Ashford Hospitality Trust Inc (AHT) 2012 Q2 法說會逐字稿

Good day ladies and gentleman, thank you for standing by. Welcome to the Ashford Hospitality Trust second quarter 2012 conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions). This conference is being recorded today Thursday, August 2nd, 2012. I would now like to turn the conference over to Mr. Scott Eckstein, please go ahead sir.

Good day everyone. Welcome to Ashford Hospitality Trust's conference call to review the Company's results for the second quarter 2012. On the call today will be Monty Bennett, Chief Executive Officer, Douglas Kessler, President, 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 distributed yesterday afternoon, in a press release that has been covered by the financial media.

At this time, let me remind you that certain statements and assumptions in this conference call contain or are based upon forward-looking information, and are being made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to numerous assumptions, uncertainties, and known or unknown risks which could cause actual results to differ materially from those anticipated. These risk factors are more fully 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 the call are non-GAAP financial measures, reconciliations of which are provided in the Company's earnings release, and accompanying tables or schedules, which have been filed on Form 8-K with the SEC on August 1st, 2012. They may also be accessed through the Company's website at www.AHTREIT.com. Each listener is encouraged to review those reconciliations provided in the earnings release, to go with all other information provided in the release. I will now turn the call over to Monty Bennett. Please go ahead, sir.

Thank you, and good morning. We are pleased to report a solid recovery in our RevPAR for the second quarter with growth of 7.3% for hotels not under renovation in our legacy portfolio. And RevPAR growth of 7.6% for hotels not under renovation in our Highland portfolio.. Additionally our adjusted EBITDA of $98.4 million reflected 10% growth over the prior year. On the Capital Markets side of our business, we continued to be conservative with our positioning and utilization. Our capital strategies include opportunistically utilizing our preferred equity at the market offering, refinancings and asset sales.

With respect to transactions, finding accretive hotel investments is challenging for us. Although we are actively underwriting opportunities the acquisition market is very competitive for high-quality hotels. At our current share price, we find it unattractive to pursue most investments in the United States or in Europe. Our share price will need to materially increase before potential acquisitions become attractive, especially those in Europe. With among the highest percentage of insider ownership at 20%, I can assure you that we remain keenly focused on strategies to increase total shareholder returns.

Overall Lodging fundamentals remain strong, the US Hotel market is performing exceptionally well, despite the choppy global backdrop of the sluggish US economy and the overhang of the dark clouds in Europe, on many economic and social and political matters. All of the data we have gathered supports our expectation in a prolonged upward trend in lodging fundamentals, that we believe is conducive for substantial long-term growth and appreciation.

In fact, PKF Hospitality Research recently affirmed its strong forecast of RevPAR growth, projecting RevPAR for US hotels will increase 6.6% in 2013, and 7.8% in 2014. As a result we are very bullish on the upside potential of this lodging cycle. We believe this remains a very appealing time to invest in lodging stocks. We are still early in the cycle, perhaps about one-third to a half of the way through what we see to be an extended period of growth. Additionally, we expect history to repeat namely that this lodging cycle peak will exceed the prior peak in terms of RevPAR, EBITDA, and hotel values.

A key driver for this healthy lodging recovery is the lack of new supply. Construction financing for lodging remains very difficult to obtain. While we have commented on this favorable demand and supply imbalance before, the significance cannot be underestimated. The forecasts from PKF in this regard have remained unchanged. Projecting new supply growth for 2012, 2013, and 2014 of 0.5%, 1.0%, and 1.6% respectively. New supply is expected to remain on average well below 2% annually through at least 2016, which is less than the average annual change in the nation's lodging supply from 1988 through 2011. For the foreseeable future, US hotel demand is expected to significantly outpace available supply.

