Ashford Hospitality Trust Inc

Thank you for standing by. My name is Greg, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ashford Hospitality Trust first quarter 2024 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star and the number one on your telephone keypad. Once again, star one. And if you'd like to withdraw your question, please press star one again. Thank you. I would now like to turn the call over to Jordan Jennings, Vice President, Investor Relations. Jordan, please go ahead.

Good day, everyone, and welcome to today's conference call to review results for Ashford Hospitality Trust for the first quarter of 2024 and to update you on recent developments. On the call today will be Rob Hayes, President and Chief Executive Officer of Derek Eubanks, Chief Financial Officer, and Chris Nixon, Executive Vice President and Head of Asset Management. The results as well as notice of accessibility of this conference call on a listen-only basis over the Internet were distributed yesterday afternoon in a press release. At this time, let me remind you that certain statements and assumptions in this conference call contain or are based upon board-looking information and are being made pursuant to the safe harbor provisions of the Federal Securities Regulations. Such forward-looking statements are subject to numerous assumptions, uncertainties, and known or unknown risk, which could cause actual results to differ materially from this anticipated. These factors are more fully discussed in the company's filings with the Securities and Exchange Commission. The forward-looking statements included in this conference call are only made as of the date of this call, and the company is not obligated to publicly update or revise them. Statements made during this call do not constitute an offer to sell or solicitation of an offer to buy any securities. Securities will be offered only by means of a registration statement and prospectus, which can be found at www.sec.gov. In addition, certain terms use this call on our GAAP financial measures, reconciliations of which are provided in the company's earnings release and company tables or schedules, which have been filed on Form 8K with the SEC on May 7, 2024, and may also be accessed through the company's website at www.htreat.com. Each listener is encouraged to review those reconciliations provided in the earnings release together with all other information provided in the release. Also, unless otherwise stated, all reported results discussed in the call compare the first quarter ended March 31, 2024 with the first quarter ended March 31, 2023. I will now turn the call over to Rob Pace. Please go ahead, sir.

Good morning. Welcome to our call. After my introductory comments, Derek will review our first quarter financial results. And then Chris will provide an operational update on our portfolio. As we announced earlier this year, we are keenly focused on paying off our strategic corporate financing in 2024. With approximately $107 million remaining, we are making tangible progress with the plan. We now have paid this loan down by almost 50%, and we believe this is a crucial step in positioning Ashford Trust back on the path of growth. Our plan to accomplish this is multifaceted and provides us with significant optionality to accomplish this goal. It includes raising sufficient capital through a combination of asset sales, mortgage debt refinancings, and non-traded preferred capital raising. We currently have several assets at various stages of the sales process, and while we're unlikely to sell all of the assets, we are working diligently to determine which assets are capturing the most attractive valuations, while also providing the largest impact to our deleveraging efforts. We have sold three assets. We have another three assets under signed purchase and sale agreements, and another five assets under letter of intent. These 11 assets have a combined sales price of approximately $625 million. As a demonstration of the significant progress we are making in these efforts, in March we closed on the sale of the 144-room residence inn located in Salt Lake City, Utah, for $19.2 million. When adjusted for the company's anticipated CapEx, the sales price represented a 4.6% capitalization rate on 2023 net operating income, or an 18.2 times 2023 hotel EBITDA. Excluding the anticipated capital spend, the sales price represented a 6% capitalization rate on 2023 net operating income, or 14 times 2023 hotel EBITDA. All the proceeds from the sale were used to pay down debt. In addition, subsequent to quarter end, we closed on the sale of the 390-room Hilton Boston Back Bay in Boston, Massachusetts for $171 million, or $438,000 per key. All of the proceeds from the sale were used for debt reduction, including approximately $68 million to pay down the company's strategic financing. Also subsequent to quarter end, we closed on a sale of the 85-room Hampton Inn in Lawrenceville, Georgia for $8.1 million. The sales price represented a 6% capitalization rate on trailing 12-month net operating income through March of 2024. Post these transactions, the remaining balance on our strategic financing is now approximately $107 million. And going forward, we plan to make regular paydowns with proceeds from the sale of our non-traded preferred stock and other asset sales. Additionally, we recently announced the transfer of the company's possession and control of the hotel property securing the $180 million Keys A loan pool and the $174 million Keys B loan pool to a court-appointed receiver. We have been fully cooperating with the servicer for consensual foreclosure or deed in lieu of foreclosure on these properties since July of 2023. As a result of this transfer, we have no further economic interest in the operations of these hotels. We're also working with lenders to refinance a loan secured by the Renaissance Nashville in Nashville, Tennessee, the Morgan Stanley Pool loan with 17 hotels located in several states, the loan secured by the Marriott Gateway in Arlington, Virginia, and the loans secured by the Indigo Atlanta in Atlanta, Georgia. We believe there could be substantial excess proceeds from the refinancing of the Renaissance National Loan, which can be used to pay down the company's strategic financing. The Princeton Westin, for which we are currently running a sales process, will be unencumbered as part of this financing to the extent it is completed. We also continue to be excited about our non-traded preferred stock offerings. We continue to build up the selling syndicate and have signed 43 dealer agreements representing over 5,884 representatives selling the security. To date, we have raised approximately $122 million of gross proceeds, including $23 million during the first quarter. Given the progress we're making across asset sales, mortgage refinancing, and our non-traded preferred offering, we continue to believe that we are on the right path to pay off the strategic financing in 2024. In terms of hotel performance, while our March operating results were a bit soft, which we directly attributed to the Easter holiday shift, we saw market improvement in April with revenue growth of approximately 3% for the portfolio. We are seeing the benefit of a broadly diversified, high-quality portfolio that is balanced across leisure, corporate, and group demand sources. And as we look for the remainder of 2024, we believe our high-quality, geographically diverse portfolio remains well-positioned to outperform.