Good day and welcome to the Ashford Hospitality Trust Second Quarter 2017 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Joe Calabrese with Financial Relations Board. Please go ahead.

Good day everyone and welcome to today's conference call to review the results for Ashford Hospitality Trust for the second 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 August 3, 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. Also unless otherwise stated, our reported results discussed in this call compare to second quarter 2017 with the second quarter of 2016. 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 results. Our second quarter comparable RevPAR growth for all hotels not under renovation was 1.4% and we delivered strong hotel EBITDA flow through of 52%. 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. We believe shareholders have benefited from our effort since our IPO given that Ashford Trust has achieved an estimated 147% total shareholder return compared to a 107% return for our peers as of yesterday's close. Key to that outperformance is the exceptionally high level of alignment that is created by our 19% insider ownership which is among the highest in the hotel REIT space and approximately eight times the peer average. Our strategy remains focused in our effort to create shareholder value. We will continue to own predominantly upper upscale full service hotels, opportunistically recycle capital, target net debt to gross assets of 55% to 60%, and maintain a cash and cash equivalents balance between 25% to 35% of our equity market capitalization for financial flexibility. We believe this excess cash balance provides a hedge in uncertain economic times, as well as providing dry powder to capitalize on attractive investment opportunities as they arise. During the quarter there were number of transactions that we completed to further our strategy and create additional value in our platform. We announced that in connection with the redevelopment of the Nashville Convention Center, we entered into an agreement with the developers of the project to acquire a permanent fee interest in our meeting space at the hotel. Jeremy will give…

Thanks Douglas. For the second quarter of 2017, we reported a net loss attributable to common stockholders of $772,000 or $0.01 per diluted share. For the quarter we reported AFFO per diluted share of $0.52. Adjusted EBITDA totaled $125.5 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 5.7%. At the end of the quarter our debt was 12% fixed rate and 88% floating rate all of which have interest rate caps in place. All of our debt is nonrecourse property level debt and we have a well laddered maturity schedule. Including the market value of our equity investment in Ashford Inc., we ended the quarter with net working capital of $514 million. As of June 30, 2017 our portfolio consisted of 120 hotels with 25,028 net rooms. Our share count currently stands at 117.6 million fully diluted shares outstanding which is comprised of 97.4 million shares of common stock and 20.2 million OP units. We have 21.3 million OP units but as a result of the current conversion factor being less than one-for-one, these units are convertible into approximately 20.2 million shares of common stock. With regards to dividend, the Board of Directors declared a second quarter 2017 cash dividend of $0.12 per share, a $0.48 on an annualized basis. Based on yesterday stock price, this represents a 7.8% dividend yield one of the highest in the hotel REIT space. Our 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. On the capital markets front during the quarter we refinanced the mortgage loan with an existing outstanding balance totaling approximately $104…

Thank you, Deric. During the quarter comparable RevPAR for all hotels not under renovation grew by 1.4%. This quarter's performance was impacted by softness in the Houston, Dallas, Atlanta, Minneapolis and Tampa markets. Additionally, the shift of Easter into the second quarter had a negative impact on the overall portfolio. Also during the quarter we had more total rooms in our portfolio impacted by renovation than during the same quarter last year which contributed to 0.5% RevPAR growth for the entire portfolio. During the quarter, our portfolio increased market share as compared to its competitive sets by 100 basis points. Year-to-date comparable RevPAR growth for those hotels not under renovation has been 2.8% with hotel EBITDA flow-through of 58%. Room nights for our retail segment increased in the second quarter, while the digital channels grew as well. We are continually identifying opportunities to create value throughout our portfolio. To that end on May 24, we converted Matt DFW airport in Irving Texas from brand managed to franchised managed and installed Remington as manager of the property. We believe the conversion of Remington management provides meaningful and significant upside as Remington will add value to both sales initiatives and enhanced cost controls. Remington also sees an opportunity to grow occupancy to regain group business and working with the local Irving convention and visitors Bureau. Despite the disruption operations caused by management conversion, the property still manage to achieve 52% hotel EBITDA flow-through for the second quarter and we expect that operating efficiency should improve further going forward. On our last call, I mentioned that the Renaissance Nashville was about to begin a significant transformation given the $400 million redevelopment of the adjoining Nashville Convention Center that will result in new demand generators for our hotel and additional premium meeting space. This…

[Operator Instructions] We’ll go first to Bryan Maher of FBR Capital.

