Ashford Hospitality Trust Inc (AHT) 2004 Q4 法說會逐字稿

Good day, everyone, and welcome to the Ashford Hospitality Trust conference call. Today's call is being recorded.

At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Tripp Sullivan. Please go ahead, sir.

Good morning, and welcome to this Ashford Hospitality Trust conference call to review the Company's results for the fourth quarter of 2004. 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 evening 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, 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 or the general economy; and the degree and nature of our competition. These and other risks factors are more fully discussed in the section entitled "Risk Factors" in Ashford's registration statement on Form S-3, 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 will now turn the call over to Monty Bennett. Please go ahead, Monty.

Good morning. Today, we will discuss our operating performance for the quarter and the year, provide an update on our investment activity, assess our investment plans for 2005 and announce our first-quarter dividend.

Our firm has a unique strategy. Many of our competitors in the hotel industry seek to be property aggregators in one segment or another. We see ourselves as more opportunistic, making us more likely to sell assets sooner, redeploying capital into more profitable areas and finding unique ways to make money. We shift our investing between ownership and lending, as well as from segment to segment, based upon current market conditions.

Currently, financing is incredibly competitive in the industry, which makes it more attractive for us to be a borrower than a lender. We are also seeing other creative ways to take advantage of what we see as an anomaly in the marketplace -- 10-year CMBS debt at 75 percent LTV being priced below T plus 100. We continue to remain strategic in our actions. For example, we originated a $15 million loan on the Hotel Teatro, and sold off the $10 million first mortgage. We bought the Sheraton Bucks County office building and hotel complex, and successfully sold off the office building. We will shortly close the FGS transaction, and have designated 8 of the 21 assets as non-core, and candidates for sale or major repositioning.

During the last call, I referred to the third quarter as one of our most active and successful quarters since completing our IPO. But we have eclipsed that level of activity in the fourth. We made tremendous progress in executing our investment plan, and showed significant improvement in RevPAR and hotel operating profit. Industry predictions are still very strong, with overall RevPAR growth of almost 8 percent in 2005, according to PKF Consulting's Hospitality Research Group, one of the oldest and most respected hospitality research organizations in the country. RevPAR for our hotels not under renovation was up 8.9 percent for the quarter year over year, and hotel level operating profit for hotels not under renovation increased by 450 basis points, from 25.0 percent to 29.5 percent on a pro forma and run rate basis for the quarter.

While this is certainly strong growth, we do not believe our properties have fully reflected the positive benefit from the completed renovations and changes in management. The outsized improvement in hotel operating margins, however, is an excellent first indicator, and we will work to extend the RevPAR penetration of our hotels in 2005. These fundamental metrics of RevPAR and hotel-level operating profit show that our asset base is solid. Also, our first mortgage and mezzanine loan portfolio currently yields over 13 percent unleveraged, a 160 basis point improvement over the fourth quarter. We completed a total of $890 million of investments to date, including announced deals. As Doug will discuss in a moment, the fourth quarter and the first quarter to date have been particularly active.

We declared a common stock dividend of 15 cents in the fourth quarter, and are increasing it by 1 cent per share to 16 cents for the first quarter of 2005. Based upon our closing price as of yesterday, this equates to a 6.4 percent annualized yield. For a Company such as ours, with a growing portfolio and active investment program, we believe that yield provides an attractive total return potential in 2005 and beyond for our shareholders.

I will now turn the call over to our Chief Financial Officer, David Kimichik.

Good morning. For the fourth quarter, we reported a net loss of $794,000, or 3 cents per share; FFO of $3,364,000, or 11 cents per share; and EBITDA of $9,402,000. Included in these results is the recurring non-cash expense of $965,000 or 3 cents per share, for the ongoing amortization of deferred loan costs.