If you consider that lodging is already reaching peak demand levels in many sub-markets, the absence of new hotel rooms coming on in that market should lead to higher room rates. This drives better margins and performance as the flow through of average daily rates exceeds that of occupancy gains. Turning more specifically to our second quarter financial and operations performance, we reported AFFO per diluted share of $0.52, compared to $0.65 a year ago. As in the first quarter of 2012 the majority of the variation in performance is due to the favorable impact we experienced last year from interest rates hedges that we used to protect our cash flows during the economic downturn. Hedged income for the quarter was $10.2 million less than prior year quarter, impacting AFFO per diluted by $0.12.

With the economic recovery taking hold, and the hedges burning off, as expected we are seeing less impact from these risk management tools in our financial reporting. Our unique strategy compared to our peers worked quite well from a financial and timing standpoint. During the second quarter we continued to achieve strong hotel EBITDA growth with hotel EBITDA flows at 57% and margin improvement of 142 basis points for all hotels in our legacy portfolio. As discussed earlier, we expect our cost saving measures will continue to facilitate strong bottom line performance as RevPAR continues to improve.

Regarding our Highland Hospitality portfolio, we are very pleased with the value we have created in the past year, since our investment in this high quality collection of hotel properties. We have had great success in changing over management, improving operations, and enhancing assets with capital expenditures and maximizing cash flow. During the past quarter RevPAR for all hotels in the Highland increased by 6.4%. We also achieved hotel EBITDA flows of 80%, and Hotel EBITDA margin improvement of 205 basis points. Hotel EBITDA for all hotels in the Highland portfolio grew by 11.3% in the quarter. On a topic of dividends we previously announced that our Board of Directors declared a dividend of $0.11 per share for the second quarter of 2012, which represents and annual rate of $0.44 per share. This covered dividend is well above our peer average. Based upon yesterday's closing price, the dividend yield it is a very strong 5.8% which is among the highest of our pier group.

In summary, our portfolio continues to perform well, and our ability to execute our business plans remains strong. As we look ahead, we are excited about the prospects for continued industry-wide RevPAR recovery. At the same time, we maintain our focus on risk mitigation and preserving financial flexibility to weather possible impacts from short term economic disruptions. As always, the end game for our strategies overall is to create long-term shareholder value.

Before I turn the call over to David Kimichik to review our financial results, I would like to highlight some additional information we provided with this quarter's financial reporting. In fact much of this new data is at the request of some of you on this call. In this financial report, we are including more detailed disclosure of our debt and TTM EBITDA by loan pool. We strongly believe that this reporting on a loan by loan basis will greatly assist in better understanding the value of our portfolio, and the benefit of the structure of the non recourse loans that we have in place.

Up until now if one were to take the approach of applying a multiple to our entire EBITDA, and then backing our debt to calculate our share price, it may imply negative equity to various loan pools. However this approach may underestimate the inherent benefit of our non recourse debt. Consider the following, any grouping of assets that may currently appear to be underwater relative to its allocated debt, does not necessarily have negative equity, given all of our property level debt is non recourse. I encourage our investors and research analysts to take the time to consider this additional disclosure of information in your analysis of the Company. With that, I will now turn the call over to Kimo to review our financial performance for the second quarter.

Thanks Monty. For the second quarter, we reported a net loss to common shareholders of $13,304,000, adjusted EBITDA of $98,442,000, and AFFO of $43,985,000, or $0.52 per diluted share. At quarter's end Ashford had total assets of $3.5 billion in continuing operations, and $4.4 billion overall including our share of the Highland Portfolio which is not consolidated. We had $2.3 billion of mortgage debt in continuing operations, and $3.1 billion overall including Highland. Our total combined debt currently has a blended average interest rate of 4.9%, and we currently have 62% fixed rate debt and 38% floating rate. The weighted average maturity is 3.8 years.

