Q4 2024 Pebblebrook Hotel Trust Earnings Call
Speaker Change: Higher, higher, higher, yeah, yeah, yeah Heart's on fire, love's on fire, higher, higher Oh, oh, oh, oh Oh, oh, oh, oh Ain't together on a special day
Speaker Change: Greetings and welcome to the Pebble Brook Hotel Trust fourth quarter earnings call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation.
Speaker Change: We are pleased to report that our fourth quarter and year end 2024, our results significantly outperformed our outlook driven by strong performance from our resort portfolio.
Speaker Change: Continued momentum at our recently Redeveloped properties for.
Speaker Change: For the full year same property total revpar increased two 1%.
Speaker Change: Driven by gains across both urban and resort properties, along with stronger out of room spending.
Speaker Change: Adjusted EBITDA rose, 8% to 350 to $359 2 million exceeding the midpoint of our outlook by $11 2 million.
Speaker Change: Adjusted <unk> per diluted share grew 5% to $1 68, surpassing our outlook midpoint by <unk>.
Speaker Change: Focusing on our fourth quarter same property total revpar increased one 8% propelled by 4% growth at our resorts and 7% increases at our urban hotels.
Speaker Change: These results include a 190 basis point negative impact from two named storms in Florida, and the brand conversion and renovation at our Hyatt centric in Santa Monica.
Speaker Change: Excluding these disruptions same property total revpar growth for the fourth quarter would have been closer to three 7%.
Speaker Change: Adjusted EBITDA for the quarter reached $62 7 million exceeding our expectations due to stronger hotel performance, particularly at our California resorts and our recently Redeveloped properties results also benefited from $5 4 million in business interruption proceeds from the final insurance settlement for Hurricane.
Speaker Change: These proceeds were not assumed in our prior outlook.
Speaker Change: Portfolio wide increases in business group, corporate transient and leisure demand fueled our growth in Q4.
Speaker Change: Same property resort occupancy jumped three 7% to 65% despite storm related impacts in Florida weekday occupancy surged four four points, reflecting the continued rebound in business group demand well weekend occupancy increased to healthy two points on improving leisure travel.
Speaker Change: Our California resorts led the way with occupancy gaining six six percentage points and Revpar climbed 88, 8%. We're very pleased to see that this momentum in both group demand and leisure at our resorts is carrying into 2025.
Speaker Change: The key driver of this encouraging growth with an almost 15% increase in business group demand at our resorts, while business groups, often booked at lower ADR and weekend leisure travelers their total revenue contribution, particularly in food and beverage, which grew 7% in Q4 plays a vital role in driving EBIT growth.
Speaker Change: The growing mix of business groups drives increased profitability across our resort portfolio.
Speaker Change: At our urban properties in Q4 occupancy rose two nine percentage points to 68, 1% supported by solid group and transient demand growth plus improving weekend leisure business similar to what we saw at our resorts.
Speaker Change: For the full year resort occupancy gained two nine percentage points to 69, 9% led by $4 four point increase at our California resorts.
Speaker Change: Our urban occupancy rose two six points to 71, 3%.
Speaker Change: Notably San Diego, our second largest market by EBITDA climbed six nine points while.
Speaker Change: While San Francisco and Chicago, each improved two eight points.
Speaker Change: Boston, our largest market gained two four points.
Speaker Change: Portland also began showing signs of recovery gaining one six points for the year, notably in the second half of the year, our two downtown Portland properties experienced an average occupancy increase of more than nine points.
Speaker Change: Same property resort revenue grew four 3% in Q4, despite the storm related disruptions outpacing the 7% growth at our urban properties.
Speaker Change: Urban performance remain constrained by the ongoing headwinds in San Francisco, Los Angeles, and Portland, Excluding these three markets same property urban Revpar for Q4 would've risen six 9% and same property total revenues would have increased five 7%.
Speaker Change: For the full year resort total revenues rose one 2%, while urban properties posted a three 1% gain.
Speaker Change: However, adjusting for the challenges in San Francisco, La Portland, St property Urban total revenue growth would have been a robust seven 7% underscoring the strength of our portfolio outside is lagging markets.
Speaker Change: Looking ahead to 2025, we believe the normalization of resort rates alerts largely run its course.
Speaker Change: After a nine 3% decline in 2023, and a four 7% decline in 2024 reserve rates remained 33% above 2019, and we don't expect any further meaningful rate declines at our resorts this year.
Speaker Change: Same property non room revenues also remained healthy increasing three 4% in Q4 and three 3% for the full year.
Speaker Change: Food and beverage revenues alone grew grew four 1% in Q4 and three 5% for the year, reflecting continued strong added room spending by both business and leisure travelers supported by increased business group demand.
Speaker Change: Our redeveloped properties completed in 2023, including Hilton Gaslamp Margaritaville Gaslamp southernmost resort Jekyll Island club resort and Viceroy, Santa Monica delivered strong results.
Speaker Change: Q4 occupancy for these properties rose four seven percentage points Revpar increased three 8% and market share expanded by 274 basis points.
Speaker Change: For the full year. These property saw a 10 seven points of occupancy gain and 11, 3% revpar surge and EBIT growth of over 20% delivering an impressive 1100 basis point market share gain.
Speaker Change: Turning to market segmentation Q4 group room nights rose two 8%, while transient room nights grew five 6% with group representing about 26% of total revenue.
Speaker Change: Group mix Rose 60 basis points year over year for the full year to 25, 6%, primarily reflecting stronger business group demand trends at both our resorts and urban properties.
Speaker Change: Our intense focus on operational efficiencies and cost controls resulted in our same property hotel expense increase before fixed costs of just three 1% in Q4.
Speaker Change: While same property occupancy increased four 8% this lowered our cost per occupied room by one 7%.
Speaker Change: Same property hotel EBITDA for Q4 was $4 million below Q4, 2023, reflecting several onetime costs from the new labor agreements and several urban urban markets, along with the impact of Florida storms and the Hyatt centric brand conversion and renovation. Excluding these factors hotel EBITDA would have increased year over year.
Speaker Change: For the full year same property expenses before fixed costs grew by just two 7%.
Speaker Change: Per occupied room basis hotel expenses declined by one 5%.
Speaker Change: As a result same property hotel EBITDA exceeded 2023 by $3 million.
Speaker Change: Our relentless focus on operating efficiency was key to mitigating wage pressures and other inflationary cost pressures.
Speaker Change: Please note that in 2024, we received about $10 million and real estate tax and municipal tax credits additional real estate tax credits are not assumed in our 2025 outlook, creating a roughly 100 basis point headwind to our 2025 expense growth rate.
Speaker Change: While we remain optimistic about securing additional tax credits through ongoing appeals the timing remains uncertain and unpredictable.
On the capital investment front, we invested $91 million in 2024, marking the completion of our multiyear $525 million portfolio wide redevelopment program.
