Q3 2020 Ashford Hospitality Trust Inc Earnings Call
[music].
Greetings and welcome to Ashford Hospitality Trust Inc. third quarter Twentytwenty results conference call.
At this time all participants are in a listen only mode.
A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host Jordan Jennings manager of Investor Relations.
Good day, everyone and welcome to today's conference call to review the results for Ashford Hospitality Trust for the third quarter of 2020 and to update you on recent developments on the call today will be Rob Hayes, President and Chief Executive Officer.
Deric Eubanks, Chief Financial Officer, and Jeremy Welter, Chief operating officer their results as well as noted on the sustainability of this conference call on a listen only basis over the Internet were distributed yesterday afternoon inappropriately.
At this time, let me remind you that certain statements and assumptions in this conference call contain or are based upon forward looking information and are being made pursuant to the safe Harbor provisions of the federal Securities regulations.
Forward looking statements are subject to numerous assumptions, uncertainties and known or unknown risks, which could cause actual results to differ materially from those anticipated. These.
These factors are more fully discussed in the Companys filings with the Securities and Exchange Commission.
The forward looking statements included in this conference call are only made as of the date of this call and the company is not obligated to publicly update or revise them. In addition, certain terms used in this call are non-GAAP financial measures reconciliations of which are provided in the company's earnings release and accompanying tables or schedules.
Which have been filed on form 8-K with the I.P. on October 27, 2020, and maybe I'll also be accessed through the Companys website at Www Dot H.T. Rowe <unk> dot com. Each listener is encouraged to review those reconciliations provided in the earnings release together with all other information.
I didn't really.
So unless otherwise stated all reported results discussed in this call compared the third quarter of 2020, but the third quarter of 2019, I will now turn the call over to Ralph Hayes. Please go ahead Sir.
Good morning, Mark.
Welcome to our call.
Since our last call in July our business and the industry have remained pressured due to the pandemic.
The last several months continued to be unlike anything most of us have experienced in our lifetimes and.
And these remain challenging times for our country, the economy and of course, the hospitality industry.
I'll start with the current environment and how Ashford Trust has managed through this pandemic and the early parts of the recovery after that Derek will review, our financial results and Jeremy will provide an operational update on the portfolio.
While we have made progress getting our business back up and running we anticipate dealing with pandemic related challenges for some time because of the impact of COVID-19 on the U.S. hospitality industry and the day to day operations our hotels.
As discussed on our last two earnings calls our response to the pandemic has been Swift and comprehensive we have focused our efforts on providing a safe environment for our guests and staff at our properties. While at the same time taken aggressive measures to protect our properties and preserve liquidity. So we can be in a position to return to profitability is the economy opens up and.
Travel resumes.
Additionally, given the economic impact of the pandemic. We were initially required to make the difficult decision to temporarily suspend operations at many of our properties.
I'm pleased to report that we currently have only two properties was suspended operations, we hope to reopen them soon as demand returns.
Operationally, we are focused on mitigating the financial impacts the pandemic with cost control initiatives, including working closely with our property managers to manage cost structures and maximize liquidity at the properties. This is where our relationship with our affiliated property manager Remington really sets us apart Remington has been able to quickly cut costs and rapidly a job.
Yes to this new operating environment, we are proud of their efforts and believe this has enabled us to better weather the impact of COVID-19, Jeremy will discuss this in more detail.
We have also significantly reduced our planned spend for capex for the rest of year and suspended ballpark common and preferred dividends Derrick will provide more detail around our liquidity shortly but throughout the quarter, we have taken action to preserve liquidity.
We've been actually working with our lenders on property level debt to arrange mutually acceptable forbearance agreements to reduce our near term cash utilization and improve our liquidity.
In early October we announced we entered into forbearance agreements on our keys loan spools.
As well as the Hilton Boston back Bay, representing 35 hotels and approximately $1.3 billion debt.
Its completion. These agreements we now have loan forbearance or modification agreements in place for 62 properties, representing approximately 72% of our current outstanding mortgage debt balance.
