Ashford Hospitality Trust's (AHT) CEO Monty Bennett on Q3 2016 Results - Earnings Call Transcript

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About: Ashford Hospitality Trust, Inc. (AHT)
by: SA Transcripts

Ashford Hospitality Trust, Inc. (NYSE:AHT) Q3 2016 Earnings Conference Call November 4, 2016 11:00 AM ET

Executives

Marilynn Meek – Financial Relations Board

Monty Bennett – Chief Executive Officer

Deric Eubanks – Chief Financial Officer and Treasurer

Jeremy Welter – Executive Vice President-Asset Management

Douglas Kessler – President

Analysts

Shaun Kelly – Bankof America

Ryan Meliker – Canaccord Genuity

Arpine Kocharian – UBS

Bryan Maher – FBR & Co

Operator

Good day and welcome to the Ashford Hospitality Trust Third Quarter 2016 Conference Call. Today’s conference is being recorded.

And at this time, I’d like to turn the conference over to Marilynn Meek. Please go ahead.

Marilynn Meek

Thank you. Good day everyone and welcome to today’s conference call to review the results for Ashford Hospitality Trust for the third quarter of 2016 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 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 contained or 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 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 releases and accompanying tables or schedules, which have been filed on Form 8-K with the SEC on November 3, 2016 and may also be accessed through the Company’s website at www.ahtreit.com. Each listener is encouraged to review those reconciliations provided in the earnings released together with the information provided in the release.

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

Monty Bennett

Good morning, everyone, and thanks for joining us. Our third quarter RevPAR growth was 3.4% and we posted solid adjusted EBITDA and AFFO growth. We also had strong flow through and saw our margins expand by 59 basis points. We are very pleased with these results and believe they speak to the quality of our portfolio and our asset management capabilities. In addition to the quality of our portfolio, we believe it is the quality, experience, stability, and alignment for management team that has driven strong total shareholder return performance since our IPO in 2003.

Since that time, this management team has achieved 111% total shareholder return compared to a 67% return for our peers. Key to that performance and this platform is the exceedingly high level of alignment that is created by our 18% insider ownership, which is the highest in the hotel REIT space and about nine times the peer average. Add to that, the incentives to create shareholder value and outperform our peers that are structured into our advisory agreement with Ashford, Inc. and it’s easy to see why we think our management structure and management team are in competitive advantage for a platform and are key to the shareholder value that we have consistently created for our investors.

In an effort to create shareholder value and consistent with our refined strategy, we will continue to focus on acquiring and owning upper-upscale, full-service hotels, opportunistically execute on the sale of our non-core select service hotels, continue to target net debt to gross assets at 55% to 60% and targeted cash and cash equivalents balance between 25% to 35% of our equity market capitalization for financial flexibility as we believe this excess cash balance provides a hedge in uncertain economic times, as well as providing dry powder to capitalize on attractive investment opportunities as they arise.

To that end, during the quarter and subsequent to the end of this quarter, we announced that we have closed on the sale of an additional four non-core select service hotels for an aggregate value of approximately $76 million. Since the announcement of this disposition strategy, we have now closed on $218 million of sales of non-core select service hotels. Douglas will provide further details on these transactions later on the call.

We were also pleased to have announced in early October that the Company refinanced four mortgage loans with existing outstanding balances totaling approximately $415 million. This refinancing addressed the vast majority of our 217 debt maturities. Deric will provide additional information on this refinancing in a couple of minutes. We are also excited to welcome Fred Kleisner’s, a new Independent Director to our board. The appointment of Mr. Kleisner brings the total number of directors to seven and the total number of independent directors to six.

Fred has held senior management positions at Morgans Hotel Group, Hard Rock Hotel Holdings, Rex Advisors, Wyndham International, Starwood Hotels & Resorts Worldwide, Westin Hotels and Resorts, Interstate Hotels Company, The Sheraton Corporation, and Hilton Hotels. He currently serves us Director of Caesars Entertainment, Kindred Healthcare, Playtime, Inc., as a member of the Board of Managers of Ambridge Hospitality, and he is on the Advisory Council of Michigan State University’s Broad School of Business. He holds a degree from The School of Hospitality Business at Michigan State University. He brings extensive experience from his many years of service in senior ship positions in the hospitality and real estate investment industries and we look forward to his contributions to our board.

