Good day and welcome to the Ashford Hospitality Trust first quarter 2017 conference call. As a reminder, today's conference is being recorded. At this time, I would like to turn the conference over to Joe Calabrese, Financial Relations Board. Please go ahead.

Thank you Lisa. Good day everyone and welcome to today's conference call to review the results for Ashford Hospitality Trust for the first quarter of 2017 and to update you on recent developments. On the call today will be Douglas Kessler, President and Chief Executive Officer, Deric Eubanks, Chief Financial Officer and Jeremy Welter, Executive Vice President of Asset Management. The results as well as notice of the accessibility of this conference call on a listen-only basis over the Internet were distributed yesterday afternoon in a press release that has been covered by the financial media. At this time, let me remind you that certain statements and assumptions in this conference call contain or based upon forward-looking information and are being made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to numerous assumptions, uncertainties and known or unknown risks, which could cause actual results to differ materially from those anticipated. These risk factors are more fully discussed in the company's filings with the Securities and Exchange Commission. The forward-looking statements included in this conference call are only made as of the date of this call and the company is not obligated to publicly update or revise them. In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in the company's earnings release and accompanying tables or schedules, which have been filed on Form 8-K with the SEC on May 4, 2017 and may also be accessed through the company's website at www.ahtreit.com. Each listener is encouraged to review those reconciliations provided in the earnings release together with all other information provided in the release. I will now turn the call over to Douglas Kessler. Please go ahead, sir.

Good morning and thank you for joining us to discuss Ashford Hospitality Trust's first quarter results. Let me begin by first addressing the FelCor transaction. We announced on Wednesday of this week that we are no longer seeking the merger with FelCor and have withdrawn our preliminary proxy statement and proposed slate of seven independent directors for election to FelCor's Board. Although we are disappointed in the outcome of our effort to merge with FelCor, we hope that investors recognize the financial and strategic discipline that we showed during the entire process in order to maximize value for our shareholders. Also, in order for me to provide more focus on the future of Ashford Trust and my duties as CEO and President of the company, I want to let our shareholders know that if you have not already read in an Ashford Prime filing, that I recently resigned as President as well as a Director of Ashford Prime. Let me now turn to our 2017 first quarter results. Our first quarter comparable RevPAR growth for all hotels of 3.4% was right in line with the overall industry and we delivered strong comparable hotel EBITDA flow-through of 56%. We also saw our comparable hotel EBITDA margin expand by 56 basis points. We are very pleased with these results and believe they speak to the quality and diversity of our portfolio as well as our asset management capabilities. This management team has a long track record since our IPO of creating shareholder value and over the years, we have worked on various ways to maximize the value of our existing assets while also looking for accretive hotel investment opportunities and maintaining capital markets discipline. Shareholders have benefited from our efforts since our IPO given that Ashford Trust has achieved a 148% total…

Thanks Douglas. For the first quarter of 2017, we reported a net loss attributable to common stockholders of $33.2 million or $0.35 per diluted share. For the quarter, we reported AFFO per diluted share of $0.32. Adjusted EBITDA totaled $100.8 million for the quarter. At the end of the quarter, we had total assets of $4.8 billion. We had $3.7 billion of mortgage debt with a blended average interest rate of 5.6%. Our debt was 15% fixed rate and 85% floating rate, all of which have interest rate caps in place. Including the market value of our equity investment in Ashford Inc., we ended the quarter with net working capital of $468 million. All of our debt is nonrecourse property level debt and we believe we have well laddered maturity schedule. As of March 31, 2017, our portfolio consisted of 121 hotels with 25,526 net rooms. Our share count currently stands at 117.6 million fully diluted shares outstanding which is comprised of 97.5 million shares of common stock and 20.1 million OP units. We have 21.2 million OP units but as a result of the current conversion factor being less than one-for-one, these units are convertible into approximately 20.1 million shares of common stock. With regard to dividends, the Board of Directors declared a first quarter 2017 cash dividend of $0.12 per share or $0.48 on an annualized basis. Based on yesterday stock price, this represents a 7.7% dividend yield, one of the highest in the hotel REIT space. The adoption of a dividend policy does not commit the company to declare future dividends and the Board will continue to review the dividend policy on a quarter-to-quarter basis. This concludes our financial review and I would now like to turn it over to Jeremy to discuss our asset management activities for the quarter.

