Q2 2025 Pebblebrook Hotel Trust Earnings Call

And if you wake up wondering, what is the dark?

Jon Bortz: Greetings and welcome to Pebblebrook Hotel Trust's second quarter earnings conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Raymond Martz, Co-President and Chief Financial Officer. Thank you. You may begin.

Greetings and welcome to Pebblebrook Hotel. Trust second quarter earnings conference call.

At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Raymond Martz, co-president and Chief Financial Officer. Thank you. You may begin.

Raymond Martz: Thank you, Donna, and good morning, everyone. Welcome to our second quarter 2025 earnings call. Joining me today is Jon Bortz, our Chairman and Chief Executive Officer, and Tom Fisher, our Co-President and Chief Investment Officer. Before we start, I would like to remind everyone that our remarks today are effective only as of today, July 30th, 2025. Our comments may include forward-looking statements that are subject to various risks and uncertainties. Please refer to our SEC filings for a detailed discussion of these risk factors and visit our website for reconciliations of any non-GAAP financial measures mentioned today. Now let us jump into the quarter. We are pleased to report that our second quarter performance exceeded our outlook. Our results are driven by healthy occupancy gains, continued resilient out-of-room revenue growth, and another strong quarter of cost discipline and efficiency improvements.

Uh, thank you Donna and good morning everyone. Welcome to our second quarter 2025 earnings call. Joining me today is John boards, our chairman and chief executive officer, and Tom Fischer, our co-president and chief investment officer. But before we start, I'd like to remind everyone that our remarks today are effective. Only as of today, July 3rd is 2025. Our comments, may include 4 looking statements that are subject to various risk and uncertainties, please refer to our FTC filings for a detailed discussion discussion of these risk factors and that our website for a reconciliations of any non-gaap Financial measures mentioned today,

Now, let's jump into the quarter.

Raymond Martz: As a result, we exceeded the midpoint of our same property hotel EBITDA outlook and came in above the high end of our ranges for both adjusted EBITDA and adjusted FFO. Same property hotel EBITDA totaled $115.8 million for the quarter, $1.8 million ahead of our midpoint. As anticipated, Los Angeles remained a modest drag on our performance with a $2.2 million EBITDA headwind, which was about $700,000 more than we anticipated. The rest of the portfolio more than offset the softness, reinforcing the strength and diversification of our portfolio. To better understand the underlying performance of the portfolio, if we adjust for the one-time real estate tax credits in last year's results and exclude Los Angeles, same property hotel EBITDA increased by $2.5 million over the prior year quarter. On a year-to-date basis, same property hotel EBITDA is up $2.3 million.

We're pleased to report that our second quarter performance. Exceeded our Outlook, our results are driven by healthy occupancy. Gains continued, resilient out of room Revenue growth and another strong quarter of cost discipline and efficiency improvements.

As a result, we exceeded the midpoint of our same property hotel, giba alook and came in above the high end of our ranges for both adjusted ibida and adjusted EO.

Same property. Hotel Ava, told the 1505.8 million for the quarter 1.8 million ahead of our midpoint.

As anticipated, Los Angeles remained, a modest drag on performance with a 2.2 million Ava headwind which was about 700,000 more than we anticipated.

Your currently, the rest of the portfolio, more than offset, the softness reinforcing, the strength and diversification of our portfolio.

To better understand the underlying performance of the portfolio. If we adjust for the 1 time, real estate tax credits in last year's results and exclude Los Angeles. Same property Hotel Ava, increased by 2.5 million over the prior year quarter.

Raymond Martz: These adjusted figures more clearly reflect the continued recovery in our other markets and the meaningful ramp-up across our recently redeveloped hotels and resorts. One key trend that we are watching closely is the continued shortening of the booking window, especially for leisure travel. It is putting near-term pressure on leisure rates and reducing forward visibility in today's uncertain macroeconomic environment. That said, our teams have adapted quickly, capturing demand within shorter lead times. Despite these headwinds, our teams executed exceptionally well. Hotel-level results were strong across most markets, more than offsetting the softness in LA and Washington, D.C. Adjusted EBITDA was $117 million, $6.5 million above our midpoint. Adjusted FFO came in $0.65 per share, $0.06 ahead of our midpoint.

And on a year-to-date basis, same property hotel ibida is up 2.3 million.

These adjusted figures more, clearly reflect the continued recovery in our other markets and a meaningful ramp up across our recently, redeveloped hotels and resorts.

One key trend that we're watching closely is the continued shortening of the booking window, especially for leisure travel.

It's putting near-term pressure on Leisure rates and reducing 4 divisibility. In today's uncertain macroeconomic environment that said our teams have adapted quickly, capturing demand within shorter lead times.

Despite these headwinds, our teams executed exceptionally well hotel level results for strong across most markets, more than offsetting the softness in LA in Washington DC.

adjusted, even though it was 117 million, 6.5 million above our midpoint,

Raymond Martz: This outperformance reflects a combination of solid hotel EBITDA results, a strong $1.8 million beat from Newport Harbor Island Resort, and $1.5 million more than expected in business interruption proceeds from appliance insurance claims. Newport, which is excluded from our same property results due to its closure for part of Q2 last year, outperformed expectations, fueled by strong business growth and leisure demand and excellent flow-through across rooms and non-rooms revenues. We also received $3.2 million of BI income related to La Playa, $1.5 million above our outlook. Turning to hotel-level performance, total property at same property RevPAR grew by 1.3% year-over-year, led by a 1.7% increase in our urban portfolio and a 0.6% gain at our resorts. However, the strength of the broader portfolio is more apparent when we exclude Los Angeles, which continues to face a unique set of market-specific headwinds.

Adjusted ffo came in 65 cents, per share, 6 cents ahead of our midpoint.

This outperformance reflects a combination of solid Hotel, ibida results.

A strong $1.8 million beat from Newport Harbor Island Resort.

And 1.5 million more than expected in business. Interruption proceeds, from apply is insurance claims.

Newport, which is excluded from our same property, results due to its closure for part of Q2 last year, our perform expectations fueled by strong business group, and Leisure demand and excellent flow through across rooms and non- rooms revenues.

We also received 3.2 million of bi income related to llia 1.5 million above our Outlook,

Returning to Hotel out of performance Total Property. Same property, repar grew by 1.3%. Year-over-year led by 1.7% increase in our Urban portfolio and appoint 6% gain at our resorts.

Raymond Martz: Excluding LA, same property total RevPAR rose 2.7%, with our urban portfolio increasing a healthy 4.1%. These are encouraging results, particularly in light of reduced government travel, weaker international inbound demand, and macroeconomic certainty stemming from ongoing policy and geopolitical disruptions. San Francisco led the portfolio once again this quarter, with RevPAR climbing at a robust 15.2%, fueled by an impressive 9-point increase in occupancy. The city's performance was supported by a stronger convention calendar, robust growth in business group and transient demand, particularly from the expanding tech and AI sectors, and a continued push for a return to office among the city's major employers. Momentum continues to build in San Francisco, and Jon Bortz will share more color on that shortly. Portland continued to recover, with RevPAR climbing 10.4% as the market continues to rebound from its more prolonged COVID-related challenges.

however, the strength of the broader portfolio is more apparent when we exclude Los Angeles, which continues to face a unique set of markets specific headwinds

Excluding the LA same property. Total rep bar, Rose 2.7%.

With our Urban portfolio, increasing a healthy 4.1%.

News government, travel weaker, International inbound, demand and macroeconomic certainty stemming from ongoing policy and geopolitical disruptions.

San Francisco leather portfolio. Once again, this quarter with repart climbing a robust 15.2 fueled by an impressive 9-point. Increase in occupancy.

The cities performance was supported by a stronger convention. Calendar, robust growth in business group, and transient demand, particularly from the expanding Tech, and AI sectors, and continue to push for return to office among the city's major employers.

Momentum continues to build in San Francisco and John will share more color on that shortly.

Raymond Martz: Gains were driven by increased business travel and a steady rise in demand from regional leisure travelers, again, evidenced by healthy gains in weekend occupancies. In San Diego, our urban hotels posted a RevPAR growth of 8.6%, fueled by a healthy convention calendar and strong weekday demand. Our recently redeveloped downtown properties continued to outperform, gain market share, and deliver meaningful growth in both rate and occupancy. At our resorts, demand remained resilient. Total RevPAR increased 0.6% year-over-year as a 1-point occupancy gain and continued strength in out-of-room spending offset a nearly 3% decline in ADR. This gain underscores the resilience of leisure demand. Out-of-room revenues at our resorts rose 3.3%, led by a 2.5% growth in food and beverage revenues as guests continued to spend across our resort dining outlets, bars, and event offerings. Same property total revenues grew 1.3%, driven by a 1.7% increase at our urban properties.

Portland continued to recover. We rep our timing 10.4% as a market continues to rebound. From its more prolonged Co related challenges,

Games were driven by increased business travel and a steady rise in demand from Regional legal Travelers again. Evidenced by healthy gains in weekend, occupancies

In San Diego, our Urban hotel is posted a rough. Our growth of 8.6% fueled by a healthy convention, calendar and strong weekday, demand,

Our recently, redeveloped downtown properties continue to outperform gain market, share and deliver meaningful growth in both rate and occupancy.

At our Resorts demand remain resilient to our rep are increased 6%. Year-over-year as a 1-point occupancy, gain and continued strength in add room spending offset and nearly 3% decline in ADR.

This gain underscores the resilience of leisure demand.

