Q3 2019 Earnings Call
Greetings and welcome to the Ashford Hospitality Trust third quarter 2019 conference call. At this time all participants are any listen only mode of question answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star Zero Wonder telephone keypad as a reminder, this.
Conference is being recorded.
So my pleasure to introduce your host Jordan Jennings. Please go ahead.
Good day, everyone and welcome to todays conference call to review the result for Ashford Hospitality Trust third quarter 2019, any update you on recent developments.
On the call today will be Douglas.
Chief Executive Officer, Deric, Eubanks, Chief Financial Officer, Jeremy Welter, Chief operating officer.
Result, as well then [laughter] velocity of this conference call on I listen only basis over the Internet were distributed yesterday afternoon inappropriately I've been covered by the financial media.
This time, let me remind you that certain statements and assumptions and this conference call contain or are based upon forward looking information and are being made great strides pretty safe Harbor provisions under federal Securities regulation.
Forward looking statements are subject to numerous assumption.
Uncertainties, and known or unknown risks, which could cause actual results could differ materially from those anticipated.
These doctors are more fully discuss any companies filings with the securities and Exchange Commission.
Before looking statements included in this conference call are only made I'd be data on the call and the company is obligated to publicly update or revise them.
In addition, certain terms you call our non-GAAP financial measures reconciliations of which are provided in the company's earnings release and accompanying tables or schedule, which haven't filed on form 8-K with the FTC on October 29, 2019, and May also be accessed through the company's website at www dot.
H.T. re dotcom.
Each listener is encouraged to review the reconciliation is provided in the earnings release together with all other information provided any really.
Also unless otherwise stated all reported results discussed in this call comparing the third quarter of 2019 with a third quarter of 2018, I will now turn the call overdue Douglas Kessler. Please go ahead Sir.
Good morning, and welcome to our call I'll begin by giving a brief overview of our third quarter 2019 results followed by the progress we've made executing on our strategy to pursue value added transactions disciplined capital markets activity and aggressive asset management initiatives.
For that Derek will review, our financial results and Jeremy will provide an operational update.
Our third quarter performance benefited from our geographically diverse portfolio, consisting of high quality well positioned to assets across the U.S.
We believe that this geographic profile provide some very distinct advantages with respect to operating performance our actual revpar for all hotels for the quarter increased 3.5% what 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 third quarter comparable revpar for hotels, not under renovation increased 1.7%.
Additionally, we reported an AFFO per share of 28 cents, an adjusted EBITDA Ari of $103.1 million.
We believe 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 going forward, we anticipate our capex spending will be more consistent with our long term historical levels.
Our approach focuses on how to best capitalize on lodging and financial.
Financial market opportunities, while at the same time being fluid and our strategic efforts for example, despite the attractive features of our enhanced return funding program.
We currently do not plan to add to our portfolio unless we can transact accretive Lee without increasing our leverage.
Well, we strongly believe the ERP improves our projected investment returns we're prepared to be patient before accessing more ERP capital for new deals given the current stock price.
Additionally, disciplined capital recycling is an important component of our strategy.
What do we evaluate asset sales, we take into consideration many factors such as the impact on EBITDA leverage Capex Revpar et cetera.
Towards this end during the third quarter, we sold the 251 room Marriott Plaza, San Antonio in San Antonio, Texas for $34 million.
The sales price inclusive of the buyers estimated capex represented a trailing 12 month cap rate of 4.9% on net operating income and a 17.1 times hotel EBITDA multiple as of June Thirtyth 2018.
After the loan payoff and transaction costs. The net proceeds from the sale were approximately $6 million.
We also completed the sales of the 156 room courtyard Savannah downtown in Savannah, Georgia, and the 128 room Hilton Garden Inn, Wisconsin, Dells, Wisconsin for $37.8 million.
The combined sales price inclusive of the buyers estimated capex represented a trailing 12 month cap rate of 5.3% on net operating income and a 16.2 times hotel EBITDA multiple as of June Thirtyth 2019.