Forbearance agreements typically allow us to defer interest on the loans for up to six months subject to certain conditions. They also allow us to utilize lender and manager help preserve accounts, which are included in restricted cash on our balance sheet to fund operating shortfalls at the hotels discussions on the remaining loan pools are progressing well and we look forward.
Providing additional information as we work through this process.
As I mentioned on our last call. It's unlikely that we will be able to agree on forbearance terms on all of our loan pools investors should anticipate that we may hand back assets to lenders during this process.
There are several reasons why we may decide to get back assets to lenders one there's negative equity in a loan pool and is unlikely to reach positive equity in the medium to long term two there are significant cash apartments, the properties such as operating shortfalls ongoing debt service or capital expenditures that we do not believe are economical.
Or three the terms lenders and Servicers are proposing are onerous, making keeping the properties on attractive.
Well, we hope to retain as many of our properties as possible I do think it is important for our investors to know that during this process. We will play I'll hand, you back assets that do not create long term value for their shareholders.
To that end during the quarter, we headed back 13 hotels to lenders and while we take no join any back assets to our lenders. We do hope it demonstrates that we are willing to make hard decisions that are in the best interest of our shareholders.
First I must have 2020 have been extraordinary by any measure I cannot be prouder the effort and the performance of our teams. During this time I believe our response has been the right one for both the short and long term health of our guests our portfolio. The communities, we serve and our shareholders. We're closely monitoring the fluid situation have plans in place to continue to reopen close properties as business demanding conditions.
Warrant our management team has extensive experience in effectively navigating tough market environments and extend the downturns now each crisis is in very different but we believe we have the right plan in place to protect long term values of our assets and the company I'll now turn the call over to Deric to review third quarter financial performance. Thanks, Rob for the third quarter of 2020, we were.
Forward and net loss attributable to common stockholders of $109 million or $9.26 per diluted share for the quarter, We reported AFFO per diluted share of negative $4.57 adjusted EBITDA Ari totaled negative $22.7 million for the quarter.
The end of the third quarter, we had $3.7 billion of mortgage loans with a blended average interest rate of 3.5%. This.
This average interest rate does not take into account any default rates are loans were approximately 7% fixed rate and 93% floating rate.
Our loans are all non recourse as Rob mentioned, we have signed forbearance or other agreements for 62 properties, representing approximately 72% of our current outstanding mortgage debt balance and we are discussing forbearance agreements with our property level lenders on all other loans.
We ended the quarter with cash and cash equivalents of $120.9 million and restricted cash of $89.5 million. The vast majority of that restricted cash is comprised of lender and manager held reserve accounts, we continue to work with our property managers and lenders in order to utilize these lender and manager held reserves to fund.
The operating shortfalls at our hotels.
We ended the quarter, we also had $13.2 million in due from third party hotel managers. This.
This represents cash held by one of our property managers, which is also available to fund hotel operating costs.
As of September 32020, our portfolio consisted of 103 hotels with 22592 net rooms, our current share count stands at approximately 16.8 million fully diluted shares outstanding which is comprised of 14.6 million shares of common stock and two.
Point 1 million LP units and reflects our recent one for 10 reverse stock split.
During the quarter, we commenced an offer to exchange shares of each series of our preferred stock for common stock we amended the exchange offer earlier this week and the total maximum consideration offered in the exchange offers is approximately 126 million of newly issued shares of our common stock which is the maximum.
Issuable, if all the outstanding shares of preferred stock were tendered into the exchange offer.
We may issue substantially less than this amount depending on the number of preferred shares tendered into the exchange offer.
We also announced that we are extending the exchange offer expiration date until November 22020.
This concludes our financial overview I would now like to turn it over to Jeremy to discuss our asset management activities for the quarter. Thank.
Thank you Derek comparable Revpar for our portfolio decreased 72.1% during the third quarter of 2020, but.
Hotel EBITDA flow through was solid at.
At 50% to 54.2%.
As a recovery in the hospitality industry continues to take place we are monitoring daily occupancy in revenue, which has experienced steady growth.
