Q4 2023 Service Properties Trust Earnings Call

Operator: Good morning, and welcome to the Service Properties Trust fourth quarter 2023 earnings conference call. All participants will be in listen only mode.

Good morning, and welcome to the service properties Trust fourth quarter 2023 earnings Conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing.

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Please note this event is being recorded.

Now like the trends in Congress over to Stephen Colbert Director of Investor Relations. Please go ahead.

Stephen Colbert: Good morning. Joining me on today's call are Todd Hargreades, President and Chief Investment Officer, and Brian Donley, Treasurer and Chief Financial Officer. Today's call includes a presentation by management, followed by a question and answer session with analysts. Please note that the recording, retransmission, and transcription of today's conference call is prohibited without the prior written consent of SVC.

Stephen Colbert: Good morning.

Stephen Colbert: Joining me on today's call are Todd hard graves, President and Chief investment Officer, and Brian Donley, Treasurer, and Chief Financial Officer.

Stephen Colbert: Today's call includes a presentation by management, followed by a question and answer session with analysts.

Speaker Change: Please note that the recording retransmission and transcription of today's conference call is prohibited without the prior written consent of SBC.

Stephen Colbert: I would like to point out that today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based on SBC's present beliefs and expectations as of today, February 29th, 2024. Actual results may differ materially from those projected in these forward-looking statements. Additional information concerning factors that could cause those differences is contained in our filings with the SEC, which can be accessed from our website at svcreep.com or the SEC's website. The company undertakes no obligation to revise or publicly release the results of any revision to the four booking statements made in today's conference call. In addition, this call may contain non-GAAP financial measures, including Normalized Funds from Operations or Normalized SFO and Adjusted EBITDA RE. Reconciliations of these non-GAAP financial measures to net income as well as components to calculate AFFO are available in our supplemental operating and financial data package, which can be found on our website. And with that, I'll turn the call over to Todd. Thank you, Stephen, and good morning.

Speaker Change: I would like to point out that today's conference call contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 and other securities laws.

Speaker Change: These forward looking statements are based on Sec's present beliefs and expectations as of today February 29 2024.

Speaker Change: Actual results may differ materially from those projected in these forward looking statements.

Speaker Change: Additional information concerning factors that could cause those differences is contained in our filings with the SEC, which can be accessed from our website.

Speaker Change: S V C dot com.

Speaker Change: Or the Sec's website.

Speaker Change: The company undertakes no obligation to revise or publicly release the results of any revision to the forward looking statements made in today's conference call.

Speaker Change: In addition.

Speaker Change: This call may contain non-GAAP financial measures, including normalized funds from operations or normalized <unk> and adjusted EBITDA Ari.

Speaker Change: Reconciliations of these non-GAAP financial measures to net income as well as components to calculate a SFO are available in our supplemental operating and financial data package, which can be found on our website.

Speaker Change: And with that I'll turn the call over to Todd.

Todd: Thank you Steven and good morning.

Todd W. Hargreaves: SVC's fourth-quarter results reflect themes we are witnessing across the lodging industry as demand is moderated and high operating costs are impacting profits. While we expect market softness to continue during the first half of 2024, we're optimistic that the back half of the year should improve due to macroeconomic factors and improve business and inbound international travel. We are using this time to invest capital in our hotels, which we expect will lead to improved performance and an attractive return on investment. Now on to our results.

Todd: <unk> fourth quarter results reflect themes, we are witnessing across the lodging industry as demand has moderated and high operating costs are impacting profits.

Todd: While we expect market softness to continue during the first half of 2024.

Todd: We're optimistic that the back half of the year should improve due to macroeconomic factors and improved business.

Todd: And inbound international travel.

Todd: We are using this time to invest capital into our hotels, which we expect will lead to improved performance and an attractive return on investment.

Speaker Change: Now onto our results.

Todd W. Hargreaves: During the quarter, we experienced a moderate top-line decline in our hotel portfolio, as year-over-year comparable ADR growth was offset by reduced occupancy, leading to a REVPAR decline of 2.2% and reduced hotel EBITDA, largely due to disruption from 23 active renovations during the quarter. Excluding the hotels experiencing renovation impacts, REF PAR was flat, decreasing by 30 basis points from the previous year's quarter, while total revenues increased We expect the pace of renovations to remain elevated through 2024.

Speaker Change: During the quarter, we experienced a moderate top line decline in our hotel portfolio.

Speaker Change: As year over year comparable ADR growth was offset by reduced occupancy leading to a revpar decline of two 2% and reduced hotel EBITDA.

Speaker Change: Largely due to disruption from 23 active renovations during the quarter.

Speaker Change: Excluding the hotels experienced some renovation impact revpar was flat decreasing by 30 basis points from the previous year quarter, while total revenues increased $7 $1 million led by F&B sales.

Speaker Change: We expect the pace of renovations to remain elevated during 2024.

Todd W. Hargreaves: Our portfolio of full-service hotels gained 40 basis points of RAPFAR over the previous year quarter, led by gains in our group and contract segments, which were up 6.2 percent and 10.2 percent year-over-year, respectively. Strong group business was driven by corporate demand at our hotels in Cambridge, Las Vegas, and San Francisco. And contract revenues fueled sizable ADR increases at our Synesta-branded hotels in Redondo Beach, San Juan, and Kauai. The notable $7.1 million of increased revenues mentioned earlier was mostly the result of banquet and catering, as well as expanded hours at our F&B outlets and our three downtown Chicago Royal Synesta properties. Our portfolio of select service hotels experienced the most disruption during the quarter, leading to a rapid decline of 5.8% year-over-year, as 18 of our 61 hotels were under renovation. Our Sinesta Select portfolio grew rapidly by 1.3%, much of which was driven by airline contract revenues in the Atlanta, Phoenix, and Los Angeles markets.

Speaker Change: Our portfolio of full service hotels gained 40 basis points of Revpar over the previous year quarter led by gains in our group and contract segments, which were up six 2% and 10, 2% year over year, respectively.

Speaker Change: Strong group business was driven by corporate demand at our hotels in Cambridge, Las Vegas, and San Francisco and contract revenues fueled sizeable ADR increases at our Sonesta branded hotels in Redondo Beach, San Juan and Hawaii.

Speaker Change: <unk> $7 $1 million of increased revenues mentioned earlier was mostly the result of banquet and catering as well as expanded hours at our F&B outlets and our three downtown Chicago Royal Sonesta properties.

Speaker Change: Our portfolio of select service hotels experienced the most disruption during the quarter, leading to a revpar decline of five 8% year over year.

Speaker Change: 18 of our 61 hotels were under renovation.

