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

Ryan Meliker - MLV & Company Austin Wurschmidt - KeyBanc Capital Markets Thomas Allen - Morgan Stanley Andrew Didora - Bank of America Merrill Lynch Chris Woronka - Deutsche Bank Nikhil Bhalla - FBR & Company.

Good day and welcome to the Ashford Hospitality Trust and Ashford Prime Third Quarter 2014 Conference Call. Today's conference is being recorded. At this time, I'd 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 third 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 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 company does not obligate 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 October 30, 2014 and may also be accessed through both companies' website 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 and thank you for joining us. As our third quarter results demonstrates both the Ashford Trust and Ashford Prime platforms that continued to benefits from the positive trends we’re seeing in the lodging industry.

At the same time, Ashford Trust executed several value enhancing transactions including strategic hotel investments and refinancing, designed to lower its cost of debt, while increasing cash flow and strengthening its balance sheet for future investments.

In what we have come to call the Ashford Group of companies, both of our platforms exhibited exceptional RevPAR and EBITDA growth.

At the same time, our team is constantly searching for new strategy to unlock further value from our existing assets, while also seizing on current market conditions to seek out appealing investments in the lodging sector. The same philosophy led to our upcoming anticipated spin-off of Ashford Inc. which I'll discuss in more detail later on.

In fact, this is value add philosophy which has guided our team throughout our history as a public company and has served as well throughout the years in delivering substantial returns for our shareholders. I believe that we have the most highly aligned stable and effective management team in the hotel industry.

That's not a statement we make lightly, but I feel just by doing so, as this management team has generated 213% total shareholders returns since Ashford’s Trust IPO in 2003, compared with 163% return from our peers in the same time period.

We've continued to outperform our peers in almost every yearly cumulative total shareholder return period since our IPO. While our Ashford Prime portfolio is still relatively young as a public company, we expect to continue this record of success with Ashford Prime as well. Yesterday's result indicate we are already well on our way towards that goal.

Our team is dedicated at creating maximum shareholder value because we are significant shareholders in both of our platforms. Our insider ownership in Trust is 17% and 13% in Ashford Prime. The next process hotel REIT peer has 4% insider ownership.

Over the years collectively we have sold very little of our stock and it made material cash purchases of shares. Back in March of this year, I purchased $500,000 of Ashford Prime stock in the open market.

If you annualize our individual holdings, you would see that the majority of our management team's network is in Ashford Trust and Ashford Prime stock. It's not surprising them when our shareholder value matters so much to us since our own capital at risk with yours.

It’s one of the major factors that distinguishes us from others in the space and we see it as significant competitive advantage. Now let's review some of the third quarter highlights. The same positive lodging sector fundamentals we saw in the first half of 2014 continue to drive RevPAR and EBITDA growth in third quarter. Demand for U.S.

lodging remains strong and we expect this will continue for the foreseeable future as projected levels of industry supply have remained at historical lows. Industry analyst confirmed these fundamentals should remain consistent for some time. PKF is forecasting net supply growth of only 0.9% and 1.3% in 2014 and 2015 respectively.

Currently PKF does not see the national annual supply growth exceeding the long run historical average until it leads to 2017 These limited supply trends are driving RevPAR forecast, with the PKF projecting their 2014 RevPAR will increase by 8.2% over 2013.

Further PKF's projected RevPAR growth forecast for 2015 is currently 6.7% driven by combination of high occupancy and strong ADR growth. Presently, PKF is forecasting that the U.S. lodging industry will achieve 65% occupancy in 2015, the highest national occupancy rate since FTR began reporting data back in 1987.

Our financial results in both of our platforms reflect these positive trends. In the third quarter, RevPAR for all Ashford Trust hotels increased 12.4%. This growth was driven largely by the new initiatives we implemented at Ashford's and Remington, our affiliated property manager that is designed to improve RevPAR performance.

I've discussed these initiatives in detail on previous calls, so I won’t rehash those now. What’s important is that, as our third quarter RevPAR performance shows, we continue to see the benefits from these actions, expect to see further improvement over time.

On the investment front, Ashford Trust acquired two hotels during the quarter including the $8 million acquisition of the 39 room Ashton Hotel in Downtown Fort Worth, and a $50 million acquisition of 357-room Fremont Marriott Silicon Valley. EBITDA growth for these properties year-over-year for the third quarter has been 301% and 63% respectively.

We’re excited about these additions to the Ashford Trust portfolio, and Douglas will discuss these acquisitions related to sale later on the call. As we’ve said it before, Ashford Trust continues to look for more opportunistic lodging investment opportunities and these recent acquisitions are excellent examples of this.

So, having capital resources readily available is extremely important to us. During the quarter, Ashford Trust continued to improve its capital structure.

In July, we refinanced three mortgage loans that had a combined outstanding balance of $325 million with new loans totaling $469 million, resulting in approximately $104 million in excess proceeds after closing costs and capital expenditure reserves.

We were also able to unencumbered two small hotels that we are now in the process of marketing for sale.

As previously announced, earlier this year Ashford Trust's Board of Directors unanimously approved a plan to spin-off its asset management business into a separate publicly traded company in the form of a taxable distribution to Ashford Trust shareholders to be comprised of common stock at Ashford Inc., a successor company of Ashford Trust existing advisory subsidiary, Ashford Hospitality Advisors LLC, which currently advices Ashford Prime.

