Ashford Hospitality Trust Inc (AHT) 2008 Q1 法說會逐字稿

Good day, everyone. 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.

Thank you. Welcome to this Ashford Hospitality Trust conference call to review the Company's results for the first quarter of 2008. On the call today will be Monty Bennett, President Chief Executive Officer; Doug Kessler, Chief Operating Officer and Head of Acquisitions; and David Kimichik, Chief Financial Officer.

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 and a press release has been covered by the financial media.

As we start, let me remind you that certain statements and assumptions in this conference call contain or are based upon forward-looking information that are being made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to numerous assumptions, uncertainties and known or unknown risks which could cause actual results to differ materially from those anticipated. These risk factors are more fully discussed in the section entitled Risk Factors in Ashford's registration statement on Form S-3 and 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, and the Company is not obligated to publicly update or revise them.

In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in the Company's earnings release and accompanying tables or schedules, which has been filed on Form 8-K with the SEC on April 30th, 2008, and may also be accessed through the Company's web site at www.AHTREIT.com. Each listener is encouraged to review those reconciliations provided in the earnings release, together with all other information provided in the release.

I'll now turn the call over to Monty Bennett. Please go ahead.

Good morning and thank you for joining us. The US economic slowdown presents challenges for the industry. Despite this environment, we reported a pro forma RevPAR increase of 2.6% for the hotels not under renovation, and an 80-basis-point improvement in operating margin. Our RevPAR yield index for the quarter increased from 115.2%, to 120.0% for the hotels not under renovation, and from 115.5% to 118.8% for all hotels. AFFO per diluted share for the quarter was $0.29, [add] per diluted share was $0.22, which resulted in a dividend coverage ratio of 105% and an AFFO, a dividend coverage ratio of 136% for the quarter.

Based upon the seasonality of our portfolio, the first quarter is typically weaker in terms of operating performance. Overall, ADR improved 3.3% and occupancy declined 168 basis points. As we noted last quarter, in a slower economy we would expect occupancy to decline, that we should maintain pricing power due to our concentration in urban and larger hotels. The contribution from our select service portfolio of hotels, comprising about one-third of our EBITDA along with our mezzanine loan portfolio, could add stability in a softening market.

As a company, we continue to focus on two main strategies. First is the balance sheet or capital-based strategy. Second is from operating cash flow strategy. Our capital strategy seeks to lower our net debt to gross assets ratio by year end to 60% or less. Currently, it is 61.5%. It also seeks to raise capital through joint ventures and direct hotel asset sales and then deploy capital into mezzanine loans, share buybacks, ROI projects and debt paydown. Our operating cash flow strategy seeks to increase our dividend coverage by swapping our fixed-rate debt to floating-rate and by implementing cost-containment contingency plans at our hotels, including locking in a two-year insurance program, appealing all property tax assessments and locking in energy contracts where possible.

You'll find that almost all of our activity focuses on moving forward with these two strategies. Doug and Kimo will provide more details regarding our progress on these.

As we discussed last quarter, our $190 million capital investment plan for the portfolio remains heavily weighted to the second half of the year and will roll over into 2009. Of this amount, $80 million constitutes what we are obligated to spend or is underway, $60 million can be deferred and $50 million would be for ROI projects. We have spent $32.6 million in CapEx so far in 2008, much of which is related to the conversion of the former Sea Turtle Inn that is anticipated to be completed in early May. As a major repositioning, the Sea Turtle Inn, which will be rename One Ocean shortly, has had a downward impact on our overall results.

After the second quarter we expect this difference to moderate and then start to move in our favor as the property ramps up.

We remain confident in our ability to respond to market conditions and to be opportunistic. As tough as the environment has become, we believe we are positioned to outperform the industry over the long-term. To speak in greater detail about our first-quarter results, I would now like to turn the call over to David Kimichik to take you through the numbers.

For the first quarter we reported a net loss to common shareholders of $833,000, EBITDA of $93,596,000 and AFFO of $39,860,000 or $0.29 per diluted share. At quarter end Ashford had total assets of $4.4 billion including $141 million in cash. We had $2.7 billion of mortgage debt with a blended average interest rate of 5.2%, leaving net debt to total gross assets at 61.5%.

Following the $1.8 billion interest rate swap, 89% of our debt is now floating.

