SOHO - Earnings call transcript Q4 2017

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Operator

Good morning, and welcome to the Sotherly Hotels Fourth Quarter Earnings Conference Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there'll be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Scott Kucinski, Vice President. ahead. go Please

Scott Kucinski

Company's good quarter and President Welcome Sotherly review to COO, portfolio review and our our quarter Chairman Thank call morning, update will with our Tony and for Domalski, and key on fourth results the to guidance. an call objectives. earnings will CEO begin CFO performance. initial our our activities our webcast. XXXX provide financial Hotels' and will the you, today's everyone. quarterly the Dave and review Sims, strategic Drew Folsom, conclude

take then will questions. We

If accordance made you to Company measures you've not Reg with this received has at a our during the copy Any statements. which call, conference financial in of non-GAAP the historical, the G requirements. most may are earnings it sotherlyhotels.com. release, not reconciled release, directly access In comparable statements forward-looking may the website measures on constitute GAAP

in does filings by and from Company's reasonable I'll that, press expectations over forward-looking Dave. give today's SEC. statements call to the to actual believe forward-looking implied are materially with any or a results we attained. to undertake be release will assurance the forward-looking on are The the in statements statements. With based that duty time-to-time detailed Company no update not any in expressed and differ Factors revise expectations turn can Although, or those the risks cause can we that reflected from assumptions, these

David Folsom

fourth product of previously we have had to our economic you, to that am key very reap I off enhanced renovation call and strong operating pleased of Thank today's with a everyone. morning, portfolios under quarter review the of Scott. benefits Good begun start many service. I’ll report the hotels as a metrics.

markets. addition, saw many growth we our of encouraging in In

the condominium & the portfolio, the which Looking Residences. properties rooms for at hotel the Resort Company's participating wholly-owned results represents in composite and Hyde

an X.X% $XX.XX increase over in RevPAR a the X.X% decrease prior in increased occupancy. portfolio year and X.X% quarter, ADR with to For

$XXX.XX basis with X.X% occupancy. basis quarter points the increased For margins XXX portfolio year XX in finish a points RevPAR Hotel the year, increase in expanded at to X.X% prior year XX.X%. for EBITDA by expanded margins in the rate, to XX.X%, to and X.X% over decrease

Looking activity highlights Whitehall in hotel business season. was substantially up. a the In to mid-December of the progress in now to of renovation with casualty quarter. the hotel October hotel the Hotel a the and re-branding completed XX in anticipate Flag high completed to gain we South in the is up that back to of being at million and Florida's enter was ramping casualty. we The asset $X claim of for electrical within Ballast. property the and XXXX March operation a without days traction by be renovation which with hotel reopened cover to as we level In to ramp and approximately all power $XX and The DoubleTree the XX. million Wilmington, repair Houston closed includes significant scheduled due result Crowne the The to all Resort continue costs we on Hilton Plaza, Hilton the insured completed converting the event continues repairs Hollywood, an as and system Florida, incurred. The interruption

product experience of for unique into emphasize and to Collection. entered both Ballast announced as As join Worldwide offering the in modifying retains change provides for Hotel agreement believe with a We service the the with guests. system the Hilton the power best while of have Hilton local a worlds hotel to November, franchise the XX-year it we reservations Tapestry our this our

that and of shares use Series sale the in net approximately to occur million, We corporate of combination through of which of option. completed anticipate at and was redeemable purchase $XX.X proceeds sale recent recently preferred closed Arlington, In $XX.X November hotel X.X January. to the X.XX% we quarter. X% sale later overallotment this December, our on entered to including and activity hotel We October, acquisition was price additional mortgage expect operating million a completed In credit to XX. Last the no than agreement million spending approximately from the proceeds located notes. an completed Centric offering senior call. the redeem and early a we C net color new million, purchase the we in the sale later an notes senior upon stock for the million X.XXX% our operating of includes into in on of $X.X Drew the $XX unsecured partnerships’ looking our provide our XXXX proceeds fund aggregate the for of this Arlington aggregate a our issuance approximately issuance Hyatt of cumulative net unsecured offering in financing. Now purchase full $XX outstanding and of closing and Virginia agreed acquire April our month, note in of unsecured will million partnership

