Ashford Hospitality Trust, Inc. (AHT) Q4 2020 Earnings Report, Transcript and Summary

Greetings, and welcome to the Ashford Hospitality Trust Fourth Quarter 2020 Results Conference Call. At this time all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Jordan Jennings, Investor Relations for Ashford Hospitality Trust. Please go ahead Ms. Jennings.

Good day, everyone, and welcome to today's conference call to review the results for Ashford Hospitality Trust for the fourth quarter and full year 2020 and to update you on recent developments. On the call today will be Rob Hays, President and Chief Executive Officer; Deric Eubanks, Chief Financial Officer; and Jeremy Welter, Chief Operating Officer. 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. At this time, let me remind you that certain statements and assumptions in this conference call contain or are based upon forward-looking information are being made pursuant to the safe harbor provisions of the federal securities regulations. 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 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 February 24, 2021, and may be also accessed through the company's website at www.ahtreit.com. Each listener is encouraged to review those reconciliations provided in our earnings release together with all other information provided in the release. Also, unless otherwise stated, all reported results discussed in this call compare the fourth quarter of 2020 with the fourth quarter of 2019. I will now turn the call over to Rob Hays. Please go ahead, sir.

Good morning and welcome to our call. Since our last call in October, our business and the industry have remained pressured due to the pandemic and these remain challenging times for our country, the economy, and of course the hospitality industry. I'll start with the current environment and how Ashford Trust has managed through this pandemic and the early parts of the recovery. After that, Deric will review our financial results, and Jeremy will provide an operational update on the portfolio. I'd like to highlight though some of our accomplishments and we can get into the details later in the call. First, we secured strategic financing with additional future commitments to provide years of runway. Second, we effectively completed our forbearance initiative. Third, we have delevered the balance sheet by close to $0.5 billion since the beginning of the pandemic. Fourth, we have materially grown both the equity value of the company and daily trading volume to provide increased liquidity for our shareholders. Fifth, we have reduced our monthly property cash utilization by approximately 85% since the second quarter. And lastly though we have an attractive loan maturity schedule, we have successfully modified property loan extension tests on two large pools for 23 and 24 tests. This initiative will continue to be a focus for us going forward. Now, while we have made progress getting our business back up and running, we anticipate dealing with challenges for some time because of the impact of COVID-19 on the U.S. hospitality industry and the day-to-day operations at our hotels. But there has been, as I mentioned, a number of positive developments for both our company and the hospitality industry over the past few months. We are encouraged by the development and the deployment of vaccines in the U.S. and believe that progress on that front will provide some visibility to the end of the pandemic. Some doctors and scientists believe that herd immunity in the U.S. could be reached as early as April. As I mentioned earlier, we are substantially complete with our debt forbearance efforts signing several agreements during and subsequent to the end of the quarter. Most importantly, last month we closed a crucial strategic financing. We drew down an initial $200 million at the closing of the financing and have the option to draw down an additional $250 million if needed. We are optimistic about the long-term outlook for the company and by taking decisive actions to strengthen our balance sheet with this financing and other steps, we now have multiple years of runway that will allow us to capitalize on the upcoming recovery in the hospitality industry. As discussed on our recent earnings calls, our response to this pandemic has been swift and comprehensive. We have focused our efforts on providing a safe environment for the guests and staff at our properties, while at the same time taking aggressive measures to protect our properties and preserve liquidity, so that we can be in a position to return to profitability as the economy opens and travel resumes. Operationally, we are focused on mitigating the financial impacts of the pandemic with aggressive cost control initiatives, including working closely with our property managers to minimize cost structures and maximize liquidity at the hotels. And this is where our relationship with our affiliated property manager, Remington, really sets us apart. Remington has been able to quickly cut costs and rapidly adjust to this new operating environment. We are proud of their efforts and believe this important relationship has enabled us to better weather the impact of COVID-19, and Jeremy will discuss this in more detail. We have also significantly reduced our planned spend for CapEx for the year and suspended both our common and preferred dividends, and Deric will provide more detail around our liquidity outlook. We've been actively working with our lenders on property-level debt to arrange mutually acceptable forbearance arrangements to reduce our near-term cash utilization and improve our liquidity. In early October, we announced we had entered into forbearance agreements on our KEYS Loan Pools as well as the Hilton Boston Back Bay, which in total represents 35 hotels and approximately $1.3 billion of debt. We also extended our loan on the Marriott Gateway, which now has the final maturity date of November 2021. We anticipate refinancing this loan later this year as terms – debt terms continue to improve and the recovery advances. On December 31, we executed forbearance arrangements on two loan pools representing five hotels as well as the loans for the residents in Jacksonville and the residents in Manchester. Together, these agreements represented $52 million of debt. Subsequent to quarter end on January 19, we entered into a modification agreement on our JP Morgan 8 portfolio loan representing eight hotels and $395 million of debt. This agreement paid all deferred amounts current in exchange for reducing future debt yield extension tests. And additionally on February 9, we entered into a modification agreement on our MS 17 portfolio loan representing 17 hotels and $419 million of debt. This agreement also paid deferred amounts current in exchange for lowering future debt yield extension tests. With the signing of these agreements, we are now substantially complete with our forbearance initiative, and as we have loan forbearance or modification agreements in place for 97 properties, representing approximately 98% of our current outstanding mortgage debt balance. These forbearance agreements are important because they typically allow us to defer interest on our loans for a period of time subject to certain conditions and also allow us to utilize lender and manager-held reserve accounts, which are included in restricted cash on our balance sheet to fund operating shortfalls at hotels. We continue to have discussions with our lenders on the small remaining loan pools where we have not yet signed forbearance agreements. As I mentioned on prior call, one of my challenges as CEO is to make sure that we emerge from this crisis in a better position as a company. To that end with the closing of our strategic financing and given the progress we've made on these forbearances, we are now in a position to spend time and analyzing lessons that we've learned from this crisis and over the past decade. Those reflections will likely lead to an update of the go-forward strategy of Ashford Trust. This could include changes to our leverage profile, financing strategies, and investment criteria. We will be communicating these updates with the investment community in due course. The past year has been extraordinary by any measure, and I cannot be prouder of the effort and the performance of our teams during this time. I believe our response has been the right one for both the short- and long-term health of our guests, our portfolio, the communities we serve, and our shareholders. Our management team has extensive experience in effectively navigating tough market environments and extended downturns. Now each crisis is invariably different, but we believe we have the right plan in place to protect long-term values of our assets and the company. I'll now turn the call over to Deric to review our fourth quarter financial performance.

