Ashford Hospitality Trust Inc (AHT) 2017 Q2 法說會逐字稿

Good day, and welcome to the Ashford Hospitality Trust Second Quarter 2017 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Joe Calabrese with the financial relations board. Please go ahead.

Good day, everyone, and welcome to today's conference call to review the results for Ashford Hospitality Trust for the second quarter of 2017 and to update you on recent developments.

On the call today will be Douglas Kessler, President and Chief Executive Officer; Deric Eubanks, Chief Financial Officer; 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 a press release that has been covered by the financial media.

At this time, let me remind you that certain statements and assumptions in this conference call contained or are based upon forward-looking information that are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to numerous assumptions, uncertainties and known or unknown risks, which could cause actual results to differ materially from those anticipated. These risk factors are more fully disclosed in the company's filings with the Securities and Exchange Commission.

The forward-looking statements included in this conference call are only made as of the date of this call and the company is not obligated to publicly update or revise them. In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in the company's earnings release and accompany tables or schedules, which have been filed on Form 8-K with the SEC on August 3, 2017, and may also be accessed through the company's website at www.ahtreit.com.

Each listener is encouraged to review those reconciliations provided in the earnings release, together with all other information provided in the release. Also, unless otherwise stated, all reported results discussed in this call compare the second quarter of 2017 with the second quarter 2016. I will now turn the call over to Douglas Kessler. Please go ahead, sir.

Good morning, and thank you for joining us to discuss Ashford Hospitality Trust's results. Our second quarter comparable RevPAR growth for all hotels not under renovation was 1.4% and we delivered strong hotel EBITDA flow-through of 52%. This management team has a long track record since our IPO of creating shareholder value. And over the years, we have worked on various ways to maximize the value of our existing assets while also looking for accretive hotel investment opportunities, and maintaining capital markets discipline. We believe shareholders have benefited from our efforts since our IPO given that Ashford Trust has achieved an estimated 147% total shareholder return compared to a 107% return for our peers, as of yesterday's close.

The key to that outperformance is the exceptionally high level of alignment that is created by our 19% insider ownership, which is among the highest in the hotel REIT space, and approximately 8x the peer average. Our strategy remains focused in our effort to create shareholder value. We will continue to own predominantly upper upscale full-service hotels, opportunistically recycle capital, target net debt to gross assets of 55% to 60%, and maintain a cash and cash equivalents balance between 25% to 35% of our equity market capitalization for financial flexibility.

We believe this excess cash balance provides a hedge in uncertain economic times as well as providing dry powder to capitalize on attractive investment opportunities as they arise.

During the quarter, there were a number of transactions that we completed to further our strategy and create additional value in our platform. We announced that in connection with the redevelopment of the Nashville Convention Center, we entered into an agreement with the developers of the project to acquire a permanent fee interest in our meeting space at the hotel. Jeremy will give an update on this project later in the call.

Second, in conjunction with this agreement, we refinanced the mortgage loan on the Renaissance Nashville and Westin Princeton, which would ultimately result in approximately $70 million of excess proceeds. Also, we refinanced our loan on the Hotel Indigo Atlanta, which addressed our final 2017 maturity. Deric will provide more details on these 2 financings.

Next, we completed the conversion of the Marriott DFW from brand-managed to a franchise agreement and installed Remington as the manager of the property. Given Remington's long-term success of delivering superior operating performance at properties where it takes over management, we are excited about the opportunities and potential upside at this property.

During the quarter, we also completed the sale of a 495-room Crowne Plaza Ravinia in Atlanta, Georgia for $88.7 million. The transaction demonstrates our value-add approach given this was an opportunity for us to sell this hotel at a very attractive trailing 12-month cap rate of 5.6% on net operating income, and a trailing 15.3x EBITDA multiple. Additionally, with a RevPAR of $84 that is well below our portfolio average, the sales should improve our overall RevPAR while also freeing up capital that can potentially be recycled into upper upscale full-service hotels or for other general corporate purposes. Collectively, we hope these types of strategy executions remind investors of the potential value we can create with assets in our portfolio.

