Ashford Hospitality Concludes Hilton Alexandria Acquisition

Stock prices increasing and decreasing in value Credit: Shutterstock photo

Ashford Hospitality Trust, Inc.AHT recently completed the previously announced acquisition of the 252-room Hilton Alexandria Old Town in Alexandria, VA, for total purchase price of $111 million.

Notably, the acquisition marks the first transaction to be executed under the Enhanced Return Funding Program (ERFP), announced on Jun 26. Per the agreement, Ashford Inc. AINC - advisor to the lodging real estate investment trust (REIT) - will fund 10% of the purchase price of all acquisitions made by the latter, up to $50 million in aggregate funding.

Accordingly, the $11.1-billion cash funding comes in the form of the future purchase of hotel furniture, fixtures and equipment to be used at the newly acquired or existing hotels of Ashford Trust.

The ERFP is designed to improve five-year internal rate of return on Ashford's hotel acquisitions by 700-1200 basis points. It will enable the company to grow assets by nearly $500 million. Further, the company will require lower equity capital for hotel buyouts.

Further, the company has financed the hotel with an interest-only, non-recourse mortgage loan worth $73.5 million. The five-year loan carries an interest rate of LIBOR +2.45%. Notably, the company also entered into a management agreement with Hilton, per which the hotel will continue operating under its own name.

Moreover, the acquisition is expected to be accretive to the company's portfolio. The property will likely enjoy high demand being in close proximity to office and retail hubs. Further, limited supply and existing metro station adjacent to the property will drive demand and occupancy. The asset has a trailing 12-month occupancy and RevPAR of 85% and $161, respectively. In fact, with nearly $9.6 million invested in the hotel since 2013, the property has no near-term capital needs.

The strategic acquisition coupled with the ERFP arrangement will likely boost shareholder returns. Further, the funding arrangement sets the company apart from its lodging peers and offers significant competitive advantage in markets bids for other acquisitions. This is beneficial for Ashford as it aims to expand portfolio.

Encouragingly, in the past six months, this Zacks Rank #3 (Hold) stock has gained 27.7%, significantly outperforming the industry's 1.6% rise.

Stocks Worth a Look

A couple of better-ranked stocks from the same space are PS Business Parks PSB and Columbia Property Trust, Inc. CXP . Both stocks carry a Zacks Rank of 2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

PS Business Parks' Zacks Consensus Estimate for 2018 funds from operations (FFO) per share has been revised 0.3% upward over the past month. Its shares have returned 15.1% in the past three months.

Columbia Property Trust's FFO per share estimates for 2018 remained unchanged at $1.46 in the past month. The stock has gained 12.1% during the past three months.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) - a widely used metric to gauge the performance of REITs

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

PS Business Parks, Inc. (PSB): Free Stock Analysis Report

Ashford Hospitality Trust Inc (AHT): Free Stock Analysis Report

Columbia Property Trust, Inc. (CXP): Free Stock Analysis Report

Ashford Inc. (AINC): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for the TradeTalks newsletter to receive your weekly dose of trading news, trends and education. Delivered Wednesdays.