Out of room revenues at a Resorts. Rose 3.3%, led by 2.5% growth in food and beverage revenues. As guests continued to spend across our Resort, dining Outlets bars, and then offerings,

Raymond Martz: Excluding LA, revenue growth rose 2.7%, supported by stronger event space utilization, elevated food and beverage performance, and the benefit of upgraded amenities across our redeveloped properties. Total out-of-rooms revenues increased 2.6% overall, and 3.5% excluding LA, with food and beverage revenue up 3.3% year-over-year. Looking at our monthly trends, April was our strongest month, with RevPAR increasing by 3.6%, benefiting from a favorable Easter shift and extended spring-based season and a major San Francisco convention that moved into April this year from May last year. That timing benefit created a tougher comp for May, which was down 0.8%, and June declined 0.6%. Excluding LA, RevPAR was positive in all three months, up 5.5% in April, 0.7% in May, and 0.6% in June. Group demand also remained strong, with group room nights rising 1.9% and accounting for 27% of room revenue, up 100 basis points from last year.

Same property, total revenues grew 1.3%, driven by 1.7% increase at our Urban properties.

Excluding the LA Revenue growth Rose, 2.7% supported by stronger event space utilization, elevated food, and beverage performance, and the benefit of upgraded, amenities across our redeveloped properties,

Total out of rooms revenues. Increased 2.6% overall, inclined 3.5% excluding LA with food and beverage Revenue up 3.3% year-over-year.

Trends. April was our strongest month for the rough part. Increasing by 3.6%.

That is fitting from a favorable Easter shift and extended Spring Break season and a major San Francisco convention that moved into April this year from May last year.

That timing benefit created a tougher conf for May, which was down Point 8% and June declined 6%.

Excluding the Le Reve power was positive in all 3 months up 5.5%. In April 7% in May and 6% in June,

Raymond Martz: This reflects the continued resilience of the group segment and the early success of our multi-year strategic reinvestment program, particularly at our resort properties, where we've been focused on growing group-related business. On the expense side, our teams remain laser-focused and delivered another strong quarter of disciplined cost control, along with further productivity and efficiency improvements. Same property hotel expenses, excluding fixed costs, rose just 1.7% year-over-year, and on a per-occupied room basis, expenses declined by 0.8%, a very favorable result. Energy was a standout this quarter, with costs down 2.1%. This was driven by reductions in energy and water usage following some focused efforts to optimize the efficiency of some of our hotel systems and equipment. These results reflect a relentless focus and innovative efforts of our hotel teams and asset managers.

Group demand also remains strong with group room nights Rising 1.9% and accounting for 27% of room, Revenue up, 100 basis points from last year.

This reflects the continued resilience of the group segment and their early success of our multi-year. Strategic reinvestment programs, particularly at our Resort properties where we've been focused on growing group related business.

On the expense side, our teams remain laser focused and delivered in another strong quarter of discipline cost control along with further productivity and efficiency improvements.

Same property Hotel expenses, excluding fixed costs Rose, just 1.7% year-over-year and on a per occupied room basis, expenses declined by 0.8% a very favorable result.

Energy was to stand out this quarter with cost down 2.1%.

This was driven by a reduction in energy and water usage. Following some focused efforts to optimize the efficiency of some of our hotel systems and equipment.

Raymond Martz: Our strategic productivity and efficiency program is driving meaningful operating improvements, enhancing guest satisfaction, profitability, and long-term value. We are incredibly proud of the execution across the portfolio. Looking ahead, we are also embracing new technology as a lever for future efficiency gains. We have begun piloting a number of AI-enabled operating tools in collaboration with our hotel partners, which we believe will lead to increased productivity, reduced hotel operating expenses, improved hiring retention, and enhanced real-time decision-making. We believe these tools will have the potential to significantly reshape our operating model over time. Shifting now to La Playa Beach Resort in Naples, Florida, we are pleased to report that the resort is fully restored and operational following last year's hurricanes. We have increased our full-year BI income forecast to $11.5 million, up from $8.5 million previously.

These result results reflected Relentless focus, and innovated efforts of our hotel teams and asset managers.

Our strategic productivity and efficiency program is driving meaningful. Operating improvements enhancing guest satisfaction profitability. And long-term value, we're incredibly proud of the execution across the portfolio.

Looking ahead. We're also embracing new technologies. A lever for future efficiency gains. We've begun piloting. A number of AI enabled. Operating Tools in collaboration with our hotel Partners which we believe will lead to increase productivity reduce Hotel operating expenses. Improved hiring and retention and enhance real-time decision-making.

We believe these tools will have the potential to significantly reshape our operating model over time.

Bi income forecast, 11.5 million up from 8.5 million previously.

Raymond Martz: We now expect La Playa Beach Resort to generate approximately $35.5 million in adjusted EBITDA this year, including both hotel EBITDA and BI income. This compares to $42.8 million in 2024, which included elevated BI collections following Hurricane Ian. As a reminder, BI income is excluded from our same property hotel EBITDA but is included in adjusted EBITDA and FFO. Turning to insurance, we completed our property insurance renewal on June 1st with significantly better results than expected. We reduced our overall premium by roughly 10%, thanks to a 13% rate drop, while increasing insurable values by 4% to reflect higher replacement costs, all without material changes to coverage or business terms. This favorable outcome lowers our near-term expense run rate and demonstrates the success of our proactive risk management strategies.

We now expect to apply the generated approximately 35.5 million in adjusted even though this year including both hotel ibida and bi income.

This compares to 42.8 million in 2024, which included elevated? Bi collections following hurricane Ian.

As a reminder, bi income is excluded from our same property, hotel ibida. But is included in adjusted to the and pho.

Credit to insurance. We completed our property insurance, renewal on June 1st with significantly better results than expected. We reduced our overall premium by roughly 10%. Thanks to our 13% rate drop while increasing insurable values by 4% to reflect higher replacement costs all without material changes to coverage or business terms.

This favorable outcome lowers our near-term expense, run rate, and demonstrates. The success of our proactive risk management strategies

Raymond Martz: On the capital front, we invested $21 million into the portfolio during the quarter, net of the key money received from Hyatt related to the Hyatt Centric Delfina Santa Monica rebranding and renovation. We remain on track to invest $65 million to $75 million this year, primarily focused on capital maintenance and targeted ROI projects. Finally, our balance sheet remains in great shape. We ended the second quarter with $267 million of cash on hand, an increase of $49 million from last quarter, and we have more than $640 million of availability on our unsecured revolver. Nearly all of our debt is unsecured, and we have no significant maturities until December 2026. Our weighted average interest cost is a very attractive 4.2%, among the lowest in the sector, with 96% of our debt now fixed. We continue to generate strong free cash flow in addition to our existing cash.

On the Capitol Front, we invested 21 million into the portfolio during the quarter. Neither, the key money received from height related to the Delfina Santa Monica, rebranding and renovation.

We remain on track to the best. 65 to 75 million this year. Probably focused on Capital maintenance and targeted Roi projects.

And finally, our balance sheet remains in great shape. We ended the second quarter with $267 million in cash on hand, an increase of $49 million from last quarter. We also have more than $640 million of availability on our unsecured revolver.

Nearly all of our debt is not secured, and we have no significant maturity until December 2026.

Our weighted average interest cost is a very attractive. 4.2% among the lowest in the sector with 90%. 96% of our debt. Now fixed

Raymond Martz: We intend to deploy the vast majority of it towards future debt paydowns, including the convertible notes. With that, I would like to turn the call over to Jon for a deeper dive into hotel operations, industry trends, and expectations for the rest of the year. Jon?

We continue to generate strong free cash flow in addition to our existing cash, and we tend to deploy the vast majority of it towards future Debt, Pay Downs, including the convertible notes.

Jon Bortz: Thanks, Ray. When we look at industry performance in the second quarter, we note that demand softened slightly from Q1. Both demand and RevPAR for the industry were negative in Q2 on a year-over-year basis. The decline was led by group, which was down in all three months versus last year, largely due to reduced government travel, weaker international participation in conventions and conferences, and some increasing attrition. Transient demand held up better, and while it was weaker for the same reasons, it remained positive versus 2024. I recognize that the group softness may surprise some of you, but the STR data clearly shows this trend over the last three months, and it has unfortunately continued into July. In terms of industry performance by price point or scale, there remains a sharp divide between the upper and lower ends of the market.

And with that, I'd like to turn the call over to the John for a deeper dive into Hotel, operations industry, Trends and expectations for the rest of the Year, John.

Thanks Ray.

when we look at industry performance in the second quarter,

we note that demand soft and slightly from q1.

Both demand and rev part for the industry were negative in Q2 on a year-over-year basis.

The decline was led by group.

which was down in all 3 months versus last year, largely due to reduce government travel

Weaker International participation in conventions and conferences.

And some increasing attrition.

transient demand held up better and while it was weaker for the same reasons,

It remained positive versus 2024.

I recognize that the group softness may surprise some of you.

But the Str data clearly shows this trend over the last 3 months.

And it it has unfortunately continued into July.

in terms of Industry performance, by price point or scale,

The Remains a sharp divide between the upper and lower ends of the market.

Jon Bortz: Premium hotels and resorts continue to perform better, while the bottom half is seeing more weakness as lower-income consumers shift some of their spending toward necessities. In contrast, Pebblebrook Hotel Trust outperformed the industry during the quarter. We successfully grew occupancy, including from group, and delivered modest RevPAR growth, even with the specific market challenges in Los Angeles. We attribute our outperformance to the strong recovery in several previously lagging markets like San Francisco, Portland, and Chicago, and the continued share gains at our redeveloped properties. While our San Francisco hotels led the way in our portfolio, our redeveloped hotels and resorts once again were leaders, including Newport Harbor Island Resort, Estancia La Jolla Hotel & Spa, and Southernmost Resort in Key West, and several urban standouts like the One Hotel San Francisco, Hilton Gaslamp Quarter, and Margaritaville San Diego Gaslamp Quarter.