Proceeds from the sales were used to pay down debt.
Note that these sales EBITDA multiples are significantly higher than where overall portfolio is publicly valued in spite of our portfolio, having higher revpar than each of these sold hotels. We strongly believe this is indicative of a greater intrinsic value of our assets when compared to current market metrics.
Regarding asset management ill provide some highlights a jeremy will cover in more detail.
We continue to engage and beneficial strategies that we believe will create long term value. This month, we announced the sale of a 1.65 acre parking lot adjacent to the Hilton Saint Petersburg Bayfront to a condo developer for total consideration of $17.5 billion to be paid over time this price exceeded appraised value.
Net proceeds from the first payment traunch resulted an $8 million of debt Paydown.
When finished the project will provide us with upgraded covered parking for our hotel guests.
Also in October we entered into a new franchise agreement with Marriott International to convert our Crowne Plaza key Westlake Concha to an autograph collection property by July 2022.
The agreement includes a $13.7 million property improvement plan of which approximately $7.8 million. We believe is incremental and should yield a 19% unlevered internal rate of return.
We anticipate the conversion will create a distinctive theme in style for the hotel that is commensurate with the upper upscale autograft product.
With its prime location in old town key west the up branding of this landmark hotel should elevate the property into a desirable niche in the very attractive high barrier to entry high Revpar key west market.
We also recently announced a new franchise agreement for the 252 room Hilton Alexandria old town, whereby the hotel transition from being Hilton manage to being managed by Remington lodging.
We believe that there was a valuation premium for franchise hotels and this management convergent did not trigger a property improvement plan.
Hilton Alexandria look Concho and Hilton Saint Pete are excellent examples of how we go about unlocking embedded value in our portfolio.
Turning to our balance sheet, we believe in the benefits of appropriate amount of nonrecourse property level financing to enhance equity returns.
We have a target range of net debt to gross assets of 55% to 60% and we anticipate returning to that range over time.
In fact, you can see that we're working to make progress given that most of our recent sales proceeds were applied to reduce outstanding loan balances.
Our loans are mainly floating rate, which we believe provides a natural hedge to our cash flows and positions us to benefit from recent interest rate movements.
At the beginning of this year LIBOR was 2.51% and currently it is 1.79%.
Every 50 basis point reduction in LIBOR would result in approximately 19 $19 million of annual interest savings based upon our current capital structure. In addition, with with all of our refinancing activity. We believe we have an attractive well laddered maturity schedule.
We also seek to maintain a high cash and cash equivalents balanced 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 third quarter of 2019.
Our net working capital totaled $346 million equating to approximately $2.79 per share, which represent a significant 107% of our current share price as of yesterday's close. This is really remarkable when you consider that on top of this net working capital we have a portfolio.
Of 118 high quality predominately upper upscale hotels, apparently these assets many of which had been recently refinanced at reasonable loan to value levels are not getting much equity value credit in the public market.
To help address what we see as an intrinsic value gap, we continue to be active with our investor outreach efforts. We recently held a well attended Investor day in New York. If you were not able to join US I encourage you to go to our website and watch the webcast.
For the remainder of the year and into 2020, we will expand our efforts to get out on the road to me with investors and to communicate our strategy and the attractiveness of investment Ashford Trust.
We look forward to speaking with many of you during upcoming events.
In summary, we remain committed to generating solid operating performance completing opportunistic transactions and proactively managing our balance sheet.
We believe we have multiple core competitive advantages that should lead to outperformance and that make Ashford trust in extremely attractive long term investment for example, our investment focus is predominately on upper upscale full service hotels, but we also have balance in our portfolio given that we own select service hotels as well.
With respect to our asset management initiatives, we remain diligent in exploring ways to increase profitability and create more value in our existing assets.
Our affiliate companies are high quality service providers that seek to maximize the value of our assets and improved guest satisfaction.
Adding to the list of competitive advantages as our capital markets execution, given that we believe we have proven our financial expertise over multiple cycles.
