Ashford Hospitality Trust Inc

Greetings and welcome to the Ashford Hospitality Trust second quarter 2022 results conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Jordan Jennings, Investor Relations for Ashford Hospitality Trust. Thank you. You may begin.

Good day, everyone, and welcome to today's conference call to review the results for Ashford Hospitality Trust for the second quarter of 2022 and to update you on recent developments. On the call today will be Rob Page, President and Chief Executive Officer, Derek Eubanks, Chief Financial Officer, and Chris Nixon, Senior Vice President and Head of Asset Management. The results, as well as notice of accessibility of this conference call on a listen-only basis over the Internet were distributed yesterday afternoon in a press release. At this time, let me remind you that certain statements and assumptions in this conference call contain or are based upon forward-looking information and are being made pursuant to the state hardware provisions of the federal securities regulations. Such forward-looking statements are subject to numerous assumptions and certainties and known or unknown risks which could cause actual results to differ materially from those anticipated. These factors are more fully discussed in the company's filings with the Securities and Exchange Commission. The forward-looking statements included in this conference call are only made as of the date of this call and the company is not obligated to publicly update or revise them. In addition, certain terms used in this call are non-GAAP financial measures, reconciliations which are provided in the company's earnings release and accompanying tables or schedules which have been filed on Form 8K with the SEC on August 2, 2022, Each listener is encouraged to view those reconciliations provided in the earnings release together with all information provided in the release. Also, unless otherwise stated, all reported results discussed in this call compare the second quarter of 2022 with the second quarter of 2021. I will now turn the call over to Rob Haight. Please go ahead, sir.

Good morning. Welcome to our call. I'll start by providing an overview of the current industry environment and how Ashford Trust has been navigating it. After that, Derek will review our financial results and then Chris will provide an operational update on our portfolio. I'd like to highlight some of our recent accomplishments and the main themes for the call. First, we saw sequential RESPAR improvement each month as we moved through the second quarter and expect continued strength through the third quarter. Additionally, we're excited that June's RevPower performance was the best month we've had versus 2019 thus far. Second, our liquidity and cash position continue to be strong. We ended the quarter with approximately $615 million of net working capital, which equates to approximately $17 per diluted share, and is an increase from where we ended the first quarter. With yesterday's closing stock price of $9.23, we believe we are trading at a meaningful discount to both our net asset value per share and our net working capital per share. I'm also pleased to report that we generated approximately $23 million of positive cash flow in the quarter after CapEx and our preferred dividends. Third, we have lowered our leverage and improved our overall financial position. Since its peak in 2020, we have lowered our net debt plus preferred equity by over $1 billion equating to a decrease in our leverage ratio, defined as net debt plus preferred equity to gross assets by approximately 12 percentage points. Fourth, in the last quarter, we filed a registration statement with the SEC for a future offering of non-traded preferred equity. Importantly, this announcement demonstrates our strategic pivot from defense to offense, as we believe this offering will provide an attractive cost of capital and allow us to accretively grow our portfolio over time, subject to future market conditions. We believe access to this attractive growth capital is a significant competitive advantage, particularly given the fact that large companies are trading at material discounts to their net asset values. We are now effective on this offering and expect to commence issuing limited amounts of the non-traded preferred equity beginning in the third quarter of 2022. We are optimistic about the long-term outlook for the company, and by taking strategic actions to strengthen our balance sheet, we feel well positioned to capitalize on opportunities we are seeing in the hospitality industry. Having said that, we have refrained from raising any common equity capital this year. Given the softness of our stock price in our current circumstances, we don't currently anticipate raising common equity capital at these levels. To the extent we're successful with our non-traded preferred capital raise, our preference would be to use that capital for future growth. We expect several of our loan pools to remain in cash traps over the next 12 to 24 months. However, we're pleased to note that several of our hotels, including the Renaissance Nashville and Hilton Back Bay, have recently come out of their respective cash traps. we believe several other of our loans may be successful in exiting their traps in 2022, including Key's Pools D and E and our Marriott Crystal Gateway. For 2022, our CapEx spending is higher than the previous two years, but still well below our historical run rate for CapEx. CapEx spend during the second quarter was approximately $20.1 million. Additionally, while we're monitoring risks related to the current high inflation environment and the potential impacts of our portfolio, CBRE recently issued an industry report that highlighted the benefits of hotels as a good hedge against inflation. Their model cited that due to the uniquely short lease periods measured in days rather than months or years, hotels have been seen as an effective hedge against inflation given hotels can adjust prices rapidly to account for any short-term variations in inflation. In fact, the report highlighted that historically during periods of high inflation, hotels have shown their ability to grow profits above the inflation rate. We are seeing this play out during the current high inflation period we are experiencing in the industry. Let me now turn to the operating environment performance at our hotels. The lodging industry is clearly showing signs of improvement. RevPAR for all hotels in the portfolio increased approximately 73% for the second quarter versus last year. This RevPAR result equates to a decrease of approximately 6% versus the second quarter of 2019. June was the best performing month of the second quarter, along with being the best month we've had versus 2019 thus far, with REVPAR down only 4% versus 2019. Preliminary numbers from July are consistent with what we saw in June across the portfolio, with REVPAR for the month down about 5% versus 2019. Looking ahead to the remainder of 2022, we believe our geographically diverse portfolio consisting of high-quality US assets with best-in-class brands and management companies is well-positioned to capitalize on the strong demand we're seeing across leisure, business, and group. We also believe that our relationship with our affiliated property manager, Remington, really sets us apart. We believe Remington has been able to consistently manage costs and optimize revenues aggressively, enabling us to outperform the industry from an operations standpoint for many years. Additionally, capital recycling remains an important component of our strategy, and we are pursuing opportunities to sell certain Encore assets. We have one full service asset under contract to sell with closing most likely in the third quarter and another full service asset currently market for sale. We expect any net proceeds from these sales will go towards paying down our strategic financing. Whenever we sell assets, our approach takes into consideration many factors such as impact on EBITDA, leverage, future capex spending, potential market growth, and rev par among others. Turning to investor relations, we continue to get on the road in order to meet with investors, communicate our strategy, and explain what we believe to be an attractive investment opportunity in Ashford Trust. We've attended numerous industry and Wall Street conferences this year, which have led to nearly 300 investor meetings year to date. We have several more conferences coming up in the second half of the year and look forward to speaking with many of you during those events. We believe we have the right plan in place to move forward and maximize value at Ashford Trust. This plan includes continuing to grow liquidity across the company, optimizing the operating performance of our assets, improving our balance sheet over time, and looking for opportunities to invest and grow our portfolio. We have a track record of success when it comes to property acquisitions, joint ventures, and asset sales, and we expect they will continue to be part of our plans moving forward. We ended 2022 second quarter with a substantial amount of cash in our balance sheet, and with the launch of our non-traded preferred stock offering, we are excited about the opportunities we see in front of us. And I'll turn the call over to Derek to review our second quarter financial performance.

