Q1 2021 Hersha Hospitality Trust Earnings Call
Should you need assistance, please signal conference specialist's office. Default to zero, after today's presentation will be an opportunity. As soon as you pass question asked a question and I'm sorry that you're touchdown to withdraw your question. Please. Press star. Then to this event is being recorded. I would not like to turn the conference over to the investor relations. Please go back. Thank you, grant. Good morning to everyone joining us today. Welcome to the Hershel offer, Hospitality trust full year and fourth quarter 2020 conference call. Today call will be based on the full year in fourth quarter, 2012 earnings relieved.
Joseph.
Which distributed yesterday afternoon before succeeding, I'd like to remind everyone that today's conference call. May be forward-looking statements looking statements, involve known and unknown, risks and uncertainties and other factors that make cause the public companies, the results performance or financial position, considerably different from any thoughts, share results, performance or Finance. These factors are detailed within the company's press release with that as well. It is eligible, my pleasure to respond to turn the call with the s e. C h is that it is now my
Pleasure to turn president in a call over to Chief Operating Officer Hospitality trust president and Chief Operating Officer sir thank you. Greg million in good weekend morning everyone but thank you this morning. Good morning everyone off our chief executive officer and she joining me this Parikh morning or Chief Financial Officer chief executive officer officer and I appreciate your joints are cheating us early. The financial office morning on Sir, such a busy day for earning. We appreciate your time going to for joining us or locusts Mike early this morning, is this morning on Saturday morning on reseed, a first and perform earnings statements. I'm and our now need to focus on staff at my comments at sales this morning before turn recent bring it over to a foreman and phone number.
We begin.
20-21 with optimism, we because the recovery in 20 as the roller gains momentum is important.
And more and more people choose to travel, as the role of January, started up stronger than we had gained dissipated for our plane engine bolt, and returning to more than $60. People used to travel with South Florida and Washington DC office started off as Coast stronger than the North East. And we anticipate made it for our. We had our first folio month of hotel level returning to the month of January $60 and we are other Parker's with February from South Florida Men's today and Washington Washington DC. The book offsetting pays off on the president on the west coast and across in the Northeast portfolio was strong, had our first month of the year ago. Pause.
Announced details on our recent kills the capital radio or turning it over to the new. Liam end to provide some credit for further detail at eight bells on our and Milton Capital where you're seeing it off our portfolio, the new Leo year to demanded credit and facility through the first hand corner and what we are seeing in our Port, Folio you here to date and through inclusion, the first quarter, the fourth quarter prefer closes the most challenging near the conclusion. Hersh's his version of the forestry quarter closes the most challenging year in Hersha history, J operating depend on faith, allowing us to shoulder. Welcome. Furthers responder, as we share some windows that have good news today.
Fifth Dodge January. And we are encouraged with where I performance. We used today. The booking paydays for projects like this day. We can you come across them in support? Phone was the strongest again depending on your start go home anymore and assure demands actually some of the summer government. Stimulus Milligan comes first month overage which significant data be more pent-up demand and then was actually realized most summer corporate accounts and participate in return. A Courage. By two, it took a lot for most corporate, a quick trial until I returned of turning to, at least twenty 50%, instead of pre cook for travel and by the end of 2014 Georgia.
Representative and more than 40% of than a Visa. Can't expect a full recovery in corporate people travel like 45,000 coverage. I'm sure. But industry should see meaningful acceleration with return of business travel which we both could begin as early as the second quarter and ramp up through the back half of the year.
Drive to Resorts have been our strongest performers since the Inception event. Pandemic this month hotels about 25% of our pre-owned demachy bit. Had a weighted average occupancy, engineering, 40% and realized, ATR growth of 2% for the full year, 2012 and dated shutdowns in California, impacted performance package, December and January for our Coastal. California properties.
Well, we are seeing an immediate Improvement in February with the lifting of these restrictions off. Not only have Leisure Travelers returns, but we're also seeing early signs of business and bought a small group activity, new corporate accounts for near-term project and deposits for spring and fall weddings are building a base at the sanctuary Beach Resort and Hotel. Milo walk across the country and Key West. The Parrot Key hotel and Villas was our best performing asset during the fog.
Or generating 55% occupancy and 8.4% year-over-year ATR to $306 for the. The holiday weeks were especially strong, most notably that. Between Christmas and New Year's which had greater than 90% occupancy home and saw, ER, see, 2019 levels of that hotel.
We're expecting cerebral. Strong quarters ahead. Only position Resort.
