Good day, ladies and gentlemen, and welcome to the Ashford Hospitality Prime Third Quarter 2017 Conference Call. Please note that today's conference is being recorded. At this time, I will turn the conference over to Mr. Joe Calabrese of the Financial Relations Board. Please go ahead, sir.

Thanks, Ellie. Good morning everyone and welcome to today's call to review results for Ashford Hospitality Prime for the third quarter of 2017 and to update you on recent developments. On the call today will be: Richard Stockton, 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 are 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 disclosed 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 the accompanying tables and schedules, which have been filed on Form 8-K with the SEC on November 1, 2017, and may also be accessed through the company's website at www.AHPREIT.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 Richard Stockton. Please go ahead, sir.

Good morning, everyone, and thank you for joining us. I would like to begin my prepared remarks today by addressing some of the natural disaster-related challenges that we have faced recently. Four of our thirteen hotels were significantly impacted by hurricanes in the Caribbean and wildfires in Northern California in the past few months. On September 6th, Hurricane Irma was the first Category 5 hurricane to ever make landfall on the U.S. Virgin Islands and its impact on that area has been significant. Our Ritz-Carlton St. Thomas received substantial damage from the storm and our team has been working diligently, along with the Ritz-Carlton property management team, to assess the damage, develop a comprehensive restoration plan, and assist in the recovery effort. Three of the six guestroom buildings on the property sustained extensive damage, and we currently have 73 of the property's 180 guest rooms available and in service. These rooms are mostly being occupied by those assisting in the recovery effort. We expect that the recovery at this property could take up to two years. The Florida Keys were also significantly impacted by Hurricane Irma and our Pier House Resort in Key West also sustained some damage. The damage at Pier House was less extensive than at the Ritz-Carlton St. Thomas and currently all of the property's guest rooms are available and in service. We expect Key West to recover much more quickly than St. Thomas. During the quarter, we booked insurance deductibles for both property and business interruption of $4.6 million related to both Hurricane Irma and Maria that we have added back for purposes of our non-GAAP metrics. During the month of October, we also experienced disruption at two of our properties due to the Napa Valley wildfires. While none of our guests or associates were injured,…

Thanks, Richard. For the third quarter of 2017, we reported a net loss attributable to common stockholders of $2.7 million or $0.09 per diluted share. For the quarter, we reported AFFO per diluted share of $0.37 compared with $0.38 for the same quarter last year. Adjusted EBITDA for the quarter was $26.0 million compared to $22 million in the prior year quarter. For purposes of calculating Adjusted EBITDA and AFFO this quarter, we added back the uninsured costs associated with the hurricanes. Those expenses totaled $4.6 million. We also booked an insurance receivable of $19 million during the quarter, however, we expect this number to change over time as we continue to work with our insurance carriers to assess the physical damage and business interruption claims. At quarter's end, we had total assets of $1.5 billion. We had $914 million of mortgage debt, of which $48 million related to our joint venture partner's share of the debt on the Capital Hilton and Hilton La Jolla Torrey Pines. Our total combined debt had a blended average interest rate of 4.0% and was almost entirely floating rate. All of our floating rate debt has interest rate caps in place. As of the end of the third quarter, we had approximately 45% net debt to gross assets and our trailing 12-month fixed charge coverage ratio was 2.1x. All of our debt is non-recourse, property-level debt, and our next hard debt maturity is not until 2019. We ended the quarter with net working capital of $146 million. As of September 30, 2017, our portfolio consisted of 13 hotels with 3,743 net rooms. Our share count currently stands at 37.3 million fully diluted shares outstanding, which is comprised of 31.9 million shares of common stock and 5.4 million OP units. In our financial results, we…

Thank you, Deric. Comparable RevPAR for our portfolio declined by 2.9% for all hotels not under renovation during the third quarter. Year-to-date, Comparable RevPAR for hotels not under renovation has grown 1.1%. For the third quarter, Hotel EBITDA flow-through for the entire portfolio was strong at 72%. Year-to-date Hotel EBITDA flow-through has been even stronger at 108%. This quarter's best performing asset was Renaissance Tampa, which grew RevPAR by 9.9%, driven by occupancy growth of 6% and rate growth of 3.7%. This robust RevPAR growth resulted in the property increasing share relative to both its competitors and upper upscale Tampa/St. Petersburg market by 580 basis points. July and August were strong group months, with an additional 2,000 group room nights compared with 2016, driven by two long length-of-stay groups: the Tampa Bay Buccaneers and the HBO TV series Hard Knocks. Later during my comments, I will address the impact the hurricanes had at Ritz-Carlton St. Thomas and Pier House; however, Renaissance Tampa benefited from people relocating to west Florida as Hurricane Irma approached. Not only did we increase the top line, but Hotel EBITDA flow-through was also 317% during the third quarter and margins increased by 28%, resulting in a $293,000, or a 30.8%, increase in Hotel EBITDA. This strong bottom line performance was primarily due to productivity increases related to the long length-of-stay groups. In addition to the outstanding performance of the Renaissance Tampa, I want to briefly mention that our next best performing asset, Bardessono, grew RevPAR 3.3% during the third quarter on the back of 8.4% rate growth. This RevPAR growth represents a 510 basis point increase in RevPAR relative to the luxury northern California market. Driving rates aggressively on weekends was the main contributor to the increase in RevPAR relative to the market and competitors. Hotel…

