Marilynn Meek - Financial Relations Board Monty Bennett - Chairman, Chief Executive Officer Deric Eubanks - Chief Financial Officer, Treasurer Jeremy Welter - EVP of Asset Management Douglas Kessler - President.

Chris Woronka - Deutsche Bank Securities, Inc. Ryan Meliker - Canaccord Genuity Gregory Miller - SunTrust Robinson Humphrey.

Good day and welcome to the Ashford Hospitality Trust Second Quarter 2016 Conference Call. Today’s conference is being recorded. Now at this time, I’ll turn the conference over to your host Marilynn Meek. Please go ahead..

Thank you. Good day, everyone and welcome to today’s conference call to review the results for Ashford Hospitality Trust for the second quarter of 2016 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 accessibility of this conference call on a listen-only basis over the Internet were distributed yesterday afternoon in a press release that has been covered by the financial media.

At this time, let me remind you that certain statements and assumptions in this conference call contained or are based upon forward-looking information 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 releases and accompanying tables or schedules, which have been filed on Form 8-K with the SEC on August 4, 2016 and may also be accessed through the Company’s website at www.ahtreit.com.

Each listener is encouraged to view those reconciliations provided in the earnings release together with all other information provided in the release. I will now turn the call over to Monty Bennett. Please go ahead, sir..

Good morning, everyone, and thank you for joining us. Our second quarter RevPAR growth was 4.9% which significantly outperformed the industry average of 3.5%. We also posted solid adjusted EBITDA and AFFO growth and saw our margins expand by 106 basis points.

We’re very pleased with these results and believe they speak to the quality of our portfolio and asset management capabilities. In addition to the quality of our portfolio we believe it is the quality, experienced stability and alignment our management team that has driven strong total shareholder return performance since our IPO in 2003.

Since our IPO, this management team has achieved a 113% total shareholder return compared to 87% return for our peers. Key to that performance in this platform is the exceptionally high level alignment that is created by 18% insider ownership which is the highest in the hotel REITs space and about nine times the peer average.

Add to that the [indiscernible] shareholder value and outperform our peers that are structured into our advisory agreement with Ashford Inc., and as you can see why we think our management structure and management team are in competitive advantage for our platform and are key to the shareholder value that we’ve consistently created for our investors.

This focus on driving shareholder value was the impetus to refining our strategy at Trust to focus on acquiring and owning upper upscale full-service hotels opportunistically execute on the sale of our non-core select service hotels, continue to target net debt to gross assets at 55% to 60% and to target a cash and cash equivalents balance equal to 25% to 35% of our total equity market capitalization for financial flexibility as 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.

Along those lines in early June Trust announced the completed a sale of a five hotel portfolio of select service hotels for $142 million in cash at the same time we signed a definitive agreement for the sale of our two Palm Desert assets for $36 million and Hampton Inn Gainesville for $27 million.

We believe these three transactions further validate the attractiveness of our select service portfolio to potential buyers and the soundness of our refined sales process in divesting of non-core assets to ensure that we maximize long-term value for our shareholders.

We are committed to maximizing value for our shareholders as we focus on generating solid operating performance and continuing to execute on opportunistic sales of remaining select service assets. We thank you for all of your continued support and look forward to updating you on our progress on future calls.

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

Thanks, Monty. For the second quarter of 2016, we reported AFFO per diluted share of $0.60 compared with $0.51 a year ago. This reflects an 18% growth rate over the prior year. Adjusted EBITDA totaled $132.8 million, reflecting an 11% growth rate over the prior year.

At quarter’s end, we had total assets of $4.9 billion in continuing operations, we had $3.8 billion of mortgage debt in continuing operations with a blended average interest rate of 5.2%. Our debt is currently 26% fixed rate and 74% floating rate, all of which have interest rate caps in place.

Including the market value of our equity investment in Ashford Inc., we ended the quarter with net working capital of $435 million which equates to over $3.70 per share of value. As of June 30, 2016, our portfolio consisted of 127 hotels with 26,554 net rooms.

Our share count currently stands at 116.7 million fully diluted shares outstanding, which is comprised of 96.2 million shares of common stock and 20.5 million OP units.

