Ashford Hospitality Trust Inc (AHT) 2015 Q4 法說會逐字稿

Good day, everyone, and welcome to the Ashford Hospitality Trust and Ashford Hospitality Prime fourth quarter and full year 2015 conference call.

Today's conference is being recorded.

At this time I'd like to turn the conference over to Ms. Stacy Feit. Please go ahead, ma'am.

Thanks. 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 2015 and to update you on recent developments.

On the call today will be Monty Bennett, Chairman and Chief Executive Officer, Douglas Kessler, President, Deric Eubanks, Chief Financial Officer, and Jeremy Welter, Executive Vice President of Asset Management.

The results as well as notice of the accessibility of this conference call on a listen only basis over the Internet were distributed yesterday afternoon in press releases that have 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 both companies' 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 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 are provided in the Company's earnings releases and accompanying tables or schedules, which have been filed on Form 8-K with the SEC on February 25, 2016, 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 the earnings releases, together with all other information provided in the releases.

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

Good morning, everyone, and thank you for joining us. We had a solid finish to the year for both the Trust and Prime platforms during the fourth quarter.

Trust posted robust RevPAR growth of 6.8% which outperformed the broader industry and supported another quarter of strong EBITDA and AFFO performance. Trust RevPAR improvement is one of the highest of any of its competitors that have reported thus far, and has beaten the industry for five of the past six quarters.

Prime's RevPAR was up 4.4% reflecting a strong contribution from a recently acquired Bardessono property in Napa Valley during our first full quarter of ownership.

For the full year 2015, Trust RevPAR was up 6.5%, and Prime RevPAR increased 7.3%. Both of these results exceeded industry averages.

We enter 2016 with a backdrop of continuous favorable industry fundamentals, as demand growth continues to outpace supply growth, and PKF forecasts that will continue at least through 2017. With those dynamics in place, PKF is also projecting a national occupancy rate of 66% for both 2016 and 2017, which should support continued pricing power and rate growth for the industry as evidenced by their estimates of 6.1% RevPAR growth in 2016 and 5.8% growth in 2017.

Given these trends, we believe we are well-positioned to drive strong operating performance in 2016 at both Trust and Prime. We continue to manage each platform to maximize long-term value for our shareholders, and believe our long-term track record coupled with industry-leading insider ownership among publicly traded hotel REITs, makes us the most highly aligned management team with our shareholders in the hotel REIT space.

[Speaking and asking] shareholders has always distinguished Ashford from others in our industry. We consider it to be an important component of our value proposition, one of our main competitive advantages, and a key reason for our consistent superior long-term performance.

Since our IPO, Ashford Trust has achieved a 105% total shareholder return, compared to a 76% for our peers. We are particularly shareholder focused as we are also substantial shareholders in both Trust with 16% insider ownership, and Prime with 14% insider ownership.

To put that in context, the peer average insider ownership is around 2%. Having so much our personal capital invested in these platforms has created a high level of alignment between our management team and our shareholders. Additionally, the structure of the Ashford REIT's unique advisory agreements create significant incentives to outperform.

With a base fee that takes into account stock price, and an incentive fee that is predicated on total shareholder return for outperformance versus its peer group, we are solely focused on maximizing long-term shareholder value, and producing outsize returns for all of our investors.

Both of our platforms have targeted and distinct strategies. Trust focuses on upper-upscale full service hotels, while utilizing moderate leverage to maximize returns, while Prime focuses on high-quality luxury hotels in resort and gateway markets, with more a conservative leverage level.

We believe that both companies are well-positioned for future growth. While we remain confident in the strategic direction of both platforms, in August we announced a plan to explore a full range of strategic alternatives for Prime, including the possible sale of the company.

Our independent directors are actively engaged in that process with Deutsche Bank as our financial advisor, and they are committed to thoroughly reviewing all alternatives in an effort to choose a path that will continue to generate maximum long-term value for all shareholders.

This review process is still underway and the independent directors are actively engaged in the process, with the sole focus of ensuring that it is done properly and results in the best possible outcome for all shareholders. We will keep the investment community apprised as soon as there is an update to communicate.

Turning to Trust, in January we announced a refined sales process for Trust's select-service portfolio, as change in market conditions had reduced large portfolio bids to levels which we believe did not capture the full value of the hotels for shareholders. Therefore, we are no longer marketing the 24-hotel portfolio as a single portfolio, but will pursue the sale of these assets in smaller groups and individually.