Premium hotels and resorts. Continue to perform better.

While the bottom half is seeing more weakness, as lower income. Consumers ship some of their spending toward necessities.

In contrast Pebble Brook, outperformed the industry during the quarter.

We successfully grew occupancy, including from group.

And delivered modest revpar growth, even with a specific Market challenges in Los Angeles.

We attribute our outperformance to the strong recovery in several previously. Lagging markets. Like San Francisco Portland and Chicago.

And the continued share gains at our redeveloped properties.

While our San Francisco hotels, led the way in our portfolio.

Our redeveloped hotels and resorts once again were leaders, including Newport, Harbor Island, Resort Estates, and Southernmost Resort in Key West.

And several Urban standouts, like the 1 Hotel, San Francisco.

Hilton, Gaslamp Quarter, and Margaritaville, San Diego, Gaslamp Quarter.

Jon Bortz: For our portfolio, we continued to see a recovery in business travel in both transient and group. Group room nights, group ADR, and business transient rates all improved. Leisure demand also grew, though we saw increasing price competition due to much shorter booking windows. Still, weekend occupancies were up all across our portfolio, demonstrating the continued appeal of our high-quality properties, especially for leisure and social group customers. As mentioned, our results were even stronger, excluding Los Angeles, which faced another difficult quarter. The combination of a post-fire slowdown in business and transient demand and the often exaggerated media coverage around the ICE raids, which created the impression that the protests and damage were all over the city when, in fact, they were isolated to a few blocks in downtown LA, caused cancellations and a slowdown in bookings.

For our portfolio. We continue to see a recovery in business, travel in both tangent and group.

Broom Knights group ADR.

And business tangent rates all improved.

Leisure demand also grew, though. We saw increasing price competition due to much shorter booking windows.

Demonstrating the continued appeal of our high-quality properties, especially for leisure and social group customers.

as mentioned our results were even stronger, excluding Los Angeles

which faced another difficult quarter.

The combination of a post-fire Slowdown in business and transient demand.

And the often exaggerated media coverage around the ice raids.

Which created the impression that the protests and damage were all over the city, when in fact, they were isolated to a few blocks in downtown LA.

Jon Bortz: The administration's military response only amplified the negative media coverage, creating an even broader misperception about safety in the market. Despite these short-term challenges, we remain confident in LA's long-term outlook. It is a global gateway destination. It is the entertainment capital of the world, and it has big, beautiful beaches and great weather, among many unique amenities. We do not expect to see any meaningful new hotel supply for the next 5 to 10 years. We are encouraged by the new state legislation doubling film and television tax credits to $200 to $750 million, which will help spur production activity, much of which should directly benefit Los Angeles. The city also passed legislation that makes it easier and cheaper to film in Los Angeles, and the president has talked about making Hollywood great again by bringing production back to the U.S., especially to LA.

caused cancellations and a Slowdown in bookings.

The administration's military response. Only Amplified the negative media coverage.

C, creating an even broader misperception about safety in the market.

Despite these short-term challenges, we remain confident in LA's, long-term Outlook.

It's a global gateway destination.

It's the entertainment capital of the world.

And it has big, beautiful beaches, and great weather. Among many unique amenities.

And we don't expect to see any meaningful new hotel supply for the next 5 to 10 years.

We're encouraged by the new state, legislation doubling film, and television, tax credits, to 200, to 750 million.

Which will help spur production activity, much of which should directly benefit Los Angeles.

The city also passed legislation, that makes it easier and cheaper to fill in Los Angeles and the president has talked about making Hollywood great again.

by bringing production back to the US, especially to LA

Jon Bortz: Additional demand for LA will come from a loaded future calendar of events, starting with the NBA All-Star Game in February and eight World Cup matches next summer, then the Super Bowl in 2027, and finally the Summer Olympics in 2028, including all the preparation generating demand in 2026 and 2027. Plus, the rebuilding of thousands of homes in the two neighborhoods destroyed by the January fires should also generate incremental demand for the market well before the games begin. San Francisco, one of our previously slower to recover cities, demonstrated very strong performance in Q2 for the second quarter in a row and led all of our markets. RevPAR for our seven hotels there rose a robust 15.2%, with occupancy gains in the market from all segments. Business travel rose significantly from a better convention calendar and increases in transient and in-house group.

additional demand for La will come from a loaded future, calendar of events.

Starting with the NBA, the NBA All-Star Game in February and 8 World Cup matches next summer.

then the Super Bowl in 2027,

And finally, the Summer Olympics in 2028.

Including all the preparation generating demand in 2026 and 2027.

Plus the rebuilding of thousands of homes in the 2hours destroyed by the January buyers should also generate incremental demand for the market. Well, before the games begin

San Francisco, 1 of our previously slower to recover cities.

Demonstrated, very strong performance in Q2 for the second quarter in a row and let all of our markets.

Revpar for our 7 hotels. There Rose a robust 152 15.2%.

With occupancy gains in the market. From all segments.

Jon Bortz: Leisure demand also grew as leisure travelers returned to the city. SF Travel is doing a great job bringing more concerts, sporting events, and future conventions to the city, which is drawing increased business and leisure travel. We are also extremely encouraged by the new city leadership, who are focused on improving safety, cleanliness, and quality of life issues. San Francisco looks and feels great. It is rapidly getting busier, and very positive momentum is clearly building each day. San Francisco has definitely turned, and we are very excited. Portland and Chicago also made progress. Both cities are benefiting from cleaner, safer downtowns and are hosting more concerts and sporting events in their many venues, helping to successfully attract leisure back to the cities.

Business travel Rose significantly from a better convention, calendar and increases in transient and in-house group.

Leisure demand also grew as Leisure, Travelers return to the city.

SF travels doing a great job, bringing more concerts, sporting events, and future conventions to the city.

Which is drawing increased business and Leisure Travel.

We're also extremely encouraged by the new city leadership.

Who are focused on improving safety cleanliness and quality of life issues.

San Francisco looks and feels great. It's rapidly getting busier and very positive. Momentum is clearly building each day.

San Francisco has definitely turned and we're very excited.

Portland and Chicago also made progress, both cities are benefiting from cleaner safer, downtowns.

And our hosting more concerts, and sporting events in their many venues.

Helping to successfully attract Leisure, back to the cities.

Jon Bortz: Turning to performance at our redeveloped properties, Newport Harbor Island Resort led the way as it continued its strong ramp following the $50 million transformation completed last spring. The resort generated $5.1 million of EBITDA in Q2, which was $1.8 million above forecast. Revenues rose over 60% from Q2 last year, and out-of-room revenues jumped 70%, making up 50% of the resort's revenue mix. This revenue shift demonstrates the benefits of the significant improvements and additions we made to the restaurants and bars, as well as the dramatic enhancements we made to the number and quality of indoor and outdoor event venues. We now expect Newport to generate over $15 million of EBITDA in 2025, well ahead of the $13.6 million at acquisition in mid-2022, which was a peak year for most resorts. We are very excited about Newport's future.

Turning to performance at our redeveloped properties.

Newport Harbor Island Resort led the way as it continued its strong ramp.

Following the 50 million dollar transformation completed last spring.

The resort generated 5.1 million of IBA in Q2.

Which was 1.8 million above forecast.

Revenues. Rose over 60% from Q2 last year.

And out of room revenues jumped 70%.

Making up 50% of the resorts Revenue mix.

This Revenue shift demonstrates, the benefits.

Of the significant improvements in additions. We made to the restaurants and bars.

To the number and quality of indoor and outdoor event venues.

We now expect Newport to generate over 15 million of IBA in 2025.

Well, ahead of the 13.6 million at acquisition in mid 2022, which was a peak year for most resorts.

Jon Bortz: In 2025, it is just our first full year of post-redevelopment operations. We believe the resort is positioned to generate even stronger performance over the next few years as it continues its ramp and benefits from increased group and leisure demand. Newport is just one example. Across the board, our redeveloped hotels and resorts are gaining share and growing cash flow, with most still having multiple years left until they stabilize. This includes Estancia La Jolla Hotel & Spa, Chaminade, Southernmost, One Hotel San Francisco, Hilton Gaslamp, Margaritaville Gaslamp, and Jekyll Island Club, among others. There is more upside to come. Shifting to operations, as Ray Martz noted, we held same property total expenses to just 1.7% growth after adjusting for last year's tax credits.

We're very excited about Newport's future and 2025; it's just our first full year of post-redevelopment operation.

We believe the resort is positioned to generate even stronger performance over the next few years as it continues its ramp and benefits from increased group and leisure demand.

In Newport is just 1 example.

Across the board are redeveloped hotels and resorts are gaining, share and growing cash flow.

With most still having multiple years left until they stabilize.

This includes estanzia, Shaman southernmost.

1 Hotel, San Francisco Hilton Gas, Lamp Margaritaville, Gas, Lamp and Jaco Island Club among others.

There's more upside to come.

Now shifting to operations.

as Rey noted, we held same property, total expenses to just 1.7% growth

Jon Bortz: Per-occupied room expenses declined. That is a direct result of our team's relentless focus on improving every aspect of our cost structure and the benefits of our strategic productivity and efficiency program. We are working collaboratively with our operators to attack every expense category with targeted productivity and efficiency initiatives. This includes smarter labor scheduling through new technology and training, tighter procurement, appealing our tax assessments with almost 100 tax appeals underway, and operational upgrades to reduce accidents and claims. We are also investing in physical improvements to mitigate weather-related damage, particularly at properties like La Playa Beach Resort. On the technology front, we are piloting AI and automation tools aimed at improving hiring, retention, service delivery, and overall productivity across the portfolio. The pace of AI and robotics innovation is accelerating rapidly, and we are working closely with Curator to identify and implement the most impactful solutions.

after adjusting for last year's tax credits.

