Q2 2022 Ashford Hospitality Trust Inc Earnings Call
Greetings and welcome to the Ashford Hospitality Trust second quarter 2022 results conference call. At this time, all participants are in a listen only mode.
And answer session will follow the formal presentation.
Pretty much require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded I would now like to turn the call over to Jordan Jennings Investor Relations for Ashford Hospitality Trust.
Thank you you may begin.
Good day, everyone and welcome to today's conference call.
For Ashford Hospitality Trust second quarter, 2022, and to update you on recent developments.
On the call today will be Rob <unk>, President and Chief Executive Officer, Eric Eubanks, Chief Financial Officer, and Christmas Senior Vice President and head of asset.
Arizona as well.
That's the ability of this conference call when I listen only basis over the Internet were distributed yesterday afternoon in a preference.
At this time, let me remind you that certain statements and assumptions in this conference call.
Pain or are based upon forward looking information and are being made pursuant to the safe Harbor provision.
Federal Securities regulation.
Such forward looking statements are subject to numerous assumptions, uncertainties and known or unknown risks, which could cause actual results to differ materially from those anticipated.
These factors are more fully discussed in the company's filings with the Securities and Exchange Commission before looking statements.
In this conference call are only made as of the date of this call and the company has the obligation to publically update or revise them.
In addition, certain terms in this call are non-GAAP financial measures reconciliations of which are provided in the company's earnings release and accompanying tables or schedules, which have been filed on form 8-K with the FTC on August seven 2022, and May also be accessed the company's web site at Www Dot H C.
<unk> Dot com.
Each listener is encouraged to review those reconciliations provided in the earnings release together with all information provided in that release also unless otherwise stated all reported results discussed in this call compare the second quarter of 2022 with the same quarter of 2021, I will now turn the call over to Rolf. Please go ahead Sir.
Good morning, welcome to our call.
I'll start by providing an overview of the current industry environment and how Ashford Trust has been navigating it.
After that Derek will review, our financial results and then Chris will provide an operational update on our portfolio.
I'd like to highlight some of our recent accomplishments and the main themes for the call.
First we saw sequential revpar improvement each month as we move through the second quarter and expect continued strength through the third quarter and Additionally, we're excited that Jews Revpar performance was the best month, we've had versus 2019, thus far.
Second our liquidity and cash position continued to be strong.
We ended the quarter with approximately $615 million of net working capital, which equates to approximately $17 per diluted share and is an increase from where we ended the first quarter with yesterdays closing stock price of 923, we believe we are trading at a meaningful discount to both our net asset value per share and our net working capital per share.
Most are pleased to report that we generated approximately $23 million positive cash flow in the quarter after capex and our preferred dividends.
Third we have lowered our leverage and improved our overall financial position since its peak in 2020, we have lowered our net debt plus preferred equity by over $1 billion.
Waiting to a decrease in our leverage ratio defined as net debt plus preferred equity to gross assets by approximately 12 percentage points.
Fourth.
Last quarter, we filed a registration statement with the SEC for future offering of non traded preferred equity importantly, this announcement demonstrates our strategic pivot from defense to offense as we believe this offering will provide an attractive cost of capital allow us to accretively grow our portfolio over time subject to future market conditions, we believe access to attractive growth capital.
This is a significant competitive advantage, particularly given the fact that lodging Reits are trading at material discounts to their net asset values. We are now effective on this offering and expect to commence issuing limited amounts of the non traded preferred equity beginning of third quarter of 2022.
We are optimistic about the long term outlook for the company and by taking strategic actions to strengthen our balance sheet, we feel well positioned to capitalize on opportunities we are seeing in the hospitality industry.
Having said that we have refrained from raising any common equity capital this year, given the softness in our stock price and our current circumstances. We don't currently anticipate raising common equity capital at these levels to the extent, we're successful with our non traded preferred capital raise our preference would be to use that capital for future growth.
We expect several of our loan pools to remaining cash crops over the next 12 months to 24 months. However, we're pleased to note that several of our hotels, including the Renaissance Nashville, and Hilton back Bay have recently come out of their respective cash traps. We believe several other of our loans may be successful magazine, they're traps in 2022, including key spools D and E.
