Ashford Hospitality Suspends Preferred Payments

Lodging REIT Ashford Hospitality (AHT) has finally suspended their preferred stock dividends. It was obvious that this was coming. Shares are tumbling on the official news (we all knew this was coming–only a fool would keep paying when they are fighting for survival).

The company joins Hersha Hospitality (HT) and Sotherly Hotels (SOHO) in having their preferred dividends suspended.

The preferreds are cumulative, meaning they will have to pay the suspended dividends before they ever pay another common dividend. This assumes that the company is solvent enough in the future to do so.

Ashford carries a ton of debt (over $4 billion)–but all debt is at the property level so I suspect we will see the REIT walk away from many properties instead of continuing to make debt payments–the company has over $200 million of cash on hand.

A chart of all lodging REIT preferred can be seen here.

The SEC announcement is here.

8 thoughts on “Ashford Hospitality Suspends Preferred Payments”

  1. Hmm. So a lottery ticket if they can hold out or they dump the property on their bank if things don’t improve.
    Tourism may come back and then get slammed again.
    A vaccine is the only thing that will get business travel to return.

  2. I own a boatload of Summit Hotels 2 preferreds. INN+D and INN+E. Both are cumulative. Would welcome anyone’s opinion on the companys financial strength or if any of you folks own it also.

    1. I like the pricing of the issues and have even been tempted to buy the common. I looked through the listed of the locations and franchises and was impressed with the upper middle portfolio (like Residence Inn) and good locations. My problem is that I don’t think that business travel is going to come back soon in full strength. Business may have learned that in person meetings aren’t as important as they thought. I see that hurting Summit. Me daughter-in-law is a big 8 auditor and says they have cut back on in person meetings with clients and don’t seem likely to resume a lot of travel soon.

      I have driven twice in the last two weeks from Texas to Michigan and was surprised to see hotels in the middle bracket like Comfort Suites And Country Suites with pretty good occupancy but the cheaper units seem pretty vacant. Anecdotal? I suspect that occupancy is going to be spotty.

      Sorry they are just impressions and not financial analysis.

      1. Thank You George for your opinion. Iam reluctant to sell out as I would lose a ton of money and the fact that they are cumulative gives me “hope” that I will be ok. But it is a classic example of how a person should not load up too much on one company. When you look at pre-pandemic these high quality hotels were doing great. Just amazing at how fast things have changed.

    2. @ Chuck P. INN has a little bit more leverage than Pebblebrook and RLJ, but is in much better shape than HT and AHT. It was noted in INN’s last conference call that they would be breakeven at the property level with about 40-45% occupancy, and 50-55% occupancy at the corporate level. Nationwide hotel occupancy has been improving 1-3% each week from the low in April and now just hit over 40% for the week ending June 13 (https://str.com/press-release/str-us-hotel-results-week-ending-13-june). So my guess is that INN is probably at or close to breakeven now, especially because they have mid-tier hotels which is doing better than luxury.

      In their analysis, their cash flow projections include assuming continuing to pay the preferreds. I also own the preferreds, and basically all we should care about is survival and preferreds still getting paid, and I think INN will do that.

      Separately, they have a strategic partnership with GIC, Singapore’s sovereign wealth fund. This is a good vote of confidence and tells me that INN is a credible company and good fiduciary.

      1. Hanger; Thank You for your very insightful reply. I truly appreciate it very much. I have not seen you post before. But I can tell that you are on top of your game.

  3. Anyone have thoughts on the viability of SOHO or HT (or AHT)? Their preferred shares have risen quite a bit (~$10 and ~$12), far above their lows, but far below par/normal. My assumption has been it will depend almost entirely on the speed of the recovery, how much business they get back and when. They seem like potential plays, but also potential pitfalls. Maybe it just a guessing game at this point…

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