Q2 2021 Park Hotels & Resorts Inc Earnings Call
[music].
Greetings and welcome to Park hotels, and Resorts, Inc. Second quarter 2021 earnings Conference call.
And as 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 and is now my pleasure to introduce your host Ian Weissman Senior Vice President corporate strategy.
Thank you you may begin.
You operator, and welcome everyone to the park hotels and resorts second quarter 2021 earnings call.
Before we begin I would like to remind everyone that many of the comments made today are considered forward looking statements under federal Securities laws as described in our filings with the SEC. These statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed and we are not obligated to publicly update.
<unk> or revise these forward looking statements.
In addition on today's call, we may discuss certain non-GAAP financial information such as adjusted EBITDA. You can find this information together with reconciliations to the most directly comparable GAAP financial measure and last night's earnings release, as well as and our 8-K filed with the SEC and.
And the supplemental information available on our website at PK hotels and resorts Dot com.
This morning, Tom Baltimore, our chairman and Chief Executive Officer will provide an overview of the industry as well as a review of parks second quarter performance and thoughts on the balance of this year, Sean Dellorto, Our Chief Financial Officer, who will provide additional color on second quarter results as well as more detail on our balance sheet and.
Liquidity following our prepared remarks, we will open the call for questions with that I would like to turn the call over to Tom.
Thank you and.
And welcome everyone.
I am pleased to report that widespread leisure demand accelerated during the second quarter.
Leading to stronger than expected operating performance.
Which ultimately drove breakeven results at the corporate level during the month of June.
Well ahead of expectations.
We continue to make progress on strengthening our balance sheet.
Raising an additional $750 million.
Of attractively priced senior secured notes and announcing nearly $480 million of asset sales.
With net proceeds be used to repay debt.
Given the meaningful improvements to both operations and the balance sheet.
We are on a great position to once again prioritize growth opportunities.
Including ROI projects and selective acquisitions.
On the macro front the combination of strong economic growth.
And stimulus personal.
Personal savings widespread availability of vaccines.
And the corresponding easing of Covid related restrictions has fueled a resurgence and leisure travel.
The pace of economic growth has accelerated meaningfully since our last call.
GDP reached an all time high during the second quarter.
And is now forecast to increased 6.6% for 2021.
Nonresidential fixed investment.
Which is highly correlated with lodging demand is estimated to grow by 8.4% this year.
And 60 basis points higher than our last call.
And by an additional 6% and 2022.
U S savings set at 1.7 trillion as of June.
And with roughly 2 thirds of the U S population over 12 years old now vaccinated.
All signs still point to a return to in person schooling and.
And work for many people post labor day, assuming for now that the Delta variance does not alter this progression.
The ongoing return of normalcy as an important catalyst for our industry's recovery.
While we have all benefited from strong leisure demand in recent months. This next step should allow for the resumption of business travel core.
<unk> group and convention business.
None of us can be certain of the shape or the pace of the recovery, but I strongly believe that the fundamental desire to be.
With people face to face will again prevail.
We continue to work closely with our brand partners to ensure we are offering our customers what they need.
Enhanced safety and cleanliness.
More automated and digital amenities.
And flexible workspaces to blend between business and leisure.
I am thrilled with Hilton and recent announcement for opt in housekeeping at the majority of its hotels.
We believe that measures like these will push the industry and in the right direction not only from a profitability standpoint, but also from an environmental standpoint.
For park.
And of 5 key priorities and I would like to highlight.
First we are focused on reopening our 3 remaining suspended properties located in New York and San Francisco Metro areas second.
Second we are seeking to maximize revpar by pushing average rates.
And the strong leisure demand markets, while positioning ourselves for select business and smaller smurf and corporate group opportunities to build occupancies and urban suburban and the airport locations.
Third.
We remain laser focused on implementing operational efficiencies to increase profitability and realize the $85 million and cost savings were nearly 300 basis points of margin improvement we've mentioned on previous calls.
Fourth.
We continue to make progress on deleveraging our balance sheet through asset sales.
And finally pivoting now to offense to drive earnings growth through accretive investments, including value enhancing ROI projects like our Bonnet Creek Cigna conversion and meeting space expansion.
While I'm several other potential brand conversions and repositioning within the portfolio.
With respect to future acquisitions, we anticipate being very active as we head into 2022 with a continued focus on upper upscale and luxury hotels and top 25 markets and premium resort destinations.
Turning to our second quarter results consolidated Revpar came in 25% higher than expected.
Driven by incremental growth and both occupancy and ADR and select markets.
Performance at our hotels and leisure oriented markets helped us generate $33 million of adjusted EBITDA on more than $60 million ahead of the forecast we set at the beginning of the quarter.
Results at our leisure focused properties continue to surprise to the upside with.
And with 5 of our hotels meeting are surpassing 2019 occupancy levels.
While 10 of our hotels surpassed 2019 ADR.
And by an average of 25% during the quarter.
The phenomenon of revenge spending is.
And is very real and has led to price sensitivity.
Fueled by higher than average savings and cabin fever.
Our Royal Palm Hotel and in Miami for example grew ADR by $47 or 25% over the second quarter of 2019.
While our 2 resorts and key west, which have continued to see incredible demand recorded quarterly occupancy of over 92% and and ADR of nearly $500.
Leading to nearly 50% revpar growth over the second quarter of 2019.
And total.
Our open hotels saw ancillary out of room spend increased 65% to $26 on a per occupied room basis. During the second quarter compared to the same time and 2019, highlighting the pent up demand for perceived extras.
Such as golf for spot treatments as well as the appeal of drive to destinations, which provided incremental parking revenue.
Note that this figure excludes food and beverage as many of our outlets were closed during the quarter as.
And as our food and beverage outlets reopen we expect to see incremental growth and our total revpar stats.
As restrictions ease during the quarter, we reopened the W City Center in Chicago and mid May.
Followed by the Hilton San Francisco Union Square, just performed Memorial day, and the Hilton Chicago and mid June we were able to move up the full reopening of all 5 towers Hilton Hawaiian village due to the robust demand, we've been seeing and Hawaii, we now.
Now have 90% of our total portfolio of rooms open.
And hope to reopen our remaining 3 hotels over the coming months as we evaluate the near term business demand trends and these markets.
From a segmentation perspective leisure demand doubled from the first quarter and accounted for roughly 70% of total demand.
Benefiting from strong performance and Hawaii in particular.
And while we're still seeing very modest numbers overall, both business transient and group revenues also doubled from the first quarter would support the trend we're seeing of increased mobility.
