Welcome to the Ashford Hospitality Trust and Ashford Prime Third Quarter 2015 Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Ms. Stacy Feit. Please go ahead.

Thanks. 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 2015 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 have been 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. 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 November 4, 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, everyone, and thank you for joining us. As we discuss at our recent Investor and Analyst Day, we continue to see very positive industry dynamics and believe that these favorable fundamentals will drive solid RevPAR growth going forward. During the third quarter, the lodging industry was negatively impacted by a couple of calendar events, namely the shift in the Labor Day Holiday to one week rather than last year, as well as the shift of some other holiday dates, both of which led us to a decrease in business travel during the quarter. In spite of this transitory issue, Trust third quarter RevPAR for all hotels still increased 5%, illustrating the benefits of its geographically diversified portfolio. Prime’s RevPAR grew 2.7%. We believe this was an anomaly rather than part of the trend. Looking ahead from a macro-perspective, the fundamentals in the lodging sector continue to exhibit positive long-term trends. PKF is projecting RevPAR growth to exceed 6% in 2016 and 5.5% in 2017, indicating this cycle still has lags and thus we remain bullish on the outlook for both Trust and Prime. We continue to manage each business with the long-term interest of our shareholders in mind and believe our long-term track record coupled with industry leading insider ownership among public-traded hotel REITs demonstrates our aligned interest with shareholders. The asset management team has long track record of creating shareholder value since Ashford Trust IPO in 2003. Over the years we have worked on new innovative way to maximize the value of our existing assets, while also looking for accretive opportunities to further invest in the hospitality industry. Since our IPO, Ashford Trust has achieved 144% total shareholder return. We're particularly shareholder focused as we're also substantial shareholders in both Trust with 15% insider ownership and Prime…

Thanks Monty. For the third quarter of 2015, Trust reported AFFO per diluted share of $0.35, compared with $0.25 year ago. This reflects the 40% growth rate over the prior year. Prime reported AFFO per diluted share of $0.39 compared with $0.42 a year ago. For the third quarter, we reported adjusted EBITDA of $104 million for Trust and $24 million for Prime. This result for Trust reflected a 26% growth rate over the prior year. At quarter’s end, Trust had total assets of $4.9 billion in continuing operations. It had $3.7 billion of mortgage debt in continuing operations with a blended average interest rate of 4.97%. The debt is currently 35% fixed rate and 65% floating rate, all of which have interest rate caps in place. Including the market value of trust equity investment in Ashford Inc., Trust ended the quarter with net working capital of $359 million. Prime at quarter's end had total assets of $1.3 billion in continuing operations. It had $760 million of mortgage debt in continuing operations of which $49 million related to its joint venture partner's share of the debt on the capital Hilton and Hilton La Jolla Torrey Pines. Prime's total combined debt had a blended average interest rate of 4.54% and is currently 55% fixed rate and 45% floating rate, all of which have interest rate caps in place. Prime ended the quarter with net working capital of $158 million. On the financing front, we are in the process of refinancing Trust’s remaining 2015 debt maturity as well as our only two 2016 debt maturities and expect to have them closed by year end. The total amount being refinanced is approximately $266 million. We expect the new loan proceeds to be approximately $456 million, resulting in approximately $190 million of excess proceeds,…

Thank you, Deric. Prime’s RevPAR growth of 2.7% in the third quarter was negatively impacted by shift in a holiday’s year-over-year, tough group comparables and renovation at Hilton La Jolla Torrey Pines and Renaissance Tampa. 11 Prime assets produced occupancy of 86%, an ADR of $238 and RevPAR of $204 for the third quarter. This high quality portfolio has also grown market share index year-to-date. This high RevPAR level combined with portfolios 33.1% EBITDA margin continues to illustrate the high quality nature of these assets. Overall, we view Prime’s third quarter RevPAR growth as an anomaly. It is not continued into the fourth quarter. Moving to the Trust portfolio, during the third quarter Trust grew RevPAR by 5% with EBITDA flow-through of 55%. This performance compares very favorably to how our competitors performed for the quarter. Our margin improvement of 87 basis points is almost twice the peer average. Headwinds during the third quarter came from holiday changes including Labor Day falling a week later this year which extended the summer season and reduced business travel and the Jewish holiday of Yom Kippur, which fell in the third quarter this year and the fourth quarter last year, which also negatively impacted business in the third quarter. Despite the third quarter results, we continue to see industry dynamics that favor continued expansion in hotel RevPAR. Most notably, new hotel construction continues to lag the broader economic recovery. New supply growth over last 12 months has fallen short of Smith Travel Research's projections in gross new supply and we expect this trend to continue. Thus we believe our assets are well-positioned to thrive in this industry climate. During the third quarter, Ashford began a thorough review process of our hotel’s business preferred -- preferred business transient account for 2016 in order to…