As of December 31st, the Company had total assets of $596 million, including $61 million of cash. This is up from total assets of $571 million at the end of the third quarter. The increase in assets is a result of the acquisition of the 654-room Hyatt Anaheim for $81 million that occurred in October. Currently, we have a total cash balance, including restricted cash, of approximately $75 million. As of December 31st, we have $301 million of mortgage debt, leaving net debt to enterprise value at 38 percent at the end of the quarter. This debt was paid down to $260 million in January, subsequent to the completion of our follow-on common stock offering.

Our blended annual interest cost is currently approximately 5 percent. $105 million of our 149 million of floating debt contains an interest rate cap, and $32 million of our floating debt is naturally hedged by virtue of being secured by a portion of our floating-rate mezzanine loan portfolio. We are pleased to report that 95 percent of our current debt is either fixed, capped or hedged. The Company currently has zero principal outstanding on our $60 million credit facility. Not only do we currently have low leverage, we also have the ability to raise equity capital at our discretion, pursuant to agreements in place with security capital by issuing to them up to $65 million of our Series B preferred stock and $19 million of additional common stock.

Currently, we have 36.2 million common shares outstanding, 2.3 million Series A preferred shares outstanding, 1 million Series B preferred shares outstanding and 6.1 million OP units issued. Following the closing of the FGS and Santa Fe acquisitions, we will have total investments of $890 million and total debt of $410 million, with our debt to total enterprise value being 45 percent based on our stock closing price yesterday. At that point in time, our fixed-rate debt will be 61 percent of our total debt. Our annual cost of debt will be 5.8 percent.

Also in conjunction with the FGS transaction, the Company will be issuing 5 million additional OP units to the sellers. Following the FGS transaction, we will have agreements for management with 6 different companies. Remington Hospitality and Lodging will manage 36 of our properties; Noble manages 4 of our properties; Sivica Hospitality, the successor to Day Hospitality, manages 4 of our properties; Dunn Hospitality manages 9 of our properties; and Buccini/Pollin Group and Hyatt Hotel Corp each manage 1 of our properties. As of December 31st, we owned a position in 7 mezzanine and first mortgage loans, with total principal outstanding of $80 million.

For the quarter, we have an excellent news from the operating results of our 33 owned assets. Pro forma RevPAR for the entire portfolio was up 5.1 percent during the fourth quarter, as compared to the fourth quarter '03, and for the hotels not under renovation, which is all but 3 hotels, the RevPAR was up 8.9 percent. The increase was equally attributable to increases in both occupancy and average rate.

Pro forma hotel operating profit for the entire portfolio was up approximately $1.3 million for the quarter or 15 percent when compared to the fourth quarter '03. For the hotels not under renovation, the operating profit was up $1.7 million or 25 percent. This was a result of both increases in revenue, as well as enhanced flow-throughs.

For the fourth quarter, we reported CAD of $3,495,000 or 11 cents per share, and announced and paid a dividend of 15 cents per share. CAD for the full year 2004 was 44 cents per share, while dividends for the year equaled 45 cents per share. This represented a 102 percent payout rate on our full-year CAD on a partially-invested basis.

Lastly, at this point in time, the Company fully expects to get a positive review from our external auditors of our compliance with Section 404 of Sarbanes-Oxley.

I'd now like to turn it over to Doug Kessler to discuss our ongoing investment plan.

Good morning. Since Ashford's formation, we have focused on building a high-yielding quality portfolio of assets. We believe in the benefits of diversity in our investments by capital structure, geography and segment. With the combination of portfolio and one-off transactions over the last several months and continued growth in our hotel lending, we have done exactly that.

The level of investment activity since our last conference call has been our highest by far since going public. I have to say rather emphatically that we are getting our fair share of deals at attractive yields with capital appreciation opportunities. As a result of our diverse investment platform and the expanding relations we are establishing with hotel owners and borrowers, we continue to source deals, in many cases directly, or preempt a widely-marketed sale.