Speaker Change: Early returns from these recent investments have been extremely encouraging and John will discuss some of these during his remarks.
John: 2025, our capital investments are projected at $65 $75 million.
John: Reflecting our portfolio's excellent condition and reduced need for additional capital.
John: We expect a similar capital investment level in 2026, excluding the potential of Paradise point resort redevelopment in conversion in San Diego into a Margaritaville resort, which remains in the review and approval process with the California Coastal Commission.
John: I'll apply beach resort, we made tremendous progress on repairing and restoring the resort following Hurricanes Lane and Milton.
John: <unk> complex opened in December and the upper floors of the 79 room <unk> opened in mid January the remaining 20, Groundfloor Guestrooms are expected to be substantially completed in Q2, 2025, pending regulatory approvals and supply chain timelines.
All repair and restoration costs are covered by insurance net of deductibles.
John: It's worth pointing out that we made significant improvements as part of the rebuilding of the Playa following hurricane in to significantly strengthened the property against future storms.
John: In the aftermath of Hurricane Helane in Milton, we experienced reduced downtime far less damage and a much more efficient restoration process.
John: Building on this success, we plan to make additional upgrades this year to further fortify the clients enhances resilience against future storms.
John: Looking ahead to 2025 by proceeds from the recent Hurricanes have leaned in Milton will be substantially lower than those received for our hurricane in <unk>.
John: Creating an earnings headwind for context in 2020 for the power generated $19 million and hotel EBITDA, plus $23 8 million in proceeds totaling $42 8 million and adjusted EBITDA.
John: Our 2025 outlook assumes that will apply would generate $24 million to $26 million and hotel EBITDA below its stabilized $35 million level, plus approximately $6 million in bi proceeds related to hurricane Helena Milton for a total of 30% to $32 million.
John: Moving to our balance sheet, we made significant strides in strengthening our balance sheet and reducing leverage in 2024, we successfully executed $1 6 billion in debt refinancing and extensions pay down over $350 million in bank term loans and extend and most of the remaining term loans out to 2029.
John: The next major maturity is our $750 million convertible note, which is not due until December 2026.
John: Our weighted average interest cost on our debt was four 2% at the end of the year one of the lowest in our industry and reflecting our disciplined and opportunistic approach to managing our balance sheet.
John: In addition, we ended 2024 with $217 6 million in cash and with lower near term capital investment needs, we expect to generate significant free cash flow this year and next.
John: We're also pleased that the strong operating performance combined with proceeds from the hurricane in settlement and free cash flow helped to reduce our net debt to EBITDA to five eight times down from about six five times in 2023.
John: And with that I'd now like to turn the call over to John for a deeper look at our hotel operating results and expectations for 2025.
John: Thanks Ray.
Speaker Change: Thanks to all of you who have joined us today.
Speaker Change: I'd like to provide additional insight and perspective into last year's performance and our outlook for 2025, both for the lodging industry and for Pebble Brook.
Speaker Change: As a reminder, at the start of last year, we forecasted industry revpar growth at zero to 2%, though many prognosticators were significantly more optimistic.
Speaker Change: Optimistic.
Speaker Change: The final result was a modest one 8% growth with a notable three 6% surge in Q4.
Speaker Change: So why did the industry underperformed most of the higher forecast.
Speaker Change: We believe it primarily had to do with the issue of normalization.
Speaker Change: Our 2024 forecast stems from our belief that post pandemic demand behaviors had not yet fully normalized.
Speaker Change: We expect that a prolonged.
Ed: Hey, Ed, which limited demand growth.
Ed: Between April 2023, and September 2024.
Ed: Industry demand remained flat.
Ed: Which is unique in history for a period with GDP growth in the mid to upper twos.
Ed: However by Q4 2024, we observed more typical demand behavior as evidenced by a two 2% increase in demand.
Ed: More in line with GDP growth and historical norms.
Ed: This trend continued in January 2025, with demand up another one 7%.
Ed: Reinforcing our view that industry demand is once again more closely tracking economic growth.
Ed: In 2024 business group and transient travel continued to recover.
Ed: And leisure demand returned to urban centers that are providing safer environments and.
Ed: And vibrant cultural sporting and entertainment attractions.
Ed: By late 2024, we saw early signs of renewed leisure travel growth industry wide.
Ed: Further supporting our view that consumer travel behaviors have normalized.
Ed: While some of the Q4 improvement may have been a post election boost from reduced uncertainty surrounding the election.
Ed: We believe the primary driver was the renewed link between industry demand and economic growth.
Ed: For <unk> in 2024, we saw continued recovery at our urban properties with demand growth coming from business group and transient as well as leisure travelers returning to the cities.
Ed: However challenges in three key markets, San Francisco, Los Angeles, and Portland muted our overall performance.
Ed: In 2020 for San Francisco suffered from a weak convention calendar.
Ed: Los Angeles grappled with the lingering effects of the 2023 entertainment industry strikes.
Ed: In Portland struggled with intense quality of life issues and the slow implementation of policies to improve the city, which finally occurred later in the year operating some optimism for 2025 and beyond.
Ed: Okay.
Ray: As Ray indicated.
Speaker Change: Our overall performance was enhanced by excellent performance at many of our recently Redeveloped and repositioned properties.
Speaker Change: We've invested over half a billion dollars in recent years.
Speaker Change: These properties are still ramping up with significant revpar share gains expected over the next few years.
Speaker Change: Along with non room revenue growth due to the re merchandising and amenity additions made at these properties.
Speaker Change: As detailed in our updated Investor presentation, we anticipate continued upside from these strategic investments.
Speaker Change: Let me provide a few performance examples.
Speaker Change: Embassy suite, San Diego downtown gained over 330 basis points of Revpar share since its last stabilized pre development year in 2018, and all of the gains were in 2024.
Speaker Change: The Westin San Diego Gaslamp quarter as gained 570 basis points since its 2019 renovation, including continued improvements in 2024.
Speaker Change: Both the embassy suites and Westin Gaslamp are now considered stabilized following their redevelopments and we account for them that way within the EBITDA bridge in our Investor presentation.
Speaker Change: One hotel San Francisco transformed in mid 2022.
Speaker Change: And has gained over 4485 basis points.
Speaker Change: Revpar share since 2019, it's last stabilized year prior to its redevelopment and brand conversion and.
Speaker Change: And that includes 970 basis points in 2024.
Speaker Change: We expect further share gains this year and likely next year as well.
Speaker Change: Year over year in January the one gained 870 basis points of Revpar share.
Speaker Change: Chaminade resort, which we don't think is stabilized yet, though we conservatively treated as stabilized in our EBITDA Bridge has gained 1150 basis points of Revpar share since 2018.
Speaker Change: Including 700 basis points in 2024, as we really get going and driving significantly more group to this unique resort.
Speaker Change: Harbor Court in San Francisco has gained 900 basis points from its last stabilized year in 2019, all of which was achieved in 2024.