Per occupied room. Expenses decline.

That's a direct result of our team's Relentless focus on improving every aspect of our cost structure and the benefits of our strategic productivity and efficiency program.

We're working collaboratively with our operators to attack every expense category with targeted productivity and efficiency initiatives.

This includes smarter labor scheduling through new technology and training.

Tighter procurement.

Appealing our tax assessments, with almost 100 tax appeals underway.

And operational upgrades to reduce accidents and claims.

We're also investing in physical improvements to mitigate weather-related damage, particularly at properties like Lelia.

On the technology front. We're piloting Ai and automation, tools aimed at improving hiring retention Service, delivery and overall productivity across the portfolio.

The pace of AI and Robotics, Innovation is accelerating rapidly.

Jon Bortz: We believe the operating model for hotels will look quite different in a few years, and we intend to be ahead of that curve. We are still in the early innings of new technology that reduces energy and water usage. We are applying the findings from our engineering audits and rolling out new systems, including solar and HVA upgrades, where the ROI justifies the investment. On top of that, we are actively pressing the major brands to pass through savings through their economies of scale and from the rollout of their own AI tools and centralized services.

And we're working closely with the curator to identify and implement the most impactful solutions.

We believe the operating model for hotels will look quite different in a few years and we intend to be ahead of that curve.

We're still we're still in the early Innings of new technology.

That reduce reduces energy and water usage.

We're applying the findings from our engineering Audits and rolling out new systems, including solar and hva upgrades where the ROI justifies the investment.

Jon Bortz: We believe these will evolve meaningfully over the next few years, ultimately resulting in additional cost reductions for owners. We are also clustering more operating teams where it makes sense to reduce costs and improve our property leadership teams. We are leaving no stone unturned. We are in the early stages of what we see as a transformational shift in hotel operations, and we intend to lead that evolution. Our teams deserve tremendous credit. Their creativity, discipline, and relentless execution are driving positive results and positioning us for even greater success going forward. Now, let's shift to the third quarter and the macro outlook. We remain cautious about the macroeconomic outlook, given the continuing uncertainty related to tariff policy and governmental efforts to reduce government spending and the ultimate impact of those policies on the economy in the next few quarters.

On top of that, we're actively pressing the major brands to pass through savings through their economies of scale, and from the rollout of their own AI tools and centralized services.

We believe these will evolve meaningfully over the next few years, ultimately resulting in additional cost, reductions for owners.

We're also clustering more operating teams where it makes sense to reduce costs and improve our property leadership teams.

We're leaving. No stone unturned.

We're in the early stages of what we see as a transformational shift in hotel operations.

And we intend to lead that evolution.

Our teams deserve tremendous credit.

Their creativity, discipline, and relentless execution are driving positive results and positioning us for even greater success going forward.

Now, let's shift to the third quarter, and the macro Outlook.

We remain cautious about the macroeconomic Outlook.

Given the continuing uncertainty related to tariff policy, and governmental efforts to reduce government spending, and the ultimate impact of those policies on the economy in the next few quarters.

Jon Bortz: While it's becoming increasingly clear where most tariffs are likely to settle, we believe both businesses and consumers remain hesitant until there's more clarity. Economists continue to forecast slower growth in the back half of this year. As a result, we expect demand growth outlook to remain muted in the second half of this year, with Q3 likely the weakest quarter due to its heavier leisure mix. Leisure demand is expected to remain relatively price-sensitive. For July, RevPAR is trending down 2% to 3% for our portfolio, though we expect higher occupancy year-over-year. That increase is being offset by modest ADR declines. In addition to the continuing overall weakness in Los Angeles from the multitude of negative events in the market, we are facing some less favorable citywide comps in Q3 in markets like Chicago, which hosted the DNC last year, Boston, and San Diego to a lesser extent.

While it's becoming increasingly clear where most tariffs are likely to settle.

We believe both businesses and consumers remain hesitant until there's more clarity.

This year.

As a result, we expect a demand growth outlook to remain muted in the second half of this year, with Q3 likely being the weakest quarter.

Due to its heavier Leisure mix.

Leisure demand is expected to remain relatively price sensitive.

For July revar trending Down 2 to 3% for our portfolio that we expect higher occupancy year-over-year.

That increase is being offset by modest ADR declines.

In addition to the continuing overall weakness in Los Angeles from the multitude of negative events in the market.

we're facing some less favorable Citywide comps in Q3 in markets, like Chicago, which hosted the DNC last year,

Boston and San Diego to a lesser extent.

Jon Bortz: Our total revenue pace for Q3 is down 3%, with group pace down 4%, mostly on group room nights. In addition, group attrition has recently ticked up modestly. On the brighter side, Q4 group pace is currently flat, and we are no longer seeing the same group hesitancy to sign contracts that we experienced last quarter. Importantly, we have not yet seen any increase in group cancellations. This gives us greater confidence that Q3 will likely mark the low point in performance for the year. As a result, our Q3 outlook assumes same property RevPAR will decline 1% to 4%, with total RevPAR down 0.5% to 3.2%. On the cost side, due to the benefits of our strategic efficiency and productivity program, we expect total hotel expenses to grow just 0.2%, which means expenses per occupied room should decline again.

Our total revenue for Q3 is down 3%.

Group pays down 4%, mostly on group room nights.

In addition group attrition has recently ticked up modestly.

On the brighter side Q4 group pace is currently flat.

And we're no longer seeing the same group hesitancy to sign contracts.

That we experienced last quarter.

And importantly, we've not yet seen any increase in group cancellations.

This gives us greater confidence that Q3 will likely Mark the low point in performance for the year.

As a result, our Q3 outlook assumes same property RevPAR will decline 1% to 4%.

with total rev, par down 0.5% to 3.2%

On the cost side, due to the benefits of our strategic efficiency and productivity program.

We expect total Hotel expenses to Crow just 0.2%.

Which means expenses per occupied room should decline again.

Jon Bortz: As for the year, the midpoint of our guidance still reflects our most likely outcome. While there is still macro uncertainty, the good news is we see no systemic issues at this time. Employment and corporate profits remain solid. If policy uncertainty improves, that alone could give the economy a boost, which should benefit the hotel industry. We are increasingly optimistic about 2026. If economic uncertainty fades, hotel demand should normalize with GDP growth. Supply is extremely restricted, and our industry fundamentals are set up for a very good year. For Pebblebrook, we are in a very good place, and we expect to outperform the industry. Our redeveloped properties will contribute to this outperformance. Several of our urban markets, including San Francisco, Portland, and Chicago, are expected to continue their recoveries. LA comps, of course, will be much easier.

As for the year, the midpoint of our guidance still reflects our most likely outcome.

While our still macro uncertainty, the good news is. We see no systemic issues at this time.

Employment and corporate profits remain solid.

If policy uncertainty improves.

That alone could give the economy a boost.

Which should benefit the hotel industry.

We're increasingly optimistic about 2026.

If economic uncertainty fades.

Hotel demand should normalize with GDP growth.

Supply is extremely restricted and our industry fundamentals are set up for a Very Good Year.

For Pebblebrook, we're in a very good place.

And we expect to outperform the industry.

Our redeveloped properties will contribute to this outperformance.

Several of our Urban markets including San Francisco Portland and Chicago.

are expected to continue their recovery.

Jon Bortz: On top of that, we will see incremental demand from a multitude of major events across our portfolio: seven World Cup matches each in Boston and Miami, NCAA men's basketball tournament rounds in five of our markets, the 250th U.S. anniversary celebrations in D.C. and Boston, the Super Bowl in San Francisco, and the NBA All-Star Game and World Cup matches in Los Angeles. While most of these events have yet to put many rooms on the books for next year, except for the Super Bowl in San Francisco, our group and total pace for next year are currently very favorable. For 2026, group room nights are up nearly 9%, ADR is ahead by almost 4%, and group revenues are up by 13.1%, over $10 million ahead of 2025.

La comps of course, will be much easier.

Atude of major events across our portfolio.

7 World Cup matches each in Boston and Miami.

NCAA Men's Basketball Tournament rounds in five of our markets.

The 25th us anniversary celebrations in DC and Boston.

The Super Bowl in San Francisco.

And the NBA All-Star Game.

And World Cup matches in Los Angeles.

While most of the events of these events have yet to put many rooms on the books for next year.

Except for the Super Bowl in San Francisco.

Our group and total pays for next year are currently very favorable.

For 2026.

Group room nights are up nearly 9%.

ADR is ahead by almost 4%.

And group revenues are up by 13.1%.

Over 10 million dollars ahead of 2025.

Jon Bortz: Total revenue pace, including both group and transient, is up by a strong 19%, over $17 million ahead of same time last year. So while none of this guarantees a great year, the setup for 2026 is very strong. We are confident in our trajectory. By executing on our strategic plan, driving revenue, maximizing productivity, and growing free cash flow, we are creating the foundation for durable long-term value creation. With a solid balance sheet, proven execution, and a redeveloped portfolio, we are positioned not just to navigate uncertainty, but to capitalize on. We just need the macro to fall into place. To wrap up, we believe our relentless focus on generating operating efficiencies, our disciplined and nimble revenue strategies, our team's deep experience navigating cycles, and the transformational investments we have made across the portfolio all position us to outperform and deliver meaningful long-term returns. That completes today's remarks.

Total revenue Pace including both group and tangent.

Is up by a strong 19%.

Over 17 million ahead of the same time last year.

so, while none of this guarantees a great year,

the setup for 2026 is very strong.

We're confident in our trajectory.