In connection with the spin-off, Ashford Inc. will advice Ashford Trust. It is anticipated that Ashford Inc. will influence a 20 year advisor agreement to advice Ashford Trust. Ashford Inc. will continue to advice Ashford Prime as well. We’ve already filed an application for Ashford Inc.

with the NYSE and KT Exchange, to list the shares under the symbol AINC. We expect this distribution to be declared sometime during November, subject to certain conditions. For additional information, please refer to the registration statement on Form S4 of Ashford Inc. as declared effective by the SEC at October 7, 2014.

And the information statement include in the Form 10 filed with the SEC on October 30th. Earlier this week in response to recent shareholder feedback, we initiated over the past several weeks to solicit feedback from many of the same shareholders. We have made some enhancements to both Ashford Trust and Ashford Inc. corporate governors.

Specifically, we omitted Ashford Trust by laws consistent with the proposal of previously approved by shareholders at the company's 2014 annual shareholder meeting providing for majority voting standard in the election of Directors and uncontestable actions, starting to approve over the similar mimics the company's charter at the 2015 annual shareholder meeting.

In addition, we omitted the bi-laws to permit shareholders to mend these bi-laws and to reduce the threshold to call a special meaning of shareholders from 50% to 35% at the outstanding common stock following the company's 2015 annual shareholder meeting.

For the planned spin-off of Ashford Inc., we took into consideration the objective protecting the company for growth, while making changes in governance consistent with shareholder feedback. First we omitted the bi-logs of Ashford Inc. to provide Ashford Inc. shareholders the right to call the special meeting.

Second, we adopted a plan to give Ashford Inc. shareholders the opportunity to vote declassify the Board of Ashford Inc. first annual meeting. Third, we provided a plan to permit Ashford Inc. directors up for annual elections to be removed with or without cause if shareholders vote to declassify the Board.

Lastly, a plan was put in place to provide Ashford Inc. shareholders the opportunity to provide an advisory non-binding vote on executive compensation every three years. We believe these enhancements to the governance of Ashford Trust and Ashford Inc.

demonstrate our commitment to policies and practices that best serve the interest of the company's and shareholders. Turning to Ashford Prime, during the third quarter, RevPAR for all Ashford Prime hotels increased 11.7%. Much of this performance was driven by our West Coast assets which continue to outperform.

This includes RevPAR growth of 16% for our Courtyard San Francisco Downtown, 19% for our Marriott Seattle Waterfront and 20% for our Courtyard Seattle Downtown. Flow-through at the property level was strong again this quarter, and EBITDA flow-through was 45%.

We continue to be pleased with the performance of the Ashford Prime platform, and Jeremy will offer some additional details into this portfolio a little later in today's call. As previously announced, the Board of Directors of Ashford Trust declared a dividend of $0.12 per share for the third quarter of 2014.

The Board of Directors for Ashford Prime declared a third quarter 2014 quarterly cash dividend of $0.05 per share. On the top of Ashford Prime, it has now been about a year since we completed the spin-off of Ashford Prime from Ashford Trust.

The goal of the spin-off was to create a platform at the well defined investment strategy to only investment hotels with RevPAR of at least 2x the national average, and located a major gateway and resort markets.

We also setup Ashford Prime to operate at a lower leverage level than Ashford Trust with a leverage target of 5.0x net debt to EBITDA ratio or lower.

Over this last two year, we’ve executed on our strategy of growing the Ashford Prime portfolio and delivering solid RevPAR performance while slowly deleveraging the platform towards its target leverage level. Despite executing on its investment strategy, Ashford Prime currently trades at a TPM NOI cap rate of about 7.3%.

This is below where asset similar to the high quality assets in the Ashford Prime portfolio over trading in the private market. In fact, we've even seen much lower RevPAR portfolios trade at lower cap rates, then where Prime is trading today.

Based on the deals we’ve seen trade and other market information from HVS et cetera, we believe the Ashford Prime assets which traded around 6% TPM NOI cap rate into private market. If Prime were valued at that cap rate, it would have quite just significantly higher stock price. Our main goal has always been building shareholder value.

Currently we just don’t believe it’s in our shareholder best interest to raise common equity to grow the portfolio. It only makes sense for Prime to increase it’s asset base thus increasing it’s earnings strain diversification as well as the float and liquidity in stock. We can't do that adequately by issuing shares at these levels.

Primes cost of equity capital is simply too high right now. So, earlier this week we announced that the Ashford Prime Board approved a $100 million share repurchase programs, as well as the plan to sell the Courtyard Downtown Philadelphia to fund these share repurchases.

We prefer not to shrink the Ashford Prime portfolio but an asset sale of a lower RevPAR asset is our cheapest source of equity and we've seen attractive investment opportunity by investing the proceeds into Ashford Prime's stock. It might also show the market where private market values really are for these types of high quality assets.

This is not unfamiliar territory for us, having bought back almost 50% of Ashford Trust’s outstanding shares during the last downturn. Other steps we’re taking to address the discount to private market value that we currently see in Ashford Prime stock include increasing our communication interaction with investors.

We have been very proactive in engaging with investors about our platforms. Year-to-date we have had over 250 investor meetings and we’ll continue to get out on the road, attend conferences and tell our story. We're also working on improving Ashford Prime’s balance sheet by refinancing Hilton JV in Pier House loans.

On these loans we believe we have the ability to push out the maturities while also lowering the cost of debt and increasing cash flow. We will continue to employ at conservative leverage profile for the Ashford Prime platform. We will not be looking to increase debt proceeds through these refinancing's.

And finally, we will we continue to aggressively asset manage Ashford Prime's high quality assets to maximize RevPAR and EBIT to grow. As this past quarter shows, this portfolio is well positioned to outperform and is in great shape from a CapEx standpoint.