Generally we are seeing more demand at our select service hotels with third quarter occupancy down 54.6% compared to full service, which was down 62.5%.
Something that I always believe.
Is that we have the best asset management team in the industry.
We COVID-19 started sweeping its way across the country. Our team took immediate action to mitigate its impact on our portfolio.
Admittedly the last few months have not been easy to navigate this team has buckle down to better position us for the recovery.
We made tough decisions to suspend operations at some hotel cut staff and ultimately rethink the entire business model for our hotel operations.
Recently, we have been busy reopening and driving revenue and many of the 23 hotels that had suspended service.
As of today, we have reopened 21 of these hotels.
Of the two that still have operation suspended one is the Hampton in Parsippany, which is still accepting reservations and bundling them to our help me personally next door and the other is a little meridian, Minneapolis, which is given the uncertain, which given the uncertainty in the market is still waiting for demand to come back.
Well ideally we would have all our hotels up and we're very proud to have 98% of our portfolio back in operation.
As previously mentioned.
We have had to rethink some of the business models at our hotels during the pandemic par.
Part of that process has been shifting our focus to securing partnerships with long term projects airline freeze and universities to provide student housing during upcoming semesters and.
A number of our hotels have been successful in this endeavor, including Mad Beverly Hills, and Santa Fe and hotel Indigo Atlanta Midtown.
At our Marriott Beverly Hills, we manage to secure business via the California State government that piece of business brought in 7615 room nights and approximately $754000 in rooms revenue.
This combined with or.
With other business on the bus contributed two hotels incredible performance of 71.1% occupancy and 50.8% hotel EBITDA flow through for the third quarter.
Another success story has been the Hilton Santa Fe.
We were able to successfully launch and Amazon film proved during August and September, which generated 3467 room nights and $270000 in revenue.
What is really impressive is that hotel ran 96.9% occupancy for the month of September.
In early August at the hotel Indigo Atlanta, Midtown, we were able to secure a partnership with Georgia Tech University to provide student housing.
During the third quarter that relationship produced 7614 room nights and approximately $484000 in rooms revenue.
As a result, the hotel ran a 21.8% hotel EBITDA margin.
These types of arrangements are great because they solve unique business issues, both universities and hotels are facing due to the pandemic.
During the last few years, we have invested significant capital in renovating our hotel.
Our portfolio to maintain competitiveness.
During the third quarter, we completed the guest room renovation at the map Bridgewater looking ahead to the final quarter of 2020. These investments will provide us with a competitive advantage, while our industry weathered the storm brought on by the COVID-19 pandemic.
Additionally, our capital investment strategies will allow us to allocate capital more shrewdly for the remainder of the year.
Get ahead, one area that we expect it may have a strong recovery is in Washington, DC market, which represents approximately 11% of our total revenues.
First we have the presidential inauguration coming in January 2021 from which our assets should benefit second Amazon H Q2 is being built right next door to a number of our hotels some of which will be walked within walking distance.
As a result, we look forward to significant improvement in that important market that conclusion prepared remarks, we will now open the call for queuing.
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Our first question today comes from Tyler Battery of Janney Capital markets. Please proceed with your question.
Hey, good morning, Thank you for taking my questions.
I wanted to start on demand from what you're seeing out. There. Obviously you are the first company in the space to report.
So very curious what you're what you're seeing.
Yeah, obviously occupancy for the for the quarter near 30%.
Are you able to say for your portfolio and what we saw in terms of demand trends and in October I know you don't want to give specific guidance on a quarter, but just kind of curious what you saw after September and then I'm also interested if you could discuss the leisure travel trends, especially after labor day weekend.
Well, let me I'll start and have Jeremy jump in here I mean, what what I can say is that we we saw September was overall fairly similar to August.
And I think overall, we're seen October is fairly similar to September I mean, where.
Looking to see.
I think overall, we're not seeing I guess as a significant ramp in demand that it's the kind of the fee.
Theme or feel that were seen in the last few months overall is probably fairly consistent now the mix of that is a little bit different as Jeremy can talk about here in a minute, but I don't think we are you know the booking windows have shortened to a point, where it's it's really coming in.