Thank you Deric. Our portfolio grew comparable RevPAR by 3.4% with EBITDA flow-through of 56% in the first quarter. Our RevPAR growth outperformed the upper upscale chain scale nationally by 40 basis points and our competitors by 120 basis points. Room nights for both our group and retail segments increased in the first quarter while the digital channels grew as well. During 2017, we will continue to invest in our portfolio to maintain competitiveness. In total, we estimate spending approximately $200 million in capital expenditures during the year, which includes guest room renovations at the Hilton Boston Back Bay, Marriott Crystal Gateway, Renaissance Palm Springs and Ritz-Carlton Atlanta. In addition to the guestrooms renovations, we will complete a comprehensive lobby and restaurant repositioning at the Hyatt Regency Savannah. We continually identify opportunities to create value throughout our portfolio and at the Renaissance Nashville, a significant and transformational redevelopment of the adjoining Nashville Convention Center is about to begin that will result in new demand generators for our hotel and additional premium meeting space for the hotel. To provide a little more detail on the redevelopment, the City of Nashville recently sold the Nashville Convention Center to a developer. The former convention center is adjacent to our Renaissance Nashville. The developer is planning a $400 million redevelopment into a mixed-use facility featuring a 385,000 square foot Class A office tower, 235,000 square feet of high-end retail, dining and entertainment, including the National Museum for African American Music, over 350 residential units, more than 2,000 parking spaces and upgraded meeting space that is currently utilized by our hotel. We have worked with the developer and have entered into an agreement to acquire a permanent fee interest in the reconfigured meeting space that is currently utilized by the hotel as well as additional…

[Operator Instructions]. We will take our first question from Bryan Maher with FBR & Co.

Good morning guys.

Good morning Bryan.

Just a couple of quick question. We heard this morning from one of the big REITs in the space about increased labor cost and we are just curious if you are seeing any of the same and potentially what the magnitude of that is?

This is Jeremy, Bryan. We have been dealing with that specifically for the last couple of years and we have done a good job of controlling it and still driving margin and by doing some other things within our business and some other efficiencies. But I don't think it's a huge issue in our portfolio. It's primarily an issue in certain markets and we have got pretty good diversification within our assets.

Bryan, I think obviously the announcement, the employment rate getting down another 10% of 4.4%, I think is an indication that obviously labor markets continue to tighten and it's certainly something that we, along with our HR group, continue to do our best to keep those cost under control. But certainly I would say that the tide doesn't move in lodgings favor, given the more constrained labor conditions and we are doing our best to control those costs.

And something that helped a little bit is it were you are seeing a lot of those wage pressures are in markets that are outperforming the rest of the industry.

Yes. That's helpful. And then on the acquisition front, with FelCor now in the rearview mirror, what do you think that the prospect are to continue to ramp the portfolio quality higher into the upper upscale full-service? What are the prospects there? And then also if you could just update on the select service sales outlook?

