Q3 2023 Summit Hotel Properties Inc Earnings Call
Okay.
Good day, and thank you for standing by and welcome to the Summit Hotel properties Q3, 2023 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you want to press Star one.
One on your telephone you will then hear an automated message advising you had this race to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand.
The conference over to your Speaker today, Adam Dell Senior Vice President of Finance capital markets and Treasurer. Please go ahead.
Thank you Victor and good morning, I am joined today by Summit Hotel properties, President and Chief Executive Officer, John Scanner, and Executive Vice President and Chief Financial Officer Trade Toggling.
Please note that many of our comments today are considered forward looking statements as defined by federal Securities laws.
These statements are subject to risks and uncertainties, both known and unknown as described in our SEC filings.
Forward looking statements that we make today are effective only as of today November 2nd 2023, and we undertake no duty to update them later.
You can find copies of our SEC filings and earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call on our website at Www Dot SHP REIT dotcom.
Please welcome Summit Hotel properties, President and CEO John standard.
Thanks, Adam and thank you all for joining us today for our third 2023 earnings call.
We were pleased with our third quarter results as pro forma Revpar increased two 4% compared to the third quarter of last year driving a two 6% increase in hotel EBITDA and essentially unchanged operating margins.
Accelerating urban and midweek demand led by improving business transient and strong group trends as well as continued outperformance within the NCI portfolio serve as our primary growth catalyst in the quarter.
Urban and midweek demand trends in September and October were particularly strong which resulted in September revpar growth of three 6% in October is expected to finish generally in line with September a reacceleration from July and August more modest growth levels.
If our trends during those peak summer months were pressured by difficult year over year comparisons as leisure demand normalized in outbound travel to Europe surge.
It is important to note that leisure demand remained strong in a historical context illustrated by Revpar in the retail segment of our portfolio, which is a reasonable proxy for the leisure transient customer still trending well above 2019 levels.
The outlook for leisure demand broadly remains positive with more normalized comparisons coming next year.
Group demand was especially strong during the third quarter driving occupancy approximately 250 basis points higher than the third quarter last year, and a 12% increase in non rooms revenue.
The evolution of hybrid and remote work environment has created increased demand for smaller groups with shorter term stays in tighter booking windows for which our portfolio is particularly well suited.
Overall pro forma total revenue for the portfolio increased three 3% in the third quarter.
Business travel typically accelerates post labor day, and we were encouraged with a clear upward trends in weekday performance, particularly Tuesday, and Wednesday nights as indicators of growth in business transient and group demand.
Since labor day weekend, Tuesday, and Wednesday, absolute occupancy has reached 84% dropping nearly 10% year over year Revpar growth in those days of the week.
Encouragingly the operating expense environment continues to normalize and our team did a fantastic job during the quarter controlling costs as operating expenses decelerated noticeably from earlier in the year on a per occupied room basis, driven in part by an approximately 20% reduction in contract labor year over year.
Cost per occupied room in our pro forma portfolio increased just 1% in the third quarter, a deceleration from the over 8% growth we experienced in the first half of the year and we expect continued moderation in expense growth through the remainder of the year.
We continue to make important capital investments at our hotels to enhance our ability to drive revpar growth and gain market share.
The recent renovation activity combined with our boots on the ground approach to asset and revenue management resulted in our third quarter Revpar index, increasing to 114%.
230 basis point improvement from the third quarter of last year, and a sequential 100 basis point improvement from the second quarter of this year.
Our portfolio's market share is at or approaching the highest level ever achieved outside of the pandemic years.
The NCI portfolio once again produced particularly strong this quarter.
Quarter, as Revpar increased 12% and hotel EBITDA increased 27% compared to the same period last year group.
Group and negotiated Revpar within the NCI portfolio increased 24% and 23% respectively.
And midweek Revpar increased 16% in the quarter further highlighting the strength, we see in business transient and overall weekday demand.
