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Maryland (State of jurisdiction of incorporation or organization) | 86-1062192 (I.R.S. Employer Identification No.) | |
14185 Dallas Parkway, Suite 1100 Dallas, Texas 75254 (972) 490-9600 (Address including zip code, and telephone number, including area code, of registrant’s principal executive offices) | Montgomery J. Bennett David A. Brooks 14185 Dallas Parkway, Suite 1100 Dallas, Texas 75254 (972) 490-9600 (Name, address, including zip code, and telephone number, including area code, of agent for service) |
David Barbour
Muriel C. McFarling
Andrews Kurth LLP
1717 Main Street, Suite 3700
Dallas, Texas 75201
(214) 659-4400
Proposed | ||||||||||||||||||||||
Amount | Proposed | maximum | ||||||||||||||||||||
Title of each class of | to be | maximum offering | aggregate offering | Amount of | ||||||||||||||||||
securities to be registered | registered | price per unit(1) | price | registration fee | ||||||||||||||||||
Common Stock, $0.01 par value per share | 333,333 | $ | 11.42 | $ | 3,806,663 | $ | 448 | (2) | ||||||||||||||
(1) | Estimated solely for the purpose of determining the registration fee pursuant to Rule 457(c), based on the average of the high and low prices of the common stock as reported on the New York Stock Exchange on August 31, 2005, the day immediately preceding the initial filing of this registration statement. |
(2) | Previously paid. |
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The information in this prospectus is not complete and may be changed or supplemented. We cannot sell any of the securities described in this prospectus until the registration statement that we have filed to cover the securities has become effective under the rules of the Securities and Exchange Commission. This prospectus is not an offer to sell the securities, nor is it a solicitation of an offer to buy the securities, in any state where the offer or sale is not permitted.
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Opinion/Consent of Hogan & Hartson |
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• | our Annual Report on Form 10-K for the year ended December 31, 2004, as amended by Amendment No. 1 to our Annual Report on Forms 10-K/A filed with the SEC on August 10, 2005 and August 24, 2005; | ||
• | our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2005 and June 30, 2005; and | ||
• | our Current Reports on Form 8-K, filed with the SEC on January 4, 2005, January 10, 2005, January 11, 2005, January 14, 2005, January 20, 2005 (both Current Reports filed on such date), February 10, 2005, March 14, 2005, March 18, 2005, March 22, 2005, March 29, 2005, March 31, 2005 (pursuant to Item 8.01), April 1, 2005, April 5, 2005, April 29, 2005, May 9, 2005, June 21, 2005 (pursuant to Items 1.01, 2.01, 2.03, 3.02, 8.01 and 9.01), July 6, 2005, August 26, 2005, August 30, 2005 and September 23, 2005. | ||
Ashford Hospitality Trust, Inc.
14185 Dallas Parkway, Suite 1100
Dallas, Texas 75254
(972) 490-9600
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• | our business and investment strategy; | ||
• | our projected operating results; | ||
• | completion of any pending transactions; | ||
• | our ability to obtain future financing arrangements; | ||
• | our understanding of our competition; | ||
• | market trends; | ||
• | projected capital expenditures; and | ||
• | the impact of technology on our operations and business. |
• | the factors discussed in this prospectus, and in the information incorporated by reference into this prospectus, including those set forth under the section titled “Risk Factors;” | ||
• | general volatility of the capital markets and the market price of our securities; | ||
• | changes in our business or investment strategy; | ||
• | availability, terms and deployment of capital; | ||
• | availability of qualified personnel; | ||
• | changes in our industry and the market in which we operate, interest rates or the general economy; and | ||
• | the degree and nature of our competition. |
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• | form of organization; | ||
• | management control; | ||
• | voting and consent rights; | ||
• | liquidity; and | ||
• | federal income tax considerations. |
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• | 10 years after the contribution of such property, and | ||
• | the date on which the contributor no longer owns, in the aggregate, at least 25% of the units we issued to the contributor at the time of its contribution of property to our operating partnership. |
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• | 7 years after the contribution of such property, and | ||
• | the date on which the contributor or any of its specified transferees no longer owns, in the aggregate, at least 10% of the units we issued to the contributor at the time of its contribution of property to our operating partnership. |
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• | Available interest rate hedging may not correspond directly with the interest rate risk for which protection is sought. | ||
• | The duration of the hedge may not match the duration of the related liability. | ||
• | The party owing money in the hedging transaction may default on its obligation to pay. | ||
• | The credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction. | ||
• | The value of derivatives used for hedging may be adjusted from time to time in accordance with accounting rules to reflect changes in fair value. Downward adjustments, or “mark-to-market losses,” would reduce our stockholders’ equity. |
• | our hotels compete with other hotel properties in their geographic markets and many of our competitors have substantial marketing and financial resources; | ||
• | over-building in our markets, which adversely affects occupancy and revenues at our hotels; |
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• | dependence on business and commercial travelers and tourism; and | ||
• | adverse effects of general, regional and local economic conditions and increases in energy costs or labor costs and other expenses affecting travel, which may affect travel patterns and reduce the number of business and commercial travelers and tourists. |
• | cost overruns and delays; | ||
• | renovations can be disruptive to operations and can displace revenue at the hotels, including revenue lost while rooms under renovation are out of service; | ||
• | the cost of funding renovations and the possibility that financing for these renovations may not be available on attractive terms; and | ||
• | the risk that the return on our investment in these capital improvements will not be what we expect. | ||
If we have insufficient cash flow from operations to fund needed capital expenditures, then we will need to borrow to fund future capital improvements. |
• | actual development costs may exceed our budgeted or contracted amounts; | ||
• | construction delays may prevent us from opening hotels on schedule; | ||
• | we may not be able to obtain all necessary zoning, land use, building, occupancy and construction permits; | ||
• | our developed properties may not achieve our desired revenue or profit goals; and | ||
• | we may incur substantial development costs and then have to abandon a development project before completion. |
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• | adverse changes in national and local economic and market conditions; | ||
• | changes in interest rates and in the availability, cost and terms of debt financing; | ||