Looking ahead, we are optimistic about the balance of 2016, and we remain committed to enhancing the company’s ability to deliver long-term value to our shareholders. We will continue to focus on generating solid operating performance, execute on opportunistic sales of our remaining non-service select service hotels and proactively manage our balance sheet.

We thank you all for your continued support and look forward to updating you on our progress and future goals. I will now turn the call over to Deric to review our third quarter financial performance.

Deric Eubanks

Thanks, Monty. For the third quarter of 2016, we reported a net loss attributable to common stock holders of $35.1 million, or $0.37 per dilute share. For the quarter, we reported AFFO per diluted share of $0.40 compared with $0.35 for the same quarter last year. This reflects a 14% growth rate over the prior year. Adjusted EBITDA totaled $109.5 million, reflecting a 5% growth rate over the prior year.

At quarter’s end, we had total assets of $4.8 billion, we had $3.8 billion of mortgage debt with a blended average interest rate of 5.3%. At the end of the quarter our debt was 26% fixed rate and 74% floating rate, all of which have interest rate caps in place. Including the market value of our equity investment in Ashford Inc., we ended the quarter with net working capital of $401 million.

As of September 30, 2016, our portfolio consisted of 126 hotels with 26,430 net rooms. Our share count currently stands at 114.8 million fully diluted shares outstanding, which is comprised of 96.2 million shares of common stock and 18.6 million OP units. We have 19.7 million OP units, but as a result of the current conversion factor being less than 1:1, these units are convertible into approximately 18.6 million shares of common stock.

With regards to dividends, the Board of Directors declared a third quarter 2016 cash dividend of $0.12 per share or $0.48 per share on an annualized basis. Based on yesterday’s stock price, this represents an 8.7% dividend yield, one of the highest in the hotel REIT space. The adoption of a dividend policy does not commit the Company to declare future dividends. The Board will continue to review the dividend policy on a quarter-to-quarter basis.

On the capital markets front, during the third quarter, we completed an underwritten public offering of 4,800,000 million shares of 7.375% Series F Cumulative Preferred Stock at $25 per share.

Additionally in the third quarter we completed the redemption all of the issued and outstanding shares of our 9% Series E Cumulative Preferred Stock. The redemption was funded from the proceeds of the Company’s public offering of our Series F cumulative preferred stock.

Subsequent to quarter end, in early October we’ve refinanced four mortgage loans with existing outstanding balances totaling approximately $415 million. The previous mortgage loans that were refinanced were the Wachovia 1, Wachovia 2 and Wachovia 6 loans with final maturity dates in April 2017, and the JP Morgan Chase Marriott Fremont loan with a final maturity date in August 2019. The mortgage loans were refinanced through one new mortgage loan, totaling $450 million, with a two-year initial term and four one-year extension options, subject to the satisfaction of certain conditions.

The new loan is interest only, provides for a floating interest rate of LIBOR plus 4.55%, and contains flexible release provisions for the potential sale of assets. The next non-extendable debt maturity for the Company is a $16 million loan that matures in June 2017.

Additionally in mid-October we announced that we had priced an underwritten public offering of 6,200,000 shares of 7.375% Series G Cumulative Preferred Stock at $25 per share.

This concludes our financial review. And I would now like to turn it over to Jeremy to discuss our asset management activities for the quarter.

Jeremy Welter

Thank you, Deric. During the third quarter we grew RevPAR by 3.4% with EBITDA flow-through of 54%. These quarterly results are in line with our year-to-date performance of 3.6% RevPAR growth and 57% EBITDA flow through. Our RevPAR growth outperformed both our competitors in the upper upscale segment nationally by 90 basis points.