We will also look to opportunistically sell the other 38 non-core select-service hotels we own over time. We believe exercising patience and pursuing an opportunistic sales approach is the best course of action to maximize long-term value for our shareholders.

In addition to divesting its select-service assets, as a part of its refined strategy Trust will not be pursuing additional spinoffs, and will continue to target a leverage level of 55% to 60% net debt to gross assets, and a cash and cash equivalents balance equal to 25% to 35% of its total equity market capitalization for financial flexibility.

We believe this excess cash balance provides a hedge against a downturn in the economy, and also provides for [drought powder] necessary to capitalize on attractive investment opportunities, and/or stock buybacks, which could drive significant value creation for our shareholders.

In closing, we are pleased with both the fourth quarter and full 2015 performance at Trust and Prime. We are optimistic about 2016, and we believe the initiatives we are pursuing should help reduce the valuation discount relative to private market values for both platforms. We thank you all for your continued support, and look forward to updating you on our progress in future calls.

I will now turn the call over to Deric to review our fourth quarter financial performance.

Thanks, Monty. For the fourth quarter of 2015, Trust reported AFFO per diluted share of $0.26, compared with $0.17 a year ago. This reflects a 53% growth rate over the prior year.

Prime reported AFFO per diluted share of $0.22, compared with $0.21 a year ago. This represents 5% growth over the prior year.

For the fourth quarter, we reported adjusted EBITDA of $93.7 million for Trust and $19.1 million for Prime. These results reflected a 31% growth rate over the prior year for Trust, and a 9% growth rate the Prime.

At quarter's end, Trust had total assets of $5 billion in continuing operations. It had $3.9 billion of nonrecourse mortgage debt in continuing operations, with a blended average interest rate of 5.1%. The debt is currently 28% fixed rate and 72% floating rate, all of which have interest rate caps in place.

Including the market value of Trust's equity investment in Ashford Inc., Trust ended the quarter with net working capital of $373 million, which equates to over $3 per share of value.

Prime at quarter's end had total assets of $1.4 billion in continuing operations. It had $840 million of nonrecourse mortgage debt in continuing operations, of which $49 million related to its joint venture partner share of the debt on the Capital Hilton and Hilton La Jolla Torrey Pines.

Prime's total combined debt had a blended average interest rate of 4.7%, and is currently 49% fixed rate and 51% floating rate, all of which have interest rate caps in place. Prime's next debt maturity is in April 2017, and the Company ended the quarter with net working capital of $169 million.

On the financing front, in January we announced that we completed the refinancing of three mortgage loans at Trust, with existing balances of approximately $268 million. The previous loans that were refinanced included the $91 million UBS 2 loan, the $103 million Merrill 2 loan, and the $74 million Merrill 7 loan.

The new loan totals $375 million and resulted in excess proceeds of approximately $81 million after closing costs and reserves. The new loan is interest only, provides for a floating interest rate of LIBOR plus 4.87%, and has a six year term including extensions. This refinance address all of Trust's 2016 debt maturities, and the next hard debt maturity for Trust is in April of 2017.

As of December 31, 2015, the Trust portfolio consisted of 132 hotels with 27,950 net rooms, and the Prime portfolio consisted of 12 hotels with 3,717 net rooms.

Trust's share count currently stands at 114.8 million fully diluted shares outstanding, which is comprised of 95.5 million shares of common stock and 19.3 million OP units. Trust has 20.4 million OP units, but as a result of the current conversion factor being less than one for one, these units are convertible into approximately 19.3 million shares of common stock.

Prime's share count currently stands at approximately 32.8 million fully diluted shares outstanding, which is comprised of approximately 28.5 million shares of common stock and 4.4 million OP units. In Prime's financial results, we include approximately 3.4 million shares in our fully diluted share count, associated with our Series B convertible preferred stock.

With regard to dividends, the Board of Directors of Trust declared a fourth quarter 2015 cash dividend of $0.12 per share, or $0.48 per share on an annualized basis. The Board also approved Trust's dividend policy for 2016, during which the Company expects to pay a quarterly cash dividend of $0.12 per share, $0.48 per share on an annualized basis. Based on the current stock price, this dividend represents an 8.4% dividend yield, one of the highest in the hotel REIT space.