We have 21.7 million OP units, but as a result of the current conversion factor being less than 1:1, these units are convertible into approximately 20.5 million shares of common stock. With regards to dividends, the Board of Directors declared a second quarter 2016 cash dividend of $0.12 per share or $0.48 per share on an annualized basis.

Based on the stock price from yesterday, that represents an 8.4% dividend yield, one of the highest in the hotel REIT space. The adoption of a dividend policy does not commit the Company to declare future dividends. The Board will continue to review the dividend policy on a quarter-to-quarter basis.

Subsequent to quarter end, early July, we priced an underwritten public offering of 4.8 million shares of 7.375% Series F Cumulative Preferred Stock at $25 per share. Dividends on the Preferred Stock will accrue at a rate of 7.375% per annum on the liquidation preference of $25 per share.

Also in early July, we announced that we intend to redeem all of our issued and outstanding shares of our 9% Series E Cumulative Preferred Stock using the proceeds from the Series F preferred raise. The redemption date will be August 8, 2016.

Additionally, while we do not have any debt maturities until April of 2017, we are continuously monitoring the debt markets and will be opportunistic when we believe market conditions are favorable to do so. This concludes our financial review. I would now like to turn it over to Jeremy to discuss our asset management activities for the quarter..

Thank you, Deric. During the second quarter, we grew RevPAR by 4.9% with EBITDA flow-through of 61%. Portfolio RevPAR growth for the quarter outperformed our track scale chain by 40 basis points. As portfolio we outperformed our competitors across both the group and retail transient segments.

Not only did we achieve solid RevPAR results, we also produced strong margin growth as EBITDA margin for the portfolio grew 106 basis points to reach an all time high of 35.9% during the second quarter. We attribute this solid performance to the quality and diversity of the portfolio.

I would now like to discuss several successful asset management initiatives our team has undertaken at our properties that are driving very positive results. As I mentioned on previous calls, in August of 2013, we announced a plan to convert the Beverly Hills Crowne Plaza to a Marriott.

The Marriott Beverly Hills officially opened on July 1, 2015 and the renovation concluded in August, receiving an award from Marriott International for renovation excellence.

The property’s year-to-date performance through June has been stellar with total revenue growth of 84%, rate growth of 48%, EBITDA flow-through of 53% and the gain of 5,100 basis points in market share versus its competitors year-to-date.

Additionally, following a guest room renovation in the first quarter of 2015 and the completion of a quarter renovation in the first quarter of 2016 the 673 room Renaissance Nashville which is our largest property grew RevPAR by 22.7% during the second quarter which outperformed the market by 1,210 basis points.

The properties rate increased by 13% and EBITDA flow-through was 64%. The Marriott Beverly Hills and Renaissance Nashville are just two of many of the many examples of effective deployment of capital into our portfolio. In July 2015, we completed the acquisition of The W Atlanta Downtown.

One of our team strategies was to focus on the number of value add opportunities outside of traditional hotel operations. To date, we have changed out the management of the on-premise digital billboard and renegotiated guest parking arrangements which combined should generate over $850,000 in incremental EBITDA.

In addition to these value add opportunities, the W Atlanta grew RevPAR by 12.8% for the second quarter with 83% EBITDA flow through. Compared to last year total revenue in the second quarter increased by more than $700,000, while EBITDA increased by more than $580,000.

At corporate level, our team is also focused on finding ways to reduce our costs of doing business. For example, we recently renewed our property insurance policy and reduced our property insurance premiums on a comparable basis by 11% to the previous policy year, which contributed to a cumulative decrease of over 30% for the last three years.

Also during the second quarter, the team was successful in reducing property tax assessments at both the Hilton Ft. Worth and the Marriott Sugarland creating tax savings of approximately $725,000. I’ll now hand the call over to Douglas..

Thank you, Jeremy. Last June, we announced the Trust would, as part of a refined investment strategy, opportunistically divest of its non-core select service assets over time.

Earlier this year, we decided to focus on selling these assets and smaller portfolios and/or single asset transactions as we believe that strategy will result in higher prices in the current market environment.

To that end, in early June, we completed the sale of the five hotel 1,396 room portfolio of select service hotels for $142 million in cash or $102,000 per key to Noble Investment Group.