Revpar index in the NCI portfolio also achieved a new post acquisition high of 116%, increasing nearly 700 basis points from the third quarter of last year and further testament to the great work. Our team has done deploying cluster sales strategies and other operating initiatives across the 27 hotels.
Our outlook for the NCI portfolio remains extremely positive and we expect to continue to generate outsize revpar and EBITDA growth in the near term as these markets benefit from the favorable trends we identified during our underwriting process.
Driven primarily by the strength of the NCI portfolio much of our recent EBITDA growth can be attributed to our successful acquisition activity coming out of the pandemic.
Since July of 2021, we've acquired 34 hotels for a total of approximately $1 billion.
Collectively these recent acquisitions generated third quarter, Revpar, and EBITDA growth of 9% and 19% respectively and.
And year to date, Revpar, and EBITDA growth of 14% and 21% respectively.
All of these assets are relatively new developments with minimal near term capital requirements.
Our Texas markets, which in total represent more than one quarter of our total room count continue to be the strongest performers in our portfolio as Revpar grew 12% in the third quarter highlighted by Dallas, and Houston, which generated revpar growth of 16% and 14% respectively.
In addition, several of our legacy hotels, particularly here in urban markets delivered outsized growth during the quarter.
Our best performing legacy markets, including Indianapolis Bolder in Austin, as well as encouragingly certain markets that have been slower to recover such as Kansas City, Minneapolis and Baltimore.
Combined these markets generated approximately 19% revpar growth in the quarter.
We believe the next leg of our recovery will be more equally driven by our legacy hotels, which have a significant urban orientation and the majority of our exposure to markets that are earlier in their recovery cycle.
We continue to successfully execute on capital recycling opportunities to increase the overall quality of the portfolio and its growth profile minimize non core capital expenditures and enhance our liquidity and balance sheet profile.
In September we signed an agreement to sell our 123 Guestroom Hyatt place in Owings Mills, Maryland for $8 $25 million.
The sale price equates to a four 6% capitalization rate on the hotel's trailing 12 months net operating income at quarter end and a two 9% capitalization rate inclusive of near term deferred capex.
The buyers earnest money is nonrefundable and we currently expect the transaction to close prior to the end of the year.
Since may of 2022, we've disposed of fixed hotels inclusive of the pending sale of the Hyatt place Owings mills totaling $111 million and deferred.
Approximately $33 million of near term capital requirements.
The collective sale price for these hotels resulted in a blended capitalization rate on the trailing 12 months net operating income of less than 2%.
Although the transaction environment remains generally challenged we continue to evaluate additional potential asset sales that we believe are similarly value accretive.
Finally trade will provide the specifics of our changes in full year guidance, but I want to highlight we are increasing the midpoint of our EBITDA and <unk> guidance ranges, while leaving the midpoint of our full year Revpar guidance range unchanged, given strong third quarter results and our confidence in the forward outlook.
With that I'll turn the call over to our CFO trade conflicts.
Thanks, Sean and good afternoon, everyone.
Across our various location types, the companys urban and suburban hotels, where relative outperformers with third quarter Revpar growth of three 2% and four 1%, respectively, driven primarily by the continued improvement in weekday demand.
The urban portfolio continues to be driven by strong midweek demand, particularly for business transient customer, resulting in midweek revpar growth of approximately 7% in the third quarter at approximately 9% in the four weeks post labor day, respectively.
Group demand was also a significant catalyst for the urban and suburban portfolios with third quarter group Revpar, increasing approximately 5% collectively.
Group Revpar within the urban portfolio, specifically is currently approximately 80% of 2019 levels declining ample opportunity for continued growth moving forward.
Today, <unk> urban and suburban hotels account for approximately 75% of our overall portfolio.
The moderation in leisure demand was felt most acutely in our resort in small town metro assets, where third quarter Revpar was essentially flat to prior year, but a strong 108% recapture rate to 2019 levels.