In October, we closed our largest single-asset acquisition, the $81 million purchase of the Hyatt Orange County. The renovation of the property was not completed until December, and as a result, we saw very little contribution in the quarter. We expect 2005 to reflect the benefit from the addition of this asset and the renovation.

We followed up this acquisition with the announcement of a 21-hotel portfolio acquisition for $250 million. Details of this transaction have already been announced, and are in yesterday's earnings release. We expect this deal to close before the end of this month. The closing was a few weeks later than we had originally targeted, mainly due to the time required to obtain lender, servicer and rating agency approvals for the debt assumption.

Our investment pace has not let up since the end of the year. Last month, we originated an $8 million mezzanine line on the Viceroy Santa Monica, a luxury boutique hotel owned and managed by the Kor Group. This was a high-profile deal for our hotel lending program, and was priced at an attractive rate of 912.5 basis points over LIBOR.

Just yesterday, we announced an agreement to acquire the Santa Fe Hilton for $18.2 million or $116,000 per key. Following a minor renovation and change in management, we believe there is a significant opportunity to increase RevPAR penetration and EBITDA flow-through.

When these latest acquisitions are closed, we will have 55 direct hotel investments containing over 9300 rooms across 18 brands and 4 independents. Over 78 percent of the portfolio is in the full-service segment, 18 percent in the select service segment and 4 percent in the extended stay segment. Approximately 62 percent of our rooms are Hilton, Marriott, Starwood or Hyatt branded, with the rest being a variety of other brands. Our portfolio consists of some of the highest forecast RevPAR growth segments, with 43 percent of our portfolio upper upscale, and 38 percent upscale. Our direct hotels are diversified by geography, market location and demand generators.

We continue to believe that this diversification, which is different from many of our peers, optimizes shareholder returns and enables our management team to avoid being boxed in when it comes to finding the best investments for our capital. Clearly, with over 90 percent of our investments in direct hotels, we focused on this part of the capital structure. However, our 10 percent allocation to date in debt investments remains a strategic component of our platform. Given where we continue to see opportunities in the market, we believe this is the appropriate mix of investments at this time.

Market awareness of our lending program continues to grow, and we are now originating loans and offering term sheets at a faster pace than any time in the past 12 months. We have a solid pipeline of potential loan originations. To this point, our loan portfolio of $88 million and our loan pipeline is comprised almost entirely of mezz. Our loan portfolio currently yields 13 percent, so we are definitely seeing some favorable returns in this investment class. We continue to see financing opportunities consistent with our targeted range. To date, our pricing is based upon a grid, with a minimum spread above LIBOR of 900 basis points for mezzanine loans. The loan portfolio consists of 20 different hotels containing over 6600 rooms across 7 different brands and 3 independents.

As the lodging market continues to improve, we expect that (indiscernible) and even some sale-leaseback transactions could be more likely later in the year. Our targeted allocation for loans in 2005 will most likely be at or below the bottom end of the 10 to 30 percent range we originally anticipated for at least the first half of the year.

In addition to our active investment pace, we also completed several transactions to fund our growth. During the quarter, we arranged private placement with Security Capital to sell up to $75 million of Series B preferred stock. This was a two-stage transaction, with the first tranche representing 20 million. The initial funding occurred on December 30th for 10 million, and the second will be available for disbursement by June 30th. The remaining $55 million will be funded based upon certain criteria, between the closing of the FGS transaction on December 23rd, 2005. Subsequent to year end, we completed a follow-on offering of 10,350,000 shares that raised $94.3 million in net proceeds. There is (technical difficulty) to sell Security Capital 20 percent of the equity offering, which will increase funds available for transactions.

Our debt and equity arrangements enable Ashford to access capital and match funds concurrently with new investments. As we execute our investment strategy in 2005, we expect to continue to evaluate capital alternatives to efficiently fund our investment pace.