Looking ahead, we have a high-quality well-diversified portfolio, and we're committed to maximizing value for our shareholders as we focus on generating solid operating performance, continuing to be opportunistic on transactions and proactively managing our balance sheet. Before turning the call over to Deric, I would like to mention that we have our upcoming Investor Day in New York on October 3. Details for the event will be distributed shortly and we look forward to seeing you there.

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

Thanks, Douglas. For the second quarter of 2017, we reported a net loss attributable to common stockholders of $772,000 or $0.01 per diluted share. For the quarter, we reported AFFO per diluted share of $0.52. Adjusted EBITDA totaled $125.5 million for the quarter. At the end of the quarter, we had total assets of $4.8 billion. We had $3.7 billion of mortgage debt with a blended average interest rate of 5.7%. At the end of the quarter, our debt was 12% fixed rate and 88% floating rate, all of which have interest rate caps in place. All of our debt is nonrecourse property level debt and we have a well-laddered maturity schedule. Including the market value of our equity investment in Ashford Inc. we ended the quarter with net working capital of $514 million. As of June 30, 2017, our portfolio consisted of 120 hotels with 25,028 net rooms.

Our share count currently stands at 117.6 million fully diluted shares outstanding, which is comprised of 97.4 million shares of common stock, and 20.2 million OP Units. We have 21.3 million OP Units, but as a result of the current conversion factor being less than 1 for 1, these units are convertible into approximately 20.2 million shares of common stock.

With regards to dividends, the Board of Directors declared a second quarter 2017 cash dividend of $0.12 per share or $0.48 on an annualized basis. Based on yesterday's stock price, this represents a 7.8% dividend yield, one of the highest in the hotel REIT space. Our dividend policy does not commit the company to declare future dividends and the board will continue to review the dividend policy on a quarter-to-quarter basis.

On the capital markets front, during the quarter, we refinanced a mortgage loan with an existing outstanding balance totaling approximately $104 million. The previous mortgage loan that was refinanced was secured by the Westin Princeton and Renaissance Nashville hotels. The new nonrecourse loan for the same 2 properties totals $181 million, consisting of an initial advance of $165 million, with future advances totaling $16 million as reimbursement for capital expenditures. The new loan has a 5-year term and provides for a floating interest rate of LIBOR plus 3%. The loan is interest-only until July 2020, with $750,000 quarterly amortization payments thereafter. After closing costs, reserves, and the full funding of the loan, the company expects to realize excess proceeds of approximately $70 million on this refinancing.

Additionally, we refinanced the mortgage loan secured by the Hotel Indigo Atlanta Midtown with an existing outstanding balance totaling approximately $15.6 million. The new nonrecourse loan totals $16.1 million with a 3-year term and 2 1-year extension options subject to the satisfaction of certain conditions. The loan, which is interest-only for the first 2 years with a 30-year amortization schedule based on a 6% interest rate starting in the third year, provides for an interest rate of LIBOR plus 2.9%. Looking ahead, we believe we have an attractive maturity schedule with the next hard maturity in January 2018, a loan which we are currently addressing, after which we do not have another hard maturity until February 2019. This concludes our financial review, and I would now like to turn it over to Jeremy to discuss our asset management activities for the quarter.

Thank you, Deric. During the quarter, comparable RevPAR for all hotels not under renovation grew by 1.4%. This quarter's performance was impacted by softness in the Houston, Dallas, Atlanta, Minneapolis, and Tampa markets. Additionally, the shift of Easter into the second quarter had a negative impact on the overall portfolio. Also during the quarter, we had more total rooms in our portfolio impacted by renovation than during the same quarter last year, which contributed to 0.5% RevPAR growth for the entire portfolio. During the quarter, our portfolio increased market share as compared to its competitive sets by 100 basis points. Year-to-date, comparable RevPAR growth for those hotels not under renovation has been 2.8% with hotel EBITDA flow-through of 58%.