I don't just ask that the Cadillac Hotel and Beach Club on Miami Beach. Its seeing increased Demand on weekends and during special events, generating occupancies approximating. 90% off with radon page to improve incrementally throughout the balance. Before our momentum package has been building year-to-date in Miami from Leisure demand and recent announcements around major corporations or relocations. Highlight the tremendous draw to the region, which leaves us optimistic for this year's wage.
Brewery and substantial market growth for years to come home and destinations, we're essentially shut down from March to September of last year, and again, from December, through January, we believe that the reopening of Museum, a national parks, theaters sports venues, and more bars and restaurants in the coming month will lead to a pickup in both ends of leisure and business demand to our grade City wage.
As trouble begins to resume which we've already seen in warmer climates such as South Florida. And even at our lifestyle hotels, North over Presidents Day weekend bag unique portfolio provides as multiple leavers to capture market. Share will continuing the odd rate in a cost-efficient manner, as occupancy bills towards no normalization wage
Washington DC has been a very strong performing Market, despite the significantly abbreviated and off activity.
Although, the public was unable to attend the event, the same Gregory Hotel, contracted with medial including CVS BBC, and I'll just Sera. The Hilton Garden. Inn M, great and the Hampton Inn. Matt serve the men and women of the National Guard who were deployed to the city leading up to and review of that, the Ritz-Carlton Georgetown was able to hold a $1,000 radiar for the peak nights for the fuel Leisure, gas and town washing.
Has begun 20-21 on strong. Footing ending, January with portfolio revenues, more than double our efforts, patient's at the beginning of the month.
The new presidential Administration is expected to lead to a pick-up in activity among the lobbying federal government and diplomatic segments. And we're also looking forward to the upcoming Cherry Blossom. Festival, the coming order
One of our better for markets during the fourth quarter. From our forecast perspective was our New York City portfolio up. Finishing the quarter with bush to 40% occupancy which came in spite of having a few Leisure tractions open in the city.
We continue to see strong performance from our JFK submarkets, but also saw an uptick in first responder of your business at our Brooklyn and Lower Manhattan assets. These customers the New York Police Department, send a few medical groups continue to get rest at the new hotel, Brooklyn wage and they handed in Seaport resulting in January, occupancy, of 97%, and 51% respectively. Although this business is transitory and related to the ongoing wage
19th red. We are grateful that these front-line workers are able to utilize our hotels, to stay home. They and guide us through this home. Stretch of this endemic.
Urban Market recovery, is not only driven by vaccine distribution and the return of business with international travel, but it meaningfully enhanced with reductions or deterioration of Supply in markets around the country. Aging hotels are being rendered obsolete of the Wardman Park in DC Embassy Suites in Philadelphia and the Buckminster in Boston and New York more than anywhere else. Consultants of forecasting array of figures birth.
Regarding the permanent Supply reduction in New York.
It may not actualize it, highest 25% of predicted, but the confirm closures in 2020 alone, provide a concrete realism that the supply will control by adding to. This is the newly-announced proposal requiring special permits for new hotels and expansions in zoning distiction throughout the city by the department of planning.
Public hearing.
On this proposal have commenced and it passed will materially impact hotel construction across the five boroughs and provided significant Cal win for hotel owners. Free years, come home takes a deeper dive into our balance sheet and birth, right? I want to spend a few minutes on our Capital, allocation strategy and sources of additional liquidity long as we outlined on our previous earnings calls disposition.
Represented, the lowest cost of capital has we considered alternatives to raise liquidity? In a crease? Our financial flexibility.
We were in wide and robust marking processes with multiple Brokers. Beginning. This fall off
Our strong locations in major Gateway markets attracted, tremendous interest from private Equity, firms, family, offices and residential developers. These were fee, simple Hotel, a little remained open throughout the pandemic, unencumbered of management and owner of Labor contracts.
Menu running converter. Brandt all of which made the bidding process quite competitive with our goal is to generate a hundred fifty to two hundred million dollars in proceeds, from asset sales to page. Yeah, on our senior credit facility. The 6th recently announced asset sales will generate net proceeds of approximately 191 million dollars.
Sheraton Wilmington closed in December while the courtyard off the coconut, coconut Capitol Hill, Inn and Holiday. Inn Express Holiday, Inn Express Cambridge are affected by the flood of the first was, by the end of the first quarter of the sales managers, while the street Hotel sale of the Duane Street Hotel in related to curly close to in early two chips, too many of these Hotel. Many is Representatives. Who did those held down those capital projects and tens on the drive? Jack's on the successful and complete acceptance of these lower wage?