The five hotel portfolio is comprised of the 146 room Courtyard Edison in Edison, New Jersey, the 150 room Residence Inn Buckhead in Atlanta, Georgia and the 312 room Courtyard Lake Buena Vista, 388 room Fairfield Inn Lake Buena Vista and 400 room Springhill Suites Lake Buena Vista, in Orlando, Florida.

The purchase price, including the projected CapEx to be invested by Noble represents a trailing 12-month cap rate of 8% on net operating income. The portfolio had an existing debt balance of approximately $98 million and Trust realized net proceeds from the disposition of approximately $37 million after debt repayment and transaction costs.

Also in early June, we announced that we entered into a definitive agreement to sell the 150 room Courtyard Palm Desert and 130 room Residence Inn Palm Desert for $36 million, which is $128,000 per key. The two assets have an existing debt balance of approximately $24 million that will be assumed by the buyer.

After debt assumption and transaction costs, the net proceeds are expected to be approximately $11 million. The transaction is scheduled to close in the third or fourth quarter of 2016, subject to certain closing conditions.

We have also entered into a definitive agreement to sell Hampton Inn Gainesville for approximately $27 million and is expected to close in the third or fourth quarter of 2016. The property has an existing debt balance of $21 million, the net proceeds are expected to be approximately $5 million.

We are continuing to pursue the opportunistic sale of our other non-core select service hotels over time. That concludes our prepared remarks and we will now open it up for your questions..

[Operator Instructions] We will hear first from Chris Woronka with Deutsche Bank..

Okay. Hey, good morning, guys.

I want to ask you just general view on asset sale market and what kind of changes, if any, you’ve seen since last quarter in terms of breadth and depth of buyers?.

Chris, it’s Douglas. The appetite in 2016 for kind of buyer demand is slowing down a bit. I think that when you look at some of the industry reports, transaction volume is down kind of more than 50% year-to-date. And there are buyers out there and I think we’ve had a fair amount of success on the assets that we have sold.

Pretty attractive cap rates overall.

So we’re continuing to mine the market, continue to list the assets according to our plan and we’ve remain hopeful that there will be still attractive pricing, but it is slowing down a little bit and pricing has moved out somewhat I’d say that when you look at kind of overall increase in cap rates, I think all in cap rates for select service have moved up where I think and I’m excluding kind of the urban high rise select service, but we’re seeing kind of mid A cap rates for a lot of this product on an all-in basis right now.

.

Okay. That’s helpful and then maybe a question for Jeremy. Wanted to see what you guys’ views are on the brands with the direct booking push and what kind of results you’re seeing so far and if that’s having any impact yet on in terms of either lower commissions or if it’s helping or hurting your reported ADR..

Well, I mean obviously for us for the quarter we had strong results, better than the industry. When you look at the quarter, our retail and overall leisure was strong.

But in terms of the brands push for what you’re talking about I’d assume - maybe the new member pricing program, I think it’s still early days we are still working with the brands to get a good data on the impact. Our concern is that a large portion of customers would book direct through the website regardless.

And so you’re kind of trading down that rate and so while we’re very supportive of the direct booking channels the lowest cost channel for us certainly is direct booking, we’re concerned about too much discounting and specifically some of the brands as you know discount as much as 10% for weekends. Our position is that’s too much of a discount.

But overall I think it’s early days in terms of the impact it’s having towards our direct booking channels..

Okay..

Does that help?.

Yes, that’s helpful. Thanks guys..

Now we will hear from Robin Farley with UBS..

Hi, thank you, good morning. This is [Arpine] [ph] in for Robin. Overall the quarters saw pretty strong RevPAR performance. If you could just break down the components of it in terms of corporate transient demand versus leisure if you could quantify it.

And then have you seen - how have you seen those trends sort of shaping up into the July, August so far? Thanks..

Sure, this is Jeremy. I can’t comment on July, August, but I can tell you what we saw on the quarter. So specifically our group and transient segment were both up 4.9% in RevPAR, so they were equal. The third segment contract was less. When you look within our segments our group was strong.

Overall, ADR was up about 3% in group and most of that actually was driven by weekend group, Weekday group was flat. So you’re seeing a lot of the social events being booked and a lot of that is really a targeted effort from our teams to try to layer in the right layers of business over weekend and [indiscernible].