• | changes in governmental laws and regulations, fiscal policies and zoning and other ordinances and costs of compliance with laws and regulations; | ||
• | the ongoing need for capital improvements, particularly in older structures; | ||
• | changes in operating expenses; and | ||
• | civil unrest, acts of war and natural disasters, including earthquakes and floods, which may result in uninsured and underinsured losses. |
• | our knowledge of the contamination; | ||
• | the timing of the contamination; | ||
• | the cause of the contamination; or | ||
• | the party responsible for the contamination of the property. |
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• | we would be taxed as a regular domestic corporation, which, among other things, means being unable to deduct distributions to stockholders in computing taxable income and being subject to federal income tax on our taxable income at regular corporate rates; | ||
• | we would also be subject to federal alternative minimum tax and, possibly, increased state and local taxes; | ||
• | any resulting tax liability could be substantial and would reduce the amount of cash available for distribution to stockholders; and | ||
• | unless we were entitled to relief under applicable statutory provisions, we would be disqualified from treatment as a REIT for the subsequent four taxable years following the year during which we lost our qualification, and, thus, our cash available for distribution to stockholders would be reduced for each of the years during which we did not qualify as a REIT. |
• | We will be required to pay tax on undistributed REIT taxable income. | ||
• | We may be required to pay the “alternative minimum tax” on our items of tax preference. |
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• | If we have net income from the disposition of foreclosure property held primarily for sale to customers in the ordinary course of business or other non-qualifying income from foreclosure property, we must pay tax on that income at the highest corporate rate. | ||
• | If we sell a property in a “prohibited transaction,” our gain from the sale would be subject to a 100% penalty tax. A “prohibited transaction” would be a sale of property, other than a foreclosure property, held primarily for sale to customers in the ordinary course of business. | ||
• | Our taxable REIT subsidiaries, including Ashford TRS Corporation and Ashford TRS VI Corporation, are fully taxable corporations and will be required to pay federal and state taxes on their income. |
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• | Ownership limit:The ownership limit in our charter limits related investors, including, among other things, any voting group, from acquiring over 9.8% of our common stock without our permission. | ||
• | Classification of preferred stock:Our charter authorizes our board of directors to issue preferred stock in one or more classes and to establish the preferences and rights of any class of preferred stock issued. These actions can be taken without soliciting stockholder approval. The issuance of preferred stock could have the effect of delaying or preventing someone from taking control of us, even if a change in control were in our stockholders’ best interests. |
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• | In order to protect our status as a REIT, no unit holder shall be entitled to effect a redemption, if such redemption would cause such holder or any other person to violate the provisions of our charter. | ||
• | No unit holder may effect a redemption for less than 1,000 units, or if such holder holds less than 1,000 units, all of the units held by such holder. |
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• | a citizen or resident of the United States; | ||
• | a corporation or partnership (including an entity treated as a corporation or partnership for U.S. federal income tax purposes) created or organized in or under the laws of the United States or of a political subdivision thereof; | ||
• | an estate whose income is subject to U.S. federal income taxation regardless of its source; or | ||
• | any trust if (1) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) it has a valid election in place to be treated as a U.S. person. |
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Number of | Number of | |||||||||||||||
Shares Owned | Shares | |||||||||||||||
Prior to the | Offered | Shares Owned Following | ||||||||||||||
Selling Stockholder | Offering(1) | Hereby(2) | the Offering | |||||||||||||
Shares | Percent | |||||||||||||||
Dunn Family Associates, LLP, as sole beneficiary under Land Trust Agreement dated July 16, 1990 | 60,320 | 60,320 | — | — | ||||||||||||
Hotel Investment, LLC | 12,052 | 12,052 | — | — | ||||||||||||
Encore Hotels of Bloomington, Inc. | 94,425 | 94,425 | — | — | ||||||||||||
Encore Hotels of Terre Haute, LLC | 19,498 | 19,498 | — | — | ||||||||||||
Encore Residential Hotels of Evansville, LLC | 34,994 | 34,994 | — | — | ||||||||||||
Encore Hotels of Columbus, LLC | 37,800 | 37,800 | — | — | ||||||||||||
Encore Hotels of Horse Cave, LLC | 40 | 40 | — | — | ||||||||||||
Encore Hotels of Princeton II, LLC | 110 | 110 | — | — | ||||||||||||
Dunn Hospitality Group, LLC | 74,094 | 74,094 | — | — | ||||||||||||
333,333 | 333,333 | — | — | |||||||||||||
(1) | Represents shares of common stock currently owned by the selling stockholder or issuable in exchange for an equal number of currently redeemable units of limited partnership interest in our operating partnership owned by the selling stockholder. | |
(2) | Assumes that all units held by the selling stockholder are exchanged for shares of common stock and that all such shares of common stock are being resold pursuant to this prospectus. |
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• | any person from actually or constructively owning shares of our capital stock that would result in us being “closely held” under Section 856(h) of the Code or otherwise cause us to fail to qualify as a REIT; and | ||
• | any person from transferring shares of our capital stock if such transfer would result in shares of our stock being beneficially owned by fewer than 100 persons (determined without reference to any rules of attribution). |
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• | any person who beneficially owns 10% or more of the voting power of our voting stock; or | ||
• | an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then-outstanding voting stock of the corporation. |
• | 80% of the votes entitled to be cast by holders of the then outstanding shares of common stock; and | ||
• | two-thirds of the votes entitled to be cast by holders of the common stock other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or shares held by an affiliate or associate of the interested stockholder. |
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• | with respect to an annual meeting of stockholders, the only business to be considered and the only proposals to be acted upon will be those properly brought before the annual meeting: |
— | pursuant to our notice of the meeting; | ||
— | by, or at the direction of, a majority of our board of directors; or | ||
— | by a stockholder who is entitled to vote at the meeting and has complied with the advance notice procedures set forth in our bylaws; |
• | with respect to special meetings of stockholders, only the business specified in our company’s notice of meeting may be brought before the meeting of stockholders unless otherwise provided by law; and |
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• | nominations of persons for election to our board of directors at any annual or special meeting of stockholders may be made only: |