Explore our approximate budget, delete five twenty million dollars million dollars and years over the coming years.
Term strategy, cycling strategy, the distance positions in the deceive, with the quiddity and flexibility, but reasonable cost-based simple car. Last transaction, we track discount, did it had a disco discount about a little bit valve? Can we we spoke to her hotel hotel hotel, hotels near nearly 10-year, the hotel captain during the week and during the recovery and growth in each of our towel, Honey, Pig.
Hotel name and email and Evie the remaining e of the phone ending. Portfolio, celebrity meaning to hand places for them to cancel, call his portfolio, but quality and reduce spending addiction thing and dead at the external Assets in the, in the bath tub.
Okay, just yesterday with an immensely. It's Goldman affiliate. This is Merchants, Goldman Sachs Merchants Bank provides a hundred from $1,500 to $50. Unsecured. Loans can be expanded, which can be handed a hundred million thousand two hundred million dollars. This Capital infusion this caption but one Fusion in conjunction with Ambassador The Junction that's that's itself led to the loss except level and the 16 minutes depending are extending wait until June June June, 22 and elimidate an armload eliminated. Short Term Loan in 20 21 + 21 Club
Please do we are fiercely the to hear the runway and provided and financial flexibility. Focus on the ram. Focus on the off-ramp up early in the portfolio, how to open a year in the coming year, we've discussed them. Involve vegetables editing best for meeting. We've been investing. Instead in our Capital allocation home, bring the cash, considering the profile a file coming off and travel pull up. Logging, we were loads. We were closed, transactions, newer Trends. In fact, that would be unnecessary would be utterly necessarily birth.
Even our location, even on the office. How can I spend on? I mean from the north east south and west coast technology and wax confirms codes technology, firms. All of this moving out, all corporate disapproving managing outpatient remains intact expect. You should remain intact, but I had to be glad to the General Motors in US demands. Gateway Min, Raiders tickets in our Gateway, pretty Market, particularly for our particular easily assembled location, submarkets and locations dead.
Mission announcement this year or disposition announcement for this year. Should all also a member of our portfolio bag folio Aldi nature for a better Port flower folio. Tunnels are precisely. The kind of hotels are bells of precisely, the kind of booster seat. Owls fisticated in our Master sales, hotels, have a long margin still dead. Who sings seconds after leading? Mark the hotel for today or Thursday for the for the minimal future requirements for the foreseeable future and have hotels off.
Sentencing and have a prepaid have management and signals for bread. Encumbrance have a few messages and achievement or branding all low-income life in the valuable markets in the United States. Aided in the most valuable markets, Nita, it's state law require pool, open to be a credible operational and and still offers an incredible urge to the home operation coverage and financial leverage with financial rate, flexibility capital. And with confusion increase, the wage like know the ability from Capital infusion, come and install a known issue credit to search page.
The focus credit is still in capture marked. We are able to focus on category tells you can manage your business and am reading our profiles linked pasta station, manager manner. Without, let me try to turn it over to blow off with L love. Can we turn it over to Ashton discuss? The morning detail? Thanks for calling. Good morning, everyone else. I'm going to do a Jeep or Dodge on our reason morning and everyone we announced and recently in our impact. It's a capital gains exaction. An interest expense Bank Amendment and they're imposing with a car about date on. She operating was interested in current events before it closed down.
With an update last week, they announced the spring result in Karnataka. Financing commitment with Affiliates of sweet, we have a text message to bank TG provide often and not even able to depending on some notes in tax which comes back up sides to provide a hundred fifty million in at any place. Secured me a hundred before which can be up to September size to 2/30, a hundred million a year. Any point with a table for two on September 30th of February of 2026 200x off. On the note, we success of February close early appointment yesterday and look forward to furthering. We success are partner. She'll be closed off yesterday. Merchant back and look forward to furthering. Our partnership with Louis.
And so, I preferred dividend dividend Distribution Solutions moving forward and forward at this at this time, we in time we anticipate Clearlake clearing, our approval are accrual on the phone and give it ends. By the end of the first quarter, quarter of these cap, Trans actual transaction, allows options. Allows you to just to continue Cobra Center on your focus on operational for operational, performance performance, and opportune creative opportunities, that communities that emerge maymar in the recovery. In the recovery result result, our properties that are products are incrementally as of April, improve the passing gas.
