Q2 2021 Sunstone Hotel Investors Inc Earnings Call
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Good day, and good morning, ladies and gentlemen, and thank you first funding by welcomed at of Sunstone Hotel investors second quarter at 2021 earnings call. At this time, all participants are in a listen only.
Mode. Later, we will conduct a question and answer session and instruction will be given at that time I would like to remind everyone that this conference is being recorded today.
Thus far at with thousands and went to 1 at 12 P. M. Eastern time, I will now turn the presentation over at the Mr ear and radius Senior Vice President and Treasurer. Please go ahead Sir.
Thank you operator, and good morning, everyone.
By now you should have all received a copy of our second quarter earnings release, and supplemental which were made available yesterday.
And now you have a copy you can access them on our website.
Before we begin I would like to remind everyone that this call contains forward looking statements that are subject to risks and uncertainties, including those described in our prospectuses 10, Qs 10, Ks and other filings with the SEC, which could cause actual results to differ materially from those projected.
We caution you to consider these factors and evaluating our forward looking statements.
We also note that this call may contain non-GAAP financial information, including adjusted EBITDA of our E. Adjusted <unk> and property level adjusted EBITDA of our E.
We are providing that information as a supplement to information prepared in accordance with generally accepted accounting principles.
With us on the call today are John Arabia, President and Chief Executive Officer.
And Julia Chief Financial Officer, and Chris off the Povich, Chief operating officer at.
After our remarks, we will be available to answer your questions.
With that I would like to turn the call over to John. Please go ahead.
Thank you Eric.
Hello, everyone and thank you for joining the call today.
Chart with the review of our second quarter operating results, which materially exceeded our expectations and put the company back into profitability sooner than expected.
I'll also provide and update on the current operating environment and.
And we're booking trends, which continue to provide strong signal of continued growth and the third and fourth quarters. Despite the uncertainty surrounding COVID-19.
Last I will provide an update on our most recent hotel investment montage healdsburg.
And the potential for additional acquisitions of long term relevant real estate.
Brian will later provide more details of our liquidity earnings and dividends.
As well as an update of our recent financing transactions, which have materially increased our near term investment capacity.
And again, let's talk about our second quarter operating results.
Building on the better than anticipated results of the first quarter second quarter materially exceeded our expectations with comparable 17 hotel portfolio of revenues of $104 million.
And revpar of $96.
Revpar at all of our open hotels, including montage Healdsburg was $107 made up of and average daily rate of $235 of the occupancy of 45, 6%.
While the comparison to the second quarter of 2020 is of little value. The open hotel revpar of $107 and the second quarter was more than double the open hotel revpar of nearly $48 achieved and the first quarter of this year.
Furthermore, our occupancy ADR and revpar of each increased meaningfully on a sequential basis every month this year and our June revpar of almost $130 was nearly 5 times of that of the $27 comparable Revpar achieved this past January.
While we still have of ways to go the trajectory of the recovery has been force steeper than expected.
As a result of the better than expected second quarter results.
Hotel EBITDA was positive each month of the quarter, which is the first time, we achieved this important milestone since the fourth quarter of 2019.
This is a testament to the efficacy of zero basing expenses the efficiencies of our operations the diligence of our managers and the proactive investment and operating decisions made during the depths of the pandemic.
When we last spoke on our first quarter earnings call. We share that we expect to return to quarterly corporate profitability and the second half of the year.
I am happy to report we achieved this goal and the second quarter at least 3 months ahead of schedule.
So, let's dig into some of the details of our quarter.
While occupancy and all segments grew quarter over quarter transient demand continues to be the shining star and transient room nights more than doubled compared to the first quarter.
Leisure demand continues to be incredibly strong, including and non traditional leisure destinations and commercial demand continues to demonstrate improvement as more people get back the business while.
While the special corporate demand for the portfolio was still only around 20% of normal levels and the second quarter several of our hotels, including the Hilton San Diego Bayfront Embassy suites, La Jolla, Hyatt Regency, San Francisco, and Hyatt centric, Chicago witnessed a meaningful acceleration and special corporate room nights.
Even more encouraging is the strength of transient pricing with our second quarter transient rate at $253.
