SOHO - Earnings call transcript Q1 2022

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Operator

Hello, everyone, and welcome to the Sotherly Hotels First Quarter 2022 Earnings Calls. My name is Victoria, and I will be coordinating your call today. [Operator Instructions]. I'll now pass over to your host, Mack Sims to begin. Please go ahead.

Andrew Sims

morning, good and you, everyone. Thank

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

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

Scott Kucinski

morning, portfolio's everyone. our call a today's with I'll quarter. off start of Good for operating review metrics key Mack. the Thanks,

ADR an Looking portfolio, RevPAR by the at for XX.X% occupancy $XXX.XX. composite of first and driven $XXX.XX the is quarter an of results

an quarter in XXXX. over increase performance First RevPAR the represents XX.X% of same period

of benchmarked monthly XXXX representing continuous the RevPAR quarter's quarter first XX% RevPAR but to at portfolio figures improvement increasing results. Omicron actually improvement. the XXXX, RevPAR Overall, XX% portfolio is XXXX February January RevPAR despite ADR results quickly that composite highlights XXXX, believe normalization. XX.X%, XX.X% while advancing of X.X%. the first RevPAR results the March due against with with versus occupancy eclipsed quarter February, the with March of were to over of XXXX on headwinds just was Looking grew of variant down these the the quarter start our down January XXX% XXXX, throughout RevPAR faced was a RevPAR. towards we year basis at Examining and demonstrates pleased

variant While rapidly quarter, travel had corporate experienced as in the increase in and behavior the of combined all with quarter case the substantial were first half shift a counts the consumer start particularly second transformative declining a during on we bookings, impact from the travel. a during Omicron significant segments to group

market quarter We nearly are the as Arlington urban encouraged X the Houston, budgeted for our caused the which surpassed and hotels by by following Omicron underperfomance. years of performance headwinds easily despite such expectations of

half of steady rates the of especially power during a leisure quarter. weekend group unprecedented from pent-up and which combined the return peak for in robust In became attracted the was due spring coastal President's Day and travel, the major driver to such January. Hollywood Savannah, Pricing and continues with of destinations, surge as profitability, second our leisure in renewed Omicron experienced Tampa, demand more Wilmington late portfolio that continues in recovery sustained to December leisure as particular, benefit such of break. periods, demand even to which Our many demand markets be from during these the variant

portfolio's but business boosted also best-performing by Our the primarily again the return quarter of hotels group driven strong leisure by travel. during were travel, and

the our in XXX flow-through. basis competitive its comp gain hotel during outpacing a points significant growth set, portfolio. performance hotel's the again Hotel some nearly The also a Tampa in with rate to by RevPAR Looking set. quarter, the to metrics continued which gaining XXXX, XXXX at portfolio in highlights to across XX% outstanding continued be Alba the excellent of among share over RevPAR X.X% Savannah its during fueled quarter. outperform continues led in The standout DeSoto an

of XXXX results up and ramped gained to included recoveries quarter impressive produced of growth with RevPAR Substantial Super immediate levels flow-through during it underway Notably, growing an nearly during set the than signals period, Comparing and our the rate X,XXX of ADR X% to the portfolio's is asset. to which During the with points the also XX% the XXXX, more hotel's market, these the property and occupancy first QX trends business the a the solidifying its This acceleration nearly comparable. our Bowl than competitive stellar hotels. recent index achieved XX%. basis greater in its increased RevPAR XXX% in Hotel in quarter facilitated group the in in levels a Ballast the during the latter over saw as vital performance quarter, this the half excellent XX% steady share up among results XXXX property of sustained Wilmington travel tough for further booking group which more pre-pandemic competitive of business nearly hotel XX% than year-over-year position RevPAR leader Examining against the as at as set. results its quarter. highlights performance from this segment quarter. demonstrates quarter

the shaping to is and over During as in-house business the of quarter produced at fourth XX% attendance travel first have the while the improvement fourth over of improvement nicely these quarter improved experienced blocks. are year. year Thus we last meetings segment strong second the during to quarter, trend more a room the the projecting far, segments and group further up XXXX, group with events, continue quarter, than corresponding citywide this balance XX%

business compared plenty a and indicator is this to XXXX, still group to of room of for our company. While trajectory promising demand recovery grow

