Q1 2024 Ashford Hospitality Trust Inc Earnings Call

Greg: Thank you for standing by. My name is Greg, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ashford Hospitality Trust first quarter 2024 results conference call. All lines have been placed on mute to prevent any background noise.

Thank you for standing by my name is Greg and I will be your conference operator today.

Greg: At this time I would like to welcome everyone to the Ashford Hospitality Trust first quarter 2024 results conference call. All lines have been placed on mute to prevent any background noise.

Greg: After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star and the number 1 on your telephone keypad. Once again, star 1. And if you'd like to withdraw your question, please press star 1 again. Thank you. I would now like to turn the call over to Jordan Jennings, Vice President, Investor Relations. Jordan, please go ahead.

Greg: After the Speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press star and the number one on your telephone keypad once again star one.

Jordan Jennings: And if you'd like to withdraw your question. Please press star one again thank you.

Greg: I would now like to turn the call over to Jordan Jennings, Vice President Investor Relations Jordan. Please go ahead.

Jordan Jennings: Good morning, everyone, and welcome to today's conference call to review results for Ashford Hospitality Trust for the first quarter of 2024 and to update you on recent developments. On the call today will be Rob Hayes, President and Chief Executive Officer, Deric Eubanks, Chief Financial Officer, and Chris Nixon, Executive Vice President and Head of Asset Management.

Jordan Jennings: Good day, everyone and welcome to today's conference call to review results for Ashford Hospitality Trust for the first quarter 2024.

Jordan Jennings: See you on recent developments on the call today will be Rob <unk>, President and Chief Executive Officer, Derek Eubanks, Chief Finance Officer, and Chris Nicholson Executive Vice President and head of asset management. The result, as well notice of the accessibility of this conference call on a listen only basis over the Internet were distributed yesterday afternoon in a press release.

Jordan Jennings: The results as well as notice of accessibility of this conference call on a listen-only basis over the Internet were distributed yesterday afternoon in a press release. At this time, let me remind you that certain statements and assumptions in this conference call contain or are based upon forward-looking information and are being made pursuant to the safe harbor provisions of the Federal Securities Regulations. Such forward-looking statements are subject to numerous assumptions and certainties and known or unknown risks, which could cause actual results to differ materially from those anticipated.

Jordan Jennings: These factors are more fully discussed in accompanying filings with the Securities and Exchange Commission. Before you look, statements included in this conference call are only made as of the date of this call, and the company is not obligated to publicly update or revise them. Statements made during this call do not constitute an offer to sell or a solicitation of an offer to buy any security. Securities will be offered only by means of a registration statement and prospectus, which can be found at www.sec.gov.

Jordan Jennings: At that time, I remind you that certain statements and assumptions in this conference call contain or are based upon forward looking information and are being made pursuant to the safe Harbor provisions of the federal Securities regulations.

Jordan Jennings: Such forward looking statements are subject to numerous assumptions, uncertainties and known or unknown risks, which could cause actual results to differ materially from that anticipated. These factors are more fully discussed in the company's filings with the securities and Exchange Commission.

Jordan Jennings: Before looking statements included in this conference call are only made as of the date of this call and the company is not obligated to publicly update or revise them statements made during this call do not constitute an offer to sell or supposed to patient of an offer to buy any securities.

Jordan Jennings: Securities will be offered only by means of a registration statement and prospectus, which can be found at www Dot said he thought that.

Jordan Jennings: In addition, certain terms use this call on armed gas financial measures, reconciliations of which are provided in the company's earnings release and company tables or schedules, which were filed on Form 8K with the SEC on May 7, 2024, and may also be accessed on the company's website at www.htreet.com. Each listener is encouraged to review those reconciliations provided in the earnings release together with all other information provided in the release. Also, unless otherwise stated, all reported results discussed in this call compare the first quarter ended March 31st, 2024 with the first quarter ended March 31st, 2023. I will now turn the call over to Rob Case. Please go ahead, sir.

Jordan Jennings: In addition at certain times during this call on our GAAP financial measures reconciliations of which are provided in the accompanying the earnings release and accompanying tables or schedules, which have been filed on form 8-K with the SEC on May seven 2024 may also be accessed the company's website at www Dot H T REIT dotcom equally I think.

Rob Case: First to review those reconciliations provided in the earnings release together with all other information provided in that release.

Jordan Jennings: Also unless otherwise stated all reported results discussed in this call compare the first quarter ended March 31, 2024 with the first quarter ended March 31, 2023, I will now turn the call over to Rob Hayes. Please go ahead Sir.

