Scott Eckstein - IR Monty Bennett - CEO Deric Eubanks - CFO Jeremy Welter - EVP, Asset Management Douglas Kessler - President.

Ryan Meliker - MLV & Company David Loeb - Baird Chris Woronka - Deutsche Bank.

Good day and welcome to the Ashford Hospitality Trust and Ashford Prime Fourth 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 fourth 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 are being 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 February 26, 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 everybody and thank you for joining us. Both the fourth quarter and the full year 2014 were exciting and profitable periods for the Ashford Group of companies.

From an operational perspective both Ashford Trust and Ashford Prime demonstrated strong operating performance, reflecting the positive trends that we continue to see in the lodging sector.

Additionally both companies were active from the acquisitions market as well as the capital markets and completed several value enhancing transactions in an effort to grow the companies as well as to put them on the even more sound financial putting. We believe the best way to measure our management team 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 to find new and innovative ways to maximize the value of our existing assets while also looking for accretive opportunities to further invest in the hospitality space.

This focus has paid off for our shareholders. Since our 2003 IPO Ashford Trust has achieved a 233% total shareholder return compared with a 170% return for our peers over the same period. We are particularly dedicated to shareholder value because as many of you know we are substantial shareholders in all of the Ashford Group of companies.

Insider ownership currently stands at 14% for Ashford Trust and 13% for Ashford Prime. The next closest hotel REIT peer has 4% insider ownership. So it’s clear why we think and act like shareholders when our own capital is at a risk with yours.

It’s something that has always distinguished Ashford from others in the space and we consider it one of our main competitive advantages.

In the fourth quarter of 2014 and early 2015 this commitment to building shareholder value was evidenced in the strategic transactions, capital market activities, and asset management initiatives that we completed across both of these platforms. This includes the successful spin-off of our asset management business Ashford Inc.

into a separate company that is now publically traded on the NYSE MKT market under the symbol AINC. Following the spin-off Ashford Inc. is now an independent asset management company focusing on managing real-estate, hospitality and securities platforms, both domestically and internationally.

We will be holding a separate conference call to discuss Ashford Inc.’s fourth quarter and mission highlights following this conference call.

More recently to capitalize on the favorable trends we see the select service segment, we announced the formation of Ashford Hospitality Select, a new private company focused on investing primarily in premium branded select-service hotels, including extended stay hotels in the U.S.

Ashford Trust plans to contribute to Ashford Select a high-quality, geographically diverse portfolio of 16 select-service hotels, located in 10 states, comprised of 2,560 total guestrooms and operated under up scaled or upper-upscale premium brands affiliated with Marriott International.

We expect to complete the launch of Ashford Select during the first half of this year. These transactions are indicative of our proven ability to create long-term shareholder value. The same management team responsible for Ashford Trust’s historical outperformance would be adviser [ph] to Ashford Trust, Ashford Prime and Ashford Select.

This should further our competitive advantage in the marketplace offering the Ashford management team greater flexibility to leverage the multiple platform resources when pursuing investment opportunities. Now let’s review the fourth quarter highlights. We ended 2014 with another year of remarkable growth in the U.S. hotel industry.

For the year the industry’s occupancy rose 3.6% to 64.4%. ADR increased 4.6% to $115.32 and RevPAR was up 8.3% to $74.28. The same positive lodging sector fundamentals we saw in the prior year continue to drive RevPAR and EBITDA growth in 2014. Demand for U.S.

lodging continued to expand in 2014 while industry supply remains well below historical averages and should be for the foreseeable future. U.S. hotel room net supply growth in 2014 was only 0.9%, one of the lowest annual growth rates in history.

PKF recently projected the U.S lodging industry will achieve 65% occupancy in 2015, the highest national occupancy rates since FTR began reporting data back in 1987, which should fuel strong RevPAR and EBITDA growth. And we believe both of our platforms are well positioned to benefit from these strong fundamentals.

These trends drove strong fourth quarter results in both of our portfolios. First at Ashford Trust in the fourth quarter RevPAR for all hotels increased 11.3%. This cost was driven largely by the new initiatives implemented at Remington our affiliate manager.

We really began to see the benefits of these initiatives from the third quarter and they have continued to gain traction as our fourth quarter RevPAR performance shows. We're quite pleased with our results since Remington implemented these initiatives and we expect to see further improvement over time.