Add to the valley and ultimately, they should have led to the boundary keeping fluoridation of overcast during break, even in January forecast during January two thousand. A year. Our slowest most properties for the year generated, our property positive generated property laws of public cash flow properly during the multi-level cash. January. Am I understand. The 40 with represent occupant level since the sixty percent with rep below level January of sixty percent, 20, and Below January 13th 2020 in January of our 36 in Jenks operational. Right. 26 operation Hotel. Brooklyn. Even fourteen on the break. We've achieved seating even even represent a 75% off.
These results and hopes representative for sending the 75% inquiries that broke res and even 40% on the Eve increase input. It. Line from compared to leave in November on and just leave it. December compared to respectively to November and based on past, for the first quarter wage based on gender. We always result comfortable in our fluid. Our previous cash for the flats and they said, first-quarter the entire portfolio. Where you are comfortable, Steven at Pearl with our property, level assessment that the package with your portfolio, lucky breaks. Even the 60% loyal client with a six percent Breakeven, a pack occurring. Or is that a 45% decrease level by our our break, even offers at a 4% trading strategy. Fine job.
La 4Runner details and very, very lean later franchise. Over model operating strapped to improve demand. This additional staffing office on various until must getting screwed demand warrants, it just cross you additional satellite manufacturers judgment Personnel help while trying various and out, so cost-cutting forcing strategy, some sharing with it, just crossing the hotel utilizing and management person across our female clusters and Outdoors are sourcing in your overall cost sharing within the hotel, the miles and across that likes ability clusters to continue lowers to operate. Our overall compliance staff signal levels of flexibility to confirm a meeting to operate. 35, your parents 10% Staffing levels up a break, even up to 16, occupancy percent at approximately paying $30,000 5% off.
I'll talk to the 50 is increased 5 to 6 at our hotels. He percent. We are see something leaking floats through town. It's as high as 75% off of leader and as we have been 75° his pay on the line for the anger of the month. We push those rate in occupancy, the flood, his ability of the maintaining model them for the remainder. Resulting manager of the cost of fish, are these wage Justified, the inflexibility canoeing of the model operations, at our end, the result Urban in different cost of dependant Resorts and fees for Destination economically. Broadly justify. Depends like continuing mitigating cooperation Ashburn that are Urban is the course of independent twenty twenty or Destiny's you should our total at the proper Pig.
Didn't work for cash over the course nine $20 off on the 1st of last year and in Ashburn, 44.3 properties of million in cash flow for the First Choice represents since March 6th of last year per cent reduction option to April. Twenty twenty four point B. Battery million is the depths of January the crisis represents a, we expecting percent restart February, very performing paired, to April, to be in line, with twenty twentieth, January at the depth with March from the Chrysler operating of projects. Extracted to suspect are fed passed out of your way. Perform January to be a man, February, 9th of January, uary as the pace of with Mark vaccination, operating distributions of projection birth.
Government or past that direction of January and am looking for director, bring break travel and warm wet weather along the north Northeast should before. I could yield increases of these bookings regarding a black cross. The quick folio, pick up date is really in New York City. Joint venture partner sitting down before a capital game.
This regard.
David call quick update on her. She's only sixteen relationship transaction. Our New York City where he joint venture, we sold Partners majority of this portal management page. You may have a call and in the following are between that the 26th gain transact, $213 off the interest and $2 a month, he retained it through this month aboard, the equity had minority interests of that interest in the portfolio or polio who are transferred with. It was Junior and we have no root. The syndics remaining Equity equity for the interest of the month, or economics or legal familiar. This joint venture the interests of that that portfolio hotels and we have no remaining dead.
303 reduce bass by side with the cash price. Are we have to do that and down as well. And Thursday, we open all set manager of our hotel and Nimble franchise off. And we essentially reducing booster following burn rate of the, Strategic off the transaction pin, since he's announced laughing on set of this week and Emily, we write something, besides the balance sheet, all of them are a testament and turned. Our foot are aggressive. Get to Opera original performance, been off for franchise, operating money, and reimburse Bridges. And the opportunity. Transactions become actions announced available across week, off the side of the balance sheet and turned his Focus to us includes my operational portion in the corner, small dog.
And we were happy to address any questions about that and you may have to, available across the recovery operation.
Well, this concludes my portion to call question that we can now presents are. So, we're, we're happy to question. We do address any questions that page one operating function. Using speakerphone question and answer. Please pick up your handset off the keys one or two left here. Using, please press the speaker phone or then, see, please pick up your handset. Before pressing this time, we open the keys off to withdraw your question. Again, please press down below. At this time, we go home. First question, how this month
stuff with
Good morning everyone. Good morning everyone. Good morning. Mike. First question for you. If you think about the first question about the fundamental, did you get your updating off the ramp up in Old Bridge level and what's your updated? Do you think needs to be done between June party front to get my router? What else do you think could be done in between? I'm like Dead Island that on the balance sheet, kind of just the, the broadcaster recovery, which is just so uncertain still dead.
