Ashford Hospitality Trust Inc (AHT) 2013 Q4 法說會逐字稿

Welcome to the Ashford Hospitality Trust and Ashford Hospitality Prime fourth quarter conference call.

(Operator Instructions)

This conference is being recorded today, February 28, 2014. I would now like to turn the conference over to Mr. Scott Eckstein. Please go ahead, sir.

Thank you, operator.

Good day, everyone, and welcome to today's conference call to review results for both Ashford Hospitality Trust and Ashford Hospitality Prime for the fourth quarter of 2013 and to update you on recent developments. On the call today will be Monty Bennett, Chairman and Chief Executive Officer; Douglas Kessler, President; David Kimichik, Chief Financial Officer; and Jeremy Welter, Executive Vice President of Asset Management. The results, as well as notice of this accessibility of conference call on listen-only basis over the internet, were distributed yesterday afternoon in press releases that had 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 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 both Companies' filings with Securities and Exchange Commission. The forward-looking statements included in this conference call are made only as of the day of this call and the Companies are not obligated to publicly update or revise them.

In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which provided are provided in the Companies' earnings releases and accompanying tables or schedules which have been filed on Form 8-K with SEC on February 27, 2014, and may also be accessed through both Companies' websites at www.AHTREIT.com and www.AHPREIT.com. Each listener is encouraged to review those reconciliations provided in these earnings releases, together with all other information provided in the releases.

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

Thank you, and good morning.

Today marks our first quarterly conference call following the recent spin-off of Ashford Hospitality Prime, as a new independent public Company from Ashford Hospitality Trust. Here with me today is the management team responsible for directing the activities of these two distinct entities.

At Ashford, we believe the best way to measure a management team is by looking at the value we create for our shareholders. While Ashford Prime is new to the public markets, Ashford Trust has an extensive history of generating excellent shareholder returns. Since Ashford Trust's IPO in 2003, this management team has generated a 210% total return to shareholders, compared with the 96% return from our peers over the same time period. Looking back, we have outperformed our peers in every yearly cumulative total shareholder return period since our IPO.

We believe there are several reasons for our strong return performance compared with others in the hotel REIT space, including our team's extensive operational expertise. Our chief executives have spent their entire careers working in the lodging and real estate industries in a variety of roles including acquisitions and dispositions, asset management, property management, finance, accounting, et cetera.

If you look at just the top 10 most senior executives in our Company, we have well over 200 years of cumulative hotel and real estate experience. We believe that our industry and capital allocation expertise is most clearly reflected and demonstrated in the strong consistent shareholder returns that I quoted earlier.

It is the same management team that is still guiding both Ashford Trust and now Ashford Prime. I believe we have the most highly aligned, stable, and effective management team in the hotel industry. The same people that took Ashford Trust public over 10 years ago are all still here. We are proud of our performance and challenge ourselves daily to meet and exceed the expectations for shareholders.

We already think like shareholders because it's exactly what we are. Our insider ownership at Ashford Trust is 19%, and following the spin-off and subsequent equity raise, our insider ownership is 14% in Ashford Prime. The next closest hotel REIT peer has 4% insider ownership. We collectively have sold very little of our stock over the years and have made material cash purchases of shares.

The majority of our management team's net worth is in Ashford Trust and Ashford Prime stock, and as a result, we strive to be good stewards of the capital entrusted to us by our investors, since our own capital is at risk with yours. We are by far the most highly aligned management team with our shareholders in the hotel REIT space, and we consider this one of our key differentiators and competitive advantages.

That is why when we structured Ashford Prime, we came up with a new, revolutionary external advisory agreement that has been structured to ensure that Prime, like Trust, has close management alignment with shareholders. Since announcing the specifics of this advisory agreement, other industry participants have sought to emulate its unique structure.

It's this management team that will manage both the Ashford Trust and Ashford Prime investment strategies. With the recently completed spin-off of Ashford Prime, we've created separate entities with a renewed focus on their two distinct well-defined and corresponding investment strategies. Ashford Prime now has a focused investment strategy targeting high RevPAR hotels and resorts located predominantly in domestic and international gateway markets. Ashford Trust will continue to focus on all segments of the hospitality industry with RevPAR criteria outside the Ashford Prime investment focus at all levels of the capital structure.

This leads me to our latest announcement. Yesterday, we announced the Board of Directors of Ashford Trust unanimously approved a plan to spin off its asset management business into a separate publicly-traded Company in the form of a taxable distribution. The distribution will be comprised of common stock in Ashford Inc. a newly-formed [success] Company of Ashford Trust existing advisor subsidiary, Ashford Hospitality Advisors, LLC, which currently advises Ashford Prime.

The Company plans to file a listing application for Ashford Inc. with the NYSE or NYSE MKT exchanges. In connection with spin-off, it is anticipated that Ashford Inc. will enter into a 20-year advisory agreement to externally advise Ashford Trust. In addition Ashford Inc. will continue to externally advise Ashford Prime.

This distribution is anticipated to be declared during the third quarter of 2014. However, it remains subject to the filing of the required registration statement with the Securities and Exchange Commission, the review of the registration statement by the SEC, the approving of the listing of shares by the applicable exchange and other legal requirements. Ashford Trust expects to file the required registration statement next month. We cannot be certain this distribution will proceed in the manner as currently anticipated.

This spin-off of our asset management business is another step towards maximizing value for shareholders. With advisory agreements in place, with two publicly-traded Companies and several potential lines of business, we believe Ashford Inc. is well-positioned for growth.

For example, Ashford Trust real estate investment securities subsidiary is currently raising private capital and is expected Ashford Inc. will advise its platform. In addition, other business opportunities for Ashford Inc. include future external advisory services to other platforms, such as a select service hotel future platform, and a hotel debt platform, both of which are opportunities being explored by the Company.

Further, it is anticipated that Ashford Inc. will pursue other business acquisitions which may include hotel management, project and construction management, and other hospitality related services. We will have more information to share with you about this spin-off after we file the required forms, as we get closer to the distribution date.

Now, onto our review for fourth quarter, from our perspective during the fourth quarter and more recently in 2014, we have seen a continued recovery in the hotel space, driven by improving macroeconomic conditions. We expect to see several additional years of growth as demand steadily rises while new hotel group supply is expected to remain at low levels for at least the near term.