Room nights for our retail segment increased in the second quarter while the digital channels grew as well. We're continually identifying opportunities to create value throughout our portfolio. To that end, on May 24, we converted the Marriott DFW airport in Irving, Texas from brand managed to franchise managed, and installed Remington as manager of the property. We believe the conversion of Remington management provides meaningful and significant upside as Remington will add value through both sales initiatives and enhanced cost controls. Remington also sees an opportunity to grow occupancy through weekend group business and working with the local Irving Convention and Visitors Bureau. Despite the disruption to operations caused by management conversion, the property still managed to achieve 52% hotel EBITDA flow-through for the second quarter, and we expect that operating efficiency should improve further going forward.

On our last call, I mentioned that the Renaissance Nashville was about to begin a significant transformation, given the $400 million redevelopment of the adjoining Nashville Convention Center that will result in new demand generators for our hotel and additional premium meeting space. This project will begin -- the total meeting space available -- will bring the total meeting space available at our hotel to approximately 75,000 square feet that will ultimately be owned fee-simple, compared to the current situation, in which approximately 13,000 square feet is owned fee-simple, and approximately 48,000 square feet is subject to a ground lease. As part of this transaction, we plan to spend approximately $20 million to renovate the new space. We are very excited about this redevelopment and additional meeting space and believe the Renaissance will be very well positioned in that market going forward.

I'd also like to highlight the strong post-acquisition results of our W Atlanta downtown hotel, which we acquired in the third quarter 2015. With the change in ownership, and with the same property management team in place, this Marriott-managed property experienced a substantial increase in profitability in 2016 during its first full year in our portfolio. This success has continued in 2017 as year-to-date, hotel EBITDA flow-through has been 114%, with 5.3% hotel EBITDA growth and margin growth of 312 basis points. On a trailing 12-month basis, hotel EBITDA flow-through has been 217%, and margins have improved 414 basis points. This performance is a direct result of our quick implementation of several value-add opportunities. Most recently, by bringing the operation of the restaurant in-house, we improved food and beverage margins by 811 basis points during the second quarter.

We believe this property's performance further validates the Ashford asset management team's ability to add significant value following acquisitions, even in situations where the existing brands and manager remain in place.

During the quarter, we also saw very strong results from our portfolio of hotels in the Boston market. We own 3 hotels in the Boston area, one of our highest RevPAR markets. During the second quarter, the Boston portfolio grew RevPAR 11.2% with 8.8% occupancy growth and 2.2% rate growth, which represented a 660 basis point gain versus the market.

Hotel EBITDA flow-through was 52% and hotel EBITDA increased $981,000 or 11.2% for the quarter. During 2017, we will continue to invest in our portfolio to maintain competitiveness. In total, we estimate spending approximately $200 million in capital expenditures during the year, including major guest room renovations at Hilton Boston Back Bay, Marriott Crystal Gateway, Renaissance Palm Springs, and Ritz-Carlton Atlanta. In addition to the guest room renovations, we will complete a comprehensive lobby and restaurant repositioning at Hyatt Regency Savannah. As I mentioned earlier, we will also make significant capital improvements at the Renaissance Nashville to redevelop the adjoining national convention center and the premium meeting space as well as to start to renovate the lobby and restaurant.

This concludes our prepared remarks, and we will now open the call up to your questions.

(Operator Instructions) We'll go first to Bryan Maher of FBR Capital.

Can you give us an update on the select-service hotel sales. How many are actively being shopped? What you're seeing in the marketplace, cap rates, et cetera?

Sure. So our ultimate goal is to focus on owning upper upscale full-service hotels. And our select portfolio accounts for approximately 30% of our EBITDA and has about a 1.9% RevPAR growth in the second quarter. So for those reasons, we want to make sure we provide for a strategic and accretive outcome to the transactions related to this portfolio. We've looked at and continue to look at a variety of options, and it's a fluid situation. I think that the market for select-service hotels has remained fairly stable throughout the year. There've been single asset trades, not a large number of portfolio trades. And so we're monitoring the pricing in that market and the opportunity to redeploy capital and looking at strategic alternatives with the portfolio that we have, because it's a very attractive portfolio of select-service hotels.