Thanks, Rob. For the second quarter of 2022, we reported a net loss attributable to common stockholders of $9.3 million, or 27 cents per diluted share. For the quarter, we reported ASFO per diluted share of $1.23, which represents a growth rate of 2,975% over the prior year quarter. Adjusted EBITDA RE totaled $96.4 million for the quarter, which reflected a growth rate of 207% over the prior year quarter. This is the company's best quarter for adjusted EBITDA RE since the third quarter of 2019. At the end of the second quarter, we had $3.9 billion of loans with a blended average interest rate of 5.6%. Our loans were approximately 8% fixed rate and 92% floating rate. We utilize floating rate debt as we believe it is a better edge of our operating cash flows. However, we do utilize caps on those floating rate loans to protect the company against significant interest rate increases. We currently have one loan with a final maturity in 2022, which is currently under contract for sale, and have approximately $98 million in final loan maturities in 2023. Some of the company's loans will be subject to extension tests, and with our significant cash balance, we believe we are well prepared to meet any potential loan paydowns required to meet those tests. Our hotel loans are all non-recourse, and currently 85% of our hotels are in cash drafts, which is down from 90% last quarter. A cash trap means that we are currently unable to utilize property level cash for corporate related purposes. As the properties recover and meet the various debt yield or coverage thresholds, we will be able to utilize that cash freely at corporate. Importantly, subsequent to the end of the quarter, the Renaissance Nashville and Weston Princeton loan came out of its cash trap and approximately $15 million of cash that had been trapped was released to corporate. We ended the quarter with cash and cash equivalents of $538.4 million and restricted cash of $126.6 million. The vast majority of that restricted cash is comprised of lender and manager-held reserve accounts. At the end of the quarter, we also had $24.7 million in due from third-party hotel managers. This primarily represents cash held by one of our property managers, which is also available to fund hotel operating costs. We also ended the quarter with net working capital of approximately $615 million, which is an increase from $609 million last quarter. As Rob mentioned, I think it's also important to point out that this net working capital amount of $615 million equates to approximately $17 per share. This compares to our closing stock price from yesterday of $9.23, which is an approximate 46% discount to our net working capital per share. Our networking capital reflects value over and above the value of our hotels. As such, we believe that our current stock price does not reflect the intrinsic value of our high-quality hotel portfolio. As of June 30, 2022, our portfolio consisted of 100 hotels with 22,313 net rooms. Our share count currently stands at approximately 36.2 million fully diluted shares outstanding. which is comprised of 34.5 million shares of common stock and 1.7 million OP units. In the second quarter, our weighted average fully diluted share count used to calculate ASFO per share included approximately 1.7 million common shares associated with the exit fee on the strategic financing we completed in January 2021. Assuming yesterday's closing stock price, our equity market cap is approximately $334 million. While we are currently paying our preferred dividends quarterly, we do not anticipate reinstating a common dividend for some time. Over the past several months, we have taken numerous steps to strengthen our financial position and improve our liquidity, and we are pleased with the progress that we've made. Our cash balance is solid. We have an attractive maturity schedule. Our non-traded preferred security offering is effective, and we believe the company is well positioned to benefit from the improving trends we are seeing in the lodging industry. This concludes our financial review, and I would now like to turn it over to Chris to discuss our asset management activities for the quarter.

