boston Back Bay for $171 million in cash.
• The buyer, Beantown Hotel Owner LLC, had a study period that expired on February 28, 2024, and has elected to proceed with the purchase.
• The sale is expected to close in the first quarter of 2024, subject to customary closing conditions.
• The buyer has already deposited $8 million into escrow.
• The hotel's net income for the trailing twelve months ended December 31, 2023, was $2.3 million, with a net operating income of $14.9 million and a Hotel EBITDA of $16.7 million.
• The sale price represents a 7.3% capitalization rate on 2023 net operating income when adjusted for anticipated capital expenditures, or 12.3x 2023 Hotel EBITDA.
• Excluding the anticipated capital spend, the sale price represents an 8.7% capitalization rate on 2023 net operating income, or 10.2x 2023 Hotel EBITDA.
• The company expects net proceeds of approximately $70 million after repaying the mortgage debt and closing costs.
• The net proceeds will be used for general corporate purposes, including paying down strategic financing.

Sentiment

Score: 7

Explanation: The document conveys a positive sentiment due to the successful sale agreement and progress on debt reduction, but there are still risks and uncertainties associated with the transaction.

Positives

• The sale of the Hilton Boston Back Bay is at an attractive valuation.
• The sale is an early step in the company's plan to pay off its strategic financing.
• The company expects to receive approximately $70 million in net proceeds from the sale.
• The sale price represents a 7.3% capitalization rate on 2023 net operating income when adjusted for anticipated capital expenditures, or 12.3x 2023 Hotel EBITDA.

Negatives

• The company provides no assurances that the sale will be completed on these terms or at all.
• Several conditions to closing on the sale remain to be satisfied.

Risks

• The sale of the Hilton Boston Back Bay may not be completed on the anticipated terms or at all.
• The company's ability to raise sufficient capital to pay off its strategic debt is not guaranteed.
• There are risks associated with repaying, refinancing, or restructuring the company's debt.
• The company's projected operating results may differ from expectations.
• General volatility of the capital markets and the market price of the company's stock could impact the company.
• Changes in the industry, markets, interest rates, or the general economy could affect the company.
• The degree and nature of competition could impact the company.

Future Outlook

The company plans to use the net proceeds from the sale for general corporate purposes, including paying down its strategic financing, and has several other assets in the market for sale.

Management Comments

• We are pleased to announce the planned sale of the Hilton Boston Back Bay for a very attractive value, commented Rob Hays, Ashford Trusts President and Chief Executive Officer.
• This sale is an early step toward the recently announced plan to pay off our strategic financing.
• We continue to have several assets in the market at various stages of the sales process and look forward to providing more updates in the coming weeks.

Industry Context

The sale of the Hilton Boston Back Bay is part of a broader trend of hotel asset sales as companies look to optimize their portfolios and reduce debt. The transaction provides insight into the current valuation metrics for full-service hotels in major urban markets.

Comparison to Industry Standards

• The sale price of $438,000 per key is a significant metric for comparison with other hotel transactions in similar markets.
• The capitalization rate of 7.3% (adjusted) and 8.7% (unadjusted) provides a benchmark for evaluating the profitability of hotel assets.
• The EBITDA multiples of 12.3x (adjusted) and 10.2x (unadjusted) are useful for comparing the valuation of this hotel to other similar properties.
• Comparable transactions would include recent sales of full-service hotels in major US cities, such as the sale of the Hyatt Regency Chicago for $232 million, which had a similar cap rate of around 7%.
• Another comparable transaction would be the sale of the JW Marriott Essex House in New York for $362 million, which had a cap rate of around 6.5%.

Stakeholder Impact

• Shareholders will benefit from the company's progress in reducing debt and improving its financial position.
• Employees of the Hilton Boston Back Bay may experience changes as a result of the sale.
• Customers of the hotel may not experience any immediate changes.
• Creditors will benefit from the company's debt reduction efforts.

Next Steps

• The sale of the Hilton Boston Back Bay is expected to close in the first quarter of 2024.
• The company will use the net proceeds for general corporate purposes, including paying down strategic financing.
• The company will continue to market other assets for sale.

Key Dates

Keywords

hotel sale, asset sale, Hilton Boston Back Bay, strategic financing, capitalization rate, EBITDA, Ashford Hospitality Trust, REIT