Thanks, Rob. For the fourth quarter of 2020, we reported a net loss attributable to common stockholders of $70.5 million, or $2.29 per diluted share. For the quarter, we reported AFFO per diluted share of negative $1.67. Adjusted EBITDAre totaled negative $23.1 million for the quarter. At the end of the fourth quarter, we had $3.7 billion of mortgage loans with a blended average interest rate of 3.5%. This average interest rate does not take into account any default rates. Our loans were approximately 6% fixed rate and 94% floating rate. Our hotel loans are all non-recourse. As Rob mentioned, we have signed forbearance or other agreements for 97 properties representing approximately 98% of our current outstanding mortgage debt balance. We ended the quarter with cash and cash equivalents of $92.9 million and restricted cash of $74.4 million. The vast majority of that restricted cash is comprised of lender and manager held reserve accounts. At the end of the quarter, we also had $9.4 million in due from third-party hotel managers. This primarily represents cash held by one of our property managers, which is also available to fund hotel operating costs. From a cash utilization standpoint, our hotel EBITDA in the fourth quarter was negative $9.3 million that equates to a shortfall of around $3 million to $4 million per month. Our current monthly run rate for interest expense is approximately $11.4 million and our current monthly run rate for corporate G&A and advisory expense is approximately $4 million. In total, our current monthly cash utilization is approximately $18 million to $20 million, which is down significantly from around $37 million that we disclosed in the second quarter. As of December 31, 2020, our portfolio consisted of 103 hotels with 22,594 net rooms. Our current share count stands at approximately 86.4 million fully diluted shares outstanding, which is comprised of 84.2 million shares of common stock and 2.2 million OP units at yesterday's closing stock price of $3.97 that equates to an equity market cap of approximately $343 million. During the quarter, we closed on our previously commenced offers to exchange shares of our common stock for all outstanding shares of each series of preferred stock. Approximately 30% of the preferred stock participated in the exchange offers and the transaction resulted in the issuance of approximately 38.4 million new shares of our common stock. Additionally from December 8, 2020 through February 23, 2021, we entered into privately negotiated exchange agreements with certain holders of our preferred stock to exchange an additional approximately 13.1 million shares of common stock for approximately 2.3 million shares of preferred stock. Through these exchanges, we have exchanged approximately 41% of our original preferred stock into common stock. After taking into account, the $200 million of new corporate debt that we closed on in January, we have lowered our outstanding debt plus preferred equity by over $430 million since the beginning of the pandemic. During the quarter, we also entered into an Equity Line with Lincoln Park Capital. During the fourth quarter and into the first quarter of 2021, we issued approximately 10.6 million shares of common stock under the Equity Line raising approximately $25.1 million in net proceeds. Also subsequent to quarter end, we entered into a Standby Equity Distribution Agreement, or SEDA, with Yorkville pursuant to which we have the right to sell up to 13.7 million shares of our common stock. Today, we have issued 7.5 million shares under the SEDA for approximately $22 million in proceeds. In January, we also sold a small hotel, the Le Meridien in Minneapolis for $7.3 million in net proceeds. Over the past several months, we have taken multiple steps to strengthen our financial position and improve our liquidity and we are very happy with the progress that we've made. While we still have work to do to decrease our leverage, we believe the company is now well positioned to benefit from the improving trends we are starting to see in the lodging industry. This concludes our financial review. I would now like to turn over to Jeremy to discuss our asset management activities for the quarter.