The Board of Directors of Prime declared a fourth quarter 2015 cash dividend of $0.10 per share, or $0.40 per share on an annualized basis. The Board also approved Prime's dividend policy for 2016, during which the Company expects to pay a quarterly cash dividend of $0.10 per share, or $0.40 per share on an annualized basis.

The adoption of a dividend policy does not commit either company to declare future dividends. Both Trust and Prime will continue to review their dividend policies on a quarter to quarter basis. This concludes our financial review.

I'd like to turn it over to Jeremy to discuss our asset management activities for the quarter.

Thank you, Deric. Our best in class asset management team continues to deliver industry-leading performance on behalf of Trust and Prime shareholders. In 2015 the Trust and Prime portfolios outperformed their competitive sets, and turned in some of the best results amongst our peers.

During the quarter, Trust grew RevPAR by 6.8%, while achieving EBITDA flow-throughs of 52%. This RevPAR growth outperformed its competitive set by 110 basis points. For the full year, Trust grew RevPAR by 6.5%, outperforming competitors by 50 basis points.

As I mentioned on previous calls, in August of 2013 Ashford Trust announced a plan to convert the Beverly Hills Crowne Plaza to a Marriott. A nearly converted Marriott Beverly Hills officially opened on July 1, 2015, and the transformational $26 million renovation was fully completed in August.

Post renovation and conversion from September through December, the property has experienced RevPAR growth of 43%, and total revenue growth at 47%. This trend has accelerated in 2016 with RevPAR growth approaching 100% on a year-over-year basis.

Turning to Prime, the portfolio grew RevPAR by 4.4% during the quarter. For the full year 2015, Prime grew RevPAR by 7.3%, outperforming its competitive set by 30 basis points.

In December, Prime completed the acquisition of the Ritz-Carlton St. Thomas, which Doug will discuss in more detail. During the quarter, RevPAR for the property grew 17.6%, and EBITDA flow-through was 60%.

Additionally since the acquisition, the asset management team has identified several opportunities to improve operating performance, both on the revenue and expense side, beginning with approximately $200,000 in insurance cost savings that have already been achieved. As we move into 2016, I look forward to sharing further details with you about these initiatives.

The fourth quarter also reflected our first full quarter of ownership of the Bardessono resort in Napa Valley. During the quarter, RevPAR at the property was up 6%, with 83% EBITDA flow-through. We also generated a 460 basis point year-over-year increase in comparable hotel EBITDA margin at the property.

This is exceptional performance, and highlights the strong capabilities of Remington, and we expect this trophy asset to continue to be a strong contributor going forward. I would also like to point out that the hotel was recently recognized as the second best hotel in America by TripAdvisor.

As Monty mentioned, we continue to see demand growth outpacing supply growth. Looking at our markets specifically, while we expect 2016 to be challenging in Houston due to continuing soft oil prices, and Chicago with new supply in an unfavorable citywide calendar, we see strength in most other markets.

Atlanta has a strong citywide calendar, and we expect expansion and transient demand in 2016, while Dallas has double digit committed occupancy growth for 2016, with no significant new supply expected until 2017. We also see significant favorable trends in Minneapolis, Los Angeles, Tampa, and San Francisco the 2016. Overall, our data gives us reason to remain optimistic for the industry in 2016.

I will now hand the call over to Douglas.

Thank you, Jeremy. Consistent with Prime's focus on investing in luxury hotels located in resort and gateway markets, in December we completed the acquisition of the iconic Ritz-Carlton St. Thomas for $64 million, further strengthening the Prime portfolio.

We saw this as an opportunity to add to the Prime portfolio one of the premier resorts in the Caribbean that is performing very well coming out of the recent renovation, and we believe this luxury resort will be a very accretive acquisition for shareholders.

Located on 30 oceanfront acres, this resort recently underwent a comprehensive $22 million renovation that is supporting strong RevPAR performance and meaningful upside potential. We acquired the hotel with 10% trailing 12 month NOI cap rate, and $355,000 per key.

Many of you have asked about the attractive metrics for this acquisition, so let me give you a little background on the transaction. During the comprehensive renovation, a substantial number of the rooms were offline. In the prior year, the property was experiencing very strong year-over-year growth during the period of our initial underwriting. This resulted in strong growth in cash flow by the time we announced and closed on the transaction.