Over 1 third of our total group business for Q2 was picked up in the quarter for the quarter.
As people gain confidence and restrictions eased.
We are seeing group pace picking up beginning in the fourth quarter with confirmed bookings pacing at roughly 50% of 2019 revenues.
Looking ahead to 2022, we're trending at 72%.
The pace for 2019 at the same time and 2018.
Our top group markets for 2022 include.
Hawaii, New Orleans key West and Orlando.
As we mentioned on our last call we have been working tirelessly to re imagine the operating model to find incremental permanent savings across our portfolio.
Adopting the adage of never waste a crisis, we've identified $85 million of savings and translates into nearly 300 basis points of margin improvement on an annualized basis.
All across our portfolio our asset managers have challenged our operating partners to think creatively cross utilize staff and.
And reexamine contracts and procedures and.
And Hawaii for example, we combined management of our 2 resorts under 1 executive leader.
And implemented several new operational synergies.
Which resulted in roughly $1.5 million and savings in the second quarter.
Modified operating hours or changed food and beverage outlet concepts to mitigate losses stemming from low occupancies and.
And we have re imagined how these outlets can operate more profitably moving forward.
We remain confident that with the support of our brand partners. We can translate these modifications into permanent practice going forward.
As another example of proactively sourcing operating efficiencies across our portfolio.
We are very pleased to have transitioned.
For self managed select service hotels to third party management arrangements and July <unk>.
And with our exit from these 3 laundry facilities last year, we no longer directly manage any properties.
Which is a significant savings to our operating model going forward.
Diving into our markets.
As we have forecasted on our last call Hawaii has seen a huge acceleration and demand.
Many travelers are opting to take advantage of the ability to work from and.
Anywhere before I return to work.
And school after the summer and this is especially true for Hawaii.
Increased domestic air lift to the state, particularly from southwest has provided us air travelers.
With ready access to a tropical destination with many international destinations remain restricted.
For our 2 resorts revpar exceeded the first quarter by $104 or nearly 210%.
And Hilton Hawaiian village occupancy at our nearly 3000 room resort jumped from 44% and.
And April 284% and June all from domestic leisure strength.
We have reopened all 5 towers and most of our food and beverage outlets have reopened some of the operational modifications to increase profitability.
Operating margins of the property exceeded 34%.
For the second quarter, or just 570 basis points shy of the level achieved during the same period and 2019 at.
And why koloa occupancy increased from 70% and April to nearly 90% and June.
Even more impressive.
We have been able to maximize rate over 2019, with june's ADR of close to $300 coming and $81 higher and June 2019, and.
In fact.
<unk> generated more EBITDA this past June.
And with half the number of rooms available and it did in June 2019.
Clear proof that we made the right decision the transfer of 600 rooms to HCV and rightsize the hotel to maximize operating efficiencies.
And higher rates and drive better margins.
Furthermore.
Many guests are taking full advantage of all of our resorts have to offer.
Ancillary spending such as Lou ILS parking Spa and resort rentals increased 33% over the second quarter of 2019 to $116 on a per occupied room basis for our 2 Hawaii properties during the quarter.
While we expect these leisure driven trends to moderate some after labor day and.
We remain very bullish on Hawaii going forward.
We expect strong demand over the winter holidays, where we are already seeing rates in excess of $1000 per night.
With that momentum expected to continue well into 2022 and beyond.
As we anticipate the resumption of Asian travel to Hawaii later next year.
In terms of group demand some headwinds persist from restrictions against gatherings that remain in place statewide however.
However group pace for our Hawaii hotels is currently up over 20%.
And in 'twenty, 2 and at this time.
We have every expectation that these groups will be able to meet.
Albeit with potential attrition from international and <unk> and the early part of the year.
Moving to Florida.
Our resorts across the state continue to have strong performance fueled by leisure strength.
And as well as small groups.
And key West Revpar at our 2 resorts was up nearly 50% in 2019 levels.
As we continue to reap the benefits from our renovated assets and complementary branding strategy.
We are seeing incredibly strong out of room spend and key west.
With total Revpar for our 2 assets, reaching $663 for Q2.
Which is 37% ahead of 2019.
On the group side.
Our hotels hosted 5200 group room rates during the quarter.
On local catering was up 26% in 2019 driven by weddings.
The resorts have more weddings on the books and they have had and any prior year.
And with 136 weddings on the books in 2021.
Versus 122 and 2018.
And Miami our teams have employed aggressive rate strategy is to drive ADR, 23% higher.
And the second quarter of 2019.
Our rates to summer had been more in line with peak season, rather than the typical post spring break discounting we see.
Although we do expect that this to moderate post labor day, and then Reaccelerate as we move into the peak winter holiday season and.
And Orlando, we're starting to see the return of traditional group demand.
Our newly rebranded hotel Cigna by Hilton Bonnet Creek as over 50000 group room nights on the books for the back half of the year, which is down just 5% to 2019 levels.
In addition, and Orange County Convention Center lifted all capacity restrictions and June.
And the convention calendar for the balance of the year sits at roughly 75% of 2019 levels in terms of room nights.
Based on past trends, we expect Orlando and Florida to continue to remain accommodating.
And both transient and group visitors, which should continue to translate into increased bookings going forward.
Moving to our capital allocation successes.
We made significant progress in reshaping, our balance sheet and reducing leverage during the quarter.
Issuing attractively price corporate debt and also executing strategic asset sales.
I'm, especially proud of the team's efforts on the capital recycling front.
Given the strong appetite for institutional quality assets in major markets by private equity, we took advantage of market conditions and are on track to exceed our stated goal of $3 to $400 million worth of asset sales. This year with our recently completed and pending transactions.
We remain disciplined throughout the pandemic and.
Is the bid ask spread narrowed significantly following the widespread distribution of the vaccine.
Further supported by our most recent completed and pending.
San Francisco Hotel sales, which went under contract at less than a 2% to 3% discount to pre COVID-19 levels.
Despite increased price transparency and the private markets the.
And the valuation GAAP between public and private pricing remains at among the widest gaps in recent memory.
Similar to previous cycles. However, we expect the valuation gap to narrow as the lodging recovery continues and it takes shape.
And the pace of private market transactions accelerate over the coming months.
With respect to additional asset sales over the balance of the year.
We do not have anything to report at this time.
We are always seeking to maximize shareholder value and.
And we will entertain attractive offers as they arise.
As we look ahead.
We are encouraged by the healthy lead volumes, we've seen since the start of the second quarter.
