Ashford Hospitality Trust Inc (AHT) 2003 Q4 法說會逐字稿

Welcome to the Ashford Hospitality Trust conference call. Today's call is being recorded. At this time for opening for opening remarks and introductions, I would like to turn the call over to Mr. Tripp Sullivan. Please go ahead.

Good morning and welcome to this Ashford Hospitality Trust conference call to review the Company's results for the fourth quarter of 2003. On the call this morning will be Monty Bennett, President and Chief Executive Officer, Doug Kessler, Chief Operating Officer and Head of Acquisitions, and David Kimichik, Chief Financial Officer and Head 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 released yesterday afternoon in a press release that has been covered by the financial media.

As we start, let me express 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. When we use the words will likely result, may, anticipate participate, estimate, should, expect, believe, intend, or similar expressions, we intend to identify forward-looking statements. Such statements are subject to numerous assumptions and uncertainties, many of which are outside Ashford's control. These forward-looking statements are subject to known and unknown risks and uncertainties which could cause actual results to differ materially from those anticipated, including without limitation -- general volatility of the capital markets and the market price of our common stock; changes in our business or investment strategy; availability, terms and deployment of capital; availability of qualified personnel; changes in our industry and the market in which we operate; interest rates of the general economy; and the degree and nature of our competition. These and other risk factors are more fully discussed in the section entitled risk factors in Ashford's registration statement on form S-11 as amended, and from time to time in Ashford's other 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. Investors should not place undue reliance on these forward-looking statements. We are not obligated to publicly update or revise any forward-looking statements, whether as a result of new information, future events or circumstances, changes in expectations, or otherwise.

I now will turn the call over to Monty Bennett. Please go ahead, Monty.

Thank you, Tripp. Good morning. A lot has happened since our last conference call in early November, so we will take some time to update you on our growing portfolio of investments and assessments of the current operating climate and where we are in executing our investment strategy.

Let me first begin with a couple of housekeeping items by first acknowledging that this conference call on fourth quarter results should be the longest time we ever have to wait to announce our results. As we disclosed in our fourth quarter preview release last month, the fact that we were not classified as an early filer for purposes of meeting the March 15th 10-K deadline put us farther down the line than we would have preferred with our auditors, an unfortunate consequence of Sarbanes Oxley. Going forward, we expect to report our results within four to six weeks after the end of the quarter.

Second, effective this coming Monday, we will be moving our offices to across the tollway. Our phone numbers will be the same, but our new address will be 14185 Dallas Parkway, Suite 1100, Dallas, Texas 75254.

Similar to the third quarter, the fourth quarter was strategic in terms of starting off our mezzanine lending and direct hotel investment programs on the best footing. We invested time and resources in developing new relationships, expanding existing relationships, and expanding awareness of both programs. Most importantly, we took the time to make the best allocations of our capital and take a fresh look at all of our investment opportunities. As you may have noticed during the last two to three months, and as Doug will discuss in a moment, that patience has reaped significant awards rewards in the form of higher yielding acquisitions than we had originally targeted, a faster deployment of capital than anticipated, and an earlier than projected dividend payment.

For the total portfolio, operational highlights for the fourth quarter include RevPAR, or revenue per available room, up 1.3 percent. Total revenue up 77.8 percent. Occupancy declined to 66.3 percent from 66.7 percent a year ago. ADR, or average daily rate, was up by 2 percent to $96.79. Hotel-level operations and NOI growth in the comparable portfolio were consistent with the results and trends we cited in the third quarter -- a greater emphasis on building (indiscernible) group sales efforts at several assets, higher levels of business travel in all but the two Texas markets, and an increase in occupancy due to completed renovations at two properties.

Total portfolio operating performance in the fourth quarter was influenced by the 6.1 million of revenues added by the nine new hotels, as well as the transition to new management at the five hotels acquired from FelCor. Generally, when a sale of an asset occurs, and more so if management changes, there is a quarter or two impact on revenue. When major renovations are performed, revenues are affected during the renovation and for a few months thereafter.

The current hotel operating environment has improved from a year ago. We have seen the business traveler begin to return in a more meaningful way and we are experiencing more group bookings in several markets. However, we are still on the upswing with a long way to go before we reach the corporate spending levels achieved prior to 2001. On the expense side, we continued to benefit from a tight control of costs at the hotel level, which should accelerate our margins with any sustained revenue growth.