Since the length of the swap does not match the term of the underlying fixed rate debt, for GAAP purposes this swap is not considered an effective hedge. The result of this is the changes in market value of these instruments, must be run through our P&L each quarter as unrealized gains or losses on derivatives. These are noncash entries that will affect our net income, but will be added back for purposes of calculating our AFFO. The second quarter was a loss $7.5 million, and for the year it was a loss of $17.4 million. At quarter's end our Legacy Portfolio consisted of 96 hotels in continuing operations, containing 20,395 rooms. Additionally we own 71.74% of the 28 Highland hotels, containing 5,800 net rooms, in a joint venture. All combined we currently own a total of 26,195 net rooms.

During the quarter we took a $4.1 million impairment charge on the Hilton Hotel in Tucson. We wrote down the value to the level of non recourse debt on the property, and are in discussions with the lender of a possible deed in lieu, or consensual foreclosure transaction. We currently are in a position in just one performing Mezzanine loan, the Ritz Carlton in Key Biscayne, Florida, with an outstanding balance of $4 million. Hotel operating profits for all hotels including Highland was up by $10.7 million or 10.8% for the quarter. Our quarter end adjusted EBITDA, the fixed charge ratio for our credit facility now stands at 1.48 times versus the required minimum 1.35 times.

As Monty mentioned, our quarterly results for adjusted EBITDA of $98.4 million exceeded prior year by 10%. You should note that we have begun adding back the noncash stock unit based amortization expense in our calculation of adjusted EBITDA. We believe our prior methodology distorted our true cash EBITDA, and our current methodology of adding back this noncash amortization expense, is consistent with many industry peers. We continue to show it as a deed expiry for AFFO purposes, and the associated shares are reflected in our fully diluted share count once they vest. Our share count currently stands at 85.8 million fully diluted shares outstanding, which are comprised of 68.2 million common shares, and 17.6 million OP units.

During the quarter we sold 301,000 shares of our Series A and Series B stock through our At the market program, for total gross proceeds of $7.4 million. Now I will turn it over to Douglas to discuss our capital market strategies.

Thank you and good morning. We are focused on strengthening our liquidity and financial resources to provide insulation against possible short term market fluctuations, while being ready to take advantage of any accretive investment opportunities. There are an increasing number of hotels for sale, and the financial markets are more liquid.

During the quarter we successfully refinanced our sole 2012 maturity. The $167.2 million loan was refinanced with a new $135 million loan that matures in May of 2014, and has three one-year extension options subject to satisfaction of certain conditions. The new loan provides for a floating interest rate of LIBOR plus 6.5%, with no LIBOR floor. Having addressed all of our 2012 debt maturities, we are already looking ahead at 2013, and have engaged in discussions with several lenders regarding the $101 million of loans set to mature in the first and second quarter of next year in the Highland Portfolio.

We are also looking at refinancing another loan pool in our Legacy Portfolio well ahead of the maturity date, given a more favorable interest rate environment today compared to when we closed on the original loan. We see the financing market for high-quality hotels, with strong sponsorship now attracting multiple bids from lenders. Given the high debt yields on both of these financing initiatives, we do not expect any pay down will be required. Again, these transactions are not for some time but we wanted to give you an indication of our ongoing proactive approach to staying well ahead of future financings on assets that are core to our portfolio.

On the transaction side of our business, we are now actively marketing the sale of the Doubletree Columbus. Regarding other asset sales, it is worth noting that we regularly receive interest from unsolicited buyers for many of our hotels. We are generally inclined to hold hotels rather than sell them at this point in the cycle for the following reasons. First we expect to see improvement in net operating income in our hotels, which should lead to increased value.

We are not solely focused on generating the highest internal rates of return, and instead are focused on maximizing the net present value of total dollars from our investments. Second, we expect to see more capital flowing into lodging investments which will keep the market very competitive. This typically happens as the lodging cycle shows more sustained upside and stability, which tends to bring the more cautious investors back to the table. Third, we do not see the immediate risk of cap rate expansion. As long as interest rates remain low and capital flows into Lodging are increasing, we believe cap rates will not rise dramatically.

