Scott Eckstein - Financial Relations Board, IR Monty J. Bennett - CEO and Chairman Deric S. Eubanks - CFO Jeremy J. Welter - EVP, Asset Management Douglas A. Kessler - President.

Analysts:.

Ladies and gentlemen, thank you for standing by. Good day and welcome to the Ashford Hospitality Trust and Ashford Hospitality Prime First Quarter 2014 Conference Call. Today’s conference is being recorded. At this time I would like to turn the conference over to Mr. Scott Eckstein. Please go ahead, sir..

Thank you, operator. Good day everyone and welcome to today’s conference call to review results for both Ashford Hospitality Trust and Ashford Hospitality Prime for the first quarter of 2014 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 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 May 7, 2015 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. During the first quarter, wee again saw strong operating performance, at both Ashford Trust and Ashford Prime, reflecting the positive trend that we continue to see in the lodging sector.

Additionally both companies completed value enhancing transactions and initiatives in an effort to grow the platforms, increase operating performance and put them on an even more sound financial footing. We believe the best way to measure management team is by the value it creates for its shareholders.

The Ashford management team has a long track record of creating shareholder value since Ashford Trust’s IPO in 2003. Over the years we have worked on new and innovative ways to maximize the value of our existing assets while also looking for accretive opportunities to further invest in the hospitality industry.

Our shareholders have benefited from our efforts. Since our 2003 IPO Ashford Trust has achieved a 177% total shareholder return. We are particularly dedicated to shareholder value because we are substantial shareholders in both Ashford Trust, with 15% insider ownership and Ashford Prime with 14% insider ownership.

To put that in perspective the next closest hotel REIT peer has 5% insider ownership and the peer average is around 2%. Having so much of our personal capital at risk in these platforms has created a high level of alignment between our management team and our shareholders.

Thinking and acting like shareholders has always distinguished Ashford from others in our industry. We consider it one of our main competitive advantages and the reason for our superior performance. Now let’s review the first quarter highlights. From a macro perspective the first quarter of 2015 built on the substantial growth we saw in the U.S.

hotel industry in 2014 as the same positive lodging sector fundamentals we saw in the prior year continued to drive RevPAR and EBITDA growth into 2015. Demand for U.S. Lodging continues to be strong while new supply remains well below historical averages and should for foreseeable future.

Currently PKF projects that supply will only grow by 1.2% in 2015 which is well below the long-term average, while they predict that demand will grow at a 3.1% pace. Accordingly PKF predicts the U.S.

lodging industry will achieve a 65.6% occupancy in 2015, the highest national occupancy rate since the STR [ph] begin reporting data back in 1987, which should continue to drive the strong RevPAR EBITDA growth we are seeing and we believe both of our platforms are well positioned to benefit from these dynamics.

These translate to solid operating results in both of our portfolios, at Ashford Trust in the first quarter the RevPAR for all hotels increased by 8.5% while hotel EBITDA increased by 12.7%.

For Ashford Prime RevPAR grew by 10.8%, which was the third consecutive quarter of double-digit RevPAR growth for that portfolio while hotel EBITDA grew by 16.4%. We attribute much of this growth to the revenue initiatives we have implemented that have allowed us to capitalize on the strength we are seeing across our two platforms.

We continue to be pleased with the operational performance of both Ashford Trust and Ashford Prime and Jeremy will offer some additional details into these operational results shortly.

On the transaction front, Ashford Trust completed the buyout of the remaining 28.26% ownership interest in the Highland Hospitality portfolio from our joint venture partner, the value-add fund managed by Prudential Real Estate Investors.

The company also completed the acquisition of Lakeway Resort & Spa in Austin, Texas for $33.5 million and the Marriott Memphis East Hotel for $43.5 million. Subsequent to the end of the quarter, the Trust completed the acquisition of Hampton Inn & Suites in Gainesville Florida for $25.3 million.

In addition, the Trust continued to capitalize on the attractive debt market conditions by completing approximately $1.6 billion in refinancings and new loans this quarter, including that $1.07 billion Highland portfolio refinancing while Prime refinanced its mortgage loan on the Pier House Resort in Key West Florida.