By executing on our strategic plan.

Driving Revenue, maximizing productivity and growing free cash flow.

We're creating the foundation for durable. Long-term value creation.

With a, with a solid. Balance sheet, proven execution and a redeveloped portfolio.

We're positioned, not just to navigate uncertainty but to capitalize on it.

We just need the macro to fall into place.

To wrap up.

We believe our Relentless focus on generating operating efficiencies.

Our disciplined and nimble revenue strategies.

Our team's deep experience. Navigating Cycles.

And the transformational Investments, we've made across the portfolio.

All positioned us to outperform and deliver meaningful long-term returns.

Jon Bortz: Donna, we would now be happy to proceed with the Q&A.

Jon Bortz: 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. A confirmation tone will indicate that your line is in the question queue. You may press star two if you 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. Again, that is star one to register a question at this time. We do ask that you please limit yourself to one question and one follow-up. Today's first question is coming from Smedes Rose of Citi. Please go ahead.

So, that completes today's remarks, Donna. We'd now be happy to proceed with the Q&A.

Thank you. The floor is now open for questions. If you would like to ask a question, please press star 1 on your telephone keypad at this time. A confirmation tone will indicate that your line is in the question queue. You may press star 2. If you 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. Again, that's star, 1 to register a question. At this time, we do ask that you, please limit yourself to 1 question and 1 follow-up. Today's first question is coming from SME rows of City. Please go ahead.

Analyst: Hi. Good morning. Jon, I wanted to ask you a little more about Los Angeles. Looking at STR data for the quarter, LA was up 3.8% for RevPAR. That stands in contrast to what you saw. I am wondering what your confidence is that the declines in RevPAR were largely related to the ICE activity that you mentioned, or if there is something going on in addition at your portfolio that is dragging on those assets.

Hi, good morning.

Um, John, I wanted to ask you a little more. I wanted to ask you a little more just about Los Angeles. Um, just looking at just Str data for the quarter, uh, La was up, um, 3.8%, I think for for revpar. Um, so that stands sort of in contrast to what you saw, and just kind of wondering what's your confidence that the declines in revpar were

Largely related to the ice activity that you mentioned, or if there's maybe something going on, you know, in addition at your portfolio that's dragging on those assets.

Jon Bortz: The fires benefited a lot of the lower end of the market and a lot of the suburban end of the market, because that's where a lot of your EPA, where your per diem, many of your middle-income homeowners who lost their homes, have relocated. Where the market has suffered has been in the West L.A. market, which is the higher end of the market. The higher up the properties, generally the bigger the suffering. That's really what's impacted our portfolio, which is really spread from Santa Monica on the west side through Westwood and Beverly Hills in the middle of the west side, and then to the east into West Hollywood, which sounds weird because it's West Hollywood, but if you go further east, you get to Hollywood, obviously. That's really what's happening in the market.

Sure. So

The the fires benefited, a lot of the lower end of the market and a lot of the Suburban end of the market, um, because that's where, uh, a lot of your EPA, where your per diem, um, many of your middle income homeowners, who lost their homes. Um, have relocated, um, where the market has suffered has been in the, in the West LA Market, which is the higher end of the market, um, and the higher up, the properties that generally, the bigger the suffering. So, um, that's really what's impacted. Our portfolio. Um, which is really spread from Santa Monica on the west side.

Jon Bortz: The overall market doesn't really indicate how each of the individual submarkets are performing, and it's those other markets that are really benefiting from the fires, whereas the central part of the market, including much of downtown, is really suffering as a result of the fires.

The market, including much of downtown, is really suffering as a result of the fires.

Analyst: Okay. Thank you. I just wanted to follow up on, as these sort of ICE activity and the raids seem to be stepped up, we are just hearing anecdotally that even, you know, some workers that are even here probably legally or etc. are maybe not showing up for work or afraid of what is going on. Are you seeing that at all across your hotels, or do you feel pretty good about where your sort of labor and staffing are right now?

Jon Bortz: No, no. We are not seeing that at all across our hotels. So, we have not had an impact from that. I want to make it clear, it is not the ICE raids themselves that created the problem, for, and the falloff in demand. It was the media attention around them, and the military response that really created this misperception of a lack of safety, throughout the marketplace. As you know, and most people know, L.A. is extremely spread out. We had cancellations in Santa Monica, when the events that were going on were concentrated in a three-block area in downtown L.A., which is a 45-minute to an hour drive, when traffic is not bad. So, it was not because of the ICE raids. It all has to do with the media attention and the creation of this misperception of a lack of safety.

Okay, thank you. And I just wanted to follow up on um, as these um, sort of ice activity in the raids seem to be stepped up. Um, we're just hearing anecdotally that even, you know, some, some workers that are even here probably legally or Etc are still maybe not showing up for work or afraid of. Um, what's going on? Are you seeing that at all across your hotels or do you feel um pretty good about where your sort of Labor and Staffing are right now?

No, no we're not. We're all we're not seeing that at all across our hotels. So, um, we we've not had an impact from that and and just, I, I want to make it clear. It's not the ice, raids themselves that created the problem, uh, for for uh, and the fall off. In demand, it was the media attention around them. Uh, and the and the military response that really created, this misperception of a lack of safety, uh, throughout the marketplace. And as you know, and most people know, I mean, La is extremely spread out. I mean, we had cancellations in Santa Monica, when the events that were going on, were, were concentrated in a 3 block per, uh, uh, area in Downtown LA, which is a 45-minute to an hour drive, uh, when when traffic's not bad. So, um, it's it wasn't, it's not because of the ice raids.

It it it all has to do with the media, attention and the creation of this misperception of a lack of safety.

Analyst: Okay. Thank you very much.

Okay, thank you very much.

Jon Bortz: Thank you.

Jon Bortz: Thank you. The next question is coming from Duane Pfennigwerth of Evercore ISI. Please go ahead.

Thank you.

Thank you. The next question is coming from Dwayne pfennigwerth of evercore isi. Please go ahead.

Analyst: Hey, thanks. Good morning. Just to follow up on Smedes' question, I want to ask you about really two markets, the recovery trajectory for L.A. and the continued growth trajectory for San Francisco. I do not know if you implicitly have sized an L.A. headwind in the back half, what you think that looks like into the third quarter and into the fourth quarter. The other half of that coin is just the convention calendar. Do you see sustained strength in San Francisco as you look at maybe a fourth quarter?

Hey thanks. Good morning. Um, just to follow up on uh sme's question and I want to ask you about uh really 2 markets, uh the the recovery trajectory for La uh and the continued growth trajectory for San Francisco. I don't know if you implicitly have sized, you know like an LA headwind in the back. Half, you know what you you think that looks like into into the third quarter and into the fourth quarter.

And you know, the other half of that coin is just, you know, the convention calendar, you know, do you see sustained strength in San Francisco? As you look at maybe like a fourth quarter.

Jon Bortz: Sure. I think as it relates to LA, we were on a pretty good recovery trajectory from the fires throughout much of Q2 until those activities happened in downtown LA. I think we feel pretty good that things are recovering. It is what we hear from our customer base there. We are seeing more production demand in the market that may or may not be related to. I suspect it is related to one or two of the following. It is related to the ongoing recovery from the strikes, with production coming back, and two, with additional credits available beginning July 1 of this year that the state is offering for production in California. It has been hard to forecast LA. It jumps around from month to month, and we have had some unexpected activities. I think the back half should continue to improve.

Sure. So I think, as it relates to La, um, I mean, we were on a pretty good recovery trajectory um, from the fires um, in, uh, throughout much of Q2 and until uh, the those activities happened in in Downtown LA. So, uh, I I think our, I mean, we feel pretty good that things are recovering. It's it's what we hear from our customer base there. Um, we're seeing more production, uh, demand

Jon Bortz: We have a much easier comp, particularly in Q4, when we had the renovation that started at what was the Meridian that became the Hyatt Centric Delfina Santa Monica, where we had a large amount of disruption in Q4. We think LA should get better as the year goes on. As it relates to San Francisco, we do see sustained progress in sales related to the convention calendar, and Q4 is a blowout on a year-over-year basis compared to last year. San Francisco is going to benefit from a Dreamforce moving from September to October. Then September, Dreamforce being backfilled with a number of small to medium-sized conventions that are driving pretty healthy demand for September. Then with Dreamforce in October, and then the success of bringing in Microsoft Ignite in November, which was in Chicago last year, and to use a pun, ignited that market when it was there.

Uh in the market that may or may not be related to, I mean, I suspect it's related to 1 or 2 of the following its related to the ongoing recovery from the strikes uh with production coming back and 2 with additional uh credits available beginning July 1 of this year um that the state is offering um for production and in California. So um look it's it's been hard to forecast. La it jumps around from month to month. And we've had some unexpected activities, but I think, um, the back half should continue to improve and we have a much easier comp, uh, particularly in Q4. Um, when we had the renovation that started at at, uh, what was the Meridian that became the highest, um, uh, Centric in Santa Monica, where, uh, we had a large amount of disruption in Q4, so we think La should get better as the year goes on.

As it relates to San Francisco. I mean, we do see sustained progress in sales related to the convention calendar. And, and Q4 is a blowout on a year-over-year basis, um, compared to last year. So, um, San Francisco is going to benefit from a dream force moving from September to October.

But then September dreamforce being backfilled with a, with a, a number of small to medium-sized conventions um, that are driving, um, pretty healthy demand, um, for September. And then with 3 or 4 in October, and then the success of of bringing in Microsoft ignite, uh, in November, which was in Chicago last year, and

Jon Bortz: We expect the same result in San Francisco. It is AI-focused, that conference. Q4 sets up. The numbers are huge in terms of the increase. At the same time, we have business transient, business group, and leisure returning to the city. San Francisco looks really good in the back half of this year, especially in Q4.