Lastly, we expect to see the debt markets becoming more liquid for Lodging. This will help to sustain the high returns for certain buyers seeking the benefits of leverage. Our assessment of these factors and others is fluid and subject to change. At this time, we believe we are in a good position to evaluate the increasing number of hotel investment opportunities. We remain very selective and disciplined. As I mentioned on our last call, we are primarily focusing our attention on full-service upper upscale hotels franchised with major brands in top markets. Although we have talked about Europe, we simply continue to study and monitor the financial, political, and social dynamics. Given the European market uncertainties and risks, we have no immediate plans to enter this market unless conditions over there change, our stock price materially improves, and we are presented with a very attractive investment opportunity.

That concludes our prepared remarks. We will now open it up for your questions.

Thank you. (Operator Instructions). First question is from the line of Ryan Meliker with MLV and Company. Please go ahead.

Good morning guys. Congratulations on a great quarter. Just a couple of quick questions for you. First, with regards to fundamentals in the quarter, you obviously had a material acceleration in RevPAR growth from 1Q to 2Q particularly at Highland. Were there any one-time items in the quarter that really led to the massive acceleration, or can you just give us some color on why things improved so much, whether it was just everything that you have done at Highland over the past year, finally coming to fruition in this quarter? Thanks.

Thanks, Ryan. Last quarter was a difficult one for us, and as you recall on the phone call that we had with everyone and at our Annual Investor Day in New York, as we went through the results we were a bit exasperated, because we couldn't find anything systemic about the performance. It was due to a number of one-time events. If it was all of the flight cancellations that did not occur in the first quarter of this year versus prior years, and therefore there weren't as many distressed days in our airport markets, to Nashville not having the same run-up in demand as the prior year, downtown Nashville because during that time there were floods out in the outskirts of town that drove all of the business downtown. We were hit by a number of one-time events in the first quarter. Here in the second quarter there wasn't so much of a one-time event that helped us, but there weren't all of these one-time events that hurt us in the first quarter. Another example is the SuperBowl that happened in Dallas the prior year, so that the comparisons first quarter this year hurt us. It was more a removal of the kind of one-off events that happened in the first quarter.

That is helpful. Positive signs for going forward too. Second question was with regard to your new disclosures. First of all I think it is really helpful, thank you. By any chance are you guys planning to or maybe you did and I didn't see it yet. Are we going to get a breakdown of which assets are enclosed in each of these debt pools?

At this time we haven't decided to do that. We are trying to thread that needle of trying to have a little bit of information confidential from our competitors, and at the same time providing our investors with the information that they need to properly value us. We think this properly did thread that needle. At this time we don't have any intention of listing the properties specifically, as to which is in which debt pool.

Fair enough. That is disappointing, but okay. Next question was with regards to a couple of the debt pools. I look at the Merrill 1, and the UBS 2, and maybe the Merrill 2, 3, and 7. If I look at the trailing 12-month EBITDA relative to the book value that you had on the books at the end of 2011, the book value looks incredibly light. Is there a particular reason that might be the case, and we are talking 7 or 8 times trailing 12-month EBITDA for those four or five portfolios?

This is Kimo. The book value is relative to what we paid for the assets. The results are the results going forward. Or looking back 12 months, you have the results here. It can be totally different from the valuation put on by the book value methodology.

The book value you are talking about gross or net book?

I believe this was net book.

This is after depreciation, so obviously that can change. Those Merrill Lynch pools were assets that we bought in 2005 and 2006. So that has been quite some time since we have purchased those assets. We don't see any, it is a change in the cash flows and market values since that time, with depreciation coming off of those assets over time. And CapEx is adding into it. I think adds to the net book value. We will take a look at that, and see if there is anything peculiar about those. But we don't see anything that would require further commentary. Other than they are what they are.

Maybe good acquisitions when you made them. Just the last minor issue. Based on the renovation schedule in the back of your press release, it looks like you will have materially more renovations in the fourth quarter than the third quarter, should we expect slower RevPAR growth in 4Q than 3Q, due to those renovations?