Thank you, Derek. We are extremely proud of the work that our asset management team has done to drive operating results. Comparable rev par for our portfolio increased by 73% during the second quarter relative to the same time period in 2021. For the second quarter, our portfolio has recovered 94% of 2019 comparable rev par. we continue to be encouraged by the recovery signs we are seeing within the group segment across our portfolio. During the second quarter, our portfolio recovered 92% of group room nights relative to 2019. Additionally, our full year group pays compared to 2019 has improved 6% quarter over quarter. I would like to spend some time highlighting the success that we are seeing in some of our assets. Renaissance Nashville had a record of the hotel at $8.1 million in total hotel revenue. That represents a 3% increase over the next best month, which was October of 2021. It also had a strong second quarter, which saw total hotel revenue exceeding comparable 2019 by 9%. Group rooms accounted for nearly 58% of all sold room nights during the second quarter, which is a 95% recovery in group room nights sold when compared to 2019. largely recovered at this hotel, it has allowed us to become more aggressive with transient rate strategies. We have recently increased the rate premium for club-level rooms and suites. In addition, the hotel has closed out many discounted categories to drive retail rate efficiency. These initiatives resulted in second quarter transient ADR exceeding comparable 2019 by 12%. There are no signs that these dynamics are slowing down, and we are excited to see the future performance of this hotel. The Hyatt Regency Coral Gables also broke a second quarter record with hotel EBITDA coming in at $2.4 million. That is a 28% premium to the second quarter of 2018 which was a previous record. The majority of this success was a result of room rate which was up nearly 30% during the second quarter relative to comparable 2019. The hotel was able to bring back a large long-term piece of group business which helped propel the hotel to an 11% growth in group room revenue during the second quarter relative to 2019. With this core piece of business back in place, the hotel was able to be more selective with remaining groups, which drove the overall group room rate during the second quarter by 15% over the same time period in 2019. Lastly, I would like to highlight the success of Lakeway Resort and Spa in Austin, which also broke a record with hotel EBITDA nearing $2.5 million during the second quarter. The achievement is a 39% improvement over the next best quarter, which is remarkable. The hotel had been incredibly successful in locking in several groups, which resulted in the hotel exceeding sold group room nights by 11% during the second quarter relative to comparable 2019. Two of these groups signed multi-year contracts with the property. These organizations contributed to our ability to push rates, which outperformed during the second quarter by 36% compared to the same period in 2019. With these contracts already secured for future years, the hotel will be able to replicate the successful rate strategy and capitalize on additional demand. And moving on to capital expenditures, we've noted in previous calls how we were proactive prior to the pandemic in renovating our hotels to renew our portfolio. That commitment has now resulted in a competitive and strategic advantage as demand continues to accelerate. We currently anticipate strategically deploying approximately $110 to $120 million in capital expenditures in 2022. We recently completed the guest room renovation at Marriott Fremont and will begin a meeting space renovation at Hyde Coral Gables and a lobby and bar renovation at the Ritz Carlton Atlanta. Before moving on to Q&A, I would like to reiterate how optimistic we are about the recovery of our portfolio and the industry as a whole. Every month this year through the second quarter, we have seen hotel EBITDA in our portfolio grow over the previous month, with June's hotel EBITDA nearly 10 times larger than that of January. Some of the hotels have already outpaced their 2019 performance. During the first quarter of this year, 11% of our hotels were exceeding their comparable 2019 hotel EBITDA. Now during the second quarter, 25% of our hotels are exceeding comparable 2019 hotel EBITDA. This trend is accelerating with 31% of our assets exceeding their June 2019 comparable. As we look forward, we are seeing encouraging signs in our group lead volume for a number of markets. With these positive indicators, we believe our portfolio is well positioned to capitalize on the industry's continued recovery. That concludes our prepared remarks, and we will now open up the call for Q&A.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. The participants using speaker equipment may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for your questions. Our first questions come from the line of Tyler Vittori with Oppenheimer.

