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Ashford Assembles $600M Mezzanine Loan Pipeline

DALLAS-The REIT moves deeper into its strategy to use the arena as a fertile deployment ground for gains from this year's hotel sales, which are on track to top $600 million.

By Connie Gore | Updated on May 01, 2008

DALLAS-Ashford Hospitality Trust Inc. is working on a $600-million pipeline for mezzanine loans in a balancing act to maintain dividends, ensure a fertile deployment ground for sale proceeds and mine opportunities with higher yields for the till.

Share buybacks are part of the backup plan if the Dallas-based REIT needs another planting ground for gains from sales, which are expected to hit or top $600 million before the year ends, according to statements during yesterday’s earnings call. “Mezzanine pricing today is more attractive than share buybacks,” Ashford president and CEO Monty Bennett told analysts and shareholders. He says the REIT’s pipeline has gone from $200 million with a Libor spread of 650 basis points to $600 million and a spread exceeding 800 bps.

Ashford unveiled the strategy in February, completing three mezz loans totaling $57.6 million in one-off deals in Q1. The bigger picture is to chase and secure portfolios of hotel loans that didn’t make it into the CMBS market. Bennett says lending activity is expected to pick up significantly in the last half of the year and continue through 2008.

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