Thanks, Jeremy. As Monty discussed, trust has received the first round of offers for its 24 pack of select-service hotels for sale. The next and possibly final binding round is the end of this week. Given where the initial bids have come in, we continue to expect the portfolio to trade in the $550 million to $600 million range, which would provide trust with significant proceeds to accretively redeploy to increase shareholder value. Furthermore, this transaction will boost the remaining portfolio RevPAR for trust, which given the strong relationship between RevPAR and EBITDA multiple should translate into a higher trending multiple for trust stock. In fact, the increased in overall portfolio RevPAR from the sale of the 24 hotels would be 3.6%. And following the sale, trust ultimately plans to opportunistically divest in other 38 non-core select-service hotels, which would increase the remaining portfolio RevPAR by another 5% based on where the portfolio RevPAR is today. Our investment strategy to focus is trust is focused on full-service, upper upscale hotels and Prime will continue to focus on investing in luxury hotels located in resort and gateway markets. We believe both these platforms are well-positioned to capitalize on the attractive lodging market conditions. As always our goal is to provide you with superior returns, something our track record clearly demonstrates. That concludes our prepared remarks and we will now open it up for your questions.

[Operator Instructions]. We will take our first question from Ryan Meliker with Canaccord Genuity. Your line is open.

I guess had, I guess one question. I was hoping you could kind of walk me through the timeline for the 24 select-service hotel portfolio sale. When did you decide to sell it, when did it hit the market? I just want to understand kind of the duration of this taking. Thanks.

The decision to sell the 24 pack portfolio was actually an evolutionary response to shareholder feedback that we received. Previously, earlier in the year, we had talked about establishing a select-service strategy and we went down that path in a few different ways and concluded that the most accretive opportunity for the shareholder was to engage and to sell this portfolio. So, clearly, another example of the management team being responsive to doing that. It was towards the back end of the summer that we brought the portfolio sort of on a preliminary basis into the market, letting people know on the teaser that the portfolio would become available and then the first rounds of bids were due just around the time of the Investor Day Conference. You recall we commented on that. Then we gave a couple more weeks for people to refine their bids and so as I said on my comments that our expectation is that the second and perhaps the final bidding around will be the end of this week. After that, if we don't go to an another bidding round and we select a winning bidder then it would be kind of a customary process of maybe a couple weeks to negotiate a PSA and then a diligence period, typically you see for portfolio, could be anywhere from 45 to 60 days and then closings sometimes, 30 to 60 days thereafter. We stated consistently that we expect this portfolio to close in the first quarter of 2016.

And I guess if I can kind of parlay that timeline to the Ashford Prime strategic review, it kind of sounds like from the time you guys put it up for sale it took about two months to get the initial bids and maybe it will be three months before you have a deal in place. Is that the type of timeline that we should expect from the strategic review process with Ashford Prime or are there other moving pieces that are going to elongate that?

There are moving pieces. As you know, Ryan, there has been a decision to sell the Prime portfolio, a strategic review. And so what you described here for the 24 pack was just the timeline in order to sell a portfolio. So, first, the independent directors have got to decide what they are going to do then start down that timeline. And as you also know, typically the process of selling a company, if that’s what they choose to do is a longer ones than selling just straight out assets. But the independent directors are on the case, have met over it. There is dialog going on all the time with their advisor. And I know the week is -- I am sorry, another meeting is already on the books for all the directors to get -- to get there in person with the advisors. So it is an active process, but the timeline has not been set.

And then I guess, can we expect to get an update from you and the Board once you do determine you want to go down?

I can’t speak for those guys, for the independent directors. I guess it would depend upon exactly what they want to pursue, but I just really can’t comment on that, because I am not sure what they want to do, but I can tell you that it is a very active process.

Thank you. We will go next to Sean Kelly with Bank of America. Your line is open.

I was wondering if you guys could comment a little bit more and maybe you gave some good color already on just price expectations and timeline for the select-service asset. So maybe could you just talk a little bit more about the type of buyer universe you’re seeing, how deep is the pool, what’s the level of interest? I mean, it seems like decent valuation and the price is moving ahead. So I am just curious on who is out there right now.

The number of CAs that were signed was pretty deep and diverse. And so there is interest among buyers today for this asset class and we typically don’t comment mid process in terms of anything other than that and I think we had given a lot of detail in terms of our expectation for the trading level for this portfolio. I think I can comment generally speaking across the market that cap rates are holding up pretty well the private market and obviously with many of the REITs that are sitting on the sidelines for transactions, you have a slight reduction in the depth of buyer pools for assets that would generally fit REIT criteria, but having said that, there is a pretty deep buyer pool of non-U.S. lodging REITs that are actively engaged in pursuing all types of transactions in the marketplace today.

And we will go next to Ian Weissman from Credit Suisse. Your line is open.

This is Kris for Ian. When we look at the performance for trust this year, I mean you consistently put up some of the best RevPAR results in the industry. You worked to address several important issues, such as spinning out the remaining interest and primes on select assets, but we still haven’t really addressed the issues that our clients are primarily concerned about which is the high leveraged external management and the termination fee. So I guess my question is absent any changes to these items, it appears that the only way to remove the discount is effectively through force, I mean essentially selling large parts of the company and using the proceeds to acquire stock. Is that the way you see it, or is there another option to kind of remove the disconnect?