In recent projections, PKF is forecasting that 2014 RevPAR will increase by 6.6% over 2013. Further, the firm's projected RevPAR growth forecast for 2015 is currently 7.5%, driven by expectations for growth in both lodging demand and ADR. Supply growth is also expected to remain well below its long-term average with PKF projecting net supply growth of only 1.2% and 1.4% in 2014 and 2015, respectively.

Now, I'll provide some high level highlights for the quarter starting with Ashford Trust. For the fourth quarter, we faced some difficult year-over-year RevPAR comparisons, due to our concentration in the Washington DC area, and notably, from the favorable impact in the fourth quarter of 2012 from Hurricane Sandy, which caused a spike in occupancy in several of our Northeast assets as people were displaced from their homes for several months following the storm's impact in late October. Jeremy will address this in more detail shortly.

Of course, most important accomplishment we've made during the fourth quarter was finalizing the spin-off of Ashford Prime, which began trading on New York Stock Exchange under the ticker symbol AHP on November 20, 2013. Ashford Trust completed spin-off by distributing a pro rata taxable dividend of Ashford Prime common stock to Ashford Trust stockholders based on a distribution ratio of one share of Ashford Prime common stock for every five shares of Ashford Trust common stock.

The performance of Ashford Prime's portfolio speaks to the strength of our Prime assets and the rationale for the spin-off. During the quarter, the Prime portfolio experienced RevPAR growth of 6.9%. RevPAR for Ashford Prime hotels not under renovation increased an exceptional 10.1% during the quarter. Much of the performance was driven by our West Coast assets, which continue to outperform relative to competitive sets. This includes RevPAR growth of 19% for our Courtyard San Francisco Downtown, 20% for our Hilton La Jolla Torrey Pines, and 10% and 9% for our Courtyard Seattle Downtown and Seattle Marriott Waterfront, respectively.

Since year end, we have already announced two acquisitions for Ashford Prime, the Sofitel Chicago Water Tower and the Pier House Resort in Key West. Douglas will discuss the details of those transactions later in today's call. Both acquisitions were strong additions to the Prime portfolio. More importantly, these deals are representative of the types of transactions we will look for as we expand the Ashford Prime portfolio, high RevPAR hotels with attractive locations in key US gateway markets.

As previously announced, the Board of Directors of Ashford Trust declared a dividend of $0.12 per share for the fourth quarter 2013. The Board also approved Ashford Trust dividend policy for 2014, during which we expect too pay a quarterly cash dividend of $0.12 per share or $0.48 per share on an annualized basis.

The Board declared a fourth quarter 2013 quarterly cash dividend of $0.05 per share for Ashford Prime. The Board also approved Ashford Prime's dividend policy for 2014. Ashford Prime expect to pay a quarterly cash dividend of $0.05 per share for 2014 or $0.20 per share on an annualized basis. The adoption of a dividend policy does not commit either Company to declare future dividends. Both Ashford Trust and Ashford Prime will continue to review their dividend policies on a quarter-to-quarter basis.

In conclusion, we are very pleased to announce that we are spinning off Ashford Trust's asset management business, and that we have completed the spin-off of Ashford Prime, creating this new, high RevPAR portfolio. Ashford, Inc. will be an asset-light Company, with limited capital leaves, that will have attractive advisory agreements in place with two publicly-traded Companies, a pipeline of potential sources of business, and a currency to make acquisitions.

The management team that has been responsible for Ashford Trust's out-performance for the past decade will continue to work in best interest of shareholders. The same team can now work through multiple platforms offering more avenues for us to development new and creative strategies to enhance shareholder value. With the steps we have taken already to improve the capital structure and dry powder available for both Ashford Trust and Ashford Prime, we believe we are poised to benefit from the favorable conditions in the lodging sector and look forward to updating you on future calls as both organizations continue to execute on their distinct investment strategies.

Before turning this call over to my colleagues to discuss this past quarter's performance, I want to discuss some new initiatives we have underway at our affiliate manager, Remington. Last quarter, I briefly discussed some of the steps we have taken at Remington to drive revenue growth and market share at our hotels.

First, we turned over and replaced our senior sales and marketing position which oversees direct sales, such as group contract and preferred accounts. In addition, we created two new senior positions in sales and marketing to report this most senior position, overseeing all of the hotels. The new senior sales and marketing leadership team has focused on creating strong alignment between the director of sales at our hotels and the sales team to ensure everyone is motivated and focused on maximizing total revenues and driving market share growth at our hotels.

Separately on the revenue management side which oversees revenue management electronic commerce, we've created and have almost completely filled a number of new positions, taking this department from 11 individuals to over 20, with new both senior and junior executives. This group has been focused on maximizing revenues from the lowest cost channels, including hotel websites. We've already seen growth in bookings through our hotel websites that is exceeding the industry averages.

In addition to personnel, we are comprehensively upgrading our business analytics capabilities on the REIT side and with Remington. This big data initiative is focused on revenue optimization to make sure we are implementing the best possible pricing strategies for our available inventory, given historical and projected room demand patterns. We believe these investments in systems and personnel will materially increase our revenue enhancement capabilities. I am personally overseeing much of this effort.

With that, I will now turn the call over to Kimo to review our financial performance for the quarter.

Thanks, Monty.

For the fourth quarter 2013, Ashford Trust reported AFFO per diluted share of $0.14, compared with $0.39 a year ago. The fourth quarter of 2012 included $8.1 million of interest rate derivative income which impacted AFFO per share by $0.08. It also included 20 more days of income in the 40 Marriott-managed hotels that converted to a calendar year accounting system in 2013, from the previous 13-period, 28-date accounting cycle. During the quarter, Trust pro forma hotel operating profit increased by 4.6%.

For Ashford Prime, we presented the quarterly results in accordance with GAAP, which requires that historical carve-out financial statements be presented. Accordingly, Ashford Prime's results for the period may not be representative of results in future periods.

In particular, the G&A expenses that are shown in historical carve-out financial statements do not reflect the expected G&A cost of Ashford Prime, but rather reflect an allocation of the actual G&A cost of Ashford Trust. Ashford Prime will have G&A costs that it incurs as will as reimbursable costs that Ashford Trust incurs on its behalf. Ashford Prime will pay a base management fee to Ashford Trust equal to 70 basis points times its total enterprise value.