I think you know you know industry really follow kind of Georgia analyst. See the broader can look recovery way till today I think June nineteen you know levels and twenty twenty or Twenty twenty analysts. I couldn't look to him a kind of, I think most cover Hotel public hotel jobs in Maine, 23, or 24. They'd like to be, I think that God
I think most it'll likely to tell as much as the hotel Market recover close in the years, they're going to main menu to how may have leverage with the levels that are higher and higher than a pretended like to be hemmick level and I think there's a cash 1000 and we'll light and that's the going to be as the Accord is as them to the PACE Market recovers recovery. Which were were uncertain. You to have no leverage wage here than we think we've, you know, pretty pathetic in the level to to make a meaningful resistance of friction. Reducer is so hard over the cash, 10 close and when I'm in the bath total going to be that cord, bring to the page as of today, District of a very, which were we're concerned about as the birth.
Goes and what we think we asked Flo begins to round up, will to make a meeting able to be difficult over 10, 20, prove those messages explode, I have slowed, there are lots of as other public today will continue to return home shows and actually load the end of this used to round here. We'll be able to do next to get layed out to be the case. For those who think tricks will with the bubble night show, some think, there are a lot of other pumpkin with portfolio because of overtime continue to burn. But again, dipping an amount on a cash draw Greg's through the end of the until this year, get out to 43. We don't expect that. It's basically for Thursday.
Rachael fireman, the phenomena of the portal Services Holyoke, but it would keep it is truly what I just spoke Park and ablution according to their, you know, they're really do anything. Exactly. Exactly what I don't know, what's going to cash flow mean the coming of Gears quiddity, what we are really pleased plans have hasn't mentioned or formed in his so it just reminds a lot of comics ability to strike a hundred thousand and the world. But and this is true potential, a strong part solution ship, moving forward, you know really fitting exactly with what our low profile profile and business plan off.
Has in store for us. So it just provides a lot of question marks ability come from and pub, and we actually be a strong part ownership moving forward. Thank you. And give you a little bit of a follow-up home on the balance sheet wage. And how are you thinking about moving from last month? We've got a, we've done the same time. Being wage.
On the balance sheet done for the time being I will always remain, stop for sales rep by the stage. We're not thinking about marketing that any that's for certain still at home. We are discussing our joint venture, as largely in South Boston. And those discussions continue with I'm sorry, Venture for the window, long time being have any will always remain opportunity sale in the market place. But but at this stage we're not Mark just you know, God
You're saying we've discussed joint venture, you know, had bought a look at the market just like New York directions, are you seeing you with your partner? But we look like a longer have that any and then just took a broader. Yeah. Well throughout the week okay? And I'm just you know how long the include some of those friends and you're seeing is part of it just a function, you know you know places that been for people when I look at them like you do things that are trending that you're you know expect the Consulting and moving for pick up markets like like that. Yep.
Just walk towards trade and we both believe that some of those rights here car is here to stay at least for the next election several years off from people. I think it would help to take some time for everyone to continue with wanted Dead travel overseas and and and really publicity take you know some of the you know additional risks am going into a second monitor. He's where you know, the left off.
You fact that International demand and group, and just the general coverage will continue to lead wage very strong results on the resort side. You know, I think that off right now. Well, we try to stress an hour prepared. Remarks was that there's just walk in two minutes just so negative towards Urban markets and Thursday and we see that as perhaps something that's been under-appreciated is just the the amount.
Instead of a brewery and the level of recovery that can come in markets, like New York, Boston, Washington, Silicon Valley, Los Angeles, and you're seeing it already dead, you know, it's we don't have it now dated beat on a drum here but but we are seeing if you just look at the TSA data for the country just every day, there's more people travelling than there ever has been since the pen down. And, and that's just bite frigid conditions and Andre acceleration of birth.
Accounts. And and the like in you're still seeing people moving around and and sees me getting going in airports getting moving. And so we do love the resort markets and and we're glad that we have about a 25% position there, but the 75% of our portfolio page is a way Urban Innovation oriented were expecting. Really strong things from in me coming here too.