Speaker Change: Our sonesta select portfolio grew revpar by one 3%.

Speaker Change: Much of which was driven by airline contract revenues in the Atlanta, Phoenix and Los Angeles markets.

Todd W. Hargreaves: Our extended stay portfolio experienced a 2.8% decline in rep par year-over-year when excluding three hotels under renovation. This segment has seen reduced occupancy from non-repeat long-term extended stay business for medical related and project-based accounts, while shorter-term stays with higher ADRs have increased. The results in this segment were largely market dependent, with positive red parts relative to 2022 at our extended stay hotels in Boston, San Francisco, and Sunnyvale offset by declines in San Diego, Reno, Dallas, and Atlanta. Segmentation in our portfolio shifted away from transient, which represented 72.5% of total revenues in Q4, due to a continued softening in leisure demand, while group X increased 1.3% year over year to 18.1% of revenues, and contract mix increased 80 basis points to 7.3%.

Speaker Change: Our extended stay portfolio experienced a two 8% decline in revpar year over year, when excluding three hotels under renovation.

Speaker Change: This segment has seen reduced occupancy from non repeat long term extended stay business for medical related and project based accounts.

Speaker Change: While shorter term stays with higher ADR as have increased.

Speaker Change: The results in this segment were largely market dependent with positive revpar relative to 2022 at.

Speaker Change: At our extended stay hotels in Boston, San Francisco, and Sunnyvale, offset by declines in San Diego, Reno, Dallas and Atlanta.

Speaker Change: Segmentation in our portfolio shifted away from transient which represented 72, 5% of total revenues in Q4 due to a continued softening in leisure demand while group <unk> increased one 3% year over year to 18, 1% of revenues and contract mix increased 80 basis points to seven 3%.

Todd W. Hargreaves: 2024 full-year growth pace is up $19 million, or 22.5% over the same time last year, with strong growth across all our operators. OTA revenue as a percentage of total revenues decreased from 27.6% to 25.9% year-over-year during the quarter, and our operators continue to focus efforts on driving bookings to their websites to lessen the dependency on third-party channels that charge commission. VINESTA remains focused on building its brand through spending on advertising, marketing, and IT initiatives.

Speaker Change: 2020 for full year group pace group pace is up $19 million or 22, 5% over the same time last year.

Speaker Change: With strong growth across all of our operators.

Speaker Change: O T. A revenue as a percentage of total revenues decreased from 27, 6% to 25, 9% year over year during the quarter and our operators continue to focus efforts on driving bookings to their websites to lessen the dependency on third party channels the charge commissions.

Speaker Change: <unk> remains focused on building its brand their spend on advertising marketing and it initiatives.

Todd W. Hargreaves: Travel pass continues to see increased consumer adoption, evidenced by the mix of room nights and semester's full service hotels increasing by 16.5% year over year. However, heightened operating expenses are impacting margins, and while our operators lessen their reliance on contract labor by filling open positions. Below the GOP line, expenses have increased, notably real estate taxes up $2.5 million from Q4 2022 and insurance costs up $2.4 million from increased premiums, as well as deductibles paid on a higher number of claims.

Speaker Change: <unk> continues to see increased consumer adoption evidenced by the mix of room nights, just messaged full service hotels, increasing by 16, 5% year over year.

Speaker Change: I'm getting the operating expenses are impacting margins and while our operators lessens our reliance on contract labor by filling open positions.

Speaker Change: Below the GOP line expenses have increased notably real estate taxes up to $5 million from Q4, 2022, and insurance costs up $2 $4 million from increased premiums as well as deductibles paid on a higher number of claims.

Todd W. Hargreaves: We expect near-term disruption in our portfolio as renovations are completed during the upcoming quarters. However, we are already starting to see the benefits of these renovations at some of our recently renovated hotels, with substantial rent power increases, and we are expecting upcoming renovation hotels to also benefit from these much needed improvements. Turning to our net lease portfolio, which represents 45% of SVC's portfolio by investment as of December 31, 2023, our 752 service-oriented retail net lease properties were 97.1% leased with a weighted average lease term of 8.8 years.

Speaker Change: We expect near term disruption in our portfolio as renovations are completed during the upcoming quarters.

Speaker Change: However, we are already starting to see the benefits of these renovations at some of our recently renovated hotels with substantial revpar increases and we are expecting upcoming renovation hotels to also benefit from these much needed improvements.

Speaker Change: Turning to our net lease portfolio, which represents 45% of our species portfolio by investment as of December 31, 2023 or.

Speaker Change: 752 service oriented retail net lease properties were 97, 1% leased with a weighted average lease term of eight eight years.

Todd W. Hargreaves: Our lease maturities are well laddered, and only 2.1% of our net lease minimum rents expire prior to the end of 2024. The aggregate coverage of our net lease portfolio's minimum rents was 2.46 times on a trailing 12-month basis as of December 31, 2023. The decline sequentially is largely driven by software EBITDAR reported by TA for Q4 2023.

Speaker Change: Our lease maturities are well ladder and only two 1% of our net lease minimum Ras expire prior to the end of 2024.

Speaker Change: The aggregate coverage over net lease portfolios minimum rents was 2.46 times on a trailing 12 month basis as of December 31, 2023.

Speaker Change: The decline sequentially is largely driven by softer EBITDAR reported by T. A for Q4 2023.

Todd W. Hargreaves: Notably, the increase in fuel margins that TA benefited from post-pandemic due to increased trucking activity has returned to more normalized levels, consistent with levels immediately preceding the pandemic. And these properties remain some of our most stable investments, as rent payments are guaranteed by an investment grade rated subsidiary of BP. Frank coverage for other net retail net lease tenants was stable at 3.7 times. Transaction activity during the quarter consisted of no acquisitions and nine net lease dispositions for an aggregate sales price of 8.8 million dollars. As we have discussed previously, we continually evaluate opportunities to optimize our portfolio, specifically trimming our lodging portfolio of lower performing hotels that have been a headwind to overall EBITDA. After careful analysis, we have begun to market 22 SINESTA hotels, totaling 2,832 keys for disposition, including nine SINESTA ES suites, five Simply Sweet, seven Synesta Selects, and one full-service Synesta Hotel.

Notably the increase in fuel margins that benefited from post pandemic due to increased trucking activity has returned to more normalized levels consistent with levels immediately preceding the pandemic and these properties remain some of our most stable investments as rent payments are guaranteed by investment grade rated subsidiary of V. P.

Speaker Change: Rent coverage for our other net retail net lease tenants was stable at three seven times.