With approximately 17% insider ownership, we believe we have tremendous alignment with our shareholders, which has incurred which encourages us to think and act like owners to maximize long term total shareholder returns.
Looking ahead, we remain confident that we're well positioned to outperform.
I'll now turn the call over to Derek to review, our third quarter financial performance.
Most of us for the third quarter of 2019, we reported a net loss attributable to common stockholders of $41.8 million or 42 cents per diluted share.
For the quarter, we reported FFO per diluted share of 28 cents.
Adjusted EBITDA totaled $103.1 million for the quarter, which represents a 1.3% increase over the prior year quarter.
At the end of the third quarter, we had $4.1 billion of mortgage loans with a blended average interest rate of 5.3% 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 Douglas mentioned, we believe we have a well laddered attractive maturity schedule with a weighted average maturity of five years, assuming all loans are fully extended.
Our loans are non recourse and we have no corporate debt in terms of upcoming maturities. We have zero final maturities remaining in 2019.
When you see loans in our debt table that have extension options. Most of those extensions have no tests in order to extend except that we purchase an interest rate cap and that the loan not be in default.
Thats why we include another schedule at our earnings release, which shows our debt maturities, assuming all extension options are exercised.
I will also point out that we have interest rate caps in place on almost all of our debt to protect us it gets any sort of spike in rates.
Additionally, the current forward LIBOR curve shows LIBOR coming down through the remainder of 2018, which would potentially lower our interest costs even further.
Looking at our cash and networking capital we ended the third quarter with $256 million of cash and cash equivalents and including the market value of our equity investment and Ashford Inc.. We ended the quarter with now working capital of $346 million.
As of September 32000, I seen our portfolio consisted of 118 hotels with 25017 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 at 21.9.
Million LP units.
With regard to dividends the board of directors declared a third quarter 2019 cash dividend of six cents per share or 24 cents on an annualized basis.
Based on Yesterdays stock price this represents a 9.2% dividend yield.
In October we entered into a stock purchase agreement with Ashford Inc. under the agreement Ashford Inc. purchased 393077 shares of its common stock for $30 per share, resulting in total proceeds of approximately $11.8 million to the company.
The purchase price reflected a premium of approximately 20% based on the closing price of Ashford and common stock on October Onest 2019.
We also announced the plan to distribute the remaining 205086 shares of Ashford Inc. common stock on a pro rata basis to Ashford Trust common shareholders and unit holders. The pro rata distribution is expected to be completed on November five 2019 to shareholders of record as of October 29 2019.
This concludes our financial review I would now like 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 third quarter of 2019.
Comparable revpar for those hotels not under renovation grew 1.7%.
This growth represents a one percentage point gain any 0.8 percentage point gain relative to the total United States and the upper upscale class.
Nationally respectively.
Year to date comparable revpar for the entire portfolio has ground 1.6%.
During the third quarter Hotel EBITDA was essentially flat decreasing 0.3% year to date hotel EBITDA has ground $4.4 million.
I wanted to update you on the performance of some of our most recent acquisitions, which were acquired in combination with funds from the enhance return funding program that we had in place with our advisor Ashford Inc.
First is the Hilton Alexandria old town, which we acquired in June 2018.
Comparable revpar increased 5% during the third quarter.
The Revpar growth represents an increase of 0.5 percentage points relative to the Washington, DC, Maryland, Virginia market.
I would tell benefited from July and August citywide compression.
When we acquire the hotel we had the right converted from Hilton manage to franchise, we exercise this right and Remington lodging took over management of the property on October Onest.
We maintain has been getting higher revpar growth going forward for the hotel than Hilton management was either forecasting or actualizing, indicating untapped potential.
In addition in December we will begin to build out of the new lobby grab and go market. There will be completed during the first quarter of 2020 and should provide additional total revenue upside.
Our next year RFP acquisition was Lapa Saturday, Santa Fe, which is now a hotel and mass tribute portfolio that we acquired in October 2018.
