UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

(Rule 13d-101)

INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT

TO § 240.13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO

§ 240.13d-2(a)

(Amendment No.  )1

Ashford Hospitality Trust, Inc.

(Name of Issuer)

Common Stock, par value $0.01 per share

(Title of Class of Securities)

044103109

(CUSIP Number)

CHRISTOPHER SWANN

CYGNUS CAPITAL, INC.

3060 Peachtree Road NW, Suite 1080

Atlanta, Georgia 30305

(212) 201-2640

 

STEVE WOLOSKY, ESQ.,

ELIZABETH GONZALEZ- SUSSMAN, ESQ.,

OLSHAN FROME WOLOSKY LLP

1325 Avenue of the Americas

New York, New York 10019

(212) 451-2300

(Name, Address and Telephone Number of Person

Authorized to Receive Notices and Communications)

 

September 17, 2020

(Date of Event Which Requires Filing of This Statement)

 

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§ 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box ☒.

Note:  Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits.  See § 240.13d-7 for other parties to whom copies are to be sent.

 

 

 

1              The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

 

CUSIP No. 044103109

  1   NAME OF REPORTING PERSON  
         
        Cygnus Opportunity Fund, LLC  
  2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ☐
        (b) ☐
           
  3   SEC USE ONLY    
           
           
  4   SOURCE OF FUNDS  
         
        WC  
  5   CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)     ☐
       
           
  6   CITIZENSHIP OR PLACE OF ORGANIZATION  
         
        Delaware  
NUMBER OF   7   SOLE VOTING POWER  
SHARES          
BENEFICIALLY         - 0 -  
OWNED BY   8   SHARED VOTING POWER  
EACH          
REPORTING         494,080  
PERSON WITH   9   SOLE DISPOSITIVE POWER  
         
          - 0 -  
    10   SHARED DISPOSITIVE POWER  
           
          494,080  
  11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON  
         
        494,080  
  12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES     ☐
       
           
  13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)  
         
        3.8%  
  14   TYPE OF REPORTING PERSON  
         
        OO  

  

2

CUSIP No. 044103109

  1   NAME OF REPORTING PERSON  
         
        Cygnus Property Fund IV, LLC  
  2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ☐
        (b) ☐
           
  3   SEC USE ONLY    
           
           
  4   SOURCE OF FUNDS  
         
        WC  
  5   CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)     ☐
       
           
  6   CITIZENSHIP OR PLACE OF ORGANIZATION  
         
        Delaware  
NUMBER OF   7   SOLE VOTING POWER  
SHARES          
BENEFICIALLY         - 0 -  
OWNED BY   8   SHARED VOTING POWER  
EACH          
REPORTING         5,405  
PERSON WITH   9   SOLE DISPOSITIVE POWER  
         
          - 0 -  
    10   SHARED DISPOSITIVE POWER  
           
          5,405  
  11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON  
         
        5,405  
  12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES     ☐
       
           
  13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)  
         
        Less than 1%  
  14   TYPE OF REPORTING PERSON  
         
        OO  

  

3

CUSIP No. 044103109

 

  1   NAME OF REPORTING PERSON  
         
        Cygnus Property Fund V, LLC  
  2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ☐
        (b) ☐
           
  3   SEC USE ONLY    
           
           
  4   SOURCE OF FUNDS  
         
        WC  
  5   CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)     ☐
       
           
  6   CITIZENSHIP OR PLACE OF ORGANIZATION  
         
        Delaware  
NUMBER OF   7   SOLE VOTING POWER  
SHARES          
BENEFICIALLY         - 0 -  
OWNED BY   8   SHARED VOTING POWER  
EACH          
REPORTING         134,121  
PERSON WITH   9   SOLE DISPOSITIVE POWER  
         
          - 0 -  
    10   SHARED DISPOSITIVE POWER  
           
          134,121  
  11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON  
         
        134,121  
  12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES     ☐
       
           
  13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)  
         
        1.0%  
  14   TYPE OF REPORTING PERSON  
         
        OO  

  

4

CUSIP No. 044103109

 

  1   NAME OF REPORTING PERSON  
         
        Cygnus Capital Advisers, LLC  
  2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ☐
        (b) ☐
           
  3   SEC USE ONLY    
           
           
  4   SOURCE OF FUNDS  
         
        AF  
  5   CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)     ☐
       
           
  6   CITIZENSHIP OR PLACE OF ORGANIZATION  
         
        Wyoming  
NUMBER OF   7   SOLE VOTING POWER  
SHARES          
BENEFICIALLY         - 0 -  
OWNED BY   8   SHARED VOTING POWER  
EACH          
REPORTING         494,080  
PERSON WITH   9   SOLE DISPOSITIVE POWER  
         
          - 0 -  
    10   SHARED DISPOSITIVE POWER  
           
          494,080  
  11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON  
         
        494,080  
  12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES     ☐
       
           
  13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)  
         
        3.8%  
  14   TYPE OF REPORTING PERSON  
         
        OO  

  

5

CUSIP No. 044103109

 

  1   NAME OF REPORTING PERSON  
         
        Cygnus General Partners, LLC  
  2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ☐
        (b) ☐
           
  3   SEC USE ONLY    
           
           
  4   SOURCE OF FUNDS  
         
        AF  
  5   CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)     ☐
       
           
  6   CITIZENSHIP OR PLACE OF ORGANIZATION  
         
        Wyoming  
NUMBER OF   7   SOLE VOTING POWER  
SHARES          
BENEFICIALLY         - 0 -  
OWNED BY   8   SHARED VOTING POWER  
EACH          
REPORTING         494,080  
PERSON WITH   9   SOLE DISPOSITIVE POWER  
         
          - 0 -  
    10   SHARED DISPOSITIVE POWER  
           
          494,080  
  11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON  
         
        494,080  
  12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES     ☐
       
           
  13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)  
         
        3.8%  
  14   TYPE OF REPORTING PERSON  
         
        OO  

  

6

CUSIP No. 044103109

 

  1   NAME OF REPORTING PERSON  
         
        Cygnus Capital Real Estate Advisors II, LLC  
  2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ☐
        (b) ☐
           
  3   SEC USE ONLY    
           
           
  4   SOURCE OF FUNDS  
         
        AF  
  5   CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)     ☐
       
           
  6   CITIZENSHIP OR PLACE OF ORGANIZATION  
         
        Wyoming  
NUMBER OF   7   SOLE VOTING POWER  
SHARES          
BENEFICIALLY         - 0 -  
OWNED BY   8   SHARED VOTING POWER  
EACH          
REPORTING         139,526  
PERSON WITH   9   SOLE DISPOSITIVE POWER  
         
          - 0 -  
    10   SHARED DISPOSITIVE POWER  
           
          139,526  
  11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON  
         
        139,526  
  12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES     ☐
       
           
  13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)  
         
        1.1%  
  14   TYPE OF REPORTING PERSON  
         
        OO  

  

7

CUSIP No. 044103109

 

  1   NAME OF REPORTING PERSON  
         
        Cygnus Capital, Inc.  
  2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ☐
        (b) ☐
           
  3   SEC USE ONLY    
           
           
  4   SOURCE OF FUNDS  
         
        AF  
  5   CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)     ☐
       
           
  6   CITIZENSHIP OR PLACE OF ORGANIZATION  
         
        Wyoming  
NUMBER OF   7   SOLE VOTING POWER  
SHARES          
BENEFICIALLY         - 0 -  
OWNED BY   8   SHARED VOTING POWER  
EACH          
REPORTING         633,606  
PERSON WITH   9   SOLE DISPOSITIVE POWER  
         