We believe that if we continue to execute on these strategies and provide some pure performance, the market will recognize the value of its portfolio. If it doesn't, we remain open to exploring all options to maximize value In conclusion, we are very pleased with our operating performance this past quarter.

With Ashford Trust and Ashford Prime demonstrate a strong RevPAR growth and we are well positioned for growth in the future. We also are very excited about the prospects for our planned spin-off of Ashford Inc. which we expect to occur shortly.

Once completed the same management team responsible for Ashford Trust historical outperformance will now be the external advisor to Ashford Prime and Ashford Trust. This will offer our team greater flexibility to leverage the resources of both platforms putting us in a better competitive position when pursuing investment opportunities.

Our shareholders will also benefit as the Ashford family of companies is structured to ensure the alignment of management’s interest with shareholders. Also investors will have greater flexibility to take the investment strategy that best fits their needs.

For example, since the Advisors will be a public traded company, if investors want to synthetically internalize management, they can just buy share of Ashford Inc. stock. Most importantly, through all of these platforms we believe we are well positioned to capitalize on improving hospitality sector fundamentals.

We thank you all for your continued support and look forward to updating you on our progress on 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 third quarter of 2014, Ashford Trust reported AFFO per diluted share of $0.25 compared with $0.25 a year ago. It’s important to note that the third quarter of 2013 included the operations of the Ashford Prime hotels. Ashford Prime reported AFFO per diluted share of $0.42 compared with $0.32 a year ago.

For the third quarter, we reported adjusted EBITDA of $82.4 million for Ashford Trust and $24.7 million for Ashford Prime. This adjusted EBITDA result for Ashford Prime reflected a 47% increase over the prior year. At quarter’s end, Ashford Trust had total assets of $3.9 billion including the Highland portfolio which is not consolidated.

It had $2 billion of mortgage debt and 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 has currently 47% fixed rate and 53% floating rate, all of which have interest rate caps in place.

Including the market value of Ashford Trust OP units of Ashford Prime, and it’s pro rata share of the networking capital of the Highland portfolio, Ashford Trust ended the quarter with net working capital of $547 million. Ashford Prime at quarter's end had total assets of $1.3 billion.

It had $765 million of mortgage debt and continuing operations which had a blended average interest rate of 5% and is currently 55% fixed rate and 45% floating rate, all of which have interest rate caps in place.

As of September 30, 2014, the Ashford Trust portfolio consisted of 116 hotels with 23,063 net rooms and the Ashford Prime portfolio consisted of 10 hotels with 3,472 net rooms.

Ashford Trust share count currently stands at $110.9 million fully diluted shares outstanding which is comprised of $91.1 million common shares and $19.8 million OP units, while Ashford Prime share count currently stands at $34.5 million fully diluted shares outstanding which is comprised of $25.4 million common shares and $9.1 million OP units.

I’d now like to turn it over to Jeremy to discuss our asset management accomplishments for the quarter..

Thank you, Deric. This was an exciting quarter for both Ashford Trust and Ashford Prime with each producing double digit RevPAR growth. I’d like to start by discussing Ashford Prime where our 10 assets increased RevPAR by 11.7% and total revenue by 11%. When compared to competitors, the portfolio gained 135,000 basis points of RevPAR market share.

The four West Coast assets continue to perform well with a combined RevPAR growth of 15.2%. We are also pleased with the strong quarter in Washington DC with the Capital Hilton Group RevPAR by 11.9% driven primarily by strong group business.

The exceptional top line performance translated well to the bottom line, the strong flow-through at the property level. Hotel EBITDA flow-through for all 10 Ashford Prime Hotels was 45% and hotel EBITDA margins increased by 116 basis points to 34.7%. Adjusting for property manager incentive fees, EBITDA flow-throughs would have been 69%.

Our management team is very pleased with Ashford Prime strong performance in the quarter. Portfolio RevPAR was $191 million. Average rate was over $220 million and the 10 properties operated at 87% occupancy. Four out of the 10 hotels maintained over 90% occupancy, while Pier House and Marriot Seattle average rates about $300 night.

Room revenues grew 21% versus last year, dealing significant increases in ancillary revenues including high margin banquet and catering business. Overall these results highlight the premium nature of the Ashford Prime assets, all of which are located in high quality markets and are among the finest properties in the respective areas.

I'd like to move on to the Ashford Trust portfolio. With 116 assets grew RevPAR by 12.4% and 11.1% in total revenue. The Ashford Trust hotels increased the RevPAR market share by 226 basis points during the quarter. All five property managers grew RevPAR by double digits in the quarter.

64 assets grew RevPAR by more than 10%, 28 by more than 20% and six by more than 30%. Much of this growth came through a 14% increase in group room revenue. The Ashford Trust portfolio had hotel EBITDA flow through of 48%.

Similar to Ashford Prime strength in Washington DC was a significant driver of Q3 performance as Ashford Trust assets in the DC metro area grew RevPAR by 18.9% year-over-year. During the third quarter we acquired two new assets in the Ashford Trust portfolio. The 39 room Ashton Hotel in Fort Worth and 357-room Marriot Fremont in Silicon Valley.

We are already seeing evidence of the operational improvement we expected from installing Remington as the property manager at these hotels. During the quarter they together produced EBITDA flow-throughs of almost 100%. Also during the quarter Ashford Trust completed full renovation of the guest rooms at our Hilton Property in Downtown Fort Worth.

