Q2 2019 Earnings Call
Good day and welcome to the Ashford Hospitality Trust second quarter 2019 results Conference call Today's conference is being recorded.
At this time I'd like to turn the conference over to Jordan Jennings. Please go ahead.
Good day, everyone and welcome to today's conference call to review the result for Ashford Hospitality Trust for the second quarter of 2019 and to update you on recent developments.
On the call today, well be Douglas Kessler, President and Chief Executive Officer, Deric, Eubanks, Chief Financial Officer, and Jeremy Welter, Chief operating officer. The result, as well as notice of the accessibility of this conference call on a listen only basis over the Internet were distributed yesterday afternoon and appropriately.
He 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 based upon forward looking information are being made pursuant to the safe Harbor provisions of the federal Securities regulations.
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 factors are more fully discussed in the Companys 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 8-K with the SEC on August Onest 2019, and May also be accessed to the company's website at www Dot H.T. read dotcom.
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 on this call compared the second quarter of 2019 with the second quarter of 2018, I will now turn the call over to Douglas Kessler. Please go ahead Sir.
Good morning, and thank you for joining us to discuss Ashford Hospitality Trust second quarter results.
I want to begin by providing some comments on the recent performance of our stock.
We hope that the information or second quarter earnings release, along with other topics discussed on this call we'll highlight a simple fact.
It's business as usual at Ashford Trust.
Well lodging REIT stocks in general experience some softness during the quarter, we believe that our dividend announcement led to an overreaction in our stock.
Management has entrusted with making the right decisions once it often times are about longer term vision and opportunity.
This is exactly what you should expect from us given our significant insider ownership at 17% the highest among our peer group.
Our goal is to maximize shareholder returns over time.
And our team is committed to achieving this value added transactions.
Disciplined capital markets activity and aggressive asset management.
Our approach at Ashford Trust has always focused on how best to capitalize on lodging and financial market opportunities.
While at the same time being fluid in our strategic efforts for example, despite the attractive features of our enhanced return funding program. We currently do not plan to make any acquisitions, unless we can do it accretive lease without increasing our leverage.
We strongly believe the ERP has improved the investment returns on our recent purchases. How are we are prepared to be patient before accessing more ERP capital for new deals given the current stock price.
Compared to where we traded when we acquired the past four hotels that led to ERP commitments.
Alternatively, we are engaged in some asset sales discussions.
When we evaluate asset sales, we take into consideration many factors such as the impact on EBITDA leverage Capex Revpar et cetera.
Weve listed a few assets for sale and if we complete the sales we plan to use the proceeds mainly to reduce our leverage.
We may also consider share buybacks under the right conditions.
Also our portfolio is currently realizing the benefits from our recent capex spending which is evidenced by the outperformance in our operating results.
As we stated earlier this year, we anticipate our capex spending will be more consistent with our long term historical levels.
As I now turn to our second quarter performance I would like to remind everyone that we have a very geographically diverse portfolio consisting of high quality well positioned assets across the us.
We believe this is that this geographic profile provides some very distinct advantages with respect to operating performance.
Our actual revpar for all hotels for the quarter increased 2.8%, while comparable revpar for all hotels increased 1.4%.
Comparable total revpar increased 1.9% for all hotels.
Highlighting our focus on growing ancillary revenues.
For the second quarter comparable Revpar for hotels, not under renovation increased 1.6%. Additionally were reported AFFO per share of 47 cents and adjusted EBITDAR.
Of $132.1 million.
We are pleased with our second quarter performance.
Since the ERP is a unique competitive advantage for us it is worth highlighting where we stand with the program.
Ashford Inc. is committed to bright to provide $50 million to the company on a programmatic basis equating to approximately 10% of each new investments the acquisition price to be used for the purchase of funny at properties owned by the company.
Since establishing the ERP, we have already completed $406 million of high quality acquisitions that have utilized the program, which equates to approximately 80% committed utilization of the pledge $50 million of ERP funding.
To date, we've received approximately $29.2 million of the $40.6 million at Ashford Inc. is committed to provide us for the four acquisitions under the ERP.
Jeremy will provide additional information on the performance of these properties along with other portfolio highlights.
In a few minutes.
Turning to our balance sheet, we believe in the benefits of an appropriate amount of non recourse asset level financing to enhance equity returns.
