Q1 2025 Sotherly Hotels Inc Earnings Call
Carly: Good morning all and thank you for joining us for the Sotherly Hotels Q1 2025 conference call and webcast. My name is Carly and I'll be coordinating the call today.
Good morning, and thank you for joining us separately hotels Q1, 'twenty five conference call and webcast. My name is calling it will be coordinating the call today.
Carly: If you'd like to register a question during the call, you can do so by pressing star followed by one on your telephone keypad, and to unmute yourself at the line of questioning will be star followed by two.
Appreciate your question during the call you can do so by pressing star flip I wanted to get sort of thing keypad and shouldn't be yourself on our questionnaire stuffed up let's see I don't know that.
Scott Kucinski: And then I turn it over to our host, Scott Kucinski, Chief Operating Officer of Sotherly Hotels. The floor is yours. Thank you, and good morning, everyone. If you have not received a copy of the earnings release, you may access it on our website at SotherlyHotels.com. In the release, the company has reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirements. Any statements made during this conference call, which are not historical, they constitute forward-looking statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that these expectations will be attained.
Speaker Change: <unk>, Scott Kucinski, Chief operating Officer, 70 hotels, the floor is yours.
Speaker Change: Thank you and good morning, everyone. If you've not received a copy of the earnings release, you may access it on our website at suddenly hotels dot com in the release the company has reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirements.
Speaker Change: Any statements made during this conference call, which are not historical may constitute forward looking statements. Although we believe the expectations reflected in any forward looking statements are based on reasonable assumptions. We can give no assurance that these expectations will be attained factors and risks that can cause actual results to differ materially from those expressed or implied by forward looking statements are detailed.
Scott Kucinski: Factors and risks that can cause actual results to differ materially from those expressed or implied by forward-looking statements are detailed in today's press release and from time to time in the company's filings at the FEC. The company does not undertake a duty to update or revise any forward-looking statements.
Speaker Change: And in today's press release and from time to time in the company's filings with the SEC.
Speaker Change: <unk> does not undertake a duty to update or revise any forward looking statements.
Scott Kucinski: With that said, I'll start off today's call with a review of our portfolio's key operating metrics for the first quarter. Looking at the first quarter results for the actual portfolio compared to 2024, RevPAR increased 6.4%, driven by a 6.4% increase in occupancy, with ADR flat to prior year. Stripping out Tampa from the results due to continued impact to the property from Hurricane Helene, which struck Tampa in late September 2024, the first quarter's actual portfolio RevPAR increased a healthy 7.3% compared to prior year, driven by a 7.5% increase in occupancy. Overall, we delivered a solid first quarter with results ahead of our internal expectations.
Speaker Change: With that said I'll start off today's call with a review of our portfolio's key operating metrics for the first quarter looking at the first quarter results for the actual portfolio compared to 2020 for Revpar increased six 4% driven by a six 4% increase in occupancy with ADR flat to prior year.
Speaker Change: Stripping out Tampa from our results due to continued impact of the property from Hurricane lean with struck Tampa in late September 2024.
Speaker Change: The first quarter's actual portfolio Revpar increased a healthy seven 3% compared to prior year, driven by seven 5% increase in occupancy.
Speaker Change: Overall, we delivered a solid first quarter with results ahead of our internal expectations. The outperformance was largely driven by strong year over year occupancy growth, which reflects continued momentum across the portfolio.
Scott Kucinski: The outperformance was largely driven by strong year-over-year occupancy growth, which reflects continued momentum across the portfolio. Importantly, we saw the most pronounced gains in our urban markets, many of which have been slower to rebound post-pandemic. That strength is a clear indication that lodging fundamentals have stabilized and demand patterns have normalized across segments of market. In addition to growth in the group segment, our urban markets were buoyed by special events during the quarter, including the Presidential Inauguration in Arlington, NFL Playoffs in Philadelphia, and the College Football National Championship in Atlanta.
Speaker Change: Importantly, we saw the most pronounced gains in our urban markets, many of which have been slower to rebound post pandemic.
Speaker Change: Our strength is a clear indication that lodging fundamentals stabilize and demand patterns have normalized across segments and markets and.
Speaker Change: In addition to growth in the group segment, our urban markets were buoyed by special events during the quarter, including the presidential inauguration in Arlington NFL playoffs in Philadelphia, and the college football National Championship in Atlanta.
Scott Kucinski: Turning to rate, we're encouraged by the stabilization we saw during the first quarter. After experiencing multiple quarters of sequential rate declines, ADR held steady across most of the portfolio, particularly in our top-performing business travel and group markets. As previously noted, Hotel Alba in Tampa continued to experience operational disruption from Hurricane Helene during the first quarter as the hotel's elevators remained impaired from flood damage. We anticipate the elevator restoration to take several months to complete. Therefore, that impact will continue through at least the end of the second quarter. From a reporting standpoint, our headline operating metrics, ADR, occupancy, and REVPAR reflect the storm-related disruption at Hotel Alba on a pre-insurance basis.