The property is in fantastic shape after the recent renovation, with very little CapEx needs, and the management agreement with Marriott is a standard market contract. We are very excited about this investment for our shareholders, and as Jeremy mentioned, post closing we have continued to find value-enhancing opportunities at the property.

Turning to Trust, as Monty mentioned, we announced that we are no longer marketing the 24-hotel select-service portfolio as a single portfolio, but instead have made the strategic decision to pursue the sale of these assets in smaller groups and individually.

We saw the market move over a very short period of time, during which the premium for larger select-service portfolios evaporated. This reduced the bids to levels that we do not believe capture the full value of the portfolio. In order to maximize value for our shareholders, we have opted to take a different approach and will therefore be opportunistic as it relates to the sale of this portfolio, and our other 38 non-core select service assets.

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

(Operator Instructions)

Kris Trafton, Credit Suisse.

Hi guys. Looks like another strong year of RevPAR growth, with the full year I think it's 6.5%, like well above peers. Not looking for guidance, but given your suburban non focus, city market exposures where there is less supply pressure, do think another year on that level is likely, and how do you see 2016 shaping up for your portfolio relative to 2015?

You know it's just hard to say. There's been a lot of discussion in the industry, and I'm sure you've seen it where you have the industry pundits saying RevPAR growth will be 4% to 6%. You've got a number of our REIT competitors that are more cautious in putting in numbers below that. And then you've got some analysts saying that RevPAR's going to be turning negative at the end of the year.

So it's just hard to say. But right now, as demand growth appears to be exceeding supply growth, that's positive. And I would say that it seems like some of the softness are in some of these markets that we don't have much exposure to. And that helps our portfolio, relatively, as long as that trend continues. And I think in some places like Houston, that'll probably continue.

Got it, great. And then can you talk a bit about the two assets you acquired, I think you got the W Hotel and Indigo, I'm talking about the Trust portfolio, maybe you'd mention the forward cap rates and the purchase prices for those?

Sure. The Hotel Indigo we acquired at a price of $26.4 million, $188,000 per key, and a T12 cap rate of 7.6%. RevPAR for the asset is $96. And we thought that's an attractive purchase in a market that is performing well, excellent location, and very pleased with that investment.

On the W Minneapolis, we acquired that $86 million, $375,000 a key, 6% cap rate, and that asset had a $164 RevPAR. Again, great property in the Minneapolis market, an asset that, or a market that is performing well, has additional demand generators coming in, so, pleased with that transaction.

Another asset we acquired in the fourth quarter, which was the Ritz-Carlton, as I said, we bought that at $64 million, excuse me, $355,000 a key, and T12 cap rate of 10.7%. By the time we closed, $441 RevPAR, a property that we believe has some value-added revenue enhancement opportunities of properties coming out of recent renovation.

So, we believe that the potential for added performances is quite attractive [add asset] and having said that, though, even just the metrics on its own, we felt like we bought it at a very attractive price for a luxury hotel, luxury resort in the St. Thomas market.

Right, and then that one was in the Prime portfolio, correct?

Yes.

Okay, great. So I appreciate the color on the 24 select-service assets and how you kind of went through the process there, and it looked like the bid kind of evaporated a bit. So assuming it went from a premium to sell like a portfolio of assets and it went to neutral, that would still put you at about the same place as selling these one-off. Did it actually get to be a discount to sell the portfolio?

And then maybe can you just address like what is the potential range for dispositions this year? Originally you're talking about the 24 closing 1Q, with the remainder of maybe 34 of those, sold some of those throughout 2016. Do we have kind of a best guess at this point, in terms of what you think might be sold, and then how many assets that you're currently marketing?

So a variety of questions, let me see if I can track them all down. But with respect to the movement in the portfolio pricing, when we initially took the portfolio market, there was a clear premium provided for large portfolios, $500 million, billion dollar portfolios, and that was really fueled by a lot of the private equity fund investment in these types of assets. And that was further fueled by the fact that the financing for these types of portfolios is quite attractive, and so the cash on cash yields by these funds provided pretty strong returns.