Analyst: Duane, just to provide a little reference of where San Francisco was in 2024 and where it is trending in 2025. In 2024, at our properties, our occupancies were about 64%. This year, based upon our implied outlook, its occupancies are going to finish, you know, upper 60, 68% to 70%. So that is a pretty, pretty big improvement. But it is still a long way off from where it was in 2019. Not that 2019 should be the year that we should reference because it was a very busy year in San Francisco, but occupancies in our portfolios were in the upper 80s in 2019. So there is a long way to go, but it is certainly a very encouraging trend that we have seen here over the last two years in San Francisco. Thank you.

Result in San Francisco. So, uh, it's AI focused that conference. And so Q4 sets up. I mean, the numbers are huge, uh, in in terms of the uh, in terms of the increase, at the same time, we have business, transient business group and Leisure returning to the city. So, um, San Francisco, looks really good, uh, in the back half of this year, especially in Q4.

And, and, and just provide low reference of where San Francisco was in 24. And whereas trending in 25 and 24, and our, our properties. Our occupancies were about 64%. Um, this year based upon our implied Outlook its occupancy is going to finish, you know, upper upper 60s 68 to 70%. So it's a pretty pretty big Improvement. Um but it's still a long way off from where it was in 2019. Not the 2019 should be the year that we should reference because it was a very busy year in San Francisco. But occupancy is in our portfolio is when they're upper 80s in 2019. So there's a, a long way to go. But it's, it's certainly a very cursing Trend that we've seen here over the last 2 years in San Francisco.

Thank you.

Jon Bortz: Thank you. The next question is coming from Ari Klein of BMO Capital Markets. Please go ahead.

Thank you. The next question is coming from Ari Kline of BMO Capital markets. Please go ahead.

Tom Fisher: Thanks, and good morning. As it relates to the guidance, it looks like it implies some improvement in the fourth quarter relative to the third. Can you talk about what underpins that? Is that largely the San Francisco set that you talked about, or are there other things driving that as well?

Uh, thanks and good morning. Uh, I guess as it relates to the guidance, it looks like it implies some improvement in the fourth quarter relative to the third, can you talk about what what underpins that is? That largely the San Francisco set set up you talked about or their other uh things driving that as well.

Jon Bortz: Sure. So, Ari Klein, it's a few things. One is, it's some negative things in Q3 that are making Q3 worse, like the fact that Chicago had the DNC last year and doesn't have it this year. We have some weaker convention calendars, including in Boston, which is an important market for us in Q3, which then gets better in Q4. I mentioned the easier comp in Santa Monica in Q4 related to the Hyatt Centric Delfina Santa Monica in that market that will help us. We also had about 100 basis point impact from storms down in Florida, outside of the impact on La Playa Beach Resort. We may have storms again. We don't have them in our forecast. Maybe we should. Who knows? But, if we don't have those storms, we have that benefit, which we're taking into account.

Sure. So AI it. It's a few things 1 is, um, it's some negative things in Q3 that that are are are making Q3 worse. Um, like the fact that Chicago had the DNC last year and and doesn't have it uh, this year. We have some weaker convention calendars um, including in Boston which is an important market for us in Q3, which then gets better in Q4. Um, I mentioned that the, um, the easier comp in Santa Monica, in Q4 related to the the Hyatt in in, uh, in that market. Um, that will help us. We also had about a 100% from storms down in Florida, um, outside of the impact on the Playa.

Jon Bortz: For D.C., there's no election this year, and we hope less DOJ disruption by the fourth quarter. So, those should all help Q4 be better than Q3. The one thing I'd add, so those are all specific really to our portfolio and our markets. The one macro thing I'd say is it just as the public markets have clearly looked through this economic uncertainty, that's beginning to happen on the private side. I'd mentioned the fact that the hesitancy we had seen for groups to book later in this year that we saw a few months back had gone away, and those contracts came back signed, and we're not seeing that hesitancy again. Doesn't mean it won't come around again, but we're not seeing it right now.

We may have storms again. Um, we don't have them in our forecast. Maybe we should; who knows? But, um, if we don't have those storms, we have that, uh, benefit which, um, we're taking into account. Um, and then for DC, there's no election this year. Um, we hope for less Doge disruption, um, by the fourth quarter. So, um, those should all help Q4 be better than Q3. And then the one thing I'd add, so those are all specific.

Really to, to our portfolio and our markets.

The 1 macro thing, I'd say is it.

Jon Bortz: We just think as there's more clarity on these issues, and clearly the tax bill has passed, so there's no uncertainty about that at this point. We think that'll ultimately lead to an improving economic outlook and companies and the leisure customer being a little less hesitant to travel at the margin than they ought to this summer.

Just as the public markets have clearly looked through this economic uncertainty um that's beginning to happen on the private side. Um you know I mentioned the fact that the hesitancy we had seen for groups to book later in this year that that we saw a few months back had gone away in those contracts, came back signed and we've we're not seeing that hesitancy. Again doesn't mean it won't come around again, but we're not seeing it right now. We just think as there's more clarity, on, on these issues. And clearly, the tax bill has passed. So, there's no uncertainty about that at this point. Um, we think that'll ultimately lead to, you know, an improving economic Outlook and, and, um,

Companies and uh the Leisure customer, um being a little less hesitant to to travel at the margin um than they than they are this summer.

Tom Fisher: Thanks. Then maybe on the expense side, growth was sub-2% in Q2 and flattish, I guess, in the third quarter. Do you think 2% or even sub-2% growth is something that is sustainable? How significant can these efficiency and productivity enhancements that you are looking at ultimately be?

Okay. And then maybe on the expense side growth growth was up, 2% in 2q and and flattish, I guess in the third quarter, do you think 2% or even stuff? 2% growth is something that can produce sustainable and how significant can these efficiency and productivity enhancements? Uh, that you're looking at ultimately, uh, be

Jon Bortz: Yeah, I will let Ray jump in, but I think they are very substantial. I think they are significant offsets to what will continue to be, we expect. We are historically in our industry, you know, wages and benefits that have gone up faster than inflation. So, we do think that we have some significant benefits from these programs. We are really at the early stages of many of them. The technology is developing extremely rapidly, almost mind-boggling fast. So, we do think it is going to be a big offset. What is the exact number? I mean, it is going to depend upon where inflation settles down, where if we get back down to that sort of 3% wage increase and benefits have historically gone up more than that each year. But yeah, I would hope that we can more than offset the wage and benefits.

Jon Bortz: We also have some very significant real estate tax reductions to come. We just can't predict exactly when they're going to hit, but for the long term, it'll be very significant.

Raymond Martz: Yeah, Ari, in addition to all the efficiency tools and the AI programs that we're piloting, which we're very excited about, it is also important to remember that a lot of the cost increases in these labor contracts from a lot of these cities that went through the union renegotiations last year, the big large hit was really this year, and the rate of change will be a little bit lesser in the outer years in these Q3 and Q4 of these contracts. So that is also another benefit that gives us confidence. There is a lot of areas that we are pulling and looking at, and again, as Jon mentioned, we are looking at every single line item.

Um, the technology is developing extremely rapidly, uh, almost mind-boggling uh, fast. Um and and so, we do think, um, it's going to be a big offset. What's the exact number? I mean, it's going to depend upon where inflation settles down. Um, where if we get back down to that, sort of 3% wage, increase and benefits of historically gone up more than that each year. Um, but but yeah, I, I, I would hope that we can more than offset the, the wage and benefits side. We also have some very significant real estate tax. Reductions to come. We just, don't we just can't predict exactly when they're going to hit. But for the long term, um, it'll be very significant. Yeah. And, and, and our, in addition, to all the efficiency tools and the AI, uh, programs that we're piloting, which we're we're very excited about, um, you know, it's also remember that a lot of the, the cost increases in these labor contracts from a lot of these cities that

Raymond Martz: Our hotel teams have been great, our asset managers have been great looking at this, and we think there is a lot more that will come in, especially we will start seeing that in Q2.

we went through the union, Renee negotiation last year. The big large head was, is really this year and the, the the rate of change will be a little bit lesser in the outer years and these 2 3 and 4 of these contracts. So, that's also another benefit that gives us a confidence. But the the lav areas we that we're we're pulling and looking at. And again, it's John John mentioned. We're looking at every single line item. Uh, our hotel teams have been greater as managers have been great looking at this, and we think there's a lot more, um, that will come in especially we'll start seeing that in 26.

David Brown: Thank you.

Thank you.

Donna: Thank you. The next question is coming from Gregory Miller of Truist Securities. Please go ahead.

Thank you. The next question is coming from Gregory Miller of truist Securities. Please go ahead.

Raymond Martz: Thanks. Thanks. Good morning. I also have a couple of questions on AI. To start with, do you expect certain hotels in your portfolio likely to see better opportunities, say, bigger key count hotels or branded hotels versus independents?

Thanks, thanks. Good morning. Uh, I also have a couple questions on AI, uh, to start with, do you expect certain hotels in your portfolio? Likely to see better opportunities? Say, bigger key, count, hotels, or branded hotels versus independents.

Raymond Martz: is a very broad question. Look, I think some of the areas that we are starting to look at, actually, in some ways, it is the more complicated the operations in the hotels. That could be where there is some of the bigger opportunities because you think of a lot of our resorts where there is a lot of demand from the hotel teams because of different services and outlets and all the different venues and services that we provide the properties. In the AI area that we are looking at, we can do a lot of those, handling a lot of those calls because one of our properties that we tracked, I think in certain days of the week, 40% to 50% of the calls were just to the front desk asking about to get their valet car.