We are very excited to offer this new product which features a streamline modern design while blending in with the traditional atmosphere of the city. The newly renovated rooms, suites and executive rooms are positioned among the finest in the city and will appeal to business travelers and major guests alike.

Our Ashford management team continues to work alongside Remington to maximize the return to shareholders on capital expenditures. In August of last year Ashford Trust announced a conversion of the Beverly Hills Crowne Plaza to a Marriot, to be completed in the first half of 2015.

We have identified a gap in the supply of Marriot rooms in that market with no full service Marriot within 6.5 miles of this property. At the end of the second quarter of this year, we've again a full renovation in preparation for the conversion.

And I'll share with you the completion of a stunning model room that truly embodies our concept for the new positioning. In the third quarter we began to work on the remainder of the rooms most recently completing the new HVC systems.

We are excited about the upcoming opening of the Marriot Beverly Hills which is on schedule for the first half of 2015. This quarter's robust gains in RevPAR market share coincide with the fourth full quarter since Ashford substantially increased its focus on market share and investment in revenue enhancement initiatives.

On the Ashford asset management team, these efforts began in July 2013, with the creation of a comprehensive revenue optimization initiative which is installed - instilled in analytical data driven top line culture within our asset management team.

This revenue culture combines innovative new sources of revenue management data with rigorous and regular top line reviews with a brand management partners, enhance our hotels revenue optimization strategies. We recently conducted comprehensive reviews of all of our properties negotiated corporate account for RFP.

These reviews were data intensive valuations of each hotels top negotiated accounts proposed pricing taking in accounts stay patterns, ancillary spend and displacement levels of higher trends in retail demand. In addition, Remington also vastly expanded some sales, revenue management, and ecommerce resources and capabilities in the middle of 2013.

They increased staff and included a 100% increase in ecommerce revenue management coverage. In the past several quarters, I have highlighted these areas of increased revenue investment in greater detail and I believe this quarters RevPAR index growth demonstrates the success of our strategies and initiatives.

Continuing to optimize top line growth will enable superior bottom line results for our investors. I will now hand the call over to Douglas..

Thanks, Jeremy. Throughout the course of 2014, Ashford Trust had made good use of favorable capital markets condition to opportunistically address our debt maturities. At the same time we have generated excess cash to strengthen our balance sheet and we raised equity for the two acquisitions that we completed during the third quarter.

We use the proceeds from that equity offering to acquire two hotels during the third quarter. The 39-room Ashton Hotel in Downtown Fort Worth for $8 million and 357 room Fremont Marriott Silicon Valley for $50 million.

We specifically look for transactions such as these or we see high quality assets with desirable locations and an opportunity to significantly improve the operating performance of the property by installing our affiliated property manager Remington.

While the Ashton Hotels are smaller deal size and what you would typically expect for Ashford Trust, we considered it an extremely attractive investment opportunity given us as the only luxury hotel in Downtown Fort Worth.

We expect Remington will be able to realize considerable synergies since the Ashton is located two blocks from the Hilton Fort Worth, which is also earned by Ashford Trust and managed by Remington. Subsequent to closing, we financed this hotel with $5.5 million and non-recourse mortgage loan with the term of five years.

The Fremont Marriott Silicon Valley acquisition was a compelling opportunity for Ashford Trust. We acquired this hotel to very attractive purchase price representing an approximate 45% discount to estimated replacement cost.

On a full 12 month basis the purchase price represents an estimated cap rate of 8.1% on net operating income which equates to an expected 10.0x for EBITDA multiple.

The hotel was in exceptional physical condition with minimal CapEx needs having recently undergone a significant renovation of approximately $8.1 million or $23,000 per key which was completed in 2013. The Fremont Marriott is the only full service hotel in Fremont which is itself a high barrier to entry fast growing RevPAR market.

This gives a considerable leverage in drawing corporate demand from the large number of technology companies headquartered in the immediate area. The hotel offers market leading amenities and 15,000 square feet of meeting space.

Now that we've installed Remington as the property manager, we have already seen markedly improved operating performance at this hotel. To finance the hotel with a $37.5 million non recourse mortgage loan that bears interest at a floating rate of LIBOR plus 4.20%. And the loan has a two-year term with three one-year extension options.

In terms of financing activity during the quarter, in late July Ashford Trust successfully refinanced three mortgage loans with a combined outstanding balance of approximately $325 million for $469 million. Additional information including terms are referred you to the Ashford Trust press release date July 28, 2014.

In summary, the refinancing resulted in excess net proceeds after closing costs and capital expenditure reserves of approximately $104 million and unencumbered two hotels, The Hampton Inn in Terre Haute and Homewood Suites Mobile which we listed for sale.

We continue to see favorable conditions in lending terms in the debt markets as spreads keep tightening, LTVs rise, and debt yields shrink. So you can expect us pursue similar financings in the future, as we continue to proactively manage our debt maturity schedule.

Ashford Trust will likely continue to take a more opportunistic view on leverage and liquidity, while Ashford Prime will continue to be more conservative in its use and structure of leverage. The third quarter was relatively quite for Ashford Prime.

We saw a lot of activity earlier this year following the spin-off including the January public offering of $9.2 million shares of common stock and the acquisitions of 415 room Sofitel Chicago Water Tower and the 142 room Pier House Resort, which demonstrate this platforms well defined investment focus on high RevPAR hotels and gateway and resort locations.

We remain committed to growing this platform but as we stated previously we will only do so in a manner that is accretive to shareholders. Meanwhile, we see the stock buyback as a better alternative to hotel purchases currently. As Monty mentioned earlier we remain open to exploiting all avenues to maximize value for our shareholders.