Ashford Prime reported AFFO per diluted share of $0.09 compared to $0.23 a year ago. The fourth quarter was also impacted by the Marriott accounting change, as six of the eight Prime hotels are Marriott managed hotels. During the quarter, our pro forma hotel operating profit increased by 5. 2%.

For the fourth quarter, we reported adjusted EBITDA of $71,168,000 million for Ashford Trust, and $10,656,000 million for the Ashford Prime hotels.

At quarter's end, Ashford Trust had total assets of $3.6 billion, including the Highland portfolio which is not consolidated. We had $1.8 billion of mortgage debt in continuing operations, and $2.6 billion overall including Highland. Our total combined debt currently has a blended average interest rate of 5.3%. We currently have 53% fixed rate debt and 47% floating rate debt, all of which have interest rate caps in place.

Including the market value of Ashford Trust's OP units of Ashford Prime, as pro rata share of the net working capital of the Highland portfolio, Ashford Trust ended the quarter with net working capital of $381 million. Ashford Prime at quarter's end had total assets of $962 million. We had $622 million of mortgage debt in continuing operations, which has a blended average interest rate of 5.3%. We currently have 68% fixed rate debt and 32% floating rate debt, all of which have interest rate caps in place.

At quarter's end, our Ashford Trust portfolio consisted of 115 hotels with 22,809 net rooms, and our Ashford Prime portfolio consisted of 8 hotels with 2,912 net rooms. The Ashford Trust share count currently stands at 101.1 million fully diluted shares outstanding, which is comprised of 82.1 million common shares and 19 million operating partnership units, while Ashford Prime share count currently stands at 34.1 million fully diluted shares outstanding, which is comprised of 25.3 million common shares and 8.8 million operating partnership units.

I'd now like to turn the call over to Jeremy to discuss our asset management accomplishments for the quarter.

Thank you, Kimo.

RevPAR at the 8 properties in our Ashford Prime portfolio increased 6.9% in fourth quarter, driven primarily by rate, which increased 5.5%. This strong revenue performance was driven by the four properties located on the West Coast, which experienced significant combined RevPAR growth of 15.6%.

For the full year of 2013, the RevPAR gain for the Ashford Prime portfolio was 6%, again largely driven by ADR growth of 4.7%. For the full year of 2013, Ashford Prime EBITDA margins improved by 35 basis points, while EBITDA flow-through was 40%. EBITDA flow-through for Ashford Prime in the fourth quarter was adversely impacted by increases in property taxes of $500,000 and incentive management fees of $400,000. These two items impacted margins for the fourth quarter and the full year by 121 basis points and 89 basis points, respectively.

I mentioned last quarter that the Hilton La Jolla Torrey Pines completed a truly stunning rooms renovation in the second quarter of 2013. Fourth quarter RevPAR growth for this hotel was 20.2%, and RevPAR index in the fourth quarter exceeded all of its competitors enabling the hotel to gain significant market share to close out 2013. We're very excited about this hotel's prospects heading into 2014.

Turning to the four hotels in the Eastern half of country, there were some one-time challenges to keep in mind when analyzing their financial results. First, the primary factor affecting performance in the fourth quarter was the federal government shutdown during the first 17 days of October. In the fourth quarter, the Capitol Hilton in Washington DC experienced a 23% decline in government business.

Second, the Philadelphia Courtyard Downtown began a significant rooms renovation during the quarter, and as such suffered a 6.9% year-over-year loss in occupancy. Lastly, the Plano Marriott Legacy Town Center underwent meeting space and ballroom renovations, leading to a 15% decline in group room nights. Excluding these two hotels under renovation and the Capitol Hilton, which was impacted by the government shutdown, RevPAR growth for the Ashford Prime portfolio in the fourth quarter was 14.3%.

I'd like to end my section on Ashford Prime portfolio by taking a moment to highlight the portfolio's remarkable success thus far in the current economic cycle. Last year marked the fourth consecutive year of EBITDA margin expansion for the current eight hotels in the portfolio, going from 28.1% in 2009, to 33.6% in 2013. While revenues have increased at a 5% compound annual growth rate since 2009, we've been able to grow hotel EBITDA at a 10% compound annual growth rate over the same period. I believe the sustained performance reflects Ashford's unique and superior asset management expertise.

Moving to our Ashford Trust portfolio, RevPAR increased 1.3% in the fourth quarter, driven by rate which increased 1.6%. For the full year 2013, RevPAR increased 2.6%, again, entirely driven by ADR which increased 2.9%. For the full year, EBITDA margins improved by 51 basis points, while EBITDA flows were 55%. Again, the primary factor affecting performance in the fourth quarter was the federal government shutdown during the first 17 days of October.

While the impact of the shutdown was felt to varying degrees across the country, the Washington DC market was a market that was impacted the most. Collectively, the 10 hotels in the Ashford Trust portfolio located in the Washington DC market experienced a RevPAR decline of 9.3% in the fourth quarter and a RevPAR decline of 6.7% for the entire year. These hotels in the Washington DC area experience a 41% decline in room nights directly related to the government in the fourth quarter.

Last year, Ashford Trust's seven hotels in the New York/New Jersey Metro area benefited significantly from storm-related business in the aftermath of Hurricane Sandy. Insurance adjusters, utility repair workers, and displaced residents drove RevPAR growth of 17.9% for these hotels in the prior-year quarter.

The non-repeating nature of this business made for difficult year-over-year comparison for the fourth quarter of 2013. The seven hotels in New York/New Jersey market area experienced a RevPAR decline of 12.5% in the fourth quarter. If you exclude both Washington DC and New York/New Jersey market areas, Ashford Trust RevPAR growth in the fourth quarter would have been 4.3%.

We believe the booking window for group business is extending, which is indicative of the improved business sentiment and overall economic environment. Our hotels will continue to strategically and selectively evaluate group business opportunities taking into account stay patterns, F&B contributions, and expected, concurrent transient demand.

In terms of the corporate negotiated rates, we have been very encouraged by the aggressive posture our managers have taken in strategically pursuing ADR growth, even if it sometimes comes at the expense of not being accepted into every corporate program. At Ashford Prime, we have seen an aggregate increase of approximately 5.6% for negotiated accounts, while Ashford Trust recorded a similar increase of approximately 4.5% to 5.5%.

We've also been active in identifying savings in our energy consumption. We implemented numerous energy ROI initiatives, conservation practices, energy audits, and usage benchmarking. In addition, we have been diligent in our energy procurement negotiations. Combining these tactics have resulted in savings of $4 million annually.