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

Thank you, Doug. 2005 should continue to be a year of ramping up FFO growth, with the transactions we have announced starting to contribute to our results in the second and third quarters. The renovations we have completed should also position us for year-over-year growth in RevPAR in our existing portfolio. The fourth-quarter operating results are an early indication of the impact repositioning can have.

We remain reluctant to provide earnings guidance, due to the continued noise in our numbers, which includes a rapidly-growing portfolio and disruption due to ongoing renovation work. However, some of you have asked that I provide guidance in those areas that I can, such as dividend policy and more specific information regarding those assets under renovation. At the end of the fourth quarter, I indicated that, while we were raising our dividend from 14 cents to 15 cents per share per quarter, we would like to raise our dividend as much as 18 cents per share throughout the year, giving guidance that our dividend would increase by 0 to 3 cents per share during 2005. Last night, we announced that our first-quarter dividend would be 16 cents per share, another 1-cent increase.

Our guidance remains the same, in that through 2005, our dividends will increase anywhere from 0 to 2 cents from the 16 cent level. Ultimately, we would like to stabilize our dividend in the 80 to 85 percent of CAD level, although for the short term, the dividend may be a bit higher percentage-wise, because of seasonality and partially-invested capital. More likely than not, at the end of this year, we will set our dividend for the full year 2006, and would review our dividend levels annually rather than quarterly.

We continue to have properties that move in and out of major renovations. During the fourth quarter, we had only 3 assets under renovation, but this included the relatively large Hyatt Anaheim. For the first quarter, 2 of these assets, the Sheraton Bucks County and Phoenix Airport Embassy Suites, will be continuing to be under renovation, as well as 8 select service hotels purchased from Dunn Hospitality last year. We expect all of these assets to be under renovation in the second quarter, as well, except for the Phoenix Airport Embassy Suites.

Regarding the 13 core hotels in the FGS portfolio, we're still evaluating when would be the best time for those assets to go under renovation. The impact to earnings on those assets would most likely occur in the third and fourth quarters of this year, as well as into the first quarter of 2006. We have significant growth capacity, considering that we have a number of properties unleveraged, quite a bit of cash on the balance sheet and access to another 65 million of Security Capital (technical difficulty) convertible preferred facility as well as $19 million of common, also through Security Capital.

All told, we have dry powder of approximately $0.5 billion. The pipeline remains significant in size, as we continue to source attractive opportunities. It is hard to say exactly how much we will invest this year, but I will be surprised if it is not in the several hundred million dollar range, in addition to the FGS transaction.

That covers all of our prepared remarks. We will now answer any questions that you may have.

(OPERATOR INSTRUCTIONS). David Loeb, FBR.

Well, you anticipated one of my questions -- actually, two of my questions, which were about the dividend and which hotels you expected to be under renovation. If we could just drill down a little bit into the fourth-quarter renovation impact, clearly there was a big difference in the RevPAR when adding those 3 hotels in. Was that primarily from the Hyatt?

Well, it was from all 3 hotels. But from an impact standpoint, it was primarily from the Hyatt. They have a renovation program that was prepacked before we bought the hotel, and it was to occur in the fourth quarter, which it did. And it happened very rapidly, but it had high displacement -- very high displacement, because it was done so quickly, in such a short period of time. And so the impact, dollar-wise, was largely the Hyatt, and it did have a good impact. You saw what impact it had on the overall numbers, just because of those 3 properties, and that was largely the Hyatt. However, it is out of renovation now. So we are excited about its prospects going forward.

So what are you seeing now that it's out? Do you expected that will be a three-month ramp or a six-month ramp to get back to what you think it will be able to earn?

It depends upon what you mean by ramp and where you are going with that. We are already seeing increased performance here in the first quarter. It's a group house, and historically it's been about 40 percent group, and that has been because 400 of the 650 rooms were unrenovated and in pretty poor shape. So groups don't want to stay there, because they don't know if they are going to get a new room or an old room.