During the third quarter comparable Revpar grew 8.8% driven by 4.8% occupancy growth and 3.9% rate growth.
This revpar growth represents 3.6, and 3.3 percentage point growth relative to the hotels competitors and the Mexico North market respectively.
Year to date comparable rep par has ground 12.7%.
Versus the same benchmarks. This growth represents increases of 9.1 and 10.8 percentage points.
We continue to see significant growth in transient booking following the Marat reservation merger.
In addition map envoy redemptions and provide an additional $50000 revenue per month.
During the third quarter, we're not only able to realize strong revenue growth. We also saw a 22.6% or 356000, our increase in hotel EBITDA with hotel EBITDA flow through of 67%.
Year to date hotel EBITDA has grown 27.4% or $641000.
Another ERP success story has been the acquisition of the Embassy Suites, New York Manhattan Times Square in January of this year.
Comparable revpar during the third quarter grew 14.5% driven by 10.6% occupancy growth and 3.6% rate growth.
This revpar growth represents increases of 16.7 percentage points and 16.5 percentage points relative to the New York City market and the Midtown South Submarket, respectively.
Year to date comparable Revpar has grown 23.7%.
Our revenue optimization team has focused on driving longer stays in order to cover shoulder nights.
Year to date hotel EBITDA has grown 1.7 million or 42%.
We continue to build on the success experienced since the properties opening in 2018.
Following the favorable performance of recent acquisitions I want to call attention to the diversity of our portfolio and how we see this as a benefit, especially given where we are in the current cycle.
During the third quarter Industrywide Revpar for the top 25 markets decreased 0.4%.
Revpar growth for all other markets in the United States was up 1.3%.
We expect our revpar to continue to benefit from the diversity of our portfolio, especially from those hotels outside the top 25 markets.
Not only as a diversity of our portfolio important.
But we're also looking.
To leverage the value of our assets as Douglas highlighted earlier by determining their highest and best use to that end, we recently announced that our Crowne Plaza Qs the content will be converting by July 22nd due to 22022 to Marriott's autograph collection collection, a diverse portfolio of approximately 100.
And 80 upscale luxury hotels around the world.
Approximately $7.8 million in incremental capital expenditures will be needed to update the exterior guestrooms guest bathrooms corridors lobby restaurant lounge pool and meeting space under the property improvement plan.
The limited availability of full service map branded product in the heart of supply constrained old town key West presents us with a unique opportunity to up brand our hotel and capitalize on merits strong distribution capability.
Another way in which we creatively we're creatively maximize the value of our assets is evident at the Hilton San Peter third Bayfront.
Where we were able to sell the parking lot adjacent to the property at above praise value to the developer will be building, a 35 storey condominium impart congrats.
The end result will be an adjacent potential demand generator, along with upgraded covered parking where we will own 205 spaces.
We also negotiate a restriction to prevent future competitive hotel or use as temporary logic.
While we are discussing.
The Hilton Saint Petersburg Bayfront.
Would be remiss to not mentioned that during the third quarter comparable Revpar grew 10.2% and hotel EBITDA grew 28.1% or $170000 Revpar growth represents increases of 9.8, and 6.5 percentage points relative to the Tampa Saint Petersburg floor of market and the Saint Petersburg, Florida.
Submarket, respectively year to date comparable Revpar has grown 11.9% in hotel EBITDA as ground $358000.
In the future this hotel and market look bright.
In addition to our focus on continuously looking for ways to maximize asset value I will highlight and now number of other steps, we're taking in order to control cost and drive ancillary income.
The following this is meant to be illustrated the not exhausted first we have analyzed our hotels competitors to find opportunities in our restaurant and banquet prices, which led us to rollout price increases and many of our properties over the summer.
We're also focused on directing ecommerce spending to various digital programs to increase visibility in advertising to the leisure in group segments.
For example in the group segment, we're working diligently to increase exposure to group. Please.
