Lodging REIT Ashford Hospitality Trust Sells a Preferred Offering

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Ashford Hospitality Trust (NYSE:AHT) has sold a new 7.375% preferred offering in a refinancing transaction.  The proceeds from this offering will be used to redeem the Trusts outstanding 9% preferred issue (NYSE:AHT-E) which became redeemable on 4/18/2016.

AHT is a large owner of upscale hotels with branding that includes, Hilton, Westin and Marriott.  The Trust has performed well in the last 12 months after a number of years of poor financial performance. But regardless of recent results we are not impressed with the performance of the common shares which have traded in a range of $4.15-$9.25 with a recent price of $5.25.  At this point in time the big issue with Ashford is they carry a very heavy debt load.  Debt is near $4 billion against total assets of around $5 billion and this has scared investors away from the common shares.  As long as the economy performs well the debt burden should not be an issue, but when a recession nears it might be best to avoid AHT issues.

While the common shares have performed poorly, this new preferred issue should be considered by investors because of a coupon that is relatively high compared to other lodging REIT preferreds that have recently been issued.   Sunstone Hotels (NYSE:SHO), LaSalle Hotels (NYSE:LHO), Summit Hotels (NYSE:INN), Pebblebrook Hotels (NYSE:PEB) and Hersha Hospitality (NYSE:HT) have all sold preferred issues in the last 60 days and all coupons were between 6.375% and 6.5%.  A coupon as high as 7.375% is becoming a rare rate these days and all investors except the most conservative should consider this issue with the caveat that a recession could hammer earnings hard.


AHT has 3 issues currently outstanding (although Series E will be redeemed soon) and to compare this issue to the current outstanding issues you can check our “swaps” page here.

The issue will be trading on the OTC Grey market under the ticker AHFFP.  Our Grey market primer can be found here for those not familiar with purchasing new preferred issues at “wholesale” prices.

Further details on this issue can be found here.

Tim McPartland

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Tim McPartland
Tim McPartland is a private investor with over 45 years of investing experience. His analysis, research and writing is devoted to the hunt for income producing securities of all types, but in particular specializing in preferred stocks, exchange traded debt and Master Limited Partnerships.
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