On this question, will come from Dori espan with Wells Fargo, please go ahead. Thanks. Good morning. I believe initially, your plan was move on Thursday, to luxury or or the higher end. Sales taxes is current round of dispositions, but with the the notes or the appraise me, you don't need to move forward. Those did you did you ever test the market would be that long? I'm just, I'm just wondering if you have the status of pricing at this point.
On the luxury asset story.
Yeah, do you we we didn't formally Marcus.
Any of our luxury hotels and our reasoning. There was this black market just hadn't developed yet for luxury assets and trophy Dale. Well, we feel well, we, as well as kind of the Brokers community in the investment Community wage. Was that what was it difficult to Market luxury hotels into getting a strong values was a function of a few things. One just the significant amount of dead.
Cash burn that exists in the luxury segment in a time like this. So it's very hard for investors to be able to to underwrite when they didn't know when the bleeding would stop off. So that no rational reason. I think for for investors to have been has another second thoughts and and maybe even more important reason was that the luxury markets have generally been a mandated by international buyers that that really do need to suck.
yeah Hotel before they buy it and and because there was no international travel there, clearly was down here, National investor travel to buy hotels and and so we think that that the luxury grades
Our something that will become potentially more attractive. Towards the end of this year, is the vaccine is distributed. And you just see more international travel begins and you seek Ashburn. Moderate wage, so that investors can and his think about Road rather than six. Okay. So on on the lien so we think probably more with you. There was a good time to add to the market luxury until later in twenty one month.
But it is staged. We really we were not in anticipating any other further marketing of Assets in the portfolio. We do think that the hotels that we have wage waiting in our portfolio hour and particularly fine shape and are going to have great faith in the recovery which we do want to hold on to
Okay, and you just mentioned that the the 75% of the portfolio that's more wage and focused to recover. Well the next 102 years. Do you think York City wage tax and that is kind of neutral to the I guess the rest of the top 25.
No, probably neutral. I knew Troy, you know, it's dead. You think New York?
Yeah, neutral for our hours and that's a good point, you know, things for our locations, in our kind of non-union newly-built boxes. We think it's going to be, you know, neutral to the the the urban set as a market wage there it is working through a lot of new Supply and off and still you know, a market that is dominated by large employers that are back to work and back to travel. Yep.
So, you know, we are sensitive to the the pace of recovery in New York. But the positions we have them, their locations were in, we're still very confident about. We could put the early recovers in the kind of Washington is in early recovery Market, wage Southern California, kind of urban Mark, while New York in Boston dead.
Are are more kind of midterm, kind of a very markets are View.
And just finish that was you consider be late?
Yeah, there's there's just some dynamics of playing Philadelphia with some new Supply coming on, Thursday, the rising and, and some real uncertainty around when the convention center really gets going again, which you to make it a little bit more concerned about the pace of recovery in Philadelphia. Yeah, yeah. That, that we have three exceptionally located at that here and and phone number. And we will have sure more than our fair share in the light. So we're not overly concerned but there's some dead.
CERN, they're Silicone Valley and Seattle. Where we're just it's just still ashing marks a little bit on just when things get back. And when people start traveling wore off, when the remote workers come back for, you know, business meeting that Corporate Center and Silicon Valley life things. So, so, not laggards, but just questions still
Okay, thank you.
Bryan with the please.
Good morning guys, taking a little bit different of it active and maybe there's nothing to talk about. Well, they, you know when you what
And other clever say you had is there at all? And what are your thoughts on going on the fences in 2021 and looking it acquisition? Or is that just be able to look at trading in a, you know, I five million dollars, you know, and other potential opportunities out there and with their stock valuation set moved, how are you thinking about rolling the portfolio, over the name?
You're too.
Yeah. Brian, you know, it's not often hear the word not seeing compelling enough opportunities to make it a common conversation in the office needs. We're just not seeing anything to really get excited about. You know, there, there are discounts Dupree COVID-19, for sure. But this recovery is, is still dead, no uncertain about the pace of it. And so, the values,
You know, although, you know, perhaps attractive for the absolutely new investor to the space, for a company that has, you know, forty really exceptional hotels and summer, the best markets in the country and our expected growth on our existing, portfolio wage. I think make less focused on the acquisition environment today. We, as you know, we're always in the marketplace, we're buying and selling and our manager.
M is a very active fire in the marketplace today. We're just we're dead. We haven't been compelled today, eight by anything. Now that is some of the flexibility life in the capital solution that we have. You know, we we can clearly sell more hotels and we think the very liquid portfolio and as New York starts to recover towards the end of the year and you know them, there would be some additional recycling to take advantage of acquisition opportunities dead.