We have a targeted range of net debt to gross assets of 55% to 60% and we anticipate returning to that range over time.
We would like to remind everyone.
That our loans are mainly floating rate, which we believe provides a natural hedge to our cash flows.
At the beginning of this year LIBOR was 2.51%.
And currently it is 2.24%.
Every 50 basis point reduction in LIBOR would result in approximately $19 million of annual interest savings based upon our current capital structure.
With all our recent refinancing activity. We believe we now have an attractive well laddered maturity schedule.
We also seek to maintain a high cash and cash equivalents balance between 25% and 35% of our equity market capitalization for financial flexibility.
We note that this excess cash balance can provide a hedge during uncertain economic times as well as the requisite funds to capitalize on attractive investment opportunities as they arise.
As of the second quarter of 2019, our net working capital totaled $367 million equating to approximately $2.95 per share.
Which represents a significant 115% of our current share price as of yesterday's close.
I will repeat that our net working capital per share was 115% of yesterday's closing price.
We believe our current valuation is significantly below the intrinsic value of the company with the current market cap less net working capital the market seems to be ascribing negative value to our hotel portfolio, which is financed solely with nonrecourse debt.
If you take just two of our 121 hotels, the Hilton Boston back Bay, and the Renaissance Nashville, and apply a reasonable value for those hotels, we believe the implied equity value after debt pay down is approximately $200 million. If you add the excess cash on our balance sheet as of the second quarter to the implied equity value of those two hotels, we believe the combined value significantly exceeds our market cap.
We still would have 119 hotels, the majority of which have been recently refinanced and appraised with and with appraised value significantly above the loan amounts.
We strongly believe the valuation disconnect between our market value and the perceived value of the company is significant and our management team and board are focused on this disparity.
We also continue to make progress on our investor outreach efforts.
More so now given the recent increase in our average daily trading volume.
During the remainder of 2019, we will continue to get out on the road to meet with investors to communicate our strategy and the attractiveness of that investment and Ashford Trust.
Once again, we are planning to have our Investor day in New York City on October Threerd and hope to see many of you there.
Looking ahead, Paul well diversified portfolio and remain confident that we are well positioned to outperform.
We remain focused on proactive management initiatives across our platform to maximize value for shareholders.
I will now turn the call over to Deric to review, our second quarter financial performance.
Thanks Douglas for the second quarter of 2019, we reported a net loss attributable to common stockholders of $26.9 million or 27 cents per diluted share.
For the quarter, we reported AFFO per diluted share of 47 cents.
Adjusted EBITDA totaled a $132.1 million for the quarter, which represents a 5.8% increase over the prior year quarter.
At the end of the second quarter, we had $4.2 billion of mortgage loans with a blended average interest rate of 5.7% our loans were 9% fixed rate and 91% floating rate.
We focus on floating rate financing as we believe it has several benefits.
Also as Doug has mentioned, we believe we have a well laddered attractive maturity schedule with a weighted average maturity of 5.3 years, assuming all loans are fully extended.
All of our loans are non recourse, we have no corporate level debt in terms of upcoming maturities, we have zero final maturities in 2019.
When you see loans and our debt table that have extension options. Most of those extensions have no tests in order to extend except that we purchased an interest rate cap and that the loan not be in the fall.
That's why we include another schedule in our earnings release, which shows our debt maturities, assuming all extension options are exercised.
Ill also point out that we have interest rate caps in place on almost all of our debt to protect us against any sort of spike in rates.
Additionally, the current forward LIBOR curve shows LIBOR coming down through the remainder of 2019, which would potentially lower our interest costs even further.
Looking at our cash in networking capital, we ended the second quarter with $237 million of cash and cash equivalents.
And including the market value of our equity investment in Ashford Inc., we ended the quarter with net working capital of $367 million.
As of June 32019, our portfolio consisted of 121 hotels with 25552 net rooms, our share count at quarter end stood at 124.1 million fully diluted shares outstanding which is comprised of 102.1 million shares of common stock and 21.9 million LP units.
With regard to dividends the board of directors declared a second quarter 2019 cash dividend of six cents per share or 24 cents on an annualized basis based on yesterdays stock price. This represents a 9.4% dividend yield.
On the capital markets front during the quarter, we closed on the refinancing of the Ashton Hotel. This new loan has an $8.9 million balance bears interest at a floating rate of LIBOR, plus 2% and has a five year term. The next hard debt maturity for the company is in June 2020, and we are currently in the market working on a refinancing of that loan.