Please proceed with your questions. Good morning. Thanks for taking my questions. First one for me, more open-ended in terms of broad trends. When you look at July down 5% with 2019, can you discuss more detail on what you saw in the business in July? And then in terms of the recovery trajectory, obviously lots of momentum here. Is it possible Q3 compared with 2019 is better sequentially than Q2? And Kind of how are you thinking about your commentary with revenue compared with 2019 coming back in 2023? Is it possible that maybe we see that a little bit earlier?

Yeah, thanks for your question, Tyler. This is Chris. I'll take that. So we are seeing favorable signs and trends continue into Q3. There's nothing in the data that we're seeing that indicates any kind of a pullback. And our preliminary forecast for Q3 do show continued improvement over 2019 relative to Q2. And so July performed very consistent with what we saw in June. Broadly, in terms of the segment trends we're seeing, the mix of business is very similar to what we saw pre-pandemic. now and it was pre-pandemic. Contract has been relatively similar. We're seeing an increase in leisure as a percentage of our mix and a decrease in corporate. Leisure is up to about 48% of our business mix compared to 42% pre-pandemic and corporates moved from about 29% down to 23%. We are seeing very encouraging trends from the corporate segment, and we believe those are going to continue as we look ahead. There's been steady recovery out of that segment. To kind of paint that picture, if we look back to January, corporate was at 37% of 2019 levels for a portfolio. In June, it was up to 76% recovery. We're very encouraged by that continued momentum. We're also seeing some interesting things. The corporate customer has had a longer length of stay than they've ever had across our portfolio. We're seeing a lot of our corporate travelers staying through shoulder nights and into weekends. Sunday night occupancy in our portfolio for Q2 actually exceeded 2019 levels, which is great. And so we expect these trends to continue into Q3, and we're not seeing any sign of a pullback.

Okay, great. Appreciate that commentary. And then follow-up question, probably for Rob, just in terms of the asset sales here, any more detail you can provide on why you think now is the right time to pull the trigger on this, why you selected these hotels specifically? Any numbers in terms of potential proceeds as well?

Sure. So a few different things. I mean, I think it's something where we've, you know, I don't know if there's any one moment where you can kind of do it all at once, right? So I think our strategy is going to be to continue to kind of layer these on over time. The reason that these assets are currently on the market or for sale was that they are kind of lower rev par full service assets that potentially had either CapEx needs that we maybe don't think were the best use of proceeds or weren't longer term hold markets for us. And I think that'll be pretty consistent with the assets that you'll see us sell will probably fall either into the bucket of lower rev par full service assets just because when we look over the life of those assets, we find that they just don't generate as much EBITDA just because you, with the lower rev part, you just don't generate as much cash flow, but you still have to do the same amount of capex many times. So I think we're trying to move some of those off our books. And then at some point in time, you'll see us potentially sell off some of our select service assets that aren't long-term holds. But again, that'll be kind of, you know, select it. In terms of what we think the net proceeds may be for at least these two assets, it's probably in the neighborhood of, I don't know, I'd say probably $15 to $20 million. This is kind of a best guess right now. It could be a little bit higher than that, but somewhere in that range. And just given our current strategic financing, those proceeds will need to – primarily go to pay down that debt. So that would be our most likely use of proceeds for that.