Thank you, Deric. Comparable RevPAR for our portfolio decreased 70.1% during the fourth quarter of 2020, while hotel EBITDA flow through was a solid 55.6%. This pandemic has been the most difficult challenge our industry has ever faced, but we're optimistic that the worst is behind us. With the rollout of vaccines accelerating and people's desire to travel again, we are starting to see an acceleration in bookings including corporate demand. I've said this several times over the years, but I'll say it again because it is true. I believe we have the best asset management team in the hotel industry. These associates along with the employees at our hotels, we're on the frontlines when the pandemic hit and had a lot of long and difficult days in 2020. One of the hardest things you've had to do as an organization this past year was to work with our property managers to reduce labor costs quickly when it became clear that our hotels would be losing money for an extended period of time. On a full year basis, our asset management team reduced labor, employment taxes and benefits by approximately $191 million that replaced a 53% reduction when compared to 2019 and also compares favorably to the industry average of the 50% reduction according to Smith Travel Research. As we look ahead, we were already seeing demand return in some key markets. Florida is one market that stands out in terms of the recovery in demand. Our hotels in Florida had occupancy of 46% during the fourth quarter, compared to the entire portfolio of occupancy of 31%. We believe that a good portion of this outperformance had to do with the drive-to nature of these hotels and the lighter restrictions that the state has put in place compared to the rest of the country. Our La Concha hotel in Key West is a great example of the demand recovery we are seeing in Florida. That hotel actually ran higher occupancy in the fourth quarter than in the prior year quarter. Another factor that resulted in improved demand for some of our hotels was the wildfires in California. A number of our hotel properties hosted displaced transient guests, firefighters, and other groups. The Hilton Scotts Valley Santa Cruz was one hotel that benefited from the wildfires by hosting a group of firefighters. This group helped drive occupancy to 72% during the fourth quarter and resulted in RevPAR being down only 7% compared to the prior year quarter. Moving on to capital management, over the last few years, we have invested significant capital in renovating our portfolio to maintain competitiveness. This was obviously important after the pandemic hit, and we needed to conserve as much cash as possible. With our portfolio in good shape from a physical product standpoint, and limited capital available for capital expenditures, we were very selective in how we allocated capital. During the fourth quarter, we completed the ballroom and meeting space renovation at the Hyatt Savannah to ensure the hotel is well-positioned for the return of group business. Looking ahead to 2021, we believe our portfolio is in good shape to benefit from the return in lodging demand. Before moving to Q&A, I just want to mention that we are excited about the future of this portfolio. We continue to see our bookings increase and have even seen a slight increase in the trend for corporate demand. We are optimistic that this trajectory will continue to increase as we get further into 2021. That concludes the prepared remarks. We will now open the call up for Q&A.