We anticipate these hotels will continue to perform at levels well above 2019 results.
The resort in small town Metro segments account for approximately 15% of salvage total portfolio.
Overall weekday demand growth was robust throughout the quarter posting year over year Revpar increases in all segments.
Most notably the retail and group segments, which make up nearly half of our current room night mix generated weekday revpar growth of three 1% and seven 2% respectively.
The retail segment, which captures various types of demand, including leisure and some business transient.
Remain the largest weekday relay contributor and continued to post positive weekday ADR growth.
Pro forma hotel EBITDA for the third quarter was $62 3 million.
A two 6% increase from the third quarter of last year.
Hotel EBITDA margin for the pro forma portfolio contracted by only 25 basis points versus the third quarter of 2022 to 34, 3%, despite primarily occupancy driven revpar growth.
On a same store basis hotel EBITDA margin was 35, 4% with margin contraction of only 12 basis points.
The most notable headwind to EBIT margin as the more than 40% increase in insurance premiums, which created a 65 basis point headwind to hotel EBITDA margin that was partially offset by several favorable property tax appeals.
The timing of these property tax appeals represents a headwind in the fourth quarter of 2023 as we received the benefit from our property tax appeals in the fourth quarter of 2022.
Our margin performance in the quarter points to a more stabilized operating environment and labor base as well as strong operational oversight and cost containment at the asset level.
The company's FTE count per hotel stay is approximately 20% below 2019 levels in the company's utilization of contract labor declined by approximately 20% on a nominal basis year over year and 5% sequentially from the second quarter.
In addition, hourly wages have stabilized since the beginning of 2023.
We believe that moderating labor expense pressures and our efficient operating model will continue to benefit the company moving forward.
Adjusted EBITDA for the quarter was $46 3 million.
A one 9% decrease compared to the third quarter of 2022.
Although pro forma hotel EBITDA increased $2 six year over year to <unk>, 6% year over year. The modest decline in adjusted EBITDA was attributable to net transaction activity as we have been a net seller over the past 12 months as well as the relative contribution of our wholly owned portfolio and joint venture portfolio.
In particular, the NCI portfolio, which saw meaningful outperformance during the quarter.
Adjusted for net transaction activity over the last year adjusted EBITDA was unchanged compared to the third quarter of 2022.
We expect to see continued strength in our joint venture assets, particularly the NCI portfolio through the balance of the year.
Third quarter, adjusted <unk> was $26 5 million or.
<unk> 22 per diluted share compared to $30 $9 million or <unk> 25 per diluted share in the third quarter of 2022.
From a capital expenditure standpoint in the third quarter, we invested approximately $20 million in our portfolio.
Solidago basis at approximately $16 6 million on a pro rata basis for.
For the year capital expenditures on a pro rata basis, now total approximately $52 million.
The vast majority of this capital continues to be invested in guest facing projects and includes comprehensive ongoing renovations at our <unk> suites Cherry Creek courtyard, New Haven, Connecticut, Springhill suites, Dallas downtown Embassy suites, Tucson, and Hyatt place Denver Tech Center.
We continue to ensure the quality and relative age of our portfolio positions the company to drive market share and improve operational results and.
And we expect the ongoing transformation transformational renovations across our portfolio to drive outsized future growth.
Turning to the balance sheet, our current overall liquidity position remains robust at over $400 million.
And approximately 74% of our pro rata share of that is fixed when accounting for the effect of interest rate swaps.
Including the Companys fixed coupon preferred securities, which carry a blended coupon of less than 6%. The balance sheet is approximately 80% fixed at a blended rate of just over 5%.
Specific to the wholly owned portfolio, our hedging activity over the last year effectively fixes approximately 90% of wholly owned indebtedness.
In total the company has $600 million swap portfolio fixes so far at an average rate of less than 3% and has an average duration of approximately three years.
In September we successfully completed the refinancing of $200 million GIC joint venture credit facility.