Okay, very helpful. That's all for me. Thank you.

Thank you. Our next question has come from the line of Chris Voronka with Deutsche Bank. Please proceed with your questions.

Hey, good morning, guys. First one might be for Rob. Rob talked a little bit about with the non-pref the opportunity to go back on offense at some point. I mean, how do you not looking for super specifics here, but I mean, how would you directionally characterize the kind of stuff you're going to look at? Is it going to be full service? Are you going to tilt towards more towards resorts or urban or some of the same markets you've looked at in the past, or are you trying to get a little bit more broad?

I think the question, Chris, and the answer is a lot of it's opportunistic. You know, I, I think, When we're looking at some of the theses that we want to invest in, some of them are opportunities that we're seeing for repositioning. Some of the assets that we're looking at are assets that we think are kind of under-branded or independent that maybe could use a brand from a distribution standpoint. I think we're also looking potentially at markets where we already have Markets we like already have a little bit of a position just because it really allows us to operate those with a lot of efficiencies. But I also think that we're also seeing opportunities in some of these more northern and urban markets that are a little bit out of favor because you can get more attractive pricing on them relatively than you can in some of these resorts and southern markets that we're seeing right now. Because we are believers in the recovery of business travel. and the recovery of group. And so I think given that there's some out-of-favor markets kind of in the northern half of the U.S., I think there's some interesting opportunities that are going to be coming up over the next few years in that. So not particularly specific because a lot of it's kind of opportunistic, but I think there's not necessarily a consistent theme in the stuff that we're looking at today. They just all have kind of unique opportunities in their own right.

Okay, thanks, Rob. Fair enough. And then this one might be for Chris. Thinking about brand standards now that we're back to pretty much have most of our corporate travel back, group travel back, do you think the brands have landed on a final resting point in terms of service delivery on housekeeping and some of the food and beverage options?

I don't know that they've landed on it and that it's fixed. We've got a great relationship with the brand. It continues to be fluid. We've got a number of vehicles where we provide heavy, heavy input and our feedback. I can't tell you that in addition to the operational efficiencies that our management partners have found, thoughtful about how we deploy capital. We're running more efficient operations, but our guest service scores are increasing over prior years and also over 2019. That tells us that we're being very thoughtful in terms of the efficiencies we're driving and how we're deploying capital to be very mindful of the guest experience. I don't think they're firm and final. There continue to be changes. Marriott adjusted their housekeeping policy just in July. And, you know, we're hoping that the other players don't follow suit, but I don't think anything is final yet.

Okay. Very helpful. Thanks, guys.

Thank you. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Our next questions come from the line of Brian Maher with B. Riley. Please proceed with your questions.

Good morning. Just first a point of clarity. I think you mentioned 15 to 20 million proceeds for a hotel sale. Was that the one hotel that's currently under contract that's, I guess, looking to close in the third quarter?

That would be both to the extent that we end up selling the other one that is currently on the market. So it's kind of the combined of those two.

Okay. Thanks for that. And then If memory serves me a few years back, five, six years ago, you know, there was plans or consideration to really lighten up on the select service and focus on full service, you know, kind of like what you just talked about, you know, maybe stuff that needs some help and some decent markets that you think are going to grow. Is that still the case? I mean, would you anticipate lightening up on select server? Is there a thought to really keep that large chunk of that portfolio?

Yeah, I think over time the goal will be to lighten up on it. I think the question is what's the right way to do it? Is there a way that makes broader, more strategic sense for the portfolio? But I do think there are some pools and some assets that are select service that I think we are probably going to consider for sale in the next six to 12 months. So I think on a net basis, you'll see us continue to lighten up on our select service. Just given where the debt markets and transaction markets are, it seems unlikely that there's a trade to do kind of all of the select service or a huge part of select service. Realistically, we have a decent amount of select service that's crossed in debt pools, both in our Highland portfolio and in what's called our MS-17s. loans where we've got full service and select service crossed. And so at a minimum, to be able to extract that and do something with it, we'll need to refinance that at some point in time in the next two years. So I think as opposed to anything dramatic, I think you will see us kind of lighten up on it over time opportunistically.

And that's a good segue into my next question, maybe for Derek, I guess