Speaker Change: Many of our other more recent development and repositioning <unk> have also gained share for.
Speaker Change: For example, Estancia hotel and Spa in La Jolla is already outperforming its pre construction 2022 levels by over 350 basis points. Despite some disruption from redevelopment in 2024.
Speaker Change: We're expecting large gains in revpar share. It starts here this year, along with significant gains in non room revenues as we added multiple outlets event lines and are completely redeveloped full complex.
Speaker Change: We continue to be very excited about the major investments we've made over the last few years covering a large portion of our portfolio.
And we're confident in achieving the revpar share gains that will drive the conservative EBITDA upside, which is detailed in our investor presentation.
Speaker Change: Now looking ahead to 2025, we expect industry hotel demand will revert to its normal historical connection with economic growth.
Speaker Change: With GDP projected to grow 2% to two 5%.
Speaker Change: We're forecasting industry demand growth of one and three quarters to 2.25%.
Speaker Change: And limited supply growth of well under 1%.
Speaker Change: That should lead to an occupancy increase of about one to one 5%.
Speaker Change: We expect industry revpar to grow 1% to 3% in 2025.
Speaker Change: With more ADR growth represented at the higher end of the range.
Speaker Change: And with potential upside in the second half of the year, if revenue managers gained more confidence in pricing.
Speaker Change: Our industry forecast assumes no progress in reducing the current domestic outbound to international inbound imbalance.
Speaker Change: Which currently contrast, with pre pandemic norms when international inbound was stronger than domestic outbound travel.
Speaker Change: We should note that we are increasingly cautious about the potential for a negative economic impact from the plethora of domestic policy announcements and threats from the current administration.
Speaker Change: While we were quite optimistic just a month ago due to the overall optimism expressed by business businesses and much of the public following the election.
Speaker Change: Some of that enthusiasm seems to be waning as concerns increase about extensive talk of tariffs government firings mass deportations and significant reductions in federal spending.
Including many spending freezes already put into place.
Speaker Change: Most of these items are not business friendly.
Speaker Change: Without these very significant concerns we would be much more positive and confident in our 2025 outlook.
Speaker Change: For Pebble Brock BLA wildfires have created a tough start to 2025.
Speaker Change: Past disasters like these wildfires often bring longer term business opportunities for the affected areas. However, they tend to primarily benefit the lower priced hotels and submarkets.
Speaker Change: Our west Los Angeles properties, which fall into the upper upscale and luxury categories have not yet seen increased demand.
Speaker Change: While other parts of the vast la market have benefited from evacuees first responders and early cleanup efforts.
Speaker Change: Our west L. A submarkets, which are higher priced have not.
Speaker Change: That said, we believe significant new demand will emerge as extensive rebuilding commences over the next few years.
Speaker Change: Additional demand drivers for La <unk>.
Speaker Change: Include the NBA, All Star game and World Cup games in 2026.
Speaker Change: The Super Bowl in 2027 and of course, the long buildup to the 2028 Summer Olympics.
Speaker Change: But the fires caused significant group and transient cancelations and led to a very substantial slowdown in bookings at our properties.
Speaker Change: While we're seeing some recent recovering in pickup.
Speaker Change: Booking volumes are not yet back to normal at our la properties.
Speaker Change: February has been weaker than January.
Speaker Change: <unk> is showing improvement.
Speaker Change: Frustratingly, despite outreach from the hotel and business communities.
Speaker Change: Local law leaders, including the mayor have not publicly encourage business and leisure travelers to returned to L. A.
Speaker Change: The fires affected two major residential neighborhoods not commercial or tourist areas and all major attractions remain open and unaffected.
Speaker Change: All the reasons to go to law continue to exist and are undamaged the.
Speaker Change: The Sun is out the errors as clear as it normally is and the beaches are beautiful.
Speaker Change: Of course, the silver lining here is that our comps for next year will be much easier.
Speaker Change: The negative start to 2025 for our la properties is disappointing given our expectations that this would be a recovery year for la following the entertainment strikes and slow return of production last year.
Speaker Change: We're currently estimating a $9 million to $12 million impact to rooms revenue was six five to $8 $5 million of that occurring in the first quarter.
Speaker Change: Total revenue is projected to take $12 million to $16 million hit.
Speaker Change: With eight 5% to $11 million in the first quarter.
Speaker Change: This translates to a 115 basis point drag on full year Revpar growth and a 100 basis point impact of total revpar.
Speaker Change: For the first quarter, we estimate of 380 basis point impact on Revpar, and 320 basis points to total revpar.
Speaker Change: As a result of these forecasted revenue declines we have reduced hotel EBITDA by $9 million for the full year with a $6 $5 million impact in the first quarter.
Speaker Change: Outside of La <unk>, our other markets are well positioned led by San Francisco and Washington D C.
Speaker Change: San Francisco is convention calendar is up nearly 70% in room nights to last year with business transient group and leisure travel all continuing to recover.
Speaker Change: DC has already benefited from the inauguration.
Speaker Change: And we will continue to improve from a very active congressional schedule and government transition.
Speaker Change: We expect our resorts to lead the way in our portfolio performance in 2025 as group pace at our resorts is well ahead of 2024.
Speaker Change: For the total portfolio group room night pace is up three 8% group ADR is his head ahead by one 8% and group revenues are beating last year by five 7%.
Speaker Change: Transient pace is also ahead up eight 3% in revenue.
Speaker Change: And total combined paces ahead of healthy six 9%.
Speaker Change: In total revenues on the books.
Speaker Change: And our overall pickup trends are providing further support for our optimism.
Speaker Change: They've improved as booking patterns and timing have finally normalized.
Speaker Change: The total in the quarter for the quarter pickup in our portfolio turned positive in Q4, and excluding la <unk>. It was again very positive in January.
Speaker Change: So if the economy remains resilient and continues on a solid growth path.
Speaker Change: We should see our nominal pace advantage grow over the course of the year instead of the opposite behavior and resolved last year.
I also want to highlight the great success, we've achieved in improving our operating efficiencies throughout our portfolio through a very intense ongoing collaboration with our operators.
Speaker Change: We continue to find new and more efficient ways to operate our properties yet.
Speaker Change: Yes, we're not sacrificing service levels, our customer satisfaction scores and rankings increased again in 2024, and they are up significantly compared to pre pandemic.
Speaker Change: Our success in increasing productivity and efficiencies has resulted from the full implementation of our best practices.
Speaker Change: Rigorous auditing of those implementations.
Speaker Change: Extensive detailed benchmarking and better use of technology focused on eliminating waste overstaffing and reducing energy and utility consumption.
Speaker Change: Pebble Brooks dose if you will.
Speaker Change: And those efforts include testing new technologies based on AI robotics sensors and predictive analytics.
