Ashford Hospitality Trust Inc (AHT) 2018 Q1 法說會逐字稿

Good day, and welcome to the Ashford Hospitality Trust First Quarter 2018 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 first quarter of 2018 and to update you on the recent developments.

On the call today will be Douglas Kessler, President and Chief Executive Officer; Deric Eubanks, Chief Financial Officer; and Jeremy Welter, Chief Operating Officer.

The results as well as notice of the accessibility of this conference call on a listen-only basis over the Internet were distributed yesterday afternoon in a press release that has been covered by the financial media.

At this time, let me remind you that certain statements and assumptions in this conference call contain or are based upon forward-looking information and are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to numerous assumptions, uncertainties and known or unknown risks, which could cause actual results to differ materially from those anticipated. These risk factors are more fully discussed in the 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 accompanying tables or schedules, which have been filed on Form 8-K with the SEC on May 3, 2018, 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 our information provided in the release. Also, unless otherwise stated, all reported results discussed in this call compare the first quarter 2018 with the first quarter of 2017.

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 first quarter results.

Our comparable RevPAR for all hotels decreased 0.2%, while our comparable RevPAR for all hotels not under renovation increased 2.5%. Jeremy will provide more information on our renovations, which contributed to this wider-than-normal gap of our RevPAR results.

For the quarter, we reported AFFO per share of $0.28. Additionally, we reported adjusted EBITDAre of $95.8 million for the quarter. For our hotels not under renovation, we generated hotel EBITDA flow-through of approximately 46%, and hotel EBITDA margins increased 29 basis points.

This management team has a long track record of diligently seeking to maximize long-term shareholder value. Our exceptionally high insider ownership of 18%, which is approximately 6x the peer average, establishes a strong financial alignment with our shareholders and incentivizes us to excel in achieving the highest-possible returns for our investors. Our strategy remains focused on our effort to enhance shareholder value.

We will continue to own and acquire predominantly upper upscale full-service hotels at a RevPAR of generally less than 2x the national average. We are not purposefully chasing the highest RevPAR hotels because we see trade-offs in RevPAR and yield. We will remain disciplined on new deals as we balance expected returns, underwritten growth and our cost of capital. We are active in seeking deals in the marketplace but the pipeline has thinned from the start of the year and the environment remains very competitive.

Switching to dispositions, we believe selling hotels is an economic strategy to enhance value, not simply to achieve a stated portfolio objective. As a result, our asset sales are financially calibrated.

During the quarter, we sold the SpringHill Suites Glen Allen for $10.9 million, equating to an estimated trailing 12-month cap rate of 7.1%, after taking into account projected CapEx to be invested by the buyer. Subsequent to the end of the quarter, we also sold the SpringHill Suites Centreville for $7.5 million, which resulted in an approximate 7.3% trailing 12-month cap rate.

Since 2015, we have sold approximately $350 million of hotels, with an average RevPAR of $79, equating to an approximate trailing 12-month cap rate of 8.2% and an estimated all-in 7.1% cap rate based upon the buyers' projected capital expenditures. The sales resulted in a debt paydown of $291 million. Through these sales of mostly lower RevPAR, select service and some full-service hotels, we believe we have improved the overall quality of the portfolio.

As for our balance sheet, we target net debt to gross assets of 55% to 60% because we believe in the benefits of an appropriate amount of nonrecourse debt to enhance equity returns. We have generally run near this leverage consistently since our IPO 15 years ago through up-and-down cycles. We've been active refinancing our existing debt totaling approximately $2.1 billion in new loans since the start of 2017.

During the quarter and subsequent to quarter end, we completed 2 significant refinancings amounting to approximately $1.4 billion to enhance shareholder value. These transactions resulted in significant savings for our platform as compared to what we would have paid on the prior loans, and we intend to continue with more refinancing activity in 2018. Deric will go into more detail in these transactions later, but they are yet another example of how this management team looks for every opportunity to drive value on our platform.