[Operator Instructions] Our first question will come from Tyler Batory with Janney Capital Markets.

Maybe why don't we get started on the asset sale side things. One of you maybe discuss the depth of the buyer pool out there generally. And then also how did -- Marriott Plano will come in on your expectations just from a valuation perspective?

Sure, Tyler. So in terms of the depth of the buyer pool, I'd say it's very deep. We had dozens of confidentiality agreements signed by buyers looking at that asset. We had a number of bids come in. We ultimately awarded exclusivity to bid -- the top bid on that asset. So we feel like we definitely got market pricing on that asset. It was very thoroughly vetted by a number of buyers. The buyers that we saw were private companies. There were some private equity. Clearly, the investment sales market is being fueled by low cost of capital on the debt side, and I think that's really greasing the wheels of that market. The pricing expectation was in line with what we expected and we were absolutely happy to contract on that basis.

Okay, great, appreciate that. And then just as a follow up a few questions on Napa Valley. Obviously, the wildfire has certainly -- I imagine, it had an impact on result in October. Are you seeing any cancellations in November and December? And also just on Yountville, I mean, I know there are some issues there with a management transition, what's your thought on when that starts to improve? Is that going to be a lingering issue into 2018? Or do you think you're kind of past that at this point?

Sure, this is Jeremy. We expect Napa to recover. So we're not worried about it. But specifically at Hotel Yountville, the issue there is that during the sale, the -- most of the team -- neither hotel is for sale and the executive team left the asset. So the General Manager actually went to a competitive group of properties in the market and there's no Director of Sales, no Revenue management. And we actually tried to work with the seller to try to get Remington in a little bit earlier. Unfortunately, if you recall, we had to get a variance towards some of the zoning to be able to rebuild some of the keys and so that even extended the sale even further. And so during that process, there just wasn't anyone, there was so many group business. So what we're experiencing today is really a lack of mainly weekday group business. And so there's a lot of holes that we've had. We expected this by the way, and it's just part of the transition of the sale process. Going forward, we've got teams in place. We're selling the group of properties between Bardessono and Yountville together. We're able to get a little bit more attractive groups. There's still a little bit of transition I think during Q4, but I think that we've got a position to have a relatively strong 2019.

Our next question will come from Bryan Maher with B. Riley.

Couple of questions. Can you elaborate a little bit more, I know you did talk about it, on Chicago and the RevPAR at the Sofitel being down 11%. But I didn't get the sense from your prepared comments that, that situation is going to necessarily improve materially anytime soon other than the group nights issue. Can you elaborate a little bit more on that?

Sure, this is Jeremy. We quoted the group nights statistic, which is partially up 15% for next year. So that's a good trend -- first good trend that we're seeing in quite some time, but I've been extremely disappointed with the performance of this property. It's our worst-performing asset in our collective portfolio that I oversee. And we've been very direct and candid with the core team, which is really now the prior leadership of Fairmont. And so there's been a temp transition of property. I can tell you that they have been extremely engaged or dedicating a lot of resources, even coming out-of-pocket to help contribute towards some marketing funds, to get additional business into that asset. But right now, we're having some transition, where we are changing out some very key positions. So I think that the transition is probably going to go through the renovation, which is going to be the fourth quarter, first quarter and then, of course, we're going to have some easing comparables, I mean year-over-year basis because the property, quite frankly, has underperformed. So I think the next year, there's a lot of positive trends on the year-over-year basis. But it's not anywhere near where I think the property should be and where we plan it to be. So I think it's going to take a little bit of time. But I won't expect it to be an underperformer for next year. I'm sorry, I think I said 2019, but I meant 2018.