Yes. I guess, I'm just surprised. When you look at somebody like RLJ going after FelCor when they've got a lot of select-serve, and companies like Apple REIT with a lot of select-serve, that there couldn't be some type of combination that basically solves both entities' problems. Would you suspect that it's just the bid-ask spread is too wide or there just isn't an interest?

Well, we've got a great collection of select-service hotels, and what we're trying to accomplish is the value maximization of that portfolio. So we're open to evaluating and have been evaluating a variety of alternatives, and we'll continue to do so until we come across the one that we feel is going to be the best outcome for the shareholders.

Okay. And without getting specific, I mean, you guys made a run at FelCor earlier this year. And again, you don't have to be specific, but do you see other opportunities in the marketplace besides kind of one-off acquisitions that could spearhead your growth into the upper upscale full-service segment?

Over the years, you've seen us perform well, both with single-asset transactions, portfolios, and entities. We always keep our eye open for the most accretive utilization of our cash. We have a substantial amount of net working capital, as Deric highlighted. We like the fact that we have that amount of capital for a variety of reasons. And yet, over the past couple years, you've also seen us be very disciplined in that we haven't acquired much. And so I think that what we're exercising is good judgment on transaction and utilizing our capital, and making sure that the investments that we make are in fact opportunistic. I think the case in point, one of the more recent transactions that we did acquire was an asset that Jeremy highlighted in his comments, the W Atlanta; and the tremendous performance enhancements that we've made at that asset. So those are the types of opportunities that we're looking for.

We'll go next to Chris Woronka of Deutsche Bank.

I know you called out Dallas as one of the weaker markets in the quarter. We've heard that from a couple of your peers. And I guess, since that's kind of your backyard, I mean, can you walk us through -- because that had been a strong market for most folks. Can you walk us through what you're seeing down there?

Sure. I can handle that. Dallas, there's a tremendous amount of demand generators coming into Dallas, but there's also a tremendous amount of supply. Most of that supply is in the Plano, Frisco market. I don't know how familiar you are with Dallas, but there is a lot of supply coming into that market. And the demand generators are a development called Legacy West, which is really quite phenomenal what they're doing there, and Toyota has relocated their headquarters to Dallas -- their North American headquarters. There's also Liberty Mutual. There's a decent amount of business demand generators, but a lot of those demand generators are just starting to come in, and so the supply was first to come to the market, because folks saw the demand coming in, but they unfortunately came in before the demand was in. And so I think you've got a period of imbalance. I don't know exactly how long that's going to last, but it's probably several quarters and then you'll see hopefully demand mitigate some of the supply growth.

Okay. And also, on the -- you mentioned the one management contract conversion to franchise. I guess, across the portfolio, do you have a lot more opportunities coming up to do more management-to-franchise conversions?

Not really. We're always looking at ways that we can -- to add value. Unfortunately, our hotels are performing pretty well. And so the way that you can typically convert is through performance thresholds. I guess, unfortunately/fortunately, right? So we're happy with the performance. We're driving great performance in the hotels that we own, but we don't have any opportunities for performance termination. In this specific transaction that we did with Marriott, it was a horse trade for something that is -- we're in a confidentiality agreement with. But it was not a performance termination provision that we utilized. But it was an opportunity for us to seize a way to capture value in that asset.

(Operator Instructions) We'll go next to Robin Farley of UBS.

Great. I wonder if you could just sort of give your take on the group booking outlook and demand and how that may have changed over the last quarter and where you see that going.