          - 0 -  
    10   SHARED DISPOSITIVE POWER  
           
          633,606  
  11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON  
         
        633,606  
  12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES     ☐
       
           
  13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)  
         
        4.9%  
  14   TYPE OF REPORTING PERSON  
         
        CO  

  

8

CUSIP No. 044103109

 

  1   NAME OF REPORTING PERSON  
         
        Christopher Swann.  
  2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ☐
        (b) ☐
           
  3   SEC USE ONLY    
           
           
  4   SOURCE OF FUNDS  
         
        AF, PF  
  5   CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)     ☐
       
           
  6   CITIZENSHIP OR PLACE OF ORGANIZATION  
         
        USA  
NUMBER OF   7   SOLE VOTING POWER  
SHARES          
BENEFICIALLY         - 0 -  
OWNED BY   8   SHARED VOTING POWER  
EACH          
REPORTING         1,012,231 (1)  
PERSON WITH   9   SOLE DISPOSITIVE POWER  
         
          - 0 -  
    10   SHARED DISPOSITIVE POWER  
           
          1,012,231 (1)  
  11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON  
         
        1,012,231 (1)  
  12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES     ☐
       
           
  13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)  
         
        7.8%  
  14   TYPE OF REPORTING PERSON  
         
        IN  

  

(1) Includes 70,000 Shares (as defined in Item 1) underlying certain call options.

9

CUSIP No. 044103109

The following constitutes the Schedule 13D filed by the undersigned (the “Schedule 13D”).

 

Item 1.Security and Issuer.

This statement relates to the Common Stock, par value $0.01 per share (the “Shares”), of Ashford Hospitality Trust, Inc., a Maryland corporation (the “Issuer”). The address of the principal executive offices of the Issuer is 14185 Dallas Parkway, Suite 1100, Dallas, Texas 75254.

 

Item 2.Identity and Background.

(a)       This statement is filed by:

(i)Cygnus Opportunity Fund, LLC, a Delaware limited liability company (“Cygnus Opportunity”), with respect to the Shares owned directly by it;
(ii)Cygnus Property Fund IV, LLC, a Delaware limited liability company (“Cygnus IV”), with respect to the Shares owned directly by it;
(iii)Cygnus Property Fund V, LLC, a Delaware limited liability company (“Cygnus V”), with respect to the Shares owned directly by it
(iv)Cygnus Capital Advisers, LLC, a Wyoming limited liability company (“Cygnus Capital”), as the investment adviser of Cygnus Opportunity;
(v)Cygnus General Partners, LLC, a Wyoming limited liability company (“Cygnus GP”), as the general partner of Cygnus Opportunity;
(vi)Cygnus Capital Real Estate Advisors II, LLC, a Wyoming limited liability company (“Cygnus Property GP”), as the general partner and investment advisor of each of Cygnus IV and Cygnus V;
(vii)Cygnus Capital, Inc., a Wyoming corporation (“Cygnus”), as the managing member of each of Cygnus Capital, Cygnus GP and Cygnus Property GP; and
(viii)Christopher Swann, (a) with respect to (1) the Shares owned directly by him and (2) the Shares owned by members of his immediately family that he may be deemed to beneficially own, and (b) as the President and CEO of Cygnus.

10

CUSIP No. 044103109

Each of the foregoing is referred to as a “Reporting Person” and collectively as the “Reporting Persons.” Each of the Reporting Persons is party to that certain Joint Filing Agreement, as further described in Item 6. Accordingly, the Reporting Persons are hereby filing a joint Schedule 13D.

Set forth on Schedule A annexed hereto (“Schedule A”) is the name and present principal occupation or employment, principal business address and citizenship of the executive officers and directors of Cygnus. To the best of the Reporting Persons’ knowledge, except as otherwise set forth herein, none of the persons listed on Schedule A beneficially owns any securities of the Issuer or is a party to any contract, agreement or understanding required to be disclosed herein.

(b)       The principal business address of each of the Reporting Persons is 3060 Peachtree Road NW, Suite 1080, Atlanta, Georgia 30305.

(c)       The principal business of each of Cygnus Opportunity, Cygnus IV and Cygnus V is investing in securities. The principal business of Cygnus Capital is serving as the investment adviser to Cygnus Opportunity. The principal business of Cygnus GP is serving as the general partner of Cygnus Opportunity. The principal business of Cygnus Property GP is serving as the general partner and investment adviser of each of Cygnus IV and Cygnus V. The principal business of Cygnus is serving as the managing member of each of Cygnus Capital, Cygnus GP and Cygnus Property GP. The principal occupation of Mr. Swann is serving as the President and CEO of Cygnus.

(d)       No Reporting Person, nor any person listed on Schedule A, has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors).

(e)       No Reporting Person, nor any person listed on Schedule A, has, during the last five years, been party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

(f)       Mr. Swann is a citizen of the United States of America. The citizenship of the persons listed on Schedule A is set forth therein.

 

11

CUSIP No. 044103109

Item 3.Source and Amount of Funds or Other Consideration.

 The Shares purchased by each of Cygnus Opportunity, Cygnus IV and Cygnus V were purchased with working capital (which may, at any given time, include margin loans made by brokerage firms in the ordinary course of business) in open market purchases. The aggregate purchase price of the 494,080 Shares beneficially owned by Cygnus Opportunity is approximately $1,742,963, including brokerage commissions. The aggregate purchase price of the 5,405 Shares beneficially owned by Cygnus IV is approximately $16,377, including brokerage commissions. The aggregate purchase price of the 134,121 Shares beneficially owned by Cygnus V is approximately $438,829, including brokerage commissions.

 

The Shares purchased by Mr. Swann personally, including Shares held in an IRA Account in Mr. Swann’s name, and held by members of his immediate family, which Mr. Swann is deemed to beneficially own, were purchased with personal funds (which may, at any given time, include margin loans made by brokerage firms in the ordinary course of business) in open market purchases. The aggregate purchase price of the 172,000 Shares, including 100,000 Shares held in an IRA account in Mr. Swann’s name, beneficially owned directly by Mr. Swann is approximately $532,618, including brokerage commissions. The aggregate purchase price of the 206,625 Shares, including 70,000 Shares underlying certain call options, held by members of Mr. Swann’s immediate family, which Mr. Swann is deemed to beneficially own, is $488,935, including brokerage commissions.

 

Item 4.Purpose of Transaction.

The Reporting Persons purchased the Shares based on the Reporting Persons’ belief that the Shares, when purchased, were undervalued and represented an attractive investment opportunity. Depending upon overall market conditions, other investment opportunities available to the Reporting Persons and the availability of Shares at prices that would make the purchase or sale of Shares desirable, the Reporting Persons may endeavor to increase or decrease their position in the Issuer through, among other things, the purchase or sale of Shares in the open market, private transactions or otherwise, on such terms and at such times as the Reporting Persons may deem advisable.

On September 17, 2020, the Reporting Persons issued a press release and letter (the “Letter”) to common stockholders of the Issuer urging them to vote Against the proposals to be considered at the Issuer’s upcoming special meeting of stockholders to be held on October 6, 2020, the effect of which will be to dilute the ownership interests of common stockholders by approximately 94% through what the Reporting Persons believe to be an unnecessary and rushed conversion of all of the Issuer’s outstanding shares of preferred stock into Shares (the “Exchange Offers”). The Letter sets forth a number of reasons why the Reporting Persons believe the Exchange Offers are ill-advised and not in the best interest of stockholders, including the Reporting Persons’ belief that recent improvements in the hospitality industry and the Issuer’s current cash levels make the Exchange Offers premature.