Deric and Douglas will provide more specifics for these transactions later in the call. Now I’d like to offer brief update on the Ashford Select platform.

In January, we announced the formation of Ashford Hospitality Select, a new company focused on investing primarily in premium branded Select service hotels, including extended stay hotels in the U.S. Since the announcement we have continued to work on launching this platform, at the time being is still being incubated inside of Ashford Trust.

We are continuing to progress down this path and look forward to being able to provide you more details in the future.

In the end, we will either pursue this strategy as a wholly owned subsidiary of Ashford Trust and then distribute the platform out to shareholders after we achieve scale or we will team up with a capital source to purchase Select service assets.

On another note, at its next meeting in May the Board of Directors of Ashford Prime will revisit its dividend policy as it appears at the current level Prime’s dividend will not be enough to satisfy the 90% income distribution requirement. In conclusion, we are very pleased with our operating performance across both platforms.

Ashford Trust and Ashford Prime are both well positioned for growth as lodging sector fundamentals for the remainder of the year are predicted to remain strong.

We will continue to look for growth opportunities and value-added transactions that will allow us to deliver positive shareholder returns as management team has achieved throughout our history.

As always the interest of our shareholders are of utmost concern and our significant ownership in the platforms ensures the alignment of management’s interest with shareholders. 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 financial performance for the quarter..

Thanks Monty. For the first quarter 2015, Ashford Trust reported AFFO per diluted share of $0.30 compared with $0.25 a year ago. This result for Ashford Trust reflected a 20% growth rate over the prior year. Ashford Prime reported AFFO per diluted share of $0.26 compared with $0.18 a year ago.

This result for Ashford Prime reflected a 44% growth rate over the prior year. For the first quarter we reported adjusted EBITDA of $89.4 million for Ashford Trust and $18.5 million for Ashford Prime. These results reflected a 12% growth rate over the prior year for Ashford Trust and a 30% growth rate for Ashford Prime.

At quarter’s end Ashford Trust had total assets of $4.8 billion in continuing operations. This includes 100% of the assets in the Highland portfolio which is now consolidated. It had $3.4 billion of mortgage debt in continuing operations with a blended average interest rate of 4.99%.

The debt is currently 38.3% fixed rate and 61.7% floating rate, all of which have interest rate caps in place. Including the market value of Ashford Trust’s equity investment in Ashford Prime and Ashford Inc., Ashford Trust ended the quarter with net working capital of $664 million.

Ashford Prime, at quarter's end, had total assets of $1.2 billion in continuing operations. It had $764 million of mortgage debt in continuing operations, of which $49.3 million related to our joint venture partner's share of the debt on the Capital Hilton and Hilton La Jolla Torrey Pines.

Ashford Prime’s total combined debt had a blended average interest rate of 4.77% and it’s currently 54.6% fixed rate and 45.4% floating rate, all of which have interest rate caps in place. Ashford Prime ended the quarter with net working capital of $175 million.

As of March 31, 2015 the Ashford Trust portfolio consisted of 116 hotels with 25,552 net rooms and the Ashford Prime portfolio consisted of 10 hotels with 3,472 net rooms.

In terms of capital market activity for Ashford Trust during the quarter the company priced the follow-on public offering of 10,529,450 shares of common stock at $10.65 per share for net proceeds of $111.1 million. Ashford Trust continued to capitalize on attractive debt market conditions to strengthen its liquidity position.

During the quarter Ashford Trust refinanced two mortgage loans with an outstanding balance of approximately $354 million with new loans totaling $478 million, resulting in over $100 million of excess proceeds after closing costs and reserves.

Additionally in March, Ashford Trust closed on a $33.3 million mortgage loan for the Marriott Memphis East Hotel and in April it closed on a $25.1 million mortgage loan for the Lakeway Resort and Spa.

