Dear Fellow Shareholders,
Ashford Hospitality Trust’s core objective seeks to maximize long term total shareholder returns. Our Board, management team, and affiliates align with this goal given high insider ownership of 19%, which exceeds the peer average by approximately six times. This alignment motivates our performance and continues to be one of our many key differentiators. Driven by this commitment to maximize shareholder value, we attempt to optimize the strategic and economic impact of our transaction, capital markets, asset management, and governance initiatives.
As for our 2017 highlights, at year-end, our portfolio consisted of 120 hotels containing 25,031 net rooms spread across 31 states. We believe our geographic diversity, combined with the fact that no major market represents more than 10% of our EBITDA, provides economic balance and reduces risk. Turning to our financial performance for 2017, comparable RevPAR for our hotels increased 1.8% to $123.47, driven by a 1.4% increase in rate and a 0.4% improvement in occupancy. We are also pleased to report the fourth straight year of increasing our RevPAR penetration index, which we believe is evidence of strong hotel operations and the benefits of our capital refreshes at the hotels. Adjusted EBITDA for 2017 totaled $419.2 million and AFFO per share was $1.37. This performance emphasizes the quality of our portfolio as well as the strength of our asset management capabilities.
Regarding transactions, we will continue to own and acquire predominantly upper upscale full-service hotels with a RevPAR generally less than two times the national average. We calculate economic tradeoffs in balancing RevPAR compared to the initial cash on cash yields. Furthermore, we frequently see a wider array of transaction opportunities with less competition at more attractive pricing, oftentimes with the ability to add value or convert to franchised hotels. We did not buy any new hotels during 2017 given an unusually shallow transaction pipeline along with what we saw as unattractive pricing and underwriting results for available hotel deals. It is worth noting that in the first half of the year we pursued what became an unsuccessful attempt to acquire one of our lodging REIT peers. While disappointed in the eventual outcome, we exhibited a high degree of financial discipline and judgment for our shareholders in assessing our economic and strategic limits on the merger opportunity. Going forward on acquisitions, shareholders should expect us to remain selective as we balance expected returns, market conditions, cost of capital, and effect on share price.
We believe selling hotels should encompass an economic strategy to enhance value, not simply to achieve a stated portfolio objective. As a result, we financially calibrate our asset sales by taking both opportunistic and measured approaches. Several factors that go into our asset sales decisions include: RevPAR growth, future capital expenditures, loan impact, net proceeds redeployment opportunities, and overall results on EBITDA. For example, the 2017 sale of the Crowne Plaza Ravinia at a trailing twelve-month cap rate of 5.6% for an asset with an $84 RevPAR represents a value-added execution when considering all the aforementioned factors.
Our equity and debt capital markets initiatives during the year centered on our goals to create shareholder value. We continue to target net debt to gross assets of 55-60%, and aim for a cash and cash equivalents balance of 25-35% of total equity market capitalization. This target cash balance intends to provide financial flexibility to cover working capital needs, a hedge in uncertain financial times, or excess funds to pursue accretive investment opportunities. At year-end, we had $459 million in net working capital. All our debt is property level, non-recourse. Most of our debt is floating rate and we believe this gives us greater flexibility to prepay, refinance, or sell assets. While the possibility exists of future Fed increases in rates, we have caps in place and model this in our corporate projections. However, we would also anticipate witnessing rate increases associated with a growing top line in RevPAR growth in conjunction with an inflationary economy. During 2017, we completed several financings with the purpose to address debt maturities as well as lower our cost of capital, reduce interest and principal payments, strengthen our balance sheet, and improve our liquidity. We refinanced four mortgage loans, representing twenty-one hotels, for approximately $705 million that resulted in about $74 million of excess proceeds as well as expected annual principal payment and interest expense savings estimated at $13 million. In 2017, we completed the public offerings of our Series H and Series I Cumulative Preferred Stock that raised $230 million. We used the proceeds from these two preferred raises to complete the redemption of all of our issued and outstanding shares of our Series A Cumulative Preferred Stock as well as the partial redemption of 7,079,313 shares of our Series D Cumulative Preferred Stock, which together resulted in annual preferred dividend payments savings of over $1.2 million. Looking ahead, we will continue the proactive management of our balance sheet and look for additional opportunities such as these to maximize value for our shareholders.
As for our asset management efforts, we continue to implement ideas within our portfolio to increase profitability and drive value. For example, during the year we announced planned enhancements to our Renaissance Nashville in connection with the urban revitalization of the city block containing the Nashville Convention Center. Also we completed the conversion of the Marriott DFW from brand-managed to a franchise agreement, which we believe will provide operational upside and improve long term value. Regarding hotel refreshes, we expect to benefit from an estimated $222 million of capital expenditures in 2017. Overall, with respect to our asset management opportunities, we remain diligent in exploring ways to create more value in our existing assets on the revenue and cost side.
We continue to pay attention to the evolving best practices related to public company governance. To that end, our Governance Committee is engaged and looks forward to changes that are in the best interest of creating long term shareholder value.
We view the common stock dividend as an important part of our total shareholder return. In December, we provided our 2018 dividend guidance, during which we expect to distribute a quarterly cash dividend of $0.12 per common share or $0.48 per common share on an annualized basis, subject to quarterly Board approval. At year-end, this equated to a common dividend yield of approximately 7.1%, one of the highest in our industry. In conclusion, key economic indicators such as GDP growth, unemployment, consumer confidence, and non-residential investment showed some encouraging trends in 2017. During the past year, the U.S. lodging industry exhibited favorable performance as overall demand growth continued to outpace supply growth across the country. For the year, occupancy rose to 65.9% and RevPAR grew 3.0% for the overall U.S. lodging industry. STR projects continued RevPAR expansion for the industry with estimates of 2.7% RevPAR growth in 2018 and 2.4% in 2019. With this industry backdrop, we believe the quality and diversity of our portfolio as well as our superior asset management capabilities position us well to drive operating performance in 2018.
Our commitment remains to generate solid operating performance, continue to be opportunistic on transactions and proactively manage our balance sheet. We remain focused on enhancing returns for our fellow shareholders, and would like to thank you for your continued trust and support.
Douglas A. Kessler
President & Chief Executive Officer