SOHO - Earnings call transcript Q2 2020

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Operator

Good morning and welcome to the Sotherly Hotels' Second Quarter 2020 Earnings Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will 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 Mack Sims. ahead. go Please

Mack Sims

good and Thank morning you everyone.

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

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

Scott Kucinski

during were Mack. operating Thanks quarter suspended a pandemic. mandates. programs remain government and in hotels I'll temporarily morning of as exception on quarter as call month off Hyde Hotels, open our the a during and the Hyde May Resort with which the during record All of which, and was the two rental of all worst quarter, our result with Beach April Condominium measures the we know, the company's portfolio our for Good to review COVID-XX today's industry everyone. key start the

of the year, a RevPar and in decrease occupancy the ADR. a XX.X% our ahead concepts segment, occupancy and over for portfolio, majority RevPar with XX.X% in portfolio have that Looking at reported of results to and decrease decrease the in weak appear for decreased be ADR. reflecting XX.X% year Year-to-date XX.X% in prior of XX.X% in decrease of These in decreased lodging were upscale the thus upper far. owned prior wholly our metrics line X.X% peers US

was some on the performance clearly gain now uphill industry to traction. portfolios Our by demand, COVID-XX fighting travel as battle tries and driven our we're impact

have inevitable worked Pricing beds at some non as institutional markets While integrity in operators cost. demand trying heads our returns. maintain wars to to rate in operators owner are simply are put any where

the has see to of as on which done our some currently of of our the all we note on in, social have should operators events course. This lifted, full and traveler coming time. sit due in is our restrictions. reduced benefit for Until a lifestyle group portion question. to Our us reliance are concepts. important as The added warrior limited commendable that will over business recovery transition has that on job service due these property measures, past during be travel very revenues, corporate the this been segment individual events our It grouping hotels business segment a be the catering size we our reliance road back don't few to headwinds some restrictions years further to staying to limitations which gathering distancing

on Memorial half such decline avoiding with the last expect averages as starting as properties Day portfolio travel national have our urban This in CBD our a areas. quarter holiday. and in more do in We the underperformed be quarter Atlanta most Like have XX.X% been can to restrictions April you in decline with solid commenced. of month-by-month, incremental portfolio populated from populated of and the and improvement latter lifted in densely bottomed government went re-openings out Lastly, of to the RevPar result located slightly ticked-up month around densely D.C., more RevPar year. over year, XX.X% locations markets, May, Houston, as Washington phase prior consumers see Raleigh, understandably

Highlighting weekend in half falling our phase our of decline and we've the drive markets June. as to terms ADR, As these reimplementing coronavirus -- improvement continued With year-over-year. a of the some driven These expanded several performance effort and in relative particularly further to market, steps Savannah. resume, leisure re-openings again case curve. trends such states weekend flatten this leisure primarily were the to driving improve surges to improvement we stall locations to the saw where primarily US Unfortunately, Wilmington, outperform able XX.X% of RevPar latter seen Jacksonville begin by broader in of properties restrictions in an with business. southern in

and Florida, Texas actions directly Specifically properties are portfolio, has reopening, pause operations our relating that the to the city taking our in impacted the of Atlanta, to destination. located which

shaping the As Tony. expect response the primary in call we we continue on recoveries, our the demand virus turn now industry. the trajectory over a in government's past I'll driver to to be to the of

Tony Domalski

Thank XXXX. you, Scott. the period performance ended Reviewing XX, June for

and the quarter, debt interest. had items. XX% fixed quarter For $XX.X in a of of was the reserved million, ago, of of representing we the approximately was over capital approximately or total $XX.X first and the of the $XX.X million $X.X the rate quarter of over $X.X At year approximately and X.XX%. second approximately of balances improvements, deficit decrease debt adjusted or at cash unrestricted a end The a million was $X.X million, pandemic equivalents $XX.X for million, million real million approximately since began, a cash of the interest well AFFO total million, same quarter the million, company's which or quarter for company as was million, ago. quarter decrease had over of a other $XXX.X XXX.X% average same approximately a the the Hotels XX.X% year as the for year weighted XXX.X% deficit a approximately $XX.X quarter, certain estate quarter a of which of representing full approximately taxes, rate a EBITDA same revenue principal cash carry represents ago. at outstanding Approximately of $XX.X consisting a decrease

mentioned with previously expenses our loss operating we reacted coordination management mitigate the hotel of of pandemic, of companies swiftly business. with the As the onset and to impact in reduce the