This consists of 125 billion revolving credit line at a $75 million term loan.
The fully extended maturity date of the credit facility to September 2028, and as a result, our average length to maturity increased to more than three years.
So far this year, we have successfully refinanced $800 million of debt, which includes both the primary credit facility for the company and the GIC joint venture credit facility.
It continues to be a challenging debt capital markets backdrop.
We are thrilled that both executions maintain interest rate pricing was effectively the same terms as the prior facilities.
And they continue to ensure the company has sufficient flexibility and liquidity to execute on our strategic initiatives.
For the balance sheet as a whole with the exception of a $15 million property level loans due in December 2024, we have no other maturities until February 2025.
On October 26th our board of Directors declared a quarterly common dividend of <unk> <unk> per share or an annualized dividend of 24 per share, which represents a dividend yield of approximately 4%.
The dividend continues to represent a prudent <unk> payout ratio, leaving room for increases over time, assuming no material changes to the current operating environment.
The company continues to prioritize striking an appropriate balance between returning capital to shareholders.
<unk> corporate leverage and maintaining liquidity for future growth opportunities.
As John previously referenced included in our press release last evening, we provided updated ranges on full year guidance for 2023 operational metrics as well as certain non operational items.
This outlook does not include any additional transaction or capital markets activity.
Based on the company's third quarter operating results as well as our future outlook, we are revising full year guidance across certain key metrics.
Our full year Revpar growth range has been narrowed to 625% to 775%.
Which implies no change to the midpoint relative to our previously stated full year Revpar guidance.
This translates to an adjusted EBITDA range of $186 5 million to 191 $6 million an increase.
<unk> of over $1 million at the midpoint of our prior range and an adjusted <unk> range of 89 to.
To <unk> 93 per share, which also reflects an increase to the midpoint of the range.
We expect full year pro rata interest expense, excluding the amortization of deferred financing costs to be approximately $55 million to $60 million series, a and series F preferred dividends to be $15 9 million.
Series C preferred distributions to be $2 6 million and a revised pro rata capital expenditures range of $65 billion to $75 billion.
As previously mentioned given the increased size of the GIC joint venture.
Income payable to summit now covers nearly 15% of annual cash corporate G&A expense, excluding any promote distributions summit may earn during the year.
And with that we'll open the call to your questions.
Yeah.
And as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced toward drawing a question. Please press star one again please.
Please standby, we compile the Q&A roster.
One moment for our first question.
Our first question comes from the line of Austin, where Schmidt.
Keybanc capital markets. Your line is open.
Great. Thank you.
Just wanted to start out just talking a little bit about the leisure segment, John you've mentioned, it's been a little bit of a.
Drag due to some of the comps and normalization I'm just curious as you look out whether you expect that segment to Reaccelerate next year or kind of perform even in line with overall industry forecast just just trying to get some color around how you think.
Things play out within within leisure demand.
Yes. Good afternoon. Thanks for the question I think generally we think that leisure demand remained strong and as we alluded to in my prepared remarks, but I think when you look at it in a historical context outside of the year over year comparisons to last year.
I think leisure demand generally.
Still looks very very good I think we can expect leisure to remains strong I think that the comp comparisons as we go into next year you get much more normalized so.
We will look back in several years and look at the rates that we were able to charge in 2022 is a bit of an outlier and we saw that as we looked at our rate specifically in the third quarter in July and August in particular, those comparisons were very difficult as we turn the calendar into 2024, we will have much more normalized comparison, but I think again.
Absent anything dramatic happening in the macro we think leisure demand remained stable.
Helpful. And then just as it relates to the transaction market. I mean are you seeing any kind of positive changes there greater depth in the buyer pool and how big is the pool of assets that you are evaluating for sale today.
Yes, I think the transaction market has remained relatively unchanged its still pretty challenged the rates are still higher the buyer pool is still smaller than it was several years ago. We still continue to believe that the assets that we have sold.