The other income line below operating income on the face of our P&L will reflect the amount of interest savings we realize each quarter from the swap. For the 19-day period the swap was in effect during the first quarter, we realized $296,000 of interest savings. Since the length of the swap does not match the term of the swap fixed-rate debt for GAAP purposes, swap is not considered an effective hedge. The result of this is that the changes in market value of these instruments must be run through our P&L each quarter. These are non-cash entries that will affect our net income but will be added that for purposes of calculating our AFFO and our [CAD].

During the first quarter the Company sold three assets for a total of $81 million in proceeds. At quarter end, our portfolio consisted of 109 hotels in continuing operations [spanning] 25,165 rooms plus one hotel listed as held for sale. At quarter end, we owned a position in 11 mezzanine loans with total principal outstanding of $136 million with an average annual unleveraged yield of 12.4%. Two of the mezz investments are held in a joint venture with Prudential and are recorded in the unconsolidated joint venture line on our financials.

For the quarter, pro forma RevPAR for all hotels was up 0.8% as compared to the first quarter '07. For the hotels not under renovation, which is all but 13 hotels, pro forma RevPAR was up 2.6%, driven by a 3% increase in ADR and a 26-basis-point decrease in occupancy. Pro forma hotel operating profit for the entire portfolio was up by $392,000 or 0.4% for the quarter. [For] the 96 hotels not under renovation, pro forma hotel operating profit increased 6.5%. Our pro forma hotel operating profit margin improved 80 basis points for the hotels not under renovation and decreased 37 basis points for all hotels.

Another strategic decision we made during the first quarter to enhance our dividend coverage was the execution of our debt swap. We based this decision on the high historical correlation of RevPAR and interest rates. This transaction swapped $1.8 billion of our existing fixed-rate debt for floating-rate debt. The day we executed this swap, the favorable interest rate difference on the $1.8 billion of debt was 34 basis points. For every 25 basis point drop in LIBOR from the date of execution, we had realized an additional annual interest expense savings of approximately $4.5 million, based solely on the swap.

At the time of the swap, our interest rate on this debt was 5.84%. Our effective floating-rate for the swapped $1.8 billion is now based upon a spread of 264 basis points above LIBOR. If the forward LIBOR yield curve held true for the next 12 months, that would equate to an approximate $8.8 million in annual interest savings.

We ended the quarter with 119.7 million common shares outstanding, 7.4 million series B convertible preferred shares outstanding and 14.4 million OP units issued for a total share count of 141.5 million. During the quarter we purchased in the open market 700,800 shares of our common stock at an average price of $6.54. We have completed a total $23 million in our buyback since inception and have approximately $27 million left under our current share authorization -- buyback authorization.

For the first quarter we reported CAD of $30,608,000 or $0.22 per diluted share and announced and paid a dividend of $0.21 per share.

I'd now like to turn it over to Douglas to discuss our capital allocation strategies.

Thanks, David. We continued to execute our capital allocation strategy during the first quarter. We cycled capital through asset sales, generated internal growth, reinvested in mezzanine loans and repurchased shares. We sold two hotels during the quarter for total proceeds of $77 million. JW Marriott New Orleans was sold for $67.5 million and the Sheraton Iowa City was sold for $9.5 million. We also completed the sale of the vacant Fort Worth office tower for an additional $4.1 million.

During the quarter we placed the Hyatt Dulles Airport under contract for $78 million. We acquired the Hyatt Dulles asset in October 2005 for $72.5 million. A $78 million sale which is expected to close in June represents a purchase price of $247,000 per key and a trailing 12-month NOI cap rate of 7.2%. This hotel was included in the $2 billion of asset sales we listed on the market earlier this year, and we're very pleased with the cap rate as well as the profit we should realize.

As we indicated before, we don't anticipate selling the total $2 billion of assets we put on the market. Our targeted level is closer to $600 million. Additional contract negotiations are underway, and offers are being reviewed, but none are at a stage where we can comment. Virtually any type of transaction, whether debt or equity, is taking longer to complete, and bid/ask spreads between buyers and sellers have widened.

With our recycled capital, we have several accretive investment opportunities. Our mezzanine lending was particularly active during the quarter. We closed on three mezzanine loans in the first quarter. Most recent was the acquisition of a senior mezzanine loan secured by a 29-hotel portfolio of full and select service hotels owned by JER Partners. This loan was acquired in conjunction with our Prudential joint venture, which resulted in an Ashford investment of $17.5 million. Including the promote, the discounted purchase and the forward curve, the loan is expected to yield 18.3% unleveraged to us.