We seek to maintain a cash and cash equivalents balance of between 25% to 35% of our equity market capitalization for financial flexibility. At the end of the first quarter of 2018, this totaled $428 million in net working capital, equating to approximately $3.59 per share. 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.

Also, we remain focused on our investor outreach efforts in 2018. We will continue to get out on the road with investors to communicate our strategy and attractiveness of an investment in Ashford Trust and look forward to speaking with many of you during upcoming events.

Finally, I see more economic indicators leading to growth rather than contraction. There is talk of RevPAR reacceleration and perhaps less dialogue as to why this cycle should be ending, other than the fact that it's already been a long recovery. Conversely, there are growing cost pressures for our industry, which will also affect performance. Each cycle is different and more often exogenous events change the course of lodging REIT performance.

When I look ahead, I particularly like what we are doing. We are being disciplined in looking for accretive acquisitions, while simultaneously patiently culling less-strategic, lower RevPAR hotels, with a focus on maximizing shareholder returns. We are investing in our hotels with aggressive refresh campaigns to improve their competitive position.

Our asset management initiatives focus on all incremental revenue and cost-saving opportunities to deliver improvement in revenue and operating margins. Our refinancing efforts are substantial today and will have the impact in the future given the maturity extension and spread reduction.

I feel this management team is really hitting on all cylinders across multiple facets of Ashford Trust to enhance value. I also believe there are more opportunities ahead.

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

Thanks, Douglas. For the first quarter of 2018, we reported a net loss attributable to common stockholders of $36.9 million or $0.39 per diluted share. For the quarter, we reported AFFO per diluted share of $0.28 compared with $0.32 for the prior year quarter.

Beginning with our first quarter results, we have started reporting EBITDA for real estate, or EBITDAre as defined by NAREIT, and adjusted EBITDAre. Previously, we reported adjusted EBITDA. Adjusted EBITDAre is calculated in a similar manner as adjusted EBITDA, with the exception of the adjustment for noncontrolling partners' pro rata share of adjusted EBITDA. Adjusted EBITDAre totaled $95.8 million for the quarter compared with $109 million for the -- $100.9 million for the prior year quarter.

During the quarter, we booked approximately $0.4 million in income related to business-interruption proceeds on our Crowne Plaza Key West due to Hurricane Irma. Given the recovery in business to Key West, we do not expect to receive any additional business-interruption income at this property.

At the end of the first quarter, we had total assets of $4.6 billion. We had $3.7 billion of mortgage debt, with a blended average interest rate of 5.8%. At the end of the quarter, our debt was approximately 9% fixed rate and 91% floating rate. All of our debt is nonrecourse property level debt, and we have a well-laddered maturity schedule.

Interest rate caps are in place for virtually all of our floating-rate loans. Including the market value of our equity investment in Ashford Inc., we ended the quarter with net working capital of $428 million. Net working capital on our balance sheet currently equates to approximately $3.59 per share or approximately 50% of our current share price.

As of March 31, 2018, our portfolio consisted of 119 hotels with 24,895 net rooms. Our share count currently stands at 119.2 million fully diluted shares outstanding, which is comprised of 98.7 million shares of common stock and 20.6 million OP units.

With regards to dividends, the Board of Directors declared a first quarter 2018 cash dividend of $0.12 per share or $0.48 on an annualized basis. Based on yesterday's stock price, this represents a 6.8% dividend yield, which is one of the highest in the hotel REIT space.

The adoption of a dividend policy does not commit the Board of Directors to declare future dividends or the amount thereof. The board will continue to review its 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 $377 million secured by 8 hotels. The new loan totals $395 million and has a 2-year initial term with 5 1-year extension options, subject to the satisfaction of certain conditions. The loan is interest-only and provides for a floating interest rate of LIBOR plus 2.92%. This financing is expected to result in annual interest payment savings of approximately $6.8 million as compared to the prior loan terms.

Subsequent to quarter end, we refinanced a mortgage loan secured by 22 hotels with an existing outstanding balance totaling approximately $972 million. The previous mortgage loan that was refinanced was the Highland Pool loan with a final maturity date in April of 2021.