Turning to acquisitions, as previously announced back in December Ashford Trust signed a definitive agreement to acquire the remaining 28.26% ownership interest in the Highland Hospitality portfolio from our joint venture partner Prudential Real Estate Investors.

The buyout is expected to be completed by the end of the first quarter of 2015 and simultaneous with an anticipated refinancing of the Highland portfolio. Ashford Trust has remained busy on other acquisitions as well.

This month, Ashford Trust closed on the acquisitions of the 168 room Lakeway Resort & Spa for a total consideration of $33.5 million and the 232-room Memphis Marriott East hotel for $43.5 million.

Doug will discuss the details of both of these acquisitions later in the call but we are excited about these additions to the portfolio and believe that both of these transactions are indicative of Ashford Trust’s 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 where appropriate.

In 2015, Ashford Trust will continue to be opportunistic in pursuing investment opportunities. Having ample capital resources gives us a competitive advantage, thus we have continued to take advantage of the favorable capital markets to strengthen our balance sheet and shore up our liquidity.

Some examples of this are, in early January of this year, Ashford Trust refinanced two mortgage loans that resulted in excess net proceeds of over $100 million after closing costs and reserves. Furthermore, in February, Ashford Trust completed a follow-on public offering resulting in net proceeds of approximately $111.1 million.

For Ashford Prime, the fourth quarter RevPAR for all hotels increased 11.0%. We saw strength across many of Ashford Prime’s markets including RevPAR growth of 27.9% for the Courtyard Philadelphia Downtown, 15.2% for the Courtyard Seattle Downtown, 14.9% for the Courtyard San Francisco Downtown, and 9.9% for the Capital Hilton Washington D.C.

We continue to be pleased with the operational performance of the Ashford Prime platform, and Jeremy will offer some additional details into this portfolio shortly. As previously announced, the Board of Directors of Ashford Trust declared a dividend of $0.12 per share for the fourth quarter 2014.

The Board also approved Ashford Trust’s dividend policy for 2015, during which the Company expects to pay a quarterly cash dividend of $0.12 per share, or $0.48 per share on an annualized basis. The Board of Directors for Ashford Prime declared a fourth quarter 2014 quarterly cash dividend of $0.05 per share.

The Board also approved Ashford Prime’s dividend policy for 2015, during which Ashford Prime expects to pay a quarterly 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. In conclusion, we are very pleased with our operating performance across both platforms in the fourth quarter and for the full year 2014.

Ashford Trust and Ashford Prime are both well positioned for growth as lodging sector fundamentals in 2015 are predicted to remain strong. At the same time, we are very excited for the prospects of our newest venture, Ashford Inc., which is also poised to benefit from these same industry trends.

As always the interest of our shareholders is our utmost concern, as the Ashford group of companies is structured to ensure the alignment of management’s interests with shareholders. Your management team is and will remain significant shareholders in the Ashford companies.

We thank you all for your continued support and look forward to updating you on our progress in future calls. With that, I will now turn the call over to Deric to review our financial performance for the quarter..

Thanks, Monty. For the fourth quarter of 2014, Ashford Trust reported AFFO per diluted share of $0.17 compared with $0.14 a year ago. Ashford Prime reported AFFO per diluted share of $0.21 compared with $0.09 a year ago. For the fourth quarter, we reported Adjusted EBITDA of $71.7 million for Ashford Trust and $17.5 million for Ashford Prime.

This adjusted EBITDA result for Ashford Prime reflected a 64% increase over the prior year. At quarter’s end, Ashford Trust had total assets of $2.8 billion in continuing operations, and $3.6 billion including the Highland portfolio which is not consolidated.

It had $2.0 billion of mortgage debt in continuing operations and $2.8 billion overall including Highland. The total combined debt for Ashford Trust currently has a blended average interest rate of 5.3%, and is currently 46.7% fixed rate and 53.3% 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., and it's pro rata share of the net working capital of the Highland portfolio, Ashford Trust ended the quarter with net working capital of $542 million. Ashford Prime, at quarter's end, had total assets of $1.2 billion in continuing operations.

It had $765 million of mortgage debt in continuing operations, of which $49.4 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 4.99% and is currently 54.7% fixed rate and 45.3% floating rate, all of which have interest rate caps in place.