At the asset level, I’d first like to comment on the success of the Renaissance Nashville. Our largest hotel, which continues to capitalize on increased leisure demand following the rooms’ renovation in the first quarter of 2015 and the completion of a corridor renovation in the first quarter of 2016.

For the third quarter of 2016 Renaissance Nashville’s RevPAR outperformed the market by 590 basis points. Year-to-date the property has grown RevPAR by a robust 14.4% with a $20 or 9.4% increase in rate. 4.6% occupancy growth and EBITDA flow-through of 59%

Room night mix optimization has led to increases in both transient room nights and transient average rates. Additionally, the strong demand in the market has allowed us to command higher group catering contributions leading to a 16.3% increase in food and beverage department profit.

On another note, we recently completed painting the exterior of the 31-story building in this transformational project resulted in a modern and stunning façade that won the 2016 National Downtown Partnership Investor award.

Next, in November 2015, we acquired a W Minneapolis Hotel - The Foshay, along with Le Meridien Chambers in Minneapolis. With the same management team in place both properties have experienced substantial growth and increased profitability under our ownership.

In the third quarter, the W Hotel achieved 8.6% RevPAR growth, and 92% EBITDA flow-through driven by significant rooms revenue increases. The Meridien’s numbers are similarly outstanding with 8.8% RevPAR growth and a 116% EBITDA flow through for the quarter.

Year-to-date, which nearly coincides with timing of our acquisition EBITDA flow-throughs have been 118% of the W and 188% for Le Meridien. The performance of these two properties speaks to Ashford asset management team’s capability to add value following acquisitions, even in situations where the existing brands and managers remain in place.

Finally, in August of 2013, we announced our plan to convert the Beverly Hills Crown Plaza to Marriott. The Marriott Beverly Hills officially opened on July 1, 2015 and the renovation concluded in August, receiving an award from Marriott International for renovation excellence. With more rooms available and a higher rate due to the Marriott conversion, the property has seen occupancy growth 24.9%, rate growth 38.6% and RevPAR growth 73.1% year-to-date.

Additionally, year-to-date the property has gained 5,270 basis points in market share versus its competitors, and grown total revenue and EBITDA by 69.8% and 81.8% respectively. Whether it’s to renovation, acquisition, or conversion, the foregoing examples are all indicative of the stellar results there are consistently produced by our best-in-class asset management team.

I will now hand the call over to Douglas.

Douglas Kessler

Thank you Jeremy. Earlier this year, we announced a strategy to sell our non-core select service hotels, and smaller portfolios and/or single asset transactions as we believe that strategy will result in higher prices in the current market environment. In line with that strategy in the third quarter, we completed the sale of the 124-room Hampton Inn & Suites in Gainesville, Florida for approximately $27 million in cash, $218,000 per key.

The hotel had existing debt balance of approximately $21 million, and the Company realized net proceeds from the disposition of approximately $5 million after debt repayment and transaction costs.

Subsequent to quarter end, in early October, we closed on the sale of the 162-room SpringHill Suites Gaithersburg in Gaithersburg Maryland for approximately $13.2, $81,000 per key. Consideration received from the sale was a combination of cash and approximately two million Class B common units of the Company’s operating partnership. The company also paid off approximately $10.4 million of debt associated with the property.

Additionally in October, we completed the sale of the 2-hotel portfolio, comprised of the 151-room Courtyard Palm Desert and the 130-room Residence Inn Palm Desert for $36 million, $128,000 per key. The portfolio had an existing debt balance of approximately $24 million that was assumed by the buyer. After debt assumption and transaction cost the net proceeds were approximately $11 million. With these sales the company has now closed on approximately $218 million of sales of its non-core, select service hotels since the beginning of the year. Going forward, we will continue to pursue opportunistic accretive sales our other non-core select service hotels.

That concludes our prepared remarks and we will now open up the call to your questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] And we will take our first question from Shaun Kelly of Bank of America.

Shaun Kelly

Hey good morning, guys. Thank you for taking my question. So may be just to hit on the transaction activity that you guys highlighted the very end there, could you just give us a little bit more color on two things, one is valuation either EBITDA or cap rate. And then the other one would be what’s the composition of the buyer universe out there for these types of assets right now?