The new loan totals $985 million and has a 2-year initial term with 5 1-year extension options, subject to the satisfaction of certain conditions. The loan is interest-only and provides for a floating interest rate of LIBOR plus 3.2%. This refinancing is expected to result in annual interest savings of approximately $11 million as compared to the prior loan terms.

After these refinancings, our next hard debt maturity is in February of 2019. The debt capital markets continue to be very attractive, and going forward into 2018, our goal is to continue to be opportunistic in accessing the debt markets to refinance or significant -- a significant portion of our debt to improve our liquidity, extend our maturities and lower our cost of capital.

As you can see, we have benefited from the flexibility of our floating rate debt to efficiently refinance a substantial portion of our existing loans at a time when loan spreads have significantly compressed over the past 12 to 18 months. We believe we are enhancing shareholder value by capitalizing on the current capital market conditions.

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. Our portfolio of comparable RevPAR was basically flat, declining 0.2% during the quarter, as hotels not under renovation grew comparable RevPAR by 2.5% during the quarter.

Holidays had a negative impact this quarter with Easter shifting to April 1, 2018, compared with April 16 in 2017. The 270 basis point gap between our overall portfolio's RevPAR and the RevPAR for those hotels not under renovation represents a much larger renovation impact than we normally experience. Over the previous 8 quarters, this impact has ranged from 40 basis points to 190 basis points with a median impact of 100 basis points.

The first quarter of 2018 was heavily impacted by renovations, with 5 more hotels representing 2,221 more rooms or a 65% increase under renovation than the first quarter of 2017.

Going further back and comparing Q1 2018 to Q1 2016 shows 4 more hotels and 88% more rooms under renovation during the 2018 period. However, for the balance of 2018, we are projecting an average of 5 fewer hotels under renovation per quarter with an average of 281 or 7% fewer rooms out of service.

One of this quarter's top-performing assets was the Marriott DFW airport, which recently converted from Marriott-managed to Remington-managed. This hotel grew RevPAR by 6.2%, driven by 11.4% occupancy growth. This robust RevPAR growth resulted in the property increasing share relative to both the Dallas market and the upper upscale Irving north area submarket by 470 and 320 basis points, respectively. Much of this growth can be attributed to recruiting, hiring and redeploying the sales team as well as the Remington revenue management program and processes that we have implemented.

We were able to also strategically add additional airline contract nights to increase shoulder night occupancy. Not only did we increase the room revenue but hotel EBITDA flow-through was 490% during the quarter, and margins increased by 17.6%, resulting in a 401,000 or 16.2% increase in hotel EBITDA.

In addition, event satisfaction scores were up 14% during the first quarter of 2018, relative to the first quarter of 2017. The main driver of this improvement was Remington management and bringing in J&S Audio Visual to run AV at the property. The continued strong results of this property showcase the performance improvements we expect to see when Remington takes over as a property manager and work seamlessly with Ashford's best-in-class asset management team.

A few of our top-performing assets this quarter include Le Meridien and W Minneapolis, both 2015 brand-managed acquisitions, along with our other 2 Minneapolis hotels, the Hilton Minneapolis/Bloomington and Sheraton Minneapolis West. The 4-hotel portfolio grew RevPAR by 12.3%, led by the Hilton Minneapolis growing RevPAR by 21.9%. The Hilton's growth outpaced that of the property's competitors by 620 basis points.

February was a primary driver of growth, with total revenues increasing by 74%, 43%, 42% and 45% at the Le Meridien, W, Hilton and Sheraton, respectively, as a result of Minneapolis playing host to the Super Bowl. Not only did we successfully drive top line at these 4 hotels, but hotel EBITDA for the portfolio increased 44% or $1 million due to 83% hotel EBITDA flow-through and a 29% increase to margins. These outstanding results are all in spite of the fact that Le Meridien Minneapolis was completing renovation during the first quarter.

During 2018, we will continue to invest in our portfolio to maintain competitiveness. In total, we estimate spending approximately $165 million to $185 million in capital expenditures during the year, which will primarily be comprised of guestrooms renovations at the Hyatt Regency Coral Gables, Westin Princeton, Ritz-Carlton Atlanta and Hotel Indigo Atlanta.