As of December 31, 2014 the Ashford Trust portfolio consisted of 115 hotels with 23,004 net rooms and the Ashford Prime portfolio consisted of 10 hotels with 3,472 net rooms.

Ashford Trust share count currently stands at 118.3 million fully diluted shares outstanding which is comprised of 100.1 million shares of common stock and 18.2 million OP units.

Ashford Trust has 19.7 million OP units but as a result of the current conversion factor being less than one for one, these units are convertible into approximately 18.2 shares of common stock.

Ashford Prime share count currently stands at 32.8 million fully diluted shares outstanding which is comprised of 24.1 million shares of common stock and 8.7 million OP units.

Taking a look at our capital markets activity, in the beginning of January Ashford Trust successfully refinanced two mortgage loans with an existing outstanding balance of approximately $354 million.

The two previous mortgage loans that were refinanced include a $211 million Goldman Sachs floater loan with a final maturity date in November 2017 and a $143 million Merrill Lynch loan with a final maturity date in July 2015. The new loans totaled $478 million and resulted in excess net proceeds of over $100 million after closing costs and reserves.

During early 2015 Ashford Trust was also able to opportunistically raise equity capital to fund our growth initiatives. In February the Company completed a follow-on of public offering of 10,529,450 shares of common stock at $10.65 per share resulting in net proceeds of $111.1 million.

As mentioned earlier Ashford Prime will continue to be conservative in its use and structure of leverage consistent with our leverage target of five times net debt plus preferred equity to EBITDA. In 2014 Ashford Prime capitalized on the favorable capital markets conditions we are seeing to opportunistically refinance some of its debt.

Our goal with this refinancing was to reduce our interest expense and increase cash flow while pushing out a debt maturity.

To this end in November Ashford Prime refinanced its mortgage loan on the Capital Hilton and the Hilton La Jolla Torrey Pines reducing the interest rate by 0.85% and resulting in savings of approximately $1.6 million in interest cost per year.

In the future we will continue to look for these types of opportunities to improve the cost of capital and maximize cash flow. I'd now like to turn it over to Jeremy to discuss our asset management accomplishments for the quarter. .

Thank you Deric. I'm excited to share today a second consecutive quarter with double-digit RevPAR growth across both portfolios. The robust transient demand seen across the industry in the third quarter persisted through the end of the year driving strong top-line results.

We are particularly pleased with the strength in the Washington DC market where our assets across both portfolios grew RevPAR by 13.2%. Though corporate transient demand was the most significant driver, we have also seen substantial improvement in a government segment which is essential to long-term health of the DC market.

Additionally Ashford’s revenue optimization strategies continue to yield positive results in the fourth quarter, leaving our properties in both portfolios to outgrow their competitive sets with Ashford Trust and Ashford Prime posting combined RevPAR index growth of over 200 basis points.

Focusing on the Ashford Prime portfolio, RevPAR growth in the quarter was 11%; EBITDA flow through was 52% in the quarter. Continued strength on the West Coast combined with resurgent transient demand in Washington DC and Philadelphia drove the second consecutive double-digit RevPAR growth for Ashford Prime.

November marked the one year anniversary of the Ashford Prime spin-off from Ashford Trust, and I would like to take some time to discuss the highlights of the portfolio’s first year as Standalone Company. In the first quarter Ashford Prime added two additional hotels, the Sofitel Chicago Water Tower and the Pier House Resort in Key West.

Major projects completed during the year include a complete guest room innovation at the Courtyard Philadelphia Downtown, lobby renovations at the Marriott Seattle and the Renaissance Tampa, and a strategic project to create additional rooms at the Capital Hilton.

Most important though are the outstanding operating results these properties continue to generate. Moving to the Ashford Trust side, during the fourth quarter the Ashford Trust portfolio grew RevPAR by 11.3%. 56 of the 115 hotels grew RevPAR by double-digits in the quarter.

The west Coast markets remained strong, with San Francisco and San Diego growing at 16.7% and 11.5%, respectively. We also saw continued resurgence of transient business on the East Coast, where the Boston, Washington DC, and Atlanta assets grew RevPAR at 15.3%, 14.4% and 14.2% respectively.

I'd like to share the results of two of our major capital projects that we completed in the fourth quarter. The first of these is a rooms renovation at our SpringHill Suites in Lake Buena Vista, Florida. This property is part of a three property complex with a combined 1,100 guest rooms, which is 4.8% of the total Trust portfolio.