Note, our other option property, the Marriott Gateway in Crystal City has a 12-month exercisable term that runs from May 2014 through May 2015.

Given Ashford Prime’s existing disclosure in the DC market, with the Capital Hilton, and the current price of Ashford Prime stock, we do not expect Ashford Prime to exercise that option in the near term unless these conditions change. Our deal pipeline remains strong as we continue to see the strategic benefits of having two investment platforms.

However while Ashford Trust will continue to be more opportunistic, Ashford Prime has well defined strategy. So while we continue to review many potential deals, the ones we will pursue for each platform will depend upon the marketed and off-marketed deal-flow along with each company’s respective cost of capital.

We’ll see more portfolio opportunities coming at the market which is typical at this point in real estate cycle. Our two platforms in Prime and Trust offers an advantage as we can leverage both platforms to mix in that assets and capital to maintain a strong competitive bidding position against the private equity funds.

We are looking forward to the pending launch of Ashford Inc. Ashford seeks to increase its income stream through the growth of existing platform if any and the potential launch of future businesses including select service platform and mortgage lending platform and a real estate oriented hedge fund.

Other revenues of growth include starting or buying companies and offers services good at various hotels that the Ashford platforms own. We released information recently that pointed to an annual EBITDA of approximately $2.4 million as estimated in our Form-8K filed on October 10, 2014.

We are very excited about the long term potential of this platform over time. In closing, we continue to seek out attractive investment opportunities, as well as alternative ways to invest in accretive growth for both Trust and Prime. This includes proactively managing our capital structure.

Our focus for Ashford Trust remains opportunistic when deciding on refinancing and investment decision. At Ashford Prime our investment strategy is very focused on our target assets remaining true to our objective of completing transactions that are accretive to shareholder value.

Remember, our interests are closely aligned with yours because we are significant shareholders in both of these companies, holding 17% of Ashford Trust and 13% of Ashford Prime. We invested right along side all of you and as our track record clearly shows, we are dedicated to delivering superior returns to our shareholders.

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

Thank you. (Operator Instructions) And we’ll take our first question from Ryan Meliker from MLV & Company. Caller, your line is open..

Hello, can you hear me? This is Ryan, can you - great. Nice quarter guys. Thanks a lot. I just had a couple of quick questions. With regards to AHT, I was wondering if you could give us some color on what really drove Highland’s performance in the quarter? It was pretty stellar.

Were those properties coming off, renovations more or is it just really same things unfold? And then the second question I had with regards to Highland was, are you guys close to being in the market for refinancing? How are things unfolding? It looked like your debt yields on the strong flows of the property really ran up to over 12%, if I recall in the last call you had mentioned that the debt yields for Highland could be refinanced in the 8% to 9% range potentially.

It seems like there’ll be a pretty windfall of cash that could come when you refinance, how are you guys thinking about that now? Thanks..

.

And so when we acquired the assets, we initially just cut costs to get to levels at the expense level and then put the right capital in the properties from a mechanical and systems perspective.

And then the renovation of the major renovation for positions actually we put into the capital but that's impactful to the guest experience took some time as we planned it out. And so, we are now getting the benefits of the renovation we put in place. I don't think mainly because of year-over-year renovation comparisons.

I think its just the fact that it’s a return on some of the renovation, capital was invested as well as the sales and marketing revenue management strategies that we are putting in place both in Remington and non Remington hotels..

Great. Thanks Jeremy..

Hey Ryan, its Douglas. So regarding the refinancing, I would say - we've adjusted our views internally but not yet really made any decision. We’ve moved this initiative forward from previous calls where this question has been asked and clearly the waiting has been the right thing to do as evidenced by the strong performance out of portfolio.

We try to optimize the lining of the operating performance of the hotels, as well as what’s taking place in the debt capital markets. And over the period of time, this year the debt capital markets have clearly tightened in the favor of borrowers and the performance of this portfolio has increased.

So waiting clearly has been the right decision with respect to evaluating potential refinance of this portfolio.

Obviously this is decision that we will make in conjunction with our partner Prudential but we have started a process just to get a view of – out of indicative pricing on the portfolio and I think it is evident that there are excess proceeds available given the current financing terms in the market.

As to the timing of when we do this, I think we first want to get a better understanding of where the financing terms will come out. We also want to get better understanding of what our partner credentials objectives are with respect to their investment in the portfolio.

And to the extent there is any alignment of refinancing with any strategic initiative with our partner that’s something for consideration or if we just go ahead and refinance it as a partnership as it stands right now, that’s also a possible strategy. So, we are engaged more in evaluating this opportunity.

We clearly believe it’s an opportunity for our shareholders overall..

This is Monty, Ryan. I think that – on that financing we prefer - to drive us back in the ground on safer shore. But clearly nothing is going to happen between now and the end of the year because we just have it – been in that process much. But we are starting to process. So that’s a change from the past.

So I'd say there’s very real possibility that it occur in the first quarter. But again we’re not saying that that’s anywhere close for share because of all the items that Doug mentioned. But it’s certainly a something we’re looking at..

That's helpful. Thanks Monty. And then I guess, with regards to Prudential, I think we have a pretty good understanding of your management teams, your leverage and how you think about maximizing the value of your portfolio.

Would Prudential be on similar views where they might be open to maximizing leverage when this comes up for refinancing? Or do you think that they’ll take a little bit more of a conservative approach and you guys are going to engage in that discussion going forward?.

We are in discussions with Prudential on this, I think they also see the attractive aspects of the markets today and the performance of this portfolio. It's an ongoing dialogue, obviously we would prefer to see a stake advantage of the markets today and we're going to continue to put strategy in there. .