Regarding capital expenditures, we invested over $7 million in the Ashford Prime portfolio in the fourth quarter of 2013, bringing the full year 2013 capital expenditure amount to $24.5 million, which was $0.6 million or 2.5% owner funded above and beyond what was required of our FF&E reserve requirements. For the Ashford Trust portfolio, CapEx invested in the fourth quarter was $40.8 million, bringing the full year 2013 capital expenditure amount to $149.2 million which was $17.8 million or 12% owner funded above FF&E reserve requirements. We will continue to strategically invest capital into our hotels, using our analytical and quantitative framework to make sure we are maximizing returns for our shareholders on that invested capital.

Thank you. Now, I'd like to turn the call over to Douglas.

Thank you, Jeremy.

In fourth quarter, Ashford Trust continued to focus on improving its capital structure and further strengthening its liquidity position. During the quarter, we closed mortgage loans totaling $18.2 million on the Residence Inn Jacksonville, Florida, and the Residence Inn Manchester, Connecticut, with both loans now set to mature in January 2024. The previous $6.4 million loan balance on the Residence Inn Jacksonville was refinanced with a new $10.8 million loan that is non-recourse with a 10-year term and a fixed interest rate of 5.49%. Refinance resulted in an excess net proceeds of approximately $4 million which were added to Ashford Trust's unrestricted cash balance.

The Residence Inn Manchester was previously unencumbered. The new financing on this property includes a $7.4 million loan, also with a 10-year term. The new loan has a fixed interest rate of 5.9% and is non-recourse. Ashford Trust has an 85% ownership interest in the property with interstate hotels and resorts holding the remaining 15%, and the terms I've described refer to 100% of the loan indebtedness unless otherwise indicated. The excess loan proceeds above typical closing costs and reserves were distributed to the partners on a pro rata basis. Ashford Trust's share of the excess proceeds was about $6 million which were added to the unrestricted cash balance.

We continue this progress in 2014 successfully refinancing our $165 million MIP portfolio mortgage loan last month, with a new $200 million non-recourse mortgage loan with a two-year initial term, and three one-year extension options, subject to the satisfaction of certain conditions. The new loan is interest-only with a floating interest rate of LIBOR plus 4.75% with 0.2% LIBOR floor. There were excess net proceeds of about $30 million which were added to the unrestricted cash balance.

The new loan remains secured by the same five hotels including the Embassy Suites Philadelphia Airport, Embassy Suites Walnut Creek, Sheraton Mission Valley San Diego, Sheraton Anchorage, and the Hilton Minneapolis-St. Paul Airport Mall of America. Since the excess proceeds from each of these financings was added to the unrestricted cash balance, these financings were neutral to the Company on a net-debt basis.

Turning to Ashford Prime in connection with the spin-off, Ashford Prime entered into a new $150 million secured credit facility with Bank of America acting as a sole administrative agent. Other participating lenders include Credit Agricole, Credit Suisse, Deutsche Bank, KeyBanc, and Morgan Stanley. The new credit facility has a three-year term with two one-year extension options, and bears interest at a range of 2.25% to 3.75% over LIBOR, depending upon Prime's leverage level. We also had the opportunity to expand the facility's borrowing capacity by up to $150 million to the aggregate size of $300 million.

To further strengthen Prime's liquidity position to better position the Company for investment opportunities, this January, we closed an underwritten public offering of 8 million shares of common stock, including the 1.2 million shares of common stock sold in connection with the underwriters option. A total of 9.2 million shares of common stock were sold at a public offering price of $16.50 per share. Total gross proceeds to Ashford Prime from the offering before deducting the underwriting discount and other estimated offering costs were $151.8 million. BofA/Merrill Lynch and Morgan Stanley acted as the joint book-running managers for the offering.

As we previously announced, Ashford Prime closed on the acquisition of the 415-room Sofitel Chicago Water Tower for $153 million in cash, or $369,000 per key. This four-star hotel features over 10,000 square feet of meeting space and is situated in the Gold Coast submarket of Chicago, a major US gateway market for both corporate and leisure travelers. Sofitel will continue to manage the property.

At closing, we financed this hotel with $80 million of non-recourse mortgage debt, priced at LIBOR plus 2.3%. The new debt has a five-year term including extension options. The purchase price of $153 million represents a trailing 12-month cap rate of 6.0% on net operating income, and an EBITDA multiple of 14.1 times.

On a forward 12-month basis, the purchase price represents a cap rate of 6.8% on net operating income, and an EBITDA multiple of 12.7 times. In 2013, the Sofitel Chicago Water Tower achieved RevPAR of $182 with 82% occupancy and an average daily rate of $222.

We expect to close on our acquisition of 142-room Pier House Resort in Key West Florida today, and we'll provide more information regarding that acquisition soon. As a reminder, the purchase price is $92.7 million and Ashford Prime will assume a $69 million mortgage on that hotel, and paid to Ashford Trust the balance of the purchase price with cash on hand.

These acquisitions are significant milestones for Ashford Prime. Not only are they the first acquisitions Prime has completed as an independent public company, but as Monty mentioned, they are indicative of the high RevPAR, well located properties at attractive values that we are targeting for Ashford Prime's growth.

In conclusion, we've continued to strengthen the capital structures and liquidity resources for both Ashford Trust and Ashford Prime to better position ourselves for investment opportunities by capitalizing on today's attractive debt and equity market conditions. As 19% holders of Ashford Trust and 14% holders of Ashford Prime, your management team is dedicated to maximizing shareholder value and delivering superior returns.

That concludes our prepared remarks, and we will now open it up for your questions.

(Operator Instructions)

Ryan Meliker, MLV and Company.

Hi, good morning, guys. Just first of all with regards to the Ashford Inc. spin-off, can you help us understand how Ashford Inc. is going to be aligned with those shareholders of Trust and Prime? Is Ashford Inc. going to own a portion of Trust and Prime? Or is Ashford still going to own the equity that it owns in Prime? Is the fee structure going to be similar to how the fee structure currently is with Prime?

Sure, Ryan. This is Monty. On the alignment side, we want very much for Ashford Inc. to have ownership in Trust and Prime, but because of some 1940s securities act regulations it makes it very difficult for that to happen. What we're going to do for strong alignment is do it through the management team. The management team is going to continue to own 19% in Trust, the 14% in Prime, and then the 19% in Inc.