Sure. So on the transaction opportunity and the pipeline today, let me just start there from a macro level. The pipeline for transactions today, it's been active but still somewhat soft relative to, I think, some folks' expectations as to how 2017 would get off. We have tracked about 50 to 60 deals that have traded, circa $4 billion of transactions and these are for assets that are more than $20 million in purchase price. So trying to capture the meat of the segment for where we would look. The deals that are extremely high quality, high RevPAR, there is a lot of competition for those types of assets. And as you know, the profile for Trust is to pursue a full-service upper upscale and upscale type hotels. And we are not chasing to elevate RevPAR. We are looking for deals that are right in our strike zone from a RevPAR standpoint but also balancing it with the yield that we can acquire them for. So there is a trade-off that we view between current yield and the impact of that the RevPAR would have on our multiples. We believe that higher RevPAR portfolios have generally shown over time to trade at slightly higher multiples. So we are cognizant of all the relationships that are involved in that. We are sitting on a significant amount of capital in Ashford Trust and even during the FelCor process, we were continuing to mine the market for appropriate deals that would fit our criteria. Obviously with the NYU Conference coming up, that generally is a point in the cycle where more deals come to market. We have meetings set up with all the appropriate brokers and we will be evaluating opportunities to invest our capital in ways that are accretive to maximize shareholder returns with a focus on total shareholder return as it factors into our expected stock price growth over time. As to your question about select service, obviously our long-term focus is on the full-service hotel strategy and long-term we don't intend to be in the select service segment in Ashford Trust. So we do plan to exit over time and we continue to evaluate the best way to maximize returns for shareholders. So we will continue to be disciplined in our approach of exiting the select service segment.

Thanks Douglas.

Thanks Bryan.

And we will now go to Ryan Meliker with Canaccord Genuity. Please go ahead.

Thanks. A couple quick ones for me. I think first of all, you guys have talked about your particular strategy focused on full-service hotels across the country. Ashford Prime has talked about focusing on luxury and high-end hotels and they have identified a handful of assets that are non-core to them or you guys have a handful of assets that seem like they would be core to them and they have got some ROFO opportunities there. Is Ashford Trust interested in either A, selling some of those ROFO assets in the near-term? Or B, maybe even doing some type of swap where AHT contributes some assets to AHP and AHP contributes some assets back to AHT?

Thanks Ryan. The goal of Ashford Trust is to maximize the value for shareholders and in doing so through transactions. We have an open mind as to monetizing hotels. We identify the ROFO assets some time ago with the creation of Ashford Prime. I think if you look at the assets more closely in that portfolio, given the stated strategy that Ashford Prime has outlined with respect to luxury and resort type hotels, within that portfolio of ROFO assets, there is only a couple maybe that would fit the criteria. So for example, even though just to pick one or two, we have some Embassy suites identified. I don't think that while they were originally lined as potential ROFO assets, they probably don't fit the criteria for Prime, but I will leave that up to do Prime to address. Any sort of activity related to the ROFO assets would first require the Trust Board to indicate that they wanted to sell those ROFO assets and then at that point that the Prime Board could engage. We clearly have, as a result of these potential situations to create value for both platforms, we have committees set up within the Board to address any type of independence or conflict related to those types of decisions. We don't comment obviously on expected sales until such time as we have the opportunity to describe a transaction where we typically either have closed on it or hard money deposit. So hopefully that backdrop can give you some color on the situation related to your question on ROFO assets and how that would actually work.

Okay. That's helpful. And then just staying on the transaction theme, you guys sold a couple of assets in the quarter. Can you give us any color on what trailing cap rates or EBITDA multiples, et cetera for those non-core assets?

These are pretty small assets and just our logic behind them was, as we always look to our portfolio to try to find the right balance between reasons to hold, reasons to sell and these were assets that we saw a fair amount of new supply coming in. There was a pretty sizable PIP related to the properties and so we thought the best strategy was to rather than spend good money after these assets just to sell the properties, pay down the debt and move on. And so that's what we do when we look at, as I mentioned in my prepared remarks, capital recycling.

Okay. So no color on cap rates or multiples, et cetera? Because you usually provide some color on when you buy assets on a trailing basis. But okay. And then I also wanted to ask about, just bigger picture. So the FelCor deal obviously didn't work out. I am sure you guys have a pretty strong view on the mistake that was made by the FelCor Board not to take your deal over RLJ's. I am just curious if you have come away with any learning points out of this? Like what is it that you might have done differently that might position you to do things differently next time an opportunity like this comes up. I am just curious if you have any big takeaways?

I think it's a great question. I don't think there is anything we would have done differently. We are disappointed. We put a deal on the table that we felt was a better offer. And they decide to go a different direction. So I don't know what you can take away when your deal is a better deal.