Even after adjusting for the acquisition of montage Healdsburg, our second quarter transient rate still approach that of the same period and 2019.
Despite several urban markets still lagging compared to pre pandemic levels, our resort hotels, specifically Wailea Beach resort and oceans edge, each achieved higher revpar than and the same time, and 2019 up 4% and 79% respectively.
The performance of these hotels was driven by occupancy approaching pre COVID-19 levels with significantly higher room rates compared to 19 running 30% higher at Wailea Beach resort and up of staggering, 91% of the oceans edge.
The outsized rate growth at oceans edge is a direct result of our strategy to elevate the guest experience to match at superior physical offerings, and then price of the resort accordingly.
Following our acquisition of the hotel and 2017 and the implementation of several asset management initiatives the rate growth at oceans edge has been more than twice that of the Duval Street adjacent resorts.
Additionally, our recent acquisition montage Healdsburg has performed favorably to our initial estimates running at an average rate of over $1000 and the second quarter.
We continue to believe that our outstanding hotel product and the sought after markets and the desire by travelers to spend time and special locations gives us a competitive advantage and further justifies our strategy of owning long term relevant real estate.
Now, let's take a closer look at our quarterly group performance.
The presently a smaller percentage of the occupancy than is normally the case.
Group business also experienced growth beyond our expectations.
Group business contributed approximately 80000 room nights and the second quarter up from 51000 room nights and the first quarter and the outlook for the third and fourth quarters indicate significant sequential improvement.
Not only has attendance at several recent group events across the portfolio of exceeded projections, but short term lead volumes and new group functions have increased significantly in recent months.
For example, Hilton San Diego, Bayfront, Boston Park Plaza, and GW of New Orleans, each witness second quarterly volumes approaching pre pandemic levels.
Some of the last quarter, we saw corporate and association groups holding their meetings as planned and group pickup was better than anticipated.
Several of our larger group hotels, including Hyatt San Francisco, Boston Park Plaza, and Renaissance Orlando has several groups of picked up over 90% of the contracted blocks and the second quarter, which was substantially higher than we forecasted.
With these dynamics in place, we expect to see a steady acceleration and group meetings, including citywide corporate and association meetings for the remainder of the year holding all other variables constant.
The rooms revenue was not alone and growing substantially on a sequential basis.
Food and beverage revenues increased by 2.5 times and the second quarter, representing a 22% increase and food and beverage spend per occupied room and other revenues doubled as higher occupancy drove and ciliary revenues such as parking.
Catering revenue per group room night also increased by over 2.5 times as corporate groups and associations return.
Not only are more guests staying and our hotels, but they are increasingly ready for the complete hotel experience and embracing our facilities and amenities as they reopen.
As a result of these factors our comparable total revenue per available room or Trump par <unk>.
Increased from nearly $60 and the first quarter 2 of our $138 and the second quarter.
While we are pleased with our portfolio of financial improvement. We are equally pleased that our guest satisfaction scores remain very strong.
For example, travelers on Tripadvisor recently ranked oceans edge is 1 of the top 10 hotels in key west up from 24 at the end of 2019, even with the massive increase and ADR. These factors give us confidence that the rate increase is sustainable and additional growth is achievable.
Again, we are seeing the benefits of the portfolio transformation completed in recent years as well as the operational investment decisions made during the depths of the pandemic.
As we look forward we are mindful that since early July there has been a spike in COVID-19 cases, particularly amongst the and vaccinated and areas such as Florida and Texas.
And the recent Spike in cases May result in re instituting travel restrictions mass mandates and vaccine mandates and certain locations, which could postpone the eventual travel recovery.
That said, we have not yet witness meaningful evidence that the spike in Covid cases has had a material impact on the trajectory of the lodging recovery.
Rather booking trends for all segments continuing to accelerate despite increased COVID-19 cases, and numerous parts of the country.
This is evident and our continued sequential monthly revpar improvement in July.
Through July 29 of our 17 open hotels generated revpar of approximately $165.
Made up of of 62% occupancy and a $266 average daily rate.
July occupancy ADR and Revpar, all increased meaningfully over the prior month.