As detailed in the Letter, the Reporting Persons question whether the Board’s and management’s decision to undertake the highly dilutive Exchange Offers in lieu of other strategic alternatives is due to their desire to preserve the fees paid to the Issuer’s management company, Ashford, Inc., which is controlled by members of the Board and management team.   The full text of the Letter is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

12

CUSIP No. 044103109

No Reporting Person has any present plan or proposal which would relate to or result in any of the matters set forth in subparagraphs (a) - (j) of Item 4 of Schedule 13D except as set forth herein or such as would occur upon or in connection with completion of, or following, any of the actions discussed herein.

Depending on various factors including, without limitation, the Issuer’s financial position and investment strategy, the price levels of the securities of the Issuer, conditions in the securities markets and general economic and industry conditions, the Reporting Persons may in the future engage in communications with management and the Board, engage in discussions with stockholders of the Issuer and others about the Issuer and the Reporting Persons’ investment, purchase additional securities of the Issuer, selling some or all of such securities, enter into financial instruments or other agreements that increase or decrease the Reporting Persons’ economic or beneficial exposure with respect to their investment in the Issuer, engage in short selling of or any hedging or similar transaction with respect to the securities of the Issuer, including swaps and other derivative instruments, or change their intention with respect to any and all matters referred to in Item 4.

Item 5.Interest in Securities of the Issuer.

The aggregate percentage of Shares reported owned by each person named herein is based upon 13,058,909 Shares outstanding as of September 4, 2020, which is the total number of Shares outstanding as reported in the Issuer’s Proxy Statement on DEF 14A filed with the Securities and Exchange Commission on September 10, 2020.

A.Cygnus Opportunity
(a)As of the close of business on September 17, 2020, Cygnus Opportunity beneficially owned directly 494,080 Shares.

Percentage: Approximately 3.8%

(b)1. Sole power to vote or direct vote: 0
2. Shared power to vote or direct vote: 494,080
3. Sole power to dispose or direct the disposition: 0
4. Shared power to dispose or direct the disposition: 494,080
(c)The transactions in the Shares by Cygnus Opportunity during the past sixty days are set forth on Schedule B and incorporated herein by reference.
13

CUSIP No. 044103109

B.Cygnus IV
(a)As of the close of business on September 17, 2020, Cygnus IV beneficially owned directly 5,405 Shares.

Percentage: Less than 1%

(b)1. Sole power to vote or direct vote: 0
2. Shared power to vote or direct vote: 5,405
3. Sole power to dispose or direct the disposition: 0
4. Shared power to dispose or direct the disposition: 5,405
(c)The transactions in the Shares by Cygnus IV during the past sixty days are set forth on Schedule B and incorporated herein by reference.
C.Cygnus V
(a)As of the close of business on September 17, 2020, Cygnus V beneficially owned directly 134,121 Shares.

Percentage: Approximately 1.0%

(b)1. Sole power to vote or direct vote: 0
2. Shared power to vote or direct vote: 134,121
3. Sole power to dispose or direct the disposition: 0
4. Shared power to dispose or direct the disposition: 134,121
(c)The transactions in the Shares by Cygnus V during the past sixty days are set forth on Schedule B and incorporated herein by reference.
D.Cygnus Capital
(a)As the investment adviser of Cygnus Opportunity, Cygnus Capital may be deemed to beneficially own the 494,080 Shares owned by Cygnus Opportunity.

Percentage: Approximately 3.8%

(b)1. Sole power to vote or direct vote: 0
2. Shared power to vote or direct vote: 494,080
3. Sole power to dispose or direct the disposition: 0
4. Shared power to dispose or direct the disposition: 494,080
(c)Cygnus Capital has not entered into any transactions in the Shares during the past sixty days. The transactions in the Shares on behalf of Cygnus Opportunity during the past sixty days are set forth on Schedule B and incorporated herein by reference.
14

CUSIP No. 044103109

E.Cygnus GP
(a)As the general partner of Cygnus Opportunity, Cygnus GP may be deemed to beneficially own the 494,080 Shares owned by Cygnus Opportunity.

Percentage: Approximately 3.8%

(b)1. Sole power to vote or direct vote: 0
2. Shared power to vote or direct vote: 494,080
3. Sole power to dispose or direct the disposition: 0
4. Shared power to dispose or direct the disposition: 494,080
(c)Cygnus GP has not entered into any transactions in the Shares during the past sixty days. The transactions in the Shares on behalf of Cygnus Opportunity during the past sixty days are set forth on Schedule B and incorporated herein by reference.
F.Cygnus Property GP
(a)As the general partner and investment adviser of each of Cygnus IV and Cygnus V, Cygnus Property GP may be deemed to beneficially own the (i) 5,405 Shares owned by Cygnus IV, and (ii) 134,121 Shares owned by Cygnus V.

Percentage: Approximately 1.1%

(b)1. Sole power to vote or direct vote: 0
2. Shared power to vote or direct vote: 139,526
3. Sole power to dispose or direct the disposition: 0
4. Shared power to dispose or direct the disposition: 139,526
(c)Cygnus Property GP has not entered into any transactions in the Shares during the past sixty days. The transactions in the Shares on behalf of each of Cygnus IV and Cygnus V during the past sixty days are set forth on Schedule B and incorporated herein by reference.
G.Cygnus
(a)As the managing member of each of Cygnus Capital, Cygnus GP and Cygnus Property GP, Cygnus may be deemed to beneficially own the (i) 494,080 Shares owned by Cygnus Opportunity, (ii) 5,405 Shares owned by Cygnus IV, and (iii) 134,121 Shares owned by Cygnus V.

Percentage: Approximately 7.8%

(b)1. Sole power to vote or direct vote: 0
2. Shared power to vote or direct vote: 633,606
3. Sole power to dispose or direct the disposition: 0
4. Shared power to dispose or direct the disposition: 633,606
(c)Cygnus has not entered into any transactions in the Shares during the past sixty days. The transactions in the Shares on behalf of each of Cygnus Opportunity, Cygnus IV and Cygnus V during the past sixty days are set forth on Schedule B and incorporated herein by reference.
15

CUSIP No. 044103109

H.Mr. Swann
(a)As of the close of business on September 17, 2020, Mr. Swann beneficially owned directly 172,000, including 100,000 shares held in an IRA account in his name, and may be deemed to beneficially own the 206,625 Shares held by members of his immediate family, including 70,000 shares underlying certain call options that are currently exercisable. As the President and CEO of Cygnus, Mr. Swann may be deemed to beneficially own the (i) 494,080 Shares owned by Cygnus Opportunity, (ii) 5,405 Shares owned by Cygnus IV, and (iii) 134,121 Shares owned by Cygnus V.

Percentage: Approximately 7.8%

(b)1. Sole power to vote or direct vote: 0
2. Shared power to vote or direct vote: 1,012,231
3. Sole power to dispose or direct the disposition: 0
4. Shared power to dispose or direct the disposition: 1,012,231
(c)The transactions in the Shares by Mr. Swann personally and on behalf of members of his immediate family during the past sixty days are set forth on Schedule A and incorporated herein by reference. The transactions in the Shares on behalf of each of Cygnus Opportunity, Cygnus IV and Cygnus V during the past sixty days are set forth on Schedule B and incorporated herein by reference.

The filing of this Schedule 13D shall not be deemed an admission that the Reporting Persons are, for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended, the beneficial owners of any securities of the Issuer that he or it does not directly own. Each of the Reporting Persons specifically disclaims beneficial ownership of the securities reported herein that he or it does not directly own.