Speaker Change: Turning to rate, we're encouraged by the stabilization we saw during the first quarter after experiencing multiple quarters of sequential rate declines ADR held steady across most of the portfolio, particularly in our top performing business travel and group markets.
Speaker Change: As previously noted hotel Alba and Tampa continue to experience operational disruption from Hurricane Helane during the first quarter as the hotels elevators remain impaired from flood damage. We anticipate the elevated restoration. It takes several months to complete therefore that impact will continue through at least the end of the second quarter.
Speaker Change: From a reporting standpoint, our headline operating metrics ADR occupancy and Revpar reflect the storm related disruption at hotel Alba on a pre insurance basis. However, our reported revenue and profitability metrics do include business interruption insurance proceeds, which helped to offset the financial impact during the quarter.
Scott Kucinski: However, our reported revenue and profitability metrics do include business interruption insurance proceeds, which helped offset the financial impact during the quarter.
Scott Kucinski: We'll get some highlights from a few key assets in the portfolio during the quarter. Starting with the Doubletree Resort in Hollywood, Florida, the property delivered strong year-over-year results with REVFAR up 11.9%. This growth was primarily driven by an 11.8% increase in occupancy, supported by healthy weekend transient demand, better than expected banquet performance, and solid group booking. The hotel gained significant ground on its comp set, posting a 12.9% increase in REVPAR index, driven by a 9.5% gain in occupancy. Hotel Ballast in Wilmington posted another strong quarter outperforming both budgeted and prior year results. The hotel achieved red part growth of 6.5% year-over-year supported by a 3.5% increase in occupancy and a 2.9% increase in rates.
Speaker Change: Looking at some highlights from a few key assets in the portfolio during the quarter.
Speaker Change: With the Doubletree resort in Hollywood, Florida property delivered strong year over year results with Revpar up 11, 9%. This growth was primarily driven by an 11, 8% increase in occupancy supported by healthy weekend transient demand better than expected banquet performance and solid group bookings the hotel gained significant ground out comps that posting a two.
Speaker Change: One 9% increase in Revpar index, driven by nine 5% gain in occupancy share.
Speaker Change: Hotel ballast in Wilmington posted another strong quarter outperforming both budgeted and prior year results. The hotel achieved revpar growth of six 5% year over year supported by three 5% increase in occupancy and a two 9% increase in rate.
Scott Kucinski: Continued strength in group business along with robust banquet and catering revenue contributed to the outperformance. Hotel Ballas maintained a strong position against this comp set with a RevPAR index of 115.3%. Turning to the Whitehall in Houston, the property continues recovery with first quarter rep part increasing 19.4% year over year, driven by a 20.5% gain in occupancy. Strong citywide demand, business transient volume, and healthy group bookings all supported the hotel's performance. The White Hall took meaningful share from its competitive set during the quarter, gaining more than 6% in REVFAR share, fueled by strong occupancy share improvement of 12.6%.
Speaker Change: Continued strength in group business, along with robust banquet and catering revenue contributed to the outperformance.
Speaker Change: Balanced maintained a strong position against its comp set with a revpar index of 115, 3%.
Speaker Change: Turning to the Whitehall in Houston property continued its recovery with first quarter Revpar, increasing 19, 4% year over year, driven by a 25% gain in occupancy strong citywide demand business transient volume in healthy group bookings all supported the hotel's performance the Whitehall took meaningful share from its competitive set.
Speaker Change: During the quarter getting more than 6% revpar share fueled by strong occupancy share improvement of 12, 6%.
Scott Kucinski: Finally, the Doubletree Philadelphia Airport saw significant momentum in the quarter, with the REVPAR up 34.3 percent, driven by a 38.7 percent increase in occupancy. Although rate declined 3.1%, the overall result reflects strong demand improvement across the submarket, including increased air traffic and citywide events. Notably, group business increased nearly 158% over prior year, a testament to the recharged sales efforts at the hotel that capitalized on a number of short-term bookings during the quarantine. As a result of these efforts, the hotel significantly outperformed its comp set with an impressive 25.2% gain in occupancy share. Looking at portfolio profitability, Hotel EBITDA across our entire portfolio increased 4.5% over prior year.
Speaker Change: Finally, the Doubletree Philadelphia Airport saw significant momentum in the quarter with Revpar up 34, 3% driven by a 38, 7% increase in occupancy.
Speaker Change: Although rate declined three 1%. The overall result reflects strong demand improvement across sub market.
<unk> increased air traffic and citywide events, notably group business increased nearly 158% over prior year, a testament to the recharge sales efforts at the hotel to capitalize on a number of short term bookings during the quarter as.