Or there could be a scale up of our financing either, with with Goldman or with some of the other investors that we met through this process. We're just not there right now. We're just not seeing opportunities to make us both, find a way to get deals done today.
Okay? And that's a follow-up question. We look at the light bulb. The street holding up a DVR during this, you know, Mirage, for Blacksburg better much better than we saw happened during the Great Recession. When I was just, you know, ha Tre hot really hot rate. Do you feel like industry has left off and years ago and acting more rational and you expect that to continue birth?
The first half of 2021.
Yeah, hey Brian. I think that, you know, they're probably there are some lessons learned. We always worried about, are we hit some patter door that could drop rate? But I think that when you look at these cash burning now, see them and yeah, we like every other owner and operator is running them and you discount rates and I'm driving occupancy, but you're not really moving the needle on cash Burn by doing that job. So I think some of it is also a function of just yeah the occupants.
Levels and Japan levels in Solo.
People here really do system and by just lowering Ray and I think that, you know, being industry has become better and understanding that concept off and maybe it's a little more sophisticated, institutional investors that own, these assets as well. That is something different.
Right. Yeah.
Our next question will come from Dany Asad with Bank of America, please.
Hey, good morning everybody. You guys have been the past giving us a bridge to getting to a $209 rebate. Target. Look clearly alone know what has happened since then, but we're just trying to think of, you know, in a normal lives environment can you maybe help us walk through, like what? And, and updated Bridge could theoretically look like for Hersha.
I was thinking about your $2 Target Eddie. It's no longer two but
Yeah. Okay, we would we would look at this portfolio and say we have them down roughly give or take eighteen million of even month so that will reduce the overall Target. But we've also lost power leverage from the sales. So we look at the bridges. Probably, we went into 2020 with really high expectations dead.
On the ramp up from math. That like the Cadillac Parrot Key White Plains emphasis perfect. Yeah. Things that we put a lot of money into an unfortunate and then they really impacted operating results. So, we do believe that there's significant Ram in those assets that could help bridge that Gap. But I think it's difficult for us to right now, see here young and say, look we yeah we have it Target for twenty twenty-three or twenty-four we didn't know that dead.
At least fifty to seventy-five percent of what we lost and use it for math that we can make up through the ram pump of this portfolio.
Understood and then just my follow-up is of, you know, just again thinking about like this coming cycle. So dead, we know, you know her, she has this hybrid model of, you know, a high-margin limited-service assets and dead higher and lifestyle hotels with a little bit more to offer on the service side. So it was with that in mind. Can you help me about? You know, the longer-term margin opportunity at the four wall. Operating level the boss.
Yeah, absolutely looking. I think that the the basic operating promised rather is 63 * 4, * 5 * somewhat limited package or if it is an be kind of a focus on higher-margin and beverage business page and trying to run all of these assets as much as we can. Accept the luxury one that's really the lack service model and what we found through this and I actually going dead
Zero base.
Income that close a lot of them made you know, you're not going to bring back as many people, you're not going to bring back the services until you are well into the recovery. And I think even that long and it's hard for us to just look at this and say well bring the FDC count fast 2019 loved because we found more efficiently to do three two things either through technology package. Yeah. Checking you know, having virtual meeting for sales, people going out to Thursday,
And last sales needed or less, contact points needed this the time. So long, I think the margin opportunity for our portfolios and it'd be really on the labor side on utilizing our Earth. You platform to reduce utility and operating costs and we do get off. Yeah, two hundred basis points of margin Improvement, even in a stabilizing a few years.
Got it. Thank you.
Our next question comes from Bill Crow, Raymond James blue.
Good morning. Yes. Just three quick. Hopefully, quick balance sheet questions. How much pressure was exerted by the bank group in order to walk by the cover that waiver extension and Thursday? Right? For as what to the the Goldman Sachs Finance.
Yeah, it will. Okay, take that. We had good conversations with the bank group. They were very instructive in commercials but at the same time, we knew that we had to raise some level of Junior College little in conjunction, with what we had already planned on asset sales to ensure that we had Faith commitment from the bank group on the waivers and the amendment. I think that it was expected from our standpoint we use it, the market for going to improve in 2021 birth.
From. And so I did undertake a debt offering or any kind of diluted of offering a 2020 and yeah, they played out. Exactly. Has the anticipated we start the process. Right after the New Year, we started the cavalry's in process and I'm very able to get all of them done by. I think there was a clear expectation that we would raise some level of Junior Capital, whether it was unsecured notes or convert or something else in this month.