The improving operating environment has also led to a slightly more competitive environment for deal flow. In the six to seven months since our IPO, we have seen more capital flowing to the industry and the number and size of transactions increase. Although there appeared to be a good bit of doubt about our prediction on the road show that now was the time to be investing in the lodging sector again, I don't believe there are many doubters today. For the most part, the increased level of activity has had little effect on our pipeline and the quality of deals that we are reviewing. In fact, we see more opportunities available today than we have since 9/11.

There has been an impact on pricing that has so far been confined to the larger direct hotel investments and the institutional-type mezzanine loans. Our trailing 12-month EBITDA yields on direct investments and initial yields on mezzanine to first mortgages, however, are meeting or exceeding our targeted ranges, and we are ahead of schedule for deploying our capital.

With our deployment of capital ahead of schedule, we were able to declare our initial dividend a quarter earlier than expected. Last week we declared a dividend of 6 cents per share for the first quarter of 2004. We had initially expected to start paying a dividend from the results of the first or second quarter of 2004. Our dividend policy will continue to target a payout in the range of 80 to 85 percent of cash available for distribution on an annualized basis, and we expect our dividend declarations to be made in the last month of each quarter to shareholders of record at the end of the quarter. Rather than set an annual rate of up front, we expect to continue to grow the dividend over the course of the year as our portfolio grows.

I will now turn to call over to David Kimichik for the financial review.

Thank you. I would like highlight some data from yesterday's release and provide a few comparisons that will hopefully help you in understanding our financial results. First I'll talk about our financial statements, and then the combined operating results for the fourth quarter and full year 2003.

First I would like to talk about our balance sheet. As of December 31, the Company had total assets of 268 million, including $76 million of cash. Based on our ultimate amount of leverage, we were roughly 40 percent invested from the initial raise. Ate year end the Company had only $50 million of debt. Our debt to total assets was less than 20 percent. 44 million of our debt was floating at a blended cost of 5 percent, and 6.4 million was fixed at a rate of 7.09 percent. Currently the Company has 25.7 million common shares issued and outstanding. Additionally, there are 5.7 million operating partnership units issued and outstanding that are convertible to common shares.

As of December 31, the Company owned 15 hotels, comprised of 7 Embassy Suites, 2 Radisson hotels, 2 Doubletree Guest Suites, 1 Hampton Inn, one SpringHill Suites by Marriott, 1 Hilton Garden Inn and 1 Homeland (ph) Suites, with a total of 2380 guest rooms. 11 of these properties are managed by Remington Hotel Corporation, and four of these hotels are managed by Noble Hospitality from Atlanta. The Company also owned 1 mezzanine loan in the amount of $10 million secured by the New York Times Square Hilton.

Now I will give some highlights on our income statement. During the fourth quarter the Company reported a net loss of $1,329,000, or 5 cents a share. This results in a FFO calculation of a positive $43,000 and an EBITDA calculation of a positive $297,000. Hotel revenue for the quarter was 14.9 million, up 6.5 million for the quarter as compared to our predecessor, or up 78 percent. Hotel operating profit was 3.4 million for the quarter, up 1.9 million for the quarter as compared to our predecessor, or up over 100 percent.

Unfortunately, these year-over-year comparisons are not going to be very meaningful because the comparative set of our predecessor had only six assets during the periods when we are comparing, and we now have 15 assets plus a mezzanine loan. The Company started off with six assets, with much of our cash yet to be invested at year end, and therefore we believe the comparisons of our predecessor on a pro forma basis would not be very meaningful, as well as the fact that our predecessor did not have corporate-level G&A, which further distorts the comparisons of the measures on the financial tables attached to our earnings release.

The statistics that we think are meaningful and are apples and apples are the RevPAR comparisons for the entire portfolio. Fourth quarter RevPAR for the portfolio of all 15 assets was $64.12, up 1.3 percent when compared to the fourth quarter of '02. And that was primarily the result of a 2 percent increase in ADR. Full year RevPAR for the entire portfolio of 15 assets was $69.56, up 1.8 percent compared to the full year '02, and that was primarily the result of some increased occupancy.