That is how we're going to provide that alignment because, again, having the advisor own interest in the other ones just wasn't feasible considering the 1940s investment act. Those were considered securities, and that just causes all kinds of problems. We looked at that extensively because that's what we wanted to do, but just can't do it legally.

What was your second question?

Just regarding the fee structure, is that going to be similar, where it's going to be based on stock performance to a large extent?

Yes. We anticipate it'll mirror the same structure.

Okay. That's helpful. With regards to, obviously you don't have a ton of income coming from this asset management arm today. Do you have plans on growing that income stream before the spin-off is completed in 3Q? Will that be maybe contributing Remington into Ashford Inc., or doing something else, maybe it be another acquisition in advance of the spin-off, so that the Company comes out with enough earnings that it's more relevant, and investors aren't looking to dump it, given there's a lack of liquidity or capital?

We think it's going to come out in a fairly big size because even as it is today, the amount of revenue that it will be taking in, if you look at the TEBs of entities today, and without any incentive fees from Trust and from Prime, it would be about $38 million in cash flow. The expenses of the new platform will be something like $28 million or so. You can see we've got some good cash flow right out of the box.

As far as growing the platform, we're looking at all options. We've got a real estate securities platform that we're in the process of launching and starting to talk to people about it. That's in process. We hope to have our first launch sometime this summer on that.

Remington being involved somehow is certainly a possibility, somewhere along the ways, whether it's before spin-off or afterwards. If we wanted to roll that in, although, as you know, we'd have to get independent directors on board, and we'd have to go through a process because of the related parties. There is other opportunities, growing the existing platforms, Trust and Prime, and/or spinning out new platforms. We're looking to grow all of these platforms pretty aggressively.

Okay. One last for me, and then I'll jump back out of the queue. With regards to Prime, you guys, I don't want to say DC with the Capital Hilton is roughly 15% to 20% of annualized EBITDA right now. What's the appetite for acquiring Crystal Gateway, given that's going to bolster your exposure to DC closer to 30%? Are you more inclined to acquire other assets so that you dilute that massive exposure to one market, before acquiring Crystal Gateway? Are you not as concerned about that because you're more focused on the long-term value and know that you'll acquire other assets later on?

Sure. Back to your first question, and I want to point something out. You may be familiar with a company called Altisource that spun out and had their own home manager, and NorthStar who did this here recently as well. One reason that I think Altisource traded so well, their manager, is because they started with relatively low base of management fees.

To the extent that Ashford Inc. comes out on a smaller side of the advantage is that as it adds platforms, it can benefit from a large percentage increase in fees, which would be a great benefit to shareholders. That's a big advantage that's coming out of a little smaller size if we do.

Over to the Gateway property, we are sitting on our hands right now. We're not in big rush to run over there and do anything. We haven't talked internally specifically about the timing.

We were really anxious to get to an outside investment into the platform in form of something like Sofitel which we're very happy with. It couldn't a been a better opportunity for us, and then getting Pier House over.

As far as the other asset goes, the Gateway Marriott, we're not in a rush. We've got another 18 months to exercise that option. I think that Prime's just going to wait on that for a little while and see how the market, DC market, fares over the next period of time, and concentration risk would definitely be something that would be considered on the Prime Board side.

All right. I think that answers my questions. I guess if Ashford Inc. trades like Altisource out of the gate, your investors will be very happy. That's all for me. Thanks a lot.

Sure. Just as a reminder, Ryan, that transaction for the Marriott property, Marriott Gateway property, would have to be for units, and so it wouldn't be a transaction that would require cash in any event.

Right. Thank you.

Robin Farley, UBS.

Thank you. I had two questions. The first one, you alluded to already, I was basically going to ask if Ashford Inc. is a vehicle to buy Remington. It sounded like from your reference to it that basically that is what's going to happen.

You suggested that it sounded like it could even happen before the spin-off. I don't know if I misunderstood that. I don't know how that would be structure, but it sounds like that's something we can expect by year end, I guess?

Then I have a question about the transaction market after that.

Sure. As far as Remington being rolled into it, we don't have any guidance on that. We wanted to get this platform up and going. As far as Remington being as part of it, without really knowing here off of the top of my head, it might not affect our Form 10 filing and complicate things.

We'd have to look into that to see if that would delay the whole process, which we're not interested in doing. We just haven't sat down and looked at the timing of Remington, or even if it's going to happen. We just haven't come to any conclusions on that, whether it's before spin-out, after, or at all.

Regarding the transaction market, I'll let you ask your question of Doug.

Sure. It's really just to get your view on the transaction market and whether you expect you'll be a net buyer, or net seller this year?

I think for Ashford Prime, we've already indicated to be a net buyer with the great transactions we've already completed with the Sofitel property. As we stated, we'll be closing today on the Pier House Resort in Key West Florida.

The market is an attractive market. We believe there's still several years of upside potential for hotel values in the cycle, even at the midpoint. Many people believe this could be an extended cycle.

In addition, the volume of transactions is increasing. We are hearing more broker opinion of values work is being done by the major brokers. That's sometimes an early indicator potentially more transactions coming. Then naturally, you see in this part of the cycle, more transactions coming into the market as buyer and seller expectations are meeting one another.

We're not seeing much movement in cap rates. We're seeing the debt markets remain very stable and increasing liquidity. That's also a good sign from a valuation standpoint. Obviously, on the operational side we're pretty bullish on what the industry pundits are saying with respect to future RevPAR growth.

For Ashford Trust, we're also seeing opportunities in that platform as well. The interesting aspect about Ashford Trust, arguably, is that potentially there seems to be less of a competitive playing field just because I think that the Ashford Trust platforms target RevPAR, which is less than two times the national average. Obviously, it cannot be competitive with the Ashford Prime target of two times or greater the national average. We see numerous properties in that zone coming to the market, and not as many buyers chasing those assets.

I'll conclude that within both cases, as we've done for the past decade with Ashford Trust, we're very disciplined. We look at the added value of these assets in terms of the near term and longer term accretion on the share price basis to our Companies.

We'll continue to operate with a very disciplined focus on capital markets activity as well as our purchasing. Generally, we expect to be a net buyer in Prime, and I think we're looking at certainly opportunities for Trust.

Okay. Great. Thanks very much.