A week or so or less even ahead of time.
And so as we sit here now we're kind of anticipating similar trends to what we've we've seen here recently about Jeremy Yes, what I would say that is that every every month since pandemic starting in April we've seen month over month increase in occupancy.
Occupancy demand and Revpar with the exception of September was more or less flat with with August.
And that's it has to do with.
Having a good amount of leisure demand in August and then with folks kind of going back to school in September.
We actually in October we are seeing.
A little bit more demand and a better revpar than we saw on September every every week continues to just get a little bit better a week over week and we compare to the previous four weeks as well.
And when we look at where we think we'll end up.
We're hopeful that October is definitely going to be better than than September, but not not materially at this point.
Okay. Okay. That's very helpful. Just to switch gears, a little bit to the <unk> and what was the dollar one other thing I'd say that we're we're really close at a level, where our hotels or breakeven on a cash flow basis. So if if we hit where we think we can be in October we're going to be very very close to that level, which is huge.
Progress from where we've been in previous months previous quarters, yes, the <unk> for the third quarter, Our hotel hotel EBITDA averaged about negative $3 million in EBITDA.
So we are getting to a point where were we are getting close to that kind of breakeven type level that Jeremy mentioned.
Okay. Okay. That's good segue to my next question I was going to ask a little bit more you know fuel.
To provide some detail in terms of the cost structure and what you guys are doing it looked like the flow through was a little bit better than we had expected.
CNS somebody's hotels or are reopening I'm sure you've seen the flow through perhaps a little bit better than you might have anticipated originally.
Yes, well, let me start having I definitely think if you told US you know given the revenue levels that we're seeing would we be able to flow. The numbers that we are and my guess probably a year ago would have said no way, but as we sit here now the work that that Remington and that our brand partners that Marriott Hilton Hyatt have done or have been pretty remarkable.
So where we have been able to achieve.
50% better flows.
In these revenue environments.
If you have more specifics on that but it's it's been pretty remarkable and their ability to to handle those flows yes.
Yeah, Weve, what I want to say, yes. Every every month, we continue to exceed our fourth forecast both on the revenue side and on the cost side and what we do is we are getting the properties that forecast really no revenues, just because we want to manage our expense structures around.
Almost a worst case scenario.
And so we continue to exceed our forecast when when the actuals come in and we have been very pleased given the set of circumstances.
With the low revenue environment with the you know just all the pressures that we have across the board you know in our hotels that we've been able to achieve the the flow through is that we've been able to achieve I think it is not.
Not from you know a coincidence, it's been a lot of effort by the asset management team, they're doing weekly.
You know reviews at all our properties weekly revenue calls at all our properties and we're down to the general Ledger data, where we are just dissecting.
Every cost component of the hotel.
Now as we start to see revenues continue to come back, which they are coming back.
And I do think that that will be accelerated obviously, when we have a vaccine, which hopefully will happen. Soon I anticipate we will be able to maintain a higher margins coming in the recovery than we have in previous cycles I just because we have eliminated so many different positions in the brand himself done a really good job.
Removing about property costs are allocated to our properties and so you've got a multiple angles in which weve got.
Cost savings and that doesn't even include what we've done on third party side with all our vendors and what happened so.
I'm optimistic that we'll have a sustained level of higher margins that we've had in previous operating environments as revenues come back.
Okay.
Okay and then the last question, how you're probably for Robert or guarantees when you book.
In terms of forbearance.
Can you talk about the discussions you're having with lenders and more importantly, I think initially in the independent Mark.
We're able to get forbearance, you know a lot about.
Six months or so you're starting to run up to me and if someone goes initial agreements how are those conversations going with lenders and special Servicers.
Yeah. Good question, so you're right most of the the forbearance arrangements that we have signed up to date were six month type deal.
Duration of of interest forbearance, which typically when it went up to either here in October or November and so as of right. Now I mean, we do anticipate those loans that we signed a forbearance arrangements to do.
Do you know to restart interest expense here this month or next month.