And our Marriott Crystal Gateway.
For 2022, our Capex spending is higher than the previous two years, but still well below our historical run rate for Capex capex spend during the second quarter was approximately $21 million.
Additionally, while we're monitoring risks related to the current high inflation environment and the potential impacts of our portfolio CBRE recently issued an industry report that highlight the benefits of hotels is a good hedge against inflation.
Their model sided that due to the uniquely short lease periods measured in days rather than months or years hotels have been seen as an effective hedge against inflation given hotels can adjust prices rapidly to account for any short term variations in inflation. In fact report highlighted that historically during periods of high inflation hotels have shown their ability to.
Gross profits above the inflation rate we are seeing this play out during the current high inflation period, we are experiencing in the industry.
Let me now turn to the operating environment and our performance at our hotels. The lodging industry is clearly showing signs of improvement revpar for all hotels in the portfolio increased approximately 73% for the second quarter versus last year. This Revpar result, equates to a decrease of approximately 6% versus the second quarter of 2019 June was the best Perk.
Forming month of the second quarter, along with being the best month, we've had versus 2019, thus far with Revpar down only 4% versus 2019 preliminary numbers from July are consistent with what we saw in June across the portfolio with Revpar for the month down about 5% versus 2019.
Looking ahead to the remainder of 2022, we believe our geographically diverse portfolio consisting of high quality U S assets with best in class brands management companies is well positioned to capitalize on the strong demand, we're seeing across leisure business and group. We also believe that our relationship with our affiliated property manager Remington really sets US apart. We believe Remington has been able to <unk>.
Additionally, manage costs and optimize revenues aggressively enabling us to outperform the industry from an operation standpoint for many years.
Additionally, capital recycling remains an important component of our strategy and we are pursuing opportunities to sell certain non core assets. We have one full service asset under contract to sell with closing most likely in the third quarter and another full service asset currently marketed for sale. We expect any net proceeds from these sales will go towards paying down our strategic financing.
Whenever we sell assets our approach takes into consideration many factors such as impact on EBITDA leverage for your future capex spending potential market growth in revpar among others.
Turning to Investor Relations, we continue to get on the road in order to meet with investors communicate our strategy and explain what we believe to be an attractive investment opportunity and Ashford Trust. We've attended numerous industry and wall Street conferences. This year, which have led to nearly 300 investor meetings year to date, we have several more conferences coming up in the second half year and look forward to speaking with many of you during those events.
We believe we have the right plan in place to move forward and maximize value with Ashford Trust. This plan includes continuing to grow liquidity across the company optimize the operating performance of our assets improving our balance sheet over time and looking for opportunities to invest and grow our portfolio.
We have a track record of success when it comes to property acquisitions joint ventures, and asset sales and we expect they will continue to be part of our plans moving forward.
We ended 2022 second quarter with a substantial amount of cash in our balance sheet and with the launch of our non traded preferred stock offering. We are excited about the opportunities we see in front of us and I'll turn the call over to Derek to review, our second quarter financial performance.
Thanks, Rob for the second quarter of 2022, we reported a net loss attributable to common stockholders of $9 $3 million or 27 cents per diluted share for the quarter. We reported <unk> per diluted share of $1 23, which represents a growth rate of 2975% over the prior year.
Quarter, adjusted EBITDA, or EBITDA totaled $96 $4 million for the quarter, which reflected a growth rate of 207% over the prior year quarter. This was the company's best quarter for adjusted EBITDA since the third quarter of 2019.
At the end of the second quarter, we had $3 9 billion of loans with a blended average interest rate of five 6% our loans were approximately 8% fixed rate and 92% floating rate.
We utilize floating rate debt as we believe it is a better hedge of our operating cash flows. However, we do utilize caps on those floating rate loans to protect the company against significant interest rate increases. We currently have one loan with a final maturity in 2022, which is currently under contract for sale and have approximately $98 million in final loan maturities in two.
23 <unk>.
