Executive Overview

Ashford Hospitality Trust, Inc. (the “Company”) is a real estate investment trust (REIT) that focuses on owning upper upscale hotels in the United States. As of September 30, 2024, the Company’s portfolio consisted of 68 consolidated operating hotel properties with 17,051 total rooms.

The Company’s key priorities and financial strategies include preserving capital, disposing of non-core hotel properties, acquiring accretive hotel properties, accessing cost-effective capital, opportunistically exchanging preferred stock into common stock, implementing capital improvements, effective asset management, financing and refinancing hotels, utilizing hedges and derivatives, and making other strategic investments or divestitures.

The Company is advised by Ashford LLC, a subsidiary of Ashford Inc., through an advisory agreement. Remington Hospitality, a subsidiary of Ashford Inc., manages 50 of the Company’s 69 hotel properties, while third-party management companies manage the remaining properties.

Recent Developments

The Company continues to work with the lender of the KEYS A and KEYS B loan pools on a consensual transfer of ownership of those hotels to the lender, which is expected to occur in the second half of 2024. In March 2024, the hotel properties securing these loan pools were transferred to a court-appointed receiver.

In June 2024, the Company was informed by its lender that the lender intended to exercise remedies for the maturity default on the Ashton Hotel in Fort Worth, Texas. The Company and the lender agreed to a deed-in-lieu of foreclosure, which was completed on July 16, 2024.

The Company has also taken several actions to improve its financial position, including:

• Refinancing the mortgage loan secured by the Marriott Crystal Gateway Hotel in Arlington, Virginia, which resulted in approximately $31 million of excess proceeds used to pay down the Oaktree term loan.
• Entering into a 90-day forbearance agreement for its $409.8 million mortgage loan secured by 17 hotel properties, with the expectation of finalizing a multi-year extension during the forbearance period.
• Amending the Oaktree Credit Agreement to reduce the exit fee from 15.0% to 12.5% of the original loan balance, provided the outstanding loan balance is reduced to $50 million or less by November 15, 2024.

Results of Operations

The Company’s net loss attributable to the Company decreased from $63.6 million in the third quarter of 2023 to $57.9 million in the third quarter of 2024. This was primarily due to:

• A $57.6 million decrease in rooms revenue, primarily from the disposition of hotel properties and the KEYS A and B properties that went into receivership.
• A $37.8 million decrease in hotel operating expenses, also due to the hotel dispositions and KEYS A and B properties.
• An $8.2 million decrease in depreciation and amortization expense.
• An $11.1 million gain on the derecognition of assets related to the KEYS A and B properties.

For the first nine months of 2024, the Company reported net income attributable to the Company of $63.9 million, compared to a net loss of $149.1 million in the same period of 2023. This significant improvement was primarily driven by:

• A $156.7 million gain on the derecognition of assets related to the KEYS A and B properties.
• A $94.4 million gain on the disposition of various hotel properties.
• Decreases in hotel operating expenses, depreciation and amortization, and interest expense.

Liquidity and Capital Resources

As of September 30, 2024, the Company held $119.7 million in cash and cash equivalents and $114.3 million in restricted cash. The Company’s net debt to gross assets was 66.3%.

The Company’s cash flow from operations, capital market activities, asset sales, and existing cash balances are expected to be adequate to meet upcoming requirements for interest and principal payments, working capital, and capital expenditures for the next 12 months. However, the Company may need to obtain additional financing or refinance upcoming maturities, and there are no assurances that it will be able to do so on favorable terms.

Certain of the Company’s loan agreements contain cash trap provisions that may be triggered if hotel performance declines below a threshold. At September 30, 2024, 12 of the Company’s hotels were in cash traps, with approximately $2.4 million of restricted cash subject to these provisions.

The Company has extension options on certain property-level loans that require meeting debt yield targets. If the Company is unable to meet these targets, it may be required to prepay a significant amount of the loans to extend the maturity dates.

Seasonality

The Company’s hotel properties experience seasonal fluctuations in occupancy, average daily rate (ADR), and revenue per available room (RevPAR). Certain properties maintain higher occupancy during the summer months, while others have higher occupancy in the winter. This seasonality can cause fluctuations in the Company’s quarterly lease revenue under percentage leases.

Non-GAAP Financial Measures

The Company presents several non-GAAP financial measures, including EBITDA, EBITDAre, Adjusted EBITDAre, FFO, and Adjusted FFO, to help investors evaluate its operating performance. These measures exclude certain items, such as depreciation, amortization, gains/losses on asset dispositions, and non-cash or non-recurring items, to provide a better understanding of the Company’s core operations.

Outlook and Risks

The Company faces several risks and uncertainties that could impact its future performance, including:

• Changes in interest rates and inflation
• Macroeconomic conditions, such as a prolonged period of weak economic growth
• Uncertainty in the banking sector and market volatility
• Catastrophic events or geopolitical conditions
• Extreme weather conditions
• Lender foreclosure on assets pledged as collateral
• General volatility in the capital markets
• Changes in the lodging and travel industry
• Availability and terms of capital
• Unanticipated increases in financing and other costs
• Competition
• Conflicts of interest with related parties
• Changes in personnel or availability of qualified personnel
• Changes in regulations, accounting rules, and tax laws

To mitigate these risks, the Company is focused on preserving capital, disposing of non-core assets, acquiring accretive properties, accessing cost-effective capital, and implementing effective asset management strategies. However, there can be no assurance that the Company will be able to successfully execute its strategies or overcome the challenges it faces.

Conclusion

Ashford Hospitality Trust is a REIT that owns a portfolio of upper upscale hotels in the United States. The Company has faced several challenges in recent years, including the impact of the COVID-19 pandemic and the transfer of ownership of the KEYS A and B hotel properties to lenders.

However, the Company has taken steps to improve its financial position, such as refinancing debt, entering into forbearance agreements, and amending its Oaktree Credit Agreement. While the Company continues to face risks and uncertainties, its focus on preserving capital, disposing of non-core assets, and acquiring accretive properties may help it navigate the current environment and position it for future growth.