We have reached out to to some of them to open up discussions to see if there is additional forbearance of possibilities that are available and that's still kind of TBD on whether or not that's going to be possible or not.
And then you we do have about 25% of the assets that we haven't yet announced forbearance arrangements. We are in discussions with all the various parties and.
I do feel good about where most of them are but some of those need time to be documented and finalized but we have made progress that's not all of them as per the comments you made on the call. Yes, there are definitely or there will potentially be some that we don't.
And that's where we may have some additional hard decisions to make on whether or not to.
Key properties or not we're hopeful that it's going to be a minority of the amount that's remaining but that's still TBD, but we do have the these forbearance arrangements in one sense kind of burning off in terms of the entrance forbearance.
And all of those have some sort of structure, where we will repay any deferred amounts.
Over some period of time, typically nine months or 12 months or 18 months depends on the agreement.
Okay. That's all from me. Thank you for the detail I appreciate it.
The next question is from Bryan Maher of B. Riley Securities. Please proceed with your question.
Yes. Good morning, so kind of following on some of that forbearance discussion and as it relates to the 13 hotels you handed back is there some kind of you know common denominator. It's the type of assets that are going back that are they full service properties are they select service properties what has it been in.
What do you expect it might be.
Good question Brian.
Yes, each one has its own story frankly, so I don't know if there's a a common theme amongst all of them.
On some of them.
There were assets that were in a little bit of troubled prior to this.
This pandemic and that we're going to be difficult, having the ability to refinance some of those assets anyway.
Others of them were I'll say, specifically hit for example, the embassy suites in New York that we would that we hand.
And it backed up that was disappointing because it was an asset that we purchased in the last couple of years and the and felt good about over the long run, but what has happened to New York and the outlook for New York next several years just made it so that it was on economic in order to in order to keep it.
So I don't know if there really is a single theme because they've been both full service assets in a couple of them in limited service assets for the majority of them.
So I just say its kind of story by story pool by pool.
On a determining factor is just economic decisions and so we just we've looked at it very objective Lee and.
I think you can definitely see that when you see that.
By margin the vast majority substantial majority of Ben Remington managed hotel, yeah, well and I guess the one other thing that maybe there is a little bit of a theme that Brian is that all of those loans were ones that had meds on them right and that just in many of the loan pools can create.
Situations, where you have a tension whether it's because of the intercreditor agreement and certain rights that need to be enforced and that creates demand and depending upon whether or not to sit in the special servicer is giving kind of forbearance that other meds players as part of that or if they.
Stick to the letter of the law and aren't working with working with that the other pieces of the cap stack. So that was that was probably I guess one common theme is just the reality of that Mezz was in all of those loan pools.
Great and then look any modeling you guys as has always been without any guidance a little bit more difficult, but not clearly it's much more the case now because we don't know at any one time, what assets are being added back or not I will say that we noticed that you know our interest expense was way off for the quarter a part.
DAMA because I guess you have you know the forbearance agreement in place, but I guess the question I'm asking is kind of on a go forward basis with all the no I mean should we just model the company with what you kind of had at the end of the quarter and what we think interest rates are going to be and just have to live with the higher level of and Sir.
On T. as you work through all of these agreements.
Hey, Brian It's Derek Yes, I would say just from a modeling perspective.
Look at the company as we were at the end of the quarter, obviously, we do make announcements during the quarter and file a case on anything thats material that.
Any that you guys could see and could incorporate those into your models you on your comment on the interest expense.
What's some noise in the quarter.
Because we do have to accrue for default interest and and just about all the cases, where we've signed these forbearance agreements. They wave default interest. So then we reverse that out.
So there is some noise in the interest expense line item, but.
Currently the monthly run rate for interest expense for our portfolio on a sort of cash interest expense basis, assuming we were paying interest on all of our loans is around 11, and a half to $12 million a month.
But I would encourage you to just look at the portfolio. The so the on the quarter and use that your models.
Okay, and then when we think about.
The preferred exchange offer out there and I'm sure you're massively limited in what you can say.