Some of the Companys loans will be subject to extension tests and with our significant cash balance. We believe we are well prepared to meet any potential loan paydowns required to meet those tests.
Our hotel loans are all non recourse and currently 85% of our hotels are in cash traps, which is down from 90% last quarter a cash trap means that we are currently unable to utilize property level cash for corporate related purposes, as the properties recover and meet the various debt yield or coverage thresholds, we will be able to utilize that cash.
<unk> really a corporate importantly, subsequent to the end of the quarter, the Renaissance Nashville, and Westin Princeton alone came out of its cash trap and approximately $15 million of cash that had been trapped was released to corporate we ended the quarter with cash and cash equivalents of $538 4 million and restricted cash of $126.
$6 million.
The vast majority of that restricted cash is comprised of lender and manager held reserve accounts at.
At the end of the quarter, we also had $24 $7 million and due from third party hotel managers. This primarily represents cash held by one of our property managers, which is also available to fund hotel operating costs. We also ended the quarter with net working capital of approximately $615 million, which is an increase from 609.
Last quarter.
As Rob mentioned I think it's also important to point out that this net working capital amount of $615 million equates to approximately $17 per share.
This compares to our closing stock price from yesterday of $9 23.
This is an approximately 46% discount to our net working capital per share.
Our networking capital reflects value over and above the value of our hotels as such we believe that our current stock price does not reflect the intrinsic value of our high quality hotel portfolio.
As of June 32022, our portfolio consisted of 100 hotels with 22313 net rooms, our share count currently stands at approximately $36 2 million fully diluted shares outstanding which is comprised of $34 5 million shares of common stock and $1 7 million op units.
In the second quarter, our weighted average fully diluted share count used to calculate <unk> per share included approximately $1 7 million common shares associated with the exit fee on the strategic financing we completed in January 2021.
Assuming yesterdays closing stock price our equity market cap is approximately $334 million.
While we are currently paying our preferred dividends quarterly we do not anticipate reinstating our common dividend for some time over.
Over the past several months, we have taken numerous steps to strengthen our financial position and improve our liquidity and we are pleased with the progress that we've made our cash balance is solid we have an attractive maturity schedule. Our non traded preferred security offering is effective and we believe the company is well positioned to benefit from the improving trends we are seeing in the lodging industry.
This concludes our financial review and I would now like to turn it over to Chris to discuss our asset management activities for the quarter.
Thank you Derrick we are extremely proud of the work that our asset management team has done to drive operating results comparable revpar for our portfolio increased by 73% during the second quarter relative to the same time period in 2021.
For the second quarter, our portfolio has recovered 94% of 2019 comparable revpar.
We continue to be encouraged by the recovery signs, we're seeing within the group segment across our portfolio during the second quarter, our portfolio recovered, 92% of group room nights relative to 2019.
Additionally, our full year group pace compared to 2019 has improved 6% quarter over quarter I.
I would like to spend some time highlighting the success that we're seeing in some of our assets.
Renaissance Nashville had a record breaking month in June with its highest revenue month in the history of the hotel at $8 1 million and total hotel revenue.
That represents a 3% increase over the next best month, which was October of 2021.
It also had a strong second quarter, which saw a total hotel revenue exceeding comparable 2019 by 9% group.
Group rooms accounted for nearly 58% of all sold room nights during the second quarter, which is a 95% recovery in group room nights sold when compared to 2019.
With this portion of our business largely recovered at this hotel it has allowed us to become more aggressive with transient rate strategies.
We have recently increased the risk premium for club level rooms and suites.
In addition, the hotel is closed out many discounted categories to drive retail reap efficiency. These.
These initiatives resulted in second quarter transient ADR exceeding comparable 2019 by 12%.
There are no signs that these dynamics are slowing down and we are excited to see the future performance of this hotel.
The Hyatt Regency Coral Gables also broke a second quarter record with hotel EBITDA coming in at $2 4 million.
That was a 28% premium to the second quarter of 2018, which was our previous record.
The majority of this success was the result of room rate, which was up nearly 30% during the second quarter relative to comparable 2019.