the we Centric previously stated, the As partially to net fund use Arlington. to the of proceeds Hyatt intend acquisition

a of of company $XX outstanding repurchase As may Directors under previously Board its the million stock stock. program common discussed, to purchase the up Company's which authorized

of the XXXX, yield stock Tony Domalski. month, closing announced Company X.X% per an With last share, share to quarterly dividend a that, XX, the million. price. I’ll representing totaling common has $X.X CFO, finally an our to price December purchase an approximately increase call at of share, repurchased to $X.XXX yesterday's of approximately our XXX,XXX we And As $X.XX turn over per approximately based of on dividend annualized average per the of $X.XX and shares

Anthony Domalski

the approximately X.X% for period revenue an was million, quarter December ended quarter you, same a year-ago. Thank Reviewing over representing XXXX increase performance XX, Dave. the for $XX.X total of the

year. $XXX.X approximately was prior total year, an the over million, revenue increase X.X% the For

an $XX prior the and the year. was year-ago the For was same million representing XX.X% approximately an increase over of of a million, hotel quarter the year, $XX quarter, over hotel X.X% EBITDA EBITDA for increase approximately

was the the expenses, to income Hotel well approximately prior adjusted well general corporate expense, adjusted EBITDA additional representing on provision the to related our of deferred year-ago as as early of of an tax to over year, same of well note to deferred Please was income an and interest the detail. extinguishment FFO the for gains derivative XX.X% our over quarter increase X.X% For Please of approximately a our losses increase charges FFO million, other charges instruments, FFO current excludes these income, portion $XX.X and other as quarter, earnings tax items. offerings, for interest year. items. aborted $X.X million, as that adjusted as as related portion the provision and charges changes the our and refer administrative excludes release debt,

real approximately cash $XX.X as of million, approximately $X.X December approximately balance book hotel and and Looking Company of XX, certain expenses. the million as million. $XXX.X which had of unrestricted approximately at reserved net of XXXX, was investment other was cash improvements total approximately value which million, cash properties taxes capital estate to sheet, $XX.X consisting our well in assets our million, The of total includes as of $XXX equivalents

of outstanding approximately As of million. of approximately $XX debt million average fixed million the $X.X outstanding, unitholder the a and Company's was shares balances equity including interest the Total At debt shares the there quarter, end by quarter, million stock XX the Company’s common [Isa] rate approximately approximately interest. of end the unitholder rate approximately of carries the weighted X.XX%, million were equity at million of quarter, owned equity of Company principal which X.X at end had of of stockholder of the stockholder was the XX% and and a approximately $XXX.X $XX.X [ph]. approximately

quarter, of to debt as the addition were based the the the total per to partnership In end agreement ratio notes debt the units of of XX% in Also, value At interest-bearing at $XXX,XXX senior the outstanding. our million was principal quarter. was $XXX.X value, X.X in approximately of limited there end unsecured the room. the balance approximately fourth on asset asset our million total indenture defined approximately

are within as and as of issuing current Arlington to well our guidance initial for XXXX performance Centric accounts we portfolio, Hyatt the factors. acquisition which Turning other the expected our guidance, for

a we midpoint of $XX.X are the revenue million. in range, hotel represents For at revenue. the projected and of X% million, At projecting the million total total range year, the FFO of to X.X% At $XX.X $XXX.X the to to XX.X% in $XX.X over increase a $XX.X to per years of range, is the Hotel $X.XX the last a increase in million share. last EBITDA. range million range per this $X.XX year's or $XXX.X And the midpoint EBITDA the over FFO this of midpoint over represents million of share. projected this represents range, the was the XXXX adjusted increase adjusted