Lastly concurrent with the closing of the Highland buy out transactions in March the company refinanced 24 of the 28 hotels in the Highland portfolio, with a new $1.07 billion non-recourse mortgage loan, which resulted in net proceeds of approximately $200 million after closing costs and reserves, including the return to the company of approximately $80 million in reserves held by the previous lender.

Turning to Ashford Prime under its share repurchase program announced on October 27, 2014 the company has repurchased 1.9 million shares of common stock and common units in the period from November 4, 2014 up to and including May 1, 2015, for total reconsideration of $32 million.

We have slowed down our pace of buyback activities since our last call, as we have determined that liquidity is a material contributor to stock price valuation. We will continue to balance the potential returns from buying back stock at these levels with the potential negative impact of lower liquidity levels.

On the financing front in March Ashford Prime refinanced its mortgage loan on the 142 room Pier House Resort in Key West Florida which had an existing outstanding balance of approximately $69 million.

The loan has been refinanced with a new $70 million non-recourse mortgage loan with more favorable terms which resulted in annual interest savings of approximately $1.8 million.

Ashford Prime will continue to be conservative in its use of structural leverage consistent with achieving our leverage target of 5.0 times net debt plus preferred equity to EBITDA.

Ashford Trust share count currently stands at 120.1 million fully diluted shares outstanding which is comprised of 101.1 million shares of common stock and 19 million OP units.

Ashford Trust has 20.3 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 million shares of common stock.

Ashford Prime’s share count currently stands at 32.7 million fully diluted shares outstanding which is comprised of 24 million shares of common stock and 8.7 million OP units.

With regard to dividends, the Board of Directors of Ashford Trust declared a first quarter 2015 cash dividend of $0.12 per share or $0.48 per share on an annualized basis while the Board of Directors of Ashford Prime declared a first quarter 2015 cash dividend of $0.05 per share or $0.20 per share on an annualized basis.

The adoption of a dividend policy does not commit either company to declare future dividends. Both Ashford Trust and Ashford Prime will continue to review their dividend policies on a quarter-to-quarter basis and as Monty mentioned the Ashford Prime Board will be reviewing its dividend policy at its meeting next week.

This concludes our financial review. I’d now like to turn it over to Jeremy to discuss our asset management activities for the quarter..

Thank you Deric. I am pleased to share another stellar quarter of operating performance for both Ashford Trust and Ashford Prime. Transient demand growth continues to be the prevailing trend in the industry.

Nationwide hotel supply growth has been substantially outpaced by demand growth in this recovery, which has led to the highest occupancy levels since FTR began tracking them in 1987. This gain has been most pronounced in the top 50 markets where our combined assets grew RevPAR by 9.6%.

In addition to strong demand growth Ashford’s revenue management strategies continued to yield positive results in the first quarter, leading our properties in both portfolios to outgrow their competitive sets. The combined Trust and Prime portfolios produced an RevPAR index growth of 80 basis points.

Focusing on the Prime portfolio RevPAR growth was 10.8% and EBITDA flow through was 44% in the quarter. Six out of the ten hotels grew RevPAR by double-digits and the portfolio gained 240 basis points in RevPAR index.

Ashford Prime’s third consecutive quarter of double-digit RevPAR growth reflects continued out performance versus its peers and illustrates the high quality of this well located portfolio. I’d also like to point out the outstanding performance of the Courtyard Philadelphia which led the portfolio with 21% RevPAR growth and 36% EBITDA growth.

Moving to the Trust portfolio during the first quarter Ashford Trust grew RevPAR by 8.5% and 52 of the 117 hotels grew RevPAR by double-digits. In particular, Ashford Trust’s ten hotels in the Washington DC market had RevPAR growth of 5% for the quarter.

The large eastern US markets continue to show strength with Atlanta, Nashville and Boston growing RevPAR by 13.4%, 19.3% and 26.9% respectively. Much of this growth is attributable to the continued surge in transient demand. Ashford Trust completed a couple of significant property level transactions in the first quarter.

First, we completed an agreement to convert the ground lease at the Westin Princeton and the [indiscernible] ownership for $3.4 million. We also signed a 99 year ground lease extension for the Sheraton Indianapolis while reducing our annual rent obligation.