We are hesitant to provide any guidance going forward. But if you look at the history which is typical of what we have done in prior years. We really try to put as many renovations in the fourth quarter and the first quarter of the following year as we can for obvious reasons. It is slower and there is less disruption. I think the first thing to do would be to look at the level of renovations the prior year and compare those two, and see if there is a material difference. I wouldn't think there would be.

Last, quick question. In the first quarter and second quarters you were actually renovating the Hilton El Conquistador. Can you give us some color on how much money you put in, and what the thought process is now that you are in the process of a potential deed in lieu of foreclosure?

Sure. The amount of money that we put in was too much. We wish we hadn't done it. We did some work in the lobby areas and that was due to some pressure from Hilton, who is the manager there, and some requirements we had to meet with those guys. Because it was in the some of the public areas we will tend to mention that it is put on that schedule because there is potential disruption when you put it in the public areas. While if you are taking some rooms out and you are otherwise unoccupying them, there is not that much disruption. As far as the exact dollar amount of those renovations, I don't know offhand. We will get that figure for you and share it with you. But we have tried to market that hotel for sale for some time. Every time we get a buyer lined up after a while the buyer would fall out. I think we tried it off and on for two years now, and have just been unsuccessful in doing that. Meanwhile it is cash flow negative. We have also talked to Hilton about converting it to a franchise, because we think Remington could run much bigger numbers. But the penalty they would require us to pay to convert it to a franchise, was just too expensive. Then recently we had some floods out at one the golf course that caused a material amount of damage. So we are just done. We believe it is hurting our numbers because it is factored into our future 12-month EBITDA projections that you guys put out there, because it is negative. Just like all of these other additional disclosures that we put on the release, is that if you have a property with lower negative EBITDA and you have got a debt balance, then we believe the market assigns negative equity value to it. So while in a different form or different life we would love to put a bunch more money into it and hold it for the long-term, we just don't think that it is right for our platform any more. So again we have been trying to get rid of it for some time, but we just haven't been able to sell it. The price that we were going to sell it at wasn't that much more above the debt. We just got to the point where look, let's take it for the debt and be done with it.

Fair enough. Thank you for answering my questions, and congratulations on a great quarter.

Next question of Nikhil Bhalla with FBR. Please go ahead.

Hi, good morning. Just a question on the Conquistador. The trailing 12-month EBITDA is $1.4 million roughly. Would the forward numbers be much worse than that?

I don't have that forecast but remember you have got FF&E reserves that come off of that as well. From a cash flow standpoint, it is just something we don't want to continue to carry. Again, the amount that we were marketing the property for two years above the debt was just three or four or five million dollars. So to hand it back to the lender is we think a wise decision considering the fact that the cash flow on it has been negative after that reserve.

Right. Just to follow up on that a little bit. What I was trying to understand was that if you were to think about EBITDA for 2012 and 2013. The trailing 12-month number is like $1.4 million negative, and going forward, the impact would have been much more if this asset would have probably stayed on. But removing it obviously helps more than the value we see on the trailing 12-month basis, is that right.

If I understand your question, by having negative $1.4 million come off our EBITDA stream and forecast even if you assumed for the next 12 months it was about the same, that is about a negative $12 million of value with $20 million of debt, so that the net negative to our platform is $30 million of value. What is that, $0.40 per share. The way the markets values this is by handing that property back alone, justifies that difference in overall pricing so we just thought it was the best decision. We just didn't want to hang on, we have hung onto it for too long already.

Sure. One final question on just the Crystal City market in 1Q you had some significant impact there. Is there any improvement in that market after the base realignments, and all of that stuff?