— | by, or at the direction of, our board of directors; or | ||
— | by a stockholder who is entitled to vote at the meeting and has complied with the advance notice provisions set forth in our bylaws. |
• | an act or omission of the director or officer was material to the matter giving rise to the proceeding and: |
— | was committed in bad faith; or | ||
— | was the result of active and deliberate dishonesty; |
• | the director or officer actually received an improper personal benefit in money, property or services; or | ||
• | in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. |
• | a written affirmation by the director or officer of his good faith belief that he has met the standard of conduct necessary for indemnification by the corporation; and | ||
• | a written undertaking by the director or on the director’s behalf to repay the amount paid or reimbursed by the corporation if it is ultimately determined that the director did not meet the standard of conduct. |
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• | any present or former director or officer who is made a party to the proceeding by reason of his or her service in that capacity; or | ||
• | any individual who, while a director or officer of our company and at our request, serves or has served another corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or any other enterprise as a director, officer, partner or trustee and who is made a party to the proceeding by reason of his or her service in that capacity. |
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• | in connection with a merger of the operating partnership, a sale of substantially all of the assets of the operating partnership or other transaction in which the limited partners receive a certain amount of cash, securities or property; or | ||
• | in connection with a merger of us or the general partner into another entity, if the surviving entity contributes substantially all its assets to the operating partnership and assumes the duties of the general partner under the operating partnership agreement. |
• | would cause us to fail to comply with the REIT rules under the Internal Revenue Code, or | ||
• | would cause us to become a publicly-traded partnership under the Internal Revenue Code. |
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• | all expenses relating to our continuity of existence; | ||
• | all expenses relating to offerings and registration of securities; | ||
• | all expenses associated with the preparation and filing of any of our periodic reports under federal, state or local laws or regulations; | ||
• | all expenses associated with our compliance with laws, rules and regulations promulgated by any regulatory body; and | ||
• | all of our other operating or administrative costs incurred in the ordinary course of its business on behalf of the partnership. |
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• | the act or omission of the indemnitee was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty, | ||
• | the indemnitee actually received an improper personal benefit in money, property or services, or | ||
• | in the case of any criminal proceeding, the indemnitee had reasonable cause to believe that the act or omission was unlawful. |
• | the general partner’s bankruptcy or dissolution or withdrawal (unless the limited partners elect to continue the partnership); |
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• | the passage of 90 days after the sale or other disposition of all or substantially all the assets of the partnership; | ||
• | the redemption of all partnership units (other than those held by us, if any); or | ||
• | an election by us in our capacity as the sole owner of the general partner. |
PARTNERSHIP | COMPANY | |
Form of Organization and Purposes | ||
The partnership is organized as a Delaware limited partnership. The partnership’s purpose is to conduct any business that may be lawfully conducted by a limited partnership organized pursuant to the Delaware Revised Uniform Limited Partnership Act, provided that such business is to be limited to and conducted in such a manner as to permits us at all times to be qualified as a REIT under the Code unless our board of directors determines to cease to qualify as a REIT. The general partner may cause the partnership to take, or to refrain from taking, any action that, in the good faith belief of the general partner, is necessary or advisable in order (i) to protect the ability of the company to continue to qualify as a REIT, or (ii) to prevent the company from incurring any taxes under Section 857 or Section 4981 of the Code. | We are a Maryland corporation. We have elected to be taxed as a REIT under the Code and intend to maintain our qualification as a REIT. Under our charter, we may engage in any lawful act or activity for which corporation may be organized under the MGCL. |
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Length of Investment | ||
The partnership has a perpetual term and intends to continue operations for an indefinite time period. | We have a perpetual term and intend to continue our operations for an indefinite time period. | |
Additional Equity | ||
The partnership is authorized to issue units in exchange for additional capital contributions as determined by the general partner, in its sole discretion. In exchange for such capital contributions, the partnership may issue partnership interests to the general partner, may issue additional units to existing limited partners, and may admit third parties as additional limited partners. | The board of directors may issue, in its discretion, additional equity securities consisting of common stock or preferred stock; provided, that the total number of shares issued does not exceed the authorized number of shares of stock set forth in our charter. | |
Borrowing Policies | ||
The partnership has no restrictions on borrowings, and the general partner has full power and authority to borrow money on behalf of the partnership; provided that the term of any loan from the general partner or any affiliate of the general partner must be substantially equivalent to the terms that could be obtained from a third party on an arm’s-length basis. | Neither our charter nor our bylaws impose any restrictions on our ability to incur borrowings. However, our revolving credit and secured term loan facilities contain certain financial covenants and operating covenants, including, among other things, limitations on our ability to incur secured and unsecured debt. | |
Other Investment Restrictions | ||
Other than restrictions precluding investments by the partnership that would adversely affect our qualification as a REIT and restrictions on transactions with affiliates, the partnership agreement does not generally restrict the partnership’s authority to enter into certain transactions, including, among others, making investments, lending partnership funds, or reinvesting the partnership’s cash flow and net sale or refinancing proceeds. | Neither our charter nor our bylaws impose any restrictions upon the types of investments made by us. | |
Management Control | ||