Rob Hayes: Good morning, and welcome to our call. After my introductory comments, Deric will review our first quarter financial results, and then Chris will provide an operational update on our portfolio. As we announced earlier this year, we are keenly focused on paying off our strategic corporate financing in 2024. With approximately $107 million remaining, we are making tangible progress with the plan. We have now paid this loan down by almost 50%, and we believe this is a crucial step in positioning Ashford Trust back on the path of growth. Our plan to accomplish this is multifaceted and provides us with significant optionality to achieve this goal.

Rob Case: Good morning, and welcome to our call.

Rob Hayes: It includes raising sufficient capital through a combination of asset sales, mortgage debt refinancings, and non-traded preferred capital rates. We currently have several assets at various stages of the sales process, and while we're unlikely to sell all of the assets, we are working diligently to determine which assets are capturing the most attractive valuations, while also providing the largest impact on our deleveraging efforts. We have sold three assets; we have another three assets under signed purchase and sale agreements, and another five assets under letters of intent. These 11 assets have a combined sale price of approximately $625 million.

Rob Hayes: After my introductory comments Derek will review, our first quarter financial results and then Chris will provide an operational update on our portfolio.

Rob Hayes: As we announced earlier this year, we are keenly focused on paying off our strategic corporate financing in 2024, it's approximately $107 million remaining.

Rob Hayes: We're making tangible progress with the plan. We now have paid this slowed down by almost 50% and we believe this is a crucial step in positioning Ashford trust back on the path of growth. Our plan to accomplish this is multifaceted and provides us with significant optionality to accomplish this goal. It includes raising sufficient capital through a combination of asset sales.

Rob Hayes: Mortgage debt refinancings, and non traded preferred capital raising we.

Rob Hayes: We currently have several assets at various stages of the sales process and while we are unlikely to sell all the assets. We are working diligently to determine which assets are capturing the most attractive valuations. While also providing the largest impact towards deleveraging efforts. We have sold three assets. We have another three assets under signed purchase and sale agreements and another five assets under letter Vince.

Rob Hayes: Yes.

Rob Hayes: These 11 assets have a combined sales price of approximately $625 million.

Rob Hayes: As a demonstration of the significant progress we are making in these efforts, in March, we closed on the sale of the 144-room residence inn located in Salt Lake City, Utah, for $19.2 million. When adjusted for the company's anticipated CapEx, the sales price represented a 4.6% capitalization rate on 2023 net operating income, or 18.2 times 2023 hotel EBITDA. Excluding the anticipated capital spend, the sales price represented a 6% capitalization rate on 2023 net operating income, or 14 times 2023 Hotel Libya DOT.

Rob Hayes: As a demonstration of the significant progress we're making in these efforts in March we closed on a sale of the 144 room residence Inn located in Salt Lake City, Utah for $19 $2 million and adjusted for the company's anticipated Capex. The sale price represented a four 6% capitalization rate on 2023, net operating income or an 18.

Rob Hayes: Two times 2023 hotel EBITDA.

Rob Hayes: Excluding the anticipated capital spend the sales price represented a 6% capitalization rate on 2023 net operating income or 14 times 2023 Hotel EBITDA all the proceeds from the sale were used to pay down debt.

Rob Hayes: All the proceeds from the sale were used to pay down debt. In addition, subsequent to quarter end, we closed on the sale of the 390-room Hilton Boston Back Bay in Boston, Massachusetts for $171 million or $438,000. All of the proceeds from the sale were used for debt reduction, including approximately $68 million to pay down the company's strategic finances. Also, subsequent to Quarter End, we closed on the sale of the 85-room Hampton Inn in Lawrenceville, Georgia, for $8.1 million. The sales price represented a 6% capitalization rate on trailing 12-month net operating income through March 2024.

Rob Hayes: In addition, subsequent to quarter end, we closed on the sale of the 390 room Hilton Boston back Bay in Boston, Massachusetts for $171 million or 438000 per key.

Rob Hayes: All of the proceeds from the sale were used for debt reduction, including approximately $68 million to pay down the company's strategic financing.

Rob Hayes: Also subs.

Rob Hayes: Subsequent to quarter end, we closed on a sale of the 85 room Hampton Inn in Lawrenceville, Georgia for $8 $1 million. The sales price represented a 6% capitalization rate on trailing 12 months net operating income through March 2024.