So some things shifted. The pullback from the private equity funds in chasing after these large portfolios and the movement in wider spreads reduced the attractiveness of bidding premiums for these portfolios. And it moved rather precipitously, and in the midst of the bid process, while we did have bids, the bids were pulling out, actually, and we then hit the point where we felt that the pricing execution and the risk of execution was too disadvantageous to our shareholders, and we felt that we could have a better execution by one-off or much smaller groups of assets, and taking those to a greater number of buyers, actually, that could consume smaller trades.

And in fact when we made the announcement that we were no longer selling the portfolio as a whole, but made a comment that we intend to sell the assets in smaller pools or individually, we actually received a fair number of inbound inquiries without even taking these back out to the market. And so, we have kind of a parallel process right now, where we are certainly responding to those inbound inquiries to the extent we believe that the pricing is attractive and market and in the best interest of the shareholders; and then we are also evaluating individual broker opinions of value to eventually take individual assets or groups of assets back out to the market.

And that will be something that we have made decisions based upon the debt pools of the assets, when those debt pools mature, for example, the required future CapEx needs, any macro changes taking place with supply demand fundamentals in the market, and we're going to balance that sales process over a period of time to best achieve the most value-added execution for the benefit of shareholders.

Right, so any estimate in terms of volume of dispositions this year?

No. No. The market applies as transactions develop.

Got it. Okay. And so last question for me. I mean let's assume that you do get through these 24 select-service assets throughout the year, and pricing is similar to the $585 million that we talked about before. You pay off the $385 million in debt and it gives you $200 million. You just generated $80 million from cash out refinancing. Just trying to figure out the uses of these proceeds. I mean if you look at the holders of stock at this point it doesn't seem like there's any obvious candidates for, you know, hedge funds that might be wanting to sell blocks. It also doesn't seem like acquisitions are very attractive opportunities at this point given the strong bid in the private market and your high cost of capital. And it also doesn't seem like deleveraging is something high on your list of priorities. So just curious, what you do if you generate something to the extent of $300 million in proceeds, in addition to the free cash flow that you're generating from operations?

This is Monty. We'll make that decision at the time, but right now as we sit here, our thoughts are either or both of deleveraging, we'd like to maintain leverage in the 55% to 60% range, we're in the 60s right now, so we'd like to get that down at the right time. And/or we think our stock is pretty attractively priced, and so buybacks look attractive, but that's as we sit here, right here today, that may change as those proceeds become available.

Thank you very much, guys.

Ryan Meliker, Canaccord Genuity.

Hi good morning, guys. A few questions. First I guess let's start with Prime. I guess Prime booked a $34.9 million incentive [C] to Ashford Inc. Ashford Inc. booked the $1.3 million for the current year. I'm wondering if that was included in your calculation for the termination fee for Ashford Prime of $4 to $5 a share when you guys and when management estimated that number at your investor day back in October.

Hello, Ryan. I think that you know when management made that estimate, and I appreciate you emphasizing we're management, that is not the position of Ashford Inc. necessarily and the independents in the Ashford Prime, the independents, because ultimately we had to step out, and those independent directors will make these kinds of determinations. That was just management's estimate at the time.

And at the time, we made no estimates regarding incentive fees or whether incentive fees would be paid or how much. So when we made that estimate, again, just management's estimate, we didn't take into any account any the incentive fee, because at that time, no incentive fee was payable.

Okay, that's helpful, so then in terms of the incremental amount that, that would raise the termination fee today, would that be based on the $3.8 million that Ashford Prime logged as an expense, or the $1.3 million that Ashford Inc. logged as a revenue line item for this year, because I know it gets played out over the course of three years.

I think that you've got to pull up that agreement and take a closer look at it. But our understanding and our read of it is that the trailing numbers, and those trailing numbers for Ashford Inc. as received from Ashford Prime includes all monies owed. And both what actually occurred for the past 12 months plus all of monies that may be owed to them.

Got you, so with the $3.8 million fee grossed up times 12 times the 1.1, estimates about an incremental $50 million in termination fee. Does that sound about right?

We haven't gone through that process and done that so I'm hesitant to jump on that. The termination fee is something that a lot of the shareholders talk about, and we just want to stick with our estimate at the time and not provide any more guidance on that.

Okay. And then so shifting gears, next question was obviously, I know there's some litigation going on, I'm not going to ask about the litigation; but any expectation to change your typical annual meeting date from this coming May for the shareholders?

We just haven't made that determination at this time.