Which have held steady at roughly 80% and 2019 levels.
We are seeing larger corporate and citywide meetings planned for 2022 and beyond and our major group markets. While on average are more near term group's scheduled for the next couple of quarters are seeing smaller projected group sizes compared to historical levels.
Which is not surprising given the current uncertainty surrounding the delta variant.
However.
We expect this trend and normalize over the next few months as we get past. These next few weeks and as acceleration rates continue to increase.
As we think about transient demand for the balance of the year, we expect domestic leisure to continue to lead the way and.
And bond with an uptick in business transient post labor day.
Before I hand, the call over to Sean and why.
And I emphasize the important milestones we have reached with regards to achieving breakeven at the corporate level.
Bold with our initiatives to sell assets and improve the overall quality of our balance sheet.
All well ahead of expectations.
This along with our operational improvements and expectation for continued improvements and overall travel demand.
<unk> park or ongoing success for the coming quarters.
We believe our diversified portfolio will allow us to benefit from all demand segments group.
Business transient and leisure.
All phases of the lodging recovery.
With over $1.8 billion and current liquidity.
We are also poised to move to offense by unlocking embedded value through targeted ROI initiatives as well as strategic acquisitions that fit our strategic profile.
We look forward to updating you on future calls.
And with that I would like to turn the call over to Sean.
And we'll provide you with some more color on our results.
And and update on our balance sheet and liquidity.
Thanks, Tom overall, we were very pleased with our second quarter performance with pro forma revpar sequentially, increasing 92% over Q1, driven by a 600 basis point improvement and occupancy while average daily rate exceeded a $185 accounting for 19% pro forma increase from the previous quarter.
Driven in large part by the strong leisure demand, we generated positive adjusted EBITDA of $33 million for the second quarter, well ahead of expectations, representing the first time since the first quarter of 2020, and we generated positive adjusted EBITDA we.
We are very encouraged by the pace of improvement throughout the summer and performance accelerated in June the number of breakeven consolidate hotels, increasing to 34 accounts up from just 12 during the first quarter, allowing.
Allowing us to achieve breakeven at the corporate level during the month as well and <unk>.
Meaningful improvement from the $23 million burn rate achieved in April.
In light of this past quarters strong results and the momentum we anticipate throughout the summer, we expect to exceed breakeven levels for the third quarter as well.
And in addition to strong top line results performance throughout the second quarter was further enhanced by ongoing operating efficiencies, especially within our resort properties with hotel adjusted EBITDA margins exceeding 35% or 30 basis points higher than 2019.
Looking ahead to the third quarter July gave us a very strong start with occupancy for all opened hotels improving sequentially by over 800 basis points to approximately 64%. While ADR is expected to reach approximately $220 for sequential improvement of over 10% from June.
Overall, we expect to finish the third quarter with an average occupancy and mid 50% range for our consolidated portfolio, while revpar is projected to exceed $100 overall and expected sequential increase and excess of 30% over Q2.
Turning to the balance sheet as Tom noted on liquidity currently stands at over $1.8 billion include.
Including nearly $1.1 billion available on our revolver and $800 million of cash on hand.
Taking into account the sale of the 2 San Francisco hotels this quarter, our net debt, which was $4.4 billion at the end of Q2 is expected to decrease by nearly $300 million with a 100% of the net sales proceeds used to partially repay our sole remaining bank term loan, leaving just an estimated $80 million balance vs.
$670 million outstanding at the start of this year.
Over the past 2 years, we have made incredible progress and improving the overall quality of our balance sheet right.
Raising $2.1 billion of public corporate debt, while paying down over $2.3 billion of bank debt and extending our weighted average maturity profile by almost a year.
The public debt markets remain open while other debt markets are becoming more constructive at.
At the lodging recovery gains more traction over the coming months and into 2022, we will continue to evaluate options to refinance our $725 million <unk> loans coming due in late 2023, and anticipate refinancing the $650 million of senior secured notes and we issued in may of last year.
This concludes our prepared remarks, we will now open the line for Q&A to address each of your questions. We ask that you limit yourself to 1 question and 1 follow up on.
Operator may we have the first question. Please.
Thank you ladies and gentlemen at this time, we will be conducting a question and answer session. If you'd like to ask a question you May press star 1 on your telephone keypad and confirmation tone will indicate your line is and the question queue. You May Press Star 2 if you would like to remove your question from the queue core participants using speaker equipment.
And may be necessary to pick up your handset before pressing the star keen on.
Our first question comes from the line of David Katz with Jefferies. Please proceed with your question.
Hi, good morning, everyone and thanks for taking my question and I appreciate it.
And Tom it sounded and some of your opening commentary.
We heard some appetite on both the side by side and the sell side.
Any chance you can elaborate and maybe set some some boundaries or give us just a little bit more color on.
What park would find compelling and either direction.
David It's a great question I would I would remind listeners if you think back to the journey over the last.
Sort of 5 years.
We have worked really hard to reshape.
On the park portfolio. So we have sold now.
And 30 asset for about $1.7 billion.
Obviously, we bought 18 assets, obviously and as part of the Chesapeake deal.
$2.5 billion. So we have been very active and toggling between obviously, both the sale and repositioning as well as on the buy side I think the message that I'd really like to leave with you and with listeners today as we.
We are laser focused on reopening hotels as we talked about we've got the 3 remaining and again, we'll wait for the right the right conditions to open those.
We have worked tirelessly on Reimagining, the operating model and are confident that we've been able to pull out $85 million and cost savings.
And I think hilton's announcement about opt in on housekeeping is a great example.
But as we mentioned on the last call.
Taken out about 1200 Ftes.
And as a result, resulting at about 8% of the workforce plus or minus at the property level.
And we've also again really been thinking out of the box and what we what we shared in our prepared remarks about Hawaii is a great example, taking a great leader and Debbie Bishop and having her over both properties and again, taking another million and a half and admin and out of those 2 great assets as an example, so youll.
You'll continue to see those types of initiatives those will certainly continue to grow cash flow and.
And then there are many options available within our portfolio for embedded ROI opportunities, obviously, the bonnet Creek that we've talked about.
That has been reactivated were really excited about that 1 the name change and to the repositioning of that world class resorts.
On the Doubletree San Jose is another great conversion opportunity for us taking that up brand like we did with the Doubletree and Santa Barbara are we've got incredible results and then of course, the Casa Marina and key West is another that Youll see us.
And reposition as well, even though it's having phenomenal results and this time, we had great success converting to reach to a curio and we're evaluating our options for for the Cassa as well and a rig.