Rob Hayes: After these transactions, the remaining balance on our strategic financing is now approximately $107 million, and going forward, we plan to make regular paydowns with proceeds from the sale of our non-traded preferred stock and other asset sales. Additionally, we recently announced a transfer of the company's possession and control of the hotel property securing the $180 million Keys A loan pool and the $174 million Keys B loan pool to a court-appointed receiver. We have been fully cooperating with the servicer for a consensual foreclosure, or deed-in-lieu of foreclosure, on these properties since July of 2023.

Rob Hayes: Both of these transactions the remaining balance on our strategic financing is now approximately $107 million and going forward, we plan to make regular paydowns with proceeds from the sale of our non traded preferred stock and other asset sales. Additionally.

Rob Hayes: Additionally, we recently announced the transfer the Companys possession and control of the hotel properties, securing the $180 million.

Rob Hayes: Keys, a loan pool, and the $174 million keys, Pilon keys, B loan pool to a court appointed receiver.

Rob Hayes: We have been fully cooperating with the servicer for consensual foreclosure or deed in lieu of foreclosure on these properties. Since July 2023, as a result of this transfer we have no further economic interest in the operations of these hotels.

Rob Hayes: As a result of this transfer, we have no further economic interest in the operations of these hotels. We're also working with Letters to Refinance, a loan secured by the Renaissance Nashville and Nashville, Tennessee... The Morgan Stanley Pool Loan, with 17 hotels located in several states, the loan secured by the Marriott Gateway in Arlington, Virginia, and the loan secured by the Indigo Atlanta in Atlanta, Georgia. We believe there could be substantial excess proceeds from the refinancing of the Renaissance National Loan, which can be used to pay down the company's strategic financing. The Princeton-Weston, for which we are currently running the sales process, will be unencumbered as part of this transaction to the extent it is complete.

Rob Hayes: We're also working with lenders to refinance a loan secured by the Renaissance Nashville, and Nashville, Tennessee, The Morgan Stanley pool loan with 17 hotels located in several states the loan secured by the Marriott Gateway in Arlington, Virginia, and a loan secured by the Indigo Atlanta in Atlanta, Georgia, We believe there could be substantial excess proceeds from the refinancing of the <unk>.

Rob Hayes: Renaissance Nashville loan, which can be used to pay down the company's strategic financing.

Rob Hayes: Princeton Western for which we are currently running the sales process will be unencumbered as part of this financing to the extent it is completed.

Rob Hayes: We also continue to be excited about our non-traded preferred stock options. We continue to build up the selling syndicate and have signed 43 deal agreements representing over 5,884 representatives selling the security. To date, we have raised approximately $122 million in gross proceeds, including $23 million during the first quarter. Given the progress we're making across asset sales, mortgage refinancings, and our non-traded preferred offering, we continue to believe that we are on the right path to pay off the strategic financing in 2024.

Rob Hayes: We also continue to be excited about our non traded preferred stock offering we continue to build up the selling syndicate and have signed 43 dealer agreements representing over 5884 representatives selling our security to date, we have raised approximately $122 million of gross proceeds including $23 million during the first quarter.

Rob Hayes: <unk>.

Rob Hayes: And the progress, we're making across asset sales mortgage refinancings in our non traded preferred offering we continue to believe that we are on the right path to pay off the strategic financing in 2004.

Rob Hayes: In terms of hotel performance, while our March operating results were a bit soft, which we directly attributed to the Easter holiday shift, we saw a marked improvement in April with revenue growth of approximately 3% for the portfolio. We are seeing the benefit of a broadly diversified, high-quality portfolio that is balanced across leisure, corporate, and group demand sources. And as we look to the remainder of 2024, we believe our high-quality, geographically diverse portfolio remains well-positioned to outperform.

Rob Hayes: In terms of hotel performance, while our March operating results were a bit soft, which we directly attributed to the Easter holiday shift we saw market improvement in April with revenue growth.

Rob Hayes: Approximately 3% for the portfolio, we are seeing the benefit of our broadly diversified high quality portfolio that is balanced across leisure corporate and group demand sources.

Rob Hayes: And as we look to the remainder of 2024, we believe our high quality geographically diverse portfolio remains well positioned to outperform and I will turn the call over to Derek to review, our first quarter financial performance. Thanks, Rob for the first quarter. We reported net income attributable to common stockholders of $67 4 million or <unk> 60 per diluted share.

Deric S. Eubanks: First Quarter Financial Performance Thanks, Rob. For the first quarter, we reported net income attributable to common stockholders of $67.4 million, or $0.60 per diluted share. For the quarter, we reported AFFO per diluted share of negative $0.35. Adjusted EBITDA R.E.