Okay. And then the last thing I want to ask with regards to Prime was, can you give us a little bit of color on the Sofitel in Chicago. I think when you guys announced that acquisition, you had announced it was going to be at a 12.7 times forward EBITDA multiple, I think the forward EBITDA multiple came out closer to 15 times, and then the EBITDA multiple on 2015 is actually over 18 times as the properties continue to deteriorate.

You know, I'm wondering how far off your underwriting the property is, and what type of returns you guys are driving now? And then along the same lines you guys just bought the St. Thomas Ritz-Carlton, just wondering what kind of confidence or assurances can you give investors that you're not going to make those same -- you didn't make those same mistakes from an underwriting perspective?

Running hotels is difficult business. And we've got some, such as the Pier House, which the performance was substantially higher than our original underwriting, and then there's a number of cases over there in the Trust portfolio where that is the case. The Sofitel Chicago was under what we've originally estimated. I don't have the original underwriting right now, so I can't tell you how much that was and I'm not sure if we would release the comparative underwriting. But it hasn't lived up to our expectations. Chicago has been a harder hit than we anticipated. We think that has to do with more [Air bnb] impact that we anticipated, and a few other factors.

You know as far as St. Thomas goes, we were able to purchase it on very attractive trailings, cap rate. As far as the future goes, it could be like Chicago, it could be Sofitel, it could be like Pier House, or someplace in between. It's just hard to say. But generally we have a pretty good success in our underwriting, and that I'd say maybe 70%, 80% of the time we exceed or substantially exceed our original underwriting.

Okay, that's helpful. Shifting gears to Trust, obviously Trust had a good quarter, fundamentals seem really strong. You guys are able to grow margins nicely as well. With all of that positive, and the stock trading at, as low as $4.50 a share, about 50% below where you guys had purchased that block, back end of July start of August, you know, how come no share repurchases in the quarter, given the amount of cash you have, how strong the operating fundamentals look, and where the stock's trading?

Back in the summer, we were receiving a lot of pressure from shareholders to engage in buybacks. And so I don't think that you need to look at one versus the other, or why then, why now. The reason is we are trying to be responsive to shareholders. And we were responsive to shareholders and bought back a decent amount of stock.

Now that, that stock buyback seems to be premature, I think you can understand we're a bit more cautious, instead of following our instincts which was not to buy back stock, but accede to investors and buy back stock, was not the best of decisions. And so we're very cautious about it.

But to answer your question, I touched on it earlier, is that our debt, our net debt, is higher than what we want. And so we could just take those proceeds and pay down debt, and that reduces our cash, but then that reduces our flexibility.

So we'd rather look at it as the net debt standpoint, and from a net debt standpoint we're about 60%. And while we think our stock price is an attractive one, that is what's keeping us on the sidelines for now. But as far as what we do when these additional proceeds roll in, we will evaluate it at that time because we do think our stock is a bargain.

All right, that's actually very helpful. Thanks, Monty. That's all for me.

Thank you.

Robin Farley, UBS.

Hi, thank you very much, this is actually [RP Neb] for Robin. Some in the industry have pointed to a bit of slower start to the year in terms of RevPAR. Some of that is obviously related to forward booked business given Easter shift. What have you seen so far at your properties? Could you at all comment on group and leisure so far? Thanks.

Hi. We have historically shied away from giving guidance because of just the difficult nature of it. And it's encompassing a lot of management time and providing guidance and estimates when I don't think that it helps [the underwriting] of stocks to begin with. So for us to give some indication of what we think the future looks like would be a bit premature at this time. So we'll report our first-quarter results at the end of the first quarter. But I point you to what some of our competitors have said or what some of the industry outlooks have been.

Sure, sure, I was more asking about sort of January, February trends. And then my second question was actually on a little bit on the current consolidation, the environment of consolidation in the industry. As an owner of assets and you've worked with both Marriott and Starwood, could you give us your views on the current trend of consolidation and what it means for you as an owner? Thank you.

Well, as far as Marriott and Starwood, we see that at least this point a net positive for us. We do a lot of business with Marriott, not so much with Starwood. And so we think the rewards program (inaudible) significantly better, the Starwood one. And we are hopeful that it doesn't impact the existing Marriott's, and we don't know that it will. So we're bullish on it. We think it gives an industry player a lot more strength to deal with the OTAs that pull a lot of fees out of our industry. So we think that's positive.