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. Thank you Derek comparable revpar for our portfolio grew 1.4% during the second quarter of 2019.
Comparable revpar par for those hotels not under renovation grew 1.6%.
This growth represents a 120 basis point gain and a 50 basis point gain relative to the upper upscale class nationally and the total United States respectively.
Year to date comparable revpar for the entire portfolio has grown 1.6%.
During the second quarter comparable hotel EBITDA grew $1.7 million or 1.2% while year to date comparable hotel EBITDA grew $4 million or 1.6%.
I also want to point out that Easter occurring later in April 2019 hurt April performance this year relative to 2018.
I want to update you on the performance of a couple of our most recent acquisitions, which were acquired as part of the enhanced return funding program with our advisor Ashford Inc.
The last Saturday, Santa Fe, which is a hotel unmatched tribute portfolio was acquired in October 2018.
During the second quarter comparable Revpar grew 12.8% driven by 5.8% rate growth and 6.6% occupancy growth.
This revpar growth represents 1380 basis point growth relative to the new Mexico North market.
Year to date comparable Revpar has grown 16.2%.
Since the Starwood and Marriott reservation systems merger during the third quarter of 2018 lot Posada has seen significant higher rated transient growth, allowing the property to more strategically take group business. In addition, Marriott reward redemptions have provided an incremental $50000 per month and reimbursement revenues.
During the second quarter, we were not only able to realize strong revenue growth, but we also saw a 14% increase in hotel EBITDA.
Year to date hotel EBITDA has grown 37.3%.
And other ERP success story has been the acquisition of our embassy suites in New York City, which recently renamed was renamed the Embassy Suites, New York Manhattan Times Square, a change that we believe could drive additional demand.
Comparable revpar during the second quarter grew 31.5% driven by 23.4% occupancy growth and 6.6% rate growth. This revpar growth represents a 3370 basis point increase relative to the upper upscale in New York.
Market class.
Total hotel revenue grew 31.1%, while hotel EBITDA grew $803000 or 41.9%.
Year to date hotel EBITDA has grown 86.3% we plan to continue to build on our success as group pace is strong for the second half of 2019, and 22 2012 as strong as well.
During 2019.
We will continue to invest in our portfolio to maintain competitiveness in total we estimate spending approximately 135 to 150 million to $55 million in capital expenditures during the year.
This estimate is down significantly from what we spent in 2018.
We have completed Guestroom renovations at the embassy suites Crystal City, Hi, Regency, Coral gables, and six select service hotels, we are currently in process.
With a guestroom renovation at the Marriott DFW Airport.
We've also completed lobby renovations at the magic Crystal Gateway and west in Princeton. Additionally, we continuously identify opportunities to create value throughout the portfolio.
The first phase of the Renaissance Nashville redevelopment is complete and the second phase is underway, which includes a build out of additional meeting space and event space.
Furthermore, we have identified accretive opportunities to add back additional keys within our portfolio with the adding four keys at Hilton Boston back Bay and have added two keys to the embassy suites Crystal City, and one key to the Hyatt Regency Coral gables.
I want to again highlight that our capital expenditure forecast for 2019 is significantly below our spend in 2018, which ended up over $200 million.
Not only has the dollar value of our capital expenditures decreased since last year, but the number of hotels and rooms impacted has also been reduced from 28 to 17 hotels and 7462 to 5047 rooms.
I am excited to discuss.
The positive performance benefits, we have experienced from some of these transformational renovations.
And how they have positioned us for long term success.
There were a number of hotels under renovation 2018 that are delivering strong performances in 2019, specifically seven hotels that completed renovations during 2018 experienced double digit comparable revpar growth during the second quarter of 2019. The residents in Jacksonville resins in Orlando Sea World Courtyard, Denver Airport Hilton Saint Petersburg, Bayfront hotel into get Indigo, Atlanta, Midtown Anchorage, and Hilton Tampa West shore.
I would like to quickly highlight four of those hotels, the courtyard, Denver Airport, which completed its guest room renovation during the first quarter of 2018.
Continues to see strong comparable revpar growth with growth for the second quarter of 2019, equaling, 17.5% year to date comparable Revpar growth has been 25.9% hotel EBITDA growing $488000 or 30.8%.