On a last note, on October 16, the Company exercised its option to reassign its rights under our asset management agreement back to the affiliate until January 1, 2004. This was done in order to ensure the Company would meet the REIT-eligible income thresholds in 2003, and the guarantee of payment under this contract was extended for a like period of time.

Now I would like to turn it over to Doug Kessler to discuss our investment highlights.

Thank you, David, and good morning. We have been very pleased with our investment activity. There is an increasing number of opportunities available to us in direct hotel investments and mezzanine loans, and we will continue to exhibit discipline in underwriting and pursuing potential transactions to maximize shareholder returns. We believe the quality and quantity of our investments to date that we have closed on or announced, highlights our ability to source the best yielding and structured investments.

During the fourth quarter we acquired a five-property, 894-suite portfolio of Embassy Suites Hotels and Doubletree Guest Suites hotels from FelCor Lodging Trust for approximately $50 million in cash, and a four-property, 393-room portfolio of limited service hotels for 33.9 million in cash from Noble Investment Group. The purchase price of these portfolios equated to trailing 12-month EBITDA multiples of 8.8 times and 9.4 times, respectively. We are in the process of investing an additional 8.2 million and $1 million, respectively, in these acquired assets for renovation, and we plan to complete the work in the fourth quarter.

During the fourth quarter we closed on our first mezzanine financing, namely the purchase of a $10 million junior mezzanine loan on the Hilton Times Square in New York City from Bear Stearns Commercial Mortgage. This investment generates an initial unleveraged yield in excess of 11 percent. This high-profile financing served to raise the market awareness of Ashford's mezzanine loan program due to the quality asset, sponsorship and lending partners.

We have built upon the momentum established by these initial investments, and our pace of investment activity over the first quarter has definitely accelerated since year end. So far during the first quarter we have completed $25.3 million in direct hotel investments, agreed to acquire an additional $55.7 million, completed the purchase of 46.6 million in mezzanine and first mortgage participations, and originated $15 million in mezzanine loans. With these transactions, our committed or invested capital totals approximately $384 million.

In the area of direct investments, we closed or announced 4 very strategic acquisitions. The investment diversification is clearly evident in these transactions as they varied by market, brand and segment. The 210-room Residence Inn in Lake Buena Vista, Florida, is a $25.3 million hotel acquisition that we closed on yesterday. The trailing 12-month EBITDA multiple is 9.7 times. The asset will require very little in the way of CapEx; only about $250,000 for minor cosmetic upgrades.

We have announced the planned acquisition of the Sea Turtle Inn in Atlantic Beach, Florida, for total consideration of $23.1 million based on a trailing 12-month EBITDA multiple of 10.1 times. However, the first year EBITDA multiple is expected to improve to approximately 8.2 times due to the immediate implementation of better expense controls from Remington Lodging and Hospitality that will contribute to higher operating margins. The structure of this transaction included approximately $2.5 million of OP (ph) units based upon the market price of the Company's stock, approximately $4.9 million in cash and 15.7 million in assumed mortgage debt. We expect to close the acquisition later this month.

We also announced the planned acquisition of the 187-room Sheraton Bucks County and adjacent 56,000 square foot office building in suburban Philadelphia for $16.7 million in cash. The purchase price equates to a trailing 12-month EBITDA multiple of 7.6 times including the office building, and an EBITDA multiple of 6.5 times after the planned sale of the office building. These calculations assume no EBITDA contribution from the office building, only from the hotel. We also intend to immediately begin investing approximately $5.65 million in renovating the hotel once the acquisition is completed in early May.

This week we also announced the planned acquisition of the 133-suite SpringHill Suites at Baltimore Washington International Airport for total consideration of $15.9 million, based on a trailing 12-month EBITDA multiple of 10.3 times. The purchase price includes $9.1 million in cash and approximately $6.8 million in assumed debt that offers the option to borrow additional funds. We expect the acquisition to close in April.

Our original targeted investment allocation for direct hotel ownership was 60 to 80 percent of our capital base. Currently, we are at the high end of that range and will probably stay at the higher end of this range for most of 2004. Our direct portfolio now includes 19 hotels totaling 3104 rooms.

We have been very active in the mezzanine and first mortgage arena as well this year, and have clearly established Ashford in the lodging debt markets. In January we acquired a $15 million subordinated participation in a first mortgage loan secured by the 1225-room Adam's Mark Hotel in Denver. The loan bears interest at 900 basis points over LIBOR, provides debt service coverage of 3.9 times and generates an initial unleveraged yield to the shareholders in excess of 10 percent.