And as you know on the Hilton side, they're kind of going the opposite direction of de-consolidating by splitting out their real estate, which I think that's for their investors to decide, but it seems like the market does like split platforms of some being real estate focused and REITs and then others being asset-light brand and operating companies. So I think we'll be positively relieved.

That's helpful. Thank you.

Bryan Maher, FBR & Company.

Good morning, guys. I don't really know how to approach this, but I really think it's kind of the elephant in the room here with respect to the external advisory situation. And the fact that the shares of really all three entities have traded off now pretty materially, and we have a hard time engaging with investors because of that, and some frustrations surrounding that, and then as it relates to last year's estimate of kind of the termination fee payable to Ashford Inc. In light of NorthStar this week engaging UBS to possibly do a recombination, is there any internal discussion about maybe this was a bad idea and recombining the firms?

Hi Bryan, this is Monty. The trade down of our stocks have been equal to or better than, higher than our peers. So it's confusing when you say that some conclusions should be drawn because of the external management structure. Our performance for our platforms has been at or better than our peers over the past year. So I don't know where you get that from. Secondly --

Well if I look at, sorry Monty, but if I look at just year to date, your stocks are down 30% and everybody else is kind of up or down kind of mid to low single digits at this point.

All right, well, fair enough. But from a longer basis we don't see that and we certainly can see things move more in the shorter-term. But overall that's not the case and certainly we didn't just become externally managed on January 1 of this year. So I think what's difficult and I think the mistake that people make is to kind of haphazardly jump out there and draw some conclusions.

All of the MLPs are externally managed. Almost all of the mortgage REITs are externally managed. Almost all the equity REITs, or not almost all, but a clear majority of the equity REITs worldwide are externally managed. And we're supposed to come to the conclusion that just the US, just in the equity markets, on the equity side of things, that's a bad structure. That's just not the case.

The external management structure allows you to have an alignment that is much, much higher than a traditional internal management structure. And you can see that by the fact that family of our peers, despite this ongoing trading of these platforms below private market values, how those have -- very few of them have transacted; Strategic Hotels have essentially been for sale for five years. And there's one other REIT that's out there that's talking about going private and I think that'd be happening no matter what.

So the internal management structure creates conflicts because it requires people to lose their jobs, where the externally managed structure doesn't. There's a number of advantages to it. And that is that executives don't lose their jobs in the sale, and there's strong alignment with how the performance fee is paid and earned, and there's heavy insider ownership by managements in the platform.

So while some externally managed structures can not be advantageous for the shareholders, many of them are, and we believe ours are, very much. And what's more, is when you go look at the statistics, and you look at the performance of externally managed platforms versus internally managed platforms, you cannot come up with any statistical evidence that shows that they trade worse than anybody else. It's just not there.

So we don't believe, well we know it's not a factor in valuation, because the statistics show that it's not a factor in the valuation. And we know that this is not just a bad structure, when every other market around the world engages in externally managed platforms.

Look at private equity. Every single private equity fund is externally managed. Hedge funds are externally managed. And we're supposed to think that in this one situation, that's not a good structure? HPT, for example, has been one of the better performing lodging REITs over the past 15 years. So the evidence is just not there. And while some investors might cling to that for one reason or another, I challenge them to produce any evidence that's the case because we just don't see it.

Right. So no doubt on HPT, which I've covered for at least 10 to 12 years, and your company since you IPO'd in 2003. You know, given the high quality of the Ashford Prime assets which are indisputable, what do you attribute the sharp sell off in the shares to?

I think that the reason that we originally went through this strategic review process is because we thought that its float was too small, and that float was contributing to a lower valuation. We see that statistically and we can prove it statistically. For the end of the year the stock in Prime ran up much more than our peers, and so this downturn is probably just getting us back to even.

As you know once a company announced strategic alternatives, investors pile in and out of the stock based upon what they think might be happening as a result of those strategic alternatives. So I also caution that to look at movement in the stock, and you know this better than anybody, Bryan, of two months and try to determine exactly what's causing that movement, if you and I can do that well, we'd be in different industries running our own $20 billion hedge funds.