Thank you. [Operator Instructions] First question is from Tyler Batory of Janney Capital Markets. Please go ahead, sir.

Good morning. Thank you. First question, just broadly on liquidity, and congrats on the progress you've made on that front. You mentioned in the prepared remarks the runway to capitalize on the recovery in the industry. So can you expand and talk a little bit more about that? What sort of avenues you're considering and what might be some of the trigger points in terms of making some of those decisions?

Sure. Thanks, Tyler. I'll start by saying we -- as we sit here now, and I think first, some of Deric's comments, we think that our interest expense is about $11 million a month, our G&A is $4 million, and our property as of the fourth quarter is about $3 million, really close to breakeven on the property level for full year [ph] soon. So, we're about $18 million of monthly cash burn. Assuming that and assuming the various liquidity that we have via the Oaktree financing and other cash on our balance sheet, we've got probably two and a half to three years of runway, just if nothing else changes and we don't access any more capital than we sit here today. So, that's a lot of runway, a lot of liquidity, and we feel very good about it. I think for us, the issue is less about having ongoing liquidity and it's more about looking at the long way – long-term balance sheet health, and our need to recapitalize the company in a way that's more consistent with something that is healthy over the long-term. And so, I think for us the focus really has changed from liquidity to what is the balance sheet that we want to have in the next three to five years, and so that's going to be something that's going to take some time, but it's going to be via a combination of strategically selling some of our lower quality assets over time. It's going to be continuing with some of these preferred exchanges that we're doing to grow our equity base. It's going to be opportunistically raising capital, equity capital as appropriate and what we think is the most cost-efficient way. And it's going to be potentially opportunities to go on the offense and buy assets either with lower leverage or no leverage to grow out of it that way as well. So, there is going to be a variety of levers. As we sit here now, some of it's going to really depend upon what happens in the equity markets over the next six months or 12 months or two years and what happens in the transaction markets, and we're putting ourselves in a position where regardless of what that – what the opportunities look like, we're going to be ready to pounce on them when they come.

I'd add one more thing is when Robison joined as the CEO, I think in May of last year, we put together a plan that looking back we've really executed very well across that plan as we recapitalize the balance sheet and the preferred exchanges, all of those things were laid out in May of last year. And as we look – stand here today and look back at how bad things were and how much adversity and challenges this company has been through and our management team and our associates, I think we're very, very proud on what we've accomplished to date. And we're very confident that we will continue to be prudent on executing that plan to continue to add value for our shareholders.

Okay. Very helpful. And then shifting gears to trends in the operational environment out there, can you elaborate a little bit more on what you're seeing with corporate demand? I think you'd cited an increase in trends for that business, so interested where that demand is coming from. And then I'm also curious if you can speak to a group business, especially second half of this year as well.

Sure. So the corporate demand, it's -- we think we hit the trough, and we think that we're now seeing finally some trajectory of growth. Now, it tends to be – it's not a lot, frankly, but as we were actually going through with some of our property managers the other day and looking at the mix of the business, you are seeing again small trends. I don't know Tyler if it's enough to frankly to quantify that much other than we think we've hit the bottom and it's moving up. In terms of – in the second half of the year, pace for us is it's materially better than it is for first two quarters. I mean, obviously the first two quarters are struggle from a pace perspective. Again, one thing to remember is that we aren't a group-focused company. Less than 20% of our business historically is group, so we're much more transient house. But I think what we're seeing right now from a pacing standpoint in the second half of the year is call it down 30%, 25% or 30% from a pace standpoint. But frankly, I don't know how meaningful that is. There is just so much that can happen between now and then. And again, even the groups that we tend to focus on are not large conventions. They're smaller group meetings, weddings, those sorts of things that don't have quite the same kind of lag that a bigger group is. So a little bit of information, but it's not amazing.