All management powers over the business and affairs of the partnership are vested in the general partner, and generally no limited partner of the partnership has any right to participate in or exercise control or management power over the business and affairs of the partnership, except as otherwise set forth in the partnership agreement. The general partner may not be removed by the limited partners of the partnership with or without cause. | The board of directors has exclusive control over our business and affairs subject only to the restrictions in our charter and bylaws. At each annual meeting of the stockholders, the stockholders elect directors. The policies adopted by the board of directors may be altered or eliminated without a vote of the stockholders. Accordingly, except for their vote in the elections of directors, stockholders have no control over our ordinary business policies. | |
Fiduciary Duties of General Partners and Directors | ||
Under Delaware law, the general partner of the partnership is accountable to the partnership as a fiduciary and, consequently, is required to exercise good faith and integrity in all of its dealings with respect to partnership affairs. However, under the | Under the MGCL, the directors must perform their duties in good faith, in a manner that they reasonably believe to be in the best interests of the company and with the care of an ordinarily prudent person in a like position. Any director who acts in such a manner |
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partnership agreement, the general partner is not liable for monetary damages for losses sustained, liabilities incurred or benefits not derived by partners as a result of errors in judgment or of any act or omission, provided that the general partner has acted in good faith. | generally will not be liable to the company for monetary damages arising from his or her activities as a director of the company. |
Management Liability and Indemnification | ||
As a matter of Delaware law, the general partner has liability for the payment of the obligations and debts of the partnership unless limitations upon such liability are stated in the document or instrument evidencing the obligations. Under the partnership agreement, the partnership has agreed to indemnify the general partner and any director, officer, employee or agent of the partnership or the general partner from and against all losses, claims, damages, liabilities (joint or several), expenses (including legal fees and expenses), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, that relate to the operations of the partnership, unless: (i) the act or omission was material to the matter giving rise to the proceeding and with was committed in bad faith or was the result of active and deliberate dishonesty; (ii) the party actually received an improper personal benefit in money, property or services; or (iii) in the case of any criminal proceeding, the party had reasonable cause to believe that the act or omission was unlawful. The reasonable expenses incurred by an indemnitee may be reimbursed by the partnership in advance of the final disposition of the proceeding upon receipt by the partnership of (i) a written affirmation by the indemnitee of his, her or its good faith belief that the standard of conduct necessary for indemnification has been met and (ii) a written undertaking by or on behalf of the indemnitee to repay the amount if it is determined that the standard of conduct was not met. | Our charter contains a provision which eliminates the liability of our directors and officers to the company and its stockholders to the maximum extent permitted by Maryland law. Our bylaws require us, to the maximum extent permitted by Maryland law, to indemnify and, without a preliminary determination of the ultimate entitlement to indemnification, pay or reimburse reasonable expenses in advance of final disposition of a proceeding to (i) any individual who is a present or former director or officer of the company, (ii) any individual who, while a director or officer of the company and at the request of the company, serves or has served another corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or any other enterprise as a director, officer, partner or trustee. | |
Anti-takeover Provisions | ||
Except in limited circumstances (see “—Voting Rights” below), the general partner of the partnership has exclusive management power over the business and affairs of the partnership. The general partner may not be removed by the limited partners with or without cause. Except with respect to certain limited partners and after certain specified dates, a limited partner may generally transfer its limited partnership interest only with the approval of the general partner, and the general partner may, in its sole discretion, prevent the admission to the partnership of substituted limited partners. | Our charter and bylaws contain a number of provisions that may have the effect of delaying or discouraging an unsolicited proposal for the acquisition of the company or the removal of incumbent management. These provisions include, among others: (i) authorized stock that may be issued as preferred stock in the discretion of the board of directors, with superior voting or other rights to the common stock; and (ii) provisions designed to avoid concentration of share ownership in a manner that would jeopardize our status as a REIT under the Code. The MGCL also contains certain provisions which could have the effect of delaying, deferring or preventing a change in control of the company or other transaction. See “Material Provisions of Maryland Law and of Our Charter and Bylaws.” |
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Voting Rights | ||
Under the partnership agreement, the limited partners have voting rights in limited circumstances, including as to the election of a new general partner upon the dissolution or withdrawal of the existing general partner and as to certain amendments to the partnership agreement, as described more fully below. Otherwise, all decisions relating to the operation and management of the partnership are made by the general partner. | Our business and affairs are managed under the direction of our board of directors. Each director is to be elected by the stockholders at annual meetings. The MGCL requires that certain major corporate transactions, including most amendments to our charter, may not be consummated without the approval of stockholders as set forth below. All shares of our common stock and all shares of our Series B-1 preferred stock have one vote per share, and our charter permits the board of directors to classify and issue preferred stock in one or more series having voting power which may differ from that of the common stock. |
Amendment of the Partnership Agreement or our Charter | ||
The partnership agreement may be amended by the general partner without the approval of any limited partner if such amendment (i) is for the purpose of clarification or is of an inconsequential nature; (ii) is to reflect the admission, substitution or withdrawal of limited partners or to reflect the issuance of additional partnership interests or to amend the calculation of the Cash Amount and the Conversion Factor (as such terms are defined in the partnership agreement) following a merger or consolidation of the partnership with another entity. Amendments that adversely affect the limited liability of the limited partners, impose on the limited partners any obligation to make additional capital contributions, change the method of allocation of profit and loss or the distribution provisions, seek to impose personal liability on the limited partners or affect the operation of the conversion factor of the redemption right must be approved by limited partners holding more than 66 2/3% of the outstanding units. Any other amendment to the partnership agreement must be approved by the general partner and by limited partners holding a majority in interest of the units. | Under the MGCL and our charter, amendments to our charter generally must be advised by the board of directors and approved by the holders of at least a majority of the votes entitled to be cast on the matter. | |