Deric S. Eubanks: For the quarter, we reported <unk> per diluted share of negative <unk> 35 adjusted.

Deric S. Eubanks: for the quarter was $59.5 million. At the end of the first quarter, we had $2.9 billion of loans with a blended average interest rate of 8.1 percent, taking into account in-the-money interest rate caps. Considering the current level of SOFR and the corresponding interest rate caps, 92% of our debt is now effectively fixed, as almost all of our interest rate caps are now in the money.

Deric S. Eubanks: Adjusted EBITDA for the quarter was $59 $5 million.

Deric S. Eubanks: At the end of the first quarter, we had $2 9 billion of loans with a blended average interest rate of eight 1% taking into account in the money interest rate caps.

Deric S. Eubanks: Considering the current level of sulfur and the corresponding interest rate caps, 92% of our debt is now effectively fix as almost all of our interest rate caps are now in the money.

Deric S. Eubanks: We ended the quarter with cash and cash equivalents of $113 million and restricted cash of $136 million. The vast majority of that restricted cash is comprised of lender and manager-held reserve accounts, and $2.7 million related to trapped cash held by lenders. At the end of the quarter, we also had $24 million due from third-party hotel managers. This primarily represents cash held by one of our property managers, which is also available to fund hotel operating costs.

Deric S. Eubanks: We ended the quarter with cash and cash equivalents of $113 million of restricted cash of $136 million.

Deric S. Eubanks: The vast majority of that restricted cash is comprised of lender and manager held reserve accounts.

Deric S. Eubanks: At $2 $7 million related to trap cash held by lenders.

Deric S. Eubanks: At the end of the quarter, we also had $24 million due from third party hotel managers.

Deric S. Eubanks: This primarily represents cash held by one of our property managers, which is also available to fund hotel operating costs.

Deric S. Eubanks: We ended the quarter with net working capital of approximately $183 million. As of March 31st, 2024, our consolidated portfolio consisted of 75 hotels with 18,021 rooms. At the end of the quarter, our share count consisted of approximately 42.1 million fully diluted shares outstanding, comprised of 40.2 million shares of common stock and 2.0 million OP units. While we are currently paying our preferred dividends quarterly or monthly, we do not anticipate reinstating a common dividend in 2024. This concludes our financial review, and I would now like to turn it over to Chris to discuss our asset management activities for the core group.

Deric S. Eubanks: Ended the quarter with net working capital of approximately $183 million.

Chris: As of March 31, 2020 for our consolidated portfolio consisted of 75 hotels with 18021 rooms.

Chris: At the end of the quarter our share count consisted of approximately $42 1 million fully diluted shares outstanding.

Chris: Which is comprised of $40 2 million shares of common stock at two point million op units.

Chris: While we are currently paying our preferred dividends quarterly or monthly we do not anticipate reinstating our common dividend in 2024.

Deric S. Eubanks: This concludes our financial review and I would now like to turn it over to Chris to discuss our asset management activities for the quarter.

Christopher Nixon: Thank you, Deric. For the quarter, comparable hotel REVPAR for our portfolio decreased 1% over the prior year quarter. Despite the REVFAR decline, our portfolio still achieved comparable total hotel revenue growth above the prior year quarter. Our team has been actively rolling out several initiatives targeted at our food and beverage and other revenue departments, which were up 4% and 17% on a per-occupied room basis, respectively, compared to the prior year quarter. Additionally, our first quarter business transient segment revenue was up 6% over the prior year quarter.

Chris: Thank you Derrick for the quarter comparable hotel Revpar for our portfolio decreased 1% over the prior year quarter.

Christopher Nixon: Despite the Revpar decline our portfolio still achieved comparable total hotel revenue growth above the prior year quarter.

Christopher Nixon: Our team has been actively rolling out several initiatives targeted at our food and beverage and other revenue departments, which were up 4% and 17% on a per occupied room basis, respectively compared to the prior year quarter.

Christopher Nixon: Additionally, our first quarter business transient segment revenue was up 6% over the prior year quarter.

Christopher Nixon: I would like to take some time to dive into some of the success across our portfolio, including actively expanding our group position, strengthening our food and beverage profitability, and driving growth in one of our largest markets.

Christopher Nixon: I would like to take some time to dive into some of the success across our portfolio, including actively expanding our group position strengthening our food and beverage profitability and driving growth in one of our largest markets.