Lake Buena Vista, adjacent to Disney World, Universal Studios, and Sea World is an international vacation destination. The new design seamlessly blends bold contemporary styling with practical design for families traveling on vacation.

With the peak season approaching, this refreshed asset is positioned near the top of its competitive set and delivers stellar results. As part of Ashford's core asset management strategy, we constantly pursue a wide variety of opportunities to improve the profitability and value of our assets.

During the year, we proactively negotiated more than 16 extensions of our management and franchise agreements scheduled to expire prior to 2020. Our risk management department achieved over $1.2 million in annual cost savings during our property insurance renewal.

In addition to these larger items, we have routinely evaluated all active retail leases, antenna installations, and parking agreements and performed numerous RFP processes to maximize these ancillary revenue streams.

As mentioned on the previous calls, in August of 2013, Ashford Trust announced the conversion of the Beverly Hills Crowne Plaza to a Marriott. We identified a gap in the supply of Marriott rooms in that market, with no full-service Marriott within six and a half miles of this property.

In preparation for the conversion, at the end of the second quarter of last year, we began a full renovation of the entire property. I last shared with you the completion of the new HVAC systems and a stunning model room that truly embodies our concept for the new positioning.

As of the end of the year, we had renovated a significant portion of the guestrooms and corridors and begun work on a striking new lobby that will provide guests with a truly spectacular sense of arrival. We are very excited about the upcoming opening of the Marriott Beverly Hills.

Throughout 2014, I discussed the many revenue optimization strategies we have pursued as an owner, as well as those deployed by our affiliate management company, Remington. These have involved substantial investment in both personnel and technology to drive property top-line performance.

I now have the pleasure of quoting some statistics to show the unquestionable impact these initiatives have had on our operating results. Combining both portfolios, our assets achieved RevPAR growth of 9.5% in 2014.

When comparing to our property's competitive sets, that represents a combined outperformance of 171 basis points - 110 basis points for Ashford Prime and 186 for Ashford Trust. This 171 basis point outperformance equates to over $16 million of incremental rooms revenue in just one year. I will now hand the call over to Douglas..

Thank you Jeremy. As Deric mentioned earlier, in the fourth quarter, Ashford Trust continued to identify unique opportunities created by attractive debt market conditions to proactively manage our upcoming debt maturities. This has allowed us to generate substantial excess proceeds and further strengthen our liquidity position.

We intend to put these excess proceeds to good use. During the fourth quarter, we announced an agreement to acquire the remaining 28.26% ownership interest of the Highland Hospitality portfolio from our joint venture partner for $250.1 million. The total transaction value is $1.735 billion or $215,000 per key.

On a forward 12-month basis, the purchase price represents a cap rate of 7.4% on net operating income and an 11.6 times forward EBITDA multiple. This purchase will be funded with cash and is expected to be completed in the next couple of weeks, simultaneous with an anticipated refinancing of the Highland portfolio.

Ashford Trust continued executing on its investment strategy in 2015 with the acquisitions of the 168 room Lakeway Resort & Spa for a total consideration of $33.5 million or $199,000 per key and the 232-room Memphis Marriott East hotel for $43.5 million or $187,500 per key.

The Lakeway Resort & Spa has a unique lakefront location in Austin, Texas, one of the fastest growing MSA's in the country in both population and job growth. By installing Remington as property manager, we believe we will be able to capitalize on the recent renovations and growth in the market to drive better bottom line performance.

On a forward 12-month basis, the purchase price represents an estimated cap rate of 8.7% on net operating income, which equates to an estimated 9.5 times forward EBITDA multiple.

The Marriott Memphis East acquisition offered us a great opportunity to add an asset in a solid submarket with no new competitive supply and stable corporate demand generators. Additionally, the hotel has minimal CapEx needs after undergoing a complete renovation and conversion to a full-service Marriott.

The property is being managed by Remington Lodging and our expectation is that Remington will be able to achieve solid increases in RevPAR penetration as the property stabilizes. On a forward 12-month basis, the purchase price represents an estimated cap rate of 8.6% on net operating income and an estimated 10.3x forward EBITDA multiple.