Guarding kind of the next growth lever single asset acquisitions, I mean, we will.
We will like many of our peers.
Focus on top 25 markets and.
Upper upscale and luxury assets and.
And top 25 markets and premium resort destinations we too.
And certainly life.
Take a more active role as we look at opportunities both in the southwest and in the southeast.
And that's going to be incredibly competitive for for everyone.
But we will continue to look at that we will be cautious we're not ruling out.
Some of the other markets and some people are red lining, we certainly believe that deals happen opportunistically and.
These markets will come back, albeit perhaps a little slower there is no doubt that debt some.
Some of the great urban markets are certainly going to recover.
And then of course, we're going to be.
Very interested as we as we look at creative ways, given the huge discount between the public and private markets right now.
We are not going to be issuing equity and we've been crystal clear.
Through this cycle through the difficult period and.
Think we've demonstrated last year, even when our burn rate was at $85 million and given the challenges. We made all the right moves we've gotten back to breakeven and we didn't have any kind of dilutive equity raise we are not going to do anything like that as we move forward.
And clearly where we're trading at such a significant discount to NAV and certainly the replacement costs. So but there are lots of things that we can do within this portfolio and we could.
We can sell assets and recycle that capital we could joint venture assets.
We've got and iconic portfolio, our top 28 assets the core.
Accounts for 90% value and give us incredible optionality. So it will be very thoughtful, but we want to make sure that as we raise capital.
And it's done at prices that reflect MTV and on accretive and we're clearly not going to be doing anything thats dilutive.
The passion and proponent and I've said that repeatedly to investors.
And we stand by that and Youll see that behavior as we move forward.
Perfect. Thank you so much and as my follow up I just wanted to ask about about Chesapeake portfolio. We can go back and time, a part of the thesis was the opportunity to.
And to grow margins.
A less.
<unk> plus and the OTT channel.
And I realize it may be a little bit of and unfair comparison, but can you just talk about progress to that and if it's available at this stage.
Yes. There is there is no doubt that it still remains available David look we stand by the.
And the Chesapeake acquisition. We believe then as we do know that it really improves the overall portfolio of quality, we have brand and operator diversification and gave us geographic diversification and improved our growth profile and again embedded value both from ROI opportunities margin and grouping.
So Sean and the asset management team continued to work on those initiatives. We have sold some of the assets and the Chesapeake portfolio, but candidly those were assets and almost every situation, but 1.
We're really those were not really compliant with our intermediate or long term asset goals.
And so we've we've got 11 remaining out of the 18 and are confident that debt.
All of those provide the kind of opportunities that we underwrote initially and you may recall that.
Right before getting hit by the asteroid, we had 21 of the $24 million and synergies really already identified and accounted for so still very very bullish on the on the Chesapeake acquisition as we reported.
I appreciate it thank you so much.
Thank you.
Yeah.
Our next question comes from the line of Floris Van <unk> from.
And with Compass point. Please proceed with your question.
Thanks, Thanks for taking my question Tom.
And loved our luxury and your view on non issuing equity below any day.
Maybe if you could give us some of your thoughts on on on <unk> and obviously, it's an evolving.
Targets.
But presumably with some of the transactions that have occurred.
And some of the increased activity that we're seeing and the market right now.
What do you think I mean.
How should we think about your <unk> right.
Right now going forward and also how is that how much has that increased since the dark days and in January February.
Of course, it's a great. It's a great question you can imagine we feel a lot better today than <unk> and.
And certainly 16 months ago, and Im sure our peers feel the same way as.
As we were in the dark days, obviously of the pandemic.
I think our consensus NAV is somewhere in the $27 a share.
And the reality is pre pandemic, we were probably closer to 30, if not above that.
It's been about $3 of scarring and.
From the pandemic in terms of the amount of cash that we had to.
Really expand in terms of the carry during that period of time.
Recovered significantly as you look at our balance sheet and the moves that we've made.
A lot of credit and Sean our finance team and just how proactive. This is a very seasoned and experienced team we knew what to do we went into action and we never panicked. We didn't panic then we're certainly not going to panic now and I think it ties into your comment about that.
Dilutive equity moves we avoided we were.
Crystal clear and and firm and our position that we wouldn't do a dilutive equity trade and that still applies today. So we traded probably 1 of the widest discounts at any day to day and so we clearly are not going to be looking to do any kind of.
The equity offer any kind of an ATM program it doesn't and our view for park doesn't make sense at all to be selling equity and it's such a huge discount again.
This portfolio provides such great Optionality and I alluded to and and the question that David asked is look we can recycle assets out of certain other markets.
We could joint venture assets, the market and we've demonstrated and we've shown.
There's so much liquidity on the private side.
We can get AAV or above and.
So it makes no sense to be selling equity and our view and.
And Youll see us continue to be creative and thoughtful but rest assured we will create value either the public markets will recognize our value of the private markets, but we will create value for shareholders.
Thanks, Thanks, Tom if I can follow up.
On that day in terms of.
Obviously, you've got a couple of irreplaceable assets.
$1 billion assets, particularly on Hawaii.
That was I believe institutionally owned in the past.
Would you consider selling a stake and Hawaiian village to 2 large institutional investor or 1 of your other 2.
Trophy assets.
Yes, I think we would clearly explore.
With a trophy asset obviously the last on that list as you can imagine would be Hilton Hawaiian village.
Get calls all the time I would respectfully submit that.
I can't imagine that there is a REIT asset across any sector.
And as valuable as Hilton Hawaiian village.
22 acres 5 towers.
We are working on the sixth tower and.
And getting the optionality of adding another tower their world renown.
But we will do what's and shareholders' best interest and.
And we will create value for shareholders.
Thanks, Tom I appreciate it.
Thank you.
Our next question comes from the line of Rich Hightower with Evercore ISI. Please proceed with your question.
Hey, good morning, guys.
Good morning Rich.
Tom I want to I want to follow up on the.
The investment question and you sold 2 San Francisco assets.
And for reasons I think we're all on this call and we understand and but I'm curious from your longer term expectations for that market, knowing that it's always going to be a relatively low supply market and demand is going to grow eventually once we get out of out of Covid here.
And maybe back to prior peak levels whenever that happens so how do you how do you how do you sort of pair the the income and the value foregone from selling those assets versus maybe what you are looking at currently in terms of future acquisitions as we think about a use of proceeds there.
Yes, it's a great question rich and.
The reality is we we loved the San Francisco market and long term when you think to the point that you made you've got 1 huge barriers to entry and real supply constraints there.