That was the best option for.
Right. I think it was a very first question about the goal on the balance. She looking, you talked about ebitdare level security back to to nineteen and nineteen Levels. By 23 or 24, let's take care buddy, B is
I just kind of a correct krajack created, I guess my question is simply getting back to age the Weber travels. You had free pants down. Mike we're here, it was. Yeah, they were material higher than the rest of the week group. And certain way down your Equity performance is that our goal to get you know, three times or four times and get more money. I had a uniform with the rest of the the industry.
Is it not for the early part of the recovery? I wouldn't vote for three to four times, but by the middle end of the recovery we think that that would be a that would be our goal. But in the early part of the recovery, until until existing it normalizes the only way to get to meaningfully less leverage would be dead.
Through through Acquisitions of unencumbered assets. They, you know, using Equity to to buy hotels and we just don't see an opportunity for that to where we would be willing to dilute for those kinds of opportunities that could very well change by early 22-23. You know, we've gone through many cycles now, together as a team and, and we've always wage,
It was great, acquisition opportunities, for three to four years there. Early part of every cycle and your cost of capital was a lot better in year three that it was in year one. So if you were really trying to be quantitative about it, there was really no reason to to jump in very early on unless you were blessed with with a lot of money for war, a particularly attractive cost of capital. So
So that, you know, it's by end of cycle. Like, we, we definitely would want to bring in the public markets, run at a significantly lower leverage and profile page. Um, in mid mid to end Cycles. But but we don't think that, that Thursday will be the case in the early part of this recovery.
Right, right? One more for me real quick and over we're we're relieved just getting this funny dancing done. But as you look ahead, twenty $22 for all this sizable Batory off.
any, any
Strategies address that as you think ahead?
Yeah. Is, is we did this year cost of capital? We have the flag to raise additional Junior Capital. Well, we don't take that something that we would entertain in the next few months. I think that that the recovery progresses in clearly, look at where people were raising either Equity or dad last summer or last fall and the cost of them have oh has gone down. So significantly on every level rather than the high-yield offering phone number.
Brandon light car. So we we feel like we can be patient. Now on the next real virtual telling a half in until August 22, we can be patient and monitor the markets and off and we have support from the back blue. Then we'll find ways to extend out those majorities wage and to you know, raise additional Apple music.
Okay, I appreciate it. Thanks for the time.
Yeah, thank you.
Our next question from Tower battery with Jenny, please go ahead and
Good morning. This is Jonathan on, for Tyler, thanks for taking your questions. First one for me, if you could provide some additional caller on how the conversations with Group business had been going in and out, there's been any news, oil changes in the discussions recently.
You know, this is just anecdotal here. But, you know, we're we're seeing weddings again, which is great. This this past weekend in Coconut Grove, we had um, hundred seventy two person wedding. We're, we're booking weddings now at home, most of our hotels that have that kind of meeting space, Not only Resorts, but even in our Urban Gateway markets,
So the wedding business is starting to pick up and there's clearly tons of pent-up demand for that business and and then you one in the group is this will tell you, that's the best kind of Group business page, you could have on the social side, on the corporate side were also seeing it off. So they we, you know, I mentioned our prepared remarks about some California wage, some of our California Resort properties, actually getting some, some corporate Group business wage.
All Retreat business getting employees together, brainstorming kinds, of sections and and the like we've been having meetings at at our West in New Jersey near Philadelphia. Yeah, you know, your last really life ballrooms. Yeah. They're only being filled with a hundred people, instead of 350 people are paying, they're paying for the privilege and and we're we are starting to generate some income from it. So dead,
It's still all very anecdotal. Our portfolio is highly transient, so I'm off, you know, the the group part of our business is, is probably less than 15% of our business, but even with that part of the business is starting to show signs of life.
Okay, great. I appreciate all that detail. And then multiple part question for me, you know, it's on your Oscar fat strategy, sold a couple of Buster's
Are you still believer that? Yeah, in that strategy and as you look out at the opportunity is in the future, would it be your preference I guess to stay in those current markets? Or would you think about that versus buying the new markets?
You know just absolutely continue to believe in the class then believing in the clusters for us. Just means that we believe that we get Advantage from Knowledge from sales from revenue management and from the Fishin Pig. So we we getting run hotels and have better margin and get higher market share a.m. to 10 a.m.
And you usually get it.
Brandt and channel strategies. So we absolutely believe in that. And in our sales here year was was basically one hotel per cluster, we sold. So keeping in contact with the straw.