The base realignments is an ongoing process. It is going to be tough for us in that market for a little while. The BRAC process is one that is going to displace 3 million square feet of meeting space. If my numbers are right, about a million of it has been backfilled already, but there is 2 million that is in the process of being vacated and going to be backfilled over time. Most of that is high-quality space is owned by Vornado. We own a large percentage of it, and we are in touch with them. They are very aggressive about releasing it to other government agencies or contractors. Also, the impact that we faced there is the new Renaissance that was built and that is in the market and close to stabilizing. At the very least with the lack of the Renaissance affecting our business, number one that helps and the number two as this office space gets backfilled, we will expect to increase it there. That being said, that Merritt Gateway is still a very popular spot for conferences because it is right there on the metro line and people just love that for a conference, so it is going to be a challenge in that market as well as for the overall DC market for the next year, maybe two.

Got it. Thank you very much.

Next question from the line of David Loeb with Robert W. Baird.

Monty while you are on BRAC, what do you think about per diem, and do you think those two interact in way?

We spend a lot of time talking about that. Obviously the per diem talk is worrisome. It is important for the government to cut back but it seems like they are more focused on cutting back the 0.02% of the federal budget that is on travel, rather than everything else on the budge. It is going to be what it is going to be. And we are going to manage the process much like you would David, in that we will have to look at each property, how much government business it gets, how much CRC business it gets, costs reimbursable contractor business but also it gets government rate, and then make the best decision for each property. Clearly the lowering of those rates is not good overall. Who knows? Maybe we will get a little benefit in that some of the business will get pushed out of downtown area of DC and out to Crystal City. The some properties there won't want to take it any more. We will just have to see. It will be on a property by property basis.

If you look at our assets in DC that is the biggest area of exposure for our Company. It is really divided into two areas. We are kind of in the downtown area as it were, the City Center area where we have three assets, and then the Crystal City area, where we have got those three assets. Crystal City is affected by BRAC. The other assets down in City Center, the Capitol Hilton had gone through renovation and is through with all of that, and the Churchill and Melrose had been going through renovations, and through a lot of it although we might do some more on Churchill next year. So we have a lot of dynamics happening for each property. So it will be a complicated question. For example, The Melrose has been renovated substantially above where it was before. And because of that, just about every piece of business we had in the property will no longer come to the property at the rates we want to charge. We may have to charge lower rates for a while until we can fill it up. So maybe that is a better discussion on a asset by asset basis.

Okay. So far at least you are not planning for kind of a CBD market-wide reduction in demand that may lower the floor and the base level demand level that might limit pricing?

Well when you say prepare for. There is really not much to prepare for. If business falls we are always very flexible on the labor side and to control our costs and cut them. We need 15 minutes notice to do that. On the yield management side, we also react very quickly. We are certainly preparing ourselves for that possibility. Just like the big question mark we have got across the country with this fiscal cliff issue coming up. If that happens if those taxes all go up, and it sucks $350 billion a year out of our economy starting January 1st , that is going to be an impact everywhere. We just have to be prepared for it. We hope that something will be done about that, and that is our base case that Congress will do something about that. But we have got to be prepared in case that doesn't happen, or a potential of slowdown and demand growth.

That makes sense. Back to your comment about the common stock and the price being so low that you would not be particularly motivated to make acquisitions in the US or Europe, is it at a point where you would consider buy backs?

Historically below $8 has been an area where we have considered buy backs. For the first time, we are starting to run that analysis again. The trade-off that we have got internally is how much cash do we want to keep on hand versus the buy backs? It is economical we believe to do buy backs, but we want to keep some cash on hand for potential opportunities, or for any variation that occurs in the marketplace and just a matter of conservatism. That is the debate we are having back and forth internally.

On the flip side of that, you are selling preferred shares? What is the use of proceeds for that, is it essentially to fund your principal payments?

We have sold some. We are not in the market now selling them. We had done that just to bolster our cash position. No other purpose to do that. It is just very expensive for us.

Sure. One final question. As I look at the amount of renovation that you have done in both the Legacy and the Highland Portfolio this year, as you look out into 2013, is it likely to ebb a little bit relative to the level of spending in 2012?