Sure, Robin. This is Jeremy. So if you look at our quarter, we had a positive RevPAR in group for the quarter. But it was also rate, and so actually our room nights were down in the quarter. Most of that is because of the shift of Easter into the second quarter, and that had an impact at group bookings for sure. That had an impact to the business Transient as well -- or the Transient segment. But when you look at our quarter, April was the worst month. And so, we would probably have been positive in terms of group room nights had the Easter shift not occurred. Unfortunately, in a market where it is a little bit softer, you just can't overcome it like we've been able to do in maybe previous quarters with the shifted calendar.

Looking forward, I will tell you that our need period for group bookings is Q3. There are some holes that we've been focused on. It's been our need period all year long. If you're following the industry, I do believe that's very consistent with what we're hearing from our peers and from our management companies. The good thing, as we stand right now, is that we've been able to mitigate that tremendously from where we started at the beginning of the year. And so we have had some acceleration to address some of that need in the Q -- in the third quarter.

I guess, maybe even more forward-looking, how would -- what's your take on how 2018 is shaping up relative to what you would have thought a quarter ago?

Okay. We don't give guidance. But what I can say is, is that what I'm hearing from some of our peers is that group bookings are positive but in the low single digits. What I can say for the trust portfolio is our 2018 bookings are very healthy.

Okay. So in other words, are you saying that what you hear from others is -- you're saying it's consistent with that? Or you're saying, you think it's better than what some others are saying?

I think, when you look at our specific portfolio, as we stand now, and that's only about maybe 38% of what -- where we stand in terms of the year, I think about 38% of actualized group revenues from last year. And keep in mind, that group is probably 25-ish percent of our portfolio. Our group bookings are healthier than what we are hearing from our peers and management companies.

We'll go next to Michael Bellisario of Baird.

I wanted to get your thoughts on your stock's underperformance. I mean, you guys have made a lot of progress on a lot of fronts this year. I guess, twofold question, because, one, why do you think that is? And then, what else are you doing or what else do you think you could be doing to maybe close that big valuation gap that is out there today?

I appreciate you asking that question. Obviously, we are very motivated, very aligned, given the amount of ownership that we have in the company. And so we are as frustrated as I'm sure investors are with the performance of the company year-to-date. Obviously, at the beginning of the year, we attempted something very strategic, something that we thought would be in the shareholders' best interest. But it just didn't work out the way that we wanted. And yet, we still have posted numbers that are generally in line; in some cases, better than the rest of the industry. We have a great portfolio of assets that are highly diversified. We think that, at this point in the cycle, and with the difference in performance between the nonmajor markets and the major markets, that, that is a competitive advantage for us. We have a maturity schedule that we have been very proactive in managing since our IPO. Although we carry a slightly higher debt level, we believe in the benefits of financial leverage, and yet we manage our balance sheet very carefully, and Deric and his team do a very fine job. And as he noted, we have addressed our 2017 maturities. We're working on our 2018 maturity and so we're well ahead of that.

So we like where we stand with respect to the debt side of the equation. Jeremy and his team do an outstanding job on the asset management side both with respect to the Remington-managed assets as well as brand-managed assets. And that shows up in our numbers. That shows up in our RPI index gains. That shows up in our EBITDA flows. And so we're very proud of our performance, and yet we continue to find organic opportunities in our portfolio to add value even when we're not active in the transaction mode. If you think about last 2 years, we haven’t acquired much. We've chased after a few things. But we've been disciplined in our capital deployment, and yet we continue to post numbers that, I think, in general have performed exceptionally well relative to the peer group over that same period of time.

I think, it's also worth noting that we're sitting on a tremendous amount of capital that we can use opportunistically. Or alternatively, we can use it as a hedge to the extent that there's an unexpected downside occurrence in the market. So we like that position.

I think, for all those reasons, we feel like we have opportunities ahead of us. And your other question was about our select-service portfolio. That's somewhat of a valuable currency that we have that we can also use to potentially recycle into assets that are more strategically aligned with our go-forward strategy of focus on full-service upper upscale hotels.