<unk> the trend that started last year.
Our July Revpar represents a $35 increase from June <unk>.
And as of $138 higher than that experienced this past January.
As we evaluate expected group activity for the rest of the year.
We anticipate increased demand for corporate and association meetings.
The citywide calendar and many of our primary markets are very encouraging over the next several quarters and over 30% of our group room nights on the books for the fourth quarter, our force citywide events.
Citywide events are planned to resume and San Diego, Boston, New Orleans, DC and Orlando.
That said given the uncertainty around COVID-19.
Our operators have prudently assumed that the group room blocks will travel at significantly lower levels and historically been the case.
This assumes that attendees continue to make attendance decisions and relatively short timeframe and are influenced by evolving COVID-19 data and trends.
And for example, in Orlando and number of citywide groups relocated dates into the August to October timeframe from.
And from prior periods, but the team is forecasting higher than normal slippage on these programs and is anticipating softer performance for the larger conventions and the fourth quarter.
However, based on early trends, there may be upside potential and some markets from taking this conservative approach.
As previously mentioned several recent groups of picked up 90% of 100% of their room blocks, which was well on excess of our forecast.
While this will not be the case for every group. It is a far cry from the muted group attendance. We initially feared.
Examples of citywide group business for the remainder of the year include a scaled down comecon event over Thanksgiving at our Hilton San Diego Bayfront.
Several association meetings and Boston and.
And various large association meetings, and New Orleans, which will be held in addition to several festivals the rescheduled to the fall as a result of the pandemic.
These are just a few instances of the evolving citywide and group landscape. The gives us confidence that the positive trends established and the second quarter are likely to continue as pent up group demand gets back on the road.
In House Group business has also witness positive trends Inc.
The increase vaccinations and the easing of travel and in person meeting restrictions have given meeting planners, a greater comfort level that they are events will move forward.
This has resulted in stronger group leads.
More confirmed events and more participants planning to attend.
In House group demand has been broad based and includes incentive trips from technology and pharmaceutical groups of Eylea.
The retail medical and financial services groups at the Hilton Bayfront.
State and regional associations at the Renaissance Orlando and the medical company at the Hyatt San Francisco.
With a number of vaccinated people growing every day, we are optimistic the group activities should continue on this trajectory.
Based on these assumptions, we expect groups to make up and increasingly larger part of our room mix and revenues and the second half of 2021 and specifically in the fourth quarter.
On average group rates on the books for the remainder of 2021 are higher than the rates on the books for the same period and 2019.
Furthermore, given the anticipated increase in corporate and Association group business. We also anticipate the banquet spend per occupied group room will increase substantially compared to the first half of the year when government and rooms only group characterized most of the group room mix.
Supplementing the return of corporate and association travel and local social business should be robust and the third and fourth quarters, including a record numbers of wedding as expected and the second half of the year.
From corporate events, social gatherings people are motivated to get together and celebrate.
In addition to the more optimistic outlook for group business transient trends have steadily improved.
While our net transient reservations are still short of normal levels bookings continue to accelerate.
Our trailing 6 week booking trends are now down only 10% to 15% compared to the same time in 2019, which marks a substantial improvement from the 80% to 90% declines we saw at the first of the year and the 40% to 50% declines we saw going into the second quarter.
The booking window. They are still relatively short term continues to expand.
While the leisure demand was the first to come out of the gates business transient demand is expected to pick up and the third quarter and accelerate following labor day as companies continue to return to the office.
Moving to our recent investment activity, we are excited to discuss the strong performance of montage healdsburg.
Which has exceeded our underwriting.
While we are confident that this hotel will perform well the ramp up and rate and occupancy has surpassed our expectations and each month of ownership.
During the quarter, the hotel ran and occupancy of 61% and an average rate over $1000 and in July of the hotel ran at over 70% occupancy at a rate of nearly $250.
We're seeing broad based demand for the wine country and strong interest from transient and groups alike, and the second quarter, we experienced transient compression on weekends and stronger than anticipated group demand during the week.
Profitability also outperformed with the hotel achieving positive EBITDA ahead of schedule and the second quarter.