In the first quarter, we spent $64 million in CapEx. We recently completed guestrooms renovations at the Renaissance Palm Springs, Sheraton Anchorage and Marriott Research Triangle Park. In addition to the guestrooms renovations, we will complete a comprehensive lobby and restaurant repositioning at the Renaissance Nashville. Additionally, the first phase of the Renaissance Nashville redevelopment is complete, which return the grand ballroom and junior ballroom back to the hotel together with stunning new conference center lobby.

We continually invest in our portfolio, we are well positioned to effectively compete in our markets. This concludes our prepared remarks, and we'll now open the call for Q&A.

(Operator Instructions) And we'll first go to Michael Bellisario from Baird.

Just want to go back to the acquisition comments from the prepared remarks. Certainly sounds like you're getting closer to being a buyer, can you maybe help us understand why that makes sense today with your stock at $7? And then how you think about projected returns on this capital being invested compared to what you're seeing in your existing portfolio currently?

Thanks, Mike. We have always been looking to be an acquirer of hotels. That is something that's been a consistent theme for us, and we do weigh the balance of stock price, the direction that the industry is headed, which I want to come back to in a second, the yield that we can buy the assets for and the growth potential of the asset. And we've been very disciplined not having acquired any hotels since 2015 and being a net seller.

I think going into this more of a net-sale phase, what we looked at in terms of where the industry fundamentals were headed and where the economy was headed, looked and felt different, 2016 versus 2017 and now, accelerating into 2018.

I think if you look at some of the macro factors, which are obviously influencing our view on where the direction of the lodging industry is headed, heavily influenced by things like the amount of nonresidential fixed investment, the unemployment rate, consumer confidence -- I mean, even recent surveys that we've seen that indicate travel spend may grow as much as 2.6% with 64% of those surveyed budgeting for growth in their budget.

And so, I think that those are reasonable indicators for us to evaluate when we're looking at underwriting any hotels today, slightly different RevPAR forecast than we might have used, let's say, late into 2016 or early 2017.

The deal pipeline is still, as I mentioned in the prepared remarks, very thin. And so, we have to be selective in what we're looking at, and it's still a very competitive environment. So our comments have been that we continue to look and, hopefully, we'll find accretive investment opportunities to grow the platform. That's always been part of our strategy and nothing is really different today than what it's been in the past.

I would add one comment, and if you listened to Doug's prepared remarks, we sold the portfolio at a $79 RevPAR, at 7.1 point cap rate. So what we're doing is we're recycling some of our capital from lower RevPAR assets to higher RevPAR assets, and we've been very selective in terms of what we're looking at. So from a yield perspective, we've been able to potentially sell at a low cap rate and maybe go up at a similar cap rate and trade up on RevPAR.

That's helpful. And then maybe staying on that topic as you look at markets, when does New York City become interesting for you? Or what do you need to see, maybe change there, for you to take a closer look?

Mike, I find it interesting we've never owned a hotel in New York City. And although we show New York City, New Jersey as one of our markets where we have EBITDA delivery, most of that is on the outskirts or in markets like Princeton, New Jersey, et cetera.

So we find New York to be a market that's obviously going through a change from being predominantly in the headlines for all the new supply, and then looking at ways for economic growth there to absorb that supply. We've always been very cautious on New York, the yields generally that you buy there are very low. We like to maintain the high dividend that we offer to our shareholders.

And so generally, as I said also in my prepared remarks, we don't chase yield -- excuse me, we don't chase RevPAR. And in those markets, typically, you're buying higher RevPAR assets and you're paying what, in our mind, historically, has been an unattractive yield to get that asset. Now if you're buying that asset and see a tremendous amount of upside, certainly, that factors into our equation. But we have generally not been an aggressive buyer -- we haven't been a buyer in New York City.

Okay. And then you mentioned talk of a RevPAR reacceleration. Does that mean you're not seeing it in your markets just yet? Or is this still too early to tell?