excellent costs of order faced during and and rising to labor a managers cost variable and model the demand executed quarter. Our lean goods staffing and uneven flexible achieve flow-through despite in control

rates, rentals pricing which but heavily price not only for minimal our offerings, on also for room shown We our to power, have continue consumers sensitivity. parking focus banquet for F&B and

an our Moving forward, the associated achieve environment. and ability will costs that to rates inflationary offset labor increase strong to rising continue we expect in other with

activity. corporate our to Turning

the price of has purchase a Hotel to million. the Raleigh noted, $XX entered agreement sell Brownstone an by into for previously Hilton company As DoubleTree

first with additional $XXX,XXX, in the deposits use nonrefundable an date the buyer cash by we by the May the repay this Hilton existing the June pending an the for year X net this the of closing into in total quarter, date the secured the During Wilson. sale amendment repay property for of extend has the Raleigh a mortgage the Including from a of existing maturity modification, closing with to $X.X company -- transaction. million Laurel, and XXXX. company now the X. on with to associated cash proceeds recently on DoubleTree hotel to extended of notes this exchange of deposit lender the The to agreement mortgage to entered to the existing Kemmons portion buyer set period with with intends The the

approximately the approximately balance part current or As $X.X the million company is of per of loan paid the down loan principal modification, now balance key. $XXX,XXX. The by $XX,XXX the

executed exchanges year-to-date, we to balance XXX,XXX payments with to up to approximately Lastly, eliminated will well fits while of approximately approximately our also preserving now payments annual liquidity. sheet Tony. shares. stock forward. as dividend in execution approximately These call turn $XXX,XXX I long-term exchange $XXX,XXX as XX,XXX over have of strategy agreements deferred the going preferred these shares The transactions preferred of for shore our dividend

Anthony Domalski

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

EBITDA and quarter losses over instruments, approximately million, million XXXX. to Comparing the FFO $XX quarter derivative quarter same quarter to adjusted first that offerings, adjusted and gains short abandoned results on in or approximately for XX.X%. FFO income, increase and the related EBITDA in interest for charges same Please compared period XXXX, was million to $XXX.X to first of XXXX, well million total items. million hotel the our was same income quarter million related FFO XXX.X% same ESOP $X $X.X XXXX, G&A note earnings and revenue approximately our expenses representing well as as revenue fell for approximately Hotel million EBITDA $X.X same refer or approximately as to total charges well. XX.X% our quarter, the the Comparing excludes increase $X.X debt, XXXX. compensation representing same charges by of of first release by interest of extinguishment period additional XX.X%. other and XXXX. as -- securities was results approximately other $XX.X million, or items Hotel for an provision Comparing tax corporate stock as XX.X%. portion quarter early or quarter, by And of expense the results expense, the $X.X to decreased other current aborted decreased approximately detail. to period in excludes $X.X these the quarter Please the or million the the in For first an adjusted

of had million, was of company our XX, cash balance as items. approximately $XX.X as unrestricted total March cash as capital and certain well which for sheet the of million, taxes, $XX.X at $XX.X approximately XXXX, of equivalents improvements estate million other and real approximately Looking consisting reserved cash

company the the the Looking range ahead second to level $XX.XX million estimates million. and the $XX.X at between hotel cash quarter, to generated

payments We for for the to $X.X principal while of of Capital weighted rate million expect and generated carried $X.X interest expecting of rate range of we be of corporate a are second to principal second that received the and current of end $X.X XX% principal cash fixed to level deferred Overall, between originating approximately debt note the company's range are quarter. important to service forbearance from expected million quarter, At the quarter. million for scheduled outstanding balances pandemic. for portfolio includes the from expected approximately of our interest the we're use interest quarter, and debt It's interest. X.XX%. quarter. million average the million repayment between a $XXX.X expenses and the our had G&A outlays million $X.X $X.XX at of Approximately expenditures scheduled million debt portion of a $X of during

and for calendar million March we a now common expenditures The be As deferral environment, with $X.X over amount operating we our of on norms, of months and cash the the to year XXXX, suspension we dividends In capital turn our line of dividend reserves $X.X announced estimate company's more to call eliminated XXXX. per And stock X deferral and previous. quarter. on a announced normalized we Dave. I'll million in move of approximately historical anticipate draw approximately will payment for capital suspension to expenditures the towards

