Ashford Hospitality Trust Inc

Good day and welcome to the Ashford Hospitality Trust second quarter 2019 results conference call. Today's conference is being recorded. At this time I'd like to turn the conference over to Jordan Jennings. Please go ahead.

Good day everyone and welcome to today's conference call to review the results for Ashford Hospitality Trust for the second quarter of 2019 and to update you on recent developments. On the call today will be Douglas Kessler, President and Chief Executive Officer. Derek Eubanks, Chief Financial Officer, and Jeremy Walter, Chief Operating Officer. The results, as well as the notice of the accessibility of this conference call on a listen-only basis over the Internet, were distributed yesterday afternoon in a press release that has been covered by the financial media. At this time, let me remind you that certain statements and assumptions in this conference call contain or, based upon forward-looking information, are being made pursuant to the Safe Harbor provisions of the federal securities regulations, 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 factors are more fully discussed in the company's filings with the Securities and Exchange Commission. The forward-looking statements included in this conference call are only made as of the date of this call, and the company is not obligated to publicly update or revise them. In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in the company's earnings release and accompanying tables or schedules, which have been filed on Form 8K with the SEC on August 1, 2019, and may also be accessed through the company's website at www.ahtread.com. Each listener is encouraged to review those reconciliations provided in the earnings release together with all other information provided in the release. Also, unless otherwise stated, all reported results discussed in this call compare the second quarter of 2019 with the second quarter of 2018. I will now turn the call over to Douglas Kessler. Please go ahead, sir.

Good morning, and thank you for joining us to discuss Astrid Hospitality Trust's second quarter results. I want to begin by providing some comments on the recent performance of our stock. We hope that the information on our second quarter earnings released along with other topics discussed on this call, will highlight a simple fact. It's business as usual at AstroTrust. While lodging REIT stocks in general experienced some softness during the quarter, we believe that our dividend announcement led to an overreaction in our stock. Management is entrusted with making the right decisions, ones that oftentimes are about longer-term vision and opportunity. This is exactly what you should expect from us given our significant insider ownership at 17%. the highest among our peer group. Our goal is to maximize shareholder returns over time, and our team is committed to achieving this via value-added transactions, disciplined capital markets activity, and aggressive asset management. Our approach at Ashford Trust is always focused on how best to capitalize on lodging and financial market opportunities, while at the same time being fluid in our strategic efforts. For example, Despite the attractive features of our enhanced return funding program, we currently do not plan to make any acquisitions unless we can do it accretively without increasing our leverage. We strongly believe that ERFP has improved the investment returns on our recent purchases. However, we are prepared to be patient before accessing more ERFP capital for new deals given the current stock price compared to where we traded when we acquired the past four hotels that led to ERFP commitments. Alternatively, we are engaged in some asset sales discussions. When we evaluate asset sales, we take into consideration many factors, such as the impact on EBITDA, leverage, CapEx, RevPar, et cetera. We've listed a few assets for sale, and if we complete the sales, we plan to use the proceeds mainly to reduce our leverage. We may also consider share buybacks under the right conditions. Also, our portfolio is currently realizing the benefits from our recent CapEx spending, which is evidenced by the outperformance in our operating results. As we stated earlier this year, we anticipate our CapEx spending will be more consistent with our long-term historical levels. As I now turn to our second quarter performance, I would like to remind everyone that we have a very geographically diverse portfolio consisting of high-quality, well-positioned assets across the U.S. We believe that this geographic profile provides some very distinct advantages with respect to operating performance. Our actual rev par for all hotels for the quarter increased 2.8%, while comparable rev par for all hotels increased 1.4%. Comparable total rev par increased 1.9% for all hotels, highlighting our focus on growing ancillary revenues. For the second quarter, comparable rev par for hotels not under renovation increased 1.6 percent. Additionally, we reported AFFO per share of 47 cents and adjusted EBITDA RE of $132.1 million. We are pleased with our second quarter performance. Since the ERFP is a unique competitive advantage for us, it is worth highlighting where we stand with the program. Ashford, Inc. is committed to provide $50 million to the company on a programmatic basis. equating to approximately 10 percent of each new investment's acquisition price to be used for the purchase of FF&E properties owned by the company. Since establishing the ERFP, we have already completed $406 million of high-quality acquisitions that have utilized the program, which equates to approximately 80 percent committed utilization of the pledged $50 million of ERFP funding. To date, we have received approximately $29.2 million of the $40.6 million that Ashford, Inc. has committed to provide us for the four acquisitions under the ERFP. Jeremy will provide additional information on the performance of these properties along with other portfolio highlights in a few minutes. Turning to our balance sheet, we believe in the benefits of an appropriate amount of non-recourse asset level financing to enhance equity returns. We have a targeted range of net debt to gross assets of 55% to 60%, and we anticipate returning to that range over time. We would like to remind everyone that our loans are mainly floating rate, which we believe provides a natural hedge to our cash flows. At the beginning of this year, LIBOR was 2.51%, and currently it is 2.24%. Every 50 basis point reduction in LIBOR would result in approximately $19 million of annual interest savings based upon our current capital structure. With all our recent refinancing activity, we believe we now have an attractive, well-laddered maturity schedule. We also seek to maintain a high cash and cash equivalence balance between 25% and 35% of our equity market capitalization for financial flexibility. We note that this excess cash balance can provide a hedge during uncertain economic times, as well as the requisite funds to capitalize on attractive investment opportunities as they arise. As of the second quarter of 2019, our net working capital totaled $367 million, equating to approximately $2.95 per share, which represents a significant 115% of our current share price as of yesterday's close. I will repeat that. Our net working capital per share was 115 percent of yesterday's closing price. We believe our current valuation is significantly below the intrinsic value of the company. With a current market cap less than our net working capital, the market seems to be ascribing negative value to our hotel portfolio, which is financed solely with non-recourse debt. If you take just two of our 121 hotels, the Hilton Boston Back Bay, and the Renaissance Nashville, and apply a reasonable value for those hotels, we believe the implied equity value after debt pay down is approximately $200 million. If you add the excess cash in our balance sheet as of the second quarter to the implied equity value of those two hotels, we believe the combined value significantly exceeds our market cap. We still would have 119 hotels, a majority of which have been recently refinanced and with appraised value significantly higher above the loan amounts. We strongly believe the valuation disconnect between our market value and the perceived value of the company is significant, and our management team and board are focused on this disparity. We also continue to make progress on our investor outreach efforts, even more so now given the recent increase in our average daily trading volume. During the remainder of 2019, we will continue to get out on the road to meet with investors to communicate our strategy and the attractiveness of an investment in Asher Trust. Once again, we are planning to have our investor day in New York City on October 3rd and hope to see many of you there. Looking ahead, we have a well-diversified portfolio and remain confident that we are well-positioned to outperform. We remain focused on proactive management initiatives across our platform to maximize value for shareholders. I will now turn the call over to Derek to review our second quarter financial performance.