Speaker Change: As a result of these efforts the hotel significantly outperformed its comp set with an impressive 25, 2% gain in occupancy share.
Speaker Change: Looking at portfolio of profitability hotel EBITDA across our entire portfolio increased four 5% over prior year. However, when stripping out the onetime benefit of a $550000 Covid related grant received in Savannah in Q1, 2024 Hotel EBITDA increased a healthy nine four.
Scott Kucinski: However, when stripping out the one time benefit of a $550,000 COVID related grant received in Savannah in Q1 2024, Hotel EBITDA increased to healthy 9.4% over prior year. This translates to a strong 100 basis point increase in Hotel EBITDA margin. Occupancy growth across the portfolio has enabled our operators to drive incremental ancillary revenue and benefit from operating efficiencies, especially in our urban markets that are still in the recovery phase. This has helped support margin expansion and solid flow through.
Speaker Change: Percent over prior year. This translates to a strong 100 basis point increase in hotel EBITDA margins.
Speaker Change: Occupancy growth across the portfolio has enabled our operators to drive incremental ancillary revenue and benefits from operating efficiencies, especially in our urban markets that are still in a recovery phase. This has helped support margin expansion and solid flow through performance. Looking ahead, we expect margin trends to remain relatively stable as staffing levels and amenities that normalize.
Scott Kucinski: Looking ahead, we expect margin trends to remain relatively stable as staffing levels and amenities have normalized and wage pressures continue to ease across the portfolio.
Speaker Change: And wage pressures continue to ease across the portfolio.
Scott Kucinski: Turning to corporate activity, as previously disclosed, the company continues to advance planning and preparation for two upcoming PIP renovations in Philadelphia. We have signed a new 10-year franchise agreement with Hilton to retain the Doubletree flag. The Associated PIP carries a total budget of $11.5 million and is expected to be completed by May 1, 2026. In Jacksonville, the company has entered into a new 10-year franchise agreement with Hilton to reposition the hotel under a soft-branded concept, Hotel Bellamy. The planned renovation has a total budget of $14.6 million and is expected to be completed by January 1, 2027.
Speaker Change: Turning to corporate activity as previously disclosed the company continues to advance planning and preparation for two upcoming Pip renovations in Philadelphia, We have signed a new 10 year franchise agreement with Hilton to retain the doubletree flag the associated Pip carries a total budget of $11 $5 million and is expected to be completed and make by May one 2000.
Speaker Change: <unk> 26 in Jacksonville, The company has entered into a new 10 year franchise agreement with Hilton to reposition the hotel under a soft branded concept hotel Bellamy planned renovation has a total budget of $14 $6 million and is expected to be completed by January one 2027.
Scott Kucinski: Turning to our balance sheet, two of our larger assets located in Atlanta and Hollywood have debt maturities coming up this year. While we recognize the broader uncertainty in the debt markets, we remain confident in our ability to work constructively with our lending partners to address these upcoming maturities. Additionally, the potential for Fed easing could serve as a tailwind for our near-term financing efforts across the portfolio. Looking ahead, we will continue to take a disciplined and conservative approach to managing our capital structure. Our remaining near-term maturities are well staggered, which provides us with flexibility as we navigate the current financing environment.
Speaker Change: Turning to our balance sheet two of our larger assets located in Atlanta, and Hollywood have debt maturities coming up this year, while we recognize the broader uncertainty in the debt markets. We remain confident in our ability to work constructively with our lending partners to address these upcoming maturities. Additionally, the potential for fed easing could serve as a tailwind for our near term financing efforts cross.
Speaker Change: Portfolio looking ahead, we will continue to take a disciplined and conservative approach to managing our capital structure. Our remaining near term maturities are well staggered, which provides us with flexibility as we navigate the current financing environment.
Anthony Domalski: I will now turn the call over to Thank you, Scott. Reviewing performance for the period ended March 31st, 2025. For the first quarter, total revenue was approximately $48.3 million, representing an increase of 3.8% over the same quarter last year. Hotel Libre for the quarter was approximately $12.9 million, representing an increase of 4.5% over the same quarter last year. And for the quarter, adjusted FFO was approximately $4.5 million, representing a decrease of approximately $0.7 million from the same quarter last year. Please note that our adjusted FFO excludes charges related to the early extinguishment of debt, unrealized gains and losses on derivative instruments, charges related to aborted or abandoned securities offerings, ESOP and stock compensation expense, as well as other items. Hotel EBITDA excludes these charges as well as interest expense, interest income, corporate general and administrative expenses, realized gains and losses on our derivative instruments and the current portion of our income tax provision and other items as well.
Tony: I'll now turn the call over to Tony.
Tony: Thank you Scott reviewing performance for the period ended March 31, 2025 for the first quarter total revenue was approximately $48 3 million, representing an increase of three 8% over the same quarter last year.
Tony: Hotel EBITDA for the quarter was approximately $12 9 million.