Our asset management team aggressively pursues transaction such as these and rigorously reviews all options to create maximum shareholder value. Next I’d like to highlight the guest room renovation recently completed at the 351 room Hyatt Regency in the Downtown historic district of Savannah, Georgia.

The refreshed room concept draws from the rich history of Savannah featuring antique inspired case goods to provide an immersive experience for the guest. We believe this updated hotel will continue to yield strong returns in a market with no additional full service supply currently under construction.

We’re also very excited to announce our pilot program with OpenKey at the Hyatt Regency Savannah. OpenKey is a secure universal keyless mobile app allowing guests to open guestroom doors with their smartphones.

Adopting OpenKey will decrease key cost, increase staff efficiency and provide a valuable way to anticipate customer needs and improve guest satisfaction. Perhaps most importantly we believe the app will enable us to communicate more effectively with our customers and built stronger relationships with them.

We’re excited about OpenKey’s benefits going forward for Hyatt Regency, Savannah and for other Ashford Trust and Ashford Prime hotels in the future. As I mentioned on previous calls, in August of 2013 Ashford Trust announced the conversion of the Beverly Hills Crowne Plaza to a Marriott, which will be completed in the summer of 2015.

As a team we identified a gap in the supply of Marriott rooms in that market, with no additional full-service Marriott within six and a half miles of this property. In preparation for the conversion we began a comprehensive renovation.

Most importantly we finalized work on the pool and surrounding amenities and are nearing completion of the striking new lobby. We are very excited about the upcoming opening of the Marriott Beverly Hills. I will now hand the call over to Douglas..

Thank you, Jeremy. As Monty mentioned in the first quarter we continued to successfully execute on our investment strategies.

Our most significant transaction was Ashford Trust acquisition of the remaining 28.26% ownership interest in the Highland Hospitality portfolio from our joint venture partner for $250.1 million, which represented a total transaction value of $1.735 billion or $215,000 per key.

This 28 hotel portfolio includes 19 full service hotels and nine select service hotels with a concentration in major brands such as Hilton, Marriott, Hyatt and Starwood.

As we have discussed with you previously since the acquisition of this portfolio in 2011 this deal has been a tremendous success and has far exceeded our original expectations in underwriting.

Over the last several years across the portfolio we’ve implemented many value creating initiatives executed on extensive CapEx plan and completed several strategic transactions that have contributed to this performance.

We are very excited to acquire the remaining interest in this portfolio as we believe these efforts have well positioned the Highland portfolio to continue to deliver strong results going forward.

Ashford Trust also completed the acquisition of 168 room Lakeway Resort & Spa for total consideration of $33.5 million or $199,000 per key; the 232 room Memphis Marriott East Hotel for $43.5 million or $187,500 per key; and subsequent to the end of the quarter the 124 room Hampton Inn & Suites in Gainesville Florida for $25.3 million or $204,000 per key.

We believe these transactions are indicative of Ashford Trust strategy to acquire well located assets in attractive markets with unique attributes that have the potential for substantial upside by installing our affiliated manager, Remington to improve bottom line performance.

During the quarter, Ashford Trust completed the sale of Hampton Inn, Terre Haute for total consideration of $7.9 million. The sale represented a trailing 12-month cap rate of 7.0% on net operating income and a trailing 14.4 times EBITDA multiple after factoring in the expected cost of PIP-related CapEx.

I also want to give you an update on transactions at Ashford Prime. As indicated on our last call, Ashford Prime will not exercise its option to purchase the Marriott Gateway in Crystal City, Virginia from Ashford Trust. While we have seen continued improvement in the D.C.

market, with the current size of the Prime portfolio as well as already owning the Capital Hilton in that market, at this point, the company does not want to become too concentrated in any particular market. Additionally, Ashford Prime is still evaluating the potential sale of its Courtyard Philadelphia asset.

While the asset is still for sale, given its strong performance during the last couple of quarters, we feel that so far the pricing indications are not in line with the value of the property. As well, with the launch of the Select platform, there may be an opportunity to structure an efficient sale of the hotel to that entity.