This is Jeremy. I think it's a little early to tell. I mean, I think when you look out Q3, Q4, that looks really strong, but it's still a little early to tell. We are seeing strong pickup in business transient, which we didn't have in 2017, so we saw a little bit of that in the first quarter. We certainly see that going forward in the near term. So if that trend continues, I do think that there is some optimism with some of the comments that we've heard in the industry from a re-acceleration standpoint.

And then you mentioned 3Q and 4Q, is that partly a function of your assets and the heavier renovation activity you've done early in the year?

Yes, probably, it could be that. Yes, and then when you look at like group pace -- going out to 2019, our group pace is really strong. So it's hard to tell because, as you know, that some of those commissions were cut and there was some acceleration in some of the bookings to try to get ahead of the cut in the group commissions. But so far, the outlook for 2019 group pace is fairly strong.

And we'll now go to Robin Farley from UBS.

This is actually Arpine. It seems like renovations had a bit of a bigger impact on RevPAR than anticipated in Q1, but could you perhaps go through some of the puts and takes of what drove slightly weaker RevPAR? I think you mentioned slight pickup in transient. What did group do -- and I understand it might have been impacted by holiday shift, what's pace doing for group for this year, for 2018, versus what you saw about 3 months ago?

Yes, this is Jeremy. So Q1, when we talk about renovation, that's just the volume of renovations were abnormally high for us. And we tried to do everything we can to minimize displacement. The way we renovate, we've got a very unique approach on how we renovate our hotels and minimize the displacement during renovations, but we just did -- just too much going on to overcome that.

And particularly, in Nashville where we didn't have our ballroom, we didn't have our junior ballroom and that really impacted a lot of our ancillary revenues as well because it does a lot of banquet and catering revenue. So that's what happened in Q1. And when you look at the hotels that were not under renovation we had some decent RevPAR growth.

Going for the balance of the year, specifically in group, which was part of your question, our group pace for the balance of the year is flat to slightly negative for the balance of the year. And then going on to 2019, it's mid- to high single digits right now.

And then when you look at particular segments, as I mentioned earlier, business transient growth looks fairly strong, and then retail is holding up. Where we have a little bit more challenge is weekend retail specifically. And so we're doing -- to do a little bit more discounting for the shoulder and weekend rates.

Just to add to Jeremy's comments. Just to keep in mind that as you look at our portfolio, group is perhaps less of a component relative to perhaps some of our peers at about 22%.

Right. No. That's very helpful. I guess just one follow-up to that. You said flat to slightly negative, did that decelerate? Or did they decelerate slightly from what you saw about 3 months ago?

No, I don't think it's changed too much. No, it's -- we knew that we'd have a little bit of headwinds on the group side for this year, and some of it is just -- when you look up the types of renovations we have. Again, we've had Nashville with the meeting space being out. We're going to be renovating our meeting space at Crystal City Gateway.

So some of that does -- certainly has a disproportionate impact on group. And so there's still a little bit of renovation headwinds for that particular segment. Generally, we've been successful backfilling some of it with transient demand, so we'll see how it plays out for the balance of the year.

And I think there's been a lot of noise in this quarter. And when you look at -- in response just to your follow-up question, how did it compare to this quarter. We had group RevPAR that was down about 1.8% and transient was up slightly.

So to Jeremy's comment going forward, we feel like there's growth in business transient and some leisure weekend softness. Looking beyond 2018 and into 2019 though, we are more bullish on the group prospects, particularly when you look at some of the markets where we have hotels where there's big events like Minneapolis Final Four, Atlanta Super Bowl, et cetera. So hopefully, that's helpful color.

And we'll now go to Jim Lykins from D. A. Davidson.

First of -- I wonder if you might talk a little bit about supply. What you're seeing out there? When you think that may peak? And if there are any markets out there that you think are beginning to overheat?

Well, from a supply standpoint, I think just taking a macro perspective. We're still seeing supply in the sort of 2% or sub-2% range and yet, demand still continues to be ahead of that. And so we look at that favorably. And also when you look ahead at the calendar, it appears that there is continued deceleration in supply. And whether it peaks into early 2019, I think that's what everyone's waiting to see.