The hotel was able to bring back a large long term piece of group business, which helped propel the hotel to an 11% growth in group room revenue during the second quarter relative to 2019.
With this core piece of business back in place the hotel was able to be more selective with remaining groups, which drove the overall group room rates during the second quarter by 15% over the same time period in 2019.
Lastly, I would like to highlight the success of <unk> resort and Spa in Austin, which also broker record with hotel EBITDA nearly $2 5 million during the second quarter.
The achievement is a 39% improvement over the next this quarter, which is remarkable.
The hotel had been incredibly successful in locking in several groups, which resulted in the hotel exceeding sold group room nights by 11% during the second quarter relative to comparable 2019.
Two of these groups signed multi year contracts with the property. These.
These organizations contributed to our ability to push rates, which outperformed during the second quarter by 36% compared to the same period in 2019 with.
With these contracts are already secured for future years, the hotel will be able to replicate the successful rate strategy and capitalize on additional demand.
And moving on to capital expenditures, we've noted in previous calls how we were proactive prior to the pandemic and renovating our hotels to renew our portfolio.
That commitment has now resulted in a competitive and strategic advantage as demand continues to accelerate.
We currently anticipate strategically deploying approximately $110 million to $120 million in capital expenditures in 2022.
We recently completed the guest room renovation at Marriott Fremont and will begin the meeting space renovation at Hyatt <unk> cables, and a lobby and bar renovation at the Ritz Carlton Atlanta.
Before moving onto Q&A I would like to reiterate how optimistic we are about the recovery of our portfolio and the industry as a whole every month this year through the second quarter, we have seen hotel EBITDA in our portfolio grow over the previous month with Jews Hotel EBITDA, nearly 10 times larger than that of January .
Some of the hotels have already outpaced our 2019 performance.
During the first quarter of this year, 11% of our hotels were exceeding their comparable 2019 hotel EBITDA.
Now during the second quarter, 25% of our hotels are exceeding comparable 2019 hotel EBITDA.
This trend is accelerating with 31% of our assets exceeding their June 2019 comparable.
As we look forward, we are seeing encouraging signs in our group lead volume for a number of markets.
With these positive indicators, we believe our portfolio is well positioned to capitalize on the industry's continued recovery.
That concludes our prepared remarks, and we will now open up the call for Q&A.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Confirmation tone will indicate your line is in the question queue you.
You May press Star two if you would like to remove your question from the queue.
Participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys, one moment. Please while we poll for your questions.
Our first questions come from the line of Tyler <unk> with Oppenheimer. Please proceed with your questions.
Good morning, Thanks for taking my questions first one for me more open ended in terms of broad trends. When you look at July down 5% with 2019 can you discuss more detail on what you saw in the business in July and then in terms of our recovery trajectory, obviously lots of momentum.
I'm here.
Possible Q3, compared with 2019 as better sequentially than Q2, and kind of how are you thinking about your commentary with revenue compared with 2019 coming back in 2023, but is it possible that maybe we see that a little bit a little bit earlier.
Yes. Thanks for your question Tyler This is Chris I'll take that.
We are seeing favorable signs and trends continue into Q3. There are there is nothing in the data that we're seeing that indicate any kind of a pullback in our preliminary forecast for Q3 do show continued improvement over 2019 relative to Q2, and so July performed very consistent with what we saw.
In June .
Broadly in terms of the segment trends, we're seeing the mix of business is very similar to what we saw pre pandemic.
Some slight adjustments group is 25% of our mix now than it was pre pandemic contracts has been relatively similar.
We're seeing an increase in leisure as a percentage of our mix and a decrease in corporate so leisure is up to about 48% of our business mix compared to 42% pre pandemic and corporates moved from about 29% down to 23%.
We are seeing very encouraging trends from the corporate segment and we believe those are going to continue as we look ahead.
Steady recovery out of that segment.
To kind of paint that picture, if we look back to January corporate was at 37% of 2019 levels for our portfolio in June it was up to 76% recovery.
And so we're very encouraged by the continued momentum. We're also seeing some some interesting things the corporate customer is having a longer length of stay than they've ever had across our portfolio.
