Please standby. Good day, and welcome to 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 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 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 the press release that has been covered by the financial media.

At this time, I will remind you that certain statements and assumptions in this conference call contained or are based upon forward-looking information they 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. It 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 to first quarter 2018 with the first quarter of 2017. I'll 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 for our RevPAR results. For the quarter we reported AFFO per share of $0.28, additionally were reported adjusted EBITDAre of $95.8 million for the quarter.

For hotels not under renovation, we generated EBITDA hotel 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 6 times 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 predominately upper upscale full-service hotels at a RevPAR of generally less than 2 times 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 in our cost of capital. We are active in seeking deals in the marketplace but the pipeline is stemmed 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 buyer's projected capital expenditures. The sales resulted in a debt pay down of $291 million.

Through these sales of mostly lower RevPAR select service and some full service hotels we believe we've 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've generally run near this leverage consistently since our IPO 15 years ago through up and down cycles. We have 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 two 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 on these transactions later, but they are yet another example of how this management team looks for every opportunity to drive value in 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 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 the attractiveness of 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's talk of RevPAR reacceleration, and perhaps less dialog as to why this cycle should be ending, other than the fact that it's already been a long recovery. Conversely, there're 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're being disciplined in looking for accretive acquisitions, while simultaneously patiently culling less strategic low RevPAR hotels with a focus on maximizing shareholder returns.

We are investing in our hotels with aggressive REIT fresh campaigns to improve their competitive position. Our asset management initiative is focused 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've 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 non-controlling partners pro rata share of adjusted EBITDA. Adjusted EBITDAre totaled $95.8 million for the quarter, compared with $109 million for the -- a $129 million for the prior year quarter.

During the quarter, we booked approximately $0.4 million in income related to business interruptions 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 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 at 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 the 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 the mortgage loans with an existing outstanding balance totaling approximately $377 million secured by eight hotels. The new loan totals $395 million and has a two-year initial term with five one-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 the 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 two-year initial term with five one-year extension options subject to 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 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 refinancings 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 comparable RevPAR was basically flat declining 0.2% during the quarter, with 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 1st in 2018 compared with April 16th 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 eight quarters this impact has ranged from 40 basis points to 190 basis points with a median impact of 100 basis points.

The first quarter 2018 was heavily impacted by renovations, with five 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 four more hotels and 88% more rooms under renovation during the 2018 period.

However, for the balance of 2018, we are projecting an average of five 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 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're 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 the property manager and works 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 two Minneapolis hotels, the Hilton Minneapolis [Limington] and Sheraton Minneapolis West. The four 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 the 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 four hotels, but hotel EBITDA for the portfolio increased 44%, or $1 million due to 83% hotel EBITDA flow through and a 29% increase in margins. These outstanding results are all in spite of the fact that Le Meridien, Minneapolis was completely in renovation during the first quarter.

During 2018 we will continue to invest in our portfolio to maintain competitiveness, and so 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 the 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 with return to grand ballroom and junior ballroom back to the hotel together with stunning new conference center lobby. We're continually investing 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..

Thank you. [Operator Instructions] And we'll first go Michael Bellisario from Baird..

Just want to go back to the acquisition comments from the prepared remarks, it 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've 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 in a second, the yield that we can buy the asset 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 are headed and where the economy was headed looked itself different 2016 versus 2017 and now accelerating into 2018.

I think if you look at some of the macro factors, which were obviously influencing our view of 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 and even recent surveys that we've seen that indicate travel standards may grow as much as 2.6%, with 64% of the surveyed budgeting for growth in their budget.

So I think that those are reasonable indicators for us to evaluate when looking we're looking at underwriting any hotels today, slightly different RevPAR forecast and 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, comments have been that we continue to look and hopefully we will find accretive investment opportunities to grow the platform. That's always been part our strategy and nothing is really different today than what it's been in the past..

I would add one comment in that if you listened to Doug's prepared remarks, we sold the portfolio that $79 RevPAR at 7.1 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 diversify in terms of what we're looking at.

So from yield perspective, we been able to potentially sell at low cap maybe go up at similar cap rate and trade upon RevPAR..

Maybe expand the topic as look at markets, when does New York City become interesting for you or what do you need see maybe change there for you to take a closer look?.

I find it interesting, we have never owned a hotel in New York City. 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 in certain 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 predominately in the headlines for all the supplying and 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 change RevPAR and in those markets typically you're buying a higher RevPAR asset and you're paying what in our minds 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've generally not been an aggressive buyer in -- we haven't been a buyer in New York City..