But what happens to the preferred that don't get tender I mean, do they just hang out there supposedly accrue deferred dividends or how does that play out. Yes. Good question. You know as you saw we have made some announcements here recently as weve kind of amended the terms of the.
The exchange offer and one of the things that we did we would had to seek.
Two different boats for the common shareholders in order to approve the ability to effectuate that transaction, one of which was getting.
Getting approval to issue the shares for the exchange and then another was actually for a charter amendment that would allow us to.
What is called drag along all of the Oh any preferred that didnt tender, if we could get two thirds of them to tender.
That second one that was where the charter amendment, we announced that that special meeting for US is going to we're going to kind of withdraw that or cancel that special meeting but.
But the the previous one of getting the approval for the shares was was passed by by our shareholders. So what that allows us to do is basically.
Basically take.
Except whatever is exchanged in and those that do not tender will stay as they are and so they will remain outstanding and and the rest will be converted at a premium into common stock.
Okay, and then last for me and maybe this is a question for Derek and maybe you can answer it but aside from the monthly.
Yeah run rate of cash interest expense that you shared.
Is there a monthly burn rate in general that you can share and if not can you give us some color as to if it's been directionally improving over the past couple of months.
Yeah, I'll take a shot that Brian So I think the way to think about it is we've got no corporate DNA costs of about $4 million a month.
I said in the in the third quarter, we had negative EBITDA the properties of about 3 million per month.
Like per Jeremys comments, we think those are getting a little bit better.
So hopefully here in the next several months, we'll be at breakeven or better.
And then the interest expense for for Derricks comment was $11 million to $12 million a month. So that's the vast majority now there can be obviously other expenses and other onetime things for example, sometimes as we're signing up these forbearance arrangements there maybe.
25 basis points to 50 basis points or whatnot of various fees and one time fees associated with those those four brands arrangements, but.
But those numbers should give you a good sense for what we think our cash burn is as we sit here.
Okay. Thank you.
You got it.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Our next question comes from Chris Warner of Deutsche Bank. Please proceed with your question.
Hey, guys good morning.
Good morning, good morning.
<unk> can you talk a little bit about the.
Barents agreements I know you've covered it in some detail before but.
Are there embedded.
Terms that would allow you to kind of go back for furniture.
For an extension of those whether its a.
Three months kind of deal and maybe can you give us a little bit of color on.
Exactly how much what.
What exactly you need to get to to kind of come out of a forbearance comfortably.
Just property level EBITDA or is it something else beyond that.
Well I would say is.
None of the forbearance arrangements necessarily have kind of automatic.
Extensions that go.
Beyond their initial term I mean, we have some that reasonable that mezz can have some extensions for a few few months, but in terms of the ability to extend those you know for another three months or six months that would be an additional negotiation and as I mentioned earlier I mean, we have reached out to.
All of our lenders about the potential of that but thats TBD in terms of the success or viability of that path.
I think thats what was the kind of the second part of your of your question.
Yeah, just kind of what what exactly is it as simple as if it would help generates excellent <unk> EBITDA.
And your your debt payment on it if you break even on that you kind of.
You kind of come out you say were flat guidance.
Yeah. It that's a good question. So it really is more or less dealing with the same cash trap.
Metrics that existed on the loans. So for example.
So so as most of the work where it will have say call. It six months of forbearance on interest right. So call. It maybe that's April through October.
Our April through September and then.
Over the sometimes maybe starting in January that interest will be paid back call. It maybe it in 12 increments monthly over 2021. So we'll have heightened interest interest expense starting see next year.
And that goes on.
Then they will allow us to use say f. any reserves or other reserves to the extent that we're experiencing operating shortfalls call. It this year.
And any deferrals or replenishments may need to happen to those at that any reserves or other reserves starting next year and so what happens is that you know you theres, usually some sort of waterfall where.
The those are the those I guess the uses of those reserves get replenished.
And then you will be paying back the expense and then your current expense and then goes to your Mezz and then once you hit certain levels and we'll get back to distributing cash to to us, but usually those are set within the same cash management system that exists within the loan docs today.
