Ashford Hospitality Trust Inc

Greetings and welcome to the Ashford Hospitality Trust, Inc. Fourth Quarter 2019 Results Conference Call. At this time, all participants are in listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jordan Jennings, with Ashford Hospitality Trust. Thank you, Ms. Jennings. You may begin.

Good day everyone and welcome to today's conference call to review your results for Ashford Hospitality Trust for the fourth quarter and full year 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, Jeremy Welter, Chief Operating Officer. The results as well as notice of the accessibility of this conference call on a listen-only basis over the internet were distributed yesterday afternoon in 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 are based upon forward-looking information and are being made pursuant to the safe harbor provisions of the federal securities regulations. Such forward-looking statements are subject to numerous assumptions and certainties and known or unknown risk, 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 February 25, 2020, 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 fourth quarter of 2019 with the fourth quarter of 2018. I will now turn the call over to Douglas Kessler. Please go ahead, sir.

Douglas Kessler Good morning and welcome to our call. I'll begin by giving a brief overview of our fourth quarter 2019 results, followed by several highlights of our value-added initiatives. After that, Derek will review our financial results and Jeremy will provide an operational update. Our fourth quarter performance benefited from our geographically diverse portfolio, consisting of high-quality, well-positioned hotels across the U.S. We believe that having a large percentage of our EBITDA managed by Remington provides some distinct advantages with respect to operating performance. Our actual rev par for all hotels for the quarter increased 3.1%, while comparable rev par for all hotels increased 0.7%. Comparable total rev par increased 1.3% for all hotels, highlighting our focus on growing ancillary revenues. Additionally, We reported AFFO per share of 22 cents, an increase of 22% over the prior quarter, and adjusted EBITDA RE of $89.1 million. We accomplished these results despite tepid industry REVPAR growth and increasing operating cost pressure. However, we are far from satisfied and we continue to take steps to outperform operationally. Turning to our investment approach, we focus on how to best deliver accretive returns. Our cost of capital matters to us. While we see an increased number of hotels available for sale, we will remain prudent. For example, despite the attractive features of our enhanced return funding program, we currently do not plan to add to our portfolio unless we can transact accretively while enhancing our balance sheet. We strongly believe the ERP improves our projected investment returns, yet we are prepared to be patient before accessing more ERP capital for new deals given our current stock price. Disciplined capital recycling through asset sales is another important component of our strategy. When we evaluate selling a hotel, we take into consideration many factors, such as the implications for EBITDA, leverage, CapEx, REVPAR, et cetera. Towards this end, during the quarter, we sold the 102-room SpringHill Suites Jacksonville in Jacksonville, Florida, for $11.2 million. The sales price inclusive of the buyer's estimated CapEx of $2.5 million represented a trailing 12-month cap rate of 5.9% on net operating income and a 14.3 times hotel EBITDA multiple as of October 31st, 2019. The hotel was unencumbered and the net proceeds of approximately $10.8 million from the sale will be used for general corporate purposes. This sale resembled similar transactions we completed in 2019. whereby we sold lower REVPAR hotels in our remaining portfolio, but at higher EBITDA multiples than where we currently trade. We strongly believe this is indicative of a greater intrinsic value of our assets when compared to current market metrics. Regarding asset management, I will provide some highlights that Jeremy will cover in more detail. We continue to engage in strategies that we believe will create long-term value. During the quarter, we announced the sale of a 1.65-acre parking lot adjacent to the Hilton St. Petersburg Bayfront to a condo developer for total consideration of $17.5 million to be paid over time. This price exceeded appraised value. Net proceeds from the first payment tranche resulted in $8 million of loan repayment. When finished, the project will provide upgraded parking for our hotel guests. Also in October, we entered into a new franchise agreement with Marriott to convert our Crowne Plaza La Concha Key West to an autograph collection property by July 2020. The agreement includes a $13.7 million property improvement plan of which approximately $7.8 million is incremental and we believe should yield a 19% unlevered internal rate of return. We anticipate the conversion will create a distinctive style for the hotel that is commensurate with the upper upscale luxury autographed product. With its prime location in Old Town Key West, the upbranding of this landmark hotel should elevate the property's performance in this very attractive high barrier to entry, high rev par market. During the quarter, we also announced a new franchise agreement for the 252 room Hilton Alexandria Old Town. whereby the hotel transitioned from being Hilton managed to being managed by Remington. We believe there is a valuation premium for franchised hotels, and it should be noted that this change did not result in a property improvement plan. Hilton Alexandria, La Concha, and Hilton St. Pete are excellent examples of how we go about unlocking embedded value in our portfolio. As you can see, we've been extremely productive with our asset management efforts to create value. We leave no stone unturned when it comes to seeking ways to drive better operating performance. We also have several value enhancing initiatives underway involving ancillary income, cost controls, rebranding, and room additions. Jeremy will provide more details on our efforts later. As for our balance sheet, we believe in the benefits of an appropriate amount of non-recourse property level financing to enhance equity returns. We have a target range of net debt to gross assets of 55% to 60%, and we anticipate returning to that range over time. In fact, we are working to make progress given that most of our recent sales proceeds were applied to reduce outstanding loan balances. Our loans are mainly floating rate, which we believe provides a natural hedge to our cash flows and positions us to benefit from recent interest rate movements. With LIBOR currently at 1.61% and a more attractive forward LIBOR curve, in 2020, every 50 basis point reduction in LIBOR would result in approximately $19 million of annual interest savings based upon our current capital structure. In addition, with all of our recent refinancing activity, we believe we 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 are currently well in excess of that target and note that this cash balance can provide a hedge during uncertain economic times, as well as the requisite funds to capitalize on attractive investment opportunities. As of the fourth quarter of 2019, our net working capital totaled $331 million, equating to approximately $2.67 per share, which represents a significant 120% of our current share price as of yesterday's close. This is really remarkable when you consider that on top of this networking capital, we have a valuable portfolio of 117 high quality, predominantly upper upscale hotels. To help address what we see as an intrinsic value gap, we continue to be active with our investor outreach efforts. During the quarter, we held a well attended investor day in New York and also attended several conferences and had numerous investor meetings. During 2020, We remain committed to expanding our efforts to get out on the road to meet with investors to communicate our strategy and the attractiveness of an investment in AstroTrust. We look forward to speaking with many of you during upcoming events. We also recently updated our website with a new and improved investor section. The new website is meant to feature our high-quality portfolio and provide easy-to-find resources for investors. You can visit our website at www.ahtreit.com, and we hope you find it to be a useful research tool. Lastly, we understand that many investors are focused on the coronavirus. Thus far, we calculate an approximate $550,000 impact to date. However, this number is increasing. If the virus is not contained and travel patterns change, we would expect a greater impact on our operating performance. In summary, we remain committed to generating solid operating performance, completing opportunistic transactions, and proactively managing our balance sheet. We believe we have multiple core competitive advantages that should lead to our performance and that make Ashford Trust an extremely attractive long-term investment. For example, our investment focus is predominantly on upper upscale full service hotels, but we also have balance in our portfolio given that we own select service hotels as well. With respect to our asset management initiatives, we remain diligent in exploring ways to increase profitability and create more value in our existing assets. Our affiliate companies are high-quality service providers that seek to maximize the value of our assets and improve guest satisfaction. Adding to the list of competitive advantages is our capital markets execution, given that we believe we have proven our financial expertise over multiple cycles. With our approximately 17% insider ownership, we believe we have tremendous alignment with our shareholders, which encourages us to think and act like owners to maximize long-term total shareholder returns. I will now turn the call over to Derek to review our third quarter financial performance.