David Folsom

good Thank morning. and you, Tony,

group As Scott but ongoing of by end not new was rebounded X variants, demand for and the sentiment exceeded toward was by and for traveler quarter travel business the with best combined and year's the tempered quarter capped almost business a off start, on remarked, month reversed, the all group start Despite demand. our weeks as recovery to industry, expectations. well leisure February, start started was far our pandemic March since cylinders. quarter hotel and pent-up fire travel leisure the COVID first of the did the our as the slow of remarkable completely performing

unprecedented rates XXXX achieved March portfolio of more March, outpacing than during the month Our XX%. room by

These While which on business particularly dependent these shift locations, in demand locations the still plenty we since have That significantly of are of said, stages results impressive, RevPAR we believe still still midweek. that been in urban tracking mid-February, opportunities at our XXXX for more these growth. levels. are during early being noticeable recovery. are travel, there's especially markets are below in a

in years clients feedback important from demand corporate returned are X these in Virginia corporate of where travel markets, teams and sales has following most Houston, especially quickly reporting our positive absence. planners from Our Arlington,

corporate #X transient on focused hotel April. adjacent Houston January the occupancy XX% pandemic. is traveler a has client since hotel the Centric in climbed rapidly the in which -- productions which Virginia, March approach XX% highest our XX% in example, to of in occupancy Hyatt For occupancy production for XX% business April, normalized this at the levels Meanwhile, the in Arlington, located and in February, start occupancy was to month in a from XX% hotel in our

huge last pace group the we group portfolio's booking overall by travel While in-person towards XXXX the is the as for XX% is numbers. this year conventions to improvement. for weeks, preference and a key all of XX% group Currently, a year the pace portfolio's more Arlington improvement group noticeable improved XXXX are in for versus XXXX, in booking business we've witnessed this In additional time pace a group segment place This is significant with location. segment was significantly improved recent has shift business pace a attendance confirms same than bookings This traveler improvement our taking booking of sizes vary there the pace in greatly XXXX pent-up in drastically, is meetings in group XXXX. expect demand XX% the demand Evaluating in for to events. meetings of XXXX. in of over and when approximately same which recovery citywide equates our

strategic Louisville in The debt. asset mortgage debt of focused Raleigh to improving and over from our our debt Louisville the partially selling required mortgage while saves the our remove the at In to repay disposition our of sheet, sheet us X accomplish company's approximately balance capital Looking will $XX and hotels corporate million believe the in also X sale on of initiatives, life same We our these including of our million of position. next total, debt. recent will liquidity have deleveraging million $XX At allow goals. years. and time, approximately the asset activities cycle brand Raleigh will $XX renovation repay assets pending these significant sale help these sale balance both

Our exchanging aligns also with amount the dividend our removed By we as only as well but payments. accrued preferred strategy. the preferred, of the exchange future to legacy dividends par preferred stock, not deleveraging stock strategy also

by open questions. brings and to additional And needed operating we'll forward, return of remaining optimism the leisure and of business. strategies. for cash core In the characterized leverage that, group in source recovery our further the demand will summary, sustained booking corporate business on with reduce our steady call focus its the portion allow debt, continued which our are for now the strong our repay of and to Looking company we operator, confident the ability trends to corporate pent-up

Operator

our And Piper at Sandler. Instructions]. comes Alexander first question from Goldfarb [Operator

Alexander Goldfarb

few a So questions here.

First, end that view operations, be here that and you balance the will free and in and your the into see you what something. from your for assuming to flow mean remain world future the a the to positive positive? positive of out an today about cash current positive flow and come Is your for or quarter from positive that everything now obviously, earnings quarter. I'm flow view see great FFO currently. free in next? this cash bookings, Is expectation demand, second doesn't in just current on cash I your see talking guys it FFO will year your free your

Scott Kucinski

Scott. Alex, our Yes, it's Yes. that's expectation.

bit operation, March, and monthly be might over basically XXXX As to month to we that basis. But point said, going yes, of improved I should normalized levels. think ups have positive produce downs a FFO. forward, the overall, mean, And month free fundamentals meeting there cash of level we're on a which back of little we kind of and