Looking forward, there's a lot to be excited about.
The hotel has received extraordinary reviews, which has translated into strong group leads and is preparing for its second full property buyouts since our acquisition.
Layering and group with already strong transient will help drive additional success at the standout resort.
Since our last earnings call, we executed upon a number of balance sheet enhancement transactions, including the issuance of 2 record setting series of preferred equity and another favorable amendment to our unsecured debt agreements.
Not only of these transactions and provide us with and advantageous cost of capital the result, and greater <unk> growth, but they unlock meaningful debt capacity that we can use to pursue additional acquisitions of long term relevant real estate.
We expect to be acquisitive and can do so without relying on the often fickle equity markets.
This is significant advantage that is not shared by many others and 1 we plan to take advantage of to enhance the quality scale and earnings power of our portfolio, while increasing NAV per share to.
To sum things up performance and leisure and group segments, and the second quarter and set the stage for increased optimism and the second half of the year. Despite the ongoing threat of COVID-19.
Based on forward booking information, we believe the portfolio is on track for continued improvement as the year goes on and.
Furthermore, we are and the enviable position to use our strong balance sheet and debt capacity to grow the company.
And to create value for our shareholders.
With that I'll turn it over to Brian Brian. Please go ahead.
Thank you John and good morning, everyone.
As of the end of the quarter, we had approximately $210 million of total cash and cash equivalents, including $47 million of restricted cash.
Adjusting for the issuance of our series a preferred stock and the expected redemption of our series at our pro forma total cash balance at the end of the quarter would have been approximately $235 million.
In addition to cash on hand, we also maintained full availability on our $500 million revolving credit facility.
During the quarter, we executed another favorable amendment to our unsecured debt agreements, which remove the restrictions limiting the amount of unencumbered hotel acquisitions, and we could find from existing liquidity during the covenant relief period.
Even after deploying a portion of our excess liquidity and the second quarter, our balance sheet retains significant capacity and this most recent amendment better positions us to use that capacity to grow the company through additional acquisition of long term job and real estate.
We appreciate the continued partnership and support from our long standing lender and note holder relationships.
As John mentioned since our last earnings call. We also executed upon 2 additional balance sheet enhancing transactions through the issuance of both our 6 <unk>, 5% series H preferred and our 5.7% series I preferred.
Proceeds from these 2 transactions both of which were record setting low coupons at the time of issuance are being used to redeem higher cost existing preferred equity and will reduce our comparable preferred dividends by $1.5 million per year.
Given the attractive pricing and strong demand for our most recent offering we elected to upsize the series of high transaction to take incremental proceeds.
Preferred equity at an increasingly important part of our long term capital structure and as a result of the acquisition and financing activity in the quarter. We have increased our exposure and we will have 3 attractively price series of preferred stock outstanding.
Shifting to the second quarter financial results. The full details of which are provided in our earnings release and and in our supplemental.
Second quarter results reflect and improving operating environment, driven by continued strong leisure demand and an increasing amount of commercial transient and group business.
Second quarter, adjusted EBITDA was $15 million and second quarter adjusted <unk> per diluted share was the loss of <unk>.
These results far surpassed our previous expectations and marks the return to positive corporate EBITDA.
Full quarter sooner than we had previously projected.
While total <unk> was marginally negative and the second quarter, we expect it to also resumed quarterly profitability going forward.
Now turning to dividends, we have suspended our common dividend and until we return to taxable income.
Separately, our board has approved the quarterly distributions for our series H and I preferred securities.
With that we can now open the call to questions. Operator. Please go ahead.
Thank you and participants Sir.
Binder. The asked the question you will need the press star 1 on your thoughts.
Oh and keypad again Thats Star then the number 1 and your telephone keypad. The withdraw your question press the pound.
Please be advised the limit your question the 1.
Your first question comes from the line of Rich Hightower from Evercore. Your line is now open.
Hey, good morning, guys.
Hey, rich.
And I hate to ask academic questions on these calls because I'm sure at boards of lot of people, but I want to do that anyway.
And at the same question I asked on our competitors' call earlier, but when you think about ATM issuance relative to and I just wanted to get a full understanding of how sunstone thinks about calculates.