That sounds good. It's kind of exciting. It looks like with - had an 8% yield, you guys might be able to get $400 million incremental cash back to your balance sheet on a refinancing, so that would be exciting to see. Second question I had -.

Hey Ryan, it's Deric. I just want to clarify something on the – the debt deals that you’re looking at on our earnings schedule, that's an EBITDA that yield. And the debt yields that we quote in terms of what is available in the marketplace today is an NOI debt yield. So, I just wanted to -.

Got you. So, there’s a little bit of difference there. That’s helpful..

Also Ryan, just to let you know is that, three of those properties in the Highland portfolio would have a pretty healthy amount of discretions associated with them. And so, those are less likely to be refinanced. They're in a poll on their own. So we haven’t made that decision yet.

But there’s a very real chance that we'll finance all of them except for those three, or maybe those three as well..

Right. Okay. That makes sense. And then the second question I had was with regards to Ashford Prime. You guys announced the buyback on Monday and obviously the markets are certainly like that.

What we've seen this year, I think I’ll use Starwood and Marriott as prime examples and curious you take in terms of how you’re going to use the buyback? Marriott's operative and methodical approach where they’ve bought back stock at a similar pace throughout the course of the year.

Starwood had attempted to be a little bit more opportunistic with buybacks and got a lot of push-back from investors and eventually changed their course. And you’ve seen a pretty big difference in stock performance over those two companies this year largely driven by buyback dynamics.

As you guys think about the buyback for Ashford Prime, is this going to be something where you’re going to be opportunistic? Or is this something where you’re going to try to instill some type of methodical predetermined plan to show the market that you believe that this is a company where you can buyback stock because you have the cash and the stock is at a reasonable valuation?.

I think our plans are internally is to – here two days after our announcements to go ahead and to launch a programmatic program. And then later in this year or the first of next year to sit down and to - continue to reevaluate it. But we’re just going to get into the market with a programmatic plan right out of the box..

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Thank you..

Our next question comes from Jordan Sandler with KeyBanc..

Hi guys, it’s Austin Wurschmidt here with Jordan.

I was just curious, the operating strength this quarter was relatively broad-based, and I was wondering if there were any top markets where you don’t expect the momentum to continue? You mentioned DC as being a top performer and just some color on the general outlook for that market would be helpful?.

Well, in DC we had some great group dynamics here in the third quarter. That really, really helped us. At the same time, we are seeing a return of government business, we do think that, we reached the bottom in that government business a quarter or two ago. And as coming back, not to know where necessarily but it’s rebuilding.

As far as any markets that we see necessarily weakness going forward, Jeremy you might want to comment on that..

Yeah, sure. Well, one of the markets is Philadelphia has got a weaker citywide convention outlook. DC is really kind of difficult to predict how it’s going to respond.

For the quarter the government business was up 15% in DC and so we’re seeing some strength and of course in the fourth quarter, you will not have the recurrence of government shutdown that occurred in October 2013. Towards other markets, national, still looks to be strong in 2015 and 2016.

The conventional calendar is still strong relative to historical trends..

Really we don’t see much in any of the other markets to think that they would be materially off. I mean – again a little bit here and there but nothing newsworthy..

That’s helpful.

And then just, in terms of the revenue management initiatives, you guys are starting to see some of the market share benefit of that, I am just curious when you look across the portfolio, how much additional market share upside do you think that you guys have left?.

That's hard to say. I mean, a market share is very difficult item - we’re pushing to get 100 or 200 basis points, whether we get that increased every quarter and how long we can get that it’s hard to day. Of course you can’t get that forever because then you should be climbing to the sky, but that is what we’re internally trying to achieve.

But there’s just so many variables that go into it. But we’re still checking away and working very hard on that, we have just done quite a number of different techniques. We’ve developed our own revenue management system and one of the challenges we have is that the brands have their own revenue management systems or yield management systems.

And we're trying to interface so we can put our information into the reservation systems, our rates and our inventory controls. But, the brands just aren’t setup to allow us to interface. And so that's frustrating for us. We're trying to push them to allow these electronic interfaces to be in place with a very mixed results thus far.

So, anyway, we’re continuing to push forward on it..

And then just one last one from me.

I was just curious, how should we be thinking about the ROFO properties as we head into 2015?.

I think that you should think those ROFO properties as being on the back front. We’re more focused on our stock price in Ashford Prime. And you may just get into a trading zone where those purchases from Trust would be accretive for Prime as well as of course attractive for Trust..

Great. Thanks for the time..

Our next question comes from Thomas Allen with Morgan Stanley..

Hi guys. A recent theme has been around new soft brand launches by the bigger brands, your Ashford Trust portfolio has a relatively small mix of independent hotels. How are you thinking about that going forward as things change? Thank you..

We're always looking at branding options. Our property down in Key West is unbranded right now, the Pier House, and it just runs such high occupancies that it's hard to see how a brand could add any occupancy to it or maybe through the additional pressure that could increase rate even more. Although, gain on share is continuing to do well.

So, it’s just hard to see how that could help us, maybe if it was a fairly inexpensive soft branding option. But so far while we review all that constantly we just don’t see any changes at this point in time. .

Okay, thank you. And then just on the Chicago Sofitel, it seems like trends improved a bit in the third quarter, how is that performance versus your expectations? Thanks..

Well, at first it performed under our expectations. Right when we bought it, we had that tough Chicago winter. And that was unexpected for us.