Tony: Representing an increase of four 5% over the same quarter last year and for the quarter. Adjusted <unk> was approximately $4 5 million, representing a decrease of approximately $7 million from the same quarter last year. Please note that our adjusted <unk> excludes charges related to the early extinguishment of debt.
Tony: Unrealized gains and losses on derivative instruments charges related to aborted or abandoned securities offerings, Aesop and stock compensation expense as well as other items hotels.
Tony: Hotel EBITDA excludes these charges as well as interest expense interest income corporate general and administrative expenses realized gains and losses on our derivative instruments and the current portion of our income tax provision and other items as well please refer to our earnings release for additional detail.
Anthony Domalski: Please refer to our earnings release for additional detail. Looking at our balance sheet, as of March 31, 2025, the company had total cash of approximately $32.8 million, consisting of unrestricted cash and cash equivalents of approximately $11.5 million, as well as $21.3 million, which was reserved for real estate taxes, insurance, capital improvements, and certain other items. At the end of the quarter, we had principal balances of approximately $317.6 million in outstanding debt at a weighted average interest rate of 5.88%. Approximately 84.4% of the company's debt carried a fixed rate of interest when taking into account the company's interest rate hedges.
Tony: Looking at our balance sheet as of March 31, 2025, and the company had total cash of approximately $32 $8 million consisting.
Tony: Consisting of unrestricted cash and cash equivalents of approximately $11 5 million as well as $21 3 million, which was reserved for real estate taxes insurance capital improvements and certain other items.
Tony: At the end of the quarter, we had principal balances of approximately $317 6 million in outstanding debt at a weighted average interest rate of 588%.
Tony: Approximately 84, 4% of the company's debt carries a fixed rate of interest when taking into account the company's interest rate hedges.
Anthony Domalski: We anticipate routine capital expenditures for the replacement and refurbishment of furniture, fixtures and equipment will amount to approximately $7.2 million for calendar year 2025. A significant portion of our product approval plans at the DoubleTree by Hilton Philadelphia Airport and the DoubleTree by Hilton Jacksonville Riverfront will occur during the year, with anticipated capital expenditures related to these two projects totaling approximately $11.4 million this year.
Tony: We anticipate routine capital expenditures for the replacement and refurbishment of <unk>.
Tony: Furniture fixtures and equipment will amount to approximately $7 $2 million for calendar year 2025.
Tony: A significant portion of our product improvement plans at the Doubletree by Hilton Philadelphia Airport, and the Doubletree by Hilton Jacksonville Riverfront will occur during the year with anticipated capital expenditures related to these two projects totaling approximately $11 $4 million this year.
Anthony Domalski: Turning to guidance, we are reiterating our full-year guidance for 2025, accounting for current and expected performance within the portfolio, and taking into account market conditions. We're projecting total revenue in the range of $183.4 to $188.2 million for full year 2025. At the midpoint of this guidance, it represents a 2.1% increase over the prior year. Hotel EBITDA is projected in the range of $48.8 to $49.6 million. And at the midpoint of this guidance, it represents a 5.2% increase over the prior year. Adjusted FFO is projected in the range of $11.5 to $12.3 million, or $0.57 to $0.61 a share.
Tony: Turning to guidance, we are reiterating our full year guidance for 2025 accounting for current and expected performance within the portfolio and taking into account market conditions.
Tony: We're projecting total revenue in the range of 183, 4% to $188 2 million for full year 2025.
Tony: At the midpoint of this guidance it represents a two 1% increase over the prior year.
Tony: Hotel EBITDA is projected in the range of 48, 8% to $49 6 billion.
Tony: And at the midpoint of this guidance it represents a five 2% increase over the prior year.
Tony: Adjusted <unk> is projected in the range of 11, five to $12 3 million.
Tony: Or 57% to 61 a share.
Anthony Domalski: At the midpoint of this guidance, it represents a 16.4% decrease compared to the prior year.
Dave: At the midpoint of this guidance represents a 16, 4% decrease compared to the prior year and I'll now turn the call over to Dave. Thank.
David Folsom: And now I'll turn the call over to Dave. Thank you, Tony. Good morning. We were very pleased with our first quarter results, which came in ahead of expectations. Even as macroeconomic uncertainty began to emerge in March, performance was driven in large part by continued occupancy recovery in our urban markets, where demand was supported by both group business and a steady improvement in corporate transient travel. Our coastal leisure focused assets also delivered strong results, benefiting from healthy weekend leisure demand, complemented by consistent weekday group booking. While rate growth remains a broader industry challenge, we were encouraged to see our average rate hold flat year over year.
Dave: Thank you Tony and good morning.
Dave: We're very pleased with our first quarter results, which came in ahead of expectations, even as macroeconomic uncertainty began to emerge in March.