And you've got multiple sources of demand.
Corporate convention.
And clearly on the leisure front and we do believe that San Francisco will come back I would not bet against them.
Great cities of the World.
Nearly would put San Francisco and and that bucket.
And for US it became really 2 issues. It was both a concentration issue.
San Francisco is about 17%, we'd really like to be sort of inside of 15%.
And candidly the need to Delever, we thought it was really important.
To have the optionality on the balance sheet and so we looked at the 6 holdings and 6 assets that we owned and the CBD.
And concluded obviously adagio was better and better hands and private equity given the adjacent parcel and the Optionality there and.
Net of a small box and.
Allow meridian and a perfect world and normalized conditions, probably 1 that we would have liked to keep from when you compare that against the other assets, we really thought.
And that 1 it had a lot of optionality, we could achieve a really respectable pricing comparable to 2019, you do recall a year ago rich everybody said, there was going to be all this distress and.
And assets, we're going to be trading at 30%, 40% discounts I think you will recall and listeners will recall I was crystal clear and saying that park would not participate and we wouldn't sell assets at that kind of pricing, we weighted prudently and appropriately and obviously you realized in both assets attractive.
Pricing so proud of the team proud of and disciplined and we certainly made the right move.
Regarding other markets.
Everybody is chasing the southeast now we've been to this movie before remember 10 years ago when and.
And everybody, 1 and lifestyle hotels, and New York and everybody ran to by lifestyle and.
Respectfully submit that didn't work out so well.
I think here and.
And what's happening in the southwest and what's happening in the southeast we certainly agree to business friendly.
And you're seeing that change and population growth and demand growth those markets are going to be attractive it is going to be competitive.
We are well positioned and Florida, right now and but we will be looking opportunistically and we will have to evaluate the pricing and the situation and where it makes sense.
Investors need to understand that we have great optionality and our portfolio just not sure we're getting the credit that people understand that there's lots. We can do with this portfolio to continue to create tremendous value for shareholders.
Alright, Thank you, Tom and Thats all I got.
Thank you.
Our next question comes from the line on <unk> Rose with Citi. Please proceed with your question.
Yeah.
Hi, Thanks, I just said.
Wanted to ask.
Ask you a little bit more about the $85 million.
Cost savings with the recent announcements.
And David on housekeeping is that is that factored into the cost savings or do you think there could be upside to that or does it just even more kind of certainty around moving that number.
Yes, Smedes this is Sean debt.
The recent Hilton.
On policy change, there or locking and often the housekeeping is not included and $85 million to $85 million and exercise of us looking at.
Department head roles manager roles within what they call it front desk.
Yes.
Or ultimately F&B outlets and whatnot, so it's kind of going kind of position by position within each property and kind of thinking from the Org chart and not so much about brand initiatives and some certainly some upside potential there with hilton's often change going forward.
Yes, and yes, it seems like there would be on and do you have any sense any any way to kind of quantify it a little better or is it too early.
I think it's too early to tell certainly got to get into you got to kind of get the business traveler back here to kind of get a sense, which only have looked and seen how the the clean stay program has worked over the last couple of quarters, It's not exact science not perfect, but we certainly think that we've seen gains and and and above.
The upfront expense and having to clean the room with additional protocols and whatnot. Each time, there is on either the checkout, which clearly that's coming off and the opt and kind of strategy remaining so I think certainly we will see some benefits going forward from but still its early to kind of quantify at this point.
Okay. Thanks, and then I also just wanted to ask you you mentioned and you will be cash flow positive and the third quarter.
But fourth quarter and left out and attack.
Do you think you'll be cash flow negative and the fourth quarter or again too early to tell and maybe you can talk a little bit about her.
How the transition and I guess from there.
Leisure season into more business travel group.
Entered sees and how about scaling and kind of what you're seeing and the near term.
Sure I think certainly we look it's more kind of near term focus for us just to kind of look at and the cash positions.
For Q3, and certainly had a very strong July and.
And we will see as you transition.
And with from August, which obviously will be a little bit could be a little bit lighter as people think about going back to school and being prepared to go back to the office.
And we see that leisure could ultimately be.
And slowing down a little bit traditionally it does and we're certainly seeing August kind of holding its own but for the most part July was certainly and a very strong month for us.
So we think and we feel good about the quarter overall going into Q4, we certainly think there is a leisure component that really comes back around the holidays and so the question really remains around.
Around the business transient and leisure.
We've certainly seen great business transient we think Prague.
Progress over the last several months, we've kind of looked at mid week occupancies across non resort oriented hotels and our portfolio. A couple of dozen of so we've seen it go from about 35% to 65% from April through mid July.
So we certainly feel that there is.
And some data that kind of goes along with some <unk> and certainly the anecdotal changes, we've seen and experienced ourselves with people who come to visit us and.
And having meetings from externally. So I think there's people out there traveling ahead of their office and reopening and we shouldnt expect that to continue and pick up as we get into.
On the September and.
And post labor day months I should say.
But ultimately we got and certainly be respect the fact that that Delta Varian could ultimately have some inc. Pack as well. So it's certainly still a lot of visibility for us to kind of get get better, but get a bit of a bit better visibility on as we get into Q4. So not so much to say that we don't think Q4 is that way just kind of more keeping it near term focused.
Okay. Thank you.
Our next question comes from the line of Ari Klein with BMO capital markets. Please proceed with your question.
Thank you.
And maybe on the Optionality with and the portfolio you noted some opportunities, but how you're thinking about timing there, especially on some of the bigger ones and when can we expect to see and why our progress on that.
We continue to evaluate.
Opportunities.
You'll hear more probably.
As we get third fourth quarter and beyond these things tend to be opportunistic and.
And candidly that will depend on on.
And how the overall demand patterns unfold.
It will depend on discussions that we have we get lots of inbound calls all the time about different ways to work together there is no shortage of.
Private capital and there is no shortage of obviously private capital is prepared to pay and <unk>.
Or both.
And the part from public markets are dragging.
And to this movie before.
As we get more visibility, we think the public markets will catch up.
We're certainly not going to wait we're going to continue to execute the initiatives that we've talked about.
Both on continuing to rightsize the operating model looking at embedded ROI and then other ways that we can unlock so it could be that we see.
Sales, some additional assets and recycle capital it could be that we look to partner and unlike unlock capital that way from some of the tax implications of the spin go away here at the end of the year.
So that makes it a lot gives us even more optionality as we get into 2022.
And the thing to keep in mind and again I don't think the market always appreciate is just the complexity of the spin.