Obviously, the feedback that we're hearing from construction lenders is that it's harder and harder to find capital for new construction loans, and so that's helping matters as well in conjunction with obviously some increases in the cost to build just because of raw material cost increases, some inflation pressures as well as still some overlap of the impact of the natural disasters, which elevated both labor cost for construction labor as well as materials.

I think, specifically, Jeremy can give some color as to -- on certain of our markets where we're seeing supply impact, but we also need to balance that where we're also seeing incremental demand growth, too.

Yes. So when you look at where we stand and -- over the last 12 months, we've absorbed in our portfolio, in all our markets and our tracks well, about 2.8% of supply growth. And so we've been able to kind of weather that storm, so it has creeped up a little bit recently.

When you look out and look at our markets going forward, we expect that to come closer down to 2%. So we do think that the new supply growth is slowing. Your other question was specifically about markets. Where we're seeing the most supply, still Nashville. Nashville has had tremendous amount of supply growth, it has been incredibly resilient to be able to absorb that supply and still grow RevPAR.

We think that our asset is very uniquely positioned with what we're doing with the meeting space, what we're doing with the redevelopment right next to the hotel, if you know that market, if you know our hotel within that market. And then when you look at the actual convention calendar; so fairly strong and robust going forward for Nashville. So that's not a market I'm necessarily too concerned about.

And then Dallas is having quite a bit of supply. But again, Dallas has a tremendous amount of demand generators that are coming into the market. And where our hotels are, I think they're kind of uniquely positioned, and we do have some unique aspects that should be able to absorb that. And then Austin clearly is another market, and we don't have a tremendous amount of exposure there.

And then when you look at one market that I think is from an outlook that has had some supply over the last few years, is Washington, D.C. And we project that market to be under 2% over the next few years. So I think the outlook in D.C. is very favorable, and we have a lot of exposure in the market.

Okay, that is very helpful. And also, Douglas, in your prepared remarks, you mentioned growing cost pressures for the industry. Any more color you can provide on that?

Sure. I think that everyone's aware that, obviously, with the tight labor market and I think recently announced this morning, 3.9% unemployment, that every industry is experiencing labor cost increases.

And I think it's also to be expected, just given the recent natural events that happened across the U.S., that there'll probably be some anticipated elevation of everyone's insurance premiums, but that's elevating after years and years of being able to get very competitive quotes and press those overall expenses downward relative to where they were a few years ago.

So those are a couple of the obvious pressures that will be on margins. In certain areas, obviously, there's some more aggressive continuation of the real estate tax assessments. I think beyond that, I don't know, Jeremy, do you want to add any more color beyond those 3?

It's just something we have been dealing with over the last few years and continue to deal with it, mainly West Coast-driven is where we've been seeing some of the most aggressive wage -- minimum wage increases, and that's all up and down the West Coast.

In the Northeast, specifically, in New Jersey, New York, we have had to be more proactive in terms of being much more competitive to make sure that we don't have any collective bargaining issues at some of those hotels. We've been fairly proactive to make sure that we're competitive from a wage perspective and a benefit's perspective in certain markets.

But there are a lot of contingency plans we have in place that we continue to roll out, and I think that's why you look at 2017, we grew RevPAR by -- I'm sorry, revenues by just 0.8%, and we actually were able to grow our EBITDA margin by 7 basis points. And in the first quarter, if you look at the hotels not under renovation, we are able to grow margin in those hotels as well, in spite of all these pressures.

One other area that is helping is that we are gaining some of the benefits, finally, from the Starwood, Marriott merger and integration, and those are coming through very slowly. But I think that that is very timely for us because, as some of those pressures continue to provide a little bit of headwind, there's a little bit of help on the way to alleviate some of that.

(Operator Instructions) We'll now take a question from Bryan Maher from B. Riley FBR.

Kind of circling back to the acquisition environment. I mean, it really has become -- and you guys are not unique in this, like watching paint dry, with the exception of what's going on with Pebble Brook and La Salle.