Can you give us an update on the select-service hotel sales. How many are actively being shopped? What you're seeing the marketplace, cap rates, et cetera?

So, our ultimate goal is to focus on owning upper upscale full service hotels. And our select portfolio accounts for approximately 30% of our EBITDA and has about a 1.9% RevPAR growth in the second quarter. So for those reasons, we’re going to make sure we provide for a strategic and accretive outcome to the transactions related to this portfolio. We look at and continue to look at a variety of options, and it's a fluid situation. I think that the market for select service hotels has remained fairly stable throughout the year. There’ve been single asset trades, not large number of portfolio trades. So we’re monitoring the pricing in that market and the opportunity to redeploy capital, and looking at strategic alternatives with the portfolio that we have because they’re very attractive portfolio of select service hotels.

Yes. I guess, I'm just surprised. When you look at somebody like RLJ going after FelCor when they've got a lot of select-serve, and companies like Apple REIT with a lot of select-serve, that there couldn't be some type of combination that basically solves both entities' problems. Would you suspect that it's just the bid-ask spread is too wide or there just isn't an interest?

We’ve got a great collection of select service hotels, and what we’re trying to accomplish is the value maximization of that portfolio. So we’re open to evaluating and have been evaluating a variety of alternatives and will continue to do so until we come across the one that we feel is going to be the best outcome for the shareholders.

And without getting into specifics, I mean, you guys made a run at FelCor earlier this year. And, again, you don't have to be specific, but do you see other opportunities in the marketplace besides kind of one-off acquisitions that could spearhead your growth into the upper upscale full service segment?

Over the years, you’ve seen us perform well both with single asset transactions, portfolios, and entities. We always keep our eye open for the most accretive utilization of our cash. We have a substantial amount of networking capital as Deric highlighted. We like the fact that we have that amount of capital for a variety of reasons. And yet over the past couple years, you've also seen us be very disciplined in that we haven’t acquired much. And so I think that what we’re exercising is good judgment on transaction and utilizing our capital and making sure that the investments that we make are in fact opportunistic. I think the case in point, one of the more recent transactions that we did acquire was an asset that Jeremy highlighted in his comment, is W Atlanta and the tremendous performance enhancements that we've made at that asset. So those are the types of opportunities that we’re looking for.

We’ll go next to Chris Woronka of Deutsche Bank.

I know you called out Dallas as one of the weaker markets in the quarter. We’ve heard that from a couple of your peers. And I guess since that’s kind of your backyard, I mean, can you walk us through because that had been a strong market for most folks. Can you walk us through what you're seeing down there?

Sure, I can handle that. Dallas, there's a tremendous amount of demand generators coming into Dallas. But there’s also tremendous amount of supply. Most of that supply is in the Plano Frisco market. I don't know how familiar you are with Dallas, but there is a lot of supply coming in that market. And the demand generators are a development called Legacy West which is really quite phenomenal what they're doing there. And Toyota has relocated their headquarters to Dallas, their North American headquarters. There’s also Liberty Mutual. There’s a decent amount of business demand generators are just starting to come in. So the supply was supposed to come into market because folks saw the demand coming in, but they unfortunately came in before the demand was in. So I think you’ve got a period of imbalance. I don't know exactly how long that’s going to last. But it’s probably several quarters, and then now you'll see hopefully demand mitigate some of the supply growth.

And also you mentioned the one management contract conversion to franchise. I guess across the portfolio, do you have a lot more opportunities coming up to do more management franchise conversions?

Not really. We’re always looking at ways that we can add value. Fortunately our hotels are performing pretty well. And so the way that you can typically convert is through performance thresholds. Unfortunately, fortunately, right? So we’re happy with the performance, driving great performance in the hotels that we own. But we don’t have any opportunities for performance determination. In this specific transaction that we did with Marriott, it was a horse trade for something that is we’re in a confidentiality agreement with. But it was not a performance determination provision that we utilized. But it was an opportunity for us to seize a way to capture value in that asset.

[Operator Instructions] We’ll go next to Robin Farley of UBS.

I wonder if you could just sort of give your take on the group booking outlook and demand and how that may have changed over the last quarter and where you see that going.