Christopher Nixon: Group pace continues to accelerate across the portfolio. Group room revenue for the full year is pacing ahead of last year by 7%, with the second quarter through the balance of the year pacing ahead by 8%. Group business booked in the quarter for all future dates was secured at a 9% ADR premium over the business that was booked during the prior year's quarter.

Christopher Nixon: Group pace continues to accelerate across the portfolio group rooms revenue for the full year is pacing ahead of last year by 7% with a second quarter through the balance of year pacing ahead by 8%.

Christopher Nixon: Group business booked in the quarter for all future dates with secured at a 9% ADR premium over the business that was booked during the prior year quarter.

Christopher Nixon: Increases in group bookings are primarily being driven by association, multi-year, and multi-hotel bookings that are extending the overall group booking pace. Our 2025 Group Rooms revenue pace is ahead by 15%. While year-over-year group lead volume has started to normalize, conversion rates remain strong, and the average group booking size continues to increase.

Christopher Nixon: Increases in group bookings are primarily being driven by association multi year and multi hotel bookings that are extending the overall group booking window or.

Christopher Nixon: Our 2025 group rooms revenue pace is ahead by 15%.

Christopher Nixon: While year over year group lead volume has started to normalize conversion rates remained strong and the average group booking size continues to increase.

Christopher Nixon: As mentioned earlier, we are seeing success across the portfolio at our restaurants, bars, room service, and banquet service. Our Food and Beverage Department profit was up 5% on a per-occupancy basis compared to the prior year quarter. Broadly, we are seeing an increase in the banquet department. This includes audiovisual services, meeting room rental, as well as food and beverage. One hotel that benefited from this was our Embassy Suites in Las Vegas, which was up 29% in the Food and Beverage Department profit on a per-occupied room basis compared to the prior year quarter.

Christopher Nixon: As mentioned earlier, we are seeing success across the portfolio at our restaurants bars room service and banquet services.

Christopher Nixon: Our food and beverage Department profit was up 5% on a per occupied room basis compared to the prior year quarter.

Christopher Nixon: Broadly we are seeing an increase from the banquet department.

Christopher Nixon: This includes audio visual services meeting room rental as well as food and beverage.

Christopher Nixon: One hotel that benefited from this was our embassy suites in Las Vegas, which was up 29% in the food and beverage department profit on a per occupied room basis compared to the prior year quarter.

Christopher Nixon: Knowing that demand would be high surrounding the Super Bowl, our team proactively increased food and beverage requirements with each group, adding a material amount to banquet and catering in order to secure their bookings. Additionally, we influenced each of the groups that had overlapping stays to select similar menus, which reduced labor costs for food.

Christopher Nixon: Knowing that demand would be high surrounding the Super Bowl, our team proactively increased food and beverage requirements with each group, adding a material amount of banquet and catering in order to secure their bookings.

Christopher Nixon: Additionally, we influence each of the groups that had overlapping stays to select similar menus, which reduced labor cost of food waste.

Christopher Nixon: We've been pleased with the strong performance of our assets in the Washington, D.C. market, which accounts for 13% of our hotel key count in the portfolio. These assets increased total revenue by 6% compared to the prior year quarter. Additionally, Hotel Ibiza's margin expanded by approximately 99 basis points relative to the prior year quarter. One hotel that I would like to highlight is the Embassy Suites in Crystal City, which achieved total revenue growth of 19% compared to the prior year quarter.

Christopher Nixon: We've been pleased with the strong performance of our assets in the Washington, DC market, which accounts for 13% of our hotel key count in the portfolio.

Christopher Nixon: These assets increased total revenue by 6% compared to the prior year quarter.

Christopher Nixon: Additionally, hotel EBITDA margin expanded by approximately 99 basis points relative to the prior year quarter.

Christopher Nixon: One hotel that I would like to highlight is the embassy suites Crystal City, which achieved total revenue growth of 19% compared to the prior year quarter.

Christopher Nixon: First quarter group room revenue exceeded the prior year quarter by 114 percent. The hotel booked one of the largest revenue-producing groups in the history of the hotel. It was a short-term military group that needed a building with qualified security measures, which allowed us to drive a rate premium.

Christopher Nixon: First quarter group rooms revenue exceeded the prior year quarter by 114%.

Christopher Nixon: The hotel booked one of the largest revenue producing groups in the history of the hotel. It was a short term military group that needed a building with qualified security measures, which allowed us to drive a rate premium.