Last year's meeting space and fitness center relocation at the Hilton Saint Petersburg, Bayfront led to comparable Revpar growth of 17.4% during the second quarter.
The Sheraton acreages guest rooms, and lobby renovation was completed in the first quarter of 2018 and comparable Revpar growth. During the second quarter of 2019 was 16.2% year to date comparable Revpar growth has been 26.2% and hotel EBITDA has grown $414000 or 41.2%.
Finally to Hilton Tampa West shore, following as guest room, and meeting space renovation experienced comparable revpar growth of 15.2% during the second quarter year to date Hotel EBITDA has increased $583000 with hotel EBITDA flow through of 53%.
In addition to our focus on continuously reinvesting in our assets I want to highlight a number of other steps we are taking in order to drive hotel EBITDA.
First we have analyzed our hotels competitors to find opportunities in a restaurant banquet pricing and a rolling out price increases over the summer.
Second we are also focused on directing ecommerce spending to various digital programs to increase visibility and advertising to leisure and group segments to that end in the group segment. We are working closely with c. that to increase exposure to group fleet.
Third in terms of cost management, we are utilizing efficiency programs to introduce better methodologies to reduce payroll hours. These programs have achieved 5% to 6% payroll savings at various hotels, even after taking into account wage rate increases.
And lastly, this past month, we have completed deep dives at 19 of our properties to further reduce operational expenses that concludes our prepared remarks, and we will now open the call up for acuity.
Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
And again it is star one to ask a question, we'll pause for just a moment hello, everyone an opportunity to signal for questions.
And we will take our first question from Tyler with Tory with Janney capital markets. Please go head.
Thank you good morning, everyone. So the first question I had.
Douglas I think it's it would be helpful. Yeah, We got a lot of questions from investors just on the dividend and on the reduction and whatnot.
Can you maybe just address that a little bit more your decision you know why you made that decision and then your thoughts on redeploying some of that capital.
Sure Tyler so.
Each quarter, we evaluate the dividend and.
We determined that we weren't getting credit for.
What was an outsized dividend.
We also realized that we were paying.
And had been paying well in excess of our required distribution to meet REIT rules.
We've always been opportunistic with cash and felt that.
With that extra cash we could use it for more opportunistic purposes. So really everything the same that we highlighted in our our statement related to to the dividend.
Okay got it that's helpful. And then my second question, probably for Jeremy you know operationally look like a strong quarter here, we see the outperformance.
How did the second quarter from a revpar perspective come in versus your expectations versus your your budgets any significant.
Surprises one way or the other.
No no I wouldn't say, there's any significant surprises we've been projecting all year long that we referred to gain market share and so during the during the second quarter. We gained about a 100 basis points limit over 100 basis points actually and year to date, we're tracking that same level as well so.
I think it's pretty consistent is challenging it is it has been tough and we've been really focused on cost as well, but we've been doing a good job doing what we can do to increase market share.
Okay, Great. That's all I have thank you.
Well take our next question from Bryan Mayer with B. Riley FBR.
Good morning.
Couple of quick questions last clarification, so I guess, it's safe to say based upon Douglas your comments I'm that you're not really out there meaningfully looking for acquisitions and that's going to take it back seat now and maybe expanding the RFP to $100 million is also have lesser importance is that correct.
Well first of all we're always underwriting transactions, because we always want to stay in the flow of transaction activity. The transaction pipeline right now is relatively thin, but more importantly from our own standpoint, given where our stock is trading and given the.
Desire not to increase leverage.
We believe that it's best to stand on the sidelines until we can find transactions that are both accretive and do not negatively impact our leverage so for those reasons. It all makes sense too.
Two.
Not be aggressive on the acquisition pace of things and we're not actively looking to acquire hotels.
That can certainly change given changes in those in those features right.
With respect to the RFP.
We saw some capacity on the ERP, we still have the ability for about $90 million of transactions that could benefit from this current tranche of the ERP and I think if we get closer to the point, where it makes sense to engage in discussions about.
A second tranche of the ERP even.
We feel like it.
A real benefit to the.
Ashford Trust shareholders based upon the returns that we think that the ERP is contributed to to the deals that we've acquired and we hope the same is true on the on the Ashford Inc. side. So.
When that time comes that we hope to have a a.
A mutually beneficial discussion on how to expand that program, but were just not there yet.