Speaker Change: [noise] transaction activity during the quarter consisted of no acquisitions and nine net leased dispositions for an aggregate sales price of $8 $8 million.

Speaker Change: As we have discussed previously we continually evaluate opportunities to optimize our portfolio.

Speaker Change: Specifically trimming our lodging portfolio lower performing hotels would have been a headwind to overall EBITDA.

Speaker Change: After careful analysis, we have begun to market 22, sonesta hotels totaling 2832 keys for disposition, including nine Sonesta Es suites.

Speaker Change: <unk> simply suites.

Speaker Change: Seven Sonesta slacks, and one full service hotel.

Todd W. Hargreaves: These hotels have a net book value of $162 million and an aggregate reported negative EBITDA of $4.7 million for 2023. In addition, each of these hotels is slated for renovation in future years, which should reduce our overall capex spend. We expect that aggregate REVPAR and hotel EBITDA margins for the remaining hotel portfolio will improve with the removal of the subset of hotels. We also have one other hotel under contract to sell for $3.3 million. That's part of our Radisson.

These hotels have a net book value of $162 million and in aggregate reported negative EBITDA of $4 $7 million during 2023.

Speaker Change: In addition, each of these hotels were slated for renovation in future years, which should reduce our overall capex spend.

Speaker Change: We expect that aggregate Revpar and hotel EBITDA margins for the remaining hotel portfolio will improve with the removal of the subsidy the hotels.

Speaker Change: We also have one other hotel under contract to sell for $3 $3 million, that's part of a Radisson agreement.

Todd W. Hargreaves: To wrap up my comments before turning it over to Brian, we are confident that the hotel portfolio will see improved financial and operational performance as renovation capital is invested and after the expected dispositions of the 22 hotels that I discussed. In addition, our net lease portfolio provides consistent, dependable cash flows with 68% of annual minimum rents coming from an investment grade rated tenant and VP. With over $750 million of total liquidity and a large pool of highly valuable unencumbered assets, our balance sheet is well positioned with no debt maturities until 2025. I will now turn the call over to Brian to discuss our financial results in more detail. Thanks, Todd. Good morning.

Speaker Change: To wrap up my comments before turning it over to Brian We are confident that the hotel portfolio will see improved financial and operational performance is renovation capital is invested and after the expected dispositions of the 22 hotels that I discussed.

Brian E. Donley: In addition, our net lease portfolio provides consistent dependable cash flows with 68% of annual minimum rents coming from an investment grade rated tenant and V. P.

Brian E. Donley: With over $750 million of total liquidity in a large pool of highly valuable unencumbered assets, our balance sheet is well positioned with no debt maturities until 2025.

Brian E. Donley: I will now turn the call over to Brian to discuss our financial results in more detail.

Brian E. Donley: Thanks, Todd and good morning, Scott.

Brian E. Donley: Starting with our consolidated financial results for the fourth quarter of 2023, normalized FFO was $50 million or $0.30 per share versus $0.44 per share in the prior year quarter. Just Adiba to RE decreased 6.2% year-over-year to $141.2 million. Our results this quarter, as compared to the prior year, were impacted by higher expense, a decline in hotel needs, and a lower rental income record. Rental income decreased by $4.1 million this quarter compared to the prior year, largely as a result of our percentage rents recognized last year under our historical lease terms with TA, partially offset by increased minimum rental income recognized under the revised terms of our leases with TA following the BP transaction last May Turning to the performance of our hotel portfolio, for our 219 comparable hotels this quarter, rent power decreased by 2.2%, the gross operating profit margin percentage declined by 210 basis points to 26.3%, and gross operating profit decreased by $6.4 million from the prior year period. Below the GOP line, costs that are comparable entails increased $4.9 million from the prior year, driven primarily by increased property insurance and real estate tax expense.

Brian E. Donley: Starting with our consolidated financial results for the fourth quarter of 2023 normalized <unk> was $50 million or <unk> 30 per share versus 44 cents per share in the prior year quarter.

Brian E. Donley: Adjusted EBITDA decreased six 2% year over year to $141 $2 million.

Brian E. Donley: Our results this quarter as compared to the prior year were impacted by higher interest expense a decline in hotel EBITDA and lower rental income recognized.

Brian E. Donley: Rental income decreased by $4 $1 billion this quarter compared to the prior year largely as a result of our percentage rents recognized last year under our historical lease terms with T. A partially offset by increased minimum rental income recognized under the revised terms of our leases with Ta following the BP transaction last may.

Brian E. Donley: Turning to the performance of our hotel portfolio for our 290 comparable hotels this quarter Revpar decreased by two 2% gross operating profit margin percentage declined by 210 basis points to 26, 3% gross operating profit decreased by $6 $4 million from the prior year period.

Brian E. Donley: Below the GOP line costs of our comparable hotels increased $4 $9 million from the prior year, driven primarily by increased property insurance and real estate tax expense.

Brian E. Donley: Our 221 hotels generated hotel leave at $43.6 million, a 19.3% decline from the prior year, and below our guidance range of $45 to $49 million, driven by higher expenses and renovation disruption. By service level, Hotel Ibiza URBA declined $6.1 million for our 49 full-service hotels, $3.1 million for our 61 select service hotels, and $2.8 million for our 111 extended stay hotels. Turning to our expectations for Q1, we're currently projecting full-quarter Q1 rev power of $77 to $80 and hotel EBITDA in the $28 to $31 million range. We will continue to see softer seasonal results through the remainder of the winter months before activity picks up in the spring. Our portfolio will also see continued disruption in 2024, as hotels we have under renovation.

Brian E. Donley: Our 221 hotels generated hotel EBITDA of $43 $6 million of 19, 3% decline from the prior year and below our guidance range of $45 million to $49 million driven by higher expenses renovation disruption.

Brian E. Donley: By service level hotel EBITDA year over year declined $6 $1 million for our 49 full service hotels $3 $1 billion for our 61 select service hotels and $2.8 million for our 111 extended stay hotels.

Brian E. Donley: Turning to our expectations for Q1, we currently projected full quarter Q1, Revpar of 77 to $80 and hotel EBITDA in the $28 million to $31 million range.

We will continue to see softer seasonal results through the remainder of the winter months before activity picks up in the spring our portfolio will also see continued disruption in 2024 hotels, we have under renovation.

Brian E. Donley: Turning to the balance sheet during the fourth quarter, we successfully executed on our new eight year $1 billion senior secured notes offering at 858% and repay all $1 2 billion of unsecured notes that were scheduled to mature in 2024.

Brian E. Donley: Interest expense is projected to be $91 $5 million for the first quarter of 2024. Following these financings.