Also, in November, Ashford Trust completed the sale of the Homewood Suites Mobile for a total consideration of $7.4 million. The sale represented a trailing 12-month cap rate of 7.4% on net operating income and a trailing 11.8 times EBITDA multiple after factoring in the expected cost of PIP-related CapEx.

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 two times the national RevPAR average.

In addition, Ashford Prime does not expect to exercise its option to purchase the Marriott Gateway from Ashford Trust. We believe both platforms are well positioned as favorable lodging market conditions are expected to continue as the U.S. economy grows.

Our goal is to provide you with superior investment returns, something our track record clearly demonstrates. That concludes our prepared remarks and we will now open it up for your questions..

(Operator Instructions). And we will take our first question from Ryan Meliker with MLV & Company. Please go ahead, your line is open. .

Quick question, I guess the couple for you.

First of call can you give us, and I apologize if I missed this, can you give any update on the Philadelphia sale for Ashford Prime? Can you also -- if you can talk to us a little bit about the Highland refinancing? My understanding is you guys are out in the market looking for CMBS debt for the Highland portfolio.

Obviously you're not going to give us any information in terms of how things are coming out but just give us an idea what we should expect, whether you're going to take out excess proceeds, or you're going to try to unencumber some assets.

Things along those lines would be helpful in terms of how we model that? And then the third thing was can you little bit about Ashford Inc. and the structure for how Select is going to progress, whether it’s going to be, it sounds like it’s going to be private capital that you are being raised.

How much of that’s been raised thus far? When you expect to finish raising that capital? How big you want it to be? And what type of structure and then how the fee structure to Ashford Inc. might unfold? I know it’s a lot but hopefully that will take few minutes. .

Thanks Ryan. This is Monty. Jeremy and his crew and the team over at Remington had really worked their tails off in the past year and a half with all these revenue initiatives we're been mentioning and they're producing fantastic results. So we're very proud of those. Regarding our Courtyard Phili, we're still marketing it more sale.

It’s still out in the marketplace. It’s going along. Although with the Ashford Select initiative, we are looking at it and just keep it in the back of our minds whether it would be an appropriate asset for Ashford Select or not as an alternative. So that’s currently in our minds but no decision has been made regardless which way.

For Highland, we are in the process of closing a transaction, buying out our partner and then refinancing the portfolio simultaneously. It is a use of cash to buy out our partners. The financing itself will produce proceeds.

It’s just how much of those proceeds -- will those proceeds be enough to pay for some or all or more than all of the purchase price to our partners. And we should have some details on it to you soon.

I know you'd like some more details but we should be wrapping it up in the not too distant future and that way we should be able to give you all the detail that you're looking at. But we are in the throes of trying to get that closed here in the pretty near future.

And regarding Ashford Select, unfortunately we're just prevented from a securities laws from commenting very much on that. That’s just something that we can’t talk about in the broad audience. So we wish we could give you more details on it but we just can’t at this point in time.

But as soon as we can please note that we absolutely will because we know how important it is for your guys to dig your models both for Ashford Trust and Ashford Inc. .

And then so in terms of timing for selecting the transactions out of trust and Select and a decision on Philadelphia for Ashford Select, is 2Q a reasonable expectation for when those transactions could occur?.

Yes, I think so. I think Q2 is reasonable. Of course never know but I'd say that, that’s pretty reasonable. .

And sure and then with regards to the Highland refi, I appreciate some of that color. Are you planning to encumber a few of the assets and would they be assets that Prime has a rofo [ph] on. .

Not necessarily. What we are trying to do is make sure that we've got plenty of abilities to release assets. So in a way the same thing right, flexibility, because we do want to have the flexibility to have assets going to Prime and or into Select as that gets formed. So we are definitely working to include that kind of flexibility..

And our next question comes from David Loeb with Baird. Please go ahead, your line is open. .

I won’t beat the dead horse about Select although that’s clearly an interest.

Just in terms of the strategy for the Highland refinancing, are you looking at one big CMBS package or are you looking to split that up and finance a number of assets differently, separately?.

David its Deric. Three of the assets in the portfolio have existing fixed rate debt on them. So we are not looking refinance those. The remaining assets we're looking to finance and it will probably be a big pool, but as Monty mentioned, we're seeking a lot of flexibility in terms of our ability to move some assets around.

So again we hope to have some more information for you here pretty soon..