In terms of cost management, we're utilizing programs to introduce more efficient methods of performing work days to reduce payroll hours save cost and reduce environmental waste. We have added wall mounted so showered dispensers.
And again bathrooms at our independent hotels.
And lastly, we continue to complete operational deep dives at our properties to ensure expenses are at the property levels.
Given all the above efforts, we are proud to say comparable total hotel revenue excluding rooms revenue has increased 4.4% year to date or $9.8 million.
During 2019, we will continue investment portfolio to maintain competitiveness in total we estimate spending approximately $145 million to $106 million since capital expenditures during the year.
This estimate is more in line with industry averages as a percentage of revenues.
Compared to the significantly higher amounts we have deployed in recent years.
We have completed Guestroom renovations at Mad DFW Airport Embassy suites Crystal City, Hyatt Regency, Coral gables, and five select service hotels.
We've also completed lobby renovations and merit DFW Multicurrency gateway in West and Princeton.
We continuously identify opportunities create value throughout the portfolio to that end the first and second phases of the Renaissance Nashville redevelopment, our complete which included the Buildout of meeting and event space. Furthermore, we have identified accretive opportunities to add additional keys within our portfolio, including two keys at the embassy suites Crystal City and one key.
At the high Regency Coral gables.
I want to elaborate more on the rented Renaissance Nashville.
Despite being under major renovation throughout most of 2018 comparable revpar has grown 3.1%.
Incredibly this revpar growth represents increases of 5.74 percentage points relative to the hotels competitors and upscale and above change in the Nashville CBD market.
Hotel EBITDA has grown $4.8 million or 26% with hotel EBITDA flow through of 55%.
Let me take this opportunity to highlight even further an incredible job our affiliate Premier project management has done during this major improvement project.
Using their sales renovation program, which is designed to significantly minimize the impact to guess Premier has contributed to the hotel gaining significant market share despite being under a substantial ongoing renovation.
Following the renovation Q4 group pace is up nearly 20% in 2020 group pace is up 15% catering pace is up substantially for both of these time periods as well not only is premier helped our bottom line through their work during this renovation.
But they were also recently recognized by Marriott for the incredible design space. They created in addition to premieres positive impact on the property I want to also note that since JLTV audio visual took over audio visual services at the hotel revenue per group room night has increased over 50%.
That concludes our prepared remarks, and we'll now open the call for Q name.
Thank you will now be conducting a question and answer session if you'd like to be placed in the question Q. Please press star one under telephone keypad, a confirmation Tony Blair indicate your line is in the question Q you made press star to if you'd like to remove your question from the Q4 participants using speaker equipment to maybe necessary to pick up ahead said before pressing the star keys.
Once again that is star one to be please and the question Q1 moment. Please what we pull for questions.
Your first question today is coming from Tyler, but sorry from Janney capital markets. Your line is now live.
Thank you good morning first question probably for Jeremy.
Talk a little bit more about the demand environment and general trends in the quarter, none of your might be tough with the hurricane and some holiday shifts, but your results obviously outpaced the STR data. So just curious how the quarter came in versus your budgets and then additionally.
I understand that you don't give guidance, but as your view on where we are in the lodging cycle change at all just given some of the data that's been out there the past couple of months.
Sure.
Okay. So for the quarter group and government were both healthy in Q3 and in fact that group grew over 5% or UBS, just just under 5% for the quarter in terms of year over year Revpar growth.
And we believe the government demand actually helped our DC hotels performed pretty strongly you can look at a market.
Stood out as as an outperformer for us in the quarter.
I also think our DC exposure.
It is going to help us and tougher times and lodging cycle.
Transient growth for the quarter was just under 1% and then when you segment that out are negotiated was up slightly.
In our leisure is down slightly.
But but overall transit growth was up 1% for the quarter.
And then.
We experienced growth in direct booking channel so our brand dot com talents continue to outperform.
The OTA channels were down year over year, which is obviously a good thing for US and then we look at debt to the latter part of your question candidates turning the corner set to future quarters or 2020, we don't give guidance and that it is.