(d)No person other than the Reporting Persons is known to have the right to receive, or the power to direct the receipt of dividends from, or proceeds from the sale of, the Shares.
(e)Not applicable.
Item 6.Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer.

Mr. Swann is deemed to beneficially own American-style call options held by members of his immediate family, referencing an aggregate of 30,000 and 40,000 Shares, each of which has an exercise price of $5.00 and which expire on December 18, 2020 and March 19, 2020, respectively.

The Reporting Persons own in the aggregate 46,389 shares of the Issuer’s Series D Preferred Stock, 113,064 shares of the Issuer’s Series F Preferred Stock, 146,884 shares of the Issuer’s Series G Preferred Stock, 183,813 shares of the Issuer’s Series H Preferred Stock, and 129,834 shares of the Issuer’s Series I Preferred Stock.

On September 18, 2020, the Reporting Persons entered into a Joint Filing Agreement in which the Reporting Persons agreed to the joint filing on behalf of each of them of statements on Schedule 13D with respect to the securities of the Issuer to the extent required by applicable law. The Joint Filing Agreement is attached hereto as Exhibit 99.2 and is incorporated herein by reference.

Other than as described herein, there are no contracts, arrangements, understandings or relationships among the Reporting Persons, or between the Reporting Persons and any other person, with respect to the securities of the Issuer.

16

CUSIP No. 044103109

Item 7.Material to be Filed as Exhibits.
99.1Press release and Letter, dated September 17, 2020.
99.2Joint Filing Agreement by and among Cygnus Opportunity Fund, LLC, Cygnus Property Fund IV, LLC, Cygnus Property Fund V, LLC, Cygnus Capital Advisers, LLC, Cygnus General Partners, LLC, Cygnus Capital Real Estate Advisors II, LLC, Cygnus Capital, Inc. and Christopher Swann, dated September 18, 2020.

17

CUSIP No. 044103109

SIGNATURES

After reasonable inquiry and to the best of his knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct.

Dated: September 18, 2020

  Cygnus Opportunity Fund, LLC
   
  By: Cygnus General Partners, LLC, its general partner
     
  By: Cygnus Capital, Inc., its managing member
     
   

/s/ Christopher Swann

    Name: Christopher Swann
    Title: President and CEO

 

 

  Cygnus Property Fund IV, LLC
   
  By: Cygnus Capital Real Estate Advisors II, LLC, its general partner
     
  By: Cygnus Capital, Inc., its managing member
     
   

/s/ Christopher Swann

    Name: Christopher Swann
    Title: President and CEO

 

 

  Cygnus Property Fund V, LLC
   
  By: Cygnus Capital Real Estate Advisors II, LLC, its general partner
     
  By: Cygnus Capital, Inc., its managing member
     
   

/s/ Christopher Swann

    Name: Christopher Swann
    Title: President and CEO

 

 

18

CUSIP No. 044103109

  Cygnus Capital Advisers, LLC
     
  By: Cygnus Capital, Inc., its managing member
     
   

/s/ Christopher Swann

    Name: Christopher Swann
    Title: President and CEO

 

 

  Cygnus General Partners, LLC
   
  By: Cygnus Capital, Inc., its managing member
     
   

/s/ Christopher Swann

    Name: Christopher Swann
    Title: President and CEO

 

 

  Cygnus Capital Real Estate Advisors II, LLC
   
  By: Cygnus Capital, Inc., its managing member
     
   

/s/ Christopher Swann

    Name: Christopher Swann
    Title: President and CEO

 

 

  Cygnus Capital, Inc.
   
 

/s/ Christopher Swann

  Name: Christopher Swann
  Title: President and CEO

 

  

   
 

/s/ Christopher Swann

  Christopher Swann

 

19

CUSIP No. 044103109

SCHEDULE A

Directors and Officers of Cygnus Capital, Inc.

Name and Position Principal Occupation Principal Business Address Citizenship
Christopher Swann*
President and CEO
     
Natasha Swann
Secretary and Treasurer
Secretary and Treasurer of Cygnus Capital, Inc. 3060 Peachtree Road NW, Suite 1080, Atlanta, Georgia 30305. USA


* Mr. Swann is a Reporting Person and, as such, the information with respect to Mr. Swann called for by the Schedule 13D is set forth therein.

 

CUSIP No. 044103109

SCHEDULE B

 

Transactions in the Securities of the Issuer During the Past Sixty (60) Days

 

Nature of Transaction Amount of Securities
Purchased/(Sold)
Price per Share ($) Date of
Purchase

 

Cygnus Opportunity Fund, LLC

Sale of Common Stock (5,000) 7.3072 07/17/2020
Purchase of Common Stock 1,300 4.3783 07/28/2020
Purchase of Common Stock 12,000 3.6448 08/04/2020
Purchase of Common Stock 2,500 4.1775 08/04/2020
Purchase of Common Stock 3,200 4.0922 08/05/2020
Purchase of Common Stock 100 4.1200 08/05/2020
Purchase of Common Stock 11,700 4.1463 08/05/2020
Purchase of Common Stock 15,000 4.1191 08/05/2020
Purchase of Common Stock 2,900 4.0512 08/06/2020
Purchase of Common Stock 600 3.9817 08/10/2020
Purchase of Common Stock 14,400 3.9900 08/10/2020
Purchase of Common Stock 25,000 4.0716 08/11/2020
Purchase of Common Stock 6,300 4.0400 08/11/2020
Purchase of Common Stock 10,000 3.7113 08/13/2020
Purchase of Common Stock 5,000 3.6418 08/14/2020
Purchase of Common Stock 50,000 3.5113 08/17/2020
Purchase of Common Stock 10,000 3.5292 08/17/2020
Purchase of Common Stock 10,000 3.5194 08/17/2020
Purchase of Common Stock 5,222 3.5229 08/17/2020
Purchase of Common Stock 701 3.5414 08/17/2020
Purchase of Common Stock 1,800 3.5094 08/17/2020
Purchase of Common Stock 11,244 3.5230 08/17/2020
Purchase of Common Stock 6,033 3.5273 08/17/2020
Purchase of Common Stock 2,800 3.5000 08/17/2020
Purchase of Common Stock 7,200 3.5156 08/17/2020
Purchase of Common Stock 15,000 3.5287 08/18/2020
Purchase of Common Stock 10,000 3.4700 08/18/2020
Purchase of Common Stock 600 3.4600 08/18/2020
Purchase of Common Stock 100 3.4700 08/18/2020
Purchase of Common Stock 5,000 3.4000 08/18/2020
Purchase of Common Stock 1,000 3.3889 08/18/2020
Purchase of Common Stock 2,500 3.4100 08/18/2020
Purchase of Common Stock 5,000 3.4250 08/18/2020
Purchase of Common Stock 100,000 3.3480 08/19/2020
Purchase of Common Stock 19,000 3.4221 08/20/2020
Purchase of Common Stock 10,000 3.1591 08/21/2020
Purchase of Common Stock 8,232 3.1199 08/24/2020
Purchase of Common Stock 699 3.1914 08/24/2020
Purchase of Common Stock 50,000 3.0843 08/24/2020
Purchase of Common Stock 8,600 3.0091 08/25/2020
Purchase of Common Stock 16,400 2.9179 08/25/2020
Purchase of Common Stock 3,175 2.8309 08/26/2020
Purchase of Common Stock 5,000 2.8259 08/27/2020
Purchase of Common Stock 227 2.7824 08/28/2020
Purchase of Common Stock 9,773 3.0822 08/28/2020
Purchase of Common Stock 474 2.4762 09/09/2020
Purchase of Common Stock 300 1.9400 09/15/2020
Purchase of Common Stock 3,000 2.0700 09/16/2020

