Ashford Hospitality Trust, a hotel REIT with 17,000 rooms in 70 hotels across the country, sees its stock as undervalued and is considering putting itself up for sale.
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The Dallas-based company said in a release Tuesday that it has formed a “Special Committee to evaluate strategic alternatives to maximize shareholder value, including a potential transaction.”
Ashford President and CEO Stephen Zsigray said in the release that the company remains “frustrated” by the discrepancy between its underlying portfolio value and the value at which it is trading.
“The Board has tasked the Special Committee with proactively exploring alternatives to bridge that gap,” he said.
The news of a potential sale sent Ashford’s stock soaring Wednesday following the announcement. As of 1 p.m., the REIT was trading at $4.15 per share, a more than 31% increase from when the market opened.
Ashford also announced it has terminated the offering of its Series L and M nontraded preferred stock and suspended redemptions for its outstanding nontraded preferred stock.
The company has been trying to dig itself out of a hole of debt. It embarked on a plan at the beginning of this year to boost earnings before interest, taxes, depreciation and amortization by $50M and improve shareholder value.
Last quarter, Ashford sold the Hilton Houston NASA Clear Lake for $27M and the Residence Inn Evansville East in Indiana for $6M, according to its earnings report. In October, it sold the Residence Inn San Diego Sorrento Mesa for $42M.
It has reached agreements to sell three more assets, the company announced last month, which are projected to generate $69.5M in gross proceeds.
But as of the end of September, it was still saddled with $2.6B of debt with a blended average interest rate of 8%. About 5% of that debt is fixed-rate, and 95% is floating-rate.
In its third-quarter earnings report, Zsigray said the company’s “high percentage of floating-rate debt” would benefit from short-term interest rate cuts.
The REIT suspended common stock dividends in 2020 and hasn’t resumed them. Last year, it executed a 1-for-10 reverse stock split, reducing the number of common stock shares by a factor of 10 and boosting the price.
If it finds a buyer, Ashford would be the latest in a series of REITs to execute acquisitions: Roughly $3B of take-private deals were announced between September and November. The largest was Ares Alternative Credit's $2.1B acquisition of Plymouth Industrial REIT.