Brian E. Donley: Turning to the balance sheet, during the fourth quarter, we successfully executed on a new eight-year, $1 billion senior secured notes offering at 8.58% and repaid all $1.2 billion of unsecured notes that were scheduled to mature in 2024. Interest expense is projected to be $91.5 million in the first quarter of 2024 following these financings. We currently have $5.6 billion of fixed rate debt outstanding with a weighted average interest rate of 5.94%.

Brian E. Donley: We currently have five $6 billion of fixed rate debt outstanding with a weighted average interest rate of 594%.

Brian E. Donley: Our next debt maturity is $350 million senior notes maturing in March 2025.

Brian E. Donley: We currently have $100 million of cash in our $650 million revolving credit facility is undrawn for total liquidity of $750 million.

Brian E. Donley: Turning to investing activities during the fourth quarter, we sold nine net leased properties for a total price of $8 $8 million.

Brian E. Donley: Our next debt maturity is $350 million of senior notes maturing on March 2025. We currently have $100 million of cash in our $650 million Revolving Credit Facility, which is under on for total liquidity of $750 million. Turning to investing activity, during the fourth quarter, we sold nine net lease properties for a total price of $8.8 million. Additionally, we made $106 million in total capital improvements on our properties during the fourth quarter. And we expect to make capital expenditures of $250 to $275 million in 2024 as we continue to ramp up our renovation program within the hotel portfolio. Of this capital spend, we expect $80 to $100 million of maintenance-type capital, with the rest going towards renovation capital. We expect 36 hotels across all of our service levels to be under renovation throughout 2024. In January, we announced our regular quarterly common dividend of 20 cents per share, which we believe is well covered, representing a 48% normalized FFL payout ratio for the year ended 2023.

Brian E. Donley: You made $106 million of total capital improvements at our properties during the fourth quarter, and we expect to make capital expenditures up $250 million to $275 million in 2024, as we continue to ramp up our renovation program within the hotel portfolio.

Brian E. Donley: This capital spend we expect $80 million to $100 million of maintenance capital with the rest going towards renovation capital.

Brian E. Donley: We expect 36 sub travels across all of our service levels to be under renovation throughout 2024.

Brian E. Donley: In January we announced our regular quarterly common dividend of <unk> 20 per share, which we believe is well covered representing a 48% normalized <unk> payout ratio for the year ended 2023.

Speaker Change: That concludes our prepared remarks, we're ready to open the line for questions.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys.

Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

Speaker Change: Our first question comes from Bryan Maher with B Riley FBR. Please go ahead.

Bryan Anthony Maher: Thank you and good morning.

Bryan Anthony Maher: Just a few from me on the hotel renovations can you try to quantify for us.

Operator: That concludes our prepared remarks. We're ready to open the line for questions. We will now begin the question and answer session. To ask a question, you may press star and then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key.

What do you think that that's going to need a hotel margins Android RASK are throughout the year, and then maybe drill down a little bit on the non maintenance capex spend.

Spend you know what type of level of activity is going to go on at those 36 hotels.

Bryan Anthony Maher: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. Our first question comes from Bryan Maher with B. Reilly FBR. Please go ahead. Thank you and good morning.

Bryan Anthony Maher: And does any of that include the Nautilus that you bought last year in South Beach.

Speaker Change: Good morning, Brian I'll start.

Speaker Change: You for the question.

Speaker Change: As far as quantifying the disruption and potential activity.

Speaker Change: It's going to be a little choppy in Q4, we had 23 hotels under renovation and we saw a significant reduction in revpar for the hotels.

Todd W. Hargreaves: Just a few for me. On the hotel renovations, can you try to quantify them for us? you know, what you think that that's going to do to hotel margins and or rest are throughout the year. And then maybe drill down a little bit on the non-maintenance capex spend. You know what type of level of activity is going to go on at those 36 hotels? And does any of that include the Nautilus that you bought last year in South Africa? Good morning, Brian. I'll start.

Speaker Change: The 20% range.

Speaker Change: EBITDA pretty much eroded for that.

Speaker Change: <unk> Hotel portfolio said as we look forward, we're going to have hotels coming out of renovation, where you get a nice lift and the expected improvement in the position of the hotel Revpar index and so forth. So we're going to have some ups and downs are net net we're projecting revpar it won't be as drastic.

Todd W. Hargreaves: Thank you for the question. As far as quantifying the disruption and potential activity, it's going to be a little choppy. You know, in Q4, we had 23 hotels under renovation, and we saw a significant reduction in the rent bar for the hotels in the 20% range. And EBITDA pretty much eroded for that hotel portfolio set. As we look forward, we're going to have hotels coming out of renovation where you get a nice lift and the expected improvement of the position of the hotel and the rent bar index and so forth. So we're going to have some ups and downs.

Speaker Change: Is the 20% Revpar decline after the 'twenty three sub say overall.

Speaker Change: Overall, we're projecting about a 1% to 2% disruptive displacement need revpar for the whole year. So again, we're gonna have stopped going down stuff coming back.

Speaker Change: There'll be some offsetting going on so.

Speaker Change: So it won't be as material in our view today for the year and as far as what we're spending you know we've got the 17 hyatt's.

Speaker Change: That we are in full swing in Q4, and those are expected to wrap up.

Speaker Change: In early Q2.

Todd W. Hargreaves: Net, net, we're projecting rent bar won't be as drastic as the 20% rent bar decline for the 23 subset. Overall, we're projecting about a 1 to 2% disruptive displacement in rent bar for the full year. So again, we're going to have stuff going down, stuff coming back, there'll be some offsetting going on. So it won't be as material, in our view today, for the year.

Speaker Change: That's everything from guest rooms, and public space. Some exterior work and the same is going to be done.

Speaker Change: The renovation capital the Sonesta portfolio, we've got a couple of full service hotels Hilton head property. For example, we're doing all of the rooms off season.

Speaker Change: After months here now.

Speaker Change: Now, we're going to do the public space at the end of the year.

Speaker Change: Summer seasons over and we Havent.

Todd W. Hargreaves: But as far as what we're spending, you know, we've got the 17 Hyatt hotels that were in full swing in Q4, and those are expected to wrap up in early Q2. And you know that's everything from guest rooms and public space and some exterior work, and the same is going to be done for the renovation capital. And that's the portfolio. We've got a couple of full-service hotels. You know, our Hilton Head property, for example, we're doing all the rooms off-season in the winter months here and now. We're going to do the public space at the end of the year when the summer season's over.

Speaker Change: Full slate of select service and extended stay hotels that were doing the same thing where we've gone through the ROE is the public areas some facade work.