Well, now that it's fully renovated, the booking pace is picking up, and the hotel is booking more groups. But groups is a longer-lead-time type business, especially some of the groups that this property gets. So it may be a full year or more, maybe a year and a half, before it really stabilizes to what its potential could be, because of the lag time between when those groups book and when they show up. But already we're seeing good improvement, simply because we are not displacing rooms anymore.

So it sounds like the Hyatt was selling some groups in anticipation of the renovation being done?

Sure, and they were trying. And in our experience, whenever we do that, that's hard, because some meeting planners will buy into it. But a lot a meeting planners -- I'd say maybe three-quarters -- say, look, we don't believe it until we see it. We are not going to book until we see the renovation.

Doug and Kimo (ph), you both talked about low interest rates. And I guess all three of you talked about the concept of it being a better time to be a borrower than a lender. How much can you take advantage of those really attractive long-term mortgage rates? And is there any sensitivity to locking up assets, or is it more the locking up assets with a 5.5 percent CMBS would be an asset long-term, rather than a liability?

We certainly intend to take advantage of the capital markets, as we have done progressively throughout the formation of our platform. When we look at assets to refinance, we're certainly mindful of where the spreads have dropped to. So, whether we use swapping strategies or locking in the fixed-rate term, we clearly believe that -- as you accurately point out, David -- that potentially, the financing rates today become an additional asset of our platform in the future when it comes time, if the time comes to sell a particular asset.

To elaborate on that, David, when we are looking and we're examining it (indiscernible) 10-year CMBS on some existing assets and some assets that we are looking at in the marketplace to buy, the question always is, if you are going to tie up an asset with that, what kind of flexibility do you have? Well, we're negotiating, and we're looking for strong assumability and substitutability options within the facilities, number one. But also, the defeasance becomes expensive, depending upon which direction interest rates move, and also the spread difference between treasuries and the instruments you're actually borrowing on -- in this case, hotel debt CMBS -- because in order to do a defeasance, you have to substitute treasuries for your assets. And if there's a huge spread between them, that becomes very, very expensive.

Well, since spreads are so tight right now, and because we believe and almost everybody believes that interest rates will be gradually moving up, we don't even know if there will be a defeasance penalty when we look to sell these things, even if we want to sell them totally unencumbered. And on top of that, we think that we maybe want to sell these assets with this financing in place through the new buyer, and we're also making sure that we have the ability to write mezz lines on top of it, so we can originate loans and provide seller financing to these buyers. That may be something very attractive to potential buyers, and an asset that we take advantage of.

So you're actually structuring your mortgages now with that exit in mind, and with the potential to take loans back on these assets?

Exactly.

That's interesting. That's very interesting. Does the market, and the fact that lending standards are loosening up so much -- does it change your target for what you believe is an appropriate level of leverage on a corporate basis?

You know, we haven't formally changed anything. But you said something that's certainly right, is that there's just incredible financing opportunities in the marketplace today -- you know, these fixed-rate hotel loans being able to get done at below T plus 100 is just unbelievable; in my opinion, it is an anomaly in the marketplace that is not going to exist for long, and we should take advantage of it. But we haven't made the decision to change our leverage ratio, although if there was ever a time to do it, this would be the time, because we think that it would be smart to get our hands on as much of it as possible.

(OPERATOR INSTRUCTIONS). David Loeb, FBR.

I waited a long time before I pressed the buttons again, too. I know there are more people out there; they are just not asking questions.

Can you give a little more color on the acquisition pipeline? I do appreciate the comments you made, Monty, about being surprised if it wasn't into the several hundreds of millions. Can you characterize what you're looking at? Is it bigger chunks than it was before? Is there as much mezz, given the looser lending standards for first mortgage? Is it more portfolios or more single assets, larger assets, smaller assets, full-service, limited service?