Okay, and then on the flip side of that you mentioned, having a few assets out there in the marketplace for sale.
How would you characterize those assets are they I would assume more of your select service product product.
I will provide color on the sales of those assets to the extent, we complete sales and.
I would just make a general statement that these sales are financially calibrated they are not necessarily a strategy to sell a particular type of asset there based upon either benefits that we see in selling the property from a a price that we're going to get for the asset a debt pay down and impact on our portfolio revpar, because maybe their lower revpar assets or perhaps are assets that would require an amount of capex that we.
We just we would not have seen the types of returns that we would like to see I mean look at the numbers that Jeremy mentioned with respect to the Capex that we did spend and the types of performance that we got from many of those assets. So.
It's not a specific type of asset necessarily it takes all those factors and others into consideration to make good economics is decisions to try to enhance the value of our portfolio for shareholders.
And then when we think of use of proceeds I mean, you talked about both de levering and the potential for stock buybacks.
It doesn't have to be one or the other right you could split the proceeds across both.
Areas is that correct.
That's correct, obviously they assets that we have debt on any sort of sale is going to require.
Associated pay down and perhaps additional pay down related to extracting that specific asset out of a loan pool of excess proceeds can be used for.
General corporate purposes, it can be used for capex it can be used.
For share buybacks any in any and all of those and others. So.
To the extent there are excess proceeds will obviously be looking at the appropriate use of those proceeds.
And then just lastly for me and maybe this is a cost for Jeremy.
Question for Jeremy on Labor cost can you give us an update on how that's trending is it still increasing has it flattened out as a declining whats going on there.
Sure, Yes, it is still increasing and we are seeing as much as.
4% to 5% increases and wages, it's really market driven.
And the other the other headwind is some of these local ordinances that are being passed that basically.
Implement not only higher wages, but different work rules that apply to hotels are nonsense not subject to a collective bargaining agreement and we're seeing that.
More and more and in different jurisdictions, so that has been challenging as well, but we just continue to do everything we can to find more opportunities to drive more productivity in our hotels.
Okay. Thank you.
We'll take our next question from Michael Bellisario with Baird. Please go ahead.
Good morning, everyone.
Good morning could you.
Can you. Please explain the the high watermark and how that works for the ERP program. If you do sell assets and then on the calculation works there for that amount to get.
Yes, so to speak back filled.
For the asset sales.
Hey, Mike This is Derek I'll address that.
So if if H T cells assets. The dollar amounts of any sold assets goes into what's called the net asset value adjustment.
As part of the total advisory fee. So there would still be 70 bips off of the.
Total market capitalization of the company and then there would also be either 70 bips on the net asset value adjustment the amount that is in that or if it's in the RFP asset there is a slight premium to that.
Obviously therapy assets would have been recently acquired hotels, but.
And then as long as there is a balance in that net asset fee adjustment.
If the company then goes and acquires another hotel.
If if if H.T. once the RFP associated with that asset than that amount would stay in that asset fee adjustment. If the company acquires the hotel and it does not take the RFP then that net asset value adjustment amount would be reduced by the amount of that acquisition.
So any any dollars that are associated with asset sales go into that asset fee adjustments, so that that advisory fee wouldn't really change very much.
During that period, where there is an amount in there.
And obviously, you've got it Mike there's logic to that because it wasn't going to be the case, where.
The advisor provided capital to help fund accretive growth and then.
Turning right back around the company was was shrinking the portfolio. So.
We felt that that was a fair given get for both sides to incorporate into the advisory agreement with respect to the RFP.
Situation.
Right. So I guess just high level, if you sell an asset and its an eight cap.
For corporate purposes is little more like eight.
Between 7% cap rate right because the fee.
Let's stay on changes that.
Hi, My name is that correct.
I haven't thought through the cap rate impact of the sale.
And so I can't I can't address it on the call, but really on the value gets on the value and.
I'm not sure how you would back into the impact of the cap rate because.
The advisory fee will basically stay about the same as it was prior to the sale.
Okay. That's helpful and then just.
Maybe can you provide your latest thoughts on much more disclosure around the termination fee kind of similar to what Bryan Maher does and have you and the board and they had any discussions on this topic.
So obviously the calculation of the termination fee as disclosed in our advisory agreement and it's based on numerous inputs as you know Mike.
Right I guess I was I was.
Asking more along the lines of.
