Ashford Hospitality Trust, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. The company is a U.S. hotel REIT focused on upscale and upper-upscale properties. At year-end it reported 90 consolidated hotels with 20,549 rooms, four Stirling OP hotels with 405 rooms, and one hotel under development. BDO issued unqualified opinions on the financial statements and internal control over financial reporting.
Financial performance and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Total revenue | $1.368 billion | $1.241 billion |
| Operating income | $130.4 million | $76.3 million |
| Net loss | $180.7 million | $141.1 million |
| Net loss attributable to common stockholders | $193.7 million; $5.61 per share | $153.2 million; $4.46 per share |
| Adjusted EBITDAre | $324.5 million | $287.3 million |
| FFO available to common stockholders and OP unitholders | $(19.1) million | $47.1 million |
| Adjusted FFO available to common stockholders and OP unitholders | $26.4 million | $67.3 million |
| Cash from operating activities | $14.4 million | $39.2 million |
- Revenue rose 10.2%. Comparable hotels’ RevPAR increased 9.4% to $130.68, reflecting a 4.3% increase in room rates and 325 basis points of occupancy growth. Comparable occupancy was 70.57% and ADR was $185.19.
- Hotel operating expenses increased 10.7% to $925.4 million, outpacing revenue growth. Operating income improved, but the operating margin was approximately 9.5%, versus 6.1% in 2022.
- Interest expense increased 61.3% to $366.1 million, principally because of higher rates on variable-rate debt. Average SOFR was 4.91% in 2023 versus 1.58% in 2022.
- Reported net loss included a $53.4 million gain on extinguishment of debt from the KEYS Pool F deed-in-lieu transaction; derivatives produced a $2.2 million net loss, including a $44.0 million unrealized loss on interest-rate caps partly offset by realized cap payments.
- Year-end cash and cash equivalents were $165.2 million; restricted cash was $146.1 million, largely lender- and manager-held reserves. Combined cash, cash equivalents and restricted cash fell to $311.5 million from $559.0 million.
- Debt was approximately $3.4 billion, including about $3.1 billion of variable-rate debt. Net debt to gross assets was 70.2%. Stockholders’ equity was in deficit by $345.9 million.
- Cash used in investing activities was $89.8 million, including $137.4 million of hotel improvements; cash used in financing activities was $172.1 million. Cash flow from operations was $14.4 million.
Material changes and significant events
- In 2023 the company sold WorldQuest Resort and Sheraton Bucks County, recording gains of approximately $6.4 million and $3.9 million, respectively. It also contributed four hotels to Stirling OP and began consolidating Stirling OP in December.
- The company did not make required extension paydowns on KEYS Pools A, B and F and defaulted on those loans. It transferred the five Pool F hotels to the lender through a deed in lieu of foreclosure in November. In March 2024, Pool A and B collateral was transferred to a court-appointed receiver.
- Debt refinancing and extension transactions included principal paydowns on several loans. The company reported $824.2 million of mortgage loans with final maturities in 2024; its debt maturity schedule shows $3.078 billion of maturities and scheduled amortization in 2024, excluding extension options. Refinancing and extension options are conditional and not assured.
- On March 11, 2024, Amendment No. 3 extended the Oaktree facility to January 15, 2026, but imposes cash- and equity-proceeds-based mandatory prepayments, a cash exit fee of 15% (12.5% if repaid by September 30, 2024), hotel-sale requirements and limits on discretionary capital spending. A 3.5% rate increase can apply if specified repayment thresholds are missed.
- The 2024 Oaktree amendment requires commercially reasonable efforts to sell 15 specified hotels and, if repayment thresholds are not met, the sale of eight specified hotels within six months. It also requires commercially reasonable efforts to refinance Renaissance Nashville.
Outlook, risks and contingencies
- Management says cash, operating cash flow, capital-market activity and asset sales should be adequate for anticipated needs over the next 12 months, but gives no assurance of refinancing or obtaining additional financing on acceptable terms. This outlook is subject to substantial debt maturities and conditional loan extensions.
- The company had 26 hotels in cash traps at year-end, with approximately $3.9 million of restricted cash subject to those provisions. Lenders may control hotel cash while performance conditions remain unmet.
- The company did not pay common dividends in 2023 and does not expect to pay them in 2024 or the foreseeable future. It expects to pay preferred dividends in 2024, subject to board determinations and applicable conditions.
- In March 2024, the company reported a waiver concerning deferred cash grants to advisor-affiliated employees: $7.95 million in 2022, $13.06 million in 2023 and $14.88 million in 2024. The Oaktree waiver caps actual cash payments under these grants and certain other restricted payments at $30 million in aggregate until the loan is repaid.
- Material risks include high leverage and interest-rate exposure, refinancing and foreclosure risk, hotel demand and operating-cost volatility, cash-trap restrictions, capital needs, and reliance on affiliated advisor and hotel manager Ashford Inc./Remington. The filing identifies potential conflicts of interest in these related-party arrangements.
- A 2023 cyber incident may have exposed employee personal information; the company reported no identified exposure of customer information and restored systems. Two related class actions were filed in February 2024; potential loss was not estimable.
- A California employment class action remains unresolved, with no amount accrued because potential loss was not reasonably estimable. The company also disclosed $59.7 million of short-term capital commitments.
Most important facts for investors to verify
- Progress and terms of refinancing or repaying 2024 property debt and the Oaktree facility, including required paydowns, exit fees, cash thresholds and sale obligations.
- Status and financial consequences of the KEYS A and B receivership, any foreclosures, and the company’s plans for affected hotels.
- Unrestricted liquidity after lender reserves, cash traps, required debt prepayments, capital spending and preferred distributions.
- Whether operating improvement can offset higher interest, labor, insurance and other hotel costs; compare GAAP losses with non-GAAP FFO and Adjusted EBITDAre.
- Whether preferred dividends continue and whether common dividends remain suspended; also assess dilution from preferred and common equity offerings.
- Developments in the cyber and employment litigation, and the costs and governance implications of related-party agreements.