Sure. I'll give you some color. I think the first comment I want to make is that the deals that we have teed up thus far, and are in the process of closing, are extremely attractive -- that the FGS portfolio has a 10.5 percent trailing NOI cap rate, or a 12.4 percent EBITDA trailing cap rate, which is just a phenomenal deal in this marketplace. Further, the Hilton Santa Fe, while its trailing NOI and EBITDA is not that attractive, it's a lot like the Sea Turtle Inn deal we did, where we think there are significant flow-through opportunities. So the floors (ph) on that look very strong. And this Viceroy Hotel in Santa Monica is an L plus 900 mezz loan with a solid asset and a strong VAR and an attractive spot in the capital structure.

As far as what we're seeing, I would say historically, we have been seeing deals in the $5, $10, $20, $30 million range on the direct-property side. We're still seeing some of those, but we're also seeing and targeting larger investment opportunities along the lines of the size of the Hyatt Anaheim type of portfolios. So I'd say in the past, we were concentrating more on one level -- let's say, in the $10 to $30 million range, primarily. We're still looking at those, and we're still pursuing those. But we're also targeting and finding opportunities that are sizably bigger, in the 80 to couple-hundred-million-dollar range. And so, what's very difficult for us is to predict which one of those will land and which ones won't. We're examining quite a few, and we're taking a look at them, and we're very excited about the opportunities out there, but it's hard to know which will land.

As far as the lending platform goes, we are still looking at, I'd say, mezz loans in the $5 to $20 million range. I don't know if that has changed, really, very much. It is a bit tougher, because the first mortgage lenders are jumping up a little higher in the capital structure, but a lot of times, some of the borrowers are not sophisticated enough to tap into the right spots where they can get this very attractive financing, and so we are still find pockets and opportunities to place capital at very attractive rates. And we still see a few deals out there. It's probably about the same level or maybe a little bit below what we have seen in the past, but still something that we're pursuing. Doug, did you want to add to that?

And hopefully, none of your potential borrowers are listening.

Right.

Let me ask a follow-up on that. Maybe Doug can answer this one. Is your deal sheet longer than it was six months ago, a year ago? Is the sum total of the value of what you're looking at -- is it greater or less than what it has been since your IPO?

I think the best way to answer that, David, is that one of the prominent brokerage firms announced, at the end of this past year, that the transaction volume for 2004 was 2.5 times the 2003 levels, and the anticipation for '05 was to being as great a year for transaction activity, or even more so. And, as Monty pointed out, we're also seeing some sizable transactions in the market, as well. So I guess the best way to answer that question is that there's a lot of deal flow in the marketplace today.

And to answer your question even more directly, David, is that if you add the numbers down the page in the value of the deals, the number is definitely larger than it has been in the past. But we want to caution you and other people in that it's hard to say what will make it through underwriting and what we will actually close on. But as far as the volume of what we're looking at, there is no question that it's a good bit bigger.

And let me point out that, despite that there is more volume, I think that the follow-on important point to make is that there's also still a great deal of discipline in the market, still. We've seen (technical difficulty) there for sale, some prices have been what we view to be aggressive. And in fact, those deals didn't end up trading to us or any other buyer, so they have been coming back at different prices. So I think it's important to recognize that, while there are a lot more deals in the market, there's capital available in the market for transactions, there's still discipline.

And just one other point is that, while we see great external growth prospects back there, I want to emphasize the strong predictions out there for the industry of 8 percent RevPAR growth, and the performance of our own portfolio of 9 percent RevPAR growth in the fourth quarter for our non-renovated hotels -- so just excluding those 3 hotels -- and then, our profitability, as well, jumping up 450 basis points over the prior year. So we are very happy about what is going on in our existing portfolio and see lots of internal growth capability there, as well as external growth prospects.