Additional in Drew, our details over the outlook now our call Officer. of to Chief can turn found earnings Executive release. be I section the will

Andrew Sims

portfolio substantial seen just Individual our was ending spotty count competitors challenges, was from closing revised the three aggregate, Thank the we electrical we in renovation of provided results year-ago. our calendar historic our largest our fair growth encompassing and impacted you, XXX% progress a in of up for with of of XXXX in year, full performance of directly portfolio The RevPAR the challenges, XX% our guidance, some peers. career. hotels finished year under of anything compared resulting We produced same experienced our also our related I've portfolio. shy commendable my hurricanes, We of room share unlike with I and our the XX-year of and industry disruption. In the earnings after over the a hurricanes but Despite Tony. total issued basis and year some see which had Company. guidance year XX% outsized produce over market growth review year Houston initial down. these points plan to In the shares. casualty XXX took great In and proportions beat our XXXX, two that

the nearly and number to Company. sheet the and with investing repurchase our of cash capital succeeded the grow maintained in markets finishing also stock that continue on program, for We goals us a position year in We balance the executing enable strategic all year, a discipline, transactions for initiatives strong will key our in to year. stock undervalued

nearing via seeing renovations our the we in portfolio Company’s market walk the million conversions repositioning terms that across from from in Georgetown located the brand. Wilmington XX and hotel poised of North $X.X strategy that a Wilmington performing short year. hotel, going completion and in of of a fits River D.C. of is over shareholders long-term. third-party recently station renovation to outsized asset Centric Hyatt will we as represents be up Nestle's Hyatt will was believe The of now are new this have to luxury California. to the ideally to projects We three going a the completed capital shareholders the to Resort immediately of we past management on close returns Hyde The out Company’s to Potomac delivered also acquisition forward. which maintained Arlington from At The practices. dividend acquisition we Residences ramped from XXXX realized We hotel the Centric a upside months. our four key operational our trend throughout presents XXXX the we past three that an for transaction. will also We and franchised outperform a the if will have the and from the asset We continued We Virginia, quarters, the believe renovation the its opportunity hotel larger our hotel believe a display of Hyatt management accretive anticipate be when believe Metro again Centric of district. increase the will guest the the forward. our year opportunity found of now shareholders years. for is located We room remain we the we seller materialized. considerable the portfolio at conversion a the end, over Rosslyn deferred the We investment and completed repositioning refreshed resort a the and one Arlington and once & Rosslyn exchange. headquarters, of the street that our completed be benefit through The block disclosed Hollywood as reversed be is project. XX% and is asset sell acquisition XXX non-core American across the and Washington the hotel shopping opportunity the submarket and Savannah with part commitment the have Including This hotel completed will as nearly and Arlington, and rooms Company brand we that recycle

Additional when detail on at provided it a later executed. transaction date is potential if be that will and

ahead, a Looking tepid growth year will of we for believe industry. be XXXX the

was However, Company's portfolio we renovated our product. the poised given to believe recently outperform

We to full potential. ramping their will our on reposition focus properties up

We to extensive disruptive welcome spring of the by from renovation break the in XXXX. renovation planned which Hilton is set Crowne Plaza, expect The XXXX to June at a our planned be to only for Tampa with Collection brand Tapestry conversion activity. the activity is start

for a investment our disciplined the maintaining a point contact. that We identifying will strategy We focus the at while present catalyst on and on of Company guest attractive and further fit focused opportunities growth strategy. our maintain excellence shareholders, balance management remain

open We will questions. for now up the call

Operator

session. begin Please now from of question Hilliard first question-and-answer ahead. [Operator Instructions] go Carol comes The the Kemple We’ll Lyons.

