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David Harris - Deutsche BankAnd what kinds of hotels we are talking about brands and change scale? Dave Kimichik We are in, 96% of our EBITDA comes from upper upscale and upscale hotels. In terms of the class we compete in and in terms of brands, 85% of our hotels are either from the Hilton family of friends or the Marriott family of friends. And that's by design we think a lot of those two companies, they put a lot of people in our hotel rooms. They are pretty good in terms of getting RevPAR penetration in our subsets and so we like to be affiliated with Marriott or Hilton typically. David Harris - Deutsche Bank And then the hotels, a lot of them are also managed, some are managed by the brands and some are managed by third party managers as well as? Dave Kimichik Yes, we have about a third of our EBITDA is managed by an affiliate, Remington and the rest of our hotels are managed essentially by four different brands that and prominently Hilton and Marriott again are the big managers. David Harris - Deutsche Bank So what, you know Remington big manager, what do you think of the advantages and disadvantages of the Remington-managed hotels versus the big brand managed hotels? Dave Kimichik I can’t think of any disadvantages to be honest with you. Remington does a great job managing the hotels. They are typically lower paid in terms of the fee that we pay them. They are more flexible on termination for the hotels we want to sell. The contracts we have with Remington are terminable for no cost on sale and the brands on the other case are more expensive. The contracts are no-cut contracts. They go on for 20 to 30 years with renewal options and Remington does a better job of running our hotels. They run a leaner more efficient ship.
We are always comparing our notes each quarter in terms of our EBITDA margin improvement and Remington is always leading in that category, but we use their business model to get the brands to come around to our way of thinking and so we are very successful in terms of our EBITDA margin because of Remington because of the model that they set up.David Harris - Deutsche Bank So if you were to take a look at, you think Remington’s margins outperformed some of the other brands? Dave Kimichik No questions, no comments. David Harris - Deutsche Bank You know, approximate, what might be the range sort of, how do you start to think about that from a numbers perspective? Dave Kimichik For example, year-to-date, I think Remington is probably up in excess of 200 basis points of margin improvement. The brands, by and large are a little bit under 200 basis points, it’s probably about a 25% variance in terms of their success ratio. David Harris - Deutsche Bank Yeah we have seen a lot of through the downturn here, the third party managers have certainly outperformed in many cases, so certainly a good selling point and talk a little bit about the Highland transaction, maybe if you could start with an overview of the transaction for those who may not be familiar. Dave Kimichik Highland was a public to private deal. In 2007, there was a public company called Highland Hospitality. They went private, they sold their company to JER in 2007 and Ashford lent mez capital to JER. And so we were a mez lender for several years, the loan came due in 2010, and because we had the mez investment that was in essentially the fulcrum position on the value, we ultimately control the disposition of that portfolio.
We are able to buy that portfolio from JER essentially for $1.3 billion, but there was no competition and that’s really important. We have bought it we think very cheaply. In terms of metrics, we bought it for $158,000 per key that is really a feel in terms of the quality of the hotels and the quality of the assets. By comparison, similar hotels have traded since 2009 to present for $269,000 a key that’s a 41% discount; we feel like we got because we’re in the fulcrum position because we’re able to buy with no other bidders.Read the rest of this transcript for free on seekingalpha.com