And we sold 30 assets 14 of those international we inherited in our laundry business. We've gotten rid of that we had 4 assets that we had to self operate as part again some of the requirements of the spin we've now solve that problem and we've got third party operators. So the park team has been.
Incredibly busy.
Proud of our work obviously, none of us expected to get hit by the asteroid and the pandemic. We quickly retooled we've managed it our balance sheet is an outstanding shape and.
We have a lot of Optionality and we can toggle between defense and offense, but you can certainly begin to see us positioning to offense, we've got scale and we will be a player so make no mistake about that.
Thanks, and then on the group side.
Business and stuff of that are there any trends and different sales that youre seeing relative to how.
Previously and then are they asking for different things and.
Are you seeing like for like event for key on people and especially during the balance of 2020.
Yes, I would.
I'd say a couple of things I think we all can expect that.
And I was out of Dallas, obviously that you had the masks mandates and in la but.
Think what we're going to continue to see is youre going to see more of a return to normal.
We saw on the leisure front and accelerated lots of pent up demand I think youre going to see the same thing on both the business and on the group side for even those companies that have people working remotely and what I hear from Ceos and other business leaders men and women that theyre going to look to get their people together and more frequently so.
You May you may see people getting together and smaller groups or larger groups for training for innovation for team building that.
And that need to be together isn't going to go away you have to believe that advances in technology and and hybrid meetings that there'll be applications.
And I don't know that anybody has perfected it yet.
On zoom calls and combination zoom meetings and.
They work fine and they worked fine during the pandemic because we had no other alternative.
Now people want to be together.
They see the benefit of and and I think things will accelerate closer back to where we were and I.
Think people realize.
I want to be on the road and I've been on the road getting.
Getting more inbounds and people that want to come in and once we get a return to office once we get schools reopen and once we get past this delta wave and.
And the more people, we can get vaccinated the sooner the better it is going to be for all of us, but there's no there's been no real.
No real change and you can expect from hybrid stuff on the margin, but we're not.
No I'm not going to be doing hybrid meetings I, just don't I don't see that as a new standard as we move forward.
And so the collar.
Yes. Thank you.
Our next question comes from the line of Anthony Powell with Barclays. Please proceed with your question.
Hi, Good morning, just a question on adding on Hilton Good morning, good morning.
And on Hilton both.
Going to opt in housekeeping and also changing from the breakfast benefits for elite members.
Do you have a lot of full service Hilton and I'm guessing some on the customers may be used to.
Daily housekeeping and a generous breakfast how has that been received by customers and do you worry about any kind of long term impact.
From a satisfaction from these changes.
No I'll jump in here, Anthony and then Sean can jump in.
First of all as I said in my prepared remarks, I really applaud Hilton.
We have got to use the crisis as an opportunity to re imagine the operating model.
I think the opt in was the right move I think the changing the credit for.
For elite members was also I think a more efficient.
And I think we're going to continue to see changes and food and beverage and whether Thats room service or whether that's a grab and go or eliminating 3 meal restaurants that are unprofitable and we have to think about the business differently. This crisis was painful for all of US, particularly Warner owners, but also for the brands as well, but they don't.
Have a healthy owner community, they're not going to continue to getting that distribution.
As is.
Like to see and need to see so I think the moves.
With the right moves as we move forward clearly the luxury product and luxury customer.
It will be less likely to make those changes.
Continue to evaluate it and I.
I think on the margin there have been and have been.
Modest or small complaints, but the reality is I think people are accepting as of where we are right now.
Yeah, and I would just quickly add that and then.
And as I mentioned before I mean, we still need to kind of see a good return of that business customer 2 to kind of test establish certainly early on and have not seen.
And your complaints and and certainly not I've heard from our friends and Hilton around that and certainly they're very focused on making sure that they maintain their market share and market premiums and so we're certainly and conversation around any of the brand standards or thought about being brought back with that and mine, but also within obviously, the bottom line and might as well and where it certainly having great conversations.
And kind of later things back and think about it. So I think I think we're encouraged about how these things work going forward, but we have to kind of see and test it out over the next several months.
Got it thanks, and 1 more on Capex you guys have been pretty consistent on your capex as a percentage of revenue I guess up to the pandemic and I know you have you been.
And working on staying in Orlando.
And maybe an update on the New Orleans.
I guess convention center expansion there.
Other projects and just general Capex levels on a few years and can do you think you need to up Capex.
And or is that 7% still kind of where do you want to be.
Yes.
Anthony we've been kind of that 6.5% to 7% I know, Sean and the team are looking at possibly increasing that slightly.
And we've got and the 3 ROI projects that I've mentioned.
Those are probably about $200 million and capital and.
And we think the returns are probably 14% to 15% and and you're probably looking at EBITDA somewhere in the $30 million range.
And does not include New Orleans, and our New Orleans is certainly more complex, but keep in mind, we've got the well locked and we often referred to we've got 8 acres plus or minus and we've got 5 million square feet of additional <unk> adjacent to the convention center that's clear.
Really a longer term project and 1 that we would look for and our development partner and and others as we as we proceed but we see huge huge upside I mean that could be another sort of la live type execution, there and new Orleans and want to find the right timing for it but we see huge.
Jeff side again, none of that is factored into.
And our future growth, but.
It is.
It's land that was land bank 25, plus years ago and obvious.
We appreciate having net benefit for our future shareholders of park.
Okay. Thank you.
Thank you.
And.
Our next question comes from the line of Chris <unk> with Deutsche Bank. Please proceed with your question.
Hey, good morning, guys.
And then Chris.
Good morning, Tom I was hoping we could circle back to the acquisition topic for just a minute and.
Obviously, you guys took on the.
On the Chesapeake portfolio, you've sold bought sold a bunch of mostly single assets, including some of the Chesapeake hotels and you mentioned that you could.
Essentially JV some of your assets and free up a fair amount of capital. So should we triangulate that to me and you might have a preference for chunkier deals or portfolios going forward as opposed to a lot of your peers focusing on on a 1 off acquisition strategy.
Yes, it's a great question, Chris I would say.
And it's really to be opportunistic.
We want to be nimble enough and we are nimble enough whether its a single asset thats chunky I mean, we clearly 1 upper upscale or <unk>.
Our luxury assets top 25 markets by definition, we think those will probably be lower.
Acquisitions at a certainly north of $100 million and more so that by definition will be chunky.
But we're also not opposed to portfolio or larger deals and.
And we're also not opposed to M&A. We don't think M&A is the timing is right today for all the obvious reasons.