Douglas Kessler

Sure Shaun, it’s Douglas. A couple of observations. First let me give you the macro industry perspective. Values have come down and the drop off really occurred beginning in the first part of the year and has kind of continued and probably up to now it sort of feels like those valuations have somewhat stabilized. There is clearly a bridging of the gap now between private market valuations and public market valuations. And so that is an interesting dynamic that we’re keeping a close eye on.

As for the cap rates, we haven’t disclosed those in our releases. So in some cases, I think that you can tell by trends that are happening in the market that depending upon the type and location of select service hotel, the cap rates vary. So for example, if the select service hotels are unencumbered by management, they’re going to get a much better cap rate, all right, because you’ve got local operators who want to buy those assets and run them, all right.

So you could have a 50 to 75 basis points spread in some of those cap rates. As for the branded hotels and brand managed hotels, obviously, cap rates are a little bit wider. And then you have to separate out whether you are in Gateway market, in an urban location versus suburban location. And again, you could have differentials of cap rates there that are 75 basis point to 100 basis points.

So for example, well-located urban service hotels, like our – like we sold one actually out of our Ashford Prime portfolio, just to reference that that was a sub-7 cap rate. For assets, some of the ones that we sold that are not as well located, secondary markets or suburban locations and primary markets, the cap rates are generally, I’d say in the mid-to-low 8% range, some higher, some lower than that as a general comment. As for the types of buyers today, we are seeing interested parties including local owners, operators, some of the small private equity funds.

We haven’t seen much appetite as we saw previously coming from the large private equity funds, we’re looking to accumulate portfolios of assets. And your call that’s really the key reason why we pivoted in our strategy that buyer demand for large portfolios dropped off, which is really coming from the large private equity funds and one of the large non-traded REITs that’s no longer operating in terms of buying assets like this.

And so we made a strategic decision that we would maximize value for shareholders by selling single or small groups of assets, which we continue to do and continue to have some properties listed in the market today. So I hope that this is a helpful response.

Shaun Kelly

That’s great Doug, thank you very much. And just one follow-up if I could and I apologize if I missed this at the beginning of the prepared remarks but I know in some of your hotels at least you’re probably seeing a little bit of group shift for some of the maybe the larger Marriott’s. How impactful do you think that was to 3Q performance and is there any reversal to expect in 4Q.

Jeremy Welter

So for the third quarter, this is Jeremy our group revenues for transfer up 5%, versus transient up 2.3%. And I don’t see a big shift probably in the fourth quarter.

Shaun Kelly

So group still outperforming transient even with the Jewish holiday shift into in the fourth quarter.

Jeremy Welter

Yes, we don’t give guidance, but so but I don’t see a big shift. It definitely the Jewish holiday is in October impact a little bit.

Douglas Kessler

And also keep in mind Shaun that group percentage of our portfolio maybe a little bit less than some of our peers here, just given the composition of our assets in room count et cetera in locations.

Shaun Kelly

Okay, great. Thank you very much, guys.

Operator

We will take our next question from Ryan Meliker of Canaccord Genuity.

Ryan Meliker

Hey, good morning guys. I just had a couple of quick ones. First of all Doug kind of a follow-up regarding the asset sales, you mentioned, you sold $200 million worth of non-core select service hotels year-to-date. How much do you guys have left that you would define as non-core that you’d be looking to exit if the price is right?

Douglas Kessler

We still have about 60 select service hotels and some of them clearly are Urban well located, higher RevPAR assets and we’ll continue to evaluate the disposition of those assets. The clear majority of our remaining portfolio our asset set we view is non-strategic to the vision of Ashford Trust which is to be a full service RevPAR just under two times the national average. Well located, well branded diversified location. So those, we continue to put into the market.

We’re going to be commercial and disciplined about that as you have seen Ryan over the years, we have been very careful about our sales strategy, we have a clear desire to sell these assets, but we’re going to be mindful of market direction with prices. I commented earlier that prices have come down, and so, yet we feel very good about the prices that we’ve obtained for the assets that we’ve put into the market.