Vote Required to Dissolve the Partnership or the Company | ||
The partnership will be dissolved upon (i) an event of bankruptcy as to the general partner or the dissolution or withdrawal of the general partner (unless within 90 days thereafter limited partners holding more than | Under the MGCL and our charter, dissolution of the Company must be advised by the board of directors and approved by the holders of at least a majority of the votes entitled to be cast on the matter. |
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50% of the units elect to continue the partnership and elect a new general partner), (ii) 90 days following the sale of all or substantially all of the partnership’s assets, (iii) the redemption of all units (other than any units held by the general partner or the company), or (iv) the election by the general partner (but only in accordance with and as permitted by applicable law). | ||
Vote Required to Sell Assets or Merge | ||
Under the partnership agreement, the general partner has the full power and authority to effectuate the sale, transfer, exchange or other disposition of any of the partnership’s assets or the merger, consolidation, reorganization or other combination of the partnership with or into another entity. | Under the MGCL and our charter, the sale of all or substantially all of our assets, or our merger or consolidation, requires the approval of the board of directors and the holders of at least a majority of the votes entitled to be cast on the matter. No approval is required for the sale of less than all or substantially all of our assets. | |
Compensation and Fees | ||
The general partner does not receive any compensation for its services as general partner of the partnership. The partnership will reimburse the general partner for all expenses incurred relating to the ongoing operation of the partnership. | Our officers and outside directors receive compensation for their services. | |
Liability of Investors | ||
Under the partnership agreement and applicable Delaware law, the liability of the limited partners for the partnership’s debts and obligations is generally limited to the amount of their investment in the partnership. | Under Maryland law, stockholders generally are not personally liable for the debts or obligations of the Company. | |
Potential Dilution of Rights | ||
The general partner of the partnership is authorized, in its sole discretion and without limited partner approval, to cause the partnership to issue additional limited partnership interests for any partnership purpose at any time to the limited partners or to other persons (including the general partner). | The board of directors may issue, in its discretion, additional shares of common stock or preferred stock, or securities convertible into shares of its common or preferred stock. The issuance of additional shares of either common stock or preferred stock or other convertible securities may result in the dilution of the interests of the stockholders. | |
Liquidity | ||
Except with respect to certain limited partners and after certain specified dates, a limited partner may generally transfer its limited partnership interest only with the approval of the general partner, and the general partner may, in its sole discretion, prevent the admission to the partnership of substituted limited partners. | The shares of common stock issued upon redemption of the units will be freely transferable as registered securities under the Securities Act of 1933. Our common stock is listed on the New York Stock Exchange under the symbol “AHT.” The breadth and strength of this secondary market will depend, among other things, upon the number of shares of common stock outstanding, our financial condition, performance and prospects, the market for similar securities issued by REITs, and our dividend yield compared to that of other debt and equity securities. |
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Federal Income Taxation | ||
The partnership itself is not subject to federal income taxes. Instead, each holder of units includes its allocable share of the partnership’s taxable income or loss in determining its individual federal income tax liability. The maximum federal income tax rate for individuals under current law is 35%. | We have elected to be taxed as a REIT for federal income tax purposes. A REIT generally is not subject to federal income tax on the income that it distributes to stockholders if it meets the applicable REIT distribution requirements and other requirements for qualification as a REIT. Even a REIT, however, is subject to federal income tax on income that is not distributed and also may be subject to federal income and excise taxes in certain circumstances. The maximum federal income tax rate for corporations under current law is 35%. Stockholders generally will be subject to taxation on dividends (other than designated “capital gains dividends” and “qualified dividend income”) at rates applicable to ordinary income, instead of at lower capital gain rates that generally apply to dividends received from a regular C corporation. | |
Depending on certain facts, a unit holder’s allocable share of income and loss from the partnership may be subject to the “passive activity” limitations. Under the “passive activity” rules, a unit holder’s allocable share of income and loss from the partnership that is considered “passive income” generally can be offset against a holder’s income and loss from other investments that constitute “passive activities.” Cash distributions from the partnership are generally not taxable to a holder of units except to the extent they exceed such holder’s basis in its interest in the partnership (which will include such holder’s allocable share of the partnership’s nonrecourse debt). See “ – Basis of Units.” | Dividends paid by us will be treated as “portfolio” income and generally cannot be offset with losses from “passive activities.” Distributions made by us to our taxable domestic stockholders out of current or accumulated earnings and profits (and not designated as capital gain dividends) will be taken into account by them as ordinary income. Distributions that are properly designated by us as capital gain dividends or “qualified dividend income” may be taxed at long-term capital gain rates, subject to certain exceptions. Distributions (not designated as capital gain dividends) in excess of current and accumulated earnings and profits will first be treated as a non-taxable return of capital to the extent of a stockholder’s adjusted basis in its stock, with the excess taxed as capital gain (if the stock has been held as a capital asset). See “Federal Income Tax Consequences of our Status as a REIT — Taxation of Taxable U.S. Stockholders.” | |
Holders of units are required, in some cases, to file state income tax returns and/or pay state income taxes in the states in which the partnership owns property, even if they are not residents of those states. | Stockholders who are individuals generally will not be required to file state income tax returns and/or pay state income taxes outside of their state of residence with respect to our operations and distributions. We may be required to pay state income taxes in certain states. |