Speaker Change: Curator and its team have been instrumental in helping us analyze and implement these innovations and do it at favorable pricing.
Speaker Change: We have also intensified efforts to reduce costs, such as workers compensation general liability and property and casualty insurance, we're actively mitigating risk and reducing cost through targeted property investments and operational improvements.
Speaker Change: As a result of all of these extensive efforts total expense growth in 2025 is forecasted at four 1% at the midpoint of our outlook.
Speaker Change: However, this figure is inflated by the absence of the $10 million of real estate and municipal tax credits received last year.
Speaker Change: Adjusted for this total hotel expenses are forecasted to grow just three 1% at the midpoint of our outlook.
This is despite inflationary pressures on wages and benefits energy and property and casualty insurance as well as the increased costs typically associated with higher occupancy and expanded food and beverage operations and volumes.
Speaker Change: We're extremely proud of our team's efforts to drive efficiencies and reduce costs in 2024 with.
Speaker Change: With our continued relentless focus on streamlining operations, we're confident in achieving further improvements in 2025.
Speaker Change: In addition, our disciplined approach to managing our balance sheet and maturities ensures that we remain well positioned to deliver strong returns for our shareholders, while maintaining one of the lowest overall cost of total debt capital in the lodging REIT sector.
Speaker Change: As reflected in our songs selection today.
Speaker Change: We have faced many challenges for mother Earth, but we're adapting and improving and we believe we're in a good place for 2025. Despite these impacts.
Speaker Change: We're looking forward to a great year this year and in the years ahead, when we expect to gain the full benefit of a very favorable environment, including a growing economy reconnected demand growth and little to no supply growth in our markets as.
Speaker Change: As well as substantial organic growth driven by the hundreds of millions of dollars, we've thoughtfully invested into our portfolio investments.
Speaker Change: Investments, which are poised to generate significant further upside this year and at least through 2027.
Donna: So that concludes our remarks today and we'd be very happy to take your questions. So Donna you May proceed with the Q&A.
Donna: Thank you the floor is now open for questions. If you would like to ask a question. Please press star one on your telephone keypad at this time.
Donna: Confirmation tone will indicate that your line is in the question queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up the handset before pressing the star keys.
Speaker Change: Do ask that you. Please limit yourself to one question again Thats Star One to register a question at this time. Today's first question is coming from Dori Kesten of Wells Fargo. Please go ahead.
Dori Kesten: Hi, Thanks, Good morning, guys and can you dig into your expectations for R&D outside out of firms and growth in 'twenty, five and guess what your managers youre seeing in discussions with green on the anticipated spend and then just differences that you would expect generally.
Dori Kesten: Our transient any urban versus resort properties.
Dori Kesten: Sure.
Dori Kesten: <unk> of course is when you look at our total revpar growth outlook. It is higher than our revpar growth outlook. So we do continue to expect.
That out of room spend will increase at a rate that's greater than our revpar growth rate.
Dori Kesten: That's really at all in all areas of non room revenues and includes food and beverage. It includes parking it includes resort and other guest amenity fees.
Dori Kesten: At our properties.
Dori Kesten: It's in other areas like Spa, it's at our club in La Playa.
Dori Kesten: <unk> spend continues to go up on a per member per guest perspective. So.
Dori Kesten: I mean, what we're hearing from clients.
Dori Kesten: Primarily positive.
Dori Kesten: They continue to spend more now sometimes they book at a lower number but when they come in they spend more and I think thats just.
Dori Kesten: Our cautious approach from a contractual perspective.
Dori Kesten: But in general we're seeing.
Dori Kesten: Very healthy out of room spend and we're seeing those trends continue.
Dori Kesten: Okay. Thank you.
Speaker Change: Thank you. The next question is coming from Duane <unk> of Evercore ISI. Please go ahead.
Duane <unk>: Hey, good morning. Thanks.
Duane <unk>: I wondered if we could zoom in a little bit on the on the D C market.
Duane <unk>: Obviously, you have some assets there, but you're also in the market and have been in the market for a long time.
Duane <unk>: Just been getting more questions on government exposure.
Duane <unk>: And of course, <unk> is only a part of that exposure potentially.
Duane <unk>: Can you speak to just generally demand drivers around a change of administration.
Duane <unk>: And what the overall vibe is right now.
Duane <unk>: Okay.
Duane <unk>: Well.
Duane <unk>: A lot of us know a lot of people who work for the government here.
Duane <unk>: And I'd say that the general emotional mode as is very high anxiety.
Duane <unk>: I think of kind of like a Mel Brooks movie.
Duane <unk>: People are very nervous.
Duane <unk>: People are getting all sorts of confusing communications people are getting fired theyre getting rehired back theyre getting fired again, it's all over the board.
Duane <unk>: So I think from a mood perspective.
Duane <unk>: That explains the general mood now.
Duane <unk>: <unk> and perception are often different than reality, so theres a number of very positive things happening in D. C related to demand drivers for hotels.
Duane <unk>: First is.
Duane <unk>: We had an inauguration.
Duane <unk>: I'm sure. It was the largest one we've ever had.
Duane <unk>: And as a result of that.
Duane <unk>: Results were very favorable and certainly added to.
Duane <unk>: The outlook for our first quarter.
Duane <unk>: Changing government always helps particularly when there's a congressional change.
Duane <unk>: Because it means a flipping of the committees.
Duane <unk>: Like in the Senate.
Duane <unk>: And so associations companies businesses.
Duane <unk>: They come to Washington, They stay here they meet with their representatives, the New Committee heads.
Duane <unk>: The people who are legislating in leading the legislative effort.
Duane <unk>: They meet with our people and the different cabinet departments.
Duane <unk>: And so it gets very very active and in a year that is the first year.
Duane <unk>: After elections it tends to be the most active because it's one of the most legislating goes on in that first year. When there is sort of that.
Duane <unk>: Election mandate, if you will.
Duane <unk>: The additional thing Thats happening in the market is that folks had been for the most part order to come back to the office.
Duane <unk>: And work and that is very favorable for both the downtown in terms of activity levels. It's very good for the restaurants, it's terrific for service providers and it's good for the hotels because it means.
Duane <unk>: More meetings downtown with people, who are actually working again in their offices.
Duane <unk>: So D C. Right now we forecast that is along with San Francisco as our two top urban markets for the year end and we do expect.
Duane <unk>: That to play out that well that way I mean I've been in D. C. Since 1986.
Duane <unk>: Not always in the in the hotel business, but in the real estate business.
Duane <unk>: We've gone through periods, where government has shrunk.
Duane <unk>: And the city continues to grow and and so a lot of people go from the from the public sector to the private sector.
Duane <unk>: Which is often very healthy for economic growth and I guess the one other thing dimension that does go along with a change in administration.
Duane <unk>: Is that a lot of people move to Washington to work on the New administration and they have visitors and.
Duane <unk>: Sometimes they are staying in hotels, because they're commuting back and forth et cetera. So.