And we’ll continue to monitor the pace of our transaction activity. In earlier point, Ryan as you know, had large portfolios for sale, and we will continue to evaluate that opportunity if it comes back around, but meanwhile, we’ll be disciplined and continue to work with the brokerage community, as well as a field inbound calls, which in some cases, we’ve been successful in doing that and being responsive on non-broker deals to sell to buyers, have expressed interest in coming directly to us.

Ryan Meliker

Okay, that’s helpful, thanks Doug. And then, I’m just curious what your appetite is to from the call yesterday with Ashford Prime, it sounds like Ashford Prime might be moving more towards a growth mode. Is there an opportunity to execute transactions for any other ROFO assets in not too distant future, it that something Ashford Trust would be interested in?

Douglas Kessler

The decision with respect to ROFO assets will be a decision made by the Trust Board as to whether there is a desire to sell any of those assets. We have not commented on any plans to sell those assets. We typically don’t comment on asset sales until such time as they are under contract. The only reason why we commented on the select service portfolio is because that was really a strategic shift in the direction of the Company to be more focused on full-service hotels rather than having kind of the diversified mix of assets that we’ve historically had, which was the full-service, select service and even mezzanine lending back in the days.

So, the reason why we made that comment at that time was just simply to reflect the strategic shift of the Company. So we would not make any comment to the extent any of those transactions work, and the works until such time is appropriate to do so. Obviously, Trust is sitting on a fair amount of capital at the current moment through the cash on the balance sheet as well as the recent preferred Series G offering that we completed. We’ve always been opportunistic. We look at the relative cost of capital as well as the returns that we can achieve in buying an asset relative to its overall return, relative to that cost of capital. And we focus clearly as we’ve said time and time again that our basis for the decision obviously focuses on a lot of key variables, replacement cost, interest rates return, et cetera, RevPAR, but we are looking at what is the accretion to our share price over time.

And given the fact, asset prices have come down. Certainly, it’s more compelling to at least window shop these days and I think that we’re constantly monitoring the market, the pipeline for the types of deals that fall within the Trust criteria have increased. There is less competition, which we think quite frankly gives us a competitive edge over many of our public peers and we do believe that is a competitive advantage in terms of buying opportunities when and if the time is right, we’ve always been opportunistic as well as the incredible asset management capabilities that we’ve demonstrated.

And many of these hotels are unencumbered by management, which gives Remington, the opportunity to come in and add values as we’ve done many times and demonstrated that in terms of our flow through. So we’re looking, we’ve always been looking and we’ll continue to be very disciplined and look really towards one key resolve which is maximizing shareholder returns.

Ryan Meliker

Yes, now, that’s helpful, I mean, I think with all do respect, I think – what you guys have identified for your Ashford Trust strategy is RevPAR levels less than two times of national average and a lot of those real-full assets are above that, so it seems like they would be exited at some point similar to select service portfolio sale. And it seems to me that if Ashford Prime is going to grow, those assets are worth a lot more of Ashford Prime than the Ashford Trust because of the liquidity challenges, Ashford Prime has that Ashford Trust doesn’t have which might create an opportunity for AHT to sell our assets accretively.

Jeremy Welter

I understand. I’m willing to comment much.

Douglas Kessler

Ryan, you raised a good point. We’re not saying that it’s not something to be considered. We agree which is why when we originally spun the Ashford Prime platform off, Management and Board recognized that those types of assets down the road would certainly makes sense and we’ve obviously executed on at least the option asset in the past, which was the Pier House property. So if the Board recognizes that is a viable exit, the Board of Ashford Trust would recognize that’s a viable exit. The Board of Ashford Prime doesn’t have the right to acquire those assets obviously until such time as the Ashford Trust Board decides to sell those assets.

And so it’s a decision based upon alternate use of capital, replacement of yield, replacement of asset value, where can we use the cash proceeds for, how would such a transaction be destructured and executed, when is the right time to sell those assets as we continue to demonstrate strong performance around the portfolio. So trust obviously is looking to maximize the value of those assets. And until such time it believes that it’s right to sell those assets then they remain in the trust portfolio. But from the standpoint of a strategic alternative, you’re absolutely right; it is a viable alternative certain to be considered.