Carol Kemple

morning. Good

Andrew Sims

Carol. morning, Good

Carol Kemple

On that so marketed the and Arlington if did win acquisition, deal? you how widely the was all

Andrew Sims

The widely as priority some marketed. public a believe our result answer that provided company seller was it which Fortress to standing. is the us I yes, of is

in that So believe that's and would that reputation the transaction believe they we marketplace. close – our I the

We the in under put a XX-year closed and our contract history have company. of never not property

Carol Kemple

numbers that hotel can property, your you you for ADR you that in those have would in changed stats at looking owned that have XXXX? can about XXXX, give how then that occupancy And all talk us Okay. would if entirely or RevPAR

Andrew Sims

not are be at be that next able We'll this to to you provide time. able the to data with do going We that at call.

Carol Kemple

Okay. Thanks.

Andrew Sims

right. All

Operator

comes Capital. next The from Janney of question Tyler Batory go Please ahead.

Tyler Batory

everyone. Thanks. Good morning,

Andrew Sims

Tyler. Good morning,

Tyler Batory

the give Maybe maybe not anecdotally at and trends up is to general I ramp call first Hollywood, what two ask question strong you're the able to property if a here numbers on months going I'm any are market? the you're willing any wondering just you sure specific quarter. quarter post XXXX. Hollywood the Congratulations seeing through just to productive and first But the wanted how that conversion, for out other about

Andrew Sims

Sure.

on-time of Hollywood has been DoubleTree planned. the the time and but is the on here, the anticipated get end the we side on to about and I rush a and a we think on-time, takes what had always, come little – But market is great. the check been become it's would October have bit back at a terms which I as right Hollywood in We originally. did ramp Internet finish say slow the project that as converted all in of But those some to we to boxes. finished, up we to reconnected it

kind or we've in year had years those the the a we that or that weren’t Super of things. So out; January closed events special decent there all South Florida seen December in Championship Bowl game past, National

and the market real up and we're that of February pretty March nicely are the the thought nicely. season in I really but So We positioned going ramping anticipating meat think not was And is great. which market April. good, we is into

Tyler Batory

talk little XXXX? Huston that about Okay. shaping any That's if for to helpful. the then moving Great. the up post Houston, you And how back the property closure on then on at a have market and up bit I’m ramp thoughts general you sure is not can

Andrew Sims

that, going I that little view, I be, they Series, Super – to the World know is a XXXX Well, up like Center XXXX. you've Convention having probably the was floor. mean the events some of bit the is had if last Bowl little said a I suspect bit in year. have challenge it Downtown got that better than for I they’ll to think I think so But in have but don't calendar a – huge my filled not don't and that

So little more I think looking we’re contribution. a for

first have where like In our make And what we'll we terms going have and still that that to to contained quarter, get that whole the between the business have we be interruption at claim, probably on are guess of a of up, variance is once view claims. claim ramp the would end first we the I insurance that's to make for make we to been a we quarter.

we're that that. think not concerned I So overly about

We I'd the up ramp the have seen six in last progress weeks. good in say

hotel. feel we're we restart like we anew mean to been the So It's like opening all close and shocker. down I getting there. had and it's channels a

the chased of glad see that was up it thing that and we’re again and encouraging XXX% to So is a away probably that most be we glad guest we're to had and back. building the our get then we revenue them and ramp back concern transient - because open is to back transient occupancy

been So building. it's

Tyler Batory

shifting Okay, little here, at a Arlington pretty very about about I great. you how That’s long-term upside this the mean gears you a your improvements already property? acquisition mean about to helpful. high asset, here, operations? And do think level. to looks How maybe I think buying the return great performing then can maybe do potential you a like potential from talk

Andrew Sims

Well, But the it's once return closed. the at next fall, this upside like get hurdles the inappropriate make save to the project, the parking revenue closing We which some there which projections to taken being garage, we're before just feel had those year. they've good [indiscernible] is going the has a to getting with to are point. almost for of we close now away portion parking completing hotel a issues are from that the property

market. We're parking the right you're lot metro so populated high we a the office and – next like there's the a of station in to and So feel upside located densely in revenue. very

we opportunity so to need there beverage it's primary that we're and to not like and and is like premium and focus. doing here, feel make what focus create an existing Food parking line. certainly management some just team a additional there's we to and the a of reorganize rethink dollars the to it been is parking primary So a we'd bottom for demand