What are the what are the different inputs because there's obviously multiple ways of looking at at to just help us understand the and I.
At really at the cost of equity.
The.
<unk> and Theres, we think and again as we think of that issuance.
Sure.
Actually thoughtful question rich.
So <unk> is something that we look at it as 1 of the inputs that we do look at is we spend a lot of time trying to understand and making sure we understand the.
And the value of our portfolio.
And as a result of that the value of our equity.
When I take a look at consensus NAV of those that I think do a good job of calculating out of being in a thoughtful and knowing that.
It's more difficult time now.
Say before and this type of environment to calculate NAV.
And I'd say that those folks that spend a fair amount of time, including you rich.
Consensus Ntv's right around 13, and in the quarter and I think green Street's at.
The 13 in the quarter, you're at $13.50.
Third I think is at just below 13 box and I think that Thats and Thats and a fair.
A fair area, so to speak knowing that over time that NAV should continue to increase as the recovery increases.
How do we look at it.
We take a look at a combination of.
Cap rates discounted cash flow price per key and then we debated internally knowing the cap rate right now is incredibly difficult.
So we have shifted how we look at our own NAV to be a little bit and how we calculated over time, probably using a little bit more discounted cash flow now than.
And then before.
So hopefully that helps rich and thats helpful. Thanks, John.
Your next question comes from the line of Anthony Powell from Barclays. Your line is now open.
Yes.
Hi, just a follow up at that question. So obviously the access the ATM and you issued a bit of extra preferred I guess did you.
<unk> and opportunity to do a deal and the quarter that the debt.
Or do you do those at those equity offerings are there 3 of the actual equity and what are you seeing out of there in terms of the long term relevant real estate available for you by.
Yes, so let's let's go back and talk about what we've said in terms of near term tactics to fund external growth..1 we expect to be acquisitive, and we've said that loud and clear.
<unk> already completed $265 million of acquisition through the montage Healdsburg, which.
By the way, we look at it was 100% leveraging.
And again, Anthony we look at.
We look at preferreds as leverage rather than than equity.
So then we have also disclosed that we are under contract for an asset.
On the West coast of somewhere in the area of just below $200 million.
It would be our expectation that that would be funded as well.
With that preferred and the very small portion of of the ATM raise so if you put both of those together and say were and the $450.460 million of acquisitions, we're talking about and equity raise of about 8 or 9% of total proceeds, which which again is using our <unk>.
That capacity and we think so wisely.
So and.
And following up to Richard's comment.
<unk>.
$38 million at right around what consensus NAV is.
Don't think that hurts us long term and I actually think its pretty prudent.
Is it will continue to increase the amount of on a small basis and or we're always talking about $38 million there, but on a small basis and increases our borrowing capacity, which as earnings grow that buying capacity capacity excuse me should continue to grow as well as our debt capacity continues to increase.
Got it.
Alright, and just 1 more on the overall availability of deals under contract.
My question is the part of Assai, but what else are you seeing out there in terms of if the transaction environment.
We're active.
And as I've said on previous calls and at conferences, we have been active for now well over a year and sourcing transactions some of the transactions that we've been looking at.
Take take a long time.
The active and off market transactions and and broker transactions, even though I will tell you. It always seems that we do a little bit better and direct communication with potential sellers.
But we are active and I'm pleased that we have seen an uptick and the quality of the potential dispositions.
Or excuse me the quality of the potential acquisition opportunities for us.
Doesn't mean, we're going to get the mall.
As evidence of some of our peers of.
The acquired quality hotels, as well, but we expect to be active over the next few years.
Thank you.
Yeah, and Jeff a question.
Your next question comes from the line of Smedes.
Ross from Citi. Your line is now open.
Hi, good morning.
This is stefan for.
Just wanted to know what are the gating issues to disclose the net of calendar acquisition.
The gating issues the disclosure we're just.
Not ready to disclose at this we are not yet under hard contract.
And.
Once we get to the position where.
We feel that we have a very high degree of certainty that all closed and we will announce the typically we actually don't even announced transactions until they're done but given the preferred equity raise.