Okay think I got it that's helpful. I just wanted to also ask you.
It was the work the brand companies I know you've got a lot of Remington managed hotels, but but from a franchise perspective, what's your sense, so far as to how flexible the spread of companies are and do you think that can last long enough for you guys to make up for lost time.
Or is it or eventually more friction with the with the franchise companies.
Well I mean, our experience thus far has been outstanding I mean, we've just been very very happy with our relationship with Marriott Hilton Hyatt and our brand partners because they really have gone I think above and beyond this time.
In this kind of pandemic in disaster of of being flexible with us.
And working with us to.
Provide us not just flexibility, but also data as Jeremy I think mentioned.
Maybe one is really comments I mean, the amount of data operationally that we're getting now is far surpasses anything we've had before and allows us to really maintain and control costs like we've never had before and we do believe that those that sort of relationship and transparency of.
Information.
It is one that helps us across the board in terms of of what this looks like in a recovery in terms of maintaining cost structures and margins.
Frankly, the brands themselves have been going through a very very painful time, I mean, they're going through layoffs, and furloughs and restructurings and their.
There went to their own kind of distress and so we're trying to be good partners with them to be able to find ways to help them out and so there are a lot of discussions when it comes to.
Capex to pips that we don't have a whole lot of pips, but some of the plans that we have over the next several years of having a good amount of flexibility with them on that timing.
But I think the reality is that a lot of that is going to be to come as we kind of see how the recovery happens and we can get back to a more stabilized view of the world I think that will be the same thing for them or we can kind of all X X sale, a little bit and think about the best way to make capital decisions and.
Brand decisions operating decisions together.
Of what the kind of post co bid world looks like so it's hard to say exactly what that will look like but we do think it will be a much more efficient and cost saving.
Process and structure for us going forward.
Okay very good thanks, Rob.
The next question is from Robin Farley Oh, Yes. Please proceed with your question.
Hi, Thank you because our peanut butter Robyn I know this will vary by property, but if you can give us a sense of overall what percentage of revpar decline would be breakeven or property level and what percentage revpar would be breakeven at corporate level.
And then I have a quick follow up there.
Sure. Okay. That's good question. So the way that we have been looking at and thinking about it here internally is that when you're talking about limited service assets that break even level, maybe somewhere between 25% 30% occupancy.
And as you get more into full service that may be somewhere closer to 35% to 40% occupancy obviously, depending upon it but the labor Union hotel or there's other certain markets, where that maybe a little bit higher but across the whole portfolio at Ashford Trust, we think that break even level at the properties.
All in about 35%.
When you then add debt service to it we think breakeven levels, probably closer to 50%.
And to cover kind of all kind of corporate costs and everything else, it's probably closer to 60%.
Okay. That's very helpful. Thank you for that Glenn will answer and then what Youre.
Because the mix of leisure versus business travel in Q3, let's say QC of 19, which was sort of a more normal.
Yes, and what would that be in Q4 in terms of how that mix shift from Q3 to Q4.
Well on Q4, I have I'm not exactly sure because the booking windows of shorten so much it's very difficult to say.
But I mean as of right now we are seeing obviously materially more leisure travel Nan business traveler housing group is I mean, it's not nothing but its very low it's just very small group.
And so it's definitely a majority of leisure travel.
So they are more typical in bars demand environment like last year. This time what that shift.
You shifted from Q3 to Q4.
Oh no there is a big shift Q3 to Q4.
But typically what what we historically see as it were operating at 20%, 25% Graham.
And then the balance is mostly going to be transient. There is some contract business. We have it is very small historical percentage of our portfolio and.
And contract would be like an airline crews and things like that terms of the mix between business and leisure.
You know we have estimates on that because we don't always know why someone is coming coming into checking the hotel, we definitely know which accounts or what they call qualified business or especially corporate are negotiated and that's typically 20, 20%, maybe a little bit more than that and so then the balances.
Give me a mix of business and leisure and your best guess is maybe 50 50, maybe a little bit more on the on the business side typically historically, but we're definitely seeing a much higher mix of a of leisure travel right now and I think actually in some cases in some markets leisure travel is up and then we had a.