Including the asset that we announced the pending sale of in Owings Mills. This quarter that is still the most liquid part of the transaction market in our view, where you've got smaller check sizes.
Less requirements on debt capital markets, that's where we think the best execution can come as we alluded to we will continue to Opportunistically look for disposition candidates, we like the ability to sell lower cap rate assets that have larger deferred capital needs.
A good way to redeploy those capital.
Other opportunities.
Is there a specific set of properties or could you kind of gauge what.
Pool fits that criteria and that you just that you had just mentioned kind of smaller assets upcoming capex needs.
And so forth.
Yes, I think you can look at again assets that look like the assets that we sold this year, they're generally smaller they require some capex I think the common theme in all of the assets David that we've identified for sale has been kind of meaningful capital needs that we just don't feel like the return on capital is there. We think we can redeploy that cash.
<unk> into something that has a better return profile than then the renovation of those assets. So we haven't disclosed specific assets or the specific quantity of assets, but as <unk> seen again earlier this year, that's where our focus has been on the disposition side.
Understood. Thank you for the time.
Thanks Joseph.
Thank you and one moment our next question.
Our next question comes from the line of Michael Bellisario from Baird. Your line is open.
Good afternoon, everyone.
Good afternoon.
John maybe.
Similar question to the last one, but maybe I'll ask it a different way just maybe how many hotels are how many dollars do you think you need to sow before maybe you can be back in acquisition mode or growth mode, where the balance sheet isn't really a limiting factor in.
You think that could that inflection could occur in 2024 do you think it will take a little bit longer.
Yes.
As I said, often I'm hesitant to put a number or a number of hotels on it I think we said that.
Net basis, we look opportunistically to dispose of some assets that hasnt changed we think that there are more in the portfolio, where we can find opportunities to sell and redeploy that capital into better use as we would like to bring leverage down we've made some progress on that we'd like to continue to make more progress on that.
We'd like to get back to the point, where we can be an opportunistic acquirer of assets as well as as you alluded to I do think that the potential for that existed.
Get into next year again, im hesitant to put specific parameters around the number of assets or the magnitude of assets.
That would require I think we want to make sure we maintain flexibility and can continue to be opportunistic around how we think about deploying and redeploying that capital.
Got it fair enough and then presumably.
We would see two or three or some number of dispositions likely before we would see an acquisition so sort of net seller before any redeploy redeployment would come correct.
Yes.
Been a net seller of assets over the last 12 months I think we've acknowledged that wed.
We'd like to get our net debt to EBITDA ratios back down into our target range is again I want to be careful around commitments around timing, but that hasnt changed we do plan to manage the balance sheet back down into our target leverage range.
Got it fair enough and then just.
Next question for me just wanted to dig into the NCI portfolio, maybe just a revpar growth in the quarter, how much was rate how much was occupancy.
Are you picking up business demand, you're picking up leisure demand really just kind of trying to understand I understand the drivers.
The growth in the recapture that you saw in that portfolio. Thanks.
Yeah, well look obviously, it's a terrific quarter for MTI portfolio, it's been a terrific year for the NCI portfolio, our EBITDA and that portfolio is up over 25% year over year, and it's a little bit different asset by market. Mike. We've seen for example in the Dallas markets, we're getting great beauty.
Contribution we're getting good strong contribution from group in those markets other Marvel or leisure oriented so it's a little bit of a.
Mix in terms of the mix of rate and occupancy at the majority of the increase has come from occupancy ended the quarter. There has been we are positive in rates, we have some some rate lift, but as we expected and as we underwrote the ramp up of these assets. We thought there was tremendous opportunity.
From a lift perspective, that's all starting to materialize the team's done a really really nice job putting in cluster sales strategies other operating initiatives to drive. These results. We've hit our all time high from a Revpar index within the portfolio of the highest the portfolio's ever achieved and so it's been fairly broad based and again I would say this.
