The driving force for Ashford's increased interest in mezz loans is the convergence of its plan to sell up to $2 billion of hotels, the lingering credit crunch and "the need to have a substantial amount of asset redeployment," Loeb says. In Q1, Ashford collected $81 million from three hotels and has the $78-million sale of the Hyatt Dulles in Herndon, VA coming in June.

Bennett says Ashford has clearance to deploy another $27 million into share buybacks and could drop $38 million more into discretionary improvements at its hotels. The cap-ex plan already includes $80 million of obligated improvements and $60 million that, if needed, could be deferred. It plans to move $12 million from its $50-million ROI account, creating another viable option. The allocations, though, include hotels on the sales block so the outcome depends on which assets are sold, Bennett explains.

From its debt perspective, Ashford has $2.7 billion of mortgages at a 5.2% blended interest rate. Its most significant move in Q1 was the swapping of fixed-rate debt for floating-rate notes. REIT CFO and treasurer David Kimichik says the $1.8-billion swap saved $296,000 in interest in the first 19 days. Based on current spreads, he estimates the REIT will save $8.8 million in interest payments by year's end. The fixed loans averaged 5.84% interest. As a result, 89% of its debt is now at floating rates.

The REIT has a three-level contingency plan to ride out the nation's economic woes. Other safeguards include appealing property tax assessments across the board for its 114 hotels and locking in insurance and energy rates.

As the markets play out, the mezz arena is predicted to gain from refinancing needs, whether it's maturing loans or escapes from high fixed rates. "No one's in distress yet, but we expect that to pick up. Rest assured, our underwriting remains tight," Bennett says. "Our ability to recycle capital will do use well even in this tight market. We expect 2008 to provide additional opportunities to put these strategies to work."