 

 

CUSIP No. 044103109

Cygnus Property Fund IV, LLC

Purchase of Common Stock 2,400 3.0479 08/24/2020
Purchase of Common Stock 2,600 3.0893 08/24/2020
Purchase of Common Stock 405 2.4762 09/09/2020

 

Cygnus Property Fund V, LLC

Purchase of Common Stock 100,000 3.4242 08/20/2020
Purchase of Common Stock 1,500 3.1837 08/21/2020
Purchase of Common Stock 18,500 3.1554 08/21/2020
Purchase of Common Stock 5,000 3.1705 08/24/2020
Purchase of Common Stock 9,121 2.4762 09/09/2020

 

 

CUSIP No. 044103109

Christopher Swann

Purchase of Common Stock 3,500 3.7300 08/03/2020
Purchase of Common Stock 200 4.0800 08/04/2020
Purchase of Common Stock 1,900 4.0800 08/04/2020
Purchase of Common Stock 2,400 4.1000 08/04/2020
Purchase of Common Stock 80 4.0900 08/04/2020
Purchase of Common Stock 500 4.0900 08/04/2020
Purchase of Common Stock 4,420 4.0800 08/04/2020
Purchase of Common Stock 1,000 4.0100 08/10/2020
Purchase of Common Stock 1,000 4.0100 08/10/2020
Purchase of Common Stock 180 4.0100 08/11/2020
Purchase of Common Stock 200 4.0000 08/11/2020
Purchase of Common Stock 4,120 4.0000 08/11/2020
Purchase of Common Stock 104 3.5100 08/17/2020
Purchase of Common Stock 4,400 3.5100 08/17/2020
Purchase of Common Stock 25 3.5100 08/17/2020
Purchase of Common Stock 600 3.5200 08/17/2020
Purchase of Common Stock 3,539 3.5200 08/17/2020
Purchase of Common Stock 1,332 3.5100 08/17/2020
Purchase of Common Stock 5,000 3.6300 08/17/2020
Purchase of Common Stock 1,800 3.5100 08/17/2020
Purchase of Common Stock 1,000 3.5100 08/17/2020
Purchase of Common Stock 200 3.5100 08/17/2020
Purchase of Common Stock 200 3.5100 08/17/2020
Purchase of Common Stock 500 3.5100 08/17/2020
Purchase of Common Stock 100 3.5100 08/17/2020
Purchase of Common Stock 3,200 3.5100 08/17/2020
Purchase of Common Stock 3,900 3.5200 08/17/2020
Purchase of Common Stock 1,100 3.5200 08/17/2020
Purchase of Common Stock 500 3.5200 08/17/2020
Purchase of Common Stock 9,500 3.5200 08/17/2020
Purchase of Common Stock 4,000 3.5000 08/17/2020
Purchase of Common Stock 100 3.5000 08/17/2020
Purchase of Common Stock 5,102 3.5000 08/17/2020
Purchase of Common Stock 798 3.5100 08/17/2020
Purchase of Common Stock 300 3.4500 08/18/2020
Purchase of Common Stock 100 3.4400 08/18/2020
Purchase of Common Stock 5,222 3.4400 08/18/2020
Purchase of Common Stock 4,378 3.4500 08/18/2020
Purchase of Common Stock 5,000 3.4100 08/18/2020
Purchase of Common Stock 3,000 3.4500 08/18/2020
Purchase of Common Stock 275 3.4200 08/18/2020
Purchase of Common Stock 1,800 3.4400 08/18/2020
Purchase of Common Stock 700 3.4400 08/18/2020
Purchase of Common Stock 514 3.2400 08/19/2020
Purchase of Common Stock 400 3.2600 08/19/2020
Purchase of Common Stock 845 3.2500 08/19/2020
Purchase of Common Stock 6,930 3.2800 08/19/2020
Purchase of Common Stock 1,185 3.2700 08/19/2020
Purchase of Common Stock 126 3.2800 08/19/2020
Purchase of Common Stock 9,800 3.2500 08/19/2020
Purchase of Common Stock 100 3.2500 08/19/2020
Purchase of Common Stock 100 3.2500 08/19/2020
Purchase of Common Stock 1,200 3.2800 08/19/2020
Purchase of Common Stock 600 3.2800 08/19/2020
Purchase of Common Stock 1,400 3.2800 08/19/2020
Purchase of Common Stock 100 3.3000 08/19/2020
Purchase of Common Stock 400 3.2900 08/19/2020
Purchase of Common Stock 1,000 3.3000 08/19/2020
Purchase of Common Stock 900 3.3100 08/19/2020
Purchase of Common Stock 200 3.3200 08/19/2020
Purchase of Common Stock 6,700 3.3200 08/19/2020
Purchase of Common Stock 5,000 3.3700 08/20/2020
Purchase of Common Stock 400 3.4500 08/20/2020
Purchase of Common Stock 700 3.4500 08/20/2020
Purchase of Common Stock 400 3.4600 08/20/2020
Purchase of Common Stock 9,300 3.3700 08/20/2020
Purchase of Common Stock 100 3.3600 08/20/2020
Purchase of Common Stock 600 3.3700 08/20/2020
Purchase of Common Stock 10 3.4500 08/20/2020
Purchase of Common Stock 4,990 3.4500 08/20/2020
Purchase of Common Stock 1,600 3.1200 08/21/2020
Purchase of Common Stock 162 3.1200 08/21/2020
Purchase of Common Stock 3,438 3.1200 08/21/2020
Purchase of Common Stock 4,800 3.1300 08/21/2020
Purchase of Common Stock 2,500 3.1800 08/21/2020
Purchase of Common Stock 200 3.1500 08/21/2020
Purchase of Common Stock 601 3.1500 08/21/2020
Purchase of Common Stock 199 3.1500 08/21/2020
Purchase of Common Stock 1,000 3.1400 08/21/2020
Purchase of Common Stock 1,000 3.1100 08/21/2020
Purchase of Common Stock 2,500 3.1800 08/21/2020
Purchase of Common Stock 800 3.0700 08/24/2020
Purchase of Common Stock 700 3.0600 08/24/2020
Purchase of Common Stock 1,800 3.0500 08/24/2020
Purchase of Common Stock 1,900 3.0400 08/24/2020
Purchase of Common Stock 1,300 3.0500 08/24/2020
Purchase of Common Stock 795 3.1300 08/24/2020
Purchase of Common Stock 1,005 3.1300 08/24/2020
Purchase of Common Stock 800 3.1300 08/24/2020
Purchase of Common Stock 2,400 3.1400 08/24/2020
Purchase of Common Stock 3,900 3.1600 08/24/2020
Purchase of Common Stock 535 3.1500 08/24/2020
Purchase of Common Stock 565 3.1600 08/24/2020
Purchase of Common Stock 4,905 3.1800 08/24/2020
Purchase of Common Stock 95 3.1800 08/24/2020
Purchase of Common Stock 2,200 3.0700 08/24/2020
Purchase of Common Stock 600 3.0700 08/24/2020
Purchase of Common Stock 2,200 3.0700 08/24/2020
Purchase of Common Stock 300 3.0500 08/24/2020
Purchase of Common Stock 100 3.0500 08/24/2020
Purchase of Common Stock 50 3.0500 08/24/2020
Purchase of Common Stock 400 3.0600 08/24/2020
Purchase of Common Stock 5,000 3.1100 08/24/2020
Purchase of Common Stock 5,000 3.0500 08/24/2020
Purchase of Common Stock 95 3.0300 08/24/2020
Purchase of Common Stock 200 3.0400 08/24/2020
Purchase of Common Stock 3,920 3.0400 08/24/2020
Purchase of Common Stock 1,200 3.0700 08/24/2020
Purchase of Common Stock 4,585 3.0800 08/24/2020
Purchase of Common Stock 700 3.0500 08/24/2020
Purchase of Common Stock 4,300 3.0500 08/24/2020
Purchase of Common Stock 7,500 3.2200 08/24/2020
Purchase of Common Stock 100 3.0800 08/25/2020
Purchase of Common Stock 700 3.0900 08/25/2020
Purchase of Common Stock 200 3.1000 08/25/2020
Purchase of Common Stock 1,300 3.1200 08/25/2020
Purchase of Common Stock 950 3.1100 08/25/2020
Purchase of Common Stock 2,500 2.9700 08/25/2020
Purchase of Common Stock 400 2.9700 08/25/2020
Purchase of Common Stock 200 2.9800 08/25/2020
Purchase of Common Stock 3,801 2.9900 08/25/2020
Purchase of Common Stock 3,099 3.0000 08/25/2020
Purchase of Common Stock 1,500 2.8900 08/26/2020
Purchase of Common Stock 300 2.6700 08/26/2020
Purchase of Common Stock 100 2.6700 08/26/2020
Purchase of Common Stock 600 2.6700 08/26/2020
Purchase of Common Stock 1,000 2.6700 08/26/2020
Purchase of Common Stock 500 2.8800 08/27/2020
Purchase of Common Stock 4,000 2.8500 08/27/2020
Purchase of Common Stock 3,000 3.1200 08/28/2020
Purchase of Common Stock 1,500 3.0400 08/31/2020
Purchase of Common Stock 2,300 3.1500 08/31/2020
Purchase of Common Stock 700 3.1300 08/31/2020
Purchase of Common Stock 100 3.1000 09/01/2020
Purchase of Common Stock 4,900 3.1000 09/01/2020
Purchase of Common Stock 1,000 3.0400 09/01/2020
Purchase of December 18, 2020 Call Option ($5 Strike Price) 15 0.5600 09/04/2020
Purchase of December 18, 2020 Call Option ($5 Strike Price) 23 0.5600 09/04/2020
Purchase of December 18, 2020 Call Option ($5 Strike Price) 162 0.5600 09/04/2020
Purchase of March 19, 2021 Call Option ($5 Strike Price) 12 0.8600 09/04/2020
Purchase of March 19, 2021 Call Option ($5 Strike Price) 188 0.8600 09/04/2020
Purchase of Common Stock 4,250 2.5000 09/09/2020
Purchase of December 18, 2020 Call Option ($5 Strike Price) 20 0.4700 09/09/2020
Purchase of December 18, 2020 Call Option ($5 Strike Price) 20 0.4800 09/09/2020
Purchase of December 18, 2020 Call Option ($5 Strike Price) 60 0.5100 09/09/2020
Purchase of March 19, 2021 Call Option ($5 Strike Price) 10 0.8100 09/09/2020
Purchase of March 19, 2021 Call Option ($5 Strike Price) 1 0.8100 09/09/2020
Purchase of March 19, 2021 Call Option ($5 Strike Price) 89 0.8100 09/09/2020
Purchase of Common Stock 5,000 2.2800 09/10/2020
Purchase of Common Stock 4,710 2.2800 09/10/2020
Purchase of Common Stock 290 2.2900 09/10/2020
Purchase of March 19, 2021 Call Option ($5 Strike Price) 4 0.7100 09/10/2020
Purchase of March 19, 2021 Call Option ($5 Strike Price) 95 0.7100 09/10/2020
Purchase of March 19, 2021 Call Option ($5 Strike Price) 1 0.9100 09/10/2020
Purchase of Common Stock 8,400 2.0200 09/11/2020
Purchase of Common Stock 1,600 2.0100 09/11/2020
Purchase of Common Stock 10,000 2.0200 09/11/2020
Purchase of Common Stock 300 2.0200 09/11/2020
Purchase of Common Stock 100 2.0200 09/11/2020
Purchase of Common Stock 4,600 2.0200 09/11/2020
Purchase of Common Stock 10,000 1.9900 09/11/2020
Purchase of Common Stock 2,000 1.9000 09/14/2020