Specifics are really market dependent but we've seen it in all segments. We've seen it in the leisure segment, we've seen it in BT and we've seen it in some of the smaller group business in certain markets.
Thank you that's all for me.
Thanks, Mike.
Thank you and one moment our next question.
Our next question comes from the line of Chris will Ranke from Deutsche Bank. Your line is open.
Hey, good afternoon guys.
So I think you mentioned in the prepared comments that your contract labor is down pretty pretty meaningfully I guess, 20% or something.
Great to hear.
Is it possible.
Are those folks come from.
From within the industry that you are replacing them with or are they already in the industry and they are just kind of willing to take.
So he is right that the wage that they werent willing to take a year ago or are there more folks coming into the the worker pool.
Yes, we are seeing some expansion of the labor pool I would say, it's still tight I would also say again, its really a credit to the team and the management companies that we work for this has been an initiative since the beginning of the year. It is still a difficult labor market out there so.
So to see a 20% year over year reduction in contract labor is very very encouraging it's still elevated if I look at that percentage of our total labor relative to <unk> 19, you will still see that contract labor is higher than it was pre pandemic. So we're making progress we're hopeful that we can continue to make.
Incremental progress, but I do think it's broadly a function of while the labor markets are still tight they have loosened to some extent through the course of the year. So we've seen a better influx.
Labor coming into the into our hotels.
Okay. Thanks, Thanks, Tom and then.
Question for you on insurance.
Been a topic for a lot of your full service peers and of course, there may be a little bit more.
Resort oriented.
<unk>, which has been where obviously a lot of the claims have committed.
What does it look like for you guys. I mean, I think everybody is up but is it how much of a headwind is it this year what do you expect for next year.
It was a material headwind for us our renewal date is February one.
Yes, I think as we said on prior calls our insurance renewal was up.
Round, 40% year over the year the vast majority of that as you would expect was driven by higher property insurance renewal.
Most of that we've absorbed most of that where we're not quite on a calendar year end, but we're close.
Too early to really guide towards what we think next year is going to look like we're just getting started going through that process.
I had to handicap it I would say.
Knock on wood it'll be less than the increase that we saw this year, but likely higher than inflationary expense growth next year.
Okay. Thanks, and then just last one for me.
Thank you Hilton and Hyatt of both in recent quarters announced some new.
Extended stay product and you guys own a little bit of a big existing.
Existing brands should we think about how do we think about you essentially again, even in the ground yet but are you willing to do more with those with both extended stay brands with those two guys.
Yes look I think all three Marriott Hilton and Hyatt have all announced new in and around mid scale extended stay opportunities.
We followed a very closely we're good partners with all three of those brands as you know we're not natural developers, we don't do a lot of.
A lot of development activity, we do it kind of selectively throughout the portfolio where.
There are some clear synergies and adjacencies to existing projects, but it is certainly something that we'll watch very closely.
Like the idea that the brands are embracing these kind of lighter labor labor type of operating models again, it's a natural extension for the types of assets that we own and I think we're all well aware of how well extended stay has performed really sensitive since the pandemic. So.
Do think there are interesting opportunities.
We'll certainly watch it again, we're not necessarily natural merchant builders or developers of these projects, but I do think it's interesting and something that we'll pay attention to.
Okay very helpful. Thanks, John.
Thanks, Chris.
Thank you one moment our next question.
And our next question comes from the line of Bill Crow from Raymond James Your line is open.
Very good.
Afternoon.
Good afternoon out there.
Questions from me.
You talked about normalized comparisons heading into 2020 or I guess against the backdrop of really strong merger performance quarter.
You asked about thoughts are for expense growth next year, when you put together the labor in the insurance and all the other factors.
Yes look the first thing I would say is.
It's we're early we're still going through the budget process right now so to say that we've got perfect sightlines into that at this time of year would be a little premature.