I think we're seeing some pent-up demand. I mean, you see it in the leisure side where as soon as some markets open and individuals that want to travel, feel safe to travel, you can see it in our Florida markets that there's a lot of leisure demand, but you're starting to see that a little bit in corporate. And as Rob mentioned, I definitely believe that we see – I believe and hope that we hit the bottom and we're starting to see that upward trajectory, but one of the things that we see in group is that as the pandemic has extended, you've had cancellations. But a lot of that group business just does not want to cancel because they want to meet. They want to have their meetings. They want to have their weddings. And so those cancellations are becoming much more last minute than maybe earlier in the pandemic, and it's just because people are insisted [ph] that they want to continue to meet. And so, we'll see as we get through this, you'll see much less cancellations and hopefully a lot more bookings on a short-term basis. Right now, the visibility of our business more than ever has been very, very short term. And so, there is not a lot of long-term trends that we can say other than the hotel – the hotel industry is always resilient in recovery. And every time we've looked at a recovery in the past, I think that the industry experts have underestimated the pace of that recovery. And I believe that's going to be the case for this rebound as well that industry estimates are probably going to underestimate the pace of recovery just because this is not an economic recession and it was pandemic. And so, as we get the vaccine out and you get to herd immunity, there will be people – the American people are resilient, they will travel again, and we'll have people stay in our hotels more and more every day, every month, hopefully going forward.

And Tyler one nugget is that as of right now, approximately 70% of our bookings are for bookings within five days. So it's short-term right now. So it's just hard to get too much – too much color from an outlook standpoint, given the booking windows.

Okay, great. Okay. That's all from me. Thank you for the detail.

We have a question from Michael Bellisario, Robert W. Baird and Company. Please go ahead, sir.

Good morning everyone.

Good morning.

Good morning.

Good morning.

Rob, the first one for you just on the Oaktree investment, what flexibility do you guys have to sell assets and then eventually repaid the preferred accrual and then kind of how are you thinking about those two options today?

Sure. So there's a couple of different buckets that we have as part of the Oaktree financing. We do have the ability to sell some amounts, I believe it's $50 million a year of proceeds up to $125 million in total that could go towards operating shortfalls and losses. So there's some flexibility that if we needed to fund liquidity via asset sales. We do have the ability to do that. And then we have the ability to sell assets beyond that, but those proceeds will have to go towards paying them down. It does avoid any sort of call protection that they would have. So there's some benefits to it in that way versus if we're paying them otherwise to have some call protection. So that's a possibility as well as we think about the next couple of years it adds values, continue to recover and as some of our debt pools get closer to maturity, doesn't make sense to sell some of our lesser quality pools in order to help fund the repayment of Oaktree. But again I think we are also looking at the broader strategy, Mike, of how to – again to restructure the balance sheet over time and get us to a place where we are at leveraged levels and liquidity levels that are more sustainable over time.

And then on the preferred?

Say that again.

Just on being able to repay the preferred accrual.

Yes. Well, I think, the preferred is obviously we have been continuing to do some of these 3(a)(9) transactions, which we think is a real benefit for our shareholders – for our common shareholders, because we're able to take those accruals out and have been buying – by and large these preferreds at discounts and sometimes substantial discounts to par value. And so we do – we have obviously avoided now taking out 40% of our preferreds at a pretty significant amount of accruals, but yes, I'd like to, at some point in time, be able to address all these preferreds because it is something that we need to do and get the preferreds current in order to eventually get S-3 eligibility back to be able to have all of the tools that we need from a equity standpoint in terms of having an ATM and other things in place.

Got it. That's helpful. And then just kind of turn the clock back to last downturn. You guys created a lot of value with interest rate swaps and [indiscernible] and a few other things. Are you guys thinking about anything like that today? Or what options do you have to kind of either bolster cash flow or create value through? I guess I call them kind of non-hotel related investments.

Right now we're focused on the hotel business and we're focused on simplifying our capital structure. We're focused on simplifying our investment strategy. We've done a lot of the heavy lifting that we've needed to do in order to put the company in a place to thrive and participate in the recovery. And so right now, we're not frankly spending really much time at all looking at hedges and whatnot. We're focused on trying to just put the company in a good place. Though that is the reason why we have floating rate debt. And it is the reason why 94% of our debt is floating because we do think rates are going to stay low for some time. That's something we think it's a better pairing of our assets and our liabilities. And obviously floating rate debt tends to provide more flexibility than long-term fixed rate debt. So I think you're going to continue to see us have floating rate debt exposure because of all the various benefits. But right now we're not spending really any time on complicated hedging or other financial instruments.