We were we thought it was most prudent to disclose that we were under contract on an asset of that size.
And then just what are you seeing on the group side in terms of composition for 2022 in terms of.
Corporate and social.
Yes.
So I'll turn it over to Chris for any color, but in general what we're seeing is we're seeing a lot more activity in group activity starting in the third quarter as I said on my line on our last call.
We had a lot of non traditional groups that we're filling the hotels and we've seen group business increase pretty meaningfully not only of we've seen at increase I think we did something like 50000, and our showrooms and the second quarter moving up to 80000 rooms or so.
And the second quarter, and we anticipate that to continue to increase but theres going to be a from what we see right now there'll be a material shift and the number of city wides.
And the number of associations et cetera that will start coming back and why is that important.
That's important because it could represent a pretty meaningful part of our business.
But not only and in addition to hotel rooms, but out of room spend.
And so we are.
Very hopeful and we see evidence of that.
Not only groups come back, but at the room spend continues to increase group.
Chris any any color on types of groups, we expect to see yes. Thanks John.
When we look at 'twenty 2 group pace, we're pretty pleased at where it is relative to where we thought it would be at this point, we're definitely seeing strong group lead production closure is not as fast as we'd like it to be but it never seems to be.
But being being down to 19 for 'twenty 2 is encouraging as far as the mix of business. It's across the board, we're seeing very good pickup from associations and.
And the corporate continues to be a little more short term, but it's there as well speaking to John's comment about the ancillary revenue side of things.
And we're very encouraged.
Just adding to that when you take a look at the citywide calendars for 'twenty 2.
Several of our markets have very strong citywide relative to 2019 levels.
So.
Assuming this recovery continues.
We're hopeful for next year, Yes, specifically San Diego is 1 of those markets John.
No.
The very very bullish on San Diego looking at the citywide calendar and and.
At the meeting planners are telling us more short term.
The meeting planners at 1 of our brand partners just mentioned that the 90, 95% of 277 meeting planners that they spoke to.
And that to still hold their meeting in.
Between now and the end of 'twenty, 1 so that certainly leads to 2 of very positive trend leading into 2022.
Yeah.
Thanks.
Your next question comes from the line of the Lucas Hardwick from Green Street. Your line is now open.
Thanks, Good morning, guys.
And Lucas.
So in regards to inflation and there seems to be a divide and whether that is transitory or not at all.
Obviously, we're seeing pressure on <unk>.
Labour funds.
The hotel on the Street I'm, just curious do you think.
And where do you think labor cost pressure landing at the bank kind of anticipated and more transitory or do you think this is kind of the new.
And of the pressure and at <unk> for.
And foreseeable future.
Well, probably a question a little bit above my pay grade, but what we're seeing down on the ground as there is wage wage inflation now it is difficult to too higher source.
The quality of employees, our wage rates are moving up and certain areas. We are offering small small.
And the Labor day following.
The sunset of some of those benefits that we should start getting some relief on the labor side.
Great. Thank you.
Thanks Lucas.
Your next question comes from the line of Bill Crow from Raymond James Your line is now open.
Great Good morning, John Brian.
And.
2 questions here, if you don't mind.
John on the.
Labor discussion and.
As you go up and ADR of the guest expectations have to go up and and it's 1 thing to have the availability of labor, but it's another 1 day of the quality of labor and workforce and.
Just wondering whether you are you running into challenges from people not showing up and higher turnover rates and that sort of line.
Yeah, It's a great question and this particularly for.
Assets like wildfire oceans edge, Healdsburg et cetera.
You know.
There is always a challenge and operations, but at those types of the hotels, we think that we brought back staff accordingly.
And just to make sure that we are servicing the guest that the.
The and meeting their expectations and as I, just said to Lucas.
There are a couple of areas and our hotels were actually limiting.
The number of folks that we can accommodate.
For example, and Healdsburg right now.
We have so much demand for restaurant and spa that we are turning away outside guests.
For those services, because we just don't yet have the full strength of or the full.
Capacity, so to speak of of associates.
And.
We want to make the experience, particularly at those price points, we need to make the experience right.
Because that's what's going to build the loyalty back to those hotels.
Alright and.