Dave: <unk> was driven in large part by continued occupancy recovery in our urban markets, where demand was supported by both group business and the steady improvement in corporate transient travel or coastal leisure focused assets also delivered strong results.
Dave: <unk> from healthy weekend leisure demand complemented by consistent weekday group bookings while rate growth remains a broader industry challenge. We were encouraged to see our average rate hold flat year over year importantly, our operators were able to maintain rate discipline, while driving meaningful occupancy gains which translated into.
David Folsom: Importantly, our operators were able to maintain rate discipline while driving meaningful occupancy gains, which translated into healthy margin performance and outperformance versus the prior year.
Dave: A healthy margin performance and the outperformance versus the prior year.
David Folsom: Before we move on, I want to touch briefly on the potential impact of recent developments in the macroeconomic environment. Policy changes at the federal level have introduced a level of uncertainty that is impacting near-term visibility in the lodging industry. Given the current backdrop, consumer sentiment is weakened, which likely will result in increased price sensitivity and compressed booking windows among our transient guests. Meanwhile, demand from the government segment, particularly in the Washington, D.C. sub-market, has experienced a pullback. That said, our group booking pace remains solid, and importantly, we haven't seen the kind of widespread cancellations that typically accompany more severe downturns.
Dave: Before we move on I want to touch briefly on the potential impact of recent developments in the macroeconomic environment policy changes at the federal level or introduce a level of uncertainty that is impacting near term visibility in the lodging industry.
Dave: Given the current backdrop consumer sentiment has weakened which likely will result in increased price sensitivity and compressed booking windows.
Dave: Our transient guests. Meanwhile, demand from the government segment, particularly in the Washington, DC Submarket has experienced a pullback.
Dave: Our group booking pace remains solid and importantly, we haven't seen the kind of widespread cancellations that typically accompany more severe downturns. We did however experience a pause in group lead conversions in March late March and into April guiding a more cautious view on our operating fundamentals for the back half of the year.
David Folsom: We did, however, experience a pause in group lead conversions in March, late March and into April, guiding a more cautious view on our operating fundamentals for the back half of the year. We will continue to closely monitor the shifting operating environment and remain confident in our manager's ability to adapt our sales and revenue management strategies as needed to effectively navigate the current landscape. Despite such uncertainty, our portfolio performed well in the first quarter, continuing to benefit from strong occupancy growth in the group segment, particularly in several of our urban markets. In Houston, the White Hall stood out as a top performer with occupancy up 20.5% year over year, driven by a healthy mix of group business, which increased a noteworthy 64% over prior year, as well as strong citywide demand.
Dave: Here, we will continue to closely monitor the shifting operating environment and we remain confident in our manager's ability to adapt our sales and revenue management strategies as needed to effectively navigate the current landscape. Despite.
Dave: Despite such uncertainty our portfolio performed well in the first quarter continuing to benefit from strong occupancy growth in the group segment, particularly in several of our urban markets in Houston, the Whitehall stood out as a top performer with occupancy up 25% year over year, driven by a healthy mix of group business.
Dave: <unk>, which increased to noteworthy 64% over prior year as well as strong citywide demand the Georgia tariffs in Atlanta. Meanwhile, performed well during the first quarter with strong citywide demand in special events supporting rate growth driving higher than expected profitability. We also saw continued momentum in our <unk>.
David Folsom: Georgia Terrace in Atlanta, meanwhile, performed well during the first quarter, with strong citywide demand and special events supporting rate growth, driving higher than expected profitability. We also saw continued momentum at our DoubleTree Hotel at the Philadelphia Airport, which posted a 38.7 percent occupancy increase over the prior year, supported by strong group sales and elevated demand from professional sporting events. Another highlight in this quarter was the strong performance of our Doubletree Resort in Hollywood, one of our largest contributors to portfolio profitability. The hotel delivered nearly 37 percent growth in hotel EBITDA year over year, fueled by a more than 41 percent increase in group revenue, a very encouraging sign for this hotel.
Dave: <unk> hotel at the Philadelphia Airport, which posted a 38, 7% occupancy increase over the prior year supported by strong group sales of elevated demand from professional sporting events.
Dave: Another highlight this quarter was the strong performance of our Doubletree resort in Hollywood, one of our largest contributors to portfolio profitability. The hotel delivered normally 37% growth in hotel EBITDA year over year.
Dave: Fueled by more than 41% increase in group revenue.
Dave: Encouraging sign for this hotel looked.
David Folsom: Looking towards the second half of the year, while we remain optimistic about the overall outlook for the industry, we're taking a more measured view on the pace of hotel demand. That said, we believe our portfolio is well-positioned with upscale and upper upscale assets expected to outperform the broader market. We are maintaining our full year of guidance as first and second quarter performances are expected to offset one another on a relative basis. Booking trends remain healthy, and we currently forecast full year 2025 REV PAR for the actual portfolio to range between 103 and 105% of 2024 levels.