A lot of positive demand drivers the one negative I would mention is.
Duane <unk>: Freezes in government spending or <unk>.
Duane <unk>: Typically don't help when it comes to government meetings.
Duane <unk>: And so we have seen through the portfolio not necessarily in D. C. At this point, but elsewhere, where there are meetings related to government.
Duane <unk>: I know <unk> meeting is an example of that.
Duane <unk>: That got canceled.
Duane <unk>: But theres a little of that that we should expect because when government freezes happened they can't move forward.
Duane <unk>: With new contracts.
Duane <unk>: Just provide some context.
Duane <unk>: Government demand, we have at our DC hotels.
Duane <unk>: It's only about in the mid single digits kind of area.
Duane <unk>: I know its direct government business, there may be indirect and people coming in to see the governance of that could be larger clearly DC as the base for the federal government.
Duane <unk>: But when it comes to also spending reductions federal government as in every state. So this is not something that just isolated to Washington, DC, Although it's probably larger impact but it is in every market. So it is a broader thing and we're all waiting to see how this plays out.
Duane <unk>: Thank you.
Duane <unk>: Thanks Duane.
Speaker Change: Thank you. The next question is coming from Jay Kornreich of Wedbush Securities. Please go ahead.
Jay Kornreich: Hi, Good morning. Thanks, you mentioned in your comments that you anticipate no further material leisure rate deceleration in 2025. So I was just wondering if you can expand on that comment.
Speaker Change: What are you seeing that gives you more confidence on Dolby user side and is there any possibility for leisure rates, even be up by the end of the year.
Jay Kornreich: Yes.
Jay Kornreich: Through our 13 properties.
Jay Kornreich: We have some that will be up this year.
Jay Kornreich: We have some that will probably be down a little bit this year and and we have others in this sort of flat up a little down a little territory. So.
Jay Kornreich: I think right now our expectation is we gain meaningful occupancy and our resorts this year and and flat to maybe a little bit of growth in rate depending upon how the year plays out, particularly the second half of the year.
Jay Kornreich: What gives us confidence is.
Jay Kornreich: Is what's on the books.
Jay Kornreich: And how that looks from a rate perspective.
Jay Kornreich: Encouraging.
Jay Kornreich: The resorts that are been Redeveloped, which are many of them are charging more theyre growing group rates.
Jay Kornreich: At the same time that they are attracting more leisure to the properties because we've added a lot of amenities. So.
Jay Kornreich: Sure.
Jay Kornreich: The biggest confidence that we get is from what what business is on the books and what rates were picking up at within the portfolio.
Jay Kornreich: Okay.
Jay Kornreich: Okay I appreciate that and then just one other.
Jay Kornreich: Looking at the looking further into Los Angeles.
Jay Kornreich: The impact that's having a portfolio, which you outlined in guidance do you feel like that's.
Jay Kornreich: Property de risked or is there any further impact that could have.
Jay Kornreich: On the vice versa side of that.
Jay Kornreich: Your progresses and maybe transient demand comes back came with social release customers is there opportunity for upside in that market.
Jay Kornreich: Yeah. So.
Jay Kornreich: I'd start out by telling you.
Jay Kornreich: We don't have experience with the impact of fires on a <unk>.
Jay Kornreich: Medium to long term basis.
Jay Kornreich: Sure.
Jay Kornreich: I don't know many people who do in terms of hitting major metropolitan Metropolitan areas. I think Hawaii is the closest thing we can come to and there were a lot of governmental mandates.
Jay Kornreich: That occurred in Hawaii that.
Jay Kornreich: Because of the loss of housing.
Jay Kornreich: And jobs.
Jay Kornreich: On such a small island that that really stretched out.
Jay Kornreich: I think our best guess J, which is what we put together and I would tell you.
Jay Kornreich: It's not conservative it's not aggressive it's really are our honest Jon best guess.
Jay Kornreich: And how we think the impacts going to wind down over the first half of the year.
Jay Kornreich: We've not forecasted anything for the second half.
Jay Kornreich: There certainly could be an impact again, it's unknowable and unpredictable.
We think it will be less the current trends continue to be positive our operators have gone out and made a lot of outreach to their regular customers and there are a lot of those in the la markets.
Jay Kornreich: And the recording industry and the entertainment industry in the fashion industry, and the financial industry and the tech industry and the feedback that we've gotten is people stop travel into the market. When the fires began in that first week and some have.
Jay Kornreich: Have returned to normal some are in the process of setting a date, whether it's <unk>.
Jay Kornreich: Sometime in March in some cases in April.
Jay Kornreich: For their return of regular travel, so and Thats for both group and leisure.
Jay Kornreich: Originally we saw.
Jay Kornreich: A recording in the movie in the in the.
Jay Kornreich: Music industry that was put on hold we saw.
Jay Kornreich: Hesitancy around the.
Jay Kornreich: Some of the awards shows.
Jay Kornreich: We we saw.
Jay Kornreich: This sort of continuing.
Jay Kornreich: Safety approach.
Jay Kornreich: Based upon kind of the dramatization of this view that maybe the fires were still happening that has impacted half of outlay that the smoke was terrible that there were things in the air that you didn't want to breathe.
Jay Kornreich: And frankly that.
Jay Kornreich: That went away after the first couple of weeks so.
Jay Kornreich: Folks have been very hesitant in returning their travel.
Jay Kornreich: But saying that in the last two weeks, we've seen a significant impact.
Jay Kornreich: Pickup in normal travel and tier set which is very encouraging and to the second part of your question Jay.
Jay Kornreich: I think there will be lots of <unk>.
Jay Kornreich: Vendors service providers government that will be coming to the market for.
Jay Kornreich: For the clean up and the rebuilding efforts.
Jay Kornreich: Again, most of them are going to stay outside of our markets because our markets are higher priced I mean, we don't take a lot of per diem business typically because it's much lower than our average rates.
Jay Kornreich: And but it should create significant compression in the market at some point.
Jay Kornreich: When that activity level really begins to become substantial so and as it relates to certainly the people who live in the Palisades.
Jay Kornreich: Anecdotally and I know quite a few of them.
Jay Kornreich: They are already rented.
Jay Kornreich: <unk> or condos or where they've gone to live in their second.
Jay Kornreich: In their second homes.
Jay Kornreich: Those at all to Dina I think are probably struggling more and are utilizing the hotel stock.
Jay Kornreich: Particularly at the mid to lower end so.
Jay Kornreich: And I think that will go on for a while until there's alternative affordable housing for for folks from that neighborhood.
Jay Kornreich: Is that helpful.
Jay Kornreich: Yeah very helpful. Thanks, Thanks for all the color.
Jay Kornreich: Sure.
Jay Kornreich: Thank you. The next question is coming from Michael Bellisario of Baird. Please go ahead.
Michael Bellisario: Good morning, everyone.