Ryan Meliker

Okay, thanks. And then just one last one, this is probably for Jeremy, it look like Orlando was down in the quarter. Just wondering, was it up in the star data. So if there’s anything specific, if it was renovation related or something else going on there that drove the underperformance?

Jeremy Welter

Yes. So, we had Embassy Suites Orlando on renovation, so that drove some underperformance. And then we’ve lost a little bit of share in some of the other hotels as well. I would say that Orlando has been a market that’s been a little disappointing for us, if you kind of wind back the clock. We thought it probably would have performed a little bit of better when we did the budget season last year, but there’s been a lot of headwinds.

As you know, the stronger dollar has impacted international travel, and then you’ve had some major negative press associated with the proceedings and then it’s harder with the alligator. And then as team reports its highest maybe 18% and peak time periods hit that. Disney has increased their tickets prices. And so, while we were pretty optimistic for Orlando for the year, from a retail demand perspective, I think that markets underperformed a little bit more than we anticipated over the course of the year, so primarily for us Embassy Suites Orlando for the quarter.

Ryan Meliker

Okay, thanks. And then LA was up really strong, I’m guessing a big portion of that aside from LA being a good market was Beverly Hills?

Jeremy Welter

Yes. So, we were up 20% in the quarter. If you take out Beverly Hills, we were still up 11% for the balance of the other assets, so still pretty strong. One of those is – because of the Towneplace Suites Manhattan Beach, it was under renovation last year. And so it had a little bit of a favorable comp as well.

Ryan Meliker

Awesome, that’s helpful. Thanks a lot guys.

Jeremy Welter

Great.

Douglas Kessler

Thank you, Ryan.

Operator

From UBS we go next to Robin Farley.

Arpine Kocharian

Hi, thanks very much. This is actually Arpine here for Robin. So, I know you don’t provide much forward RevPAR guidance, but looking into 2017 investors are a bit worried about operating leverage for the lodging lease in general. So my question is this, what percentage of RevPAR growth would you need to offset cost growth in your portfolio and what are some of those bigger buckets of cost growth that you’re trying to manage?

Jeremy Welter

Well, I’ll start with the latter question on the bigger buckets. Customer acquisition costs are clearly the most difficult and challenging ones for us to manage. The OTA growth that we’re having, we still had, I think about 15% OTA growth in the quarter for Trust, and that’s in spite of all the direct booking programs or brands it done, as you’re probably aware of, I remember discount pricing and so just for acquisition costs or something that’s clearly going to continue to be a challenge.

The other one is just wage pressure and certainly it’s more of an impact for some of the major urban markets like New York and San Francisco, Seattle, but all the living wage initiatives that have happened in some of the changes during the regulations for overtime pay as well. So those are the two big headwinds that we’re focused on. There’s a lot of other initiatives we have and a lot of contingency plans we have, I got a big list here that we’re already in deep discussions with all the brands we’re going through the budgeting season right now. So I think we’re very well prepared, very well positioned if there is a slowdown in RevPAR.

And to answer your question, without doing a lot of some of the tricks we have up our sleeve, I think about 2% RevPAR growth, 3% RevPAR growth continuing to keep the same margins, and if RevPAR is less than that we have a history of being able to flex the cost of our hotels proven track record and so we’re very comfortable in a way that we can operate relative to our peers at any times in the cycle.

Douglas Kessler

I think Jeremy represented a very good point, just to elaborate on a bit. You do have to look at our history, and I think that we get some of the best margins out of our asset management team, in up cycles as well as in down cycles. And unfortunately in a down cycle, you have to make tough decisions, but we do have – I do believe a competitive advantage again with the high percentage of our assets that are managed by our affiliate.