 

Exhibit 99.1

CYGNUS CAPITAL, INC. ISSUES OPEN LETTER TO STOCKHOLDERS OF ASHFORD HOSPITALITY TRUST, INC.

 

·Strongly Opposes AHT’s Recently Launched Exchange Offers of Preferred Stock for Common Stock that Will Dilute Common Stockholders by ~94%
·Urges Stockholders to Vote AGAINST the Proposals to Amend AHT’s Corporate Charter and Issue Common Stock in the Exchange Offers at AHT’s Upcoming Special Meeting
·If the Special Meeting Proposals Are Voted Down, the Exchange Offers Will Not be Consummated
·Argues Recent Improvements in the Hospitality Industry and AHT’s Available Cash Make a Fire Sale of the Company to Preferred Stockholders Premature
·Believes AHT’s Board and Management Have Conflicting Interests, Are Not Aligned with Common Stockholders and Have Failed to Fully Evaluate Other Strategic Alternatives to the Exchange Offers

ATLANTA, GEORGIA, September 17, 2020 /PRNewswire/-- Cygnus Capital, Inc. (together with its affiliates, “Cygnus Capital”), one of the largest stockholders of Ashford Hospitality Trust, Inc. (the “Company”) (NYSE:AHT), beneficially owning approximately 7.8% of the Company’s outstanding common stock, today issued an open letter to the Company’s stockholders urging them to vote at the Company’s upcoming special meeting of stockholders scheduled to be held on October 6, 2020, “AGAINST” the proposals to amend the Company’s corporate charter and approve the issuance of common stock that are conditions to consummating the proposed, highly dilutive exchange offers of all of the Company’s outstanding preferred stock into shares of the Company’s common stock.

The full text of the letter follows:

 

 

3060 Peachtree Road NW, Suite 1080, Atlanta, GA 30305

P: (404) 467-6100 | F: (404) 467-6101

 

September 17, 2020

To Our Fellow Stockholders,

Cygnus Capital, Inc. (together with its affiliates, “Cygnus Capital”, “we” or “our”), is one of the largest stockholders of Ashford Hospitality Trust, Inc. (“AHT” or the “Company”) beneficially owning approximately 7.8% of the Company’s common stock (the “Common Stock”). We are writing to express our strong opposition to the Company’s proposed offers (the “Exchange Offers”) to the holders of each series of AHT’s preferred stock (the “Preferred Stock”) to exchange all of the shares of Preferred Stock for shares of Common Stock. If all shares of Preferred Stock are exchanged in the Exchange Offers, existing common stockholders will be immediately diluted by approximately 94%.

In order to consummate the Exchange Offers, common stockholders are being asked to vote upon and approve two proposals at the Company’s upcoming special meeting of stockholders scheduled to be held on October 6, 2020 (the “Special Meeting”): to amend the Company’s corporate charter and to issue up to 126,048,813 shares of Common Stock in connection with the Exchange Offers (the “Special Meeting Proposals”). We believe the Company is prematurely undertaking these highly dilutive Exchange Offers, just as the operating performance of the hospitality industry and AHT’s peers are showing signs of improvement, because management’s interests are not fully aligned with common stockholders. In our view, there are other strategic alternatives that can be explored to address the Company’s current liquidity needs and obligations to preferred stockholders until markets can stabilize post-COVID-19.