And then on the Renaissance Tampa; I mean, that's been a pretty solid performer for you as I look back over the last quite a few quarters. And I get it that you had some too long group stays in there and the people relocating. Can you tell me about the thought process of deciding to actually sell that property versus doing something else with it? Because that asset seems to have been doing fairly decently.

Yes. We're very pleased with the performance of the Tampa Renaissance. And it will make a great acquisition for somebody else. I think the rationale as we've explained is purely related to the overall strategy for our company and positioning us as the highest-quality lodging REIT in the sector, which we've already achieved that position when you look at RevPAR, but selling Tampa Renaissance and investing into a luxury hotel in its place will further put us into that position. So -- you're right, it's a great performer. We expect it to continue to be a great performer. I think it'll be a very attractive acquisition opportunity for a number of potential buyers out there. And we wish them well with it. But for our portfolio, we're looking to the overall strategy.

And then just lastly, as we think about modeling the company with kind of the issues in the U.S. with not being so sure how quickly full visitation comes back there in St. Thomas, should we be thinking about modeling these companies more steady-state with the expectation that business interruption insurance will pick up that slack, I mean how should we think about that?

Hey, Bryan. It's Deric. I think from a business interruption standpoint, there's really kind of two components with that. One is when we get the cash from the carriers, the other is when we can book that as income in our financial statements. And we are aggressively working with our carriers to make sure we get what we otherwise would've made, if these events hadn't happened. But I would expect that to run at a probably about a quarter lag. So in terms of timing, I would expect that to be about a quarter lagged where we can actually book that as income versus what we otherwise would have received.

Yes. The only thing that I would add on that is from a cash perspective, we would get that sooner than actually booking the income. So we don't plan to front a lot of cash to fund the renovation. Regarding specifically though, Key West, that's a totally different situation. It's not nearly the damage we've actually -- we've got the rooms back, as we told you, in service. And last week it ran 80% occupancy. So I think that market is going to come back very strong and very quickly, but time will tell.

[Operator Instructions] Our next question will come from Chris Woronka with Deutsche Bank.

I want to ask you on the Autograph Collection conversions in Philly and San Fran. Can you talk a little bit about what kind of, I guess, protections Marriott is going to give you on territorial? I know some of these soft brands, then a new one comes up and they kind of -- it doesn't count towards the original territorial protection. So could you just walk us through that?

Yes, this is Jeremy. I don't know if we can disclose what we were able to negotiate. It could be under confidentiality. But I can tell you that we didn't have a lot of leverage to negotiate in area of protection. I mean, this is an existing Marriott product that we had, Courtyard. And their preference was to keep it as a Courtyard. We really had to sell them on the up-branding, Philly was very easy for them to accept. San Francisco was one that required a lot of negotiations and request. And really leveraging the relationship we have with Marriott. And so we really kind of had to sell them on the story and the vision. And the reason is not because they didn't want to be an Autograph. They just had a really profitable Courtyard that they're marking a lot of fees on with the existing structure. And then, I think it's probably easier for them to maybe convert some other hotels in the market to Autograph. And so those run through their same impact process that they have. But as far as really strong rights to restrict anything, we don't have anything that's really significant. But that market is vibrant, San Francisco is a very strong market. There's not a lot of supply specifically around our hotel. We are very uniquely positioned and so, I see the trend's been upside with all the technology companies that are relocating down to our neck of the woods, especially with the Salesforce 1 Tower.

And I would add to that you mentioned the characterization as a soft branding. That's really important in this context in that each of these hotels will have its own identity. We're working with branding firms now to come up with an independent name, theme, style and ultimately customer base. And that's what will really differentiate these hotel products from the competitors in those markets.

Okay, great. And I just want to ask also as we think about when you sell Tampa and redeploying proceeds. I think the last 3 or 4 properties you guys have acquired have been resorts. Is that a general theme? I mean should we kind of think about that as you look at replacements for Tampa?

Yes. I would say as we look at what's available in the market where we're seeing the most attractive returns. It is disproportionately weighted towards resort properties at the moment. I think the CBD opportunities that we're seeing don't seem to have the same return potential, and -- so therefore it wouldn't surprise me if that's where we ended up deploying capital. That said, we're looking into those markets that have a high enough RevPAR to support our strategy, and we're hopeful that we can find opportunities in gateway markets as well. It's just really a matter to what the market pricing is dictating at the moment.

Ladies and gentlemen, that concludes today's question-and-answer session. I would now like to turn the conference over to management for any additional or closing remarks.

Well, thank you all for joining us on our third quarter earnings call, and we look forward to speaking with you again on our next call. Have a good day.

Thank you. And again, ladies and gentlemen, that does conclude our conference for today. We thank you for your participation.