Dallas-based Ashford Hospitality Trust Inc., the firm founded by Monty Bennett that owns 103 high-end hotels, is getting a $200 million lifeline to “navigate the pandemic” while it awaits an anticipated vaccine-driven recovery in the travel industry.
The company announced Monday that it has a commitment for a three-year loan from Oaktree Capital Management, with an option to increase the amount up to $350 million. Los Angeles-based Oaktree is one of the largest credit investors in the world, with $140 billion in assets under management as of Sept. 30.
The real estate investment trust said it intends to use the cash to strengthen its balance sheet, increase liquidity and pay for general operations.
“The $350 million of available liquidity, along with additional sources of capital such as our recently announced equity line and cash on the balance sheet, ensures that we have ample capital to address any operating concerns for several years to come,” said CEO J. Robison Hays in an email response to The Dallas Morning News.
As recently as a week ago, Ashford Trust warned investors in a regulatory filing that it could be forced to seek bankruptcy protection if it couldn’t raise additional capital. It said at the time that it only had enough cash to operate “into the early part of fiscal 2021.”
Hays said the Oaktree agreement averts “any near term need for restructuring.”
“We’re encouraged by the news regarding vaccines and believe this strategic financing commitment provides substantial capital and ample liquidity for Ashford Trust to capitalize on the upcoming recovery in the hospitality industry,” he said in a prepared statement announcing the deal.
Ashford Trust’s hotels, primarily branded as Hilton, Hyatt, Marriott and Intercontinental, account for 22,619 total rooms, mostly in popular tourist areas. The company also owns 90 hotel condominium units at WorldQuest Resort in Orlando, Fla., and a 17.5% stake in the keyless entry app OpenKey.
It’s part of the hotel empire created by Bennett and his father, Archie. In addition to Ashford Trust, Bennett also founded and chairs Ashford Inc. and Braemar Hotels and Resorts. All three companies are publicly traded and became embroiled in controversy in the spring for seeking $126 million in COVID-19 relief loans intended for small businesses. The companies eventually had to return money to the U.S. Small Business Administration.
Since then, Ashford Trust has had “great success in our forbearance efforts and we continue to take aggressive measures to optimize our properties,” said Hays, who took over as CEO in May. Earlier in December, for example, Ashford Trust struck a deal to waive default actions involving its Hilton Scotts Valley Hotel in Santa Cruz, Calif., and agreed to a one-year loan extension for its Marriott Crystal Gateway Hotel in Arlington, Va.
The company also had been trying to sell several hotels to raise capital, but Hays said it’s now “unlikely that the company will move forward with all of the marketed sales.”
“We believe that our portfolio is not only well-positioned as we come out of this pandemic, but Ashford Trust now has a sound balance sheet and sufficient capital resources to successfully navigate the pandemic and pursue long-term growth,” Hays said.
The Oaktree deal gives Ashford Trust an option for two one-year loan extensions and allows it to accrue interest expenses for up to two years in exchange for an exit fee. Oaktree’s investor base includes many of the nation’s largest pension funds and university endowments.
The hotel industry has been one of the hardest-hit sectors by COVID-19. Ashford Trust’s revenue fell nearly 64% for the nine months ending Sept. 30 — from $1.148 billion last year to about $418 million this year.
The American Hotel and Lodging Association said 44% of Americans don’t plan to stay in a hotel for vacation or leisure travel for at least the next year. That was based on a survey in early November of 2,200 adults.
Business travel could take even longer to rebound. The survey found that only 8% had taken an overnight business trip since March, and only 8% expected to travel for work in the next six months.
Those trends forced Ashford Trust hotels to get creative, according to executives who spoke during the company’s third-quarter investor call.
Its Marriott Beverly Hills brought in business by partnering with California’s state government for 7,615 room nights, yielding $754,000 in revenue. Its Hilton Santa Fe hosted an Amazon film crew in August and September, generating $270,000. And in early August, its Hotel Indigo Atlanta Midtown struck a deal with Georgia Tech University to provide student housing worth $484,000 in revenue.
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December 29, 2020 at 01:53AM
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