In March we acquired a $25 million mezzanine loan receivable secured by a portfolio of 17 full-service hotels totaling 5354 rooms. The loan bears interest at 870 basis points over LIBOR with a 2.5 percent LIBOR floor and provides an initial unleveraged yield of 11.2 percent.

This week we also closed on a $15 million loan origination on the 273-suite Embassy Suites at Boston Logan Airport. The loan bears interest at 1025 basis points over LIBOR with a 1.75 floor, providing an initial unleveraged yield of 12 percent.

Finally, we closed yesterday on a $6.6 million mezzanine loan receivable on the Northland Inn and Executive Conference Center in the Minneapolis suburb of Brooklyn Park. The loan bears interest at 1000 basis points over LIBOR with a 2 LIBOR floor, and it also has a 15 percent accrual feature at maturity.

Similar to our direct investments, the mezzanine and first mortgage portfolio exhibits a high degree of diversification. It includes purchases, originations, high-quality assets, well-known owners, and a healthy blend of single-asset and portfolio collateral. We have also established relationships with the leading real estate lenders, such as Bear Stearns, GMAC, Bridge Capital and walkover, just to name a few.

We noted last quarter that our diversified platform is working to our advantage in negotiations with sellers, lenders and borrowers. One example of this dynamic was the acquisition of the SpringHill Suites at BWI Airport from the Bicini Poland (ph) Group, after having originated a $15 million mezzanine loan to a joint venture owned by the Bicini Poland on the Embassy Suites at Logan Airport. We expect there to be similar opportunities with other borrowers and lenders during the year.

Our targeted allocation for mezzanine investment remains 20 to 40 percent of the portfolio. Currently our mezzanine portfolio totals $71.6 million, which is at the lower end of this target, and current indications are that as a percentage of our total investments, it will stay at the lower end of this range. We have worked hard to successfully raise awareness of our mezzanine program among borrowers, bankers and mortgage brokers. The volume of deals we have closed in such a short period of time bodes well for us in 2004, and we look forward to pursuing more opportunities in this very attractive market.

I will now turn the call back to Monty for brief concluding remarks.

Thank you, Doug. We are often asked where we stand in our allocation of capital raised from the IPO. We have noted before that we have approximately 500 to 550 million of buying power we expected to put to use within the first 12 months after our IPO. This assumes 50 to 55 percent of leverage and 250 million of equity. Including the 120 million of contributed assets from the IPO and the acquisitions and investments made to date, we have committed approximately $384 million. Should our investment pace in the second quarter of this year match that of the first quarter, we will be fully invested ahead of schedule.

We still see a lot of opportunities still available in the marketplace. We believe that hotel industry market awareness of the unique competitive advantages of our investment strategy is increasing. We offer distinct advantages to hotel owners, investors, lenders and developers, who desire a partner with the experience, long-term vision, flexibility and wealth of options to meet their unique capital needs.

We are very excited about the growth opportunities we see for Ashford Hospitality Trust. As we stated during our IPO, we believe the lodging cycle is at a point where demand is outpacing supply. Attractive current returns with upside potential are available, and most indicators appear to be showing we are moving off the bottom.

Our industry outlook for 2004 is certainly more optimistic than it was in 2003. Based upon the improving GDP forecast and performance in the second half of 2003, we expect the historical lag in lodging demand to begin to kick in during 2004. We have already seen improved market RevPAR growth in the first two months of this year in both our comparable and non-comparable portfolios.

That covers our prepared remarks. We will now be happy now be happy to answer any questions that you may have.

(OPERATOR INSTRUCTIONS). David Loeb with Friedman Billings Ramsey.

At the risk of asking the obvious question, can you give a little more color looking ahead at what is in your pipeline? Just to give us some comfort about what kinds of transactions and what kind of timing we could expect as you finish deploying that capital?

Sure, David. This is Monty. At the IPO, we shared that we were seeing deals at about an 8 to 9 percent cap rate, and we are still seeing deals available in that range in the marketplace as far as direct hotel investments, and that regarding mezzanine loans, we are targeting deals in the 11 to 12 percent range. At the time we thought that would be a little conservative. The market has gotten a little tighter, so that's about where we see pricing today, although our portfolio of investments that we have put together in the mezzanine arena has been at a lower position in the capital structure at those yields than we were earlier anticipating. And we will see what the future holds about whether that gets back to where we thought we would be.

