Ashford Hospitality On The Brink Of Bankruptcy
Ashford Hospitality Group, a REIT that specializes in full-service upscale and upper-upscale U.S. hotel properties, said in a filing with the Securities and Exchange Commission that it might face bankruptcy if its efforts to raise at least $200M in debt financing don't succeed.
Like much of the hospitality industry, Ashford has taken a beating as the coronavirus pandemic severely limited business and leisure travel. In October, Ashford reported that revenue per available room throughout its portfolio was down 72.1% during the third quarter of 2020 compared with a year earlier.
The company ended the quarter with cash and cash equivalents of about $120.9M, having burned through about $230M during 2020. It owns interests in 103 hotel properties operating as Embassy Suites, Hiltons, Hilton Garden Inns, Marriotts, Courtyard by Marriotts, Homewood Suites and other brands.
Just in the past five days, Ashford stock has dropped from $3.68 per share to $2.54 per share. At the beginning of 2020, the REIT's stocks were trading for $26.80 each.
"Generally, we are seeing more demand at our select-service hotels, with third-quarter occupancy down 54.6% compared to full-service, which was down 62.5%," Chief Operating Officer Jeremy Welter said during the company's most recent earnings call in October.
Those numbers reflect a specific example of the continuing industrywide malaise that has hit hospitality. U.S. hotel occupancies averaged 40.3% in November, STR reports, down 34.5% compared with a year ago. November revenue per available room was down 52.6% year-over-year. Some properties are disappearing as hotels in favor of redevelopment as small-unit apartments.
Ashford also reported that it has loan forbearance or modification agreements in place for 62 of its properties, representing about 72% of its current outstanding mortgage debt balance, company President and CEO Rob Hays said during the earnings call. Altogether, the REIT is carrying about $3.5B in mortgage debt at an average interest rate of 3.5%.
"The forbearance agreements typically allow us to defer interest on the loans for up to six months, subject to certain conditions," Hays said. "They also allow us to utilize lender and manager-held reserve accounts, which are included in restricted cash on our balance sheet to fund operating shortfalls at the hotels."
As of the end of the third quarter, however, the company had handed back 13 hotels to lenders.
"While we take no joy in handing back assets to our lenders, we do hope it demonstrates that we are willing to make hard decisions," Hays said.
In September, Dallas-based Ashford sold 60 West 37th Street in Manhattan, a 310-room hotel, to Magna Hospitality Group for $115M. That represents a 41% discount on the $195M it paid for the property 18 months before, The Real Deal reports.
The new stimulus bill's re-funding of the Paycheck Protection Program probably won't help Ashford. Earlier this year, it was one of the companies controlled by businessman Monty Bennett that received over $50M in loans from the PPP before a public outcry pushed it to return the funds.