Christopher Nixon: This group produced approximately $1.3 million in room revenue. Group business generally provides an opportunity for additional profit, which helped expand the hotel EBITDA margin at Embassy Suites in Crystal City by 632 basis points during the quarter compared to the prior year quarter. Even when you exclude the extraordinary performance from the Embassy Suites in Crystal City, collectively, our eight remaining Washington, D.C. hotels experienced hotel EBITDA margin expansion. Moving on to capital expenditures.

Christopher Nixon: This group produced approximately $1 $3 million in room revenue.

Christopher Nixon: Group business generally provides an opportunity for additional profit, which helped expand the hotel EBITDA margin at embassy suites Crystal city by 632 basis points during the quarter compared to the prior year quarter.

Christopher Nixon: Even when you exclude the extraordinary performance from the embassy suites Crystal City collectively our eight remaining Washington D. C hotels experienced hotel EBITDA margin expansion.

Christopher Nixon: During the first quarter, we initiated a comprehensive renovation of the guest rooms and public space at the Embassy Suites Dallas and the guest room renovation at Marriott Sugarland. Additionally, we are continually making progress towards the upcoming conversions of two of our properties. La Concha Key West, which is undergoing a conversion into an autograph collection hotel, and a conversion of La Pavillon New Orleans into a tribute portfolio hotel. Both conversions are expected to be completed later this year and will benefit from Marriott's robust sales, distribution, and loyalty platform.

Christopher Nixon: Moving on to capital expenditures during the first quarter, we initiated a comprehensive renovation of the guest rooms and public space at the embassy suites, Dallas and the Guestroom renovation at Marriott Sugarland.

Christopher Nixon: Additionally, we are continually making progress towards the upcoming conversions of two of our properties with Concha key west which is undergoing a conversion into an autograph collection hotel and the conversion of <unk>, New Orleans into attribute portfolio Hotel.

Christopher Nixon: Both conversions are expected to be completed later this year and will benefit from marriott's robust sales distribution and loyalty platforms.

Christopher Nixon: For 2024, we anticipate spending between $85 and $105 million on capital expenditure. As mentioned earlier, our portfolio is building a solid foundation for group business, our food and beverage department is excelling, and we are experiencing strong demand in various markets. The team has taken aggressive steps to drive margin and propel revenue. We continue to evaluate several new initiatives across our portfolio, such as brand conversions, strategic partnerships, and high-yield renovation. That concludes our prepared remarks. We will now open up the call for Q&A.

Christopher Nixon: For 2024, we anticipate spending between 85 and $105 million on capital expenditures.

Christopher Nixon: As mentioned earlier, our portfolio is building a solid foundation of group business, our food and beverage Department is excelling and were experiencing strong demand in various markets.

Christopher Nixon: Team has taken aggressive steps to drive margin and propel revenue.

Christopher Nixon: We continue to out to evaluate several new initiatives across our portfolio such as brand conversions strategic partnerships and high yield renovations.

Christopher Nixon: That concludes our prepared remarks, we will now open up the call for Q&A.

Operator: Thank you. And at this time, I would like to remind everyone that in order to ask a question, press star then number one on your telephone keypad, and we will pause just a moment to compile the Q&A roster. And it looks like our first question comes from the line of Tyler Batory with Oppenheimer and Company. Tyler, please go ahead.

Speaker Change: Thank you and at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad and we will pause just a moment to compile the Q&A roster.

Tyler Anton Batory: And it looks like our first question comes from the line of Tyler Batori with Oppenheimer and company Tyler. Please go ahead.

Jonathan David Jenkins: Good morning, this is Jonathan on behalf of Tyler. Thanks for taking our questions. First one for me, maybe for Rob or Chris.

Operator: Good morning. This is Jonathan on for Tyler Thanks for taking our questions.

Jonathan: First one for me maybe for Robert Chris.

Jonathan David Jenkins: You guys noted the improvement in the portfolio in April compared to March. Can you talk a little bit more about that improvement? How much of that month over month gain do you think is attributable to a favorable calendar shift versus a pickup in demand?

Jonathan: As noted the improvement in the portfolio in April compared to March can you talk a little bit more on that improvement how much of that month over month.

Jonathan David Jenkins: Dave do you think is attributable to favorable calendar shifts versus a pickup in demand.

Christopher Nixon: Yeah, thanks, Jonathan. So March was down in REVPAR by about 300 bps for the portfolio. And then, as Rob cited, we saw April up in revenue by about 300 bps. The major factor is the holiday shift, which probably accounts for at least half of that kind of shift.

Speaker Change: Yes, thanks, Jonathan.