We also acquired at a discount one B note mortgage loan and a mezzanine loan with a total face value of $45 million. The first loan purchased, at a $5 million discount, which is secured by the Ritz Carlton Key Biscayne, has a projected yield to maturity of 12.5%. The second loan, which is secured by the Hotel La Jolla, bears interest at 900 basis points over LIBOR. Both loans were purchased outside our Prudential joint venture.

The mezzanine loan market remains very active to us. Most of the current opportunities are acquisitions of existing hotel paper on the books that lenders are looking to sell at a discount, sometimes with seller financing. There is very little new origination in the marketplace. Rest assured that our underwriting criteria remains very tight. Spreads available in the market are consistent with our guidelines. There are opportunities to capture these returns at lower loan-to-value ratios.

In summary, we continue to believe our diversified platform and the ability to recycle capital should position us well even during these difficult market conditions. We're doing all right things in this market and respect to our capital and operating cash flow strategies, including, one, being proactive to protect the safety of our dividend with a debt swap; two, taking steps to fix our costs through lower insurance premiums and contingency plans; three, forming a joint venture to enhance our returns and capital; and, four, allocating capital to accretive opportunities such as mezzanine lending and stock repurchases.

We expect 2008 to present additional opportunities to put these strategies to work.

That concludes our prepared remarks, and we will open it up to any questions you may have.

(OPERATOR INSTRUCTIONS) William Truelove, UBS.

The question about the dividend coverage -- are you happy with where the dividend coverage stands now? And, B, what additional levers do you think you could pull to try to improve the dividend coverage, especially as it relates to going forward and the ROI CapEx?

I'll take a stab at it, and then if one of you guys want to take a stab at it as well -- we always want the dividend coverage to be more, and so I don't think we could ever say that we're happy with where is because we want it to continue to increase. Generally we would like, as our dividend increases over the years, we'd like to our coverage to increase beyond that. So we're going to continue to look at ways to increase coverage just because, and why not? We think it's good for our shareholders.

As far as additional things that we can do, we think that we're good on the swap side, the financial side. On the income side, as we take assets and we sell them, direct hotel investments, and put more money into mezzanine loans, that has a couple of effects. Number one, it will typically immediately increase our coverage, because those cap rates we sell assets for compared to where we could put mezz money out creates an imbalance, a difference, there, a spread increase which will increase the dividend. And then, the volatility of that income stream going forward over the next 12 months will be lower with a mezz loan than it will be with owning an asset.

So that's something that we can continue to do and are continuing to do.

Then over on the asset side with the hotels themselves, we've got three levels of contingency plans per asset about what we can do to enhance incremental revenues that mostly contain costs. Each one of our hotels is at a different stage of that plan, based upon their individual revenue levels and we're constantly adjusting those. In almost every case, I think in every case, we're moving deeper into the contingency plans, having gotten to a point where if we've reached, say, level two, we're ready to pull it back to level one. We're not into the contingency plan at all, unless we just want to be cautious (inaudible). And, we continue to do some of these other things that these guys mentioned about locking in insurance for two years. We've got some very favorable pricing for two years that we want to lock in here soon. Energy contracts, to the extent we can, in those markets, property tax appeals, you name it, continuing to lock down, lower our expenses on the hotel operating side.

One thing that confuses me, though, and maybe you could help me clear this up, is that if you're going to swap money into, say, mezz lending and get, oh, roughly 13% or so interest rates versus your dividend currently, your common dividend, at 14%, wouldn't you be able to increase the dividend coverage more faster if you just swap money out and repurchase the common shares, right? That would be a better return on the investment, wouldn't it?

In some cases, we sit down and we have a constant updated sheet where we can deploy capital and where it's most accretive. In almost every sense, when something is more accretive, it's going to increase your dividend coverage. Share repurchases is something that we have done, we are interested in. But by large, the mezz deployment works out slightly better than share repurchase for us. But it depends upon the pricing we put that mezz out at. So there is a break point where it becomes better for us to buy back shares, and indeed we've done that.

What's happened in the marketplace over the last quarter or so is a pipeline of potential mezz opportunities has grown from something like $200 million to maybe average pricing on those of, average assets, we have [L plus] 650 -- that's just kind of a broad-brush number -- to, today, maybe a pipeline out there of deals we're looking at totaling something like $600 million with the pricing in the L plus 800 range plus. So as that mezz moves up, our ability to deploy capital in that area starts to outstrip the accretion and the coverage that is affected when we do share buybacks.

Some of that has to do with your earnings and your accretion versus what you are actually paying out in dividends.