We didn't know that the conventional calendar for Chicago would be a little weak this year than normal and we put that into our underwriting, into our formulas, but it was that the initial few months of performance which has caught us a little bit by surprise.

But since then, it's been right along what we’ve anticipated and we’re happy with it, we’ve been able to achieve just some great EBITDA flows and this is despite the fact that the prior owner has some good people on it, but we’ve been able to improve it even more. So, so far so good. It's beautiful asset too..

Great. Thank you..

Our next question is from Andrew Didora with Bank of America Merrill Lynch..

Hey, good morning everyone. Just had a question on the buyback at Prime, I guess - my question is, how do you balance the buyback with wanting to delever Prime? I guess, based on our calculations or potentially is certainly accretive selling the Courtyard’s buyback stock isn’t necessarily de-levering.

At this point in the cycle are you willing to maybe keep a little bit higher leverage for kind of longer time period than you originally thought or how do you think about that? Thanks..

Thanks, you asked a good question. We're still committed to our deleveraging plan. And we’re committed to moving towards a net debt to EBITDA of about 5.0x by the end of 2015. So, we want to keep on track with that. So, we will obviously balance any buyback in the quarters with that goal. We don’t want to come off that goal. .

I guess a follow up to that, what are the steps that you guys are going to follow in order to try to get that leverage level down?.

We’re going to let the EBITDA continue to grow and just that it’s growth levels will be able to, we believe achieve that target by the end of 2015..

That's all I had. Thanks..

Our next question comes from Chris Woronka with Deutsche Bank..

Hey, good morning guys.

Want to ask you on the plan to sell the Philadelphia Courtyard at Prime, have you guys already kind of begun that process? And without kind of getting into specifics on pricing, maybe some directional guidance on where it might price relative to where your whole portfolio is trading?.

Well, we picked that asset because it's a one of our lower RevPAR assets. And, we're trying to have Prime focused at the higher end. And so that’s why we picked that one.

We’ve just begun the process, we received some brokers indications of value but we haven't started marketing at all so it’ll be sometime probably mid-spring where we are able to trade. As far as what it would trade for, I don't know that really at this stage we can’t share much of that right now because it’s just still so early in the process..

The only thing I’ll add to that is obviously with the announcement it's a very desirable asset, urban select service and a solid marketing. No surprise that we would get some inbound enquiries from groups that would fit their strategic purpose and would want to try to do a deal with us and kind of cut off the marketing process.

So, we're going to go through marketed effort here and obviously there is a convergence taking place in the market today between select service cap rates and full service cap rates.

And we want to capitalize on that situation to market and with the net impact of taking out one of our lower RevPAR assets which should elevate the overall RevPAR at the remaining portfolio and be of benefit the way we think about our EBITDA multiple given that correlation.

So, it’s the right strategic move, it’s the right time to do it and we look forward to getting this asset out in the market..

Okay. Great, and then, when you launch the buyback earlier this week or when you announced it anyway, I think you mentioned that if possible you’d sell other hotels in the future presumably for additional share repurchase.

Is that exclusively kind of the lowest - maybe the lowest RevPAR assets? Or is it more of a market based decision? I guess how do you think about potentially taking more liquidity out of the stock with incremental buybacks beyond this initial round?.

Taking liquidity out is very important issue to us. So, we’re going to look at that very, very carefully. That’s very important. And to answer to your question, it's just hard to say.

That's just out in the future and even if we’re able to buy the amount that was authorized based upon our volumes and the limitations set out there, it’s going to be over a year. So, that’s just something quite sometime out there. So, I think what we’re trying to communicate is that, we want this platform and this share price to perform well.

And it's very, very important to us. And there maybe some investors thinking that the key to our strategy – overall strategy is to grow this platform through issuing shares, and that's just not the case.

If that works for investors and it's trading well then we'll do it, if not, we’re not going to focus on the share price because the success of this platform – as stock price wise is very important to us. So, that's what we’re focusing on now. And we’ll take the future when it comes..

Okay. Got you.

Just finally maybe a question for Jeremy, trying to understand directionally the seasonality of both Sofitel and Pier House, but probably little bit more on Sofitel? Obviously first quarter is always very slow, but is there a big drop-off from third quarter or fourth quarter, knowing that October is pretty strong?.

I don’t think the seasonality is necessarily going to change for either asset. But definitely the fourth quarter and the first quarter for Chicago is much weaker relative to the second and third quarter. And for Pier House actually this season is much stronger at the first of the year. Key West in January isn’t season.

So, they’re almost counter seasonal to each of the respective assets..

Okay. Great, thanks guys..

We’ll take our next question from Robin Farley with UBS..

Hi, thank you for taking the question. This is actually [indiscernible] for Robin. I actually had a two part question.

Regarding group pace for 2015 as of now and what it was in Q2 as you look across your portfolio, if you could give some color there? And then obviously, you don’t give guidance for 2015, but as you look at group pace for 2015 and transient demand drivers today, do you expect acceleration in 2015 grows from 2014 not just year-over-year improvement?.

This is Monty, we try to avoid giving too much guidance on all of that for the reasons that we talked about in the past because then we find ourselves spending a lot of time on those forecast and the like. But, we see the economy to continue to grow and we see the desire for transients and group production to continue to be pretty strong.

So, it’s hard to say what that translates into RevPAR for the industry or for us. But we’re still pretty optimistic about where we are at this point in the cycle for the industry and for ourselves. .

Okay, great. And then a follow up. Occupancies are obviously at peak and valuations expected to be obviously higher in 2015 at this point in the cycle. And you just commented that buying back stock for the Ashford Prime portfolio is perhaps a better alternative right now versus buying hotels.