As I just alluded to I do think youll see above inflationary growth in insurance costs again next year I would just remind everybody that's roughly 5% of our total cost base of thankfully its not the biggest driver of our overall cost we have seen the biggest driver overall cost as you would expect is on the labor side we.
We have seen wages moderate significantly this year I think our wages are up about 2%.
Year to date versus where they were last year, that's been very encouraging. It's what helped drive what was really really strong margin performance in the quarter.
When you look at essentially flat.
Operating margins on plus or minus two 5% revpar growth in less than 1% expense growth for occupier room.
Youre seeing really really strong controls so I do think wages.
Do think wages generally have stabilized I think the expense growth outlook for 2024 is much better and much cleaner than it was when we looked at 'twenty three and again you saw that in the transition from the second quarter to the third quarter, where we had significant expense growth in the second quarter, because we had difficult expense.
Comps from the second quarter of last year. Those operating models now have largely normalized we will have a more a more normalized comparison as we look into next year and again, we feel better that we're going to have expense growth that's going to look much more like kind of inflationary type of growth next year versus.
The unique comparisons we had this year.
John that's helpful is that does that mean that kind of two 5% Revpar growth next year should generate those same sort of flat margins.
Yes.
Again, I don't want to get out over our skis on where we think 50 year is going to translate I would say that two 5% revpar growth historically has been where we felt.
We could breakeven from a margin perspective and that played out in the third quarter.
You think some of that was our ability to eliminate some contract labor and I think some of that going forward is going to be what mix is generating that revpar par growth and mix of rate and occupancy. We did it this quarter on essentially zero percent ADR growth that was actually slightly negative we get it on all occupancy growth my.
Vacations that we probably need a little bit more than that next year to breakeven on margins, but it's really premature to get too far into that conversation given where we are in the budget process.
Sure two other quick ones for me.
<unk> talked about wanting to get potentially back into the acquisition side of things.
Anything youre looking at the Glamping side or on the yields.
Youll possibility and future growth from traditional hotels, just too attractive at this point.
No the yield look the yield on the the Glamping opportunities are still interesting I think that we've announced that we have a development underway at our Fredericksburg asset and then we do have a mezzanine loan that's outstanding that's part of the clamping opportunities beyond that.
We've been focused on kind of the capital allocation priorities that we've talked about before but the business continues to perform very well of the yield profile of the business is still very compelling.
Finally from me.
Ncis portfolio continues to deliver terrific results, but it's also sit in the kind of in the pathway of what's going to be the highest supply growth in the country.
In the Dallas Fort worth Metroplex, and I'm, just wondering if we're going to be.
Running over over some of the supply deliveries or if you feel good.
Our assets are maybe a little bit.
More out of the way of that path of growth.
Yes.
The one thing that I constantly remind everyone. When we talk about DFW is just how large and broad that that market really is and so there are so many different pockets of the DFW market and again. It is one of the higher supply growth markets in the country. It's obviously, a really really compelling supply growth environment broadly.
For the industry I think when you break down and you look at what's going on in downtown Dallas versus great volume versus Frisco versus Fort worth we don't we're not all that concerned about supply growth affecting next year in the portfolio. The comparisons get much harder, we've obviously had enormous revenue growth and EBITDA growth.
And in that market this year.
I think we can continue this at the same growth rates next year as unrealistic, but we do feel really good that the outlook for that market in particular from a demand.
Active is extremely strong.
Are not particularly concerned with the broader supply.
The numbers that are heading the DFW market.
Sub market specific micro locations in that market feel more insulated.
Yes, perfect that's great. Thank you.
Okay.
Thank you Tom.
Thank you.
I'm not showing any further questions in the queue I would now like to turn the conference back to John <unk>, President and CEO for closing remarks.
Well. Thank you all for joining us today for the third quarter call. We'll look forward to speaking with many of you and seeing many of you in la for NAREIT. Later this month. Thank you all.
This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
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