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• | We will pay federal income tax on taxable income, including net capital gain, that we do not distribute to our stockholders during, or within a specified time period after, the calendar year in which the income is earned. | |
• | Under certain circumstances, we may be subject to the “alternative minimum tax” on items of tax preference. | |
• | We will pay income tax at the highest corporate rate on (1) net income from the sale or other disposition of property acquired through foreclosure (“foreclosure property”) that we hold primarily for sale to customers in the ordinary course of business and (2) other non-qualifying income from foreclosure property. | |
• | We will pay a 100% tax on net income from sales or other dispositions of property, other than foreclosure property, that we hold primarily for sale to customers in the ordinary course of business. | |
• | If we fail to satisfy the 75% gross income test or the 95% gross income test, as described below under “— Income Tests,” and nonetheless continue to qualify as a REIT because we meet other requirements, we will pay a 100% tax on (1) the gross income attributable to the greater of the amounts by which we fail the 75% and 95% gross income tests, multiplied by (2) a fraction intended to reflect our profitability. | |
• | If we fail to distribute during a calendar year at least the sum of (1) 85% of our REIT ordinary income for such year, (2) 95% of our REIT capital gain net income for such year, and (3) any undistributed taxable income from prior periods, we will pay a 4% excise tax on the excess of this required distribution over the amount we actually distributed. | |
• | We may elect to retain and pay income tax on our net long-term capital gain. In that case, a U.S. stockholder would be taxed on its proportionate share of our undistributed long-term capital gain (to the extent that a timely designation of such gain is made by us to the stockholder) and would receive a credit or refund for its proportionate share of the tax we paid. | |
• | If we acquire any asset from a C corporation, or a corporation that generally is subject to full corporate-level tax, in a merger or other transaction in which we acquire a basis in the asset that is determined by reference to the C corporation’s basis in the asset, we will pay tax at the highest regular corporate rate applicable if we recognize gain on the sale or disposition of such asset during the 10-year period after we acquire such asset. The amount of gain on which we will pay tax generally is the lesser of: (1) the amount of gain that we recognize at the time of the sale or disposition; or (2) the amount of gain that we would have recognized if we had sold the asset at the time we acquired the asset. | |
• | We will incur a 100% excise tax on transactions with a “taxable REIT subsidiary” that are not conducted on an arm’s-length basis. | |
• | After 2004, if we fail to satisfy certain asset tests, described below under “- Asset Tests,” by more than a de minimis threshold, and nonetheless continue to qualify as a REIT because we meet certain other requirements, we will be subject to a tax of the greater of $50,000 or at the highest corporate rate on the income generated by the non-qualifying assets. | |
• | After 2004, we may be subject to a $50,000 tax for each such failure if we fail to satisfy certain REIT qualification requirements, other than income tests or asset tests, and such failure is due to reasonable cause and not willful neglect. |
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• | rents from real property; | ||
• | interest on debt secured by mortgages on real property or on interests in real property; | ||
• | dividends and gain from the sale of shares in other REITs; and | ||
• | gain from the sale of real estate assets. |
• | First, the rent must not be based, in whole or in part, on the income or profits of any person but may be based on a fixed percentage or percentages of gross receipts or gross sales. | ||
• | Second, neither we nor a direct or indirect owner of 10% or more of our shares of common stock may own, actually or constructively, 10% or more of a tenant other than a TRS from whom we receive rent. | ||
• | Third, if the rent attributable to personal property leased in connection with a lease of real property exceeds 15% of the total rent received under the lease, then the portion of rent attributable to that personal property will not qualify as “rents from real property.” |
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• | Fourth, we generally must not operate or manage our real property or furnish or render services to our tenants, other than through an “independent contractor” who is adequately compensated, from whom we do not derive revenue, and who does not, directly or through its stockholders, own more than 35% of our shares of common stock, taking into consideration the applicable ownership attribution rules. However, we need not provide services through an “independent contractor,” but instead may provide services directly to our tenants, if the services are “usually or customarily rendered” in the geographic area in connection with the rental of space for occupancy only and are not considered to be provided for the tenants’ convenience. In addition, we may provide a minimal amount of “non-customary” services to the tenants of a property, other than through an independent contractor, as long as our income from the services (valued at not less than 150% of our direct cost of performing such services) does not exceed 1% of our income from the related property. Furthermore, we may own up to 100% of the stock of a TRS which may provide customary and noncustomary services to our tenants without tainting our rental income from the related properties. See “— Taxable REIT Subsidiaries.” |
• | the intent of the parties; | ||
• | the form of the agreement; | ||
• | the degree of control over the property that is retained by the property owner, or whether the lessee has substantial control over the operation of the property or is required simply to use its best efforts to perform its obligations under the agreement; and | ||
• | the extent to which the property owner retains the risk of loss with respect to the property, or whether the lessee bears the risk of increases in operating expenses or the risk of damage to the property or the potential for economic gain or appreciation with respect to the property. |
• | the service recipient is in physical possession of the property; | ||
• | the service recipient controls the property; | ||
• | the service recipient has a significant economic or possessory interest in the property, or whether the property’s use is likely to be dedicated to the service recipient for a substantial portion of the useful life of the property, the recipient shares the risk that the property will decline in value, the recipient shares in any appreciation in the value of the property, the recipient shares in savings in the property’s operating costs, or the recipient bears the risk of damage to or loss of the property; | ||
• | the service provider bears the risk of substantially diminished receipts or substantially increased expenditures if there is nonperformance under the contract; |
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• | the service provider uses the property concurrently to provide significant services to entities unrelated to the service recipient; and | ||
• | the total contract price substantially exceeds the rental value of the property for the contract period. |
• | the Partnerships, on the one hand, and a TRS, on the other hand, intend for their relationship to be that of a lessor and lessee, and such relationship is documented by lease agreements; | ||