There is some elements out there that I'm pretty optimistic about when you look at the travel click data across all the different top 25 markets.
For the first time and.
Certainly the last maybe six weeks that we've been tracking and we've seen an uptick in occupancy, but a lot of that is going to be obviously group positioning for the entire industry. So given that most of our bookings and mostly industry bookings are three or four weeks out I wouldn't read into that too much but for our portfolio we do.
You see some healthy potential increases in negotiated rates were in that process right now and I would estimate that we're going to land somewhere between 2% to 3%.
Year over year, increasing our special corporate negotiated rates.
And then from a grid perspective.
As we stand right now we have 50%.
On the books as at.
If you compare like our 2018 total group rooms revenue, 50% of that's already booked at where we stand right now and Thats at 3% in terms of group pace for all of next year.
Our its Douglas let me just maybe comment also on just a broader view of the economy and whatnot obviously.
There's a lot of talk about a recession and I think that people are looking at maybe slight fishers and economic reported information and expanding them into cracks because they want to talk about a recession and I think that while there are certainly feels like.
There is some softness and some of the numbers were obviously monitoring and we're planning for both upside and downside, but when you look at our portfolio and you look.
How it compares to the the national averages. If you think about some of the trends. So 11 of the top 25 markets had negative revpar for the third quarter.
We have both top 25 market exposure as well as non top 25 and for US only eight of our top 25 markets had negative revpar, but we also have 26% of our EBITDA.
Which is outside of the top 25, and so I think that the balance of our portfolio. As we commented in our prepared remarks helps us and along with the recent movement in interest rates helps us and I think that we've been through cycles before and I think that we are staying on top of of every move.
But to the positive or negative hoping to see catalysts in the economy, but also preparing for the continued up and down movement of various data points and seeing how that impacts the the lodging demand numbers. So I.
I think were taken all the right steps across many levels of the platform also having in mind. The fact that we spent a lot on our assets and the recent years and so I think we're well positioned and we continue to grab greater market share as a result of that.
Okay, perfect Thats very helpful and just to follow up.
Obviously, you have a lot of financial Flexibilities your cash on the balance sheet any updated thoughts on what are you could do with some of that capacity when would share repurchases start to make more sense from paying down debt.
So we've got to I think a really good track record of exercising buybacks. If you look at our history and when we think about what to do with our cash. We're obviously looking out a lot of opportunities. We're trying to also.
Seek a balance and our cash position our leverage.
Transactions that are available in the market.
And the opportunity to buy back stock, but also taking a view on what impact that could also have on on decreasing our float and so share buybacks or are in options for us clearly at the right time, and we're hopeful though that.
Our strategy of selling some assets improving our operational performance and working to lower our leverage will actually result in improved share price.
But its something Thats, specifically share buybacks continued to be on our radar and.
Well to see how the.
The few quarters progress with respect to that.
Okay, Great. That's all from right. Thank you.
Thank you. Our next question is coming from Michael Bellisario from Robert W. Baird. Your line is now live.
Good morning, everyone.
Morning.
I know you made a quick comment on Capex, but can you maybe give us your high level initial thoughts on 2020, Capex plans and maybe just at least directionally, how you're thinking about spend next year versus this year.
So weve spin spending quite a bit as you know over the past few years on capex well above the.
The industry averages, we have been serving the 13% to 15% of our revenues, which again I think is positioned our hotel.
We expect to see Tailwinds from that impact of refresh properties relative to their competitive set I think thats proving up in our numbers as we demonstrated this quarter.
For 2019, we clearly have stated and enter showing that we're spending less than the approximate 207 million that we spent in 2018 and in our prepared remarks.
We're going to be in the 150 ish ranges as we said and.
In our Capex spend for 20 for 2019, we're working on the 2020 numbers and it's a little bit early to tell but I would say that generally they're going to be commensurate.
With this year, perhaps slightly lower but in that general range, but more work to be done on on on that point and.