But we still believe that having 15 and 16 lodging Reits at some point.
And we hope that investors and we hope to and analyst will start to encourage.
And the most fragmented.
Segment, and all and lodging so at some point.
And that discussion will make sense again, not something that we're looking at today and that's something we're spending time on we think it's more important to execute the initiatives and priorities that I already outlined but we certainly believe long term that you will see the sector Consol.
Consolidated at some point.
Okay.
Good I appreciate that thanks, Tom.
Thanks.
Our next question comes from the line of Bill Crow with Raymond James. Please proceed with your question.
Hey, Thanks and good.
Good morning, Hey, Tom.
We've heard some indications on the airline front debt.
Youre seeing a greater than seasonal decline and for ticket sales and I assume that would be related mostly to.
So the latest delta outbreak, but anything youre seeing from a cancellation from or.
Reservations over the next call at 30 days that we might be might be and read a little bit of an air pocket.
Yes, Bill it's Sean.
We have seen and select spots some cancellations, it's kind of concentrated and as you would expect markets like Orlando and in Florida, and New Orleans.
I would say that.
And also kind of really concentrated and kind of this month and you're kind of up to mid September and terms of.
Insulation and activity.
It's a few and certainly notably 2 it's been up.
The majority of what we've seen which is not and then a lot. It's.
Let's kind of keep and medical groups.
And so.
But in the and it's interesting because a lot of stuff. We saw on Orlando is medical groups, but we haven't seen much impact on our Bonnet Creek complex machining and some other assets, we have and in Orlando, So a little bit of activity there.
And certainly we're seeing a little bit of kind of pause and wait and see on some prospecting for groups that might be looking to kind of hold off and make a decision and a few weeks and see how things play out so.
And potential slight air pocket, Bill, but I would I would say that I think people and most people generally think this kind of peaks pretty quickly and I think we just we'll probably get back to regular activity.
As we get to the end of the Montana and and early early September.
Hey, Bill, it's Tom and the only thing I would I would say as Sean said look it's probably small air pocket, we're not overly concerned.
And I think we all we all believe we're going to get to the other side we need to.
And C vaccinations accelerate we need people to get their shots and we need candidly.
As I said in my speech out at Alice we need leaders to leaf and we need companies and governments to mandate and I think thats. The only way, we're going to get to the other side and we are beginning to see people do that now which is encouraging.
But I would also say when you if you look at our non resort markets.
And.
If you look and say through <unk>.
Mid April to sort of mid July.
We saw an uptick and occupancy going from say, 35% up to probably 65%. So we're seeing business transient and again. These are the non resort this is non Hawaii or Florida.
And on New Orleans, and the other markets, where we're getting just a prolific growth.
And we were seeing that sort of mid week Tuesday, Wednesday occupancy grow so thats, an encouraging sign and I.
I think the other side of it is look where we all need to live with the facts and circumstances get vaccinated put your mask on and get moving and I think people people are moving forward and not going to see massive lockdowns youre not going to see that.
We believe the panic and hysteria, we got to get moving and I think youre going to continue to see that.
And I appreciate that Tom and <unk>.
Right and my follow up questions question on mandates.
Today, United Airlines announced Theyre going to mandate.
Explanations.
And how much pressure youre able to put out and Hilton.
And.
And of course, a mandate and introducing enforce and mandate.
Alright.
Certainly and <unk>.
Not going to try to speak from my good friend, Chris He is more than capable to 2.
To speak and to set that tone and <unk> and.
And he is a dynamic leader and I would expect that he will arrive at the right conclusion.
I was crystal clear and my remarks added Alice and I'll say it again, we're not going to get to the other side until we have leaders, leading and mandated and we're doing and at park and I am doing and and saying it on this call and any form I get and look there are going to be exceptions, whether it's for Medicare.
Our religious.
But the reality is we've got to get shots and arms to move forward.
So.
I've said my piece.
And I appreciate it thanks guys.
Our next question comes from the line of Neil Malkin with capital 1 Securities. Please proceed with your question.
Hey, Neal.
Neil Your line is live.
Oh, sorry, I was on mute that never happened and haulage.
Yes, just thinking about the delta variant and and things that are potentially being implemented or.
Things that are being canceled.
And what are the things about delta is that.
And breakthrough.
Breakthrough rate is.
And any significant in terms of people who get it.
And already been vaccinated with from.
The original vaccines, so you know.
Given given those things and you're starting to see companies delayed back to work.
And.
And just wondering.
I guess, what do you expect or what's your view on it.
You on assembly or fashion week Broadway.
Is held up as an example, and.
What's your kind of view on it.
Vaccine passports are mandated and familiar.
Bigger markets like call It New York, and California, How do you think that winds up playing out.
In terms of both business and leisure demand near term.
Yes, a couple of things and.
Got it.
And I'm not a medical professional but from what I read obviously the the.
And the suite of vaccines and we have available are holding up really well the problems are are largely.
And the 99% are with people that are on vaccinated. So I think it's important to sort of level set.
And I think the more.
Pressure encouragement that we get from both the federal government and local governments business leaders those men and women.
And those companies sort of mandated VAT.
<unk> seen the faster, we're going to get to the other side.
John I think you're going to see widespread lockdowns, we've been there done that and just don't think the nation is ready prepared or willing to do that and my view.
And we're watching demand patterns carefully and part of the reason why New York is.
Certainly remains closed as.
We want to make sure that we opened at the right time, given the size and complexity of that asset among the other S. On the large asset that we have and San Francisco. So we'll continue to study it.
I suspect if anything you might see a few companies delay.
But I think the vast majority of people.
Assuming schools are reopening and some of the childcare issues are addressed that.
People want to get back to.
Being with their colleagues and.
And continuing to.
And to interact in person and so maybe it gets pushed back.
Few weeks, maybe it gets pushed back a month, but I do think that becomes the exception rather than the rule.
Yes.
Okay, Great and then.
And just kind of looking at and.
And booking windows are short, but in terms of business transient and group.
And let's call it post post labor day or into the fourth quarter, what do you expect demand to be or what's a reasonable.
Level of demand for the debt.
Business transient and group.
Segments relative to 19 levels and sort of later on this year is 50% a good a good bogey or if you can just talk about that maybe Sean that'd be helpful and kind of gauging how things are going to progress on modeling.
Yes, I think Thats, a fair bogey and we just think about kind of our mix would you kind of as we kind of look out I think we certainly see try and getting into mix and back to kind of and I would think about group and business transient kind of to where it happened and what it was.