• | a TRS has the right to the exclusive possession, use, and quiet enjoyment of the hotels during the term of the percentage leases; | ||
• | a TRS bears the cost of, and is responsible for, day-to-day maintenance and repair of the hotels and generally dictates how the hotels are operated, maintained, and improved; | ||
• | a TRS bears all of the costs and expenses of operating the hotels, including the cost of any inventory used in their operation, during the term of the percentage leases, other than real estate; | ||
• | a TRS benefits from any savings in the costs of operating the hotels during the term of the percentage leases; | ||
• | a TRS generally has indemnified the Partnerships against all liabilities imposed on the Partnerships during the term of the percentage leases by reason of (1) injury to persons or damage to property occurring at the hotels, (2) the TRS’ use, management, maintenance, or repair of the hotels, (3) any environmental liability caused by acts or grossly negligent failures to act of the TRS, (4) taxes and assessments in respect of the hotels that are the obligations of the TRS, or (5) any breach of the percentage leases or of any sublease of a hotel by the TRS; | ||
• | a TRS is obligated to pay substantial fixed rent for the period of use of the hotels; | ||
• | a TRS stands to incur substantial losses or reap substantial gains depending on how successfully it operates the hotels; | ||
• | the Partnerships cannot use the hotels concurrently to provide significant services to entities unrelated to a TRS; and | ||
• | the total contract price under the percentage leases does not substantially exceed the rental value of the hotels for the term of the percentage leases. |
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• | are fixed at the time the percentage leases are entered into; | ||
• | are not renegotiated during the term of the percentage leases in a manner that has the effect of basing percentage rent on income or profits; and | ||
• | conform with normal business practice. |
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• | that is acquired by a REIT as the result of such REIT having bid in such property at foreclosure, or having otherwise reduced such property to ownership or possession by agreement or process of law, after there was a default or default was imminent on a lease of such property or on an indebtedness that such property secured; and | ||
• | for which such REIT makes a proper election to treat such property as foreclosure property. |
• | on which a lease is entered into with respect to such property that, by its terms, will give rise to income that does not qualify for purposes of the 75% gross income test or any amount is received or accrued, directly or indirectly, pursuant to a lease entered into on or after such day that will give rise to income that does not qualify for purposes of the 75% gross income test; | ||
• | on which any construction takes place on such property, other than completion of a building, or any other improvement, where more than 10% of the construction of such building or other improvement was completed before default became imminent; or | ||
• | which is more than 90 days after the day on which such property was acquired by the REIT and the property is used in a trade or business which is conducted by the REIT, other than through an independent contractor from whom the REIT itself does not derive or receive any income. |
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• | our failure to meet such tests is due to reasonable cause and not due to willful neglect; | ||
• | for years ending before January 1, 2005, we attach a schedule of the sources of our income to our tax return; and any incorrect information on the schedule was not due to fraud with intent to evade tax; and | ||
• | for years beginning after December 31, 2004, following our identification of the failure to meet one or both gross income tests for a taxable year, a description of each item of our gross income included in the 75% and 95% gross income tests is set forth in a schedule for such taxable year filed as specified by Treasury regulations. |
• | First, at least 75% of the value of our total assets must consist of: |
— | cash or cash items, including certain receivables; | ||
— | government securities; | ||
— | interests in real property, including leaseholds and options to acquire real property and leaseholds; | ||
— | interests in mortgages on real property; | ||
— | stock in other REITs; and | ||
— | investments in stock or debt instruments during the one-year period following our receipt of new capital that we raise through equity offerings or offerings of debt with at least a five-year term. |
• | Second, of our investments not included in the 75% asset class, the value of our interest in any one issuer’s securities may not exceed 5% of the value of our total assets. | ||
• | Third, we may not own more than 10% of the voting power or value of any one issuer’s outstanding securities. | ||
• | Fourth, no more than 20% of the value of our total assets may consist of the securities of one or more TRSs. |
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• | the sum of (1) 90% of our “REIT taxable income,” computed without regard to the dividends paid deduction and our net capital gain or loss, and (2) 90% of our after-tax net income, if any, from foreclosure property; minus | ||
• | the sum of certain items of non-cash income. |
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• | 85% of our REIT ordinary income for such year; | ||
• | 95% of our REIT capital gain income for such year; and | ||
• | any undistributed taxable income from prior periods, |
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• | a citizen or resident of the United States; | ||
• | a corporation or partnership (including an entity treated as a corporation or partnership for U.S. federal income tax purposes) created or organized in or under the laws of the United States or of a political subdivision thereof; | ||
• | an estate whose income is subject to U.S. federal income taxation regardless of its source; or | ||
• | any trust if (1) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) it has a valid election in place to be treated as a U.S. person. |
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• | is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact; or | ||
• | provides a taxpayer identification number, certifies as to no loss of exemption from backup withholding, and otherwise complies with the applicable requirements of the backup withholding rules. |
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• | the percentage of our dividends that the tax-exempt trust would be required to treat as unrelated business taxable income is at least 5%; | ||
• | we qualify as a REIT by reason of the modification of the rule requiring that no more than 50% of our common stock be owned by five or fewer individuals that allows the beneficiaries of the pension trust to be treated as holding our common stock in proportion to their actuarial interests in the pension trust (see “— Requirements for Qualification” above); and | ||
• | either (1) one pension trust owns more than 25% of the value of our common stock or (2) a group of pension trusts individually holding more than 10% of the value of our common stock collectively owns more than 50% of the value of our common stock. |
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• | a lower treaty rate applies and the non-U.S. stockholder files an IRS Form W-8BEN evidencing eligibility for that reduced rate with us; or | ||