We're excited about what we completed on our hotels Weve clearly announced a couple of other really exciting additional opportunities such as the.
Upcoming conversion of the key West look Contra property to an autograph collection, which we think is going to be a big benefit to that asset and improving its market share and improving revpar and just delivering better results.
Relative to what we've been able to achieve out of that asset so opportunities like that we think really can move the needle with respect to our capex expenditures.
Thanks, and just thinking about the Remington transaction does a fully combined Ashford inc. change the way you guys underwrite either renovations or new investments and then should we be thinking about any potential operational list at the property level. Once the transaction is complete.
Okay.
I think that the.
General view would be no real change, it's it's business as we've been conducting business I think the real benefit is in the Ashford Inc. platform with the consolidation of all of these various ancillary services that really create a very unique.
Company with respect to hotel services and hotel financing and hotel operations and Hotel project management, and so that that's a very special entity that has I think numerous growth opportunities both with respect to the companies that they.
Companies that they will acquire as well as the growth of new platforms potentially to enhance the the revenues coming into that.
That company.
Ashford Securities was recently announced as a potential of source of capital to grow.
Assets under management within that operation with respect to impact on on Ashford Trust, we will continue to benefit from the exceptional service that we get a cost effective great delivery that we've been experiencing over the years and where.
Excited about that combination, maybe slightly little bit more fluid, but other than that no real change in and what we would expect out of that relationship.
Got it and then just lastly on a housekeeping item, what's the timing of that next tranche for the Hilton San Pete proceeds.
That is.
Still subject to some work that the developer needs to take in order to hit certain thresholds for whether its.
Commencing construction or obtaining the construction financing and then getting the certificate of occupancy occupancy. So it's multiple tranches of receipt of that payment and I'd say at this point, while we have time limits on.
On the actual.
Receipt here of those funds. It's it's still just kind of kicking off with respect to that so it it's going to be over time.
It sounds like a few years out that is that correct.
So I say that again it sounds like it's a few years out that it's not two or three quarters are now.
It's possible that we can start getting additional payments in the near term, but I think it's really a staged payment to us as certain thresholds are achieved.
That's helpful. Thank you.
Thank you. Our next question today is coming from Bryan Maher from B. Riley. Your line is now lives.
Yes, good morning says Bang on St Pete for a minute.
Is that lot currently used for hotel guests and what happens to the hotel guests parking when that goes under construction.
So the lot is currently used by hotel guests for parking surface level parking and we have clearly made arrangements to protect the the parking access either through valet parking on nearby surface slots and with payments for that coming from.
Five owned covered spaces you Brian . We this is a heavily negotiated and evaluated part of this overall transaction.
We look at the leverage levels, we look at the debt pools at the assets are in and so I think what you've seen us do so far has been executed quite well, we sold lower revpar assets, many of which were in either weaker markets or.
Lodging REIT values versus how the private market is valuing assets and there is this.
Abundance of capital.
In the private side that would like to be in hotels and yet when you think about the transaction activity. This year, one survey that I looked at.
Showed that there was a 28% decline in the number of single asset sales.
And by 42% decline and the dollar volume of single asset sales and just when you look at this third quarter data you realize that there is just not a lot of product out there. So it's easy to target the public companies whose portfolio is.
Readily accessible and web sites and people can look and say I'm owner operator in this market I'd like that hotel I have two other hotels in the vicinity IC operational synergies or people that just have an interest in being a certain city. So theres a wide variety of interest both coming from.
Private equity funds as well as regional owner operators when it comes to unsolicited appetite.
Right into that and.
Look I mean Douglas you know, we speak with a lot of Buyside investors and from our vantage point, we talk to a lot. This summer.
Thank you might sell well.
If you continue down that cores and redeploy I don't know one third share buybacks of net proceeds into thirds, the data or something like that but I think a lot of people. We've spoken with bought for sure you guys would have been in the market sub $3 buyback stock, particularly with how much cash you guys.