So I'd like to think we have numerous tools in the toolbox that we still have to our advantage to create value for the portfolio. You can look at the charts and see what the relative consensus numbers are and the EBITDA multiples of us and our peers and draw your own conclusions regarding that. So I think we're working to create shareholder value on so many fronts within this company and we will continue to do that, and work even harder to drive better performance out of the portfolio and find ways to make this portfolio even more accretive to shareholders.

Got it. And then, just on the leverage side, 55% to 60% target. Where are you guys at currently?

Mike, it's Deric. We're currently at about 61%, so we're at the high end of our targeted leverage level. So a little appetite to increase our leverage from here.

(Operator Instructions) We'll go next to Ryan Meliker of Canaccord Genuity.

I had a couple things I wanted to touch on. First of all, kind of as a follow-up to Brian's questions and some of your commentary, Doug, on select service portfolio. It seems like you guys have -- one of the big advantages of the Ashford team is the fact that you're always opportunistic in nature when it comes to capital allocation, whether it be acquisitions or dispositions, and certainly the FelCor bid is a case in point there. It seems like today, from the comments you guys have made as well as what we're hearing from others, that the debt markets are pretty open for private equity and CMBS markets are pretty robust right now for hotels. And I think that's partly -- partly explains the unsolicited offer that RLJ received from Blackstone, or rumored to receive from Blackstone to take out their company. So given that dynamic, isn't now the right time to be trying to bring a big portfolio of select-service hotels to market, take advantage of that opportunity that while it exists? And then what strategic alternatives that you mentioned are you guys looking at for the select-service portfolio?

Will, I think we've considered a variety of alternatives and will continue to do so. You're right, the debt markets are very attractive today and that should enhance value across most real estate, because that is sort of the grease that helps with the valuation metrics, and it brings more buyers into the market that are seeking better returns. We have a great portfolio of select-service assets. And our purpose here is to try to find the accretive solution and to do so in a way that enables the outcome for the trust portfolio to be even better, and we have to recycle that capital. We have to figure out what the strategic implications are of what we do with that portfolio. And while we've had interest, both unsolicited, single assets, portfolios, we're evaluating those possibilities. We're evaluating strategic alternatives. So I think at this point, it's premature for us to provide any specific comment on the -- what the eventual outcome will be with the select-service portfolio, and it is taking us a little bit longer than we would have liked. We're being methodical about it. And yet we're focused on it. So we will continue to work on the best way to create value out of that group of assets within our portfolio.

No, that's helpful. And I understand that there are different ways to create value and some ways may be better than others. It just seems like, with the market pricing today, you'd be able to sell at a valuation premium to where your stock trades. And worst case, you use the proceeds to buy back stock. And best case, redeploy it into more accretive means of acquisitions. But I just -- I feel like one of the concerns that we keep hearing from investors is, one of the reasons -- wondering one of the reasons that you guys aren't doing that is because of the external adviser and the inability to sell assets without their approval and is that impeding a faster sale of these assets?

We're looking at a variety of alternatives and we'll continue to do it until we strike upon the one that we think -- one or ones, because it could be a combination of alternatives that's going to create value out of the portfolio.

Okay. And then, Jeremy, a question for you. Ashford Inc. has bought, I guess, 3 different platforms recently from J&S Audio Visual most recently, to Pure Rooms to OpenKey. And I know in their releases, they've expected to roll those platforms out at Ashford Trust's portfolio. We've gotten some questions and concerns from investors that this just adds more fees from Ashford Trust to Ashford, Inc. Can you just walk through some of the benefits that you think the Trust portfolio is going to see from rolling out some of those platforms across the portfolio?