Also, one other point is that the difference in mezz and share buybacks is that if you to mezz, then you can always redeploy that capital later as those mezz loans come due or in pinch, sell those; while, if you buy back shares, then your capital is gone until you do a new reissue, which is a lot more cumbersome.

But again, generally, where we see mezz pricing today, it is more attractive than share buybacks.

Will Marks, JMP Securities.

First of all, for Doug, on dispositions, what are you seeing in terms of number of parties coming to the table, and how are people getting financing?

The number of parties that are coming to the table are slightly down, I would say, from this time last year. But the diversity of the parties is just as high. I think we're seeing everyone from local players to funds that have been capitalized with pension capital, even some of the REIT peers are looking. You've got the opportunity funds that are still snooping around as well.

So typically we're seeing about a half a dozen bidders per property that are legitimate enough that are submitting. I think that that's kind of a rough average of who we see bids from for each opportunity.

In terms of the financing, again, some of our assets have existing financing that, with approvals from the lenders, can be assumed. Some of them are being financed with outside capital, and there is actually liquidity in the market. Matter of fact, we're seeing probably a shift among some banks to pursue assets with hotel companies, provided it's secured financing as opposed to more credit type financing.

We're also -- I failed to mention that we're seeing more of an influx today, actually, of foreign buyers as well. Some of those buyers are already coming with their bank lines established. So there is liquidity in the market. I think the good news is that there are fewer transactions being chased after in the market today, and so I think that gives us a bit of an edge, given some of the financing that we have and the high quality of assets that we've brought to market that seem to be appealing to buyers today.

I have a question on RevPAR as well. I see that the hotels not under renovation up 2.6%. Any indication, as some companies are seeing a little bit better second-quarter growth than first quarter, partially due to Easter, do you expect second-quarter to be above that? Or any indication of -- is this a run rate for the year?

We're pretty hesitant to provide forward guidance like that, but there's no question what you mentioned about Easter did depress March and is enhancing April on year-over-year guidance. But as far as what the future holds, we'd probably rather just not comment on that at this time.

Nap Overton, Morgan Keegan.

How would you characterize your level of confidence in being able to accomplish the $600 million disposition target this year?

I'd say high.

Okay. And, would you say that the 7.2% capitalization rate on recent transaction is indicative of what you expect to be able to accomplish on a large volume of sales?

Let me give you a longer answer on that one, Nap. It's hard to say, and here's the reason. We're marketing or have marketed something like $2 billion worth of assets. Some of the assets would sell, if we sold them, [in] cap rates at the 2% level, maybe because their cash pool is really low or the type of assets they are, just some maybe in low single digits or low double digits because of the markets they are in or maybe they require a whole lot of CapEx.

So we have given guidance that we're looking to dispose of $600 million, maybe a little bit more than that, certainly between $600 million and $1 billion worth of assets this year. So it just depends upon which assets we actually sell. That depends upon the buyers and what pricing we get from them and how aggressive they are. That's just something that we just don't know yet. We've been working with a number of buyers, we feel confident about our ability to dispose of the assets, and it's just hard to say without knowing which assets we're going to pull the trigger on.

If either of you guys here have got more color or feel like we can be more specific on that, I'd love to. I just don't want to -- I've got a couple of head-shakings here. It's just hard for us to know, Nap.

Okay. The capital spending that you went through in your initial remarks, but you did it so quickly, I didn't catch it. I think you were obligated on $80 million, and then there were two other pieces.

Yes, let me give you those numbers. We're obligated on $80 million. $60 million can be deferred, and $50 million would be for ROI projects, which is more discretionary, of which, at this point, we have decided to move forward with about $12 million of that $50 million. So I'd say that $38 million of that $50 million is really discretionary at this point.

Let me give you another clarifying point, Nap, that I probably should have included in the script. That is, that gross amount of $191 million assumes that we move forward with the capital plans on all the assets that we're currently marketing. So we plan on selling [600] -- $1 billion worth of assets. With those assets, CapEx requirements will drop out. We would love to give you color on how much that would be, approximately, but we've got the same problem as the cap rates. Some assets we're selling don't need much capital, and some need a lot of capital. So it just depends upon which assets we end up selling, based upon the moneys we get, the offers we get back from the buyers.

Clearly, it's more advantageous for us to sell those assets that have a lot of CapEx requirements to them, for all the logical reasons. Again, it depends upon overall pricing, and so that's how that's going to shake out. So we see that as really a max worst-case number.