Speaker Change: John just first question for you just on some of the expense cuts and efficiencies is there maybe a dollar amount for 24 that you think you achieved and then.
Speaker Change: Could you provide us with some more sort of on property examples of things you've done or plan to do in 'twenty five.
Speaker Change: Okay.
Speaker Change: So there is no there is no dollar amount.
The target is is continuous and relentless.
Speaker Change: Efficiency efforts.
Speaker Change: There is a lot of.
Speaker Change: Opportunity within the portfolio on the food and beverage side to make that more efficient.
Speaker Change: There are.
Speaker Change: Lots of opportunities on the insurance side, which will be a multi year effort related to improvements, we're making at the properties to reduce gas.
Speaker Change: Guest and associate injuries and.
Speaker Change: And reduce the impact of those speed the return of people back to work to minimize and mitigate losses.
Speaker Change: We are using.
Speaker Change: Some predictive technologies that that will improve.
Speaker Change: And shrink the number of.
Speaker Change: Water main breaks and pipe breaks that occur in our hotels.
Speaker Change: Technologies that monitor I don't know I don't understand it I guess has to do with the vibrations or something that.
Speaker Change: Occur as a pipe weakens over time.
Speaker Change: Cause those those pipe breaks tend to be.
Speaker Change: Significant impact when they happen.
Speaker Change: So it's cross training Mike in the in the portfolio.
Speaker Change: It's testing more technologies.
Speaker Change: We are utilizing more remote and mobile check in.
Speaker Change: Think that will continue to lead to further reductions in overall staffing levels.
Speaker Change: Part of it is just being efficient using appropriate labor management technology.
Speaker Change: That exists, but if you put garbage in you get garbage out so making sure everyone at the properties, who use it who need to use it are well trained and understand what information they need to put in in order to get the most efficient result, and so when we talk about best practices.
It's a lot of things like that.
Speaker Change: Theres also a lot of investments, we're making in <unk>.
Speaker Change: With an effort to reduce utility consumption, whether it's electricity natural gas water.
Speaker Change: We have some very significant improvements going on to.
Speaker Change: To make toilets toilets more efficient.
Speaker Change: To reduce.
Speaker Change: I guess the ongoing leaks that occur.
Speaker Change: And toilets of them being constantly refilled.
Speaker Change: It's lots of little things, but they all add up to very substantial numbers and maybe there's a couple that you mentioned.
Speaker Change: Look Mike is as John indicated there is many things it is not just one or two things, but I think.
Speaker Change: I think our hotel teams and our asset managers with the expenses that have increased last several years, we all have to operate differently and unfortunately, we have really good hotel teams that are open and receptive to.
Speaker Change: Operating differently and rethinking all of that and that allows you to more efficiencies different staffing plan different use of labor and technology that really frankly wasn't available four or five years ago. So we're really encouraged we don't want to show all of our share of our secret sauce here because thats, what I think we can do a little differently and it also alluded to the <unk>.
Speaker Change: The curator creative programs is really helpful to us because they can do a lot of R&D and research. They found plenty of programs that don't work and he kick those out today find ones that do work. So that allows us with our asset managers are focused on the properties. We have another team that's focused on these areas. So we feel really good about it and we can expect to have more savings and efficiencies.
Speaker Change: And 25 and beyond and I think one of the things Thats helpful. For US is with 12 or 13 different operators, we see 12 or.
Speaker Change: <unk> thousand 14 different operating models and different ways, our operators approach everything and part of what we've created with with curator is we have a very extensive very detailed benchmarking system and so our asset managers are are pulling every month.
Speaker Change: Benchmarking against different sets of properties that are relevant looking all the way down to every single line item.
Speaker Change: Within within every major category of expense.
Speaker Change: And trying to understand is there and if one property is doing it less expensively.
Speaker Change: Is there something there that can be learned and rolled out through the rest of the portfolio.
Speaker Change: And that has been extremely helpful.
Speaker Change: This past year in terms of a lot of it.
Speaker Change: A lot of the staffing.
Speaker Change: Models that are different operators use in our portfolio in order to create increased productivity.
Speaker Change: Understood. That's helpful. And then just a follow up from me on an unrelated topic, but on the disposition front, what's the latest and greatest there in terms of your efforts to transact and maybe get some things across the finish line in 2025 and I ask that in the context of.
Speaker Change: Your short term incentives for.
Speaker Change: 25.
Speaker Change: Dispositions are at the top of the list.
Speaker Change: Sure.
Speaker Change: Yes, Mike This is Tom good morning, listen, we're going to continue to be opportunistic and if it makes sense I mean, obviously the transaction market had candidates and continuation from late 'twenty three 'twenty four in terms of I think high investor engagement and interest that little conviction I think that shifting you've got some ingredients that make it.
Speaker Change: A little more functioning I mean, you have more debt availability I think that standard, but certainly with more players more availability better pricing and we've seen a compression in spreads over the last year and so I think investors can underwrite that with some confidence and I think as you've kind of heard today the operating fundamentals.
Speaker Change: They are more predictable and people can I think underwrite as well that typically leads to higher investor conviction and I think if we get this trend of the reconnection.
Speaker Change: Industry demand with GDP.
Speaker Change: Certainly over the fourth quarter of last year and into the first quarter of this year I think people are going to take notice of that and become more active and more bullish. The question is going to be to the other point is maybe.
Speaker Change: Maybe some of the uncertainty.
Speaker Change: Around some of the administration policies is that going to slow things down for another 30, 60 or 90 days. So listen we're going to continue to be active and continue to have a number of discussions.
Speaker Change: Yoyo.
Speaker Change: Have something to announce we'll certainly announce it.
Speaker Change: Understood. Thank you.
Speaker Change: Thanks, Mike.
Speaker Change: Thank you. The next question is coming from Gregory Miller of <unk> Securities. Please go ahead.
Gregory Miller: Thank you good morning.
Gregory Miller: Now I'd like to ask about San Francisco, certainly there have been many developments in recent months, including changes to local leadership could you provide your latest views on the market beyond convention citywide.
Gregory Miller: Perhaps if you can speak to what youre seeing in the streetscape.
Changes implemented by the new mayor or the board of Supervisors.
Gregory Miller: Tourism promotional efforts or other factors that are top of mind for Ya. Thanks sure. So.
Gregory Miller: I'd say.
Gregory Miller: Pretty much in all regards.
Gregory Miller: Things are improving in.
Gregory Miller: San Francisco.
Gregory Miller: From a quality of life perspective.
Gregory Miller: From a policy perspective.
Gregory Miller: From.
Gregory Miller: And optimism perspective, I think there's a lot of momentum now I think we will look back and say 2023 was the.
Gregory Miller: The trough in <unk>.
Speaker Change: Maybe for the city, although I could argue that the trough from a quality of life perspective was probably.