Fortunately, the Exchange Offers can be stopped. In order to consummate the Exchange Offers, 66 2/3% of the outstanding Common Stock must vote to approve the Special Meeting Proposals. Accordingly, Cygnus Capital urges its fellow common stockholders to vote AGAINST the Special Meeting Proposals today.

We Believe the Highly Dilutive Exchange Offers Are Premature in Light of Rapidly Improving Trends in the Hospitality Industry and AHT’s Current Cash Levels

In our view, the Exchange Offers are on an aggressive and expedited time-frame that seem to ignore rapidly improving dynamics in the hospitality industry overall and the Company’s available cash.

 

 

The operating performance of the hospitality industry in the United States is rapidly improving. While still depressed, the operating performance of the overall hospitality industry in the United States is rapidly improving as travel restrictions due to COVID-19 ease. According to STR, a leading industry data service provider and Deutsche Bank, total hospitality industry RevPAR (revenue per available room) and occupancy rates in the United States declined in April 2020 by approximately -84% and -70% year-over-year, respectively, but have since recovered nearly every week sequentially to -32.8% and -18.9%, respectively, as of the week ending September 5, 2020.

United States Hotel Occupancy YTD 2020

Source: STR

Even in the more impacted luxury hospitality segment that makes up a meaningful portion of AHT’s asset base, recovery in industry trends has been dramatic and continues to improve each week, according to STR. The slope of the recovery suggests that a near full recover is possible within a year.

In geographies where COVID-19 has been brought under control, hotel usage has returned to or in some cases exceeded 2019 levels. In China, for example, ADRs (Average Daily Rate) and occupancy rates are nearly back to 2019 levels, suggesting that typical behavior patterns will resume once the fear of COVID-19 is lifted. We assume that the United States will be able to eventually obtain the same level of public confidence in the control of COVID-19 that China has already obtained, which should translate into greatly improved hotel occupancy rates.

 

 

China Hotel Occupancy Year on Year Change in Occupancy

Source: STR

The operating performance of AHT’s peers appear to be improving. AHT’s peers and comparable real estate investment trusts (REITs) such as Pebblebrook (PEB), Xenia (XHR), Braemar (BHR), Diamondrock (DRH) and Sunshone (SHO), have recently released public presentations that show near breakeven operations at their property and/or corporate levels. STR’s industry data also shows that trends for the hospitality segments that AHT operates in are not deteriorating, rather the exact opposite – trends seem to be improving. In fact, “drive to” and “leisure” properties in the industry, of which AHT has many, are generally generating positive cash flow including debt service coverage, according to industry analysts and public comments by management teams operating in these segments. At the recent JP Morgan hospitality conference on September 14-15, 2020, management teams of REITs and publicly traded C-corps in the hospitality industry reported steadily improving industry financial conditions, not deteriorating conditions.

Comparable asset sales are improving. The sales of assets comparable to AHT’s assets, despite the effects of COVID-19, also point to rapidly improving asset values and recovery values for owners of hospitality assets. In 2019, typical cap rates for hospitality assets were 5.0-8.0% for assets of the quality in AHT’s portfolio. Using AHT’s 2019 performance of approximately $425 million of EBITDA, the implied unlevered market value of AHT’s assets prior to COVID-19 was $5.3 billion to $8.5 billion. COVID-19 has logically impaired near term asset values, but recent industry transactions suggest that cap rates are currently in the range of 10% (and declining) as the effects of COVID-19 begin to level off. Further, the Federal Reserve has stated a policy of continued support for low interest rates which is highly supportive of asset values for income generative properties such as hotels. AHT has approximately $4.1 billion of property level debt and approximately $565 million of Preferred Stock liquidation preference ahead of Common Stock holders. Even the extreme measure of an orderly liquidation of the Company over the next 12-24 months appears likely to result in a much higher recovery for holders of Common Stock, assuming these cap rates, than the proposed highly dilutive Exchange Offers.

 

 

AHT’s appears to have sufficient liquidity to fund operating costs and AHT’s overall performance may be improving. In AHT’s quarterly report for Q2 2020, AHT disclosed that the Company burned $77 million in Q2 2020, but as of the end of Q2 2020, had $274 million of liquidity, consisting of $165 million of cash, $95 million of restricted cash and $13 million due from third party managers. On AHT’s Q2 2020 earnings call, AHT’s CEO noted that while they were looking for ways to improve liquidity, he stated, “as we sit here, now we feel like we have ample liquidity”.

Management also noted that the Company does not have high exposure to group business, which has been particularly impacted by COVID-19. Management further stated, on this call, that RevPAR was down 93%, 89% and 82% in April, May and June of this year, respectively, but that they expect in July 2020 to only be down “somewhere in the 70s range”. In addition, AHT’s CEO stated that, “for limited service properties, the property level breakeven was between 25-35%, and for full service hotels…35-45% occupancy. Some individual assets… in higher wage markets could be higher so closer to 50% or so… you probably need to add 10 points or so to kind of get to a total corporate level break even”.

AHT has a highly diverse asset base that has generally trailed the industry RevPAR and occupancy rates by about 10-20% points. As noted above, STR had disclosed that overall RevPAR and occupancy rates in the United States have recovered to approximately -33% and -19%, respectively for the week ending September 5, 2020. Accordingly, it is possible that AHT has similarly recovered to a range of RevPAR being down -55-60% and occupancy rates being down in the -40-45% range. If true, this would mean that 30% of AHT’s portfolio (limited service) is close or able to service its property level expenses and debt and approximately 70% of AHT’s portfolio (full service) is at breakeven at the property level, excluding debt service. If each week continues to add 1-2 percentage points of performance improvement in RevPAR and occupancy, as the past few months have trended in the industry, we believe that by year end, all of AHT’s portfolio could be able to service its debt obligations.

Given the Company’s relatively ample liquidity and overall industry trends, AHT management and board of directors (the “Board”) seem to be rushing to consummate a highly dilutive restructuring of the Preferred Stock at the expense of common stockholders without a pressing need. Why is there such a rush to essentially wipe out common stockholders? Even if the above projections are optimistic, the Company seems to have enough cash to wait a couple more quarters before undertaking these devastating Exchange Offers. Furthermore, management has said they manage the Company’s property level performance weekly, but they have not provided any of this data to stockholders to allow them to decide if the situation is truly as dire as management claims.

 

 

Preferred Stock Is Not a Current Cash Drain; Property Level Operating Performance Is. AHT management has argued the cumulative dividend payments owed to preferred stockholders are so onerous that the only solution is to essentially wipe out common stockholders through these Exchange Offers. In our experience, preferred stock in a corporation’s capital structure is designed exactly for crisis situations such as COVID-19 to allow a management team operational flexibility in a time of financial crisis. A management team can temporarily suspend preferred stock dividend payments to focus on its operations and weather the storm for a better economic climate. That is exactly what AHT management should be doing with the Preferred Stock at this time. The cost of not paying dividends on the Preferred Stock is only about $30 million per quarter and while this accruing obligation would eventually dilute common stockholders if it cannot be paid off in cash, there is still plenty of time to see if the worst case cash scenario is really necessary at this juncture.

In contrast, we believe a more pressing cash issue at the moment at AHT is not the accruing obligations to the holders of Preferred Stock, but rather operating costs at the property level. In our view, we do not believe AHT’s Board and management are focused enough on closing hotel assets that are not covering their variable costs and question whether this lack of focus is due to the Board and management’s desire to preserve the fees paid to AHT’s management company, Ashford, Inc. (“AINC”) which is controlled by members of the Board and management team.