Looking ahead our deal pipeline remains strong and we will continue to leverage our multi-platform capabilities in the marketplace.

Our investment strategies are focused, as Ashford Prime will continue to focus on high-RevPAR assets and Ashford Trust will continue to be opportunistic while focusing on full-service hotels with less than 2 times the national RevPAR average, as well as incubating Ashford Select.

We believe these platforms are well positioned to capitalize on today’s attractive lodging market conditions and we will have ample opportunity to grow both organically and through acquisitions. As always, our goal is to provide you with superior investment returns across our platforms, something our track record clearly demonstrates.

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

Thank you. [Operator’s Instructions]. And we will take our first question from Shaun Kelley Bank of America..

Hey guys, this is actually Danny Assad [ph] on for Shaun. So my first question is actually around DC, and I was wondering what your views are on the market there and maybe what you think it can return to being an industry outperformer..

This is Monty I’ll comment and I’ll let Jeremy to see if he has to add anything. We are excited about DC. We think that the effects of the sequestrations and related matters is largely done, the economy continues to improve, receipts continue to grow for the federal government and therefor the need to cut back on the areas such as travel is receding.

And so we are excited about it and yes, we do think that it can be become once again an outperformer in the industry..

Yeah. Specifically to our hotels in the first quarter, we saw resurgence of government travel. It was up 12% room nights. Unfortunately the per diem was flat but hopeful in the October timeframe that we’ll see the per diem increases come back. And the conventional calendar is very favorable to DC this year..

Actually that’s very helpful. Thank you for the color. And then just a second question on the market and just given your Texas exposure, RLJ mentioned that Houston fell off a cliff in March and came in well below expectation.

So I was wondering if you’re seeing any weakness relating to Energy sector and maybe if you can share your outlook there too?.

Sure. Some of the team grew up in Texas and Doug and I specifically grew up in Houston back in the 80s when we saw the huge swings in the Energy sector and how they affected the economy. So we’re particularly sensitized to that.

So on the acquisition front as we’re looking at potential opportunities we first of all are wary about oil patch sector opportunities. And as far as performance we are seeing an impact in Houston, there is no question about it and to a lesser extent in Dallas.

So we’ve got a lot of supply coming in Houston in anticipation of continued rig growth in oil sector which did not materialize and then demand softening greatly. So I think Houston is going to be a little bit of a struggle for the coming quarters..

All right. And just one last one from me and then I am done. So generally speaking I guess you guys have been -- you have been active in deals but generally speaking you have been deconsolidating the company.

So with that in mind obviously just, would you be able to share your thoughts on industry consolidation and everything that has happened leading up to this or during the earning season?.

Well, I think it’s very interesting what’s going on up there we heard the announcement with Starwood [ph] and what’s going on there. As far as the REIT sector what drives consolidation in the REIT sectors is many times both opportunity and the social considerations and those are always very hard to predict.

Although a number of our competitors in the space have indicated over the past year or so that they are inclined to want to have some type of transactions. So we’ll see if that happens.

With the recent pull back in stock prices I don’t know how eager they’ll be but there is definitely a disconnect going on between the fundamentals in the industry, which are very strong, never been strong and the outlook is very, very strong, yet the public market sentiments on hotel stocks have definitely been tamped down and are much more modest, due to I think interest rates, peers which is kind of ironic as in the past hotels do very well when interest rates go up because it coincides with strong RevPAR growth.

And also I think there is maybe over an impact on the New York market and because New York market is not doing well and since lot of the investors are located in New York that kind of spreads overall -- to overall industry but markets outside of New York are doing very, very well and you can see the portfolios of those of us that don’t have large New York City concentrations performed very well in this first quarter.

So the point being is that I think that this investor sentiment regarding lodging that has been a little soft the past few months will definitely turnaround, because here very soon this somewhat negative sentiment is going to run smack into continuing very strong fundamentals and the fundamentals will win the day ultimately..