Speaker Change: And so forth so it's a pretty pretty comprehensive program.

Speaker Change: Okay.

Speaker Change: So they're not buying at all of those things.

Speaker Change: The maintenance capital of that.

Speaker Change: That we that we mentioned does not include a lot from the Nautilus. The majority of the Nautilus is like what are you going to be completed in 2025.

Speaker Change: So it does not include any maintenance or renovation related to that.

Speaker Change: Okay.

Speaker Change: Two more I mean, you made some comments about you know I get at the year over year stuff that you talked about the gas margins are getting back to pre pandemic levels from the elevated that we saw over the last couple of years I just want to clarify, though that given that lease structure you have with BP. None of that is really relevant to you and what you.

Brian E. Donley: And we have a full slate of select service and extended stay hotels that we're doing the same thing. We're going through the rooms, the public areas, some facade work, and so forth. So it's a pretty comprehensive program. I'm going to turn it over to you.

Speaker Change: Get rent wise, it maybe just impacts what the coverages, but with BP as a credit it's kind of like who cares right.

Bryan Anthony Maher: So, Brian, the Nautilus is the maintenance capital that we mentioned does not include a lot from the Nautilus. The majority of the Nautilus is likely going to be completed in 2025, so it does not include any maintenance or renovation related to that. Okay. Two more.

Speaker Change: Well I think that's exactly right, Brian we just you know.

Speaker Change: Illustrating that we do report coverage for our whole portfolio and it's such a high weighting in that calculation, but you're 100% right and we have we sleep well at night, knowing we have the credit behind us and those lease payments.

Speaker Change: Okay, and then last for me and I'll hop back in the queue. We don't talk much about your net leased assets outside in Ta.

Brian E. Donley: I mean, you made some comments about TA and, you know, I get it, the year-over-year stuff, but you talked about the gas march. I just want to clarify, though, that given the lease structure you have with BP, none of that is really relevant to you and what you get rent-wise. It maybe just impacts what the coverage is, but with BP as a credit, it's kind of like, who cares, right? Exactly right, Brian.

Speaker Change: But theres been a lot in the press regarding retail and retail demand it seems to be strong for real estate.

Speaker Change: And I know that you've been selling a few assets kind of you know smallish noncore property can you just give us a little bit of color on how many more sales. They are to go kind of what you're selling and when you do go to re lease those properties, what kind of rent roll ups are you, saying.

Brian E. Donley: We're just, you know, illustrating that we do report coverage for our whole portfolio and it's such a high weighting in that calculation, but you're 100% right. We have, we sleep well at night knowing we have the credit behind us in those lease payments. Okay, and then last, man, I'll hop back into Q.

Speaker Change: Sure.

So yes, there's a lot of good points. There we're seeing the same thing on the retail side, we're starting to see more demand, especially in the investment sales market.

Speaker Change: Our portfolio specifically over the past few years, you've really seen us sell mostly vacant properties as.

Brian E. Donley: You know, we don't talk much about your net lease assets outside of TA, but there's been a lot in the press regarding retail and retail, you know, demand, strengths, and strengths that we need to look at, particularly in anti-tax payments. So, yeah, there are a lot of good points there. We're seeing the same thing on the retail side. We're starting to see more demand, especially in the investment sales market. In our portfolio specifically, over the past few years, you've really seen us sell mostly vacant properties as we really haven't really been buying anything, and we've just been selling properties as they become vacant, and we don't think we have a good sense for leasing those. What you might see us do going forward now that we're getting back into, they're still volatile, but with a little bit more stable capital markets and buyer activity out there, you're likely going to see us sell, potentially sell some more stable assets. I think we've cycled through most of the vacant stuff that we knew were issues when we bought SMTA back in 2019. But we have, I think we have about 20 vacant properties left. There's a handful more that are probably coming.

Speaker Change: We really haven't really been buying anything and we've just been selling properties as they become vacant and we don't think we have a good sense of leasing those are what you might see us do going forward now that we're getting back into it.

Speaker Change: They're still volatile, but little bit more stable capital markets in buyer activity out there as you youre likely going to see us sell potentially sell some more stable assets I think we have cycled through most of the bacon stuff that we are that.

Speaker Change: We knew where issues when we bought S&P a back in 2019.

Speaker Change: But we have I think we have about 20 vacant properties last there's a handful more that are that are probably coming I think we're up to 97% occupancy in terms of number of properties.

Speaker Change: So.

Speaker Change: And then in terms of the the rent roll ups generally we bad at least mainly mainly maintaining ranch or rolling a branch. There is some situations you see it a lot with the movie theaters. If we release those a lot of those where we're very high rents on a per square foot basis for the size of those properties. There was a lot of T I amortization.

Brian E. Donley: I think we're up to 97% occupancy in terms of the number of properties. And then, in terms of the rent roll-ups, generally, we've been at least maintaining rents or rolling up rents. There are some situations, you see it a lot with the movie theaters, if we release those, a lot of those were very high rents on a per square foot basis for the size of those properties.

Speaker Change: Those rats as well so so that's why you might see some rent roll roll downs some of the longer term sale leasebacks that I bet spirit that the previous owner had done a lot of times those rents tend to be above market as well. So you see some rent roll downs, there, but generally where you know.

Brian E. Donley: There was a lot of TI amortization in those rents as well, so that's why you might see some rent roll-downs. Some of the longer-term sale leasebacks that the previous owner had done, a lot of times those rents tend to be above market as well, so you see some rent roll-downs there. But generally, we're, I think if you look back on the last few years, we're probably averaging about 2% rental growth for that portfolio per year. Okay, thank you very much. Our next question comes from Dori Kesten with Wells Fargo. Please go ahead. Thanks. Good morning.

Speaker Change: I think if you look back the last few years, we're probably averaging about 2% rental growth for that portfolio per year.

Speaker Change: Okay. Thank you very much.

Speaker Change: Sure.

Speaker Change: Our next question comes from Dori Kesten with Wells Fargo. Please go ahead.

Dori Lynn Kesten: Thanks, Good morning.

Dori Lynn Kesten: Assuming the 22.

Dori Lynn Kesten: But once you're in 2019 pro forma Revpar and hotel EBITDA margins be.

Brian E. Donley: Assuming the 22 finesses are sold, what would your 2019 pro forma Rev par and hotel even a margin state? Sure, I can pull that up for you. So, as I mentioned in the prepared remarks, our EBIT dial was actually negative for those 22 hotels. It was about $4.7 million. So if you take out those hotels for the year, EBITDA margin would be 18.3%, and REVPAR would be $92.18 for just the semester. Yeah, the sale of hotels in 19 generated about $19 million of hotel leave at the end of the year. In 2019, the 22 SNSs generated $19 million in EBITDA, is that what you said? Yeah, some of them were under different flags, and, you know, pre-pandemic, that was the full-year hotel EBITDA. Oh, God.