And one other point to make is that, while there are transactions out there, I think you need to separate us a little bit from the rest of the pack. I think that we have clearly demonstrated our ability to source transactions that may not be widely marketed. And really, that is one thing that, while we will certainly pursue the widely-marketed deals, we have -- through our long history as a private company and the relationships of this management team -- to be able to source private marketed transactions. And on top of that, given the diversity of our platform, because we both participate on the debt and the equity side, frequently we do business with a seller one day who is a borrower another day, and vice versa, just because of the working relation that we establish with them, and they realize that we are an excellent provider of capital to them, and we capitalize on that opportunity. Again, that goes back to my earlier prepared remarks in stating that we are not boxed-in. We have a unique ability to source transactions that many of our peers, we believe, don't have access to.

Well, you have anticipated my next question and the one after that, too, which was, while the volume of deals looks as good or better, there seem to be a lot more buyers out there. What you're saying is that you're still seeing a lot of deals that are not necessarily widely shopped or aggressively bid?

That's true. There's definitely more that are aggressively bid, but we're also trying to sit back and be clever, and this is part of the uniqueness of our platform. We are saying, okay, if there's more capital out there in the marketplace and there's more capital chasing deals, how can we, instead of being boxed-out by that and being pushed to the side, how can we capitalize on that? Well, the clear strategies would be to take advantage of the cheap debt financing, which we've already talked about, or if there's cheap equity financing out there, to partner up with those cheap equity sources and do some type of JV program to leverage off of their cheaper equity, in order to enhance our own returns. So we really see ourselves as more opportunistic, and not just property aggregators like some of our peers, but trying to be clever, and trying to take advantage of what is going on the industry. So we're exploring all those options.

And if you set up those JVs, you would earn fees and promoted interest and things like that?

That would be the idea.

That would, I think, be very interesting.

Final question, just on the internal growth -- are there any brands that you're seeing particular traction from and, conversely, any brands that are lagging in your portfolio?

There's a dynamic that we find happening in strong markets and in soft markets. And a couple of the brand families -- notably Marriott and Hilton -- have typically been the RevPAR leaders in markets. And there's a few Starwood brands in there, and a few ISG brands in there, but that typically is the case. What we find in bad times, that the non-Marriott and the non-Hilton products -- again, very generally, because there's lots of other brands that do very well, as well -- fall off a bit more, while the Hilton and Marriott products don't fall off quite as much. What I anticipate is, as this market starts to return, there will be a period where all the boats will start to rise at the same time as this tide rises. But after a while, what you'll find is that, while we'll get great strength of growth in the Hilton and Marriott products, some of the other brands that fell off a little bit more will come back a little bit stronger, because the Marriotts and the Hiltons will be full on the Tuesday and Wednesday nights, and can't take any more business, and they can't raise their rates fast enough to take advantage of that pressure on those nights.

So we have not seen it so much yet, but we anticipate the other brands to do relatively better during these tougher times. And if you look at something like Embassy Suites, which had just a dominant market position during these tough times as markets fell, as a chain, their position and their RevPAR penetration across the country increased dramatically, because they didn't fall off as much as some of their peers. But I imagine it's going to be difficult for them to maintain that advantage as this rising tide raises all boats, not because they are not a great brand, which they are, but because they are already doing relatively better.

And does that conform with what your fourth-quarter experience was? Are the Embassys still outperforming the Radissons, but are you seeing that gap close?

You know, I'd say that it's hard for us to say anything categorically. Every hotel kind of had its own story associated with it, whether there's something going on in the marketplace or, let's say, the Residence Inn in Orlando, we still had some great business booked in there, because of the crews that we ran out and aggressively booked right after the hurricane, and so they are still in there. So it's kind of a -- it's tough to (technical difficulty) historically, yes. But that is what we anticipate, and we will see if it fleshes out over the course of the year.

And there are no further questions at this time. Mr. Bennett, I'll turn the conference back over to you.

Thank you very much for your interest in Ashford Hospitality Trust, and we look forward to speaking with you guys at the end of the first quarter for our first-quarter earnings call. Thank you very much.

And that does conclude today's conference. Again, thank you for your participation.