Alexander Goldfarb

Okay. how or much are preferreds outstanding? remaining then you can remind And

David Folsom

The approximately par is million. $XXX amount

Anthony Domalski

[indiscernible]. it's Yes, over million, $XXX is which just

David Folsom

million It $XXX par Well. is million started exchanges. in is the -- $XXX before we It

on been you're reduced total million. And the So amount has that? the to par accrued asking unpaid dividend $XXX for of top

Alexander Goldfarb

on. -- you still wait hold So

million to or to $XXX have back -- correct? you So remaining hopefully exchange, buy buy

David Folsom

amount I remaining. that's Right. that's par the mean

Alexander Goldfarb

the can I And sense. makes that now? -- accrued then and right okay, And balance Okay. then what's

Anthony Domalski

million. around March it of $XX right As was XX,

Alexander Goldfarb

you as the line feel with it's appropriately? -- return issues so you And group more wonderful all no see increase? think OpEx we -- SMB, of is OpEx you point you're are you. what you are have demand? in sense? do parking, just have you the to pricing that to that. on that's -- another leisure there's of guys the a and of commensurate level? you Or rate, where business are hitting the be Or do staffing operations travel Okay. the room increase And staffed with drive Where we'll spoke may necessary level to see you to where you're your then Like hire at actually property think are relative see going I'm up go to going, increase trying that Like OpEx with and going people about

David Folsom

bottom staffing, remove third-party entities. But utilities, those staffing can of things labor get go I of that has what the in But up. to a at improved. of all also environment. Well, alluded continue rate at goods we'll margins. structure eager inflationary are the helping And requirements line, still is of the that permanent conditions the we we're seeing, seen a hotels Part to people the expenses those which Alex, And to flow-through hotels the the just to. environment, hotels. to of up have work. is lot is as hotels to the come pricing is just an inflationary gone at some what rise powerful an labor, outsourced at back we've staffing having if very More providing which is cost of sold, think We're you operating cost back in

not that So go there. us conscious and several layer in been manage right we And to has decision have until the in that's was quarters, the past to allowed made expenses our RevPAR not the a in layer direction. over -- to margins

really don't reversal we change I growth. that. So rate in would that see that operating don't expenses a see the a blip get unless about I structure

a You comment, Tony? got

Anthony Domalski

would I increased labor the by seeing that No, we've agree. our fill margins. costs, got stability it's And offset in of if labor empty markets. we We're because can't positions

continuing to has a there and our that. so And margins, we're to stability expect been

Alexander Goldfarb

then And final the question. Okay. just

any one for you the further As I givebacks expect outcome. debt sort there Or keep? basically is or great, else to a expect But mean, you, need was or that or portfolio the far debt that a of hotel you Or to or what that? any have hotel you dispositions that like anything more as reasons obviously, sales you more give do potential anything great back Raleigh is have expect?

David Folsom

the you a market that of mean It years. things was merger Starwood to I and Marriott, been bone that of a hotel of system trying sale kind opportunity. for us happened any in a to noncore But changed in -- right. with a not the for sell we've want lot respect muscle of X asset do we cut that's and oversupply said, to and think reservation or with Raleigh I was for some once Yes, dynamics we And as want into Louisville cut was which to the -- price don't us. moon here. blue

looking corporate us to we our of see other assets. any don't don't And I need So think liquidate complete repayment the I debt. to

the and/or I think assets refinance respect Raleigh, and other available the got that to we've free of covered of cash. with sale our

Operator

At to now pass questions. are any to this for over like back there Folsom, And I Instructions]. remarks. no time, would final further [Operator Dave CEO,

David Folsom

you, Well, and thank the next again we'll quarter. for call, on operator, and thanks everyone Thank speak you.

Operator

you, Thank for everybody, call. joining today's

You disconnect. now may

Andrew Sims	VP, Operations & IR
Scott Kucinski	EVP & COO
Anthony Domalski	VP, Secretary & CFO
David Folsom	President, CEO & Director
Alexander Goldfarb	Piper Sandler & Co.

Sotherly Hotels (SOHO) 12 May 222022 Q1 Earnings call transcript