Well Monty, you're doing pretty good so I don't really worry about it in that regard. Do you think, this is my last question, and I don't want you to necessarily speak for the independent board members of either Prime or Inc., but should a bidder come in for Prime, or a take-private on the part of management and associates; do you think that there's any possibility that the termination fee to Inc. could be negotiated down from current levels?

I think you're right, for me to do that I would have to speak for the independents and the process that we've got here at our company is one that's reflected and one that investors have asked for in the past several decades. And that is, is that these related party decisions be determined by independence. And that's what we've got.

And we've talked with some investors who've kind of suggested something along the lines of, well you can just make that termination fee go away. No, we can't make the termination fee go away. It is a termination fee that Ashford Inc. is entitled to, and it will be a determination by the Ashford Inc. board what they will do when the time comes. And they are constantly looking at what they think is the best interest of their shareholders; period, the end. And that's what they're going to do when the time comes.

So, if they think that they achieve some advantage by discounting the fee, and it's commercial, and it's overall good for their shareholders, that's what they're going to do. If they don't think it is, then they won't discount any of it, and that's just how it's going to be.

So I'd encourage you and the other investors to realize that we do have a process here, and we do have the independent committees, and they are independent, and they are doing what they need to do. So there is no games here of one company just waving something just because. No. They've got to do what's in the best interest of the shareholder and that's that.

Thanks for that color. And do you have any idea or thoughts as it relates to how long the process will continue, and that's my last question. Thanks.

Sure. The average process we've seen for strategic alternatives has been about 10 months. And we've been about six months into this process. That being said, the independent directors don't have a specific timeline or aren't trying to meet one objective or another as far as time goes. They have had the challenge of the financial markets moving pretty dramatically since this process has started, which has added to the work and the review that they need to do.

But they've given me no timeline, and we can't give any update on when they expect the process done. But I can tell you that they are working vigorously and have been meeting very, very regularly and engaging with their advisors in order to determine what is best interest, in the long-term interest of the shareholders and to try as expeditiously as possible to resolve the strategic alternatives process.

Thanks, Monty.

Chris Woronka, Deutsche Bank.

Good morning, guys. Ask a fundamental question if that's going to be all right. Have you, you guys have a lot of Marriott product and a little bit of Starwood product. As you kind of look out, are you seeing anything yet, or getting anything back from, say, Marriott in terms of changes that they are planning to make operationally with any of their big franchisees, and just how you see the integration going from your perspective, and are there any headwinds, or if they should be tailwinds on the horizon this year? Thanks.

This is Jeremy. What I can say is, they're buried. They've got their acquisition team and integration team, and they're really working diligently to close transaction. There have been a few conversations on a few impacts to some of our properties that may be impacted the results of the transaction, but those are early days. I think overall, as Monty mentioned, we are supportive. We think that it's going help our Starwood assets. And we don't see a tremendous amount of impact in terms of where we have Starwood assets around our Marriott products as well, so overall we're supportive of the transaction. But as it relates to Marriott, they are just heads down trying to close it.

Okay. Thanks. And then, I know you guys probably study this stuff all the time, but have you -- what is your research showing in terms of, is there a size on the Prime side that if you got there with acquisitions, just hypothetically of EBITDA, and maybe it's $150 million or it's $125 million as you look at some of the other public companies that have built out. I mean is that something you look at and say, maybe we get there because you did two smaller acquisitions this year. Does that play into your analysis, or is it not really, acquisition's not on the table at this point?

Everything is on the table. The committee is looking at anything and everything in order to maximize long-term shareholder value. We do find a relationship there, not on size specifically but on trading volumes and that's where we see the relationship, typically. So as the trading volume of the common increases, the multiple potential increases. And the higher the better.

So that multiple goes up. It does flatten out at a level, I don't know if that level is right here as I'm on the phone with you. But as it gets up to about $2 billion or so equity market cap, that's about the level where the multiples start to kind of go away, but again that's based on trading volume, not on the equity market cap itself; but that just the number I remembered here on the phone, and it just gradually goes away over time as it gets -- as that trading volume goes up.

Okay. Very good. Thanks, Monty.

Thank you.

And that concludes today's Q&A session. At this time I'd like to turn the conference back over to our presenters for any additional or closing remarks.

I thank you all for your participation today. We look forward to speaking with you again on our next call.

And ladies and gentlemen, that does conclude today's conference. We'd like to thank everyone for their participation. You may now disconnect.