And John you mentioned.
So let me just pivot there real quick and and at.
Ask if.
And we're starting to hear more pushback from politicians and the residents and over tourism already.
And we just started again and they're pushing back and I'm just wondering what your thoughts are and.
Whether that poses a risk.
And to Hawaii and hotels.
I don't think so long term bill.
And tourism represents such a major component of the economy there.
I, just don't see that being an issue long term.
Okay Alright.
Alright, thanks for the time.
Your next question comes from the line of Michael Bellisario from Baird. Your line is now open.
Good morning, everyone.
Okay and just wanted to go back from Kevin just try to go back to capital allocation and your view on M&A change at all given the funnel of fundamentals.
And then on improvement that's occurred and the divergence and stock prices that we've seen recently or do you think that the past the growth will be mostly from a single asset transactions.
I'm sorry can you ask that question again.
Just how is your view on M&A changed at all recently and given the fundamental improvement that's occurred or do you think sandstones and passed the portfolio of growth is really going to be driven mainly by single asset transactions.
I'd say, it's far more likely to be single asset transactions.
Yeah.
And everything I see right now I would say, it's probably more likely to be single asset transactions.
If if.
The more likely scenario is if the hotel rates, which are now trading at discounts to NAV.
If if they stay at discounts to NAV for some time, there's so much capital out there that actually think that the next transaction could be of privatization rather and M&A.
Should should share prices stay where they are and should operating fundamentals continue to expand.
Got it and then does that relative pricing to NAV you changed your view about how you think about dispositions and and pruning part of the portfolio going forward.
Really we're going down that path regardless.
And I'm, probably gonna off by my numbers, a little bit, but we've sold my time here from 'twenty to 'twenty 3 'twenty 4 hotels and we sold the <unk>.
The 10, or so and the past the.
3 plus years.
Give or take.
We've been very vocal that there are still a handful of hotels and our portfolio that are not long for our portfolio and so we'll continue to do that.
Understood. Thank you.
Thanks.
Your next question comes from the line of Floris Van <unk> from Compass point. Your line is now open.
Thanks for taking my question guys.
Just maybe.
And maybe if you can give some perspective on your oceans edge.
The acquisition and return I mean, obviously things are.
The incredibly strong right now.
The western at that property.
If you can.
4.4 for us to try to get more comfortable with some of the other higher price acquisitions, you've done what is the return and expect the expectations for oceans edge based on your million dollar of key.
Acquisition, I think and <unk> today, and and can we expect something similar for.
And for some of the other.
Higher higher end acquisitions that you've either done or are contemplating and doing.
So oceans edge oceans edge at Hurricane and set us back a little bit shortly after we acquired it and but this year, we're probably looking at a little.
A little bit more delayed than we had anticipated we're probably looking around at 6% yield on investment.
So and asset like that were in the money and now although I will tell you you kind of the first couple of years, largely because of hurricane and displacement and the market.
It was a little bit bumpier than we thought.
And as evidenced by the significant rate increase the repositioning of the asset the asset management work that we've done we believe that we are on path there and as I said in my prepared remarks.
Consumers are really.
Supporting the hotel given that we've moved rates so much but at the same time, we're now of top 10 resort and the key west market.
And when it comes to montage Hillsboro, we've said loud and clear that we expect the stabilized yield on that asset to be and the 6% to 7% range.
You know that was underwriting of rate of 4.5 years out of $250.
Last month, we did at a rate of $250.
Now that 1 month does not make a year because of seasonality et cetera.
But I feel very comfortable given what we've come to know that.
We will do just fine with that asset and create value. So there's been a lot of focus on price per key.
But when you take a look at the economics of that hotel the economics of that hotel will generate as much EBITDA at several 5 to 600 room hotels.
So it needs to be taken into perspective.
I appreciate it appreciate at that John Thanks.
Thanks.
This concludes the Q&A session I would like to turn the call over at the Mr. John Arabia for closing remarks.
Thanks, everybody for your time, where around the day, if theres any follow up calls and please. Please. Please if you have not been vaccinated, yet get you bought into the Doctor and get vaccinated appreciate it and good day.
Yeah.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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