Yes. Look, I thought your deal was a better deal too but I guess I think the only takeaway that I would have is that maybe some people value your currency in a different way than other company's currencies and is that something to at least consider going forward? And then I guess along those same lines, with regards to the FelCor offer you had indicated that the Ashford Trust Board would go through and potentially make some adjustments to the termination fee to Ashford Inc. upon completion of the transaction. With the FelCor deal dead now, is that still something the Ashford Trust Board plans to do?

Let me address that, Ryan. But I just want to come back to your point about looking at the value of currency differently. I think these are efficient markets and our currency is valued on a daily basis and the future benefit of currency, I think, has a lot to do with the management team, the capabilities that that management team has in maximizing total shareholder return and I think our currency has to reflect the fact that this management team has outperformed peers in terms of total shareholder return. At the end of day, I think that's really what matters in the eyes of shareholders. I think any sort of comments around the subjectivity of one currency over another, I think you just have to look at the metrics in the market and realize that whatever subjective factors and whatever objective factors are really already priced into any company's existing stock performance. So let me come back to the other part of the question which has to do with the advisory agreement. And you will recall that we announced, with the potential FelCor transaction that the Ashford Trust Independent Directors would engage with Ashford Inc. to attempt to revise the advisory agreement on terms materially similar to the Prime agreement. And it's too early to comment if such discussions would take place outside the FelCor transaction. Obviously, the Trust Board will be looking closely at the outcome of the vote that takes place with Prime, I believe, on June 9. So I think we will have to just wait and see what that outcome is and what the Trust Board, if anything, would like to do.

All right. That's helpful. That's all for me. Thanks Doug.

[Operator Instructions]. I will now take our next question from Chris Woronka with Deutsche Bank.

Hi you all. Good morning guys. Just to kind of follow up a little bit on the acquisition front. You guys have done some things in the past you found, I guess what I would say are one-off opportunities like Fremont. I assume it's harder to find those to mine through those. Is that generally accurate? And are you willing to do things at this point it's likely to kind of require I guess more heavy lifting probably than what you did in Fremont?

So I am not sure, Chris, you are saying the single property acquisitions?

Yes. I am just saying, you had a really good value add situation, right, in Fremont and it wasn't a lot of necessarily heavy lifting, right. It was kind of a change in management at the hotel and some other things. I guess the question is, are there any of those out there that you see? And then the second part of it is, if there are, are you willing to do an acquisition that requires a greater level of a renovation and disruption?

Well, I think there is a good variety of transactions that are in the market today. The question is, is the price something that we feel is going to be accretive to our total shareholder returns. And how we get there, whether it's through more aggressive asset management because there is a value add opportunity or if it's simply replacing the third-party manager with Remington or if it's more assertively managing the brands. I think you have seen in many of our case studies presented in some of our earlier presentations that I think all three of those, we pretty much hit on all cylinders. And so we are capable of doing that. Obviously low-hanging fruit is better. And so we certainly are mining the market for those types of opportunities.

Okay. Fair enough. And then secondly, with the Marriott/Starwood integration little bit further along now, are you guys, from your vantage point, seeing any kind of benefits on the cost side? And on the flip side of that, is there anything on your radar in terms of whether it be amenity creep or anything like that? How do you net the merger so far from your standpoint?

Yes. This is Jeremy. Let me take that. I sit on their integration committee and so I don't know what they have shared publicly or not at this time. so I haven't track what they release, but what I can say is that, some of the expense savings that we are going to see is going to be a little bit down the road from the property level. I think from their perspective, they are certainly seeing some of the corporate savings initially. And some of those benefits are going to come to us but most of it is going to be down the road. In terms of some of the benefits for Starwood hotels, we own some Starwood hotels, in terms of access to mass distribution, I think that's down the road as well. I think you are off just several quarters until we really start to see some significant benefits from the merger. And then one of the things that we do like is that we were never a big fan of Starwood's renovation program. And so that's going to follow Marriott's traditional renovation program which we operate very effectively with them. So we are looking forward to that.