Regarding the pipeline, we have seen a lot of assets come onto the marketplace and become available this spring. It looks like 2004 is going to be a strong year for asset sales. We are in the markets. We are very active and looking at a lot of opportunities. And so we are really working it. As far as specifics on that, it's hard for us to get into details because our outside counsel has asked us to not do that. But we still see a lot of transactions out there, and we see a lot of transactions in the pricing range that we communicated to you guys earlier.

Maybe in more general terms, if you could give us an idea -- maybe even just by proportion -- of what the things that you are looking at or are under consideration are in the early stages, in the due diligence stages, close to being at announcements. And how would that pipeline break down among those various categories?

That's hard to say, David. Every time we think a deal is in early due diligence it gets accelerated, and something that's in later due diligence falls out for some reason. So I'm reluctant to jump out there too much, but we've been working hard and seeing a lot of transactions. Some transactions we worked on for some time, months at a time, and never make. And then some ultimately do make, so it's really hard for us to characterize that. And I know you guys would like some more information in that regard, it's just tough for us to characterize it that way.

To revisit a question that I asked you on the last conference call, can you talk a little bit about some of the deals that you have not done, about what has led you to walk away from some transactions?

Sure. I'll make a comment, and then if you guys want to throw in a couple of comments as well. In some opportunities after we got into our due diligence, we'll find that that particular market had not reached the bottom yet. And so, during the period of our due diligence, we'll see numbers start to back up. In just about every case -- there are rare exceptions -- but in those cases, we just don't believe that we need it, and we step back from those assets. So that's a strong driver. The levels of PIPs (ph) that are involved from the brands -- the brands are tough, and that can affect us. We get some indications from franchisors about how much the product improvement plan will be, and then when the actual report comes out it can be a lot stronger. And that has pushed us away from particular deals. Other factors will steer us away from a deal, maybe in the earlier stage of a deal. If there is a lot of new supply coming into a marketplace, that just makes us nervous, even if it's an attractive cap rate and a good brand. We just -- it's tough for us, so we try to shy away from those markets.

Those are a few factors. guys, do you have some other factors you want to throw in?

No. I think those are the situations that we are occasionally faced with. But I want to state quite clearly that to the extent that we have engaged in a deal and we find ways to make it work, we push the sellers to recognize some of the things that we see along the away of the due diligence period, and try to convince them that either through price adjustments or additional guarantees, for example, on the mezzanine structures -- whatever the case may be, to recognize that we are a very active and attractive buyer of their assets, and whether it's with us or someone else, that they will probably have to take an adjustment. And so, given that they are already down the road with us, we still try to work the deal hard and come up with solutions to situations that we come across.

(OPERATOR INSTRUCTIONS). Brian Maher, Credit Lyonnais Securities.

Can you elaborate a little bit on who the sellers are and what is motivating them? It seems from a public company standpoint, with valuations trading up to where they have and a lot of equity issuances, that they are not as needy to sell assets as they were just six months ago. So can you elaborate on who it is you're talking to?

This is Monty. I'll make a couple of comments, and then, Doug, if you want to jump in, or anybody else here?

I would generally agree with that assessment. I'd say that the neediness for some of the other public companies to sell is not as strong as it used to be, although there still -- as you know, some of these public companies that are active sellers. And we have bought some of our assets from public companies.

The other sellers are a mixed bag. I don't know if we can characterize them all in one area. But owner operators -- that are looking to get out. They have gone through a number of tough years, and now they see an opportunity to sell their investment. Opportunity funds that have maturing lives to their funds, and they want to step out. You name it, really. It's a pretty diverse group of sellers and potential sellers out there.

This is Doug. I would add just a couple of comments. The transactions that were occurring in 2003 I would say were more heavily weighted toward the larger bulk portfolio sales. And while that is still continuing -- and even in some cases continuing to a bit of a surprising extent, when we hear about possible consolidation opportunities -- we believe that that will continue in '04.