Jonathan David Jenkins: We think so so march was down in.

Christopher Nixon: And Revpar of about 300 bps for the portfolio and then as Ross sided we saw April up in revenue by about 300 bps.

Christopher Nixon: The major factor is the holiday shift that probably accounts for at least half of that kind of shift but.

Christopher Nixon: But in Q1, we also had warmer weather across the portfolio, which was not great for our portfolio. We saw that there was a bit softer demand coming out of the Northeast for some of our destination markets. Our airport hotels saw a reduction in distressed passengers, and so we felt on kind of a number of different fronts, all of which we think are kind of anomalies for Q1. So April definitely benefited from the holiday shift, but there were some other factors that we didn't expect.

Christopher Nixon: In Q1, we also had warmer weather across the portfolio, which was not great for our portfolio.

Christopher Nixon: We saw there was a bit softer demand coming out of the northeast for some of our destination markets.

Christopher Nixon: Our airport hotels saw a reduction in distressed passengers and so we felt in a kind of a number of different fronts.

Christopher Nixon: All of which we think are kind of anomalies for Q1. So April definitely been it benefited from the holiday shift, but there were some other factors that we don't expect to continue as we get into Q2 and beyond.

Rob Hayes: Okay, very helpful. And then switching gears to the asset sales in the quarter. Can you help us think about how you're balancing doing some of these smaller deals, which seem to be getting pretty attractive cap rates versus larger sales like the Boston Back Bay asset? Is it all just normal capital recycling? And is there a preference to do one type of asset sale versus another?

Speaker Change: Okay very helpful and then switching gears to the asset sales in the quarter.

Rob Hayes: Can you help us think about how you are balancing doing some of these smaller deals which seem to be getting pretty attractive cap rates versus larger sales like the Boston back Bay asset is it all just normal capital recycling and is there a preference to do one type of asset sale versus another.

Rob Hayes: That's a good question. I mean, there are a couple of different factors going on. I mean, one is, as we've stated historically, you know, we'd like to reduce some of the exposure we have in the limited service side over time. We obviously see that the portfolio would be more, and we'd like to get more focused on the full service side. These had some loans that were coming due over the next, you know, this year.

Speaker Change: That's a good question I mean, there's a couple of different factors going on I mean, one is as we've stated historically.

Rob Hayes: We'd like to reduce some of the exposure we have in the limited service side anyway over time.

Rob Hayes: We also see that the portfolio will be more like a more focus on the full service side.

Rob Hayes: These had some loans that were coming due over the next.

Rob Hayes: This year.

Rob Hayes: And so the combination of loans coming due.

Rob Hayes: And so, the combination of loans coming due, they were, you know, basically, as a result, you could sell them the loan. They weren't crossed with large numbers of other assets. And focusing on the strategy, it made sense to generate some proceeds for them. And you're right; we have seen that some of these smaller buyers are able to seem to achieve cap rates that are more attractive than some of the stuff we're seeing on the bigger boxes.

Rob Hayes: Basically as a result, you can sell them.

Rob Hayes: Hello, and they weren't crossed with large numbers of other assets and focusing on our strategy. It made sense to generate some proceeds for them and you're right. We haven't seen that some of these smaller buyers are able to seem to achieve cap rates that are.

Rob Hayes: And are more attractive than some of the stuff, we're seeing on the bigger boxes.

Rob Hayes: But is it the balance sheet because there are some assets that we would all things considered would maybe prefer not to sell but they can generate significant proceeds which is very important to us given the need to pay down our strategic financing, but then there's some other assets where they may have some significant capex coming up I mean, even.

Rob Hayes: But it's just a balance act because there are some assets that, you know, we, all things considered, would maybe prefer not to sell, but they can generate significant proceeds, which is very important to us given the need to pay down our strategic financing. But then there are some other assets where, you know, they may have some significant capex coming up. I mean, even looking at the Boston asset, while it has been a great asset for us, it does have a franchise agreement that expires in the next couple of years.

Rob Hayes: Looking at the Boston asset.

Rob Hayes: It's been a great asset for us It does have a franchise agreement thats expiring in the next couple of years. We did think that Capex that was going to go until was significant.

Rob Hayes: We did think the capex that was going to need to go into it was significant. And so as we looked at, was that the best use of capital across our portfolio?, I think it was definitely up for debate. And so that kind of ticked a couple of different boxes for us on why to sell that asset. So it really is just kind of a mix. And so I think as you see the other, the assets that will continue to sell, it'll be a balancing of some limited service assets that will also continue to generate proceeds, some less strategic long-term assets that maybe are avoiding capex dollars, and then a couple of maybe higher quality assets that are able to generate some significant proceeds to pay for themselves.