So you've and builder something that at else want we in to…? hotels value I on good for we think focus seen you we're our and that think our that. it's a anything want think that's Dave, we to guest

David Folsom

to is Virginia. Northern Washington Yes, closest market the in this strategically D.C.

the ours, just type strategy. specifically got demand very of transient the business. So shape We've attractive two to system us But government out to It's the site. We've that is where to market umbrella is if mean D.C. from great meaning D.C., hotel got cover are not use without contract into full Texas District market are to in is raised them that can them multi-use union get leisure is that the be are in only dense line very, perspective the poor with business. of for one are massive risks our a be than a to Virginia Columbia. generator. We've or of the one closer It's to many mixed labor it's subject a Rosslyn hotels is anybody it this Drew in barrier got group will only business. being and very got Arlington, There Rosslyn to for entry just of that so located. of Arlington, understands a said good into are not market to very I lower going behaves a get as entry to We general demand solid service so capture generators. in going not both market business. and D.C. for multiple said, a lot barriers the hotels we only lot of it subject in Downtown of go like

near said and moved large other to headquarters So in right There and global to remarks, Northern in companies hotel. its are American rumors try to district. just can his North the good next really proximity just their California they Washington the because Nestle located from Drew in of Virginia be that are it's like this public going market to locate of

that very, think from hopefully just call, So it of a a financial in solid It's favorable. into more a be very on to earnings made, detail lot our and We there's perspective. found next be can little we think a hotel it's we and big delve we going very improvements can operational that acquisition. a

Tyler Batory

asset want seeing That’s I the the then there specific, trying out to marketplace just you're very there. to sales Okay. too what And just helpful. maybe seeing get front on wondering generally in you're and look just at wondering know Appreciate disposition the what here? for color the you’re to has potential

Andrew Sims

that like if find reverse identified we because and said about we thing the really the up to the execute something on it timely XXXX we and a the of assets one transaction at acceptable. want price in that's we that’s Arlington Well, some We've a accomplish. exchange can non-core past that sets us sale for we

So that if this see proceed is and of process that past we'll step one. we one

Tyler Batory

that up And doing great. Could here? behind coming think in and that? the us Okay, here, what wonder on opinion conversion Tapestry more just question on a you last the here brand where about rationale that? maybe then And Wilmington, your soft guys also bit little then just remind you

Andrew Sims

Sure. Yes.

guests. So Hyatt, of other reservation felt and It’s at in is brand hotel all what maintain we Suites. but we wanted Hilton we size maintain where in mean originally the we time this market, system, in upper-upscale, but of We like size see new almost the market, doing block service And we're built Wilmington, create Hilton the upper-upscale. together, for a you offering we like small differentiator a same a it target the core Embassy to which flag pretty thought the we dropping markets I our the is Hilton felt have unique to contemplated just market a and our that needed their us. was new a away is product from Wilmington command market a the

to allows us this do So both.

of this you we do which page standards we deliver leeway a all on brand, because strict have as these to things brand they do kind handle give that a features you if guests of touch more points we that core lot same standards, because for to Tapestry lot kind of opposed the we can and the good on that. like want Hilton's instance want to adherence a market and Savannah in way brands on our brand we're unique have hotel creating of the we to what XXX feel So with and guest our like

Tyler Batory

Okay, great. me. That’s all That’s really helpful. guys. Thanks for

Andrew Sims

Thanks.

Operator

The ahead. next question comes Sandler Please from O'Neill. go of Daniel Santos

Daniel Santos

Hey, good morning.

Andrew Sims

morning. Good

Daniel Santos

Few questions for me.

first and one impact XXXX on The how let dispositions any reform XXXX is you know if tax Could on your guidance. have us much guidance?