Raymond Martz: That is an easy thing to use AI to reduce the pressure on the teams, and then our front desk agents can service the guests and it makes them happy. So there is a lot of, it is not just the productivity, it keeps the guests happy, it gets other areas, and what we are really learning as we go through this is the more complicated the property and some of the bigger benefits to be had there. So there is a lot of different areas we are looking at, which some will work better than others, and we will look at it, but the good things are with our independent operators, they are very open to change, they are very flexible, and we are making a lot of progress there, and we will keep you apprised.

That's a very broad question. Um, uh, well look, I I, I think what some of the areas that, you know, we're certainly looking at, actually some ways. It's, it's, it's the more complicated the, um, the operations of the hotels, that could be where there's some of the bigger opportunities because, you know, think of a lot of our Resorts where there's a lot of, you know, demand from the hotel teams because of different services and outlets and all the different uh, venues. And and, and services that we provide the properties. Um, on the AI areas. We're looking at this, we can do a lot of those handling, a lot of those calls, um, uh, because 1 of our properties that we tracked, I think in certain days of the week, 40 to 50% of the calls, were just to the front desk, asking about the to get their valid car. But that's an easy thing to, to use, AI to reduce the, the pressure on the teams. And then our, you know, front desk agents can service the guests. It makes them happy. So, there's a lot of, it's not just a productivity, it keeps the guests, happy, it gets other areas and what we're really learning is we go through. This is a more

Jon Bortz: I do think, Greg, and to add on to that, I do think what we're finding is because of some of the legacy systems that the brands have, it's just going to take them longer to incorporate AI into their systems, whereas a lot of the independents that we have are using third-party systems that are being much more quickly to adapt and incorporate AI into their software and their systems. So, I do think it'll happen probably a little quicker at most of our independents, but I think ultimately it's going to be pervasive through the industry.

Complicated the property and some of the bigger benefits are to be had there. So there's a lot of different areas where we're looking at where, you know, what's um, you know, some will work better than others. Um and um we'll look at it. But the good things are with our, our independent operators. They're very open to change and very flexible and we're making a lot of progress there and we'll um, what can you keep you apprised? I, I do think Greg and uh, to add on to that. I I do think what we're finding is, um, because of some of the Legacy systems that the brands have, it's just going to take them longer to to incorporate AI into their systems. Whereas, a lot of The Independents that we have are using third-party, uh, systems that are are being much more quickly to adapt, and

And incorporate AI in into their, uh, into their software and their systems.

So I do think it'll happen. Probably a little quicker at many most of our Independents, but I think ultimately it's it's it's going to be pervasive through the industry.

Raymond Martz: Okay, thanks. I will leave it here. I appreciate it, gentlemen.

Raymond Martz: Thank you.

Okay. Thanks. Uh, I'll leave you here. I appreciate it until then.

Thank you.

Donna: Thank you. The next question is coming from Cooper Clark of Wells Fargo. Please go ahead.

Thank you. The next question is coming from Cooper Clarke of Wells Fargo, please go ahead.

Jon Bortz: Great. Thanks for taking the question. Wondering how you are thinking about potential wage pressure in both LA and San Diego, considering some of the moving pieces on the policy side in both markets and how those potential wage increases would affect margins and outlook for long-term ownership.

Great. Thanks for taking the question. I’m wondering how you’re thinking about potential wage pressure in both LA and San Diego, considering some of the moving pieces on the policy side in both markets and how those potential wage increases would affect margins and outlook for long-term ownership.

Jon Bortz: The industry has mounted quite a major effort to influence those outcomes in both LA and in San Diego. In LA, there were over 140,000 signatures collected to put that legislation on the ballot for the people to decide in the next election, which is June of next year. Assuming that those are ultimately verified and that we achieve the number of signatures required to put it on the ballot, which needs to be around 93,000 or more, then the increases are stayed from the legislation until the vote of the people.

Well, we're the industry. Um, we have mounted a, uh, quite a major effort, um, to um.

there were over 140,000 signatures collected to put that legislation on the ballot, um, for the people to decide, uh, in uh uh, in June, in the next election, which is the June of next year and assuming that those

Jon Bortz: At the same time, we have introduced a ballot initiative that we believe motivates the city to have some reasonable conversations with the business community, not just the hotel and the airline industry, which are specific to the legislation they passed, but other industry groups that have been affected by the high taxes and industry-focused legislation that the city has been passing. I think I would like to say that the tide is turning as it ultimately did in San Francisco, where we can move towards more rational legislation that does not favor one industry and does not work against any other industry. We have a very large group assembled in San Diego with a lot of money raised there, and we will be an active participant, we believe, ultimately in where legislation goes in that city, if anywhere.

Uh, are ultimately, uh, verified and that we, uh, achieve the, the number of signatures required to put it on the ballot, which needs to be 90 around 93,000 or more. Then again, the the increases are stayed, uh, from the legislation until, um, the vote of the people. Um, at the same time, we've introduced uh, about initiative that um, we believe, uh, motivates the city to, um, have some reasonable conversations.

With, uh, the business community, both not just the hotel and the airline industry, which are specific to the legislation they pass, but other.

uh industry groups that have been affected by the high taxes and uh industry focused legislation that the city's been up and passing and so I think

I think I'd like to say that the tide is turning as it as It ultimately did in San Francisco where we can move towards more rational um um more rational legislation. Um, that doesn't favor 1 industry and and and doesn't work against any other industry. We have a, a very large, very large group assembled in San Diego, uh, with a lot of money raised their, uh, and uh, I again, um, will be an active participant, We Believe, ultimately, uh, in in where, um,

Uh, where does legislation go in that, uh, city, if anywhere?

Raymond Martz: Great, thank you.

Great, thank you. And then

Jon Bortz: What a.

Raymond Martz: The CapEx program completed the multi-year CapEx program, but in terms of timing on the next project, would you think about starting the Paradise Point conversion in early 2026, or fair to assume any free cash flow will be saved for the convert over the coming months?

Just a cat back.

Program, uh, completed the multi-year capex program, but in terms of timing on the next project, would you think about starting the Paradise Point conversion in early '26? Or is it fair to assume any free cash flow will be saved for the convert, um, over the coming months?

Jon Bortz: Yeah, so I think as it relates to Paradise Point, I mean, we just don't control the timing of that. We are still working with California Coastal. We don't have approvals yet, and we don't know the timing of that at this point. So it is unlikely that we would be beginning this in certainly the first half of 2026. We did get a waiver from California Coastal so that we could move ahead with the renovations in the meeting space, the conference center there. Those were done and completed earlier this year, and so that is one piece of the ultimate program.

Yeah. So I I think as it relates to Paradise Point, I mean, we, we just don't control the timing of that. We're, um, we're still working with California Coastal. We don't we don't have approvals yet um, and and we don't know.

Jon Bortz: It is possible we may get a waiver for a couple of other smaller pieces prior to final approval, and those might move forward next year, but in terms of major capital related to the property, I would not expect it to be a major user of capital next year.

The timing of that at this point. Um, so it's unlikely that we'd be beginning this uh uh, in in certainly the first half of 26, we have, um, we did get a waiver from California Coastal so that we could move ahead with, um, the the renovations at the, in the meeting space. The conference center there. Those were done, uh, and completed earlier this year, um, and and so, that's 1 piece of the ultimate program, and it's possible. We may get a waiver for, um, for a couple of other smaller pieces, um, prior to final approval and those might move forward next year. But but in terms of major Capital related to the property, I I I wouldn't expect it to to be a major user of capital next year.

Raymond Martz: Thank you.

Thank you.

Donna: Thank you. The next question is coming from Daniel Hogan of Baird. Please go ahead.

A fair, please. Go ahead.

Analyst: I just want to touch on your comments about leisure pricing sensitivity. Is it getting worse or staying the same into the summer? Are customers booking through different channels, or is it being marketed differently? Is any promotions or discounting being used more or less at this time?

Um, I just wanted to touch on your comments, about Leisure pricing, sensitivity.

Uh, is it getting worse or staying the same, uh, into the summer? And then our customers booking through different channels are is being marketed differently. And as any promotions or discounting being used more or less at this time,

Jon Bortz: Yeah, I mean, I think that it is sort of you got to define what is going on. There is more discounting, there are more promotions going on. I do not know that it has gotten worse as the summer has gone on, but it definitely has impacted the summer fairly completely, and you know we are probably at least halfway through the summer. I am not sure it is going to get worse in August. It is possible towards the end when kids are back in school, we could see a little bit more price competition and discounting and promotions going on and some people booking through discount channels. Our guess is that by September and the early Labor Day, that that will dissipate. We will see what happens. That is primarily what we are seeing in the market.

Yeah, I mean, I think that that it, it, it sort of you got a defined, what's going on? Um, their, their, uh, there's more discounting their more promotions going on. It, it has, uh, I I don't, I don't know that it's gotten worse as the summer's gone on, but it it definitely has has impacted the summer, um, fairly uh, completely. And um, you know, we're we're probably at least halfway through the summer.

A discount channels but um, our our guess is that that by September, um, and the early Labor Day that that will dissipate so. Um, but we'll see what happens. That's primarily with what we're seeing in the market.

Analyst: Thank you. That's it for me.

Yeah, that's it for me.

Raymond Martz: Please let Mike know that we are really excited for him, the birth of his third daughter, yesterday, and tell him good luck because he is going to need it.

And and and uh Dan uh please let, uh Mike know that we're really, really excited for him. The birth of his third daughter uh yesterday um and tell him good luck because he's going to need

Analyst: Apparently, we'll do.

Raymond Martz: Thanks a lot.

It certainly will do. Thanks a lot.