Biting my earlier comments with respect to the balance that we're trying to achieve across the items that I mentioned holds true and yet you've seen us.
Clearly execute on a share buyback strategy that had significant benefit to shareholders at the time that we executed on it and we're trying to find the right balance between that strategy as well as.
Sales of assets cash flow.
All the things that I mentioned and others that.
Really are relevant to a longer term perspective on.
Seeking to increase total shareholder returns.
I understand that and I heard what you spoke with Pilar about but I would just suggest that I think would play really well with BMS makes me to see some split on the net proceeds.
Because it just leave February scratching their heads as to what is the level that you step up to the plate as the dollar to dollar where is it we don't know, but I think a lot of the people we spoke to.
Got it was something below $3 I just wanted to put that out there, but that's all I have I.
I appreciate that I appreciate that Brian .
Thank you. Our next question today is coming from Robin Farley from US. Your line is now live.
Great. Thanks. My question was was related to the last topic now estimates on the share repo, but on the idea of.
Your comments about the intrinsic value being greater than the with the market to give you credit for.
You said you will you won't comment on things.
Before they're sold that maybe if you could just.
Give us a sense of.
I've got it.
Increases your appetite to sell some assets and then is are you seeing that type of demand that you talked about the abundance of private capital or using the type of demand across your whole portfolio or were there.
Property specific reasons that these.
The transactions you did announce when those levels. Thanks, well for the assets that we've taken out to market. We've been very pleased with the.
The execution, so whether it's a deep buyer pool for some assets or just that one buyer, who strategically once that asset in their portfolio. The pricing. We we've been happy with otherwise we want to execute if it's not something that we feel that we're going to get value and benefit from.
I can't really comment on on the rest of our portfolio because we obviously haven.
That would take a widespread marketing effort to evaluate what the demand is for it for some of those assets, but I think the way that I would I would.
Reference kind of the level of interest, which is what I think about some of the other assets that have been put up for market and the depth of the buyer pool, because we may still be looking at assets, even though we're not actively seeking to deploy our capital at the current share price, we still stay in the flow of deals and I look at some of the prices in the depth of buyer pool and it's.
It's it's interesting it's interesting because of the cap rates are holding up and if you look at some of the national averages even from CBR easy.
Cap rates are relatively flat over this time period compared to last year. The one comment I would make is that it would appear that theres some slight improvement in cap rates.
In terms of lower cap rates up for secondary and third tier cities, whereas some of the more urban markets, which have experienced a little bit more new supply theres been a very slight.
Uptick in cap rates, but not meaningful either way other than just a comment that cap rates are generally flat across the board.
Which I think indicates the more bullishness that the public Mark excuse me the private market has relative to the public market, where you've seen multiple contraction.
And we've been focused on the lower quality assets and so you can look at asked we bought much higher quality on average in our portfolio and and so I think we continue to elevate the quality of our overall portfolio.
Okay, great. Thanks, and then just maybe last question. When you were given commentary on business today versus leisure transient is this the first two my feeling is for semi you commented that leisure transient.
Down it seems like Thats been up the last few quarters and just wondering if you have any insight into what's driving things, yes outlining inside he and I don't know that it is necessarily a trend at this point. It was just a mix in our business for the quarter.
But it was nice to see that we had.
And healthy increase and.
And corporate demand as you know that our portfolios is much more weighted towards corporate and leisure.
Okay, great. Thanks very much.
Thank you as a reminder, ladies and gentlemen that star one to ask a question.
One moment, please while we pull for questions.
Our next question today is coming from Chris Woronka from Deutsche Bank. Your line is now live.
Okay.
Hey, good morning, guys.
Turning to question I guess for more than had question for.
Jeremy Jeremy I think you mentioned earlier in the prepared comments that you are.
Hoping to get maybe two to 3.2% to 3% increase on the corporate negotiated rates can you maybe tell us what you got for 18 and then you are some of the renovations was that kind of if you were lower than that for for 19 was that maybe due to some of the renovation activity.