Dave: Looking towards the second half of the year, while we remain optimistic about the overall outlook for the industry. We're taking a more measured view on the pace of hotel demand that said, we believe our portfolio is well positioned with upscale and upper upscale assets expected to outperform the broader market, we are maintaining our full year.
Dave: Guidance as first and second quarter performances are expected to offset one another on a relative basis.
Dave: Looking trends remain healthy and we currently forecast full year 2025, revpar for the actual portfolio to range between 103, and 105% of 2024 levels. We're confident that our portfolio of well located high quality hotels supported by continued occupancy growth will continue.
David Folsom: We're confident that our portfolio of well-located, high-quality hotels supported by continued occupancy growth will continue to deliver strong relative performance.
Dave: <unk> delivered to deliver strong relative performance.
Carly: And with that, operator, we can open the call for questions. Thank you very much. We'd now like to open the lines for Q&A. If you'd like to ask a question, please press star followed by one on your telephone keypad now. If you'd like to remove your cell phone line of questioning, it will be star followed by two. As a reminder, to raise a question will be star followed by one.
Dave: And with that operator, we can open the call for questions.
Dave: Thank you very much.
Dave: The lines for Q&A.
Dave: So I'll ask a question. Please press star followed by one telephone keypad now measure second line of questioning.
Dave: Let's see.
Dave: Minus raise a question star one.
Alexander Goldfarb: Our first question comes from Alexander Goldfarb of Piper Sandler. Alexander, your line is now open. Hey, morning down there. And if I think I heard you correctly, you guys are renovating the Philly Hotel, which is it's great, definitely in need of some of some updates, but certainly a great hotel. So a few things and forgive my list.
Speaker Change: Our first question comes from Alexander Goldfarb with Piper Sandler.
Speaker Change: Your line is now open.
Speaker Change: Hey, good morning, good morning down there.
Speaker Change: And if I think I heard you correctly you guys are renovating the silly hotel, which is it.
Speaker Change: Great definitely in need of some.
Speaker Change: Some updates, but certainly a great hotel.
Speaker Change: So a few things and forgive my list.
Alexander Goldfarb: Just going down one reverse split timing last quarter, you guys mentioned a drop dead date of August 11. Is it your intent to go up until that date? Or you may do something sooner? We'll probably do it close to that date or relatively sooner. We're working on it now. It's a little more complicated than just reverse splitting the stock. There are QSIPs and other legal documentation that has to be done and board resolutions. So we'll get all that done here in the next 60 days and we'll execute a reverse split, I think probably in July or August, up to the point where it's due.
Speaker Change: Just going down one reverse split timing last quarter, you guys mentioned a drop dead date of August 11th is it your intent to go up until that date or you may do something sooner.
We'll probably do it close to that date were relatively sooner we're working on it now.
Speaker Change: It's a little more complicated than just reverse splitting the stock CUSIP and other legal documentation that has to be done in board resolution. So we will get all that done here in the next 60 days and we will execute a reverse split I think probably in July or August up to the up to the point where.
Speaker Change: It's due.
Speaker Change: Okay.
Speaker Change: You mentioned business interruption insurance for Alba.
Speaker Change: The delta between what you're actually booking in actual.
Revenue from Alba versus what the insurances covering just trying to figure out is as insurance cover the hotel currently like half of what it should be an insurance is picking up the other half or just trying to get some metrics on that.
Speaker Change: Okay.
Alexander Goldfarb: You're talking about from a revenue perspective or a profitability perspective? Well, you have business interruption insurance, you mentioned that is flowing through gap. So it's an FFO, I think you said, and just trying to understand the delta between So we're seeing a decrease in room revenue, you know, as we have fewer guests, but it's, you know, the room profitability is made up on a net basis. And so we're seeing The bottom line or the, you know, Hotel Ibada pretty much made whole, I mean, that's a debate with our insurance carriers as to whether we're, you know, they think we're 100% whole, we think we're 95% whole, but it's pretty much made whole.
Speaker Change: Youre talking about from a revenue perspective and from a profitability yet.
Speaker Change: Well you have business interruption insurance, you mentioned that is flowing through gap.
Speaker Change: So I think you said.
Speaker Change: And just trying to understand the delta between.
Speaker Change: So we're seeing a decrease in room revenue.
Speaker Change: As we have fewer guests but.
Speaker Change: The room profitability is made up on a net basis and so we are seeing.
Speaker Change: The bottom line or the hotel EBITDA pretty much made whole I mean, that's a debate with our insurance carriers as to whether we are you know they think we're 100% whole, we think we're 95% whole, but it's pretty much made whole.