Yes, the actual net revenues and net earnings to be able to calculate.
A termination fee using the 12 times multiple the tax gross up and that 10% step up to actually do the mechanics of it.
Yeah, So Mike so on the on the you referenced the brain Mowbray Mark does the the Bramer disclosure was something that was negotiated between Ashford inc. and bring more as part of the amendment to the advisory agreement. So that does not exist in the current.
Structure with H.T. and Ashford Inc.
Do you think that would be helpful from a transparency and investor perception perspective, though.
Well look we believe that investors should should view this as a long term agreement Mike.
Okay fair enough. Thank you.
[noise].
We will take our next question from Chris Woronka with Deutsche Bank. Please go ahead.
Hey, good morning, guys.
Douglas just wanted to follow up a little bit on your earlier comments you know understanding you have a lot of options if you sell assets there's.
Debt reduction you might have to do but you also have cash you have net working capital what what's the trigger point you know internally like what's the trigger point for for share repurchase because if you decided to do it at a certain point there would have to be some kind of trigger that made you do and I think I think we're just trying to get a better understanding of what goes into that.
Calculation.
Sure So just.
A couple of points.
Regarding this.
The company has a share buyback authorization in place at a $200 million buyback authorization.
Historically.
This management team and and and and members of the board have have engaged in a buybacks for the company. We think we did exceptionally well the last time that we did it and created a lot of value for shareholders.
It's something that.
Could be a possible use of our cash, but we don't give any particular guidance if were whether we will we will do that or at what or at what prices.
Yeah, I would add Chris Yeah that does it he said there's a lot of moving pieces here a lot of variables. Obviously, we look at our leverage we look at our trading volume our float.
Available cash on hand, where we are in the cycle et cetera. So there's a lot of factors that are that are consistently changing that all go into that analysis, but as Douglas mentioned and I would highlight in our history weve been very active buyers of our stock at certain periods of time and so that is something that is is constantly on the on the radar screen for us.
Okay.
That's helpful and then.
Probably another question for Derek on the on the.
On the negative.
Advisory the incentive fee, which I think was a reversal right over the first quarter number is that can you just remind us the mechanics of how that will how that gets every quarter, that's something that we'll reset again or is it something where.
It's it's a zero towards a positive number but it's not it's not a negative number for the full year right.
Right. So that so you're you're referring to the advisory incentive fee calculation and that's actually done at the end of the year based on a total shareholder return performance versus the peer group for GAAP purposes, we have to accrue for that fee at the end of each quarter, assuming the year ended at the end of that quarter and so we had a a fee that was accrued for the first quarter that when we looked at the second quarter performance. The year to date performance would have resulted in a lower incentive fee. So we had to reverse some of that out.
For our reported metrics of adjusted EBITDA, Ari and FFO, we add that adjustment back in quarters, one through three.
Because of that volatility and then in Q4, if there is an actual incentive fee for the year, then that would be reported in recognizing our adjusted metrics in the fourth quarter.
Okay Gotcha.
Thanks, Derek I guess I do have a question for probably for Jeremy which is kind of what impact are you guys seeing from.
Some of these little just use an example of a courtyard or or.
Hampton Inn, or something where where delegates renovated and you guys have been doing a lot of it. So so in some ways. The good story, but in other markets. Maybe you get a renovated hotel dropped dropped right next to you. It doesn't increase the supply numbers everybody looks at it essentially is more competitive supply what do you think the puts and takes our overall for your your portfolio top to bottom.
Hi.
I think I think Dave actually will supply a lot more meaningful new supply versus.
Renovated supply within your comps that if it's if I understand your question correctly there are yes.
<unk> patients were.
Mainly he had a a big hotel on your comp stat that Dan made it out at for extended period of time with a massive renovation that certainly could have an impact, but a hampton inn or a courtyard in your comp stat that was under renovation last year, that's renovated or it's just not a huge factor to us the bigger the bigger issue is supply in general as it as it comes in in certain markets and that and tracks within our comp sets.
To answer your question.
Yeah, Yeah, that's great I appreciate it.
Thanks, guys.
Okay.
Well take our next question from Robin Farley with UBS. Please go ahead.
Oh, great. Thanks, I know you've commented a little bit already on the U.S.P. and the idea of not increasing that from 50 million to 100 million. Just some is that is it just a signaling thing that you're you don't want it to signal that you might be looking to do acquisitions or is there I guess both sides have to agree to that and then has there been maybe a change and the approach to weather. Another 50 million would make sense, because because just authorizing at her agreeing to have additional funds available.