We're seeing a lot of our corporate travelers staying through shoulder nights and weekends.
Sunday night occupancy in our portfolio for Q2 actually exceeded 2019 levels, which is which is which is great.
We expect these trends to continue into Q3, and we're not we're not seeing any signs of a pullback.
Okay, Great I appreciate that commentary and then follow up question probably for Rob just in terms of the asset sales here.
Any more detail you can provide on.
Why you think now's the right time to pull the trigger on this why you selected these hotels specifically.
Any numbers in terms of.
Potential potential proceeds as well.
So a few different things.
It's something where we've.
I don't know if theres any one moment, where you can kind of do it all at once right. So I think our strategy is going to be to continue to kind of layer. These on over time.
The reason that these assets are currently on the market or for sale was that they are.
Kind of a lower Revpar full service assets.
That potentially had either capex needs that we maybe don't think are the best use of proceeds or are more longer term hold markets for us.
And I think that'll be pretty consistent with the assets that you'll you'll CSL will probably fall either into the bucket of a lower revpar full service assets, just because when we look over the life of those assets, we find that they just don't generate as much EBITDA, just because with the lower revpar.
Don't generate as much cash flow that you still have to do the same amount of Capex many times.
So I think we're trying to move some of those off our books and then at some point time Youll see us potentially sell off some of our select service assets that arent long term holds.
But again that'll be kind of so.
Selected in terms of what we think the proceeds net proceeds may be four can at least these two assets, it's probably in the neighborhood of.
I don't know I'd say, probably $15 million to $20 million.
This is kind of best guess right now it can be a little bit higher than that but somewhere in that range and just given hour.
Given our current.
Strategic financing those proceeds will need due to primarily go to pay down that debt. So that would be our most likely use of proceeds for that.
Okay very helpful. That's all for me. Thank you.
Thank you. Our next question is coming from the line of Chris <unk> with Deutsche Bank. Please proceed with your questions.
Hey, good morning, guys first one might be it might be for Rob Rob with the.
You talked a little bit about with the non perhaps the opportunity to go back on offense at some point I mean, how do you.
Now I will go from Super specifics here, but I mean, how would you directionally you characterize the kind of stuff youre going to look at is it going to be full service are you going to tilt towards more towards resorts are urban or some of the steam markets you've looked at in the past or are you trying to get a little bit more broad.
That's a good question, Chris and the answer is a lot of it's opportunistic.
I think when we're looking at some of the species that we want to invest in.
Some of them are opportunities that we're seeing for repositioning.
So some of the assets that we're looking at our assets that we think are kind of under branded or.
Independent that maybe could use a brand from a distribution standpoint.
I think we're also looking potentially add markets, where we already have markets, we like where we already have a little bit of a position just because it really allows us to operate those with a lot of efficiencies.
But I also think that we're also seeing opportunities in some of these northern more northern in urban markets that are a little bit out of favor because you can get more attractive pricing on them relatively than you can in some of these resorts in southern markets that we're seeing right now because we are believers in the recovery of business travel.
And the recovery of group.
And so I think given that there is some out of favor markets.
Kind of in the northern half of the U S. I think there's some interesting opportunities that are going to be coming up.
Over the next few years in that so.
So not particularly specific because a lot of it's kind of opportunistic but I think there is not necessarily consistent theme and the stuff that we're looking at today. They just all have kind of unique opportunities in their own right.
Okay. Thanks, Rob Fair enough and then this one might be for Chris.
Okay.
Thinking about brand standards now that we're back to pretty much have most of our corporate travel back group travel back.
Do you think the groups the brands have landed on a final resting point in terms of service delivery on housekeeping and some of the food and beverage options.
I don't know that they have landed on it and that it's fixed.
Got a great relationship with them with the brand that continues to be fluid.
We've got a number of vehicles, where we provide heavy heavy input and our feedback.
Can't tell you that in addition to.
The operational efficiencies that our management partners have found we're very thoughtful about how we deploy capital and so we're running more efficient operations, but our guest service scores are increasing over prior year and also over 2019, and so that tells us that we're being very thoughtful in terms of the efficiencies we're driving.