Alexander Goldfarb: But it's the top line room revenue that suffers there when you try to do your comparability metrics from quarter to quarter. Yeah, but Alex, I think, I think your question is, you know, without the insurance proceeds, what, you know, how far below expectations or, you know, you know, normal operations with the hotel be performing and, again, our operating metrics don't include any insurance proceeds. You can see, just look at REVFAR for the quarter, you know, the hotel did $180 and 57 cents, that's 20 cents over prior years. So, really, I mean, the hotel is performing well.
Speaker Change: But it's the topline room revenue suffers.
Speaker Change: When you try to do your comparability metrics from quarter to quarter, Yes, but Alex I think I think your question is.
Alex: Without the insurance proceeds what how far below.
Speaker Change: Expectations are.
Speaker Change: Normal operations with the hotel be performing.
Speaker Change: Again, our operating metrics don't include any insurance proceeds these look at Revpar for the quarter. The hotel did a $180 57.
Speaker Change: <unk> <unk> over prior year, so really I mean, the hotel is performing well, we're probably a little short on where we could be in the marketplace and the market is doing very well.
Alexander Goldfarb: We're probably, you know, a little short on where we could be in the marketplace because the market is doing very well. And, you know, probably missing a little bit of ancillary revenue in terms of banquet and food and beverage, but by and large, we're not getting a ton of business interruption proceeds at this point going forward. Well, the hotel, the hotel has been essentially operating normally since Christmas when we got an elevator back up and running, but there's still, you know, there's still some impact just in terms of some give backs for groups, probably a few groups that we should have in the building that don't want to stay there with one elevator versus all three.
Speaker Change: And probably missing a little bit of ancillary revenue in terms of banquet and food and beverage but.
Speaker Change: By and large we're not getting a ton of business interruption proceeds at this point going forward.
Speaker Change: The hotel has been essentially operating normally since Christmas when we got an elevator back up and running but there's still there's still some impact just in terms of some give backs for groups few groups that we should have in one building that don't want to stay there with one elevator versus offering but for the most part the hotel's operating pretty.
Alexander Goldfarb: But for the most part, the hotel is operating pretty, pretty normally right now.
Speaker Change: Pretty normal right now.
Alexander Goldfarb: So it sounds like maybe it's 100 or 200 grand that you guys are getting an interruption versus where it actually is today. for the quarter. Yeah.
Speaker Change: So it sounds like maybe it's a 100 or 200 brand that you guys are getting interruption versus where it actually is today.
Speaker Change: For the quarter.
Alexander Goldfarb: Okay, next question. You've Hollywood and Alba loans coming due this year. You know, versus where the rates are now and the proceeds, how do you see the refinancing shaping up? Do you see similar proceeds change in rate just trying to get some perspective? Yeah, it's actually Atlanta and Hollywood, not not Tampa, Hollywood. And both of those are CMBS deals. We're actually working on that every day, looking at different options. The Atlanta maturity date is coming soon. Hollywood is in the third quarter to early October. Right now, I think the most likely outcome is what is being seen throughout the CMBS universe, which is extensions and modifications.
Speaker Change: Okay next question.
Speaker Change: Hollywood and Alba loans coming due this year.
Speaker Change: Versus where the rates are now and the proceeds how do you see the refinancing shaping up do you see similar proceeds change in rate just trying to get some perspective.
Speaker Change: Yes, it's actually Atlanta in Hollywood.
Speaker Change: Tampa and Hollywood.
Speaker Change: And bulk <unk> MBS, yes, both of those are see MBS deals, we're actually working on that every day looking at different options. The Atlanta maturity date is coming soon.
Speaker Change: Leawood is in the third quarter to early October.
Right now I think the most likely outcome is what is being seen throughout the <unk> universe, which is extensions and modifications that seems to be the norm right now for.
Alexander Goldfarb: That seems to be the norm right now for for near-term maturities. Rates are higher. Underwriting standards are tighter. DSCR coverages are higher. All that means is you get less proceeds when they underwrite an asset. And if you have the capital to make that up, you can. If not, then most borrowers are simply looking for one- to two-year extensions. There's usually a view from the special servicers to increase interest rates. May be interest only, may be amortizing, that's sort of a negotiating tactic. And then you have special servicing fees, which amount to maybe a quarter of a point of the outstanding balance.
Speaker Change: For near term maturities.
Speaker Change: Rates are higher underwriting standards are tighter dfc, our coverages are higher.
Speaker Change: All of that all of that means is you get less proceeds when they underwrite an asset and if you have the capital to make that up you can if not then most borrowers are simply looking for one to two year extensions.
Speaker Change: There is usually a view from the special Servicers to increase interest rates.
Speaker Change: Maybe interest only may be amortizing that sort of a negotiating tactic.
Speaker Change: And then you have special servicing fees, which amount to maybe a quarter of a point of the outstanding balance.
