Ashford Hospitality Trust, Inc. Q2 2010 Earnings Call Transcript

Ashford Hospitality Trust, Inc. Q2 2010 Earnings Call Transcript
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Ashford Hospitality Trust, Inc. (AHT)

Q2 2010 Earnings Call Transcript

August 5, 2010 12:00 pm ET

Executives

Tripp Sullivan – Corporate Communications

Monty Bennett – CEO

David Kimichik – CFO andTreasurer

Doug Kessler – President

A

nalysts

Patrick Scholes – FBR

Andrew Whitman – Robert W. Baird

Smedes Rose – Keefe Bruyette Woods

Will Marks – JMP Securities

David Loeb – Robert W. Baird

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Ashford Hospitality second quarter 2010 earnings conference call.

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» Ashford Hospitality Trust, Inc. Q1 2010 Earnings Call Transcript
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During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this conference is being recorded Thursday, August 5, 2010.

I would now like to turn the conference over to Tripp Sullivan with Corporate Communications. Please go ahead.

Tripp Sullivan

Thank you, Sarah. Welcome to the Ashford Hospitality Trust conference call to review the company's results for the second quarter of 2010. On the call today will be Monty Bennett, Chief Executive Officer; Doug Kessler, President; and David Kimichik, Chief Financial Officer.

The results, as well as notice of the accessibility of this conference call, on a listen-only basis over the Internet were released yesterday afternoon in a press release that has been covered by the financial media.

As we start, let me remind you that certain statements and assumptions in this conference call contain or are based upon forward-looking information that 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 the section entitled Risk Factors in Ashford's registration statement on Form S-3 and other 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 has been filed on Form 8-K with the SEC on August 4, 2010 and may also be accessed through the company's web site at www.ahtreit.com. Each listener is encouraged to review those reconciliations provided in the earnings release, together with all other information provided in the release.

I will now turn the call over to Monty Bennett. Please go ahead.

Monty Bennett

Thank you. We are pleased to report that our second quarter 2010 performance was our best ever in terms of AFFO per share, with $0.46 in the quarter, compared with $0.31 a year ago. This year-over-year growth of 48% was the strongest reported from our lodging peer group. The quarter's success has a direct result of our investment, operational, and capital market strategies, which set us apart from the competition.

As a public company, we believe we have just completed one full cycle in the hotel industry. From the beginning, our desire was to create a more stable earnings platform through a variety of strategies in a volatile industry. Our trailing 12-month AFFO per share troughed in the third quarter of 2009 at a level just 14% below our peak, despite the worst downturn in the industry since the Great Depression. It seems our peers, however, have yet to trough, and thus far, are down an average of 78% from peak to trough on a trailing 12-month AFFO per share.

Our one-year, two-year, three-year, four-year, five-year, and six-year total shareholder returns exceed every one of our peers except Sully for one peers run up this year. Specifically, our share repurchases and debt strategies continue to accomplish the stated goals and distance us from the peer group. Loan extensions, modifications, and refinancing since January 2009 totaled $495 million, and has contributed to our strategy of reducing near-term loan maturities. We only have one $5.8 million non-extendable loan coming due between now and November 2011.

We are also benefiting from our floating-rate interest strategies, with freights remaining at historic lows with the Fed indicating rates are likely to remain low for an extended period of time. Based upon current LIBOR, we would expect to earn $62.1 million in 2010 from the strategies put in place beginning back in March 2008. By comparison, all of our peers have a significantly greater percentage of higher cost fixed rate debt during this downturn and have not capitalized on these unprecedented low rates.

Our share repurchases have been well-timed and quite effective. The goal of the strategy has been to maximize current and future shareholder appreciation by using our cash to make the best possible investment at a deep discount to value. During the quarter, we repurchased an additional 2.1 million shares of our common stock, and repurchased 519,000 operating partnership units. The total common share equivalents purchased since inception is 74.1 million shares, which is a 50.4% reduction from our historical peak fully diluted share count. Our average repurchase price since inception of the program is $3.26 per share for the common, $6.47 per share for preferred, and $7.25 for common equivalent partnership units. Based upon yesterday's closing prices, that represents approximately $500 million of shareholder value we have created this far, assuming we were to reissue like amounts this year is repurchased.

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