Yes, and I would just add Mike that to the point about the interest rate derivatives, I think the big lessons learned from us from the last cycle was that we wanted to have floating rate debt, and we wanted to have a lot of cash on our balance sheet. Both of those we had going into this. Obviously, the pandemic was a much worse of the downturn than anybody ever anticipated happening in our industry, which put us in a tough spot given our leverage. But having said that from here we were very active refinancing a lot of our debt going into this. And as we sit here today have a pretty attractive maturity schedule looking forward. And that will be a pretty decent asset coming out of this. It's a very attractively priced financing, as Rob mentioned. And so, from that perspective, we do feel like we're relatively well positioned.

Understood. Thank you.

We have a question from Kyle Menges, B. Riley Securities. Please go ahead, sir.

Hi. Good morning. This is Kyle on for Bryan. I just had a follow-up on the preferreds. Would you say that investors are still receptive to that 5.5 to 1 exchange ratio? And then also you mentioned that common share count number earlier in your remarks. I just wanted to check does that account for all of the preferred to time and exchanges you've done to date.

Well, let me start and I'll have Deric jumping in the second. On the preferred exchanges, we obviously had our actual offering that was completed in the fall, which had a set ratio of 5.58x. And with that we traded out about 30% of those preferreds. That offering was complete and done and finished. And so everything subsequent to that is just a private transaction or call it 3(a)(9) transaction of which that's just a private negotiation between us and any of our existing preferred holders. And so that – it's not something that we solicit. It's not something that we – that's a widely distributed offer. I mean that's just something that we negotiate privately with our preferred shareholders. So I can't really comment on their receptiveness or non-receptiveness because it's – these are just one-off transactions within – with different existing preferred holders. Go ahead, Deric.

Yes from our perspective that continue to be attractive because we're able to, as Rob mentioned, exchange the preferred out at a participate discount at par and even more so the accrued preferred dividend then goes away. So there continues to be some benefits there. In terms of the share count that I quoted in my remarks, on the preferred shares that was as of or through February 23rd, so that's as the most recent data we could give in terms of the current share count.

Great. Thank you. And then it looks like you have five more hotels that you've yet to sign agreements on. Just curious how the conversations are going with lenders, maybe the key sticking points and if you're also possibly exploring the sales of any of those hotels.

Sure. As we've got a few hotels left, I think we are in, I'd say, a good place with this servicers. We've in many cases had kind of handshake terms, but they're not yet fully documented. So that's really the process is that – it's just a long process of getting documents and going back and forth with lawyers. But I think we feel pretty good about what's remaining.

Thanks. That's all from me.

[Operator Instructions] We have a question from Chris Woronka, Deutsche Bank. Please go ahead, sir.

Hi, good morning guys. Rob, congratulations on the progress to date on getting the preferreds in I think you said 41%. Can you talk a little bit about your pipeline? I know everything is privately negotiated, but, I mean, is it fair to say you're actively working on another chunk of those? Or how would you describe the general process on getting more of those redeemed?

Yes, Chris, I can't comment on those just because they're private transactions and it's just one that we respond to inquiries from existing preferred shareholders. So I can't really provide color. We're – I can't say is – our goal is to simplify our capital structure and we'd like to over time remove these preferreds in order to remove these accruals and provide greater liquidity to our common shareholders because we do think that's important from a long-term goal perspective. I mean as we were sitting here in the fall, our equity market cap at times was in the very low double digits. And as Deric highlighted in his comments and we're well over $300 million a year, $350 million of equity share – common equity value today, which is a huge step in the right direction for us. And our shareholder liquidity if you look at our trading volume, it has materially improved from I think where – I mean where it was even prior to all this. So that's some good opportunities for our shareholders to be able to take positions, to be able to invest in the company and participate in the upside as we go through the cycle. But it's just difficult to comment on private exchanges because I don't control them. We're – we just listen to people and negotiate them as best we can, but we would like to remove as much of the preferreds these accruals as possible.