Sure, Robin, this is Jeremy. So if you look at our quarter, we had a positive RevPAR in group for the quarter, but it was all through rate. And so actually our room nights were down in the quarter. Most of that is because of the shift of the Easter into the second quarter. And that had has impacted group bookings for sure. That had an impact to the business transient as well, our transient segment. But if you look at our quarter, April was the worst month. And so we would probably have been positive in terms of group room nights had the Easter shift not occurred. Unfortunately, in a market where it is a little bit softer, you just can’t overcome it like we’ve been able to do in maybe previous quarters with the shift calendar. Looking forward, I will tell you that our need period for group bookings is Q3. There are some holes and we've been focused on. It’s been our need period all year long. If you’re following the industry, I do believe that's very consistent with what we’re hearing from our peers and from our management companies. The good thing as we stand right now is that we’ve been able to mitigate that tremendously from where we started at the beginning of the year. And so we have had some acceleration to address some of that need in the third quarter.

I guess maybe even more forward looking, what’s your take on how 2018 is shaping to relative to what you’d have thought a quarter ago?

We don’t give a guidance, but what I can say is that what I’m hearing from some of our peers is that group bookings are positive, but in the low single digits. What I can say for the trust portfolio is our 2018 bookings are very healthy.

So in other words, are you saying that what you hear from others is you’re saying is consistent with that or you’re saying you think it’s better than maybe what some others are saying.

I think when you look our specific portfolio, as we stand now, and that's only about maybe 38% of where we stand. In terms of the year, I think about 38% of actualized group revenues from last year. And keep in mind that group is probably 25ish% of our portfolio. Our group bookings are healthier to what we're hearing from our peers and management companies.

We’ll go next to Michael Bellisario of Baird.

I wanted to get your thoughts on your stocks underperformance. You guys have made a lot of progress on a lot of fronts this year, it’s two fold question as, one why do you think that is and what else are you doing or what else you think you could be doing to maybe close that big valuation gap that out there today.

I appreciate you asking that question. Obviously, we are very motivated, very align given the amount of ownership that we have in the company. And so, we are as frustrated as I'm sure investors are with the performance of the company year-to-date. Obviously, at the beginning of the year we attempted something very strategic, something that we thought would be in the shareholders best interest but it just didn't work out the way that we wanted, and yet we still have posted numbers that are generally in line in some cases better than the rest of the industry. We have a great portfolio of assets that are highly diversified. We think that it is just point in the cycle and with the difference in performance between the non-major markets and the major markets that, that is a competitive advantage for us. We have a maturity schedule that we have been very proactive in and managing since our IPO, although we carry a slightly higher debt level we believe in the benefits of financial leverage and yet we manage our balance sheet very carefully and Deric and Steve are doing very fine job and as he noted we have addressed our 2017 maturities, we are working on our 2018 maturity and so we're well ahead of that. So we like where we stand with respect to the debt side of the equation. Jeremy and his team do an outstanding job on the asset management side both with respect to the Remington managed assets, as well as brand managed assets and that shows up in our numbers, that shows up in our RPI index gains, that shows up in our EBITDA flows. And so we are very proud of our performance and yet we continue to find organic opportunities in our portfolio…

And then just on a leverage side 55% to 60% target where you guys are at currently?

Mike this is Deric. We’re currently at about 61%, so we’re, at the high end of our targeted leverage level. So little appetite to increase our leverage from here.

[Operator Instructions] We'll go next to Ryan Meliker of Canaccord Genuity.

I have a couple of things to touch on. The first of all kind of as a follow up to Brian's question and some of your commentary Doug on select service portfolio, it seems like you guys of one of the biggest managers of the Ashford team is the fact that you are always opportunistic in nature when it comes to capital allocation whether it would be acquisitions, jurisdictions and certainly the soft quarter bid is the case and point there. It seems like today from the comments you guys have made, as well as what we are hearing from others that the debt markets are pretty open for private equity, and CMBS markets are pretty robust right now for hotels, and I think that's partly, partly explains the unsolicited offer RLJ received from Blackstone or rumored received from Blackstone to take out their company. So given that dynamic isn’t now the right time to be trying to bring a big portfolio select service hotels market take advantage of that opportunity while it exists. And then, what strategic alternatives that you’ve mentioned are you guys looking at for the select service portfolio?

I think we have considered a variety of alternatives and will continue to do so. You're right the debt markets are very attractive today. And that should enhance value across most real estate because that is sort of the grease that helps with the valuation metrics and it brings more buyers into the market that are seeking better returns. We have a great portfolio of select service assets and our purpose here is to try to find the accretive solution and to do so in a way that enables the outcome for the Trust Portfolio to be even better and we have to recycle that capital. We have to figure out what the strategic implications are what we do with that portfolio. And while we had interest both unsolicited single asset portfolios we’re evaluating those possibilities, we’re evaluating strategic alternatives. So, I think at this point it's premature for us to provide any specific comment on the - what the eventual outcome will be with the select service portfolio and it just taking us a little bit longer than we would have liked. We’re being methodical about it and yet were focused on it. So we’ll continue to work on the best way to create value out of that group of assets within our portfolio.

