Ashford Hospitality Trust, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; balance-sheet figures are as of March 31, 2024. Ashford is a U.S. hotel REIT. Its portfolio included 75 operating hotels and four Stirling OP hotels, with 18,021 and 405 rooms, respectively. The quarter’s comparisons are affected by hotel sales and the transfer of 14 KEYS Pool A and B properties to a court-appointed receiver.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 / prior date |
|---|---|---|
| Total revenue | $303.9 million | $328.9 million |
| Net income (loss) | $72.4 million | $(61.5) million |
| Net income (loss) attributable to common stockholders | $67.4 million | $(64.6) million |
| Operating cash flow | $(46.5) million | $4.6 million |
| Adjusted EBITDAre | $59.5 million | $75.6 million |
| Adjusted FFO available to common stockholders and OP unitholders | $(13.8) million | $6.8 million |
| Cash and cash equivalents; restricted cash | $112.7 million; $135.7 million | $165.2 million; $146.3 million at December 31, 2023 |
| Indebtedness, net; debt associated with hotels in receivership | $2.935 billion; $355.1 million | $3.041 billion; $355.1 million at December 31, 2023 |
| Total stockholders’ equity (deficit) | $(276.8) million | $(345.9) million at December 31, 2023 |
GAAP net income included a $133.9 million gain from derecognizing the KEYS A and B hotel assets and a $7.0 million gain on the Salt Lake City hotel sale. The company recorded a $378.2 million contract asset representing liabilities it expects to be released after final resolution with the KEYS lenders. The related $355.1 million principal balance, plus accrued interest and other charges, remains a liability pending that resolution. Accordingly, reported earnings do not reflect recurring hotel operations alone.
Total revenue fell 7.6% year over year. Across reported operating hotels, RevPAR was $125.30 versus $124.95, occupancy was 67.97% versus 68.36%, and ADR was $187.30 versus $182.79. For the comparable hotel set, RevPAR declined to $128.55 from $129.74, as occupancy fell to 67.39% from 69.08% while ADR rose to $190.75 from $187.81.
Interest expense and amortization of discounts and loan costs was $74.0 million; additional interest expense associated with hotels in receivership was $12.1 million. Approximately $2.7 billion of the $3.0 billion total indebtedness was variable-rate debt. Management estimates a 25-basis-point rate change would affect annual results by about $6.8 million before considering interest-rate caps. Net debt to gross assets was 68.5%.
Changes, financing, and outlook
- Operating comparison: Revenue declined partly because of prior-year hotel dispositions and the KEYS properties entering receivership. Comparable hotel room revenue rose modestly, but comparable occupancy and RevPAR declined. Adjusted EBITDAre and adjusted FFO were lower year over year.
- Cash and liquidity: Cash, cash flow from operations, capital-market activity, and asset sales are management’s stated sources for anticipated needs. Management says these sources should cover expected interest and principal payments, working capital, capital expenditures, and required REIT distributions for the next 12 months, but gives no assurance it can refinance maturities or obtain favorable financing. Much of restricted cash is lender- or manager-held; 13 hotels were in cash traps at quarter-end.
- Oaktree financing: A March amendment extended the credit agreement to January 15, 2026 and removed the minimum-cash requirement and certain cross-default provisions. It also imposed mandatory paydowns from excess unrestricted cash and equity proceeds, required efforts to sell specified hotels and refinance Renaissance Nashville, limited discretionary capital spending, and set a cash exit fee of 15% (12.5% if repaid by September 30, 2024). If specified repayment thresholds are not met, the interest rate can increase by 3.5% and additional hotel-sale requirements apply.
- Asset sales and refinancing after quarter-end: Hilton Boston Back Bay sold April 9 for $171 million; the company repaid its $98 million mortgage and applied remaining net proceeds to Oaktree. Hampton Inn Lawrenceville sold April 23 for $8.1 million. On May 9, a $240 million mortgage secured by Renaissance Nashville and Westin Princeton was refinanced with a $267.2 million, interest-only floating-rate loan at SOFR + 3.98%; Westin Princeton became unencumbered and was listed for sale. Other announced sales were expected to close in Q2.
- Capital and distributions: Ashford issued Series J and K redeemable preferred stock and common shares during the quarter. Series J and K carry initial annual dividend rates of 8.0% and 8.2%, respectively; both are classified outside permanent equity because of redemption features. The company does not anticipate common dividends in 2024 and expects to pay preferred dividends. It reported no common dividend for Q1.
- Management and guidance: No numerical operating guidance is provided in the filing. Management identifies capital preservation, asset sales, financing and refinancing, cost control, and selective capital improvements as priorities. CEO J. Robison Hays announced an expected June 30, 2024 resignation; Stephen Zsigray was appointed to succeed him effective that date.
Risks, contingencies, and unusual items
- The KEYS A and B loan pools are in default and their hotels are under receivership. Final lender resolution and any release of the associated debt are uncertain; accrued interest, default charges, and late fees continue to be liabilities until resolution.
- Numerous property loans mature during 2024 and 2025, and extensions may require debt-yield tests or significant paydowns. Failure to refinance, meet covenants, or satisfy extension conditions could lead to foreclosure or additional liquidity pressure.
- A California employment class action and consolidated class actions related to a 2023 cyber incident remain pending. The company has not accrued an estimated loss because potential losses are not reasonably estimable; it says additional cyber-related costs are reasonably possible. It reported no identified customer information exposure from the cyber incident.
- The filing describes potential conflicts arising from the company’s dependence on Ashford Inc. and its affiliates for advisory, management, insurance, and other services. Advisory and related-party arrangements were amended during the quarter; Ashford Securities-related expenses contributed to higher corporate G&A.
- The company added activist-stockholder activity as a risk, noting a May 2, 2024 proxy filing by Blackwells Capital and potential costs, management distraction, and share-price volatility.
Important facts for investors to verify
- Progress and final terms of the KEYS A and B lender resolution, including whether the expected $378.2 million liability release is achieved and how remaining interest and charges are treated.
- Oaktree principal repayment progress, cash exit fee, mandatory paydowns, rate step-up conditions, and required hotel sales under the amended agreement.
- Upcoming loan maturities, extension-test requirements, refinancing outcomes, and the availability of unrestricted cash versus restricted or cash-trapped funds.
- Recurring operating performance apart from the receiver-related gain and asset-sale gains; compare comparable-property RevPAR, adjusted EBITDAre, adjusted FFO, and operating cash flow.
- Net proceeds and debt applications from completed or pending hotel sales, and the economics and conditions of the May 2024 refinancing.
- Preferred-stock issuance, cumulative dividend obligations, potential dilution, and the company’s ability to fund preferred distributions while servicing debt.