Ashford Hospitality Trust will form Ashford Hospitality Select, Inc., a new privately held company that will invest primarily in existing premium-branded, upscale, upper-midscale, select-service and extended-stay hotels in the U.S. Ashford Select is expected to launch sometime in the first half of 2015.
Ashford Trust intends to contribute 16 of its existing select-service hotels, comprised of 2,560 guestrooms and operated under upscale or upper-midscale premium brands affiliated with Marriott International, to Ashford Select. The estimated valuation of the hotels is US$331 million. Ashford Select is also expected to assume the US$233 million of mortgage debt associated with the 16 properties and the remaining consideration is payable in cash and/or equity interests in Ashford Select.
“The biggest unanswered question, in our opinion, is whether Ashford Trust will own Ashford Select at the time of the asset sale/contribution to Ashford Select,” said David Loeb, senior research analyst at Robert W. Baird. “If so, Trust’s shareholders will continue to receive the value of the 16 assets, which would offset any potential concerns about the valuation of the assets. Also, we expect the terms of the advisory agreement to be unchanged; if termination fees are similar to Trust and Prime’s termination fees, we believe management will be focused on growing the platform, not selling it.”