Rob Hayes: And so as we looked at was that the best use of capital across our portfolio.

Rob Hayes: I think it was definitely up for debate and.

Rob Hayes: And so that.

Rob Hayes: Take a couple of different boxes for us on why to sell the asset. So it really just kind of a mix and so I think as you see the other asset that will continue to sell.

Rob Hayes: It'll be a balancing out some limited service assets that will also continue to generate proceeds.

Rob Hayes: Less strategic long term assets, the navy or avoiding capex.

Rob Hayes: And then a couple of maybe higher quality assets that are able to generate some significant proceeds to pay down debt financing.

Deric S. Eubanks: Okay, thank you for all the color there. And then maybe last one for me, can you talk about preferred rates, how that has ramped up compared to the original expectations, and maybe remind us how much longer or how much available room you have left on that?

Speaker Change: Okay. Thank you.

Rob Hayes: For all the color there and then maybe last one for me can you talk about the preferred rate how that has ramped compare to your original expectations.

Speaker Change: Maybe remind us how much longer how much available room, you have left on that.

Deric S. Eubanks: Yeah, Jonathan, this is Deric. I'm happy to comment on that. I'd say we've been pretty pleased with the ramp in capital raising. We've kind of hit a pretty consistent rhythm. We hope that it will ramp up as we continue to make more progress in our deleveraging and paying off our strategic financing. We've almost paid off 50% of that, so we're making a lot of progress there, and that's something that the dealers and the market and these investors like to see.

Deric S. Eubanks: Yeah, Jonathan this is Derek I'm happy to comment on that.

Deric S. Eubanks: I'd say, we've been pretty pleased with the ramp and the capital raising.

Deric S. Eubanks: We've kind of hit a pretty consistent.

Deric S. Eubanks: Psi is were about $8 million to $10 million a month are coming in and.

Deric S. Eubanks: We hope that it will ramp up as we continue to make more progress in our deleveraging and paying off our strategic financing, we've almost paid off 50% of that so we're making a lot of progress there.

Deric S. Eubanks: It's something that the dealers in the market and these investors like to see so as we continue to make more progress there we anticipate our syndicate of dealers and that raised will expand.

Deric S. Eubanks: So as we continue to make more progress there, we anticipate our syndicate of dealers that's paying that raise will expand. The raise goes through May, right now May of 2025, so we've got some time left. There's an opportunity there to extend it if we want to, but I would say at this point we're very pleased with the level of capital raising and expect it to actually ramp up as we move forward.

Deric S. Eubanks: The range goes through May right now may of 2025. So we've got some some time left there is an opportunity there to the extended if we want to.

Deric S. Eubanks: But I would say at this point, we're very pleased with the.

Deric S. Eubanks: The level of capital raising and expect it to actually ramp up as we move forward.

Jonathan David Jenkins: Okay, great. I appreciate all the color. Thank you for your time, everyone, and best of luck in your future endeavors, Rob. Thank you.

Speaker Change: Okay, Great I appreciate all the color. Thank you for the time, everyone and best of luck in your future endeavors, Rob. Thank you.

Rob Hayes: Thanks, Jonathan.

Operator: And one more reminder, if you'd like to ask a question, press star and the number one on your telephone keypad. Once again, star one. We will pause for just a moment. And it looks like there are no further questions, but this time I will turn the call back over to management for closing remarks.

Speaker Change: And one more reminder, if you'd like to ask a question press star and the number one on your telephone keypad. Once again star one we'll pause just a moment.

Operator: Okay.

Speaker Change: And it looks like there are no further questions at this time I will turn the call back over to management for closing remarks.

Jordan Jennings: I thank you for joining today's call, and Stephen Zegre and the team look forward to speaking with you all next. Thank you. And, ladies and gentlemen, that concludes today's call. Thank you for joining, and you may now disconnect.

Management: Thank you for joining today's call.

Jordan Jennings: Stevens Z Gray and the team look forward to speaking with you all next quarter.

Operator: Thank you, and ladies and gentlemen, that concludes today's call. Thank you for joining us, and you may now disconnect.

Jordan Jennings: Thank you and ladies and gentlemen that concludes today's call. Thank you for joining and you may now disconnect.

Operator: Okay.

Operator: [music].

Operator: Okay.

Operator: [music].