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As part of its asset management efforts, Ashford Hospitality Trust Inc. (AHT - Snapshot Report) recently inked a deal to convert Crowne Plaza Beverly Hills to a Marriott Hotel. In addition, it disclosed that in the recent months, it converted 8 hotels from brand-managed to franchised.

Deal Details

As per the deal terms, following the expiration of the existing Crowne Plaza license agreement in Mar 2015, the 258-room, Crowne Plaza Beverly Hills will be converted to a Marriott. The renovation that is projected to be around $25 million will include revamp of the guestrooms and public areas along with improvements in the heating, ventilation and air conditioning system. Subsequent to the conversion, the property will continue to be managed by Remington Lodging & Hospitality.

Ashford also disclosed that at May end, the company accomplished the shift of management from Marriott to Remington Lodging & Hospitality at seven of its select-service hotels and one full-service hotel. The franchise deals include product improvement plan.

Our Take

The conversions are aimed at increasing Ashford’s top line and creating more cost savings. Hence, we remain encouraged and believe that this will propel its profitability going forward. It is expected to result in long-term value creation and hence such activities are viewed positively.

In July, Ashford reported its second-quarter 2013 results. Aided by growth in revenue per available room, the company’s adjusted funds from operations (FFO) came in at 55 cents per share, beating both the Zacks Consensus Estimate as well as the prior-year quarter figure by 5.8%.
Ashford Hospitality Trust is a real estate investment trust (REIT) and is engaged in investing in the hospitality industry primarily within the United States. Ashford Trust currently has a Zacks Rank #3 (Hold).

A number of other REITs that are performing well and deserve a look include Winthrop Realty Trust (FUR - Snapshot Report), that has a Zacks Rank #1 (Strong Buy) as well as CubeSmart (CUBE - Snapshot Report) and Highwoods Properties Inc. (HIW - Analyst Report), both carrying a Zacks Rank #2 (Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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