Andrew Didora, Bank of America.

Hello. Good morning, everyone, and thank you for taking the question. Monty, when I think about these transactions you've entered into over the past year or so, one of the concerns I think of is just the relatively small size and liquidity of each of the entities that have already been talked about on the call, I guess. When you thought about the Ashford Inc., how did you think about this concern?

How quickly do you think you can get this platform growing? How will you drive that growth, and will it be through debt or equity?

Good question. The liquidity is an important part of this, and we want to make sure we size this so we could get listed on a good sized exchange. We're going to go for NYC, and maybe we can only get on NYC MKT. That's very important to us.

I think also probably even more important is share price performance. That's why we want to go ahead and do these types of things. If you look at our share price performance over the past 10 years, our results are up over 200% compared to our peers of about 96%.

That long-term performance is because we do different kinds of things. While in the short-term it may make it a little difficult for one investor or another to participate in the stock, which we regret, we'd rather they just stay in the stock and stay all the way through, and they would get fantastic returns. Liquidity's only important if you want to jump out.

If you look at something like Altisource, their liquidity was extremely, extremely small, and their stock performance went sky high. I don't know that liquidity makes a difference as far as our stock performance, and in fact maybe it's just the opposite. Maybe they did so well because of their small market cap size.

That being the case, we know that a number of our investors like a bigger platforms and like more liquidity, and we do have plans for growth. You saw what happened with Ashford Prime here. If we were still together in the Ashford Trust, Ashford Prime and Trust together, we wouldn't have been able to do that equity rate. Already, Prime has been able to increase its market cap by $150 million.

As far as growing Inc., we're very excited about its growth prospects, and we plan to be actively growing it. Whether that's through cash or with our own currency, which increases our equity market capital in our float, then that's another way to do it. We are very interested in growing the platforms, and we'll be active out there doing it one way or another.

I guess at this point in time, do you have any target leverage levels for the new platform?

The new platform of Inc?

Of Inc., yes.

No. Fairly modest, it's an operating company, so it'll carry less debt when we launch it. I think our expectation's right now it'll be launched with zero debt. We could levered up a little bit if that's what we wanted to do. We've got plenty of dry powder to get out there and to grow the platform.

Understood. Then Monty, you mentioned in prepared remarks you can't be certain the spin will proceed as anticipated. I realize this is probably just required legal disclosure, but I guess what are some of the circumstances that would potentially make you reconsider the transaction before it's declared in 3Q? That's it for me. Thanks.

We'll always reconsider everything if that's what we think is best for the Company. We did a lot of analysis. We believe very strongly about measuring twice and cutting once. That's what we believe we did on this. We don't anticipate that at all, but if for some reason we saw the world change dramatically, then yes, we absolutely would reconsider it.

We've seen what's happened with these other type of platforms with this structure. On the big scale, it is the (inaudible). It's the Blackstones and the like, and the Fortress that have done very well in the public markets with this kind of structure. Then here recently, we've seen smaller type of platforms go public and do very well, whether it's Altisource or NorthStar. I'm sure you know about Starwood talking about this type of structure.

It is a structure that the market is in love with right now. If there's a big change about that, then sure, we'd look at it. We don't anticipate that change, but you never can predict the future.

Got it. One follow-up from that, you quoted a lot of other asset manager in your comment there. How do you envision the securities part of the platform looking like?

Our real estate hedged equity strategy? Is that what you're referring to?

There's that, and then you had mentioned the debt platform as well. Just maybe provide a little bit more commentary on what you guys are thinking right now for each of those?

Sure. The real estate hedged equity strategy is something we're in the process of being in market right now. We're talking to investors about it right now. That's something where we hope to have our first closing here in the summer, maybe third quarter of maybe $100 million to $200 million to start and then grow on there with traditional fees of 1.5% to 2% of gross, and then performance fees of 15% to 20% of the UPS.

As far as the debt platform, that's something we're also looking at. As you know, we've done that in core Ashford Trust platform for a while, and actually got a hold on it, despite the huge turndown in marketplace.

That's something we're looking at as well, but what we want to do is when we roll it out and when we do it, we want it to be accretive for our shareholders. That's something that we're analyzing and are a little bit farther behind the real estate hedged equity strategy. It's something were interested in. As far as timing of it, it's just hard too say.

That's really helpful. Thank you very much.

Thomas Allen, Morgan Stanley.

Hey, guys. It seems like there's increased talk around portfolio transactions in the market. Obviously, you had Highland in the past. Would you thinking about doing something similar again? Now that you have, or are going to have three platforms, how do you think you'd structure it? Thanks.

Sure. I will touch on it, and I'm sure Doug will too. We're looking at portfolios transactions. Our old structure prevented us from looking at those because where the stock was trading on that one platform. Now with a variety of platforms, we just have more flexibility, especially if you look at a portfolio, and then we can divide it up among the platforms, and put some assets in one and some assets in another. That's part of the strategy of having these platforms.

There are a number of portfolios that are out there. We're looking at all of them. Where we can make it accretive for our platforms, we are going to pursue them.

I'll add to that just by saying, at this part of the cycle is generally when you start to see more portfolio trades happening. On top of that you have, whether it's private equity funds or some of the non-traded REITs that have reached a certain time point in their cycle where a liquidating event is certainly on their radar. It's a natural part of the cycle that we're entering where you will see more portfolios, and there are several on the market.

As Monty said by having these the three platforms, we can really calibrate the portfolio to the respective cost of capital, and make it accretive for that specific platform, as opposed to when we were just Ashford Trust, and some things may have worked, and some things didn't work. Now, we can find that proper silo and put that portfolio opportunity into it, or carve it up and create (inaudible) between platforms, if need be.

I think what's important to keep in mind though is that it's the same management team that we have here that has clearly shown the expertise, more so than any of our peers in taking down large, complex portfolio trades. We did it with the C&L portfolio. We did it before that with a portfolio we called FGS. We did it with the Highland portfolio as you mentioned.

I think the key here is that we have a demonstrated expertise. We know these are complex transactions. If there's an opportunity that we think can create value for shareholders through some type of combination, we'll be thoroughly looking at that opportunity and determining whether or not we can make it an accretive transaction for our shareholders. That's the beauty of having these multiple platforms.

Okay. Then just on DC, you guys talked about how you're going to be patient around the Crystal Gateway option. Then you talked a lot about in your prepared remarks about some of the government shutdown impact. As we look forward, what are the expectations for that market?