It’s helpful and I understand that there are different ways to create value and some ways can be better than others. It seems like with the market pricing today you will be able to sell add evaluation payment where your stock trades and worst case you use the proceeds to buy back stock and best case redeploy into more accretive means of acquisitions, but I just, I feel like one of the concerns that we keep hearing from investors is one of the reason, I am wondering one of the reasons that you guys aren't doing that is because of the external advisor and the inability to sell assets without the approval and is that impeding a faster sale of these assets?

We’re looking at a variety of alternatives and will continue to do it until we strike upon the one that we think one or one because it could be a combination of alternatives that’s going to create value out of the portfolio.

And then Jeremy a question for you, Ashford Inc. has bought I guess three different platforms recently from J&S Audio Visual most recently to Pure Rooms to OpenKey, and I know in their releases they’ve expected to roll those platforms out at Ashford Trust portfolio. We've gotten some questions and concerns from investors that this just adds more fees from Ashford Trust and Ashford Inc. Can you just walk through some of the benefits that you think you know the Trust Portfolio is going to see from rolling out some of those platforms at, across the portfolio?

There is tremendous amount of benefits and when we look specifically where we target, targeted some of these assets, the reason with J&S Audio Visual I have been looking for an audiovisual company for quite some time because I would say of all the services that we see in our hotels is probably the worst for the most poorly executed within our portfolio. As you know that there has been tremendous amount of consolidation in that space and with that consolidation and some of the firms are controlled by private equity firms wanting to monetize that and they search the life out of those companies and so we had a good example that our capital held in January, and that the quality for our board meeting, the quality audiovisual services since we had at the time were embarrassing for me in front of the board, it was just really poorly executed we could not even use a crab phone. We had to use a cell phone to dial in other board members for our speaker phone. And that’s just a good example of what we see in our portfolio. And so the service is down. What we're seeing as well as it with book show up, our group business shows up. They’re not always easy than our in-house AB provider and so we’re losing some business to the hotel. And as you know, it's quite lucrative kickbacks to the hotel from the AB provider. I don’t know if you know the structure, but basically there's a commission structure that’s paid to the hotel based on the audio-visual revenue, and it’s basically a 100% profit to our hotels that we have within our portfolio. And so if the client shows up, like the AV company that we have in our hotel,…

Ryan, it’s Douglas. Just one general comment. I think that to the extent that Ashford Inc., our advisor, invests in businesses that are high quality businesses, high quality service providers to the hospitality space, I think that that is a significant competitive advantage for Ashford Trust to be able to contract with those service providers, top-notch service providers where we are adding value to those organizations through the asset management platform. And keep in mind that Ashford Trust is a one-third owner of Ashford Inc., and so we and our shareholders also participate in the benefit of those investments. But importantly, I think that with these services being implemented at market terms into the Ashford Trust hotels it will enhance the profitability in the performance of our assets and those companies will be motivated to do so. So, that I think is as we look at all the competitive advantages that we have across the Ashford Trust platform that's just another one.

And one thing, so we talked about J&S and I want to touch peer very briefly. When you look at the performance of Trust, we gain market share over the last three and half years which I think is remarkable. I am very proud of our team's accomplishments specifically on the revenue optimization side. And as we come through all of our opportunities one of the things we continue to look for is premium rooms. Howe do we have more premium rooms, how do we differentiate our premium room product. And that’s we are interested in pure. It’s a great investment for our hotels, at relatively low cost and there is incredible IRRs associated with it if executed properly. And one of the things we are doing is we are optimizing that platform to make it even better and how those rooms perform not only within Trust and Prime but amongst all owners it has pure rooms. And we look at OpenKey, I think Mobile Key is hardest technology in the lodging sector and OpenKey is the number one provider in that space. And so I think there is another huge competitive advantage across our platforms and I think very synergistic.

That concludes today’s question and answer session. I would now like to turn the conference over to management for any closing remarks.

Thank you again for joining today’s call. We look forward to speaking with you on our next quarter and also seeing you at our Investor Day which is October 3 in New York. Have a good day everyone.

That does conclude our conference for today. We thank you for your participation.