As you look ahead, do you expect to be in that buyer or seller next year? Thank you..

I think that of course it all depends. But generally in Trust, we see some opportunities to buy, but in Prime, considering where the stock price is, I see that it is unlikely..

All right. Thank you very much..

Our next question comes from Nikhil Bhalla with FBR & Company.

Hi, good morning Monty. The first question I have is on margins for both the portfolios, Prime and Trust. I think they both had headwinds from higher incentive fees again in the third quarter, very similar to what we saw in the second quarter.

Could you just give us some sense on what that may look like in terms of trend going forward?.

Sure. I think that’s first as you compare our margins to some of the other platforms out there, we’re running pretty high margins already, especially compared to some of our peers. And so, while margin is important to look like maybe even EBITDA year-over-year growth is maybe even better.

But I think that your question affects both, and Jeremy why don’t you comment a little bit on those incentive fees..

Yes sure. Really in the third quarter, both Trust and Prime had incredibly flow-throughs to the operating line which we call gross operating profit and there’s no question that were impacted by incentive fees. About 60% of both Trust and Prime properties are accruing for incentive fees for the third quarter.

And when you look on a year-over-year basis, if you recall the Trust, our revenues somewhat lagged the broader industry. So, we didn’t have as many hotels last year that earned incentive fees with the performance that we’re having with Trust right now, a lot of the properties are earning up into the incentive fee category.

The good news is that, with the Remington properties, they're capped at 1%of revenue. The non-Remington properties have kind of what a, hurdle that they exceed and then they participate in the operating cash flow above a certain hurdle.

As for Prime, we have a little bit of a year-over-year comparison where we had a property or two that ended up earning up in the incentive fee towards the end of the year.

So, it did not have it fully accrued in the third quarter because it wasn’t determined whether or not it was actually going to earn incentive fees and so on a year-over-year comparison, there is little bit of an anomaly for Prime..

Okay.

So, just going forward, I think what your comment is suggesting is that on the Prime side because fewer properties there are managed by Remington, we may still continue to see incentive fees ramp up over the next several quarters?.

They’re definitely going to be there and -- but it’s not going to be -- it should not be as significant just because we have that anomalies as I mentioned on a year-over-year basis and we’ll anniversary out of that at the end of the year, but we will still be having incentive fees probably because the properties are performing so well.

The only way to lower those incentive fees is to own or fund CapEx, and as we mentioned the properties are great from a capital standpoint or for property performance to go down..

Okay. Thank you. And then I have a follow up question for you again Monty.

When you think about the Ashford portfolio and the termination fees associated with it, if there’s a change of control for the external advisor? Yes, I know that there is some investors who've calculated that termination fee excessively high somewhere in the $4 to $5 per share range.

Would you be able to comment on that on how we should think about that if there's anyway to book in the economics on the termination fee as the portfolio stands today and where the economics of the portfolio stand today?.

Sure. I just think that some folks are making a mountain out of a molehill on all that. First of all, we think that those calculations are high. And secondly is that, that presumes that any portfolio of assets have got to be managed or overseen, right. No matter who buys some assets or what they do, they’ve got to have some asset management overhead.

And, we think that if these assets were ever sold, one of the buyers could potentially be someone that would avail themselves of Ashford Inc.'s management expertise and the overhead associated with it in which case, they’ll be no impact on price whatsoever.

So, I think it’s just because the management structure is a little bit unusual in the equity side of REIT real world, of course they're everywhere in the mortgage REIT side that there’s extra focus on it and there just doesn’t need to be because it’s just not significant..

Okay. So, just based on where the portfolio stands today in terms of – it’s creating 12 month EBITDA and things like that and management fees that we can calculate out of that.

Is there a way to get a sense of what the termination fee could look like as $1 per share value versus what people are thinking from - maybe a $4 or $5 per share number that I think some of us have heard?.

Yes. Yes, you can pull off the docs and go through the calculations. And rather than sit here and give specific numbers, I think it’s calculation that people should do for themselves. But, it’s a pretty straightforward process that we can walk you through..

Okay. All right, thank you very much..

Last question comes from Ryan Meliker from MLV & Company.

Hey guys. Just one quick follow up. We've seen the summer for your select service portfolios trade hands, usually going to private equity bidders or North Star which is essentially private equity buyer. You guys have talked about Ashford Trust being interested in acquiring a select service portfolio and Ashford Inc.

overseeing a select service REIT at some point if the stars align. I am curious, can you give us some color in terms of why you guys haven’t been the acquirer of any of these portfolios? Is it because pricings been too high or because you had been too focused on getting the Ashford Inc.

spin-off completed or something else you know that I am not even thinking of?.

I think the answer is that we had to get the Ashford Inc. spun out.

A lot of moving parts and trying to couple that with doing a large transaction would just add, not only add complexities, but also push the whole process back because we’ve had value what Ashford Inc would be worth and then with large portfolio that value would change because of TEV of Ashford Trust would change and therefore the fees would -- it’s just too much.

But, we’re almost done with that process and so we’ll be out and about..

So, it sounds like, after the spin-off is completed, you guys might be a little bit more aggressive as some more of these portfolios hit the market?.

I would expect so..

Great. That’s all from me. Thanks a lot..

That concludes today’s question-and-answer session. At this time, I would like to turn the conference back over to the management for any closing remarks..

Thank you all for your participating today. We look forward to speaking again on the next call. Thank you..

This concludes today’s conference. Thank you for your participation..