Way, which is a.
Hotel in Austin on my Travis.
Its revpar was up year over year for the quarter and.
You know our drive to leisure resort markets have performed much much stronger than a than we would have anticipated.
Okay helpful. Thank you.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Our next question is from Michael Bellisario of Baird. Please proceed with your question.
Good morning, everyone.
Good morning.
I'm wondering if it was a little bit more on liquidity and what you're doing to shore that up and kind of really more interested in the permanent solutions not really that the temporary forbearance agreement that you talked about a lot you maybe give us a sense of what you're doing on this front are you considering asset sales and I guess really what other options do you have at this point in time.
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Yeah. Good question, Mike. So you know, we obviously have to I think have all options on the table right. In this in this sort of environment, we have to and we are spending a significant amount of time looking at what are all the various solutions that can.
Lead us not just to survive but thrive.
Thrive on the back side of all of this and so there are a handful of levers we can pull you because you're right I mean, just forbearance arrangements or not a permanent solution.
And those are one we obviously have spent some time looking at asset sales. We are fortunate to be in a position, where we think we have a decent amount of equity in the portfolio even at the prices. We sit here today and we have assets that are desirable and we could sell but.
But as you know, there's there's downside to that because those are the exact same assets are going to have the equity value in NIM as we recover and to the extent that we want to be able to maximize value to shareholders over time, and we want to obviously retain as many of those assets have equity volume as possible.
And so thats a tension that exists.
We obviously are.
Focused on what are the best ways to raise capital, whether that's publicly or privately and their efforts underway on that front to see what what are sizable amount of capital that we could raise to to be able to give the company a enough liquidity to to make it through all this and so those efforts are underway and then we also have to.
Look at all.
All options right are there ways for us to restructure the company to the extent that.
Other alternatives don't lead to the best result for shareholders over the long term right and so thats, where we are looking at things like this preferred exchange in order to redo the cap structure theres other ways that we can restructure the company and it may be weather in quarter out of Port I mean, we were looking at.
All alternatives, we have a lot of lines in the water and are doing our due diligence in order to determine what we think the best path is for.
For all the various stakeholders the company over time.
So obviously.
I would say that we're we're working on a lot of fronts, and we'll be diligent and as we.
Come to.
Decisions and terminations will make sure to keep everybody up to speed with what those are.
Got it and then.
A follow up on that maybe for Derrick It looks like you did issue some stock on the ATM in the quarter can you maybe provide how many shares were issued and at what price or with the proceeds were.
Yes, so Mike so that will be at our Q, which we'll file file next week, but we did have we did turn on the ATM during the quarter and issued a issued some some share so.
That will be in the Q that we file next week.
Okay and then.
Crystal Gateway can you maybe help.
Yes, I understand what your what your thoughts and plans are there for that maturity next month, and then shared in Ann Arbor. It looks like you've got an extension maybe for a million dollar pay downs, you kind of walk us through that and what the terms of that amendment were.
Yeah, So I can say that till on on gateway.
That does mature here soon we are in the.
Process of document DNA or any.
An extension on that's a relatively shorter term extension on a long term extension on that so we'll be we're in the process of documenting that and once we have that signed up we'll obviously.
Released the terms of that but that will give us a little bit of runway.
On that that on that front, because it is a great asset and important one to us.
In terms of Ann Arbor, and that's a legacy of a relatively small asset, but it is one where we had a.
Small pay down that that came with it and then had some additional pay downs over time. It was a I think a three year extension.
And that was one that it actually had a decent amount of reserves at the property itself. So that was one whereas the deal was we were able to use some of those reserves for an interest reserve and some property in shortfalls to mitigate any negative cash flows at that property. So that's one that we think is set for some time in terms of.
Not a use of cash other than some potential small pay downs over.
Over the next year.
Got it helpful. Thank you.
There are no additional questions at this time I would like to turn the call back to management for closing remarks.
Thank you for joining today's call and we look forward to speaking with you again next quarter.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
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