And then within that the transient segments specifically retail overall leisure was strong. Weekend retail and weekend discount segments were strong on a year-over-year growth basis as well. What lagged a little bit was corporate demand, negotiated rate demand, which is down about 3.1 in occupancy for the quarter.

So we’re seeing that soften a little bit. It’s a bit different than Prime, we actually had an increase in special corporate for the quarter. Although I’d say overall corporate demand across both portfolio has been a little bit weaker than what we’ve seen over time..

Thank you, that’s helpful.

Could you comment at all on group pace over the next 12 months sort of what you saw - what you’re seeing today and what you saw a couple months ago?.

Yes, I can’t really – we can’t give guidance but I can tell you that I’ve read a lot from what our peers have commented on and from our position, overall group has been still relatively strong for us..

Okay. Thank you..

Ryan Meliker with Canaccord Genuity has the next question..

Hey, good morning, guys. Looks like you guys had a pretty good quarter with regards to operation, so kudos to that. I had a couple of questions. I think first of all, Jeremy, maybe you can give us some color. Nashville was up 23% in the quarter on RevPAR.

Was there anything unique going on there? I know that’s market that’s had some pretty gang buster economic growth but also is facing a lot of supply growth..

Yes, sure Ryan. In the quarter we had a six citywides in 2016 that were either new citywides or much larger than the previous year that created a lot of compression. As I mentioned in the script, we outperformed the market by, I think about 1,200 basis points.

But when you look at a tract scale component, I think the tract for Nashville was up maybe 16%. So the central business district, our location did quite a bit better and then we outperformed the market. A lot of that is driven by - versus what we’ve done in prior years, Nashville is always, for us, is a big group house. It’s about 50% group.

And in previous years sometimes we’ve actually lost out, because we’ve been oversold with too much group on the books. And so we’ve had a little bit less group, we’ve been a lot more selective in the group that we had at Nashville and that’s allowed us to get high rated transient demand. And specifically in the quarter, our transient ADR was up 23%.

So it’s really focused on the right mix of business for us in the quarter and then taking advantage of an overall very, very strong market..

Okay. That’s helpful. It sounds pretty good. Second on LA, RevPAR was strong. I’m wondering if you have any idea what if any impact there was from the gas leak out there on the top line and then why flow-through wasn’t stronger with EBITDA up not nearly as much as we would’ve expected with that type of RevPAR growth..

Most of what we have is driving the growth for us and I haven’t quantified the impact of the gas leak, but is Beverly Hills is driving a lot of that growth as you now. And then as it continues to ramp up, we’ve added expanded Concierge Lounge, made it more accessible to guest.

And so that’s had a little bit of an impact on some of the flow-through at that property, but overall we continue to see that property ramp up, it’s been less than a year since the renovations has been done..

If those revenues Ryan, where same brand, over brand, revenue increase we would’ve expected higher flow-through, but we’ve got a higher staffing structure there as in Marriott compared to Crowne Plaza..

Okay. That’s helpful. And then a couple quick things. I think first of all, I know in the strategic review at Ashford Prime, the Board which, obviously, Monty, you’re Chairman of both, elected to remove the investment in the hedged equity platform run by the external advisor. It doesn’t look like that has happened at Ashford Trust.

Any thoughts about making that type of change at Ashford Trust as well?.

No plans at this time..

Any color as to why not? Why does it make sense at one platform but not the other?.

Just not prepared to talk about it. We think that right now it seems to be fine in Trust, so, just hanging in there for now..

Okay. The last question I had was you guys on the Ashford Prime call have talked a little bit about the potential to engage the external advisor with regards to potentially whether it’s restructuring or renegotiating, something that could materially alter the termination fee from the external advisor.

Whether that plays out or not is obviously another story, but would you expect any changes that happen with Ashford Prime in that regard to be echoed at Ashford Trust? Would Ashford Trust’s Board be looking to mimic those changes if any changes materialize?.

There has been some discussions about that very point. And the Board’s kind of went back and forth on all that. So I think the thoughts right now is to let – to let Prime go through their process and hopefully they’ll be able to get something finalized here.

And at least right now they plan on putting it to a shareholder vote and then as soon as that’s public for Trust to reach out to its shareholders and to say, all right guys, it’s just the kind of trade that something like this that you guys would be interested, for us to do as well.