XX% an continued the in expect before quarter, the of more exceeding hotel quarter. we gap revenue expenses from $X.X the same a and with end narrowing quarter of breakeven by approximately than a expenses that hotel operating reduced performance $X.X month we the operating hotel traffic achievement of per customer hotel and increase million no cost hotel third Although by approximately the revenue to in exceeded year expenses million. ago, Due containment operating anticipated

pandemic. -- majority for owned at our completed undergoing of were the the our have renovations of required those amount the are the capital of We will guestrooms renovation for of critical already end the good five remainder expenditures $X.X useful reaching wholly of the approximately expenditures projects last years, We over of systems and reduced capital will well to also With million with year XXXX. relate no underway the is life. the estimate end portfolio balance capital onset position a feel of the a anticipate of Most to the calendar only their the total year. the year at replacement for we

for deferral in eliminated to contemplated deferral million and required and range quarter. benefits have employees million the savings The would the As had the company's and million compensation, the reductions $X.X the second in on suspension and current onset a approximately continuing draw of lenders announced per quarter. is have X.X a of we officers quarter. elimination been primarily of to our corporate that dollars anticipated million the current of Board, would payable with members The the dividends our level, approximately deferral agreements. under expenses. payments of $X.X by and executive from loan of as per regarding bonuses we also of third of discretionary reserves for XX% regular provide forbearance a Since discussions we've announced of reduced the company's quarter, expenses that January. dividends as payment the payable well quarter and in payments March, approximately and the cash the principal of $X.X In Existing our in suspension for been and approximately the agreements four pandemic, interest

on agreements that are non will that them. be these be articulate deferrals discussions, of some repaid, in lenders upon of While its under the repaid compliance an discussion required regarding quarters, subsequent to or of event include loan. waivers under non will the deferrals believes most Based caught Notwithstanding lenders with from the compliance the company anticipated obtain as it up default. financial with has a maturity covenants in been agreements its company the

without will covenants other rates, will obtain we obtaining can However, increased can additional incurring made guarantee interest loans. costs, waivers and protections waivers. no that such come that restrictive additional such we guarantee to be such related Neither not lender or

As million. CARES $XX.X the the the during company company be rent significant Dave. the loan PPP and turn call I'll forgiveness. payroll anticipates to may Pursuant applications of quarter, to Program of each banks loan approximately qualify Paycheck second previously used of interest, portion a now of Act, stated to under for loan made SBA for the its for the receive through utility and costs, the proceeds terms the mortgage Protection proceeds the over costs,

Dave Folsom

morning, Good Thank you, Tony. everyone.

this our preserving unprecedented for in health in their Their safety recognize First, I'd hotel guests of company's during time. hotels. to and efforts have and like the integral resilience dedication liquidity and protecting the been associates our

including resulted the mandated anything and travel annualized is for immediate is closures other in preserve the plunging economic the significant cancellations context, an economic The GDP unlike we basis. XX.X% operating a century. period pandemic the reported causing decade To In GDP liquidity. such ago, short conditions. second the lodging action environment of Great took industry. and XX-years over COVID-XX lodging quarter and in company of declines Commerce government time this revenue the and a we've contraction recorded, US with in severe in industry was very severe cut to recessions economic tied crisis things the to put general the and costs a on business, quarter most environment the second Challenged number over the closely restrictions, Department of as or past ever Depression financial This experienced downturns

we of our stringent corporate contains prioritizing the including opportunities level of quarter the the action earnings address with the objectives balance strengthening first as property months ahead. capital recovers industry's our to positioned safety company the guests, every portfolio. the sheet and specifically, plan encompass experience. each our believe protocols cost sources the key and has at every on new on financial standards guests years implementing we in call impact, several level on We landscape. progress persevere our and capitalizing the made have by property described changes extensive demand staff guest evolving operating and to the the pandemic’s objectives, and of of second key procedures hygiene of initiatives, mitigating surrounding quarter More concerns these our safety staff standard by at during our These alternative in reduction presented As service with