Sure. I love the question. There's a tremendous amount of benefits. And when you look specifically at kind of where we've targeted some of these investments, the recent one J&S Audio Visual, we've been -- I've been looking for an audiovisual company for quite some time, because I would say, of all the services that we receive in our hotels, that's probably the worst -- most poorly executed within our portfolio. As you know, that there's been tremendous amount of consolidation in that space. And with that consolidation, some of the firms are controlled by private equity firms that are wanting to monetize that, and they've sucked the life out of a lot of those companies. And so we had a good example at our Capital Hilton in January, and the quality of the -- for our board meeting. The quality of the audiovisual services that we had at the time were embarrassing for me in front of the board. It was just really poorly executed. We could not even use the crab phone. We had to use a cell phone to dial in other board members for our speakerphone. And that's just a good example of what we see in our portfolio. And so the service is down. What we're seeing as well as it -- when folks show up, our group business shows up, they're not always using our in-house A/V provider, and so we're losing some business to the hotel. And as you know, it's quite lucrative kickbacks to the hotel for the A/V provider. I don't know if you know the structure, but basically, there's a commission structure that's paid to the hotel based on the audiovisual revenue and it's basically 100% profit to our hotels that we have within our portfolio. And so if a client shows up, and they don't like the A/V company that we have in our hotel, and they want to use their own A/V company, well, we just lose all that business. And when you look through our guest comments, we get a lot of bad, negative feedback on the A/V companies that we have. So I think that this is a great opportunity for us to do something very similar to what we did with Remington from the very beginning. We have a tremendous amount of control on the service. These are market-based contracts. So there's not any more fees that we're going to be paying; and in fact, I think that we're going to receive more profits at our hotels because of this affiliated relationship. I think we'll have less turndowns, less lost business for our group bookings. And when they show up, I think they're more likely to use J&S. And better control of the service. I can assure you that I want the best absolute service in our hotels from our A/V provider, and I can't think of a better company than what we've invested in with J&S. The management team is incredible. The continuity of the team is remarkable. This is a company that is a father-son business, and the father is -- he's close to 70 years old, and he wanted to monetize, but his biggest concern was that he didn't want to sell to a strategic buyer that would just fire all his management staff. And so we were the right partner for them because we don't want to run the company. We just want to have an influence on how the company performs at our hotels. And so it was a very good synergistic relationship for Ashford Inc., as well as for Trust and Prime. So I'm very, very excited about this relationship. I view it as a net positive for sure and for all parties involved.

Ryan, it's Douglas. Just one general comment. I think, that to the extent that Ashford, Inc., our adviser, invests in businesses that are high-quality businesses, high-quality service providers to the hospitality space, I think that, that is a significant competitive advantage for Ashford Trust to be able to contract with those service providers, top-notch service providers, where we are adding value to those organizations through the asset management platform. And keep in mind that Ashford Trust is a 1/3 owner of Ashford, Inc. And so we, and our shareholders, also participate in the benefit of those investments. But importantly, I think that with these services being implemented at market terms into the Ashford Trust hotels, that it will enhance the profitability and the performance of our assets. And those companies will be motivated to do so. So that, I think, is, as we look at all the competitive advantages that we have across the Ashford Trust platform, that's just another one.

And one thing. And so we talked about J&S. And I want to touch Pure very briefly. When you look at the performance of Trust, we've gained market share over the last 3.5 years, which I think is remarkable, and I'm very proud of our team's accomplishments, specifically on the revenue optimization side. And as we comb through all of our opportunities, one of the things that we continue to look for is premium rooms. How do we have more premium rooms? How do we differentiate our premium room product? And that's why we were interested in Pure. It's a great investment for our hotels. It's relatively low cost, and there's incredible IRRs associated with it, if executed properly. And one of the things that we're doing is we're optimizing that platform to make it even better on how those rooms perform, not only within Trust and Prime, but amongst all owners that have Pure Rooms.

And then, when you look at OpenKey. I think, mobile -- digital -- mobile key is the hottest technology in the lodging sector, and OpenKey is the #1 provider in that space. And so, I think it's another huge competitive advantage across our platforms and I think it's very synergistic.

That concludes today's question-and-answer session. I would now like to turn the conference over to management for any closing remarks.

Thank you, again, for joining today's call. We look forward to speaking with you on our next quarter and also seeing you at our Investor Day, which is October 3 in New York. Have a good day, everyone.

That does conclude our conference for today. We thank you for your participation.