Speaker Change: 'twenty, one or 'twenty, two but because I think things have gotten had already gotten significantly better in the market. The cities in the process of rebuilding the police force.
Speaker Change: The board of Supervisors is much more moderate than.
Speaker Change: And then it was prior to the last two elections.
We have arguably a more moderate mer, although I think the last one <unk> came around and was pretty moderate we have a business friendly mayor.
Speaker Change: We had our first.
Speaker Change: Business tax reduction I think somebody told me in 80 years in San Francisco that passed in the last election, So and if you look at some of the other categories. We have started to see office positive office absorption in the market.
Speaker Change: There is.
Speaker Change: Theres been a break.
Speaker Change: Office values and they've started to trade.
Speaker Change: Be it very opportunistically for the buyer community from a pricing perspective.
Speaker Change: Seeing all segments of demand increase.
There are many many.
Speaker Change: Back to the office mandates that have been implemented and.
Speaker Change: And noticed on the ground both from a foodservice center and other service.
Speaker Change: Participants in the marketplace, we've seen at our hotels in terms of increased in house group demand.
Speaker Change: The sporting activities and music activities.
Speaker Change: Active in the market and we're getting the benefit of that on weekends.
Speaker Change: So and if you walk the city I mean again outside of.
Speaker Change: One district for which there is no reason to go into it.
Speaker Change: The city looks clean.
Speaker Change: See any more homeless there than you do in most any other city today.
Speaker Change: They're working hard on providing services to those folks.
Speaker Change: It needs so they don't need to live on the street.
Speaker Change: So I think we're very very positive it will be one of our two best urban markets. This year, along with T. C L.
Speaker Change: And we expect it to be in the mid to high single digits in terms of Revpar growth this year. So.
Speaker Change: We think the city's turned theres, a new leader of SF travel, we spent significant time with her.
Speaker Change: We're very high on her she has already made a difference.
Speaker Change: San Francisco is attracting conventions again, new conventions, Microsoft ignite is coming the week before Thanksgiving.
Speaker Change: That was a huge conference in Chicago last year.
Speaker Change: In the latter part of the year.
Speaker Change: David attracted fancy foods back from Las Vegas, They attracted snowflake back from Las Vegas.
Speaker Change: And there is other new bookings.
Speaker Change: And some return bookings for future years, and when you look at the convention pace and I know you said outside of the convention, but.
Speaker Change: Don't want to exclude the future beyond 'twenty five.
Speaker Change: The pace right now.
Speaker Change: Is significantly increased over the last six months for out years, including 26, 27 and 28. So we think the convention room night demand is going to continue to go up.
Speaker Change: In each subsequent year based upon where they are from a pace perspective.
Speaker Change: Hey, Greg just to support our confidence is supported by the numbers in our San Francisco hotels, the pace each quarter room nights are up double digits each quarter versus last year that doesn't mean, we're going to end up double digits up but it is supportive of a strong convention calendar will return to office by a lot of companies in San Francisco.
Speaker Change: <unk> AI, which we know San Francisco is the center of what's going on right now so a lot of positive momentum, which supports our confidence and Thats group and transient is not just group.
Speaker Change: I appreciate the thorough response for me both alright, thanks sure. Thanks, Greg.
Speaker Change: Thank you. The next question is coming from Ari Klein of BMO capital markets. Please go ahead.
Speaker Change: Thanks, Dan and good morning.
Speaker Change: Maybe just going back to the la market.
Speaker Change: If you even before the wildfires to 2020.
Speaker Change: <unk> was very challenging year, and I think EBITDA is.
Speaker Change: 24, 55% below the 2016 peak.
Speaker Change: I guess I'm, just curious whats your long term view on that market.
Speaker Change: And how comfortable are you with your overall exposure there.
Speaker Change: Yes.
Speaker Change: Sure so.
Speaker Change: I think.
Speaker Change: What the second largest city in America.
Speaker Change: It has.
Speaker Change: A huge and.
Speaker Change: Expansive industry base.
Speaker Change: It has great weather.
Speaker Change: It has great amenities la.
Speaker Change: La literally sits on the beach.
Speaker Change: Actively.
Speaker Change: I think we continue to be big believers in a city like San Francisco a couple of years ago law has some challenges. Some some are are self inflicted.
Speaker Change: Others.
Speaker Change: Or from a <unk>.
Speaker Change: Very aggressive.
Speaker Change: Labor movement.
Speaker Change: In the city and.
Speaker Change: L. A is one of the later.
Speaker Change: Government policy.
Speaker Change: Or.
Speaker Change: It's moving slower and transitioning to a more moderate a policy perspective than San Francisco has and so.
Speaker Change: It's going to take some time for the policies to change.
Speaker Change: But there is incredible base of business that.
Speaker Change: Is serviced in la <unk>.
Speaker Change: People are still moving to la despite.
Speaker Change: What you might otherwise.
Speaker Change: Here.
Speaker Change: And you've got some really big events coming over the next three years that will be extremely helpful. On top of the significant additional demand that's going to come from as a result of of the cleanup and rebuilding efforts for.
Speaker Change: These two major neighborhoods in la so.
Speaker Change: It's not without its challenges there is there is little to no new construction in the market.
Speaker Change: There won't be any for quite some time, the economics, just arent supportable and that that will pave the way for <unk>.
Speaker Change: Substantial recovery from as you describe it a pretty big hole in terms of pullback from where it was in 19 and in fact further from where it peaked in 2016 so.
Speaker Change: I'd say the industry is not healthy today from an.
Speaker Change: From a business model perspective.
Speaker Change: But there is opportunity, but we also need some some some better business policies in the market.
Speaker Change: Yes.
Speaker Change: When you compare maybe San Francisco and L. A.
Speaker Change: Two market do you feel better about I guess over the medium term it sounds like Theres a lot of.
Speaker Change: Maybe more near term optimism on San Francisco.
Speaker Change: Yes.
Speaker Change: I think it's maybe a little bit.
Speaker Change: A little bit more predictable in San Francisco right now, although if you asked anybody.
Speaker Change: Six months ago, Nobody would have said that so.
Speaker Change: So it's a fairly small amount of time.
Speaker Change: We truck trough from a convention calendar last year and it had a big negative impact on the market I mean, the whole is deeper in San Francisco compared to historical performance than it is in Los Angeles.
Speaker Change: And so I don't want to pick one I think we were comfortable owning in both markets I think.
Speaker Change: If we were a buyer, which we're not today because we can buy our existing portfolio back at such a big discount, but if we were allocating capital.
Speaker Change: Outside of R. R.
Speaker Change: Company, we'd be a buyer in these two markets because the values at this point are low as indicated by the values on a per key basis included.
Speaker Change: In our NAV.
Speaker Change: Analysis, and if you compare that to the historical NAV youre going to see that both of those markets have been written down very significantly.
Speaker Change: <unk> values.