Also, what I think is important is that a good amount of that $190 million is in the existing FF&E reserves, which total about $70 million. But if you're looking at dollars out of pocket or owners funded, then it's a difference between that theoretical $190 million/$70 million.

So I think what we've laid out here is kind of the worst-worst-case, and there's two or three factors that are going to mitigate it, potentially even substantially.

Okay, good. One final question. The stock market does not appear to believe that the dividend you are distributing now is sustainable, given your yield versus other similar companies. What is your intention with the dividend, and could you share with us what the decision process would be to consider that dividend and whether it should be reduced?

Sure. Our dividend policy we stated in December of this past year was to pay $0.21 per diluted share per quarter. That is the policy that is still in place and that we have not changed. Then, towards the end of each quarter is when we actually decide when to give the exact amount of the dividends, and we've always been consistent with our guidance in that regard. The process of whether we should change that dividend would be a situation where either our performance for the quarter was substantially off or where we saw the future to be substantially off.

We don't see ourselves in a position of having to use capital sales, capital dollars, in order to support the dividend. In other words, we don't want our operating income to be short of that dividend. I'm not saying that we wouldn't do that for a little while or do it in a modest amount. But as a Company, we just don't have much of an appetite to come out-of-pocket in order to pay that.

So that would be the conditions under which we would reconsider. Again, we haven't altered our policy, because we don't see that.

[Mark Lott], Black Creek Capital.

Can you give me some color on where you stand in your debt covenants relative to their minimum requirements?

Kimo, you want to take that -- debt covenants?

We have two main debt covenants in two facilities that we have. One is an EBITDA to fixed charge ratio that has to be at 1.25 times, and we are currently around two times or slightly in excess of two. The other is a leverage test, net debt to gross assets can't exceed 75%, and we are currently at 61.5%.

Great, that's helpful. Also, can you give me a time line? And I saw the February 14th transaction, but can you give me a time line on where you have to fund the $100 million contribution to the potential JV?

The time line on that is based upon when we -- as we source mezz loans, present them to Prudential and they approved them. We've got a couple of years in order to do that with them. We hope to be able to do that sooner with the volume of transactions that we see out there. It's dependent upon how fast we want to move it. So if I understand where your question is coming from, we essentially control that, not how much capital is pushed in that direction.

That's helpful, thanks.

David Loeb, Robert W. Baird.

Back to the asset sales, as you look at what you're targeting to sell, can you give us an idea about your expectations of how much of that will be brand managed versus non-brand managed? I'm guessing that two of the portfolios you're looking at are the Marriott managed limited service pools, the C&L and the pre-C&L. Is it fair to think that most of what you are selling will be the brand managed stuff?

Yes. I'd say of the assets that we're marketing and the ones we are kind of zeroing in on, if you look at them on a total value standpoint, maybe 80%, 90% are brand managed assets.

Is that affecting the appetite of particular pools of borrowers, or the pricing?

For some buyers it does, for some buyers it does. And, therefore, it affects pricing. For some of the buyers, it doesn't. It just depends upon the buyer.

On the mezz pipeline, I guess I was a little surprised to hear that the origination -- that there really are not a lot of originations. Are you expecting a wave of refinancings to come up, where owners will have a financing gap and look to mezz?

We do. Right now, what we're seeing is a greater willingness to for the banks and the holders of that mezz who have kept on their balance sheets, we start to discount it and move it. So that's why we're seeing our own mezz pipeline grow. But there's not a lot of new originations, again, because no one is really in distress, yet. But, we anticipate that to pick up. Nothing like it did after 9/11, where at first everybody kind of hung in there for a while. But as people really needed debt proceeds, especially if they needed mezz because they're refinancing the higher debt levels, there was a strong demand for mezz financing, just not much of a supply. And that's the [sort of damage] that we think is going to start to take place, probably start to pick up in the second half of this year, but really start to pick up next year.

(multiple speakers) you want to add to that?

The only thing I would add to that is that, the underwriting criteria for loans today has become more strict, which will create an enhanced opportunity for us to deploy mezz once the origination programs kick in and most of that will come from refinancing, since the transaction volume is general and the market is off about, the levels, oh, 75% off of what they used to be this time a year ago. So our view is that it will make our platform even more appealing to borrowers and lending partners. We're keeping track of how much CMBS is rolling as well as we're trying to get our arms around how much non-CMBS, sort of balance-sheet hotel debt, is rolling as well. So we're keeping our eye on that. I think this will be an opportunity for our platform, as Monty said, the latter part of this year and rolling into 2009.