Then other markets, are there other markets that you're very excited about for next year, and in the next two years? Any other markets you're concerned about?

Sure. I can take that. This is Jeremy.

As it relates to DC I can't talk specifically about our portfolio for 2014, but I can give you general market update. To really understand that, you really need to look at what happened in 2013.

In May of 2013, there was really a new baseline set because of the cuts for the government and sequestration. That's when the industry started to see the impact. It was consistently about 30% in government business declines monthly all the way through September, and then a little bit more in September in anticipation of the government shutdown. Of course, I just quoted it. In the fourth quarter, our loss of government was around 40% in the fourth quarter.

Heading into 2014, the year over year comparisons are, of course, you had the inauguration in January of 2013 that did not recur in January 2014. You'll had the impact of sequestration from January through April of 2014.

If you fast-forward to May of 2014, you have sequestration in both May 2014 and May 2013 numbers, so the impact of sequestration on a year over year basis should be muted. Of course, in the fourth quarter, assuming the government stays open, you have some easier comparables in the fourth quarter of 2014 as compared to 2013.

There is some new supply that you're probably aware of that's coming into DC. The Marriott Marquis is about 1,200 rooms. We have heard that originally it was scheduled to open in May. It's likely to slip another month into June.

What we understand is that Marriott's done a very good job of selling that hotel and ramping it up. Hopefully, some impact of the industry will be mitigated with that new supply.

Long term, we've got great hotels in DC. They make great money, spit out a lot of great cash flow. We've got great brands and locations within those markets. I do think that this is certainly a challenging time, but going forward, we're very bullish on DC over the long term.

Other markets, I'd say that there are some challenges in Philadelphia when you look at convention calendar. National convention calendar is incredibly strong. We see a lot of good outlook in certainly our West Coast markets.

Seattle, San Francisco are very strong. The bookings are strong from what we hear in those markets. We're excited about more of the West Coast markets, and Philadelphia is probably the more challenged market in the portfolio. Atlanta convention calendar as well looks very strong for the foreseeable future.

All of that is helpful. Thank you.

Nikhil Bhalla, FBR.

Good morning, everyone. Monty, you talked about, you referenced a couple of names here (inaudible) pretty high. Would you be able to give us some color on what entity economics would look like, just as it comes out the gate?

I think you talked about $8 million of management revenues. You talked about $28 million of expenses. If you don't mind, help us think through the broad level economics, if you can? Thank you.

I think we touched on the broad level of economics. There are $38 million in fees if they were paid today, just base fees. That's not with incentive fees. It's hard too estimate what those are, but that will be on top of.

Then our allocation of allocated expenses that we see right now is associated with this platform at something like $28 million. Again, there's no debt on it, and there's no preferred equity. At least that's what we're planning on doing right out of the box. You can see it that it has a great positive strong cash flow. Again, as I mentioned, it's got the ability to grow it on a multiples basis considering its size, which we think is a great advantage.

We went over a number of different ways in which that fee income could increase over time, while the expenses will not increase proportionately, whether it be growing Ashford Trust, launching an Ashford select service platform, growing Ashford Prime, launching our real estate hedged equity strategy, and receiving the benefit of those higher levels of fees from that one, an Ashford debt platform, which is something that we've got experience with and have done.

Whether it be management companies, property management companies, and related, renovation companies. Remington being one, but there are others that are out there. Whether it be services that are providing to these hotels within these different structures of publicly-traded platforms.

Inc. has the right to provide other market services to them such as future brokerage services of selling and buying assets, such as bringing about refinancings and financing services. A list of potential services goes on and on, whether that's Ashford Inc. buying a company that sells, as a pedestrian example, soap and selling the soap to these different platforms for their use in the rooms, for the guest rooms for all of the hotels. Or it's something more on the services side, which this management team has more experience with.

We just see quite a bit of revenue producing opportunity for this new spin-out platform. That's why we're so excited about it, and that's why we did it. While we really are excited about the short-term run-ups in those platforms that I mentioned, and that helps because we know many of our investors are looking for shorter-term movements in the stock, we think the long-term prospects of it are absolutely fantastic.

We've had a great eye for identifying a long-term move. That's why over the long-term our returns have materially outperformed our peers. We did this for the long-term benefits and all of those revenue-generating possibilities, but we're also pleased that at least the market currently seems to be rewarding stocks in the short term for adopting this strategy.

Thank you. Very helpful. Just a follow-up question on the expense side, the $28 million, is there an assumption there for public company costs, or would that be over and above that?

This is Kimo. That's included in the $28 million.

That is, okay. That's all for me. Thank you so much.

David Loeb, Robert W. Baird.

Good morning. Monty, a couple of follow-ups, on your last comment about the brokerage and the financing, if you're talking about doing that for companies like Prime and Trust, wouldn't that be included in the base fee? Is in that kind of normal management that you would buy and sell assets or refinance assets?

No. That would not be. Right now, when we go out and we acquire some financings, we typically will hire a debt broker to help us with that. We'll hire a real estate broker when we're selling assets.

To the extent that the new manager acquires those skills, then it can charge for those services. I believe the management team already has the skills on that debt side and can offer that today, but on the property side, that would be something we'd have to build out.

You're really talking about replacing something you're paying for externally?

That's right.

Okay. On Remington, just to be clear, I don't believe that Ashford Trust can own Remington prior to the spin-off because the management has to be done at an arm's length away with an entity that's not the subsidiary?

That's right. It just wouldn't work beforehand, although you could probably have the project management and construction business owned by it, but it probably would just be too messy. I don't see it happening beforehand. The earliest would be simultaneous, but again, that might gum up our filings and make things difficult.

Possibly under contract or with an option to buy it in place or something like that?

Something like that. Again, many times it depends on stock price and who wants to take that risk. I just see it to be more cleaner to be afterwards.

At the same time, the more important piece here is that you as a principal owner of Remington, one of the two, your inclination is to have Remington be part of Ashford Inc?

I think that would be a lot cleaner, although over the past five, seven years, we've gotten just zero comments about the related parties between Remington and these others. I think some new investors would like it. We only face the question when we come across new potential investors.

To assure the marketplace, there's no cashing out that will be going on. I'm here. I'm staying year. We love this platform. If we did something like that, we'd just roll it all in and take back shares or our units, and double down our investment in the platform.

