Ashford Hospitality Trust Inc. (AHT - Snapshot Report), a lodging real estate investment trust (REIT) in the U.S., has recently reinstated its Stock Repurchase Program to facilitate a selective purchase of its common stock over a given time period.
The strategic move is aimed at capitalizing on the current market fundamentals by mopping out some of the common stock of the company at a relatively low price, as the shares are presently undervalued due to the volatility in the market.
In concurrence with the current share repurchase program, Ashford would be entitled to buy back up to $200 million worth of its stock (excluding fees, commissions and all other ancillary expenses) in the open market and negotiated purchases.
Given the present dislocations in the market, management felt that buying back common shares at a low price would be one of the best investment alternatives for the company. In addition, the share repurchase program would also enable the company to make discounted purchases of its outstanding debt obligations.
Ashford intends to fund share repurchases or discounted debt purchases with net proceeds from asset sales, cash flow from operations, existing cash on its balance sheet, and available credit. By the end of second quarter 2011, the company had a staggering debt burden of approximately $2.4 billion, primarily due to its acquisition binge.
Ashford has continually focused on acquiring upper-upscale and luxury hotels in diversified markets throughout the U.S. The company seeks to own assets in some of the premium markets of the country at discounted prices as property prices have nose-dived in the last couple of years.
Ashford also has a well-experienced management team that puts on board a unique perspective to hotel investment sourcing, underwriting, asset managing, selling, and financing. The company’s proactive asset management strategy further provides the flexibility to adapt to the changing market conditions to maximize operating margins and enhance customer experience.
We currently have a Neutral rating on Ashford, which presently has a Zacks #3 Rank translating into a short-term Hold recommendation. We also have a Neutral rating and a Zacks #3 Rank for Host Hotels & Resorts Inc. (HST - Analyst Report), one of the competitors of Ashford.