Two quick follow-ups, then, if you will. Do you expect that you're going to provide seller financing? You're going to take back some mezz on asset sale pools that you're looking to sell.

We've offered that to every buyer out there, and so far, at least with the assets that we're looking to sell and kind of zeroing in on, none of the buyers are taking us up on it. So that's a bit of a surprise to us, but it also is good news in that buyers are able to get financing.

And given that, what do you think is an achievable amount of mezz that you can deploy, assuming you sell $600 million to $1 billion of assets this year? What is kind of a number that you might be able to put into mezz this year or over the next call it 18 months?

Well, we're going to be disciplined in how we do that, David. Obviously, we've talked about asset sales and lining them up with opportunities to redeploy. We'll weigh that in light of our three-legged stool here -- either share repurchase, which Monty I think has highlighted how we make that decision, relative to mezz yields and relative to ROI projects. I think we've clearly identified what the ROI opportunities, the trade-off between mezz and share repurchase is contingent upon -- one, where our share price is; and, two, where mezz spreads are. So we really don't want to give too much guidance on how much we would deploy. As we've demonstrated with the Prudential transaction, we've been able to access external capital, which clearly enhances the yield.

So I'd rather not draw a line in the sand and say this is approximately how much we're going to target this year. But the pipeline is plentiful. We're going to be disciplined about how we deploy.

Just to add on to that, what makes it even harder is that if we see a $100 million mezz piece and we are interested in it, but for some reason Prudential is not, because these are full or with hotel mezz or what have you, then that's a swing right there about how much we deploy -- either $100 million directly and doing it ourselves, or $25 million through the joint venture. So that just creates some pretty decent spreads.

I think a way to kind of back into it, David, is to look at our target of where we want to get to on a net debt to gross assets basis, and selling somewhere between $600 million to $800 million worth of assets. And if that available proceeds that we've really got to deploy one way or another, and I would guess that most of that is going to go into mezz over time. I would hope that it would be done over the rest of the year because the faster we get it deployed, the more accretive it is. Just hard to say.

(OPERATOR INSTRUCTIONS) Smedes Rose, KBW.

Monty, could you just go over again -- I'm sorry to ask this again -- but your capital spending? You are saying, for the calendar year 2008 you have $80 million committed, then $12 million of ROI, and then we have another, say, 4% of gross revenues? That would be a reasonable calculation for CapEx in 2008?

Actually, the 4% isn't an add-to, what Monty described. It's included in those gross numbers, and so that's a resource that's available to help pay for the program that Monty was describing.

So total cap spending for 2008 would be around $92 million?

Total CapEx above the reserves?

Just total CapEx spending. I'm just trying to get a sense of what you're spending on the hotels this year, including or excluding the hotels, or the basic 4% reserve.

I think your number is right based on what Monty indicated we're committed to; you know, the $80 million we're committed to, plus the $12 million of ROI. We have a plan that is significantly higher than that, that we back-end loaded in this year, and so we may make some decisions later on in the year to move forward on some of those other plans. But what we are essentially committed to at this point is the $92 million.

And that includes basic maintenance CapEx?

That's correct.

So, you are going to spend at least that, and then I think $140 million was your initial guidance. So it will be somewhere in that range, or are you bringing down that $140 million?

Well, the guidance was $190 million, which included $50 million of ROI. So it's $140 million of normal CapEx.

And then $50 million of the ROI.

Okay. Then my second question is, when you look at your RevPAR for properties not under renovation versus portfolio-wide, would you -- that sort of discrepancy between them, would you expect that to continue into the second quarter, or would you look for that same level of disruption, I guess, for the number of hotels that are currently -- continue under renovation?

I would say, the second quarter, the gap isn't going to be as wide as the first quarter. The first quarter numbers were skewed a little bit by the large renovation we're doing at Sea Turtle. While the property was open, it ran very low occupancy just because of the amount of repositioning that's going on there. We expect that asset to be open, fully open and operational, here shortly. So I think the gap will close a little bit. Historically, it has been a 100 to 150 basis point difference between the total portfolio and those not under renovation. I think we'd probably move closer to that in the future.

There appear to be no further questions, Mr. Bennett. I will turn it back to you for closing comments.

Thank you for your participation on today's call, and we look forward to speaking with you again on our next call.

Ladies and gentlemen, this concludes the Ashford Hospitality Trust conference call. If you would like to listen to a replay of today's conference, please dial 303-590-3000, or 1-800-405-2236 and enter a passcode of 11111805.

AT&T would like to thank you for your participation. You may now disconnect.