Okay. That's great color. Thanks guys.

We will got next to Tyler Batory with Janney Capital Markets.

Great. Thanks for taking my questions. I apologize if you addressed earlier in the call. I jumped on a little bit late here. But Doug, I understand it's been a few months since the last call, but any update on your general industry view on what are seeing out there? Just wondering if any thing has changed over the past few months?

I think the general industry view is still cautiously optimistic. You have to look at some of the macroeconomic data to get a sense as to where we think the industry is headed. And obviously GDP growth was a little light in the first quarter at 0.7%. But consumer confidence still stays high around 97% level. The unemployment rate, we comment on early in the call, tightened a bit at 4.4%. Corporate profits are still up and the PMI Index is still holding up. And so there is some inflation with prices of goods and services up about 2.6%. And you can look at all those data points as say, generally speaking that's positive for factors that could impact lodging. I think that some of the softness and I am speaking mainly with respect to the GDP number that was released for the first quarter, I think is transitory. And I think that's consistent actually with the Fed comments which is why they didn't increase rates in the meeting recently. So when you factor all of those aspects that could elevate demand, I think it's still a pretty attractive market from that standpoint. Obviously, on the other side we are looking at the growth of supply. And I think, again that speaks to the benefit of our very diverse platform, our footprint, our asset quality, our locations. I think we stand to perform well against the new supply increases and perhaps more competitively than some of our peers. And I think this quarter is a good example of that where we exhibited RevPAR growth of 3.4% and I think that data that we have seen overall on our peer average RevPAR growth is up 2%. And similarly, the types of assets that we have and how we operate them, I think from a flow-through standpoint, again we perform well with the assets that we have given that our flows were 56%. And I would think our math shows that peer EBITDA flow-through is closer to 26%. So all of those data points when you put together, I think it leaves us still with a reasonably positive outlook, obviously absent exogenous events that are a bit unpredictable right now.

Okay. That's very helpful. And then just to dig in the portfolio a little bit further here, are you able to talk about RevPAR growth that you are seeing from some of the bigger full-service assets versus some of the flex-service assets or maybe some flex-service assets that you might look to sell? I mean when I look at the 3.4% growth, just trying to get a better sense of what assets specifically are driving that?

Pretty similar across the board. It's more market driven, is what we are seeing. So obviously DC outperformed. We had some growth in Houston that's Super Bowl related. It's mainly market-driven. Okay. That's all for me. Thank you.

[Operator Instructions]. We will now go to Michael Bellisario with Robert W. Baird & Co.

Thanks. Good morning everyone.

Good morning.

I just wanted to drill down on the SW deal and the comments you made there. So was this a contract that was expiring? Or did you negotiate with Marriott a franchise agreement in exchange for the renovation that you have now planned?

It's not to do with the renovation. It is to do with something else within our portfolio that we are on a confidentiality on. But it wasn't a big concession for us. So I could tell you, it did have to do with some impact to us on integration with the Starwood, if that helps.

Got it. So it's more of a horse trade than contract.

Yes. We did enter into a PIP. But renovation plan is consistent with what we needed to do with the asset. Since we acquired the asset from Highland Hospitality, we put very little capital into the property. So it is in need of a guest room renovation. It's in need of a ballroom renovation. That was already budgeted and planned. The only capital we put into the hotel is we upgraded the restaurant and added a bar within the restaurant to give the feel of a great room concept which was very successful. But we didn't even do the rest of the lobby when we did that.

Got it. And then maybe how many other contracts aside from this one, which I guess doesn't sound like it was expiring in the near-term are up for potential renewal or rollover in the next, call it, couple of years?