And Monty I heard you on the Phili sale process for Prime and particularly the potential that that could be interesting for Select. But I wonder if you could just talk more broadly, from the Prime perspective the results of that hotel were spectacular this past quarter. You're still running off of the renovation benefit there.

How do you evaluate time versus the interest in getting that property sold, and do you think there's additional value to be had by waiting to sell it given the ramp or do you think that buyers are likely to pay for that anyway in the near-term?.

David well you hit right on it. And as we went to market to the asset, trailing numbers are something that buyers are much-much more willing to pay for than hopefully anticipated future numbers, no matter how positive that might look. And here in the fourth quarter we saw it just being -- shaping up as a fantastic quarter for that asset.

And we started marketing process. Many times you had to use numbers that are few months old for a number of reasons. And so we wanted to make sure that that value creation in the years to the full benefit of Ashford Prime. And so that's why we aren’t in a dead rush to go market it and to sell it, although that our process.

We want to make sure we're getting full value. So the point you bring up is exactly why we're still marketing it, but we just want to see how everything works out because we do want full value for those private shareholders..

Great. And Monty could you also give us a view on your thoughts of markets that have energy exposure, like Houston or other parts of Texas, Denver other markets.

What do you think about the outlook for those and how does it impact your acquisition efforts?.

Sure, we're just gun shy about those markets. Doug and I grew up in Houston in the 70s and the 80s and so we saw the great run-ups and the great run-downs.

And while the chatter is that the markets are much more diversified now and in some cases they are, we just don't see the need to take risks in markets that have question marks on them, when there's so many other markets and assets for selling pretty attractive prices.

So as we look to buy assets, we're going to generally be a string away from Texas and Colorado and any other markets, although many times when you chase portfolios, there is a few assets in these markets and that’s fine. We're not completely red lining them but we do have a very strong cautious stance towards them for the reasons that I shared.

We've been beat up once before. We don't need it again. So we're going to be careful. As far as our existing assets in Houston we're seeing some softening. The business on the books is not as strong as it was at this time of last year. So it just has a question mark on it. So we're just being careful. .

And then finally can you just talk a little bit more about your acquisition pipeline, how optimistic are you that you'll be able to find acquisitions for Trust, for Select, for anything?.

We're pretty optimistic. A number of years ago in 2009, 2010 it was a great time to buy assets but no one will sell, because everyone knows that it's a low time in the industry. And that's why as you know we went and bought back so much of our stock, because that was the best opportunity at the time.

Right now it's interesting because values have come back and they've come back strongly and sellers can sell assets at decent profits from whenever they might have bought it or built it and therefore can making some money. But we're pretty optimistic for the next numbers of years and the industry which some people are and some people aren't.

Well that gives us a great dynamic, where do you have sellers in the marketplace selling, and so volumes of assets are rising and are very, very strong. Yet it's not in our opinion close to the peak of the market and therefore the wrong time to buy.

So we see products available for all platforms and we're out aggressively looking at products and underwriting them, Doug do you want to comment?.

If I could add just one thing. With the platforms that we have Prime, Trust and soon Select, we're seeing portfolios in the market that often times have mixed assets, full-service and select-service or higher RevPAR and more middle of the road RevPAR assets. We believe that our Ashford Group of companies gives us a competitive advantage.

Sellers typically like to sell to one group rather than to engage in multiple groups that attempt a cherry pick. And there already are a couple of those opportunities like that in the market where the competitive landscape is significantly reduced and we're obviously one of the groups that's participating. .

And our last question comes from Chris Woronka with Deutsche Bank. Please go ahead. Your line is open. .

Just want to ask on the Courtyard Phili, assuming you do sell it, thoughts on use of proceeds there? I think you have about $40 million of debt and some $11 million of EBITDA last year. Your price will be well in excess of that.

So just thoughts on what you might do of the proceeds?.

Sure. We're out in the marketplace mining for opportunities for Prime and we think there's some great opportunities for Prime. So we're going to keep looking for good quality high-end assets to buy. So there's a chance to recycle the capital out of lower RevPAR assets and to reinvest it into assets that are more in line with Prime strategy. .

And is that going to be a part of a 1031? Is that the idea?.

If we can and if it’s helpful. We absolutely want to take advantage of that when and where we can. It depends upon a number of factors as you know. I'm sure you are familiar with all the rents around it. .