A few comments, say the disconnect exists for all of our peers. So there is a material difference in public market pricing versus the private marketing pricing and that exists across all platforms, somewhere between 1 and 1.5 times EBITDA is the difference between private market values and public market values. But at our Investor Day, if you weren’t there, I encourage you to pull it up on our website and pull up the Ashford Trust presentation and there is a regression line that shows the relationship of RevPAR to EBITDA and you will see that the Ashford Trust trades just maybe a half ton or so below this regression line, which is well within maybe a half from the standard deviation of where all of our other peers trades, a number of the other peers trade outside that. So we are very close to this line about where we think we should trade. So we don’t see any issues exist for the items that you’re talking about. We trade right where we should. Now the good news about that is that we have a platform that because it’s a little more leveraged, relatively small increases in that and our multiple can have a good size increase in our stock price, something like a third of a ton increase in our multiple increase in our stock price buy book. So that motivates us to do everything we can to get our valuation up in all regards. But as far as a disconnect that she referred to, it doesn’t exist other than the disconnect that all other platforms have. So we are going to continue to do what we think make sense to improve our share price and to post strong numbers. We had incredible numbers this past quarter. It is due to our higher leverage and our platform has always been higher leveraged since 2003. So those investors that expect that to change could be waiting for long time because that’s our model. And it’s been a model that’s been very successful for us. And we are going to continue to have that leverage levels between 50% to 60% and continue to have structure, which is much more aligned than our peers from an external management standpoint because of the strong incentives that we got in place. So I think we are on track, we continue to do things that make sense and I think selling this portfolio of limited service further refines our strategy and it gives us some great proceeds from current private market values that we can use to increase value accretively.

Yes, I definitely remember the chart, but I also remember an announcement or I think a disclosure somewhere that said that your NAV was around or you place your NAV at around $15. I think the street has it a little bit less than that, but let’s assume for the $15 and that’s a 60% discount to NAV. And I think what the street numbers you are probably in the 30% to 50% range, which is quite a bit bigger than peers. Can you kind of reconcile the chart that you’re talking about in terms of your multiple and the discount in that?

Sure. That’s the leverage I just mentioned.

Okay.

I mean, if two companies have the same EBITDA multiple discount, let’s say 1 to 1.5 times, but once leverage more, then the one that’s leveraged more is going to have a greater stock price or equity discounts, right. It’s just the math of it. So that is what accounts for that difference, ours being greater than our peers because we are higher leverage to platform. So it’s going to be a greater equity percentage, but the value of the whole firm is the same.

Thank you. We’ll take our next question from Chris Woronka with Deutsche Bank. Your line is open.

Could you give us an update on the W Minneapolis in -- if you think that might close anytime soon?

Sure. Chris, this is Deric. We are in the process of assuming some debt on that property and have to go through the approval process with the lender of getting approved to assume it and we do expect it to close pretty soon.

Okay. Great. And then wanted to switch over to the Bardessono, it was your first, I guess, full quarter of ownership and it looks like you traded some arc for some rate? Where kind of are you in the evolution of that in terms of what you're trying to do with margins and the remixing the business?

Just getting started, I mean, we are just getting started. Remington took over management of that property. And frankly, I’m not surprise that there was -- I’m surprise that there was more disruption in that -- in those numbers than there were, because management changeovers can’t do that. But we’re just getting start as far as our revenue enhancement techniques and some of our margin enhancement techniques. In fact, I think, we even in our person sale agreement covenanted that won’t be any employee changes for at least the first 90 days. So by contract there weren’t any changes right of that. So we’re just getting excited, started with that asset and we’re excited about its prospects.

And then, just one ask, I guess, across both platforms. Do you see any more near-term potential management company changes, anything that could -- anything more that could go over to Remington?

Let see, right now we don’t see any changes from brand managed or other third parties to Remington that’s on the table right now. When we buy assets, many times it happens or if we trade out assets of someone inversely. And in the past, we’ve converted some brand managed to Remington managed but I know that’s on the table as we sit here today.

Thank you. [Operator Instructions] we’ll go next to Robin Farley with UBS. Your line is open.

Hi. This is actually [Kim] [ph] for Robin, thank you for taking the question. Could you talk a little bit about the group business dynamics you’re seeing beyond just holiday shift between Q3 and Q4? And perhaps, if you could give us some color on pace for 2016 versus this time last year for ‘15? Thank you.

Sure. I can answer that. This is Jeremy. So in Q3, we had some challenges with city-wide events changes from 2014 to 2015. We had an incredible Q3 for group in 2014 and we had a lot of challenges. And I would say that from the very beginning of this year, Q3 was always our need period that we spend more time of trying to address in terms of getting better group business. But for Prime, group was down 10% in the third quarter. And for Trust, it was actually up close to 2% and that’s in terms of group revenues year-over-year. Looking at 2016, we don’t give guidance but I will tell you that we are still very good about our group positioning for both platforms setting in 2016.

Thank you. And we have no further questions at this time. I would like to turn the call back to Monty Bennett for any closing remarks today.

Thank you all for your participation today. We look forward to speaking with you again on our next call.