And how we're deploying capital to be to be very mindful of the guest experience. So.
I don't think their firm and final.
There continue to be changes myriad adjusted their housekeeping policy just in just in July .
We're hoping that the other players don't follow suit.
I don't think anything is final yet.
Okay very helpful. Thanks, guys.
Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Our next questions come from the line of Bryan Mayer with B Riley. Please proceed with your questions.
Good morning, just first a point of clarity I think you mentioned.
$15 million to $20 million proceeds for a hotel sale was that the one hotel that.
Currently under contract, but I guess looking to close this quarter.
That would be both to the extent that we end up selling the other one that is currently on the market. So it's been kind of the combined of those two.
Okay. Thanks for that and then if Matt.
Memory serves me a few years back five six years ago, Yeah, there was plans or considerations to really lighten up on the select service focused on full service kind.
Kind of like we just talked about you know maybe stuff that needs to help in a decent market that you think youre going to grow is that still the case and would you anticipate lightening up on select serve or is there a thought to really keep that large chunk of that portfolio.
Yes, I think over time, the goal would be to lighten up on it I think the question is what's the what's the right way to do it.
Is there a way that makes.
<unk> more strategic sense for the portfolio, so, but I do think there are some.
Some pools and some assets that are select service debt.
That I think we are probably going to consider for sale in the next six to 12 months.
So I think on a net basis Youll see us continue to lighten up on our select service.
Just given where the debt markets and transaction markets are it seems unlikely that there is a.
Trade to do kind of all of the select service are a huge part of select service.
Realistically, we have some have a decent out of select service has crossed and debt pools, both in our Highland portfolio in our let's call. It <unk> 17.
Loans, where we've got full service and select service crossed.
And so at a minimum to be able to extract that and do something with it ill will need to refinance that at some point in time in the next few years. So I think as opposed to anything dramatic I think you will see us kind of lightened up on it over time Opportunistically.
Yes, that's a good segue to my next question maybe for Derek I guess what are the mechanics.
Of actually using your large cash position to extract at that.
From the debt pools to subsequently monetize them at the right time, how do you go about doing that.
Well Brian .
Brian We've got the flexibility to do that I think.
From our perspective.
Holding that cash balance has been strategic for us because we know we've got some extension tests coming up on a lot of our loans in 2023.
We're unsure what those extension tests might look like because those are mostly a trailing debt yield at the time of the extension.
So depending on the ramp up of the recovery.
The potential paydown requirements could be nothing in can be significant. So we've wanted to hold that cash on hand for for that flexibility and for that so I think in a perfect world we'd.
We just line up the refinancing of those pools at their maturity dates are close to their maturity dates with.
Any sort of.
Leases or changes in the makeup of those of those tools and portfolio that we would want to make.
And do it at the time of the refinancings.
Contemplated go ahead and do some refinancings now.
Get in front of us.
Some of those extension tests, but the debt markets at the moment are not really attractive.
While at the same time, the fundamentals continue to be very attractive.
We've we've opted to just sit and wait.
And then hope that the market improves and Brian I would also say that we've approached.
There is a handful of assets that again I think fall in this category.
Non core non long term hold lower Revpar full service assets that are crossed and pools.
And typically the mechanism to extract doses, you're paying about 115% of the allocated loan balance for that asset, but normally there is other tests involve meaning that your debt yield isn't any lower your debt yields above where it was when he originated the loan et cetera et cetera.
Realistically right now most of the loans don't meet those tests and so you actually would have to get some sort of waiver or agreement from your lenders in order to achieve that and the issue is just what are they what do they want do they want additional paydown and they want to be.
And so right now as Derek said, you know, we're trying to be coy.
<unk> and prudent with our cash given whats.
What's going on in the debt markets.
But to the extent that we can find a solution with lenders and there are ways hopefully to maybe extract some of those assets prior to refinancings.
Okay, and just last maybe kind of a housekeeping item.
I think suffice it to say you probably pay down the oaktree financing when it gets closer to that two year Mark is that something.