Great. Thank you very much and thanks a lot for taking my question..

And next we’ll go to Robin Farley with UBS..

Hi, thank you for taking the question. This is actually RK [ph] in for Robin. I was wondering if you could share your thoughts on being a net buyer of assets so far this year. Obviously starting off pretty strongly. As you look across your portfolio for the second half of ’15 and given that U.S.

REITs are becoming a bit more careful with chasing assets at higher valuations at this point of the cycle, what are your thoughts in terms of sort of balancing those two factors.

Well, we share those sentiments in that we are careful about what the pricing is out in the marketplace. However, we do think that we’ve got a number of years left in this cycle and we think there is some great upside still out there. And we’re looking and we plan on being a net buyer this year.

Trust does have quite a bit of cash and positive net working capital, $600 million plus, so we’re very flush with the ability to acquire. And because the lot of the REIT peers are pulling back that gives us a bit of an opportunity.

So we’re going to be selective but continue to look for opportunities because we do think that this recovery has legs and has quite a bit to go yet..

Great. Thank you..

Operator:.

[:.

Hi, guys. This is Chris for Ian. Congrats on the Highland consolidation. I just wanted to follow-up about the Ashford Select’s spend. You said previously that $331 million that you expect to receive for selling the 16 Select assets will be paid through $232 million of debt with the balance in cash and Select equity.

So just a couple of questions, what is your best guess for maybe the timing of that transactions, thoughts on contributing the 11 Select Highland assets to the spend and then have you decided on the mix of cash and private company equity that you expect to get on that $100 million balance?.

Good question.

We haven’t decided on that mix yet and as you know we remain pretty opportunistic in our platforms and we do think that there is an opportunity to build a Select service platform, Select service continues to do very well and we think that’s a great sweet spot in the industry and there is just a lot of public market REITs that focus in that sector and so we think that’s a great opportunity.

We continue to just talk to Capital Sources and we continue to evaluate whether it’s better to pull the net capital and to create some type of spin out of this portfolio that you mentioned along with this capital to create a platform that we can feed with more product overtime or just to incubate it ourselves with our own capital and build it up and then somehow spin it out at some point in the future.

So we continue to talk to Capital Sources, we continue to look at Select service opportunities to buy, whether all for ourselves or in the some type of joint venture or other structure but this is the direction that we want to go and what happens to the marketplace is going to drive the details on that.

So we will share those details when they become a reality but at this point in time we’re still talking to a number of capital providers..

Okay, great.

And then I guess just more broadly why retain [ph] has taken these spends? I mean if the purpose is to be a more pure play operator in the full service premium branded space why retain exposure to Select Prime and I mean particularly when the investors can get that same exposure by directing those companies directly?.

There is not an inclination to do that. Overtime those positions will be distributed out to shareholders. There is not a necessarily a desire to hold.

Sometimes for a short period, for example if Trust is going to enter into some type of joint venture in launching of Select a capital partner may want Trust to stay in for a while to show its commitment to the launch and to its commitment that it thinks the returns are there.

But other than situations like that there is not a desire to hold on to that. So overtime I think you’re going to see these platforms clean up a little bit and not have as much cross ownership, except for these REIT platforms will probably continue to own, have some ownership in the Ashford Inc. We think that creates some great alignment.

But as far as the REITS with each other we’ll see less of that..

Okay.

So you think that Prime you might get out of that, is out of 2015 story or is that something more after that and then I guess this time you don’t know the timing yet on Select but just any sense of how long you might hope those positions?.

No. We just haven’t decided amongst ourselves and communicated to the market that the exact timings of that. Certainly where the industry is trading right now doesn’t help all of that but no there hasn’t been a decision made on the timing of separating those platforms as I just mentioned. .

Okay, great. Thank you very much..

And that concludes our question-and-answer session. I will turn it back to management for any additional or closing comments..

Well thank you and thank you everybody for joining the call today and we look forward to talking with you guys again on next quarterly earnings call..

Thank you and once again, that will conclude today’s conference. We’d like to thank everyone for their participation..