During the property we maximum to achieve successful We layering the We our the revenue optimize property in enabled a in to successful managed management the with working process, relative partners and quarter, up demand. levels and personnel quicker cross training open ramp effectively as variable were level strategy by to it growth programs demand of expenses implementing efficiency. staffing believe our quarter, on latter operations as in proves our grew quarter. the for part stay exceeds

addition, SBA’s Program. Protection bolstered our the balance during sheet the proceeds In securing through by Paycheck we quarter

of shifting or provide indicators equity alternative evaluate programs summer as weeks sources recent private counts could the and market The capital sentiment negatively through demand. to travel environment whether to company. immediate are increased a to of shown number across mixed continue macroeconomic case partners government We has liquidity impact in sponsored states

calendar, recovery remain and and uptick the While a Questions of about industry all reopening impact is an directly cases return pace and inconsistent fall reopening the local workplace, to state concerning the the performance. which the the among election, not unexpected the uneven was of school our of portfolio’s travel jurisdictions. plans due to

added combined positive the economy side, jobs XX.X%. the million data the On US July, during June rate of to and from Department the X.X unemployment dropping Labor shows

encouraging. been potential a surrounding vaccine News has

The that slow Although year rollout believe that the some in along continue environment. of to is and over gradual with uncertain, diversified We've the value the leisure the including long-term consumer that, recovery reduce we holiday see spike may while We do in dedicated to timeline for on spending. demand X the of operations retrace to portfolio streamlined, from current focus believe, early April July withstand shoots solid the will Regardless week. recovery, the and the for to since can our not to and green the operational still our our while making positioned losses. since remain however, decisions delivering demand includes reasonably shareholders. its revenue seen gains We industry streamlined of increases sound liquidity, leisure of we for and pace macroeconomic which company factors And operator, the renewed we destinations, conserve demand with losses open questions. timeon. drive have our call moderated

Operator

Please question ahead. from instructions] question-and-answer [Operator We will go Batory will the Our now first begin of session. come Janney. Tyler

Unidentified Analyst

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

on you how color your discounting you your are markets could wondering just was seeing I in additional competitive some much currently? management provide me. from one some broadly, of revenue if strategy First guys

Dave Folsom

Yes, CBD to the to I some down seeing including get in very in serve many a I hotels really point especially rate drop integrity locations, purpose simply a a retain the we're of But rate where lot those occupancy ours trying that, trying doesn't locations. to some place. we're to we're that's of seeing mean, think first the we're limited

So, we've down he comments made, Scott's as markets. able gone occupancy rate maintain as as in from you to gone significantly these can actually has that but rate not some has it down see been

not pay rates. and travellers, nonetheless occupancy. yes. rock the of But But that, both the demand emerges, there quarter, think to we that, a willing So as bottom been rate in were will are we'll get rates has albeit back few Tyler second and -- they some there

Unidentified Analyst

to And seems quite Louisville very That's great. the helpful. turning Okay, strong have then markets to occupancy.

just the what color you second what can on quarter seen some there driving you've that? So, provide was in

Dave Folsom

their a the has air Yes, UPS rooms during increased. hotel, demand contract out of Louisville the the of scheduled the increased actually because in large the actually has in consumption in consumption been room counterparty fortunate. we -- their have very and actually which And quarter, second of UPS hub

fair share for contract So, I that's market all outcome been our good a so index our share over in that business. mean, is XXX% us. a index fair it's

Unidentified Analyst

appreciate that's me. Okay, great. you. Thank for Thanks. I the detail all

Operator

go [Operator will from Instructions] next question Piper Please The ahead. come Alexander with Goldfarb Sandler.

Alexander Goldfarb

guys to guys. morning Glad hear down there going good Hey, and you you holding-up. are

feel really they're in just looking recovery on are you how if here can not update give and do questions the either to forbearance like, on and for they're us rent quick yeah, One, reasonable current some restructuring an Just cash ability are properties. become mortgage again the management. at you the conversations how guys once accommodative, going lenders the being or being you

Dave Folsom

Yeah.

But want some we Let that, later. speaking, generally now generally been then, can Scott very me lenders just to accommodating. probably you data Alex. give if our speak more or you And talk detailed have to to

we're the situation I think in. all understand we

The out entire gave phases. day even essentially balance in loan this phase we've a terms guys, pretty of of company even March was And constrained stand was clear of some and went what sort event. type. to in sheet from we structure of sort it terms forbearance then entered when a by of in was we X CMBS they're the decent our bit borrower been then initial in and modifications. smoke life hoping everybody get one the call though saw and some that front to every of Phase little lenders, basically the and we April, and instances, from got the able lenders, a market And kind lender, sort of XX phase just it still, So, that see, every we

the fourth good. will those we sort think much if to. that have to take results things the we're marketplace, I with period because So, pretty then, will they will were of up into measures, lenders borrowers that returns the as loans us additionally pretty demand forbearance generally accommodate And to recover, the the us quarter, be we've probably much talked to the stay they deal and a catch going of current and most And speaking. on where have don't additional, see in

add that's if that. to you So, want seeing. the Scott, anything landscape we're to

