Ashford Hospitality Trust has signed definitive agreements to sell the Le Pavillon, New Orleans, a Tribute Portfolio Hotel; the Embassy Suites by Hilton Austin Arboretum; and the Embassy Suites by Hilton Houston Near the Galleria. These sales are expected to generate approximately $69.5 million in aggregate gross proceeds. Based on current mortgage interest rates, the company expects more than $2 million in annual cash flow improvement and $14.5 million in future capital expenditure savings following the sales. Other terms and conditions were not disclosed.
"Strategic asset sales will continue to play an important part in our plan to deleverage Ashford Trust while also improving cash flow and liquidity. We believe that the attractive cap rates achieved on these divestitures reflect the value within our portfolio," President and CEO Stephen Zsigray said in a statement. "The majority of proceeds will be deployed immediately to retire mortgage debt, improving cash flow after debt service while eliminating sizeable future capital expenditure obligations. This disciplined approach will better position the Company for sustained value creation."
Le Pavillon
The agreement for the 226-room Le Pavillon is for $42.5 million or $188,000 per key. The sale is expected to be completed in December and is subject to normal closing conditions.
The sale price represents a 2.6 percent capitalization rate on net operating income or a multiple of 27.2 times Hotel EBITDA for the twelve months ended Sept. 30.
Embassy Suites by Hilton Austin Arboretum & Embassy Suites by Hilton Houston Near the Galleria
The agreement for Embassy Suites by Hilton Austin Arboretum and Embassy Suites by Hilton Houston Near the Galleria, totaling 300 rooms, is for $27 million or $90,000 per key. The sale is expected to be completed in January and is subject to normal closing conditions.
When adjusted for the Company's anticipated capital expenditures of $14.5 million, the sale price represents a 2.2 percent capitalization rate on net operating income or a multiple of 29.9 times Hotel EBITDA for the twelve months ended Sept. 30. Excluding the anticipated capital spend, the combined sale price represents a 3.3 percent capitalization rate on net operating income or a multiple of 19.5 times hotel EBITDA for the twelve months ended Sept. 30.