We Believe AHT Management and Board Have Conflicting Interests, Are Not Aligned with Common Stockholders and Are Not Fully Exploring Other Strategic Alternatives.

Due to REIT tax rules, AHT must use a separate property manager to manage its assets. Despite industry trends toward self or internally managed and advised hospitality REITs, AHT has a highly conflicted structure where the management of AHT is also the owner of the property/asset management company, in this case another publicly traded company, AINC. Monty Bennett who is also the Chairman of the Board of AHT owns, together with his father, a 68.1% interest in AINC on a fully diluted and converted basis and also serves as AINC’s Chairman and CEO. In addition to Mr. Bennett’s holdings, several of AHT’s management team are insiders at AINC.

We believe AHT management and AINC are operating AHT to maximize AINC’s management fees, to the detriment of AHT common stockholders. The primary objective for AINC is to grow its fees (revenue). We believe numerous expense reductions are likely possible at AINC that could benefit AHT, but AINC stockholders/insiders are better served if the AHT common stockholders are diluted and AHT as a company survives, instead of other alternatives such as a sale or orderly liquidation of AHT’s assets. AINC stockholders and insiders needs AHT to keep paying fees for AINC to survive. Even if owners and management of AINC are also stockholders of AHT, we believe their interests are not aligned as AINC is highly compensated by the fees that AHT pays to AINC. In fact, according to AINC most recently filed 10-Q, for the six months ending June 30, 2020, AINC derived $120 million from AHT out of $179 million total revenue for the period. Said another way, for the first six months of this year, 67% of AINC’s revenue came from AHT. Given a choice between the two, we believe AINC and AHT management have a bigger economic interest in the survival of AINC than they do in the dilution of their ownership position of AHT, creating an inherent conflict of interest.

 

 

We note further that AHT, AINC, Lismore, a subsidiary of AINC, and certain other parties are being formally investigated by the SEC relating to certain related party transactions and the Company’s accounting policies, procedures, and internal controls related to such related party transactions.

We Believe Numerous and Less Dilutive Strategic Alternatives Exist for AHT

We believe numerous and less dilutive strategic alternatives exist for AHT to navigate the impact of COVID-19, including orderly asset sales, refinancing of assets, raising additional short term debt, merger with or sale to a stronger REIT, a rights offering to the common stockholders, further reductions in expenses at AHTs hotel assets or evaluation of more drastic actions such has foregoing REIT status or cancelling AHT’s management contract with AINC to preserve value for common stockholders.

In our view, the obligations to the Preferred Stock can be handled in the future either by restructuring the Preferred Stock, repurchasing shares of Preferred Stock at a discount or negotiating with the Preferred Stock holders in the future to convert accrued, but unpaid dividends into additional new shares of Preferred Stock in a PIK or other similar type of transaction. The Preferred Stock obligations do not appear to represent a pressing threat to the Company currently as they don’t burn cash. Yet, AHT management is effectively bankrupting the Company with these proposed Exchange Offers without going through a formal bankruptcy process.

Finally, industry analysts such as Deutsche Bank, Baird and others have target prices for the Common Stock at multiples of current levels and have not forecasted the dire strategic necessity of this proposed dilutive transaction. Deutsche Bank put out a “sum or the parts” analysis of the Company that suggests that the Company could be liquidated for at least $190,000/key and still have recovery of $11 per share for Common Stock after all debt and Preferred Stock preferences are repaid. Prior to the announced Exchange Offers, Baird recently placed a $6 per share target price for the Common Stock.

Given the reasons outlined above we plan to vote, and urge all common stockholders to vote, AGAINST the Special Meeting Proposals. The Exchange Offers are not in the best interests of common stockholders and the common stockholders have the power to stop the consummation of the Exchange Offers by voting AGAINST the Special Meeting Proposal today. 

Sincerely,

/s/ Christopher Swann

Christopher Swann

CEO, Cygnus Capital, Inc.

 

 

 

About Cygnus Capital, Inc.

Cygnus Capital, Inc. is an integrated real estate investment and alternative asset management company focused on opportunistic, special situation, and distressed real estate investments. Cygnus targets long term, absolute returns for investors by applying a differentiated approach to real estate investing. By placing an emphasis on the acquisition, workout, and disposition of real estate debt assets characterized by their complexity, inefficiency, and niche qualities, Cygnus Capital is able to target superior, absolute returns for its investors. Cygnus Capital and its affiliates own approximately 1.9% of the outstanding shares of the Series D Preferred Stock, 2.4% of the outstanding shares of the Series F Preferred Stock, 2.4% of the outstanding shares of the Series G Preferred Stock, 4.8% of the outstanding shares of the Series H Preferred Stock, and 2.4% of the outstanding shares of the Series I Preferred Stock.



* * *

Written materials are submitted voluntarily pursuant to Rule 14a-6(g)(1) promulgated under the Securities Exchange Act of 1934. This is not a solicitation of authority to vote your proxy. Cygnus Capital is not asking for your proxy card and will not accept proxy cards if sent. The cost of this filing is being borne entirely by Cygnus Capital and its affiliates.

PLEASE NOTE: Cygnus Capital is not asking for your proxy card and cannot accept your proxy card. Please DO NOT send us your proxy card.

Exhibit 99.2

JOINT FILING AGREEMENT

In accordance with Rule 13d-1(k)(1)(iii) under the Securities Exchange Act of 1934, as amended, the persons named below agree to the joint filing on behalf of each of them of a Statement on Schedule 13D (including additional amendments thereto) with respect to the Common Stock, par value $0.01 per share, of Ashford Hospitality Trust, Inc., a Maryland corporation. This Joint Filing Agreement shall be filed as an Exhibit to such Statement.

Dated: September 18, 2020

  Cygnus Opportunity Fund, LLC
   
  By: Cygnus General Partners, LLC, its general partner
     
  By: Cygnus Capital, Inc., its managing member
     
   

/s/ Christopher Swann

    Name: Christopher Swann
    Title: President and CEO

 

 

  Cygnus Property Fund IV, LLC
   
  By: Cygnus Capital Real Estate Advisors II, LLC, its general partner
     
  By: Cygnus Capital, Inc., its managing member
     
   

/s/ Christopher Swann

    Name: Christopher Swann
    Title: President and CEO

 

 

  Cygnus Property Fund V, LLC
   
  By: Cygnus Capital Real Estate Advisors II, LLC, its general partner
     
  By: Cygnus Capital, Inc., its managing member
     
   

/s/ Christopher Swann

    Name: Christopher Swann
    Title: President and CEO

 

 

 

 

  Cygnus Capital Advisers, LLC
     
  By: Cygnus Capital, Inc., its managing member
     
   

/s/ Christopher Swann

    Name: Christopher Swann
    Title: President and CEO

 

 

  Cygnus General Partners, LLC
   
  By: Cygnus Capital, Inc., its managing member
     
   

/s/ Christopher Swann

    Name: Christopher Swann
    Title: President and CEO

 

 

  Cygnus Capital Real Estate Advisors II, LLC
   
  By: Cygnus Capital, Inc., its managing member
     
   

/s/ Christopher Swann

    Name: Christopher Swann
    Title: President and CEO

 

 

  Cygnus Capital, Inc.
   
 

/s/ Christopher Swann

  Name: Christopher Swann
  Title: President and CEO

  

 

   
 

/s/ Christopher Swann

  Christopher Swann