One thing I'd add is that I think that Deric and Rob have both been very prudent in terms of what they've negotiated and making sure that it is accretive to our common shareholders. And so, we're not going to do an exchange. It's just doesn't make sense for the common. And just given the relative trading between the preferred and the common, it actually is a situation where we've done the preferred exchanges, where it is a win-win for both sides, the investor and for Ashford Trust as a company and our common shareholders. As long as that exists, we think that there is going to be potentially more demand from investors to continue to pursue 3(a)(9) transactions.

Okay, fair enough. Appreciate that. And then looking forward a little bit, you have done a lot of heavy lifting on getting the balance sheet fixed. I know you're not done yet, but since we are supposedly very early in the next lodging cycle, what kind of appetite might you have to look at acquisitions and potentially over equitize them as a way to kind of buy some real-time cash flows? Is that something that's on the table?

Well, I think, the answer is yes, it's on the table, but doing so in a way that makes sense for our shareholders and the long-term health of the company, that's to be seen, right. It depends on what happens to our share price over the next months to come, what are the opportunities that are out there, but it is one of the levers that we would look to pull. And like I said, I think our goal – as we've learned over the last 12 months in addressing all of the various issues we've had to is we've had to go down three or four or five paths at the same time in order to be able to adjust and pivot, and depending upon what's going on in the circumstance. And I think it's going to be something similar where we're going to have three or four or five or six different ways to help the balance sheet to be able to grow. And depending upon what happens in the market, what happens in the pace and the recovery, we're going to be prepared to jump on whatever is that opportunity. One thing I'd also say that a real silver lining of this crisis is that it did put us in front of and build a lot of relationships with great potential capital partners and capital providers. And so I think we're hopeful – and given we've got our broader platform here at Ashford with where we've got the operating side of the house and not just the ownership side of the house where I think it opens our platform at Ashford Trust open to potentially pairing up with some great capital providers and partners to go out and do deals in addition to just on our balance sheet alone.

Okay. Thanks, Rob. Maybe just one quick one for Deric. Deric, as you guys worked through the – some of the forbearance agreements, was there any opportunity to maybe fix in – to fix some of the debt just with what we're seeing now in the market with interest rates and still low historically, but was there an opportunity or what do you look to do something to fix in a little bit of it if we are moving higher on long-term rates?

You know, Chris, it wasn't really something we explored that deeply. As you know our preference has kind of always been to stay at the shorter end of the curve. And we've just always had a preference for being a floating rate borrower. When you lock in stuff, it tends to tie your hands in terms of prepayment – prepayment penalties or flexibility to do something opportunistic. And the debt markets continue to get better. I would say if you kind of rewind the clock six months or so, it's a little unclear on what the debt capital markets for hotels were going to look like as we sort of came out of the pandemic. But as we sit here today, the market seems like it's just getting better every day for property level financing. And thankfully we're in a good spot where we don't have a ton of refinancings that we need to do. But for the few ones that we do need to do where we're going to be a little patience because the market just keeps getting better. There is plenty of capital out there.

Yes, and I think we're – again, Deric and his team did a great job of building the maturity ladder that we have, because as we look to this year where we've got Crystal Gateway and next year we've got Boston Back Bay, those are both assets that are very, very high quality assets. There is ample equity value in them. And so, we feel very confident about the – there's – we don't really have any material – maturity refinancing risk, which is great. The one thing that we are focused on which is obviously several years in advance and I mentioned a little bit in my comments is as we do have some pools that have extension tests that have debt yield tests that are in 2023 or 2024. And we don't know for certain that that those are going to be issues at all, but we want to be proactive in addressing those, which is why we highlighted that in two of our bigger pools that JP Morgan 8 pool and our MS 17 pools, why we – those forbearance arrangements got delayed a little bit in their closing, because as we finalized and felt certain that we were going to close the transaction with Oaktree. We knew that we now had an opportunity to potentially modify those forbearance arrangements in order to modify those debt yield extension test. And so, we're going to be focused on that on some of our other pools that have extension tests in two years or three years or four years to see if we can work with our lenders and servicers to modify those as needed.

Okay, very helpful. Thanks guys.

Ladies and gentlemen, we've reached the end of the question-and-answer session. I'd like to turn the call back over to management for closing remarks.

Thank you everybody for joining us on the call, and we will talk to you again next quarter.

This concludes today's conference. You may disconnect your lines at this time and thank you for your participation.