Maybe you should be modeling for for kind of late <unk> or early first Q2 thousand 23.
Oh, that's a good question as we sit here today, I mean, I would love to be able to pay it off in January when the.
When it's kind of a two year make whole burns off in the middle of June I mean middle of January my mistake.
But.
It's really dependent upon the next six months right I mean, if we if the recovery continues like we're hoping and we're not kicked into a nasty recession and I think it's a reasonable.
Assumption to be made that that we can pay off maybe sometime around January but.
It's still TBD.
I would like to send it I'd like to.
Paid off but also has a.
Amount of cash to send $200 million off your balance sheet. So we just want to make sure. It's right time to do it in.
So it will be dependent upon how this recovery looks for the next few months.
Okay. Thank you.
Got it Brian .
Thank you. Our next question is coming from the line of Michael Bellisario with Baird. Please proceed with your questions.
Thanks, Good morning, everyone.
Just a couple of follow ups, there focused on the balance sheet.
Both for Derek I think but how much cash is actually trapped.
At quarter end, and then I know you said you got 15% of your hotels are no longer in cash traps, but maybe directionally or if you could put numbers around how much of the value of your assets or cash flow is actually no longer in a cash trap today.
Yes, Michael at the end of the quarter, we had about $19 million that was trapped in that would be in our restricted cash in our balance sheet.
About like I said $13 million of that amount.
It's been released so there is really only about six to 7 million Thats left in the trap as of the end of the second quarter.
In terms of the assets.
A set of assets you're right, it's 85% of the assets in terms of the value.
We haven't really done that math, but I can tell you from a sort of percent of run rate EBITDA is actually pretty close it's just slightly less than that so we're going to say its 85% of the assets maybe that represents 80% to 83% of our EBITDA because some of our larger assets are out of those trials.
So its slightly less and as Rob mentioned, we do anticipate that maybe another 10 13 hotels or so by the end of the year will be coming out of the traps as well.
And really it's really only been in the last quarter or so when those hotels were generating enough excess cash to actually have any cash go into the trap.
So I would anticipate that from here if trends continue like we've been saying that we would see more and more cash start to accumulate.
And those traps and it's also important to note that any any trapped cash would also be available for any extension tests.
When the if we have loans that have extension tests at the time of those extension test any any additional cash is sitting in restricted cash that.
Trap would also be available for those pay downs if needed.
Okay. That's helpful. And then just one more on the bigger picture on the on the debt side can you maybe provide some perspective on if pricing changes and ltvs, what you've seen in the in the mortgage market and the changes that occurred over the last 90 days or so.
Yes.
There's clearly deteriorated.
And I mean look we haven't really been in the market to do anything we sort of tested the market and pulled back.
I think from an LTV standpoint, you could probably still get relatively high ltvs, but it's going to cost you.
And.
So I would say spreads probably widened 100 basis points or so from.
And maybe 150 basis points from where they were three four months ago and.
That's not typically what we've seen when the index rates have been going up typically when we've seen the fed raise rates <unk> seen credit spreads come down.
And so this is a very unique time and this isn't at least in my career in terms of the fed raising rates and we're also seeing credit spreads growth go up when in reality from a risk perspective.
Fundamentals continue to be very attractive so.
It feels very technical doesn't feel like there is a reason for the credit spreads to be going up because it's from a real risk standpoint, like I said the fundamentals continue to get better. So we're optimistic that it's a short term phenomenon that the market will improve here.
Point in the near future and I think some of it.
The quotes that we had seen.
This was basically.
<unk>, plus or <unk>, plus kind of five hundreds low five hundreds if youre going up to 60% 65%.
So I'll say, a little bit lower than that if youre staying below 50, but.
As Derek said gapped out probably at least 150 basis points I think probably from where it was.
Four or five months ago.
Thank you.
Yes, Michael.
Thank you there are no further questions at this time I would now like to turn the call back over to management for any closing comments alright. Thank you everyone for joining today's call and we look forward to speaking to you all again next quarter.
Thank you. This does conclude today's teleconference. We appreciate your participation you may disconnect your lines at this time.
Enjoy the rest of your day.