And then just as we think about you touched on it on the last question. So don’t want to spend too much time on it, but I mean as we think about Trust, and you have clear criteria for Prime and you have clear criteria Select.

Do you think there are opportunities out there for Trust to still acquire? Obviously you did a few things in the fourth quarter and early this year, but is it a fairly wide ban still or are the criteria making it more narrow and difficult for Trust to find things that might fit. .

Good question and just to be clear, we have very clear criteria for Prime and for Select. But that also gives very clear criteria for Trust, because that means it’s everything else that doesn’t fit in those other two clear criterias. So the criteria for Trust is very clear and we do see opportunities.

We just closed on the Lakeway in Austin acquisition, we just closed on the on the Marriott in the Memphis acquisition and we're looking at an opportunity right now that's a full service asset and looking at few others. So there's no question.

There's plenty, plenty of hotels in the United States that are full service that are below twice the national average..

I think just one thing to add to it is that the race to RevPAR has been exhibited by many of our REIT peers. We've created that dynamic by separating our platforms to address opportunities across all RevPAR segments.

With respect to Ashford Trust, we believe that this focused strategy actually reduces some of the competition because when we look at some of the opportunities such as that property in Memphis, I don’t believe that there were many REIT peers that were bidding on it, and yet we feel like we bought it at a very attractive cap rate for the RevPAR that it delivers with the potential upside opportunity by bringing in our affiliated manager, Remington.

So we continue to see many opportunities, less competition and arguably more value add opportunities given that many of these types of assets are run by regional or local managers that don’t necessarily have the same competitive advantages that we bring at the table given our scale and operational knowhow.

So all three platforms have a good pipeline of opportunities right now. .

And it look like we have time for one last question. And we'll go to Robin Farley with UBS. Please go ahead. Your line is open. .

It's [indiscernible] for Robin. Just two quick questions. Good flow through in the quarter, could you give us some color what’s driving management fees to be down year-over-year? And then on the transaction market, at this point in the cycle there are not that many [indiscernible] remaining in the U.S.

Do you expect to be a net buyer this year?.

We do expect to be a net buyer. Doug, if you want to hit the transaction and then Jeremy you can talk about the first question. .

Sure, we view that we're at point in the cycle where there is still plenty of runway and we also view that with the performance of the assets, given where we are with respect to the relative contribution of occupancy and ADR to RevPAR growth, clearly ADR is contributing more to the growth because we're running at peak occupancy as an industry and obviously that ADR growth drops to the bottom-line with greater profitability.

So we view this to be -- and you can look at the RevPAR performance out of our assets which has been exceptional, not necessarily the best time to sell while we have been a net buyer.

We've clearly sold onesies and twosies such as the mobile property and we continue to evaluate the same the Phili Courtyard but you can see our discipline in evaluating that sale given the strength of the RevPAR growth performance that it had. So we will be strategic and very, very selective sellers at this phase of the cycle.

We prefer to capitalize on what we see to be the net growth opportunities for the industry overall, continue to implement our value-add asset management strategies which have been clearly demonstrated this quarter and be disciplined in how and what we buy allocating capital to the appropriate risk adjusted returns in each one of these platforms.

Jeremy?.

Can you give me a little more clarity on your question on management fees, because at least for Trust they are right in line with what they were in the prior quarter?.

I'm just looking as the consolidated $7.5 million versus $8.4 million last year. .

Okay, I see what you're looking at. So last year we had some of the Prime assets consolidated. And I think what you're looking at is maybe a consolidated. It include some incentive fees. So not just base management fees and incentive fees clearly are up in the portfolio..

I guess that’s exactly what I was looking for.

Could you guys give some color on how much?.

For incentive fees?.

Yes. .

They are based on prices -- as a percentage of revenue all the increases that you see in the management fees are comprised of incentive fees..

And it does look like we have no further questions at this time, we will now hand it back over to management for any additional or closing remarks. .

Thank you this Monty. Just one clarification on that last call. If you don't mind giving a call to our CFO, because in looking at Ashford Trust last year, the management fee levels that included for a lot of the year Ashford Prime management fees or -- management fees that now Ashford Prime pays, so you kind of have to look at it on a pro-forma basis.

So that might help. So otherwise thank you everybody for your participation today and we look forward to speaking with you again on our next call..

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