But in addition, we are seeing a greater influx of single owners and smaller owners, as Monty said, bringing transactions to the pipeline. Which actually, one might consider plays better into our overall investment strategy by being able to pursue the ability to pick off assets as well as pursue preemptive bids, given our numerous relationships throughout the market.

And we, by indication of some of the deals that we have announced, have not have not only pursued widening market transactions but also privately negotiated transactions, which we still believe we have a competitive advantage, given our industry network and experience with a wide array of brokers, owners, mortgage brokers, attorneys, bankers, etc. And we continue to pursue all angles to source off-market opportunities, as we have done in the past. And we obviously will continue to pursue the widening market deals.

But the influx of a greater array of sellers and types of deals is clearly evident in the market today than it was at the time of our IPO.

And with respect to C&L, after having taken out KSL, do you think that they are pretty much out of the market for awhile, or do you just not bump into them when you're looking for deals?

Brian, we just don't bump into them. We have not competed with them -- I don't know if there's been a transaction yet. About the time that we did our IPO, they started to phase out of the kind of assets that we started bidding on. So as exemplified from this case (indiscernible) portfolio, that's a group of assets that we would not bid on and not compete in. And with the additions of some new members to their management team, it just appears to me that they are focusing more on really big box assets -- higher-end, high, high-end bigger box type assets -- so that they can deploy the substantial amount of capital that they have. So we are not running up against them, and I don't expect that to change.

I would comment, though -- this is Doug -- that where they have been active buyers on some of these larger assets, we would certainly be willing to discuss mezzanine financing opportunities with them, as we would with many of the buyers in the market today. We tend to classify ourselves as the premier provider of capital to the lodging industry, and our business strategy allows us to have the diversification of deploying capital at all levels of the capital structure. And we think, again, that plays to our competitive advantage when we are bidding on the assets. If we are not the winning bidder, we can certainly offer up financing on those assets that we've underwritten.

But to the point directly on are we competing on direct hotels with C&L, we really don't seem to be bumping into them.

One last question. Is there anybody that you are bumping into on a fairly regular basis, or is it just really scattered?

I'd say it's very scattered. When we sit down and we get together with our meetings, it is scattered. It's sometimes another public company, sometimes a private fund. But surprising to us, there is not a group that we are consistently running into.

I would say on the direct hotel investment side, that's clearly the case. It's still pretty dispersed. I would comment that on the mezzanine side that it's a narrower group of players, and so we tend to not only, I wouldn't say bump up, but sometimes we cozy up to groups that we could be bidding jointly with. And given the volume of transactions that we have stated we think will occur in 2004, that would imply more financing volume. And I think still this is very much a proceed-sensitive environment. Given where interest rates are, people are trying to access as much capital as they can, which once again, I think, plays to our mezzanine strategy. So our view is that while we may be bumping into the same players, I think there is plenty of opportunities to go around to satisfy our appetite.

Rod Petrik, Legg Mason.

Monty, Doug, just to follow up on what you have been talking about, what kind of competition are you seeing on the direct side and on the mezz? In the real estate business, anytime you buy a piece of real estate it's because you're willing to pay more than the guy in front of you and the guy behind you. On the mezz side, a lot of the private guys are saying that some of the deals that you have done that you have been pretty aggressive on your pricing.

As far as the mezz goes, I think we commented in our last call that we thought mezz pricing had gotten a little tighter. We classify the mezz investing as what we will call an institutional market and non-institutional market, the institutional market being the big boxes, big, high-profile deals. That tends to be very competitive, and we are not as competitive in that arena. The non-institutional market is where you have, say, a portfolio of Embassy Suites around the country with a good quality asset, but it's not up to the size that attracts as much attention. And we can compete a little bit better in that arena. I'd say that since our IPO, pricing for mezz has probably tightened maybe 100 to 200 basis points. But since maybe last three months I have not seen any more tightening. Doug, you might have a different comment on that.

We choose not to compete for the trophy assets, for the simple reason that as a pure-play mezz player, one has to go down the curve wherever the spreads are. Because we have got a diversified platform, we try to allocate capital to where we see the best yielding opportunities. So whereas on these trophy assets, yields have gotten compressed because there is more competition, as Monty said, we choose to play in the arena where we think we have greater market inefficiencies right now. And I would say that the yields have actually maintained their general levels for the types of assets that we have been closing on. I think that when people have commented on -- and I'm not sure who really has commented -- I think that our grid pricing for where we are relative to our loan to values is very attractively priced for the risk profile of the asset. Remember, we're not stretching out there and making loans at the highest end of the LTV, which is what we have said we might do during the IPO; we're actually able to deploy our capital within a lower LTV grid at pricing that was consistent with what we said we would do on the IPO. So I think from our management standpoint, we're actually very pleased with the yields we have been able to achieve for where we are on the grid LTV, with respect to the assets we have made loans on.