We haven't done our CapEx plans yet for 2013, but off the top of my head I would say it would be less on those plans for 2013 than for 2012. Now realize that because we typically internally approve our CapEx plans pretty late in the year, and we like to do renovations during the slow time of the year. That a lot of 2012 renovations we plan don't occur until late in the year, but that being said our overall 2013 plans at this point in time, I would think would be dollar amount below the 2012 plans.

Great. Thank you very much.

Next question from the line of William Marks with JMP Securities. Please go ahead.

Thank you. Good morning. I have a question and this is a tricky one. The equity in earnings of the JV made such a volatile line. Is there any way to help us look at that for the year?

Well, I will have to think about that. Why don't I think about that and we will talk later today. Giving guidance we are not going to give forward guidance. If there is a way to help you better understand what has happened, and you can make some predictions based on that, I would give you that guidance. I will think about that.

Unrelated. A big picture question which you have certainly addressed on the call today. Maybe I will take it a step further. You made it clear on why dispositions may not make sense right now. You don't seem to be in favor of that. But on acquisitions, how are you thinking about this in terms of your capital structure and leverage? On the surface your balance sheet is a little bit stretched. You got through the last downturn pretty well. Any comments on that would be appreciated.

We think that our leverage levels are fine, private market companies are materially more leveraged than we are. Although public markets companies typically are less leveraged. We think we are in the right spot for where we are in the cycle. That being said, we are naturally deleveraging through amortization on our loans that have been picked up over time and cash traps in a number of our loans that have picked up. We are deleveraging regardless. When we look at future acquisitions, that funding would ultimately largely come from common raises. If it is off the credit line that we would replace it with common, because we are not looking to leverage up. The price of our common is just too low right now. It just makes it challenging for us to consider something like that. Over in Europe not only is our stock price low, but over in Europe, the right time to get over there is once they have solved their problems, but the economy hasn't recovered, and pricing hasn't recovered, that is a good time to get in. They have not solved their problems. They are still kicking the can down the road, and they have not comprehensively addressed their structural problems over there. Until they do, it just doesn't seem to be smart to jump over there to buy some assets. Because the problem solving is a political solution, that is very hard to predict politically when something is going to happen or not going to happen. We still research over there and develop contacts and we want to go over there one day. That day might be, first of all our stock price has to move materially, and they have to solve the problem. It could go on for years for all we know. We will just do our research and be prepared. And one day we might be over there. It looks like it is quite some time off.

Okay. Thank you very much.

(Operator Instructions) Next question is from the line of Robin Farley with UBS. Please go ahead.

Thank you. I just want to clarify. You mentioned that you haven't decided on 2013 renovations yet. But just for the projects you have announced and are underway, I see the schedule by quarter for 2012, but will most of those projects be done by 2013, or will there still be quarters of 2013 that won't be as impacted as the quarters you had?

Robin, we are going to have to probably get back to you on that, because I just don't have all of that information in front of me. When do we usually let lose our 2013 schedule is that in October? So in our next earnings call we typically will forecast all of the way into next year. As far as getting information before that, we will just have to get back to you separately.

That is fine. Thanks. Most of my questions were answered. Your comments on Europe probably answered this. But overall it sounds like this year you would expect to be a net seller of assets, rather than net buyer, is that fair to say?

We have got this one asset that we want to sell or give back to the lender in El Con, and then the Doubletree at Columbus, we are in the process of trying to sell. Those are the assets that we have targeted as selling. Right now we don't see how or why we would be buying anything. Yes, a net sell position, because two out of the door and we don't see any coming in right now.

Okay. Great. Thank you.

There are no further questions at this time. I would now like to turn the call back over to Mr. Bennett for closing remarks.

Thank you all for your participation today. We look forward to speaking to you again on our next call next quarter. Thanks again.

Ladies and gentlemen, this concludes the Ashford Hospitality Trust second quarter 2012 conference call. If you would like to listen to a replay of today's conference, please dial 1-800-406-7325 or 303-590-3030, with the access code of 4549835. ACT would like to thank you for your participation. You may now disconnect.