Doesn't it doesn't it doesn't seem obvious why.
You wouldn't have that available scrip dry powder or is it just a signaling issue or is there more in terms of the two you know being of two minds.
Sure so.
I mentioned earlier, we still have capacity under the existing agreement and.
For $90 million of transactions and there was about $9 million left and so you know you apply that 10% to and that's where you get to the $90 million and and given our earlier comments said based upon the current stock price and.
Looking to find accretive opportunities. We're we're well we're underwriting we're really on the sidelines from from new acquisition standpoint. So.
Hey, which seems premature for management to spend their time.
Working on a mutual agreement with our advisor when we're not really in a customer of having to make that call because we still have some excess capacity.
From Ashford Trust standpoint.
And we believe also from Ashford Inc. standpoint, the ERP has been successful and so we'll have to cross that bridge. When the time comes if there is a mutual desire to reload by both parties.
We hope there will be.
Okay, Alright, Thanks, and then just one other clarification when you were talking about market share. Your opening comments are you is that just kind of looking at your portfolio versus you know upper upscale segment in the U.S. or are you actually was at a weighted by the different geography is because obviously some of the markets where you are like Atlanta, where you know theres been stronger.
Stronger results. There. So just wondering if the market share is weighted for your geographic exposure as well.
Yeah, that's great question, so anytime I quote.
A market share number on a portfolio wide basis, its revenue weighted for our portfolio and I'm, usually specific on whether or not I'm talking about a chain scale or or if we're talking about are different tracks within our art, our hotels or if we're talking about our direct competitive set for each individual hotel. So what I, what I mentioned earlier in terms of my comments earlier, when I mentioned that we were gaining over 100 basis points in market share and that is relative to the competitive set of each individual hotel.
In aggregate weighted on a revenue basis revenue weighted basis.
Okay, great. Thank you.
[laughter].
We will take our next question from Brian Dobson with Nomura Instinet.
Hi, guys just a couple of quick questions.
So given the disparity between the market value and your your perception of asset values would you consider accelerating asset sales to to free up some capital to either pay down debt or repurchase shares.
It's good question and certainly as a possible strategy.
We.
We have some assets for sale in the market currently looks like.
Reaction is to that and.
We'll we'll be fluid and our strategic analysis of next steps.
Sure and money and then you you briefly mentioned increasing your group exposure that's been a key driver of outperformance for for some of your peers. How do you see that ramping over the over the next call. It two years or so and what kind of early indications to be seen.
Yes, Jeremy actually in in the in the second quarter our group.
Uh huh.
Revpar growth was essentially flat and the growth that we hadn't revpar was was over 100% from transient we had a decline in contract an increase in transient and basically flat and group, but if you look forward through the balance of the year.
We're looking at probably between 2% to 3% growth in ER and group business. What's on the books right now in terms of forward looking pace and then heading out to 2020, our group business is up 2% I. When you look at it as compared to same time last year.
Great and do you think that will ultimately lead to higher transient routes.
[noise] eking out yeah definitely you know because you were reflective of where we were filling our group patterns and so we look at where we need business and then we compressed though talent and then our room inventory is is essentially smaller and then that allows us to push rate more aggressively.
For transient business and then in then just finally I guess looking through your portfolio do you see opportunities depress your your managers to drive.
Property level efficiencies to help to.
Increased margins I guess over the over the next two years or so and if you do do you think you could elaborate on some of those opportunities.
I know, it's just a bunch of little things, but.
Yeah. It it you're exactly right. It's it's what I tell my team is small drops of water build muddy oceans and so we are constantly minding our portfolio for opportunities to drive more margin or hotels to drive more rate to drive more revenue or whatever the case may be.
There is an extensive amount of initiatives that we have going on right now a lot of them I would say our proprietary to our asset management approach and a few of those I did highlight in our covered our prepared remarks on the script earlier.
Great. Thanks very much.
That concludes today's question and answer session. At this time I would like to turn the conference back over to management for any additional or closing remarks.
Thank you for joining todays call, we hope to see you at our Investor Day in New York on October 3rd and look forward to speaking with you again next quarter.
This concludes today's call. Thank you for your participation you may now disconnect.