Let me make a comment on that. We initially thought that we would get pricing around this range, about 900 to 1000 over, in the 65 to 85 percent tranche on an LTV basis. How it has turned out is that our investments to date are an average of about 950 basis points over LIBOR, at an average position in the capital structure between 59 and 67 percent. So while we thought we would be able to initially beat those numbers as far as the spread goes, and it's tightened up a little bit to about what we said, the position of the capital structure is more conservative than where we initially thought. And that is just a function of those individual deals.

Where do you think the opportunities -- as you fill out your real estate portfolio, where are the opportunities today? When you look at one of your first transactions from FelCor, you probably were buying it 40 percent below their cost five years ago. Yet when you look at the SpringHill Suites, you are pretty much at replacement cost.

Right. I'm sorry, Rod. What is the question?

Where are the opportunities here going forward?

You know, it's all around, it's just as you described. We see some deals we think are great opportunities on a price-per-key basis, and well, well below replacement cost what the seller paid for them. In some cases it must may be much closer to replacement cost, depending upon the market. As far as generally where we see the opportunities, we're seeing them in some select service assets, we're seeing some in full service assets, and we're still seeing some mezz opportunities. I'm looking around the table here to see if guys want to add color as to where we see more opportunity rather than other opportunity. And we see it pretty balance out there.

But you have a comfort in (indiscernible) being fully committed by your one-year anniversary?

Yes.

(OPERATOR INSTRUCTIONS). Brian Maher, Credit Lyonnais.

Monty, you guys were pretty vague, I guess, with respect to your outlook for '04, other than you thought it would be better than '03, as one would intuitively suspect. But as your portfolio is growing at a pretty rapid clip, can you give us some idea with respect to what you think RevPAR might be as it applied to your portfolio this year, in fairly broad terms if you would like?

Sure. Brian, I'm sure you are aware of what the industry pundits are saying RevPAR is going to be for this year. I think the talk is somewhere between four and five percent or so, maybe a little bit more, and then higher and lower in certain subsegments of the industry. Our portfolio is difficult to nail down, and I'll tell you why. When we jump out there and buy an asset -- and if it's like the Noble acquisition that we did, where management stays in place and they're in pretty good physical conditions, don't require much CapEx, we don't see much of a hiccup, and those assets should and we anticipate to continue to grow about with the market.

If you then take an asset where it's in good physical shape but there's going to be a change in management -- say, like at the Lake Buena Vista deal -- what we typically find in those kinds of assets is that short-term, maybe revenue growth is not quite as strong as it could be, or a tiny bit of fall-off as management cycles out, as the seller kind of loses focus on the asset for the last two or three months of ownership. And then new management comes in and stabilizes the asset and it starts to pick up.

And then you've got asset classes like the FelCor property or the Sheraton Bucks County, where there is new management and there's a lot of CapEx that comes in which affects earnings. And typically, we see earnings and RevPAR in those assets dropping down for a period of time during the renovation. Then after the renovation is complete, which for larger renovations is typically a year, then it starts to climb back after that. So to answer your question, I really would have to be able to tell you what kind of mix of assets that we would have, and I just don't know that yet. You see the kind of assets that we have bought or announced to date, but as far as what the future holds, it's hard to say. So I wish I could give you a little bit more color on that, but in this stage of our evolution, it's just too difficult for us to do.

Are you seeing anything out there in he operating environment which would get you to a RevPAR growth for the industry different than the current four to five percent that people are expecting?

Say again?

Are you expecting anything different than what the industry pundits are thinking of four to five percent RevPAR growth?

As far as the industry?

Yes.

I haven't seen anything to make me think that it's going to be different from that yet.

David Loeb with Friedman Billings Ramsey.

With first quarter winding down, can you give us a read on how your existing portfolio RevPAR has been so far in the first quarter?