And you can look historically what we’ve done to the extent that anyone believes that the cycle is slowing down or could be changing that we have the ability to make the proper cost reductions, we sort of have a philosophy of 50% flow through, and we like to hear that in an up cycle, as well as in a down cycle. And so that is an advantage now, we’re not suggesting that we’re concerned about a down cycle, but since you raised the point of what’s the margins as things slow down we just want to make sure that we’re addressing it and giving you some comfort that we do operate well in an up cycle as well as a down cycle.

Arpine Kocharian

That’s very helpful. Thank you.

Operator

[Operator Instructions] And we will go next to Bryan Maher of FBR & Co.

Bryan Maher

Good morning guys.

Douglas Kessler

Good morning, Bryan.

Bryan Maher

Kind of following that line of questioning a little bit. Were there any particular items, utility expenses and other that helped to add to the margin growth in the quarter?

Jeremy Welter

We had – I would say the biggest one is we did have some property tax refunds that came in the quarter. So, Marriott, Fremont, Wisconsin Dells, Atlanta, Churchill and Hilton Garden Inn Austin had some retransmit that we are up a buck in the quarter.

Bryan Maher

Okay. And then on the dispositions would you Doug I guess maybe would be willing to speculate as to what you think that given what you are seeing an interest in your properties what that pace of dispositions might be over the next, say, three quarters to four quarters? Should we be expecting two properties or three properties a quarter or more or less?

Douglas Kessler

You know Bryan, we don’t give any guidance in terms of the pace. We’ve stated that we’re looking to sell our non-core select service hotels. And all I can share with you, which is I think what investors want to hear, is it we are going to be opportunistic, we are going to be disciplined, we’re going to be looking to maximize the value. We could be out in the market with asset sales and if we don’t like the prices that we get for them then we certainly want to do the right thing to maximize shareholder return. So we’re not going to just carry forward on some sort of orderly liquidation process, just to match timing.

It will come in dips and drops as we have demonstrated and to the extent that there is a portfolio opportunity that services at some point unexpectedly or planned because that sometimes happens in the marketplace. And it’s a fluid market and buyers change their appetite. I mean look at the appetite that came from China for the portfolio that Starwood Capital has. That was kind of an unexpected, unforeseen large potential purchase of select service hotels, but here before that investment type really hasn’t really been on the radar for investors in China. And so we want to be aware of those opportunities, we want to be mindful of where we can enhance value, and so it’s difficult for us to provide any kind of steadied pays for you.

Bryan Maher

Okay. Maybe ask a little bit of a different way, kind of looking backward instead of forward. Have you seen any increase or decrease in the volume of people looking at the assets that you for sale?

Douglas Kessler

I don’t think there’s really been much change. I mean, audiences’ has been consistent throughout the year predominantly small private equity funds in local, regional owner operators. The only thing that we saw a change, which was really late last year in the very beginning of this year was the drop-off of the large private equity funds that we’re chasing after select service hotels to accumulate portfolios. Now having said that though from my earlier comment just a moment ago, we’ve now seen a large Chinese institution seek to buy a good amount of select service hotels.

So it’s an asset class that arguably has some appeal given the yield of these assets are trading for as I commented on earlier. Historically, there has been a greater resiliency of these types of assets in a down cycle and so to the extent that people are looking at select service as more of a defensive play in lodging, it could cater to those interests and yet we believe that the industry has – we’re optimistic about where the industry is heading. So it’s just a good investment overall.

No real significant change I would say in demand profile. There is still demand out there. It still tends to be more liquid asset class that is definitely trading.

Bryan Maher

Okay, great. Thanks, that’s helpful.

Douglas Kessler

And our transaction experience and basically selling the number of hotels and the prices we sold them for I think is indicative of that, I think we’ve done a very fine job of selling it at attractive prices and doing what we said we would do.

Bryan Maher

Thanks, Doug.

Operator

And with no additional questions, I’ll turn the conference back over to management for additional or closing remarks.

Jeremy Welter

Thank you everyone, and thank you for your interest in Ashford Hospitality Trust and your interest in the call today. We look forward to on our future calls.

Operator

And this does conclude today’s presentation. Thank you all for your participation.