What do you see potentially changing that? Or is that something that's just going to be in your view ongoing for the next couple of years? And then secondarily, how do you think about your cash hoard relative to not buying anything, relative to where your stock is trading?

Great question. So is your first question more related to the availability of new deals, Bryan?

Yes. I mean, I think you guys talked about a couple of quarters ago, seeing some opportunities in secondary and tertiary markets, full service, upper upscale type of product, is that not panning out? Are those assets being priced away from you? Or is there something there to be done?

I think we're looking across the entire footprint of the country, primary and secondary markets, urban and suburban locations. Again, I think we've got the benefit of probably having the widest appetite for properties that would fit our investment profile, which gives us a little bit more of a look to what's available in the market.

But still, as I said, the pipeline is thin. Hopefully, there'll be some reacceleration approaching the NYU conference and NAREIT. But I think some of the driving factors as to why there's not much for sale is because of really 2 reasons.

Sellers are looking at the same data points as buyers. And if, in fact, there's a reacceleration and continued slow but still expansionary economy, there's no real motivation for sellers to sell. They can still get pretty decent returns. Moreover, with the compression of spreads that Deric highlighted, it's a great market to refinance in and pull out proceeds and continue along for the ride if you're a current owner of hotels, and I think that's really why there are fewer hotels on the market.

I can tell you this, there is a reasonable amount of demand by buyers, people want to buy hotels. I think there are a lot of folks that are on the sideline looking to buy but just can't find the product.

So what will change this? It's not the worst situation to have because at least, there is demand for hospitality product and the forces behind it are more positive than negative. I think things that can change this would be clearly a material shift in the economic forecast, a change in the debt availability. And right now, those aren't really changing, they're all the favorable. Your second question, I'm sorry, was?

(multiple speakers).

I got you. Our cash -- so look, we have historically maintained this high level of cash, which we commented on as being a competitive advantage of ours to capitalize on opportunities as well as being a defensive measure to the extent there is a change in the winds, and we want to have that excess cash. Sometimes, when you want the cash, you can't get it. And time and time again, through our history of going through up-and-down cycles, we think this has been a very prudent strategy.

We are constantly looking at ways to maximize the value of the cash that we have on our balance sheet. We have been a strong believer recently of deploying that capital into our own assets, refreshing our assets, improving the quality of them, effectively bringing down the average age of those assets and gaining further penetration in the market.

I think as we commented on the last earnings call that we've had 4 consecutive years of RevPAR penetration index, which I think has a lot to do with the fact that we're spending money on the assets, we're getting a good return on the investment, improving the capital -- or the competitive position.

I would presume that as to buybacks, which is maybe what you're asking, again, we get buybacks, I don't think there's a management team and a board that as a percentage of equity float has bought back more of their stock in the lodging REIT space than us. We view that, not as a giving of a signal that when you buy a little bit, you're suggesting something, we view it to be more of a strategic maneuver. And if you do it, you should do it more meaningfully.

So obviously, we did not announce any share buybacks in the recent quarter, it's always something that management and the board will consider. But again, I don't think that we do it just as a means of signaling, I think you do it to have a real impact. And the last few times we've done it it has really had an impact.

Bryan, I want to just...go ahead.

(multiple speakers) that when the stock bounced off of kind of 5.5, 6, that range in the February period of this year, with several hundred million in cash that you would not have been in the market buying 10 million or 20 million shares, which is meaningful at a pretty low price when there's really nothing going on in the acquisition environment, it kind of surprised me.

Well, at times a company has the ability to buy and at times they don't just based upon their knowledge of material nonpublic information. And so we have to obviously think through the timings and obviously, to your point, the stock price. And so for those reasons, it's not always an open period even though at times we wish it were.

And that does conclude the question-and-answer session today. I'd like to turn the conference back over to management for any additional or closing remarks.

Well, thank you for joining today's call, and we look forward to speaking with you again next quarter and hopefully, seeing many of you at NAREIT.

This concludes today's presentation. Thank you for your participation. You may now disconnect.