Ashford Agrees to Sell Houston Property to Deleverage Portfolio

Ashford Hospitality Trust (AHT) has agreed to sell the Hilton Houston NASA Clear Lake for $27 million, expected to close in June 2025, as part of its deleveraging strategy. The sale represents a 3.2% capitalization rate on net operating income (NOI) or 23.6X Hotel EBITDA after adjustments or a 5% cap rate on NOI or 15.2X Hotel EBITDA before adjustments. While AHT expects near-term growth from its GRO AHT initiative, broader concerns persist regarding softening hotel industry fundamentals and macroeconomic uncertainty; AHT shares have declined 21.8% over the past three months.

Analysis

Ashford Hospitality Trust, Inc. (AHT) is advancing its strategic deleveraging and portfolio optimization plan with the definitive agreement to sell the 242-room Hilton Houston NASA Clear Lake for $27 million, a transaction anticipated to close in June 2025. This sale is valued at a 3.2% capitalization rate on net operating income (NOI) or 23.6X Hotel EBITDA, after adjustments for projected capital expenditures for the twelve months ending April 30, 2025; excluding these adjustments, the metrics are a 5% cap rate on NOI or 15.2X Hotel EBITDA. The disposition aims to reduce leverage on its Morgan Stanley 17 Pool loan and yield considerable future capital expenditure savings. While AHT's GRO AHT initiative is expected to drive near-term EBITDA growth and enhance shareholder value, significant concerns persist. The company faces softening hotel industry fundamentals, macroeconomic uncertainty, and an elevated interest rate environment. Reflecting these challenges, AHT's shares have declined 21.8% over the past three months, substantially underperforming the broader industry's 5.4% fall. This performance aligns with its Zacks Rank #3 (Hold) status. In contrast, peers such as VICI Properties and W.P. Carey, both holding Zacks Rank #2 (Buy), have seen marginal upward revisions in their FFO per share consensus estimates for 2025 and the current year, respectively.

Key Decisions for Investors

• Investors should acknowledge the Houston property sale as a constructive step in AHT's deleveraging strategy, though the projected June 2025 closing means immediate balance sheet impact is delayed.
• Caution is warranted given AHT's significant share price underperformance, the prevailing headwinds from macroeconomic uncertainty, softening hotel industry fundamentals, and the high interest rate environment.
• Closely monitor progress on the GRO AHT initiative for evidence of outsized EBITDA growth and further successful execution of its portfolio optimization and deleveraging efforts before adjusting positions.