Back in 19, so I think that's a fair thing to say about 50% of normal.
Okay. Thank you.
Our next question comes from the line of Brian <unk> with Jpmorgan. Please proceed with your question.
Hello, everyone. Good afternoon, and thanks for thanks for squeezing me in here I just have 1.
<unk> on the dividend as we think about how you guys are going to deleverage naturally and 'twenty, 2 and 'twenty, 3 and free cash flow associated with the business.
And what how is the board thinking about re implementing the dividend.
From the context of what do you think you might need to pay over those 2 years versus what you might want to pay or.
From a REIT perspective versus a just a corporate and corporate finance perspective.
But we're certainly going to.
And whatever the readout obligations are obviously coming through this window gives us again, a lot of optionality given some of the Nols that we have.
And then allow us to redirect capital some of the ROI projects and other initiatives that we've talked about so we do appreciate having that flexibility.
And we candidly did not have it at the start of the spin to this given the realm.
Relatively low tax basis for.
Part of the original portfolio.
So we clearly want to reinstate the dividend.
Probably more at a very modest level and then.
And have it.
Top it off at the at the end of at the end of the year.
And you would expect that our dividend would certainly be lower than what we had historically.
Okay. Thanks for that guidance.
Okay.
Our next question comes from the line of Gregory Miller with <unk>. Please proceed with your question.
Thanks, Tom and good.
Afternoon, so on.
Hey, gentlemen.
Good.
Great great.
I'm, hoping to follow up on the topic.
<unk> remarks, I appreciate visibility may be limited.
What are your current expectations of the timing and trajectory of the recovery of the Japanese consumer.
Q, Oahu, and Hawaii village, perhaps 22, playing out at this point.
Well, Greg it's great question, if you think historically.
Visitation and Hawaii has been 8 and have $9 million.
About 62% of that coming for the U S <unk>.
17% of that coming from Japanese travelers.
This will be probably the second year that they have been down those trends coming out of Japan had been pretty consistent over the last 30 years.
So it's about 30% of visitation and Hilton Hawaiian village International.
About 60% of that coming from Japanese travelers, so about 202.
<unk> 3000 room nights. So we would we would fully expect that as you see vaccinations and ramp up and international begin.
To that too.
And to start to see a ramp up I would say the second half of 'twenty, 2 and then see that just explode.
Into 2003 and <unk>.
Part of that is again, you will have had 2 seasons, where that very loyal traveler, who.
Visits Japan visits Hawaii, often and again given that 30 year history we.
And we would expect just.
Really strong resumption sort of revenge spending.
And that reclaim recapture what they've lost and effectively would've been away from.
Almost 2 years from from Hawaii.
And we're not getting we're.
And we're not getting any of that today as you know, but because you're not seeing the international travel we're getting on the domestic travel. So we see that as just another leg and continued growth for Hawaii, We think and Hawaii will continue to outperform and.
And is 25% to 30% of our.
Our revenue.
Yes.
And it makes a lot of sense I would like to follow up on also on the international front. This is more of a higher level question.
But since you mentioned leaders, leading I think are well suited to address this question.
Yes, I would be interested to hear your thoughts on the travel and infrastructure today.
Induce international demand to your gateway markets as core doors start to reopen and I think in particular about how local cities are communicating to international travelers, given very policies and cities and states on.
Items, such as indoor and mass requiring bands or perhaps presenting vaccination cards at restaurants and not sure. If the confusion may impact near term interest to visit the U S or if this is just a non issue.
All concerned argue that travelers may be confused and.
What do you think can be done to improve these potential communication issues should be efforts be at the local CVD level from hotels and the airline.
Perhaps more on a national basis.
Overstep and yes, you here, but I'd be curious to hear your thoughts about it.
It's a great question and I don't know that we've got enough time, because we could spend.
30, 40 minutes on it and I go back to my earlier comment I think the first is we've got to get people vaccinated.
Both domestically and I think abroad, and the sooner we get debt.
And to provide people with the confidence and protection and then we've got to reopen borders and I think part of it is you've got to have a consistent and and <unk>.
And markets like Chicago, where you had the governor had 1 point of view and the mayor had another and and.
Until they were aligned we really couldnt reopened there and.
And I think the same thing applies to many of the other.
Cities and I also think if you had the travel industry and Youre seeing and now youre seeing United I suspect there other companies are.
Airlines are going to follow suit I mean leaders should lead.
And we've got to have a consistent message.
Have the mandate have a strict policy of masks until we can get to the herd immunity and get to the point and then have some sort of vaccination car. Thank many years ago. Many of US had it as we were I'm older than probably a lot of people on the on.
But we had a record of day vaccinations and.
And we needed to go to school I, just think we're gonna have to figure out a way and a process and we're going to have to live with.
The Delta Varian or others until its eradicated and we can accelerate debt and the risk by getting people vaccinate.
And I'll stop there just in the interest of time, but.
And welcome the opportunity to have a sidebar with you at your convenience.
Thanks, I appreciate the insights.
Yes.
Our next question comes from the line of Lukas part, which would Green Street. Please proceed with your question.
Thank you Lou and good morning.
And how are you.
Sure and I hope you're well on.
Great. Thanks.
On the unconsolidated portfolio are there any opportunities to reduce or increase stakes there.
Yes.
And in terms of.
In terms of buying and taking an increased interest and then Lucas you broke up a little bit I want make sure I understand the question.
Yes, sorry, yes, the unconsolidated portfolio there is some some assets and there some held by owners.
Arguably you have higher levels of leverage may need access to capital and I'm just curious if there's any opportunity.
And increased stake and some of those or maybe even sell stakes potentially.
Keep in mind, and our top core portfolio accounts for 90% of the value on.
All of those remaining 10 joint ventures have different legal and tax complexities and some of that will be easier for us to address here once we get out of the day.
The remaining the fifth year sort of threshold.
On the spin so that'll give us increase optionality next year to continue to accelerate some of them have short term ground leases that have to either be extended or modified as well. So everyone has a unique story, but rest assured that the men and women and park are working hard on that.
<unk> seen us clean up in terms of the 30 assets that we've sold and including the international and getting rid of the laundry business getting out of the management business.
And we've got work streams underway on many of those assets.
And.
Excellent. Thank you.
Thank you.
Sure.
There are no further questions and NICU I'd like to hand, the call back to management for closing remarks.
Thank you we really appreciate everybody taking time today hope you enjoy the remaining part of your summer and we look forward to seeing many of you in person and September October and look forward to our next call in early November.
Safe.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.