Anthony Domalski

This is Tony. The impact of captured statement. tax reform in is pretty XXXX much

really not tax we're in too of impact So reform much going to see XXXX.

will second to tax that’s profits tax reform a that's We rates about what our of disposition? far goes. at have the as as lower question, And corporate applied but the the it part really was TRS,

Daniel Santos

Yes, disposition.

Anthony Domalski

are XXXX. in factored the of dispositions not in impact any We

of before the assets of in that trying said, would effect we’ll that update timing to explore guidance As just we disposition. the of to but wait forecast, what’s which happen going that the possibilities be those, Drew and until We to impact. any – the would be

Daniel Santos

Got then on guys it. national renew And the the acquisition, obviously flag. to you decided Arlington

walk your it or as as process to considering keep boutique wondering try hotel? a whether you're if when guys could thought you national flag a Just an to you rebrand opportunity, through

Andrew Sims

Right.

the So Centric, Hyatt a recently re-flagged to hotel from of core is theme. in the which go-local this was situation, equivalent Hyatt the brand Hyatt a

out space the agreement owner the certain of the previous occupy. really a option current or The is not made jettison system. an that they instance, was very, get had already – Hyatt Hyatt and extent, they've In expensive. with of very to the a to long-term way that only that or trying to owner executed to to agreement we're faith of it a this So jump leap

level the a well, that we hotel here. So very to really like high didn’t remake We high need a good close at it’s to felt as numbers. performing the a pie hotels acquisition, given performing is good

Daniel Santos

year Just improve take seems that wondering might asset a bit and are one to preferred you one. steps that you like sales had your below your any equity it's last It peers? if multiple I'm and funding this tangible source, given debt

Andrew Sims

Tony. Equity multiple. [Indiscernible]

Anthony Domalski

to have to you I think we’re going back that. to get on

Andrew Sims

us you help got could on You that. stopped us. Maybe

Daniel Santos

We can follow-up offline.

Andrew Sims

Okay.

it that. on don't sure. at have for We follow-up fingertips us Let our

Daniel Santos

Thanks.

Andrew Sims

you. All right. Thank

Operator

[Mike next question comes Instructions] The from Investor. go Please [Operator a Tofias], ahead. Private

Unidentified Analyst

guys. Hey,

I sounds guys, it right, you to quarter. if I math the First, strong hard bought guys a about I is XXXX. did looks appreciate you was environment a for in it to like the I my right? in also also want like guys work and want that XXX,XXX fourth quarter, thank thank you It challenging back fourth shares

Andrew Sims

Now, correct. it would be that

Unidentified Analyst

Yes.

that. value total of the per math right. So the sound liabilities – if that does right? value I million total think if a you, some about of I and for and debt appreciate my out sort for Is doing I my have One if it. thank take I'm question you do net and for the I'm share, for other $XXX little back cash, doing guys asset math the a definitely right, was over I I I you total high-teens get said

Andrew Sims

high-teens. said You

Unidentified Analyst

Right.

Andrew Sims

mid-teens, math but close the would It correct. the be might for about be

Unidentified Analyst

trading of mid-teen the in continue that high-teen kind a and the to there's that valuation. or it you as and you're I is reiterate just I'm acquisitions. I Okay. buying stock if consider to back to hope stock new relative X’s value guys mid you that, love compare

Andrew Sims

We most absolutely will.

Unidentified Analyst

you. Thank Great.

Andrew Sims

Sure. of Q&A End

Operator

to would the the remarks. Sims concludes question-and-answer for closing now This conference Drew like back to session. over turn I

Andrew Sims

Scott. an everybody. Thank a to you look good from for today's April out day coming you Williamsburg Have We call. here in all annual for come to our and participating meeting in invite invite in

Operator

The presentation. for conference has you Thank concluded. today's attending now

You may now disconnect.

Sotherly Hotels (SOHO) 27 Feb 182017 Q4 Earnings call transcript