Because you know over on Prime, there’s been some calls to do all that, but it does come at a cost, not a trade, and what’s unknown is whether those costs are going to acceptable to the Prime shareholders, and then of course whether to the Trust shareholders as well.

So we just thought that would be a better way to just kind of plumb the market after Prime comes out hopefully with their proposed revisions to it..

Okay. I appreciate the insight. That’s it for me. Thanks..

Next question will come from Bryan Maher with FBR & Company..

Good morning, guys. There’s a lot of bifurcated views on lodging right now, whether people should be buyers or sellers. Clearly there’s a lot of assets on the market for sale, including your select service.

Are you seeing any of this kind of evolve into an opportunity to grow the full service side of Ashford Trust? And if so are there any markets in particular that you’re not in now that you would steer towards?.

We think that pricing has come down for assets and it certainly getting closer to an environment where some acquisitions might be attractive, of course depending upon our stock price and our cost of capital.

We have not transitioned over to that point yet where Ashford Trust is going to be out there, buying full service assets, but to your point I think it’s a good one because the markets are moving that way that the pricing is getting better for providers. We probably hit our peak.

You might agree maybe a year ago or year and a half ago or so as far as private market pricing. So anyway it’s an interesting opportunity and something we’ve looked at, but we just don’t think it’s appropriate at least right at this time..

Thanks, Monty..

Gregory Miller with SunTrust Robinson Humphrey has a next question..

Thanks very much. Good morning, I’m calling on behalf of Patrick Scholes. Two questions, first I’m curious if you’ve seen any evidence of leisure demand shifting to the domestic market the summer, particularly focusing on upper-upscale and luxury.

You have a couple of assets, Anchorage, One Ocean, Savanna and others, that might be beneficiaries of demand shifting from Europe to the States?.

I don’t see anything that’s really significant if anything we’ve been probably impacted by some of these changes rates with some of the other international countries..

Okay great. Second question I had, I’m curious how [inaudible] demand is holding in light of softening corporate transit trends.

I’m curious how you’re replacing this lost weekday demand?.

This is Jeremy again, it’s been a touchy environment as what I would describe it.

As we go through every time we’re looking at 30-day forecast, we’re missing it pretty significantly could be on the upside, could be on the down side is just been volatile in terms of – sometimes we’re getting the short-term pick up that we’ve seen in previous quarters and sometimes it doesn’t come, so it’s been a little frustrating and it’s been difficult to manage against.

But I think our team has done a very good job of keeping appraised and making sure that we yield the best possible way that we can. And fortunately we’ve been able to get some good group on our book and we’ve been able to stimulate some good retail and leisure demand..

Great. That’s it for me. Thanks a lot..

We will now move to Shaun Kelley of Bank of America..

Hey. Good morning, guys. Just one big-picture question for me which is, so I was curious on your overall performance in the quarter in your top-10 markets versus what you might’ve seen outside the top 10.

Any noticeable pattern there, particularly as we think about were some of the supply is concentrated, supply growth, I should say, is concentrated?.

Yes. This is Jeremy.

I don’t recall seeing anything real significant across I mean there are certainly markets that outperforms quite differently than the rest of the markets, but overall I’m not – I don’t recall seeing anything that was really different from top 10 versus non-top 10 or what we look at with Trust is really outside top 25 and inside top 25..

Okay. But even across those two differences relatively consistent..

I don’t think there is a material difference..

Okay. That’s helpful.

And then my only other question, could you just remind us overall for the portfolio where you guys stand, what you’re just leisure and group mix, sorry leisure and corporate mix just overall?.

Leisure versus corporate?.

Yes..

So our mix is probably about 25% group and that’s going to be predominantly a corporate group and then the rest is going to be split between that transient and then contract, and then the majority of that’s going to be business transient. So I’d say just guessing that 70% to 80% of our transient tends to be business transient versus leisure..

Great. Thank you very much..

We don’t like to have good information when someone puts on the website through retail whether or not they’re staying for business purposes or for leisure..

Understood. Okay, thank you very much. End of Q&A.

And that does conclude today’s question-and-answer session. I will turn the call back over to management for closing remarks..

Thank you, everyone. I appreciate your participation in the call today. Look forward to speaking with you on our next earnings call..

Ladies and gentlemen, this does conclude your conference today. Thank you for your participation. You may now disconnect..