Speaker Change: Okay. Thanks, Our next question sure. The next question is coming from Floris Van <unk> with Compass point. Please go ahead.
Good morning, guys.
Speaker Change: My question to you obviously you had another.
Speaker Change: Gut punch here in L. A with the fires.
Speaker Change: You put out a bridge that basically tells you that.
Speaker Change: You think youre going to get to $442 million.
Speaker Change: <unk> of.
Speaker Change: <unk> EBITDA.
Speaker Change: And if I look at your 2019.
Speaker Change: Which by the way that breach implies 19% growth.
Speaker Change: If I look at your 2019, EBITDA, you had $436 million of hotel EBITDA.
Speaker Change: Still 65, what are the conditions that you need obviously outside of the the one off events like the Hurricanes in Florida, and the and the.
Speaker Change: Fire and all that.
Speaker Change: That you think you would need to get to those levels and how quickly can you get there and is there a scenario, where we can get beyond that.
Speaker Change: That EBITDA that you've laid out in your bridge.
Speaker Change: Sure. So so Florida I think.
Speaker Change: The base need is for continued economic consistent economic growth I think if we if we live in an economy with with a couple of percent.
Speaker Change: Plus of GDP growth.
Speaker Change: We're going to see somewhere close to that in demand growth, we've got probably four or five more years in our markets at a minimum where there will be little to no supply growth.
Speaker Change: And so we will see occupancy.
Speaker Change: Rise and we're going to see rates rise.
Speaker Change: They can happen.
Speaker Change: That can happen very quickly they can accelerate very very quickly.
Speaker Change: As as demand grows in and revenue managers and owners and operators become much more confident.
Speaker Change: In the demand environment so.
Speaker Change: You don't have to fight your neighbor to grow.
Speaker Change: You can you can price accordingly, and so if you look at history I mean, we could be in mid to upper single digits of overall revpar growth.
Speaker Change: Bye Bye next year.
Speaker Change: And.
Speaker Change: And certainly that could increase into.
Speaker Change: Into the high single digits out into 'twenty seven.
Speaker Change: 28 so.
Speaker Change: They are in our view, it's not a matter of if it is a matter of when but.
Speaker Change: When does matter because expenses keep growing every year.
Speaker Change: So we've got to grow revenues faster and then Theres a huge amount of operating leverage in the business.
Speaker Change: And in our case, we have.
Speaker Change: For us a meaningful amount of financial leverage as well.
Speaker Change: Which will flow through so we feel pretty good about achieving those numbers over the next.
Three years or so.
Speaker Change: And it's really based upon a need for continued economic growth environment.
Sean: Thanks, Sean.
Speaker Change: Thank you. Our final question today is going to be coming from Chris <unk> of Green Street. Please go ahead.
Speaker Change: Hey, Thanks, good morning.
Speaker Change: John to the extent you are successful in closing any dispositions. This year. How are you thinking about use of proceeds, especially with the convertible note maturity date approaching in the next couple of years and then secondly.
Speaker Change: Is there a scenario here, where maybe you look to sell assets in some of your stronger urban markets potentially even some of your resort hotels might imagine the liquidity profile. There is much superior relative to some of your west coast markets.
Speaker Change: Yes, so we're going to flip your multi.
Speaker Change: Question around the room, but I'll start.
Speaker Change: As it relates to what will we do with the capital.
Speaker Change: We'll decide at the time based upon what the world looks like but if it looks like today, which is the.
Speaker Change: Most.
Speaker Change: Since we have from a visibility perspective.
Speaker Change: We use a significant amount of that capital to buy our stock back.
Speaker Change: It's trading at more than 50% discount to the midpoint.
Speaker Change: All of our NAV range, we would expect to be selling our individual assets within their ranges respectfully and that is our our historical performance. It's what we've achieved.
Speaker Change: In the past.
Speaker Change: And and then we'll use the rest to pay down debt that relates to the loss of that EBITDA.
Speaker Change: And so we want to make sure we remain at least leverage neutral and potentially slightly continue to improve the leverage profile.
Speaker Change: Chris as it relates to the convert so we provided an updated slide in our new investor presentation on the balance sheet, just provide little more color in some ways. What we're thinking about addressing that so in addition to potential dispositions and the proceeds from that.
Speaker Change: We have right now just as a reminder of a $200 million of cash our free cash flow and this is after real capex net of CAD number.
Speaker Change: Should be averaging well over $1 million.
Speaker Change: A year in the next few years, so depending on how we used for stock buybacks and those sort of things.
Speaker Change: Youre looking at $400 million, plus or minus of available cash so that really brings the potential refinancing of the convert down to that $3 50 $400 million range, which we can look at a convert.
Speaker Change: We can look at term loans when you look at high yield which were we are in the markets. We have a lot of options our disposal and we're going to look at what's best at the time.
Speaker Change: What's hard for US right now is the convert is a really really good coupon right now at 175, it's hard to be that anywhere.
Speaker Change: We'd like to hold on to take advantage of that because it's showing up some of our cash flow, but it's not something that we're overly concerned about again.
Speaker Change: You've seen the improvements in the portfolio in last couple of years, how much leverage to come down and our access to other sources of debt. So it's not something that we think is a huge concern you should be worried about but let me provide all the options and some good roadmap there in our investor deck.
Speaker Change: And Ray had mentioned, we have a $650 million unused line, yes, oh by the way by the way so.
Speaker Change: There is a lot a lot of options there.
Speaker Change: Plan these things well in advance as shown.
Speaker Change: Of our 15 year history here at Pebble broken.
Speaker Change: We've never put ourselves in a box.
Speaker Change: And that won't happen here either.
Speaker Change: All the very helpful thoughts I guess just to follow up on the last part of my admittedly multi part question, but any thoughts on potentially selling some of those markets, where maybe the liquidity profile is a little bit.
Speaker Change: More conducive to a saturating some sales.
Speaker Change: We continue to discuss internally what makes sense within our portfolio and what that would mean in terms of the remaining portfolio.
Speaker Change: One of the challenges that we have just as it relates to resorts in general as we've invested a lot of capital in those resorts.
Speaker Change: And a number of the resorts are not yet stabilized, which makes it a little harder we'd like to achieve those returns and we think the value might be greater yesterday, but if someone's willing to think about that and pay us today, that's something we can evaluate.
Speaker Change: Understood I appreciate the time thank you.
Speaker Change: Thank you, Chris and Chris.
Speaker Change: At this time I would like to turn the floor back over to Mr. Bortz for closing comments.
Thanks, everybody for participating.
Speaker Change: We'll see many of you down.
Speaker Change: At.
Speaker Change: At the conference conferences down in Orlando and.
Speaker Change: In Hollywood, Florida, and we look forward to updating you on our progress this year.
Speaker Change: What in another 60 days.
Speaker Change: So thanks again.
Speaker Change: Ladies and gentlemen, thank you for your participation. This concludes today's event you may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.
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