And then you mentioned talk on the RevPAR reacceleration, does that mean you're not seeing it in your markets just yet or is it still too early to tell?.

I think it's a little early to tell, I mean I think when you look at Q3, Q4, that looks really strong, but it's still a little early to tell. We're seeing strong pick up in business transient which we didn't have in 2017. 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's some optimism, looked like some of the comments that we referred in the industry, from a reacceleration standpoint..

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

Probably it could be that. And then when you look at group pace, for 2019 our group pace is really strong.

It's hard to tell because 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 -- 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..

Hi, thanks, this is actually [indiscernible].

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 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 had been impacted by holiday shift? What's pace doing for group for this year for 2018 versus what you saw about three months ago?.

So, Q1 when we talk about renovations, the volume of renovations were abnormally high for us and we tried to do everything we can to minimize displacement. The way we renovated, we have got a very unique approach on how we renovate our hotels and minimize the displacement doing renovations, but we just had too much going on, to overcome that.

And particularly in Nashville where we didn't have a ballroom, we didn't have a junior ballroom and that really impacted a lot of our ancillary revenues as well, because it does a lot of banking and catering revenue. So that's what's happened in Q1 and we look at that because we're not in 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 onto 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. We're able [to do] more challenges as we get retail specifically until we are going to deal with more discounting for the shoulder and weekend rates..

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

Right that's very helpful thank you.

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 three months ago?.

No I don't think it changed too much. We needed -- we have a little bit of headwinds on the group side for this year and some of it is just when you're looking at types of renovations we have, again we have had Nashville with the mean space we have, we're going to be renovating our mean space at Crystal Suite Gateway.

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

And I think just there is been a lot of noise in this quarter and when you look it in responses to your follow up question, on how it did 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 the markets where we have hotels with big events like Minneapolis, [final four] Atlanta, Super Bowl, et cetera. So hopefully that's helpful color..

And we will now go to James Lykins from D.A Davidson..

First of all, wonder if you might talk a little bit about supply what you're seeing out there? When you think that may peak in or if there any markets out there that you think are beginning to overheat?.

From a supplying standpoint I think it's 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 are 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 of [bills] 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 costs for construction labor as well as raw materials.

Specifically, Jeremy can give some color as to certain of our markets where we are seeing supply impact, but we also need to balance that. We're also seeing incremental demand growth too..

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

And when you 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's 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 mean space, with what we're doing with the redevelopment, right next to the hotels.

You know that market, you know our hotel within that market, and then when you look at the actual convention calendar still fairly strong and robust going forward for Nashville. So that's not a market I am necessarily too concerned about. And then Dallas, is having quite a bit 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, it 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 outlook in D.C. is pretty favorable and we had a lot of exposure in that market..

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

I think that everyone 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 that we expect that 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 you want to add any more color beyond those three..

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

In the Northeast specifically in like New Jersey, New York, we've been more proactive in terms of being much more competitive to make sure that we don't have any corrective bargaining issues at some of those hotels.

So we've been fairly proactive to make sure that we're competitive from wage perspective, and a better wage perspective in certain markets.

But there's 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 am sorry revenues by just 0.8% and we're actually -- we're able to grow our EBITDA margin by 7 basis points, and in the first quarter if you look at the hotels that are under renovation we are able to grow margins in those hotels as well in spite of all these pressers.

One other area that is helping is that we are getting some of the benefits finally from the Starwood Marriott merger and integration and those are coming through very slowly.

But I think that is very timely for us because as some of those pressures continue to provide a little bit of headwind there is a little bit of a help on the way to alleviate some of that..

[Operator Instructions] We will 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 Pebblebrook and LaSalle.

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?.

Is your first question more related to the availability of new deals, Bryan?.

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 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 will be some reacceleration approaching the NYU conference and NARIET, but I think some of the driving factors is to why there's not much for sale is because of really two reasons.

Sellers are looking the same data points as buyers and if in fact there is 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 and pull out proceeds and continue along for the ride if you are current owner of hotels. 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 on the sideline looking to buy but just can't find a product. So what will change this, it is 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 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 are all favorable.

Your second question I'm sorry was?.

Referring to cash..

Cash. I got you. Our cash so -- 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 the 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 and 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've on our balance sheet.

We've 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 four 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 flows 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 also want to just -- go ahead..

When the stock balanced 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 it really is 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, it's based upon their knowledge of material non-public information. And so we have to obviously phase 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..