We would love to give you a read, but we can't yet. So we will wait to announce that information --

Not even January and February?

No, not even January and February.

Okay. How about this one? Let's see if you can answer this one. What is your thought on the rate of dividend growth? How quickly do you think you'll be able to ramp up the dividend?

We are still discussing that internally, David. And that also depends upon our rate of acquisitions. And at the expense of sounding like a broken record, when we run our models, it is so sensitive to whether a deal comes in a few months before another deal, or whether a deal comes in that is a mezzanine deal versus a direct hotel investment, because those mezzanine deals have higher current yields than direct hotel investments. So it's tough for us to characterize that for that reason, because then we would be predicting what our mix is going to be, and we just don't know how those deals are ultimately going to make and what that mix is going to look like.

I understand that sensitivity perfectly, because my model does the same thing.

Yes, exactly. So we started off at 6 cents. We expect that to grow over time. It's just the amount of that growth is something that we are not comfortable with disclosing because it's still in formulation ourselves.

How did you come up with 6 cents figure? Does it reflect your view on what you think first quarter (indiscernible) is going to be?

Not necessarily. Not necessarily. We just wanted to start at a level that we believed was sustainable no matter what happened.

So it's more of kind of a baseline for an annualized rate as opposed to reflecting your confidence in first quarter results?

As far as one versus the other, that's hard to characterize. But I'd say I would just stick with my statement of that we wanted to put out a dividend that we felt like we could stick to, depending upon the pace -- or regardless of when our acquisitions actually occurred with the existing capital we've got.

One more cut at the pipeline. Your first two acquisitions were both portfolios, whereas the last four acquisition announcements have been one-offs. What do you think the prospects are going forward for portfolios versus one-offs?

We still see both in the marketplace, David. I wouldn't say that there's a heavy prospect for one versus the other.

So is it just really coincidence that the recent announcements, that all the first quarter announcements have been one-offs, or is there something about the structuring of those that takes longer relative to the others or quicker, and the others were started earlier?

Actually, one of the announcements, David, was a mezzanine portfolio financing. So I think both on the debt and on the equity side, there are still portfolio opportunities in the market. And I think it was just mere coincidence that you're trying to state that there's a trend in the market. There's really no trend right now at all that we have observed with respect to single assets or portfolios, with one exception. I will tell you that there tends to be more single assets coming into the market as well than there was, I would say, 6 to 8 months ago.

Interesting. One more about the balance sheet, I guess, for David or Doug. In the release you said you have got 10 million available in the line of credit, which I guess you can expand as well, and 25 million of cash. Do you expect that you will be adding, near-term, you will be adding additional single-asset financing to increase your availability?

As we stated, we deployed our equity and then we would start financing our assets to give us the growth capital to pursue the acquisitions. And that's basically what we have mapped out. As we have announced before, we have lined up the Credit Lyonnais Merrill Lynch revolving credit facility for our secured property financings, and as we require additional debt to pursue acquisitions, given our cash balance, we will continue to pursue single-asset financings. And then we have our mezzanine portfolio, which to this point is not leveraged, but as we have shared with people, that we expect to pursue a financial strategy to leverage those assets as well.

Just to translate that back, by my read, in order to close what you have got under contract you're going to need not only to use what you have available but some additional financing. I am just trying to get a read -- are there any governors on your ability to go out and close new acquisitions, or will you be able to pretty quickly go out and line up additional debt financing as necessary to go out and make additional acquisitions?

I think that we have clearly demonstrated our ability to access the debt markets when needed, and doing so in a very efficient means to minimize the unused commitment fees or to, alternatively, maximize our balance sheet. And so we will continue to pursue financings when needed, and are always in discussions with lenders to make sure that we have got the capital available to pursue the transactions that we are working on.

Rod Petrik, Legg Mason.

I think I know this answer, but can you give any guidance for first quarter?

No guidance for first quarter.

Because you won't or you can't?

Because we --

Come on, you are a couple days of away.

Yes. We are just not in a position to, Rod.

And we are standing by with no further questions at this time. I would like to turn the conference back over to Mr. Bennett for any additional or closing comments.

No additional comments. I just want to thank everybody for your participation today and for your interest in Ashford Hospitality Trust. Thank you.

Ladies and gentlemen, that concludes today's call. Thank you for your participation. You may disconnect.