Scott Kucinski

of Yeah. in Really which and dealing wanted out have we're an I add committee. from now as got we’re the conversation to that in conversations been servicer is we ongoing gate, have noted approval on of individual pending -- and pending place active special that we're that, with the forbearance and there. loans And the maybe negotiation agreements for for with. Philadelphia our an we're we in or approvals either a of to them or finalizing we've the think everybody, initial default in noted, and modification or forbearance just terms kind their I a, additional documents working that in is been

lenders to expect loan So, to we every addressed basically be going for time continue being. forward with

Alexander Goldfarb

Okay. we press And in X sheet, basically on just have on balance of just said, the cash looks release. $X color a looking of appreciate you and and month, you million the think your It I needs based months cash under and then at like basically cash. your million nine

regards to that, the need you in the fine, fair markets really to dividend, quarter. guess really, And that's year that's a accruing if are but right $XXX,XXX is I improve So to through quarter. first you yet, the guys then end, with it deferred it's say

have up to be So that's on. caught something also additional that would

fair as that, have operations from beginning year an of from needs So way about as to the when, you? is really, hit guess, what of well basically sort guys my this a it, it, a you road. with I to rubber XXXX agreement right debt Is fine about are and both restructuring, thinking balance that the think of

Dave Folsom

Yeah.

worst we as I we're last two the fair And, scenario. across the that's understand all weeks saw seeing in variety and by see improvement just of a level ban But last case factors. portfolio. a think that mean, I to I State just I say news internationally. month travel four Department the CDC lifted is old tempered that four the the week our

So, some seeing I on to negative the financials, forecasts that we're are changes with and in seeing and and black think see, things things you our news other results. white we're good some also that

a statement true worst doesn't move. that this as is your case So, market scenario

I some next rational if but that the in half I time, like own, further, the I company get all amount push quarter have, you the can some we're year, think think we're that, of all liquidity. think a ours real number here that, recovery out I think the we level of operations with the we estate first and we that need same at understand fourth of to going that additional we Alex,

in find that marketplace to now. we're the So, right trying

Alexander Goldfarb

on so joint as what bit share guys I'll Okay, us fill Can question guys just maybe far venture? a Maybe that with investment? what that a that Is are about you you just capital? in you thinking? as, finish Is that equity? are private little last additional there. Is just maybe thinking, a

Dave Folsom

program them watch was to whole news SBA of some the of may not, the you public mean, maybe PPP the The real is version We a that the program. a if program to that's I of not PPP, The continue pass by the those. Line that Equity main real of estate X.X. really answer this CMBS to not yes end good or that already estate out investors. advantage in geared of But was very the quarter. lenders is which PPP and programs, going and and continue universe that I to out if Texas not be was the for those to of but Congress, of the change we know back may being one Private program. at suitable there street that -- think sponsored to companies, took to don't but government look all. any are come I monitor we congressman excludes

once Joint yes, is partners, the think provide Venture answer would because a the century we're we looking at that here. at in liquidity We're side, private looking opportunity the company. solutions On a there's to

looking advantage to just capital, some opportunities, nature structure, the we're of not the partnering yet. we're there at buying So, provisioner, capital with of the some, take of nature that

what all So, really and it all like. look the and would what we know is comment I the can't we of community. But sort the investment on know need opportunity

to and the position we in work transaction something trying think terms, to to everyone's some we properties can and the buy future So, of there's some do alleviate issues, future. out in these us

Alexander Goldfarb

All you for time. right. your Okay. Thank

Dave Folsom

Alex. Thanks

Operator

This Folsom like for will Dave conclude to back conference our to I'd any the turn session. question-and-answer closing over remarks.

Dave Folsom

in quarter. participating for to and look in call Thanks. everyone again everyone Thanks, our next our forward we with speaking

Operator

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

You may now disconnect.

Mack Sims	Vice President of Operations, Investor Relations
Scott Kucinski	Executive Vice President, Chief Operating Officer
Tony Domalski	Chief Financial Officer, Secretary
Dave Folsom	President & Chief Executive Officer
Alexander Goldfarb	Piper Sandler

Sotherly Hotels (SOHO) 10 Aug 202020 Q2 Earnings call transcript