Right. It certainly does align the interest if public shareholders want own the operator as well.

It definitely does.

Just to kind of step back a little bit, why now? What is it that motivated you to announce and commence the work on this spin-off now?

Versus some time? Versus when?

Two years from now, after you'd had a chance to grow the fee stream a bit more, for example.

I see. It's because in order to grow some of those streams, we need to be able to grow the real estate platforms. We couldn't grow Trust because of where it's share price was performing. I think we shared with you that we think Trust has been trading in such a way that its equity cost of capital is over 25% because we think the share price will do very well.

We couldn't raise equity capital into Trust to grow the platforms. It's by growing the platforms is how you grow the fees, right? If we're to launch something bigger, and to get bigger, we have to have these other platforms out there, that's grow and therefore grow the fees.

We could really grow it, at least the way we wanted to just in one platform with Trust because Trust can't grow. The only thing that could grow is if we just continue to grow Prime over time, and that's possible. We also wanted to make sure we do the right thing with Prime, and we don't want to grow Prime just to grow.

We've always avoided that accusation with investors and that speaks to our returns as well. We don't grow just to grow. We do every single transaction and make sure it's accretive. It depends on where the strike stock prices trading.

There are seasons where it's a good time to raise capital, and seasons where it's not. We didn't want to be handcuffed with just the one platform. We think that going ahead and getting it out there gives us more flexibility, with more platforms to grow the fee stream faster. We'll grow it faster by going ahead and spinning it out now.

Okay. That's very helpful.

One more probably for Kimo, can you give us an idea about what the G&A at Trust would look like post-transaction? Obviously, we can calculate the fee, we already have. But what do you think the reimbursements would non-cash G&A? That kind of thing.

I'll deal with the reimbursement side of that (inaudible) non-cash. The reimbursements, we're estimating to be about $6 million direct for Trust, in addition to its management fee.

Okay. Presumably, the non-cash comp would be the same. Would it be along the same lines?

Right. Just on a cash basis, let's make it easy, the overhead for Trust is something like $30 million a year. Then as we split, it'll be something like $28 million of Inc. and $6 million for Trust, and that $4 million increase is the added cost for two public Companies versus one.

Okay. I guess that's kind of split between the two Companies?

What do you mean?

The increase, the delta.

It starts at $30 million, and $28 million goes to one, $6 million goes to the other. Yes, I suppose that would be true.

It starts at $30 million, but moves up for Trust. It goes to $32 million, $28 million plus $4 million?

No, that $28 million includes it.

Okay.

(inaudible) Afterwards, it's $28 million, and $6 million in the other platform.

Okay. We'll work it all out, and if we have questions, we'll call you. That's very helpful. Thank you very much.

Patrick Scholes, SunTrust.

Hi. Good morning. The way I calculate it, it looks like you have pretty low dividend payout of CAD or FAD on the Prime. How much longer do you envision it staying that low?

You mean as far as our dividend?

Yes, dividend.

We gave out a guidance this past December. As you know, maybe you don't, but we also like to every December give guidance for the upcoming year. That's something for the Board this coming December to sit down and discuss (inaudible). If we and the Board think that it will help our stock price performance to increase it, we will.

Okay. Thank you.

Bryan Maher, Craig-Hallum.

Good morning, guys. I apologize if I missed it this, but as it relates to the Marriott impact on RevPAR, both our Ashford Trust and Prime, as well as Sandy, do you guys have an estimation as to what that impact was as in, what RevPAR might of been without those?

When you say Marriott impact, are you saying the accounting change?

Right. What would you suspect the RevPAR would have been? Would it have been up 1 percentage point, 2 percentage points, had that Marriott change not taken place?

What we quantified for Trust was about 300 basis point impact to DC and Sandy for the quarter. Then as it relates to the accounting change, we don't have that actually calculated. But I would say is just look over the course of the full year and compare RevPAR year over year basis.

Okay, so 300 basis points RevPAR degradation for Sandy and DC combined?

That's right.

For Trust?

That's right.

Thank you.

Ryan Meliker.

One last quick question, you guys mentioned in the press release, and a little bit on the call today, the plan to launch a select service hotel platform. Can you give us some color on whether you're looking to spin off some of those service assets from Trust, and potentially even Prime, into a new REIT, or whether this is something new, where you guys are looking at potentially acquiring one of the large select service portfolios that's on the market right now, and launching a third REIT to go along with Trust and Prime? Thanks.

Sure. We're looking at all of those options, Ryan. The only option we're not looking at is pulling any of the select serve out of Prime because those are high RevPAR assets. We want to keep those in there, but whether it be any of those options and more are what we're looking at as far as select service.

I guess when you think about Trust, how small are you willing to make Trust, if you do decide to split out the select service? Based on the assets that Trust owns today, if you split out the select service you'll be looking at two pretty small Companies, I guess, on a market cap basis. I'm not sure that would pencil out as well as if you were acquiring an entire portfolio to add in. Is that something you're willing to do before you grow the platform, or TBD still?

It really is TBD. First of all, we don't want to get Ashford Trust much smaller. That's going to go into our thinking a lot, but there are no hard and fast rules. We do notice that at least with all the analyst we've done that size does not affect your trade multiple, despite the fact that a lot of people say it does. Statistically, it doesn't. We know our investors like more liquidity, and so do we. We're just reluctant to do that.

Sure. I think from a size standpoint, Ryan, recall that the Highland hospitality, which was formally a publicly-traded company is embedded inside of Ashford Trust. Even if it were just that, that would be arguably a sufficient platform on its own.

In addition to that, we still would have a great number of other full-service hotels to the extent we were to do something with a select strategy. I think we would look at the situation as being more than adequate critical mass, regardless of what we do.

All right. That's helpful. Thanks a lot.

Thank you. I'm showing no further questions at this time. I'd like to turn the call back over to management for closing remarks.

Thank you all for your participation today. We will be hosting an Ashford Investor and Analyst Day again this year on May 15 at the Palace Hotel in New York City. Please be on the lookout for save-the-date. That's May 15. We hope to see you there, and we look forward to speaking with you again on our next call. Thank you.

Ladies and gentlemen, this concludes the Ashford Hospitality Trust and Ashford Prime fourth quarter conference call. If you'd 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 4662726, We'd like to thank you for your participation. You may now disconnect.