Well, we always have franchise agreements renewing. And so we look five years out on a franchise agreement and try to manage them like we manage our debt maturities. So we are always in the process of renewing franchise agreements. Management agreements tend to be long term and so there has to be some sort of event or catalyst that can create an opportunity for us to convert to franchise. We have done that. I think in the prepared remarks, I quoted 10 assets we still currently hold. I think we sold off a few. So the number that we have done since 2010 is probably somewhere close to that 12 to 15 assets that we are able to convert. But there is always some sort of reason that we are able to do that, some sort of concession that maybe Marriott is doing. In some cases, we have had some performance termination language that was favorable. But most of those have already been mined within our portfolio. And so it may just be another horse trade on something else that happens down the road. But there is nothing that I can tell you that in the near future that I am aware of that would create that opportunity.

Got it. That's helpful. And then one last one. Can you expand on your comments that you made about the Starwood renovation program. Was that a cost issue? Was it a process issue? Any color there would be helpful.

Yes. Okay. So it is more of a nuisance issue for us. And so they have right in the franchise agreements to PIP the hotel. I can't remember if it was five years or six years, but it was very frequently. And so we would go through and we would complete the renovation because we would renovate when we thought we need to renovate. And once we complete the renovation, a lot of times we get a notice that Starwood has a PIP right coming due in a year and so they want to come and PIP the hotel, even though we just completed a comprehensive renovation at the hotel. And so that would morph into a five-year capital plan that we would have to agree to with Starwood because it was amendment to the franchise agreement, we would have to get our lenders involved to approve that capital plan. So it was just an administrative hassle for us and consumed a lot of time on things that weren't really value add. And so the reason why they did that is because they had some issues with trying to upgrade the Sheraton brand and I don't think they were successful. In fact, there some opportunities for us to do more business with Starwood, some really good conversion opportunities that we passed on because we did not want to enter into those franchise agreements. Marriott is very well aware of it and they plan to it on a paper in terms of updating the franchise agreements. And so I think it will be a similar program of what they have today going forward. I will tell you that it is a goal of Marriott to elevate the Sheraton brand. Starwood has tried to do that, as you know, for quite some time. It has been unsuccessful. So I would anticipate they are probably going to be pretty aggressive to the extent that they have the ability to PIP hotels. They won't have the ability to do that for existing Sheraton hotels anytime in the near future. One thing I didn't mention on some of the immediate benefits. There is a benefit that we are going to realize with the agreements with the OTA, Marriott had a better contract. And so we are going to realize those savings. We are realizing those savings from the Marriott's contract with the OTA. So that's an immediate benefit. A lot of the other ones are going to be down the road in terms of cost savings. And there is tremendous amount of synergies in terms of the revenue side, but that's down the road as well because of similar technological integration issues.

Understood. Thank you very much.

We will go next to Robin Farley with UBS.

Hi. Two questions. One is, other companies have given different views how groups business for the year came in during Q1. I wonder if you are seeing declines or things stable, just to add your thoughts to that? And then also if you have any initial comments about April, again some other companies have said, April came in better than what they had expected given the Easter shift?

We are not going to comment on April because we don't give guidance. But I can tell you, from a group perspective, if you look on a weekly basis, you will go crazy in terms of just forward looking transient or group trend of occupancy. But when you look at our portfolio for our group positioning, both in 2017 and 2018 for the Trust hotels, the group outlook is very healthy. And so we have had a very good success with our group pace for both 2017 and 2018. Now it may vary a little bit quarter-by-quarter. I can tell you that third quarter is what I would identify as a need period for us and that's because of just a lot of shifting in some of the citywides and some of the events within the calendar shifting. But when you look at it as a whole for the year, it's strong. When you look at 2018 for Trust, the Trust portfolio group pace is very strong.

And there was nothing in Q1 that made you think that maybe slowing, anything like that?

No, not really.

Okay. All right. Great. Thank you.

It appears there are no further questions at this time. I will now turn the call back to management for any additional or closing remarks.

Thank you for joining today's call. For those of you who are able to attend, we are hosting an Ashford Trust property tour and event on Wednesday afternoon of May 17 in Atlanta and welcome you to join. Please contact Jordan Jennings in our Investor Relations group to get more details. We look forward to speaking with you again. Thank you everyone.

And that concludes our conference for today. Thank you for your participation.