Alexander Goldfarb: So I think our preference right now, which seems to be the way we're headed on those loans, is to extend them out, which seems to be consistent with the rest of the market. So, I mean, if we just look at your cash, you have eleven and a half million of unrestricted cash. You mentioned seven million of CapEx that you're planning to spend this year. And then there's whatever, you know, capital or increased interest expense that's going to be needed as part of refinancing, whether it's extension, modification or whatever. So how are you thinking about the cash that you have on hand versus the needs between the refinancing activity and the CapEx?
Speaker Change: So I think our preference right now which seems to be with the way. We're headed on those loans is to extend them out which seems to be consistent with the rest of the market.
Speaker Change: So I mean, if we just look at your cash of $11 5 million of unrestricted cash you mentioned $7 million of Capex that Youre planning to spend this year and then there is whatever.
Speaker Change: Capital or increased interest expense, that's going to be needed.
Speaker Change: As part of refinancing whether its extension modification or whatever so how are you thinking about the cash that you have on hand versus the needs between the refinancing activity in the Capex.
Alexander Goldfarb: Well, we have to see what the results are on these extensions. At the same time, we have other assets in the portfolio that have significant equity built into them. namely Savannah and Wilmington. And that that that financeable equity is probably in the 20 to $30 million range. and we can refinance those assets conventionally right now early. And we can draw a lot of cash out of those refinancings to buttress any cash impact that we would have in the refinancing or extensions of our hotels in Atlanta and Hollywood. Okay, and which hotels have that 20 to 30 million of excess?
Speaker Change: Well, we have to see what the results are on these extensions at the same time.
Speaker Change: We have other assets in the portfolio that have significant equity built into them.
Speaker Change: Namely savanna and Wilmington.
Speaker Change: And that that Financeable equity is probably in the 20% to $30 million range.
Speaker Change: And we can refinance those assets conventionally right now early.
Speaker Change: We can draw a lot of cash out of those refinancings to buttress any cash impact that we would have in the refinancing or extensions of our hotels in Atlanta in Hollywood.
Speaker Change: Okay.
Speaker Change: Hotels have that $20 million to $30 million of excess.
Alexander Goldfarb: Savannah and Wilmington. Okay. Those are hotels that have... Okay, go ahead. No, no, you said those are hotels that have had Yeah, they've got long term life loans on them dating back to the 90s. And they were 10 year amortizing loans that come due next year, and I think the year following, right, 2027. And we've paid down a lot of principal on those loans. And there's a lot of value that's been created at those assets that underwrites well, given the EBITDA profile of those hotels.
Speaker Change: Savanna and Wilmington.
Pat: Okay. Okay. These are hotels finally, Pat okay.
Speaker Change: Okay go ahead.
Speaker Change: No you said those are hotels that have had.
Speaker Change: Yes, they've got long term life loans on them dating back to the nineties.
Speaker Change: And they were 10 year amortizing loans.
Speaker Change: Come due next year and I think the year following 2027.
Speaker Change: And we've paid down a lot of principal on those loans and Theres a lot of value. That's been created at those assets that underwrites well given the EBITDA profile of those hotels. So there is a lot of cash available to be extracted from our conventional financing.
Alexander Goldfarb: So there is a lot of cash available to be extracted from a conventional finance.
Alexander Goldfarb: Okay, and then just finally, can you just remind us the accrued balance on the preferred dividends? you know, is still unpaid. Sure, it's about $21.9 million. Okay. $21.9 million. Yeah, we're we're 11 quarters behind. Okay, but you are making current payments, right? Yes. Okay.
Speaker Change: Okay and then just finally can you just remind us the accrued balance on the preferred dividends.
Speaker Change: What what.
Speaker Change: It's still unpaid.
Speaker Change: Sure, it's about $21 $9 million.
Speaker Change: Okay, it's about $2 million neither were 11.
Speaker Change: Yes, we are.
Speaker Change: 11 quarters behind.
Speaker Change: Okay, but you are making current payments right.
Speaker Change: Yes.
Speaker Change: Okay.
Alexander Goldfarb: Listen, thank you very much. Thank you, Alex. Thank you very much.
Speaker Change: Listen thank you very much.
Speaker Change: Thank you Alex.
Speaker Change: Thank you very much.
Carly: As a reminder, if you would like to raise a question, please press star followed by one on your telephone keypad now.
Speaker Change: As a reminder, if you would like to raise a question. Please press star followed by one telephone keypad now.
David Folsom: We currently have no further questions, so I'd like to hand back to David Folsom for any further remarks.
Speaker Change: We currently have no further questions. So I'd like to have much David Wilson for any further remarks.
David Folsom: Thank you very much for joining us on our quarterly call, and we'll reconvene next quarter. Thank you.
Speaker Change: Thank you very much for joining us on our quarterly call and we'll reconvene next quarter. Thank you.
Carly: As we conclude today's call, we'd like to thank everyone for joining.
Speaker Change: As we conclude today's call without thanking everyone for joining you may disconnect your lines.
Carly: You may now disconnect your lines.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Sure.