Donna: Once again, that is star one to register a question at this time. The next question is coming from Ken Billingsley of Compass Point. Please go ahead.

Once again that's star 1 to register a question at this time. The next question is coming from Ken Billingsley of compass point. Please go ahead.

Analyst: All right. Good morning. My first question is to follow up on the Paradise Point. You talked about you got approvals to work on some of the buildings there. Are those within the Margaritaville plan, or when you do a conversion, would you actually have to put more capital in there to develop that?

Good morning. Um, my first question is just a follow-up on Paradise Point. You talked about you got approvals to work on some of the, the, uh, um, I think the.

Buildings. There are those within the Margarita Village plan or, when you do a conversion, would you actually have to put more capital in there?

To develop that.

Jon Bortz: They are within the plan for Margaritaville, but if the property never became Margaritaville, it would work perfectly for the property because the property is sort of a perfect, you know, paradise resort. Our designs that we are using with Margaritaville are fairly sophisticated, but they are local, they are reflective of the local environment. They are not a standard Margaritaville, I do not know if brand standard would be the word, but so they fit the property, and the property fits being a Margaritaville. So there would not be additional dollars invested in the parts that we have already done.

Yeah, they're they're within they, they, they, they're within the plan for Margaritaville. Um, but if if the property never became Margaritaville, it would it would work uh uh perfectly um for the property because the property is sort of a perfect

You know, Paradise Resort. Um, so you know, our our designs of for that we're using with with Margaritaville are are fairly sophisticated but they're local, they're reflective of the local environment. Um, they're not a standard, um, Margaritaville

I don't know if "brand standard" would be the word, but they fit the property, and the property fits being a Margaritaville. So, there wouldn't be additional dollars invested in the parts that we've already done.

Analyst: Okay. For your Q4 outlook, you obviously have some confidence of that, and there's definitely more confidence going into 2026. What are you tracking that you think would most negatively impact that outlook? I mean, I understand a lot of it's outside of your control. So outside of weather, what are one or two of the major items that you are tracking that could impact what you think could be shaping up to be a good 2026?

Okay.

Um, and then for the your fourth quarter Outlook, you obviously there's some confidence of of that and and is definitely more confidence going in the 2026. Um what are you tracking that? You think would most negatively impact? Um, that Outlook, I mean I understand a lot of in outside of your control. So like outside of whether what are what are the 2 of the major items that you are tracking, that could impact what you think should be shaping up to be a good 2026.

Jon Bortz: The things that could impact it that we look at on the negative side or the positive side, which are you asking about?

Analyst: Obviously, we are going to be more concerned about the negative side, but if there are some positive ones, I would love to hear those as well.

I mean the things that could impact it, um, that we look at on the negative side or the positive side, which are you, are you asking about?

Jon Bortz: Sure. So, in terms of what we look for, we are looking at group cancellations. It is great when we have a group on the books, but it can cancel, and the further out it cancels, the less income we get from that cancellation. So we are always looking at cancellations, and as I mentioned in my comments, we have not seen an increase in cancellations yet, but that is what we watch for, and that would be a negative, obviously. A slowdown in booking pickup, that is the second thing we look for. That is always an indication that businesses are changing their approach to meetings and travel, and we would see that in the booking pace, both what gets put on the books and how far out they are booking and how confident they are in booking further out, which we are always looking at.

Well, obviously, we're going to be more more concerned about the negative side, but but if there's positive, obviously, there's some positive ones. I'd love to hear those as well.

Sure. So I mean, from, in terms of what we look for, I mean, we're looking at cancellation, um, group cancellations, you know, it's it's great when we have group on the books, but it can cancel. And the further out of cancels, the less income we get from that cancellation. Um, so, so we're always looking at cancellations and, as I mentioned in my, in my comments, we haven't seen an increase in cancellations yet, um, but that's what we watch for, and that would be a negative, obviously, um, a Slowdown in in Booking pickup. Um, that's the second thing we look for, um, that's always an indication that, um, businesses are changing their approach to to meetings and travel. Um, and, and we would see that in the booking Pace, um, uh, both what gets put on the books and then, um, uh, and and this and

Jon Bortz: We are looking at 2027 already for our larger conferences, and so far, those are looking good. I think in terms of the positives, it is certainly the pace at which we book. It is also our ability to push up price. Those are always things that we look at. I guess the one other positive and negative we look at, because it can be on both sides, obviously, is what is the spend outside of the room? How many dinners are they having? How many welcome receptions? How much are they spending on food? Are they spending at the upper end of our menus? Are they spending in the middle of the menus or at the bottom of the menus, as an example? So we are always looking at those items.

How far out they're booking, um, uh and how much how confident they are uh, in Booking further out, um, which we're always looking at. So we're looking at 27 already for our our larger conferences and and so far those are are looking good. Um, I think in terms of the positives, I mean it it it's certainly the pace at which we booked. It's also our ability um, to push up price. Um, those are, those are all these things that we look at. Um, I guess the 1 other positive and negative we look at it because it can be on both sides. Obviously is what's

Jon Bortz: That gives you a really good idea of the sort of economic confidence that these businesses have on a go-forward basis.

So, we're always looking at those items that give you a really good idea of the sort of um...

Economic confidence that these businesses have, uh, on a go-forward basis.

Analyst: Thank you for those answers.

Thank you for those answers.

Jon Bortz: Sure.

Sure.

Donna: Thank you. Our final question today is going to be coming from Chris Darling of Green Street. Please go ahead.

Coming from Chris darling of Green Street. Please go ahead.

Analyst: Hey, thanks. Good morning. Just want to circle back to Paradise Point for a second. What is your level of flexibility to either buy out or extend the ground lease there, and how does that influence your willingness to allocate more capital to that property over time?

Hey, thanks. Good morning. Um, just wanted to circle back to Paradise Point just for a second. Uh, what's your level of flexibility to either buy out or extend the ground lease there? And how does that influence your willingness to, you know?

Allocate more capital to that property over time.

Jon Bortz: Yeah, I mean, the ground lease is with the city of San Diego. I was going to say San Francisco, but the city of San Diego, and historically, we've extended those, as was done for Mission Bay a few years back. Those can get extended as far out as, I think, 49 or 50 years. Typically, what goes along with that is major investments that we're making in the property. So it's always important to us, in order to make major investments, to be able to have enough time to get an adequate and attractive return on that investment, and that would continue to be the case on a go-forward basis with Paradise Point.

Yeah, I mean, uh, it the, the ground leases with, um, the city of San Francisco. The city of San Diego. I was going to say San Francisco but the city of San Diego and, uh, historically, um, uh, We've extended those, uh, as was done for Mission Bay a few years back, um, those can get extended as far out as I think 49 or 50 years. Um, and so, um, the typically, what goes along with that is, um, major Investments that we're making in the properties. So, um, It's always important to us in order to make major Investments to be able to have enough time to get

An adequate and attractive return on that investment. And that would continue to be the case on a go-forward basis with Paradise Point.

Analyst: Okay, that makes sense. Helpful. Can you talk about what you are seeing in the transaction market today? You know, realize it is still slow. Maybe there is not a ton of pricing clarity, but anything incremental you are observing these days would be interesting to hear.

Jon Bortz: Thanks for that question because we can wake Tom up so he can participate, Chris.

Okay, that makes sense and is helpful. Um, and then maybe just more broadly, can you talk about what you're seeing in the transaction market today? Um, you know, I realize it's still slow. Maybe there's not a ton of pricing clarity, but anything incremental you're observing these days would be interesting to hear.

Tom Fisher: Hey, Chris. I think, as you know, we started the year with optimism. Obviously, it was interrupted with some of the macro and policy uncertainty late Q1, Q2, but we've sensed some renewed interest. Certainly within the last 60 days, our investor inquiries are up. Brokers are feeling better. I think there's kind of a shifting sentiment. The debt markets are functioning and open, and there seems to be obviously a little more clarity on the macro policy front. So I think there's kind of a shift in the tide here, and I would anticipate that over the course of the next few quarters, we'll see increased transaction activity.

Well, thanks for that question because we we can wait Tom up so we can so he can partic. He can participate, Chris. Hey, Chris. So I think as you know, we, we started the year with optimism, obviously, it was interrupted with some of the macro and policy uncertainty late first, quarter, second quarter. But we've, we we've sent some renewed interest, you know, certainly within the last 60 days, you know, our investor inquiries are up, you know, Brokers are feeling better. I think there's kind of a shifting sentiment, you know, the debt markets are functioning um and and an open. Um, and there seems to be a little more clarity on the macro uh macro policy front. So I think there's kind of a a shift in the tide here and I would, I would anticipate that over the course of the next few quarters. We'll see increased transaction activity.

Analyst: Okay. Yeah, that's helpful. I'm glad I was able to get you in there, Tom Fisher. So thank you guys for coming.

Tom Fisher: Yeah, thank you.

Okay. Yeah, that's helpful. I'm, uh, glad I was able to get you in there, Tom. So, thank you guys for your time. Thank you.

Donna: Thank you. At this time, I would like to turn the floor back over to Mr. Bortz for closing comments.

Thank you at this time. I'd like to turn the floor back over to Mr. BS for closing comments.

Jon Bortz: Thank you, Donna. Thanks, everyone, for participating. We look forward to catching up with you in 90 days, and we hope you enjoy the rest of your summer.

Thank you, Donna, thank. Thanks everyone for participating.

We look forward to catching up with you in 90 days and, uh, we hope you enjoy, uh, the rest of your summer.

Donna: Ladies and gentlemen, 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.

Ladies and gentlemen, 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.

Somewhere, somewhere, somewhere. I know I was.

somehow I wish I heard it again to you.

Slowly.

I can see the planet.