• | the non-U.S. stockholder files an IRS Form W-8ECI with us claiming that the distribution is effectively connected income. |
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• | is treated as a partnership under Treasury regulations, effective January 1, 1997, relating to entity classification (the “check-the-box regulations”); and | ||
• | is not a “publicly traded” partnership. |
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• | the amount of cash and the basis of any other property contributed by us to the operating partnership; | ||
• | increased by our allocable share of the operating partnership’s income and our allocable share of indebtedness of the operating partnership; and | ||
• | reduced, but not below zero, by our allocable share of the operating partnership’s loss and the amount of cash distributed to us, and by constructive distributions resulting from a reduction in our share of indebtedness of the operating partnership. |
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• | such person is, or is related to a person who is, actively engaged in the trade or business of operating “qualified lodging facilities” for any person unrelated to us and the TRS; | ||
• | such person does not own, directly or indirectly, more than 35% of our common stock; | ||
• | no more than 35% of such person is owned, directly or indirectly, by one or more persons owning 35% or more of our common stock; and | ||
• | we do not directly or indirectly derive any income from such person. |
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• | on the New York Stock Exchange or other national exchange or quotation system on which our shares of common stock are listed or traded at the time of sale; | ||
• | in the over-the-counter market; | ||
• | in privately negotiated transactions; | ||
• | in underwritten transactions; or | ||
• | otherwise, at prices then prevailing or related to the then current market price or at negotiated prices. |
• | a block trade in which the broker-dealer so engaged will attempt to sell common stock as agent but may position and resell a portion of the block as principal to facilitate the transaction; | ||
• | purchases by a broker-dealer as principal and resale by such broker-dealer for its own account pursuant to this prospectus; | ||
• | ordinary brokerage transactions and transactions in which the broker solicits purchases; | ||
• | an exchange distribution in accordance with the rules of the exchange or quotation system; | ||
• | privately negotiated transactions; and | ||
• | underwritten transactions. |
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SEC Registration Fee | $ | 448 | ||
Legal Fees and Expenses (other than Blue Sky) | 25,000 | * | ||
Accounting and Fees and Expenses | 10,000 | * | ||
Miscellaneous | 1,552 | * | ||
Total | $ | 37,000 | ||
* | Fees are estimates only. |
• | an act or omission of the director or officer was material to the matter giving rise to the proceeding and: |
— | was committed in bad faith; or | ||
— | was the result of active and deliberate dishonesty; |
• | the director or officer actually received an improper personal benefit in money, property or services; or | ||
• | in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. |
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• | a written affirmation by the director or officer of his good faith belief that he has met the standard of conduct necessary for indemnification by the corporation; and | ||
• | a written undertaking by the director or on the director’s behalf to repay the amount paid or reimbursed by the corporation if it is ultimately determined that the director did not meet the standard of conduct. |
• | any present or former director or officer who is made a party to the proceeding by reason of his or her service in that capacity; or | ||
• | any individual who, while a director or officer of our company and at our request, serves or has served another corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or any other enterprise as a director, officer, partner or trustee of such corporation, real estate investment trust, partnership, |
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Exhibit | ||
Number | Description of Exhibit | |
4.1 | Articles of Amendment and Restatement of the Charter of the Company (incorporated by reference to Exhibit 3.1 of Form S-11 /A, filed on July 31, 2003) | |
4.2 | Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 of Form S-11/A, filed on July 31, 2003) | |
4.3 | Amendment No. 1 to Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2.2 to the Registrant’s Form 10-K for the year ended December 31, 2003) | |
4.4 | Articles Supplementary classifying 3,000,000 shares of preferred stock as 8.55% Series A Cumulative Preferred Stock (incorporated by reference to Exhibit 4.4 to the Registrant’s Form 8-K, dated September 15, 2004, for the event dated September 21, 2004) | |
4.5 | Articles Supplementary classifying 7,447,865 shares of preferred stock as Series B-1 Cumulative Convertible Redeemable Preferred Stock (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K, dated January 4, 2005, for the event dated December 28, 2004) | |
4.6 | Articles Supplementary classifying 2,285,865 shares of preferred stock as Series B-2 Cumulative Convertible Redeemable Preferred Stock (incorporated by reference to Exhibit 4.2 to the Registrant’s Form 8-K, dated January 4, 2005, for the event dated December 28, 2004) | |
**4.7 | Registration Rights Agreement, dated as of September 2, 2004, by and between Ashford Hospitality Trust, Inc. and the Unitholders (as defined therein). | |
*5.1 | Opinion of Hogan & Hartson with respect to the legality of the shares being registered | |
**8.1 | Opinion of Andrews Kurth LLP with respect to tax matters | |
*23.1 | Consent of Hogan & Hartson (included in Exhibit 5.1) | |
**23.2 | Consent of Andrews Kurth (included in Exhibit 8.1) | |
**23.3 | Consent of Ernst & Young LLP | |
**23.4 | Consent of Holland Shipes Vann, P.C. | |
**23.5 | Consent of Berdon LLP | |
**23.6 | Consent of PricewaterhouseCoopers LLP | |
**24.1 | Power of Attorney | |
* | Filed herewith. | |
** | Previously filed. | |
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(i) | To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; | ||
(ii) | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and | ||
(iii) | To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in this registration statement; |
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ASHFORD HOSPITALITY TRUST, INC. | ||||||
By: | /s/ David Kimichik | |||||
// | ||||||
David Kimichik | ||||||
Chief Financial Officer | ||||||
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Signature | Title | Date | ||
* | Chairman of the Board of Directors | October 11, 2005 | ||
Archie Bennett, Jr. | ||||
* | Chief Executive Officer, President and Director | October 11, 2005 | ||
Montgomery J. Bennett | (Principal Executive Officer) | |||
* | Chief Financial Officer | October 11, 2005 | ||
David Kimichik | (Principal Financial Officer) | |||
* | Chief Accounting Officer | October 11, 2005 | ||
Mark Nunneley | (Principal Accounting Officer) | |||
* | Director | October 11, 2005 | ||
Martin L. Edelman | ||||
* | Director | October 11, 2005 | ||
W.D. Minami | ||||
* | Director | October 11, 2005 | ||
W. Michael Murphy | ||||
* | Director | October 11, 2005 | ||
Philip S. Payne | ||||
* | Director | October 11, 2005 | ||
Charles P. Toppino | ||||
/s/ David A. Brooks | ||||
David A. Brooks | ||||
Attorney-In-Fact |