Dori Lynn Kesten: Sure I can pull that up for you so as I mentioned on.

In the prepared remarks, our EBITDA was actually negative for those 22 hotels was about negative $4 7 million.

Dori Lynn Kesten: If you take out those hotels for the year EBITDA margin would be 18, 3%.

Dori Lynn Kesten: And revpar would be $92.18 for Jetblue this fastest yeah.

Dori Lynn Kesten: The sale of hotels, and 19 generated about $90 million of hotel EBITDA.

Dori Lynn Kesten: In 2019 that 'twenty two has generated 19 million in EBITDA.

Dori Lynn Kesten: Yes, some of that work under different flags.

Dori Lynn Kesten: That was the full year hotel EBITDA.

Dori Lynn Kesten: Okay.

Brian E. Donley: And is there, you previously talked about returning to prior peak EBITDA margins once the renovation program is complete. Is there anything going on internally at Finesta now that gives you confidence that perhaps you will exceed those prior peak margins? Holding to the side, the upside from the disposition. Sure. Yeah, I mean, and that, Dori, is a good question.

Dori Lynn Kesten: And is there I mean.

You talked about returning to prior peak EBITDA margins once the renovation programs complete there is there anything going on internally up enough to know that gives you confidence that perhaps.

Dori Lynn Kesten: You'll exceed those prior peak margins.

Dori Lynn Kesten: Clothing to decide that the upside from a disposition.

Speaker Change: Sure Yeah, I mean that is a good question. That's one of the reasons that we are.

Brian E. Donley: That's one of the reasons that we are, you know, selling some of these hotels. We've identified these hotels as ones that we don't think would return to those margin levels. But, you know, Synestas continues to be very focused on, you know, expanding the brand awareness, expanding the loyalty program. You know, they're putting, they're not taking any money out of the business.

Speaker Change: Selling some of these hotels, we have identified these hotels is one that we don't think would return to those margin levels.

Speaker Change: But you know sonesta is continues to be very focused on.

Speaker Change: Expanding the brand awareness expanding their loyalty program.

Speaker Change: Yeah, they're putting their not taking any money out of the business. They are putting everything they get from management fees paid by us franchise fees they get for their franchisees all the cash flow, they're getting from other owned hotels.

Brian E. Donley: They're putting everything they get from management fees paid by us, franchise fees they get from their franchisees, all the cash flow they're getting from all their owned hotels, specifically the hotels they own in New York, which are doing very well, all that's going back into the business. So, we are seeing the right things in terms of, you know, the number of loyalty members they have, and the percentage of revenues that are booked through the loyalty program. They continue to put money into their revamped website, mobile app, and customer relationship management system. They still have a lot of room to go there.

Speaker Change: Specifically there are no hotels, they own in New York, which are doing very well all of that is going back into the business.

Speaker Change: So we are seeing the right things in terms of.

Speaker Change: The number of loyalty members. They have the percentage of revenues that are booked through the loyalty program. They continue to put money into their revamped website mobile app a customer relationship management system. They still have a lot of weight a lot a lot of room to go there.

Brian E. Donley: You know, I think a couple of them, and we haven't seen it in terms of performance yet at all of our hotels. Again, I think we will see it once the renovations are complete. But the other thing we are seeing, and we talked about segmentation, is that they've really started to do a good job of building out their national sales platform, and you can see that with the increase in group business that they are starting to pick up. A lot of that is driven by sales and distribution channels rather than a lot of the transience both through not only the website but also through the OTAs.

Speaker Change: You know I think a couple of we had we haven't seen it for all of our hotels in terms of performance yet again, I think we will see it once the renovations are complete.

Speaker Change: But the other thing we are seeing too and we talked about the segmentation.

Speaker Change: They've really they've really done are starting to do a good job of building out their national sales.

Speaker Change: That form and you're seeing that with the the increase in group business that they are starting to pick up a lot of that is driven by our sales and distribution channels rather than a lot of the transient just spoke to not only the website, but also through the O T H. So.

Brian E. Donley: So, to answer your question, you know, we still fully expect to get back to those margin levels. The renovations, I think we'll see an immediate impact from those renovations at the Synesta hotels. There are a number of hotels, specifically a lot of the Royal Synesta and full-service hotels, that they are performing well with, and they are competing and outperforming the market in some cases.

Speaker Change: To answer your question, Yes, we still explore we expect to get back to those margin levels are the renovation I think we will see immediate <unk>.

Speaker Change: Impact from from from those renovations at the Sonesta hotels Theres, a number of hotels, specifically a lot with the Royal Sonesta and full service hotels that they are performing well with than they are.

Speaker Change: Competing and outperforming the market in some cases, so again, it's something we I think we've talked about on previous calls it's again back to the back to the sales where we're looking at the entire portfolio and anytime we put any money into these hotels in terms of renovation, where we're looking at what that return is going.

Brian E. Donley: So, again, it's something we've talked about on previous calls; it's, again, back to sales. We're looking at the entire portfolio, and anytime we put any money into these hotels in terms of renovation, we're looking at what that return is going to be. We're going out several years in terms of what we expect the operating cash flows to look like, and then we layer on the CapEx, not just the renovation CapEx, but the maintenance CapEx. And if we don't think we're going to get a return on that incremental capital, and we're back to margins that we think will compete with the market, that's why they ended up on the sale list. Okay, and I may have missed this. What did you say the total capital spend will be, including ROI? Assuming the snushes are out.

Speaker Change: B, we're going out several years in terms of what we expect the operating cash flow to look like and then we layer on the capex not just a renovation capex, but the maintenance capex and if we don't think we're going to get.

Speaker Change: Our return on that incremental capital and <unk> back to margins that we think you know.

Speaker Change: We will compete with the market.

Speaker Change: That's why they ended up on the sale list.

Speaker Change: Okay and I may have missed this what did you what did you say b I think it's a three year program what will the total capital spend be including airlines.

Speaker Change: So that's those are out.

Brian E. Donley: You know, we didn't give the multi-year number, Dori, but I think, you know, for the next two or three years, we're going to see these elevated levels, you know, as we mentioned in the prepared remarks, it'll be, you know, 250 to 275 this year, and we're going to continue to evaluate and make sure we, as Todd mentioned, the investment makes sense, provide updates as we go along, hotels onto Okay, thank you. Again, if you have a question, please press star, then 1. Our next question comes from Tyler Batory with Oppenheimer. Please go ahead. Hi, good morning. This is Jonathan for Tyler.

Speaker Change: Yeah, we didn't give the multiyear number dori, but I think you know for the next two or three years, we're going to stay at these elevated levels.

Speaker Change: I mentioned in the prepared remarks, it will be.

Speaker Change: 215 to 17 bond this year.

Speaker Change: We're going to continue to evaluate.

Speaker Change: As Todd mentioned, we believe the investment makes sense.

Speaker Change: Absolutely.

Speaker Change: Provide updates as we go along here.

Speaker Change: Oh Charles onto the list.

Speaker Change: Projects forward.

Charles: Alright, thank you.

Speaker Change: Again, if you have a question. Please press Star then one.

Speaker Change: Our next question comes from Tyler <unk> with Oppenheimer. Please go ahead.

Speaker Change: Hi, Good morning. This is Jonathan on for Tyler Thanks for taking our questions.

Jonathan David Jenkins: Thanks for taking our questions. First one for me, maybe a follow up on the CapEx. Can you help us think about how much of that is potentially spillover from this from 2023 last year and any color on the cadence over the year? I mean, I assume it's largely front half weighted.

Jonathan: First one for me maybe a follow up on the Capex can you can you help us think about how much of that is potentially spillover from that from 2023 last year and any color on the cadence of the year.

Jonathan: Assume it's.

Jonathan: Largely front half weighted.

Brian E. Donley: Yeah, it's a great question. I think I would say, probably, 20 to 5 to 40 million is probably deferred from 2023. And as far as the allocation by quarter will go, it's a little hard to predict, but I think you're right. Q1 and Q4 bookending the year are where we'll see the most activity as we try to plan these renovations around the peak seasons for us, which, you know, generally speaking, start in early spring and run through early November. Okay, very good. And thank you for all the color there.

Speaker Change: Yes, it's a great question I think.

Speaker Change: I would say.

Speaker Change: Probably.

Speaker Change: $25 million to $40 million is probably deferred from 2023.

Speaker Change: And as far as how the allocation by quarter will go it's a little hard to predict but I think you're right. It's Q1 and Q4 book ending the year as we will see the most activity as we tried to play in these renovations around the peak seasons for us, which generally speaking starts in early spring and runs through early November.

Speaker Change: Okay very good.

Speaker Change: Thank you for all the color there and then switching gears to maybe more recent demand trends.

Todd W. Hargreaves: And then switching gears to maybe more recent demand trends for the hotel portfolio. Todd, I believe you maybe noted some market softness in the first half of the year. Any additional color on that and any pockets of weakness or slowing that are worth calling out? Anything out there that potentially gives you pause as you look out?

Speaker Change: The hotel portfolio Todd I believe you noted some market softness in the first half of the year I mean, any additional color on that in any pockets of weakness or slowing that are worth calling out anything out there that potentially gives you pause if you look out.

Todd W. Hargreaves: Sure, it's mostly related to leisure travel, but we're also seeing a slowdown in business travel. We, you know, business travel still is probably in our portfolio, at least around, 70 to 80 percent of where it was in 2019, and in previous quarters, we've continued to see that tick up, and that's really slowed down and flattened out. A lot of our resort hotels we've seen declines year over year in REF PAR, which isn't surprising given the large increases that we saw back in 21 and 22 for those hotels specifically, but yeah, the softness is mostly leisure and business. We have a lot more exposure to business, and again, another factor in how we identified the hotels we wanted to sell. Most of those are business-oriented hotels. Okay, excellent, and then, maybe, last one from me.

Speaker Change: Sure.

Todd: It's mostly related to.

Todd: Leisure travel, but we're also seeing a slowdown in business travel.

Todd: We have no business travel still it's probably.

Todd: In our portfolio at least around.

Todd: 70% to 80% of where it was in 2019.

Todd: In previous quarters, we had continued to see that tick up and that's really slowed down and flattened out.

Todd: A lot of our resort hotels, we've seen declines year over year in Revpar, which which isn't surprising given.

Todd: Given that the large increases that we saw.

Todd: Back in 'twenty, one and 'twenty two for those hotels, specifically, but yeah. The softness is mostly in leisure and in business and we have a lot more exposure exposure to business and again another.

Todd: Another factor in how we identified the hotels, we wanted to sell most of those are business oriented hotels.

Speaker Change: Okay excellent and then maybe last one for me and maybe provide some additional color on per occupied room expenses, and where labor expense has trended as a blade and your general expectation for expense inflation this year.

Todd W. Hargreaves: Can you maybe provide some additional color on per-occupied room expenses and where labor expenses have trended as a blade in your general expectation for expense inflation this year? In terms of, you know, we talked about insurance and taxes, but in terms of room expenses, it is labor. Labor's just overall the largest expense by far. What we're seeing there is that most of the open positions have been filled in our portfolio across all our operators. So there's a lot less reliance on contract labor, which is positive, and it gives us, as an employer, more negotiation in terms of wages and salaries. What is impacting labor to increase it is that you're continuing to see significant year-over-year hourly wage increases, even for non-contract labor, specifically for housekeeping, front desk, and attendants, those types of positions.

And in terms of.

Speaker Change: We talked about insurance.

Speaker Change: And taxes, but in terms of rooms expense. It's it is labor labors.

Speaker Change: Just overall the largest expense by far.

Speaker Change: What we're seeing there is most of the open positions have been filled.

Speaker Change: In our portfolio across all of our operators. So theres a lot less reliance on contract labor, which is a positive.

Speaker Change: And it gives us as an employer more more negotiation in terms of.

Speaker Change: Of of of wages and salaries are what what is impacting labor.

Speaker Change: To increase it is that you're continuing to see significant year over year hourly wage increases even for non contract labor, especially specifically for housekeeping front desk F&B attendance those types of positions. So that really hasn't slowed down maybe slow down a little bit, but it's still well above.

Todd W. Hargreaves: So that really hasn't slowed down, maybe slowed down a little bit, but it's still well above historical norms. So we're, you know, a large company outside of taxes and insurance, that was probably the largest increase we saw that was impacting margins this past quarter. Okay, great. I appreciate all the color.

Speaker Change: Historical norm, so where.

Speaker Change: Outside of the taxes and insurance that was probably the largest increase we saw in to that where it's impacting margins this past quarter.

Speaker Change: Okay, Great I appreciate all the color that's all for me.

Jonathan David Jenkins: That's all for me. Thank you. Our next question is a follow-up from Bryan Maher on the Riley FBR. Please go ahead.

Speaker Change: Okay. Thank you.

Speaker Change: Our next question is a follow up from Bryan Maher with B Riley FBR. Please go ahead.

Bryan Anthony Maher: Thank you. Just a quick follow-up on your asset sales. Can you give us a little bit of thoughts on the timing of those, how they will play out through the year, kind of what you're thinking on pricing relative to book value, and who are the buyers of these assets? Are they more locals? Just a little color would be helpful.

Bryan Anthony Maher: Just a quick follow up on your asset sales can you give us a little bit of thought.

Bryan Anthony Maher: What's odd.

Bryan Anthony Maher: The timing of the how they play out through the year kind of what youre thinking on pricing relative to book value.

Bryan Anthony Maher: And you know who are the buyers of these assets are they are they more locals just a little color would be helpful.

Bryan Anthony Maher: Sure.

Brian E. Donley: Sure, so the 22, well, let me start with the first one that we talked about briefly on the call. We are selling one Radisson hotel as part of a Radisson agreement that is under contract to sell for $3.3 million that is expected to close in the next 40 or so days. That one was an outlier in that portfolio. It was the only one that was producing negative EBITDA.

Speaker Change: So yeah. So the 22, well, let me start with the first.

Speaker Change: The one that we talked about briefly on that on the call was we are selling one.

Speaker Change: Radisson hotel as part of a Radisson agreement that is under contract to sell for $3 $3 million that is expected to close in the next 40 or so days.

Speaker Change: That one was.

Speaker Change: An outlier in that portfolio it was.

Speaker Change: The only one that was producing negative EBITDA, both us and Radisson wanted to sell it we're taking out of agreement.

Brian E. Donley: Both us and Radisson wanted to sell it, so we're taking it out of the management agreement, but the owner's priority and the guarantee are not getting touched, so that remains the same. But back to the 22, which is the larger part of the portfolio, all 22 of those are on the market now. We haven't called for first round offers yet. We'll probably do that towards the end of March or beginning of April.

Speaker Change: Management agreement, but we are the owners priority and the guarantee are not getting touched that remains the same.

Speaker Change: But back to the 22, which is the larger part of the portfolio. Both at all 22 of those are in the market now we have an.

Speaker Change: Called for first round offers yet, we'll probably do that towards the end of March beginning of April it's.

Brian E. Donley: It's likely, my sense is those are likely, it's not going to be one portfolio buyer. My sense is it's probably going to be anywhere from five to eight buyers if I had to guess. Buying one office or portfolios of three, four, or five hotels, a lot of the buyers. So in terms of timing, my guess is you'll start to see some close in the second quarter, probably the majority in the third quarter.

Speaker Change: It's likely.

Speaker Change: My sense is those are likely its not going to be one portfolio buyer. My sense is it's probably going to be.

Speaker Change: Anywhere from five day buyers, if I had to guess.

Speaker Change: One offs or portfolios of three or four or five hotels.

Speaker Change: A lot of the buyers. So in terms of timing my guess is you'll start to see some clothes.

Speaker Change: In the second quarter, probably the majority in the third quarter.

Brian E. Donley: The buyers for those hotels, a lot of them are the same buyers that we had back in 2021 and 22. We are marketing these encumbered brands, so we're selling them, expecting buyers to enter into long-term franchise agreements with Synesta, just like we did a couple of years ago with the majority of those who were sold brand encumbered. So it's a lot of the same existing franchisees that have had good success and understand the Synesta brand.

Speaker Change: The buyers for those hotels a lot of them are the same buyers that we had back in.

Speaker Change: Sure.

Speaker Change: Back in 2021 and 'twenty two.

Speaker Change: We are marketing these encumbered of brands, so we're selling them.

Speaker Change: Expecting buyers to enter into long term franchise agreements with sonesta, just like we had done a couple of years ago with the majority of those were sold brand encumbered. So there's a lot of the same existing franchisees that have had good success and understand the sonesta brand. So what we've seen so far has been a lot.

Brian E. Donley: So what we've seen so far has been a lot of interest, which isn't surprising, again, because we have that group of previous buyers, but also the transactions that are occurring, it's either the very, very high-end hotels, or it's the hotels kind of at the lower price point, more select service, and extended stay hotels. So not too different than what we see, a lot of interest there, at least preliminary. In terms of pricing versus book value, there are a few variables there. Number one is, you know, it still is a volatile market environment. These had negative EBITDA for the last year, so you're not really throwing an in-place cap rate on them. It's more of a basis play.

Speaker Change: A lot of interest, which which isn't surprising again, because we have we have that that group of previous buyers, but also the transactions that are occurring it's either they're very very high end hotels or it's the hotel was kind of at the lower price point more select service and extended stay hotels. So.

Speaker Change: I'm not too.

Speaker Change: Different than what we.

A lot of a lot of interest there at least preliminary in terms of pricing.

Speaker Change: Versus book value. It's there's a few variables there number one as you know it still is a volatile market environment. These had negative EBITDA right.

Speaker Change: For the last year. So you've got really strong is in place cap rate on it it's more of a basis play so the.

Brian E. Donley: So the other variable there is how much PIP or CapEx that a buyer is going to put into their underwriting in terms of what their overall cost and overall basis would be. So my sense is we may not get all the way to book value, but I don't think it's gonna be too far below that. Again, we haven't, you know, I'll caveat that with we haven't received offers yet and it's a volatile environment, but given where our expectations are and our valuations are, I would say we'd probably be somewhat below that, but not too far.

Speaker Change: The other the other variable there is how much pay.

Speaker Change: For Capex that a buyer is going to.

Speaker Change: Put into there.

Speaker Change: Their underwriting in terms of what their overall cost and overall basis would be.

Speaker Change:

Speaker Change: So my sense is.

Speaker Change: We may not get all the way to book value, but I don't think it's going to be too far below that again, we haven't.

Speaker Change: I'll caveat that with we haven't received offers yet and it's a volatile environment, but given where our expectations are and our valuations are I would say, we'd probably be.

Speaker Change: Somewhat slightly somewhat below that but not too far.

Todd W. Hargreaves: Okay, thank you, that's very helpful. This concludes our question and answer session. I would like to turn the conference back over to Todd Hargreades, President and Chief Investment Officer, for any closing remarks. Thank you everyone for joining today's call and we appreciate your continued interest in SVC. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: Okay. Thank you that's very helpful.

Speaker Change: Sure.

Speaker Change: This concludes our question and answer session.

Speaker Change: I would like to turn the conference back over to Todd Hargreaves, President and Chief investment officer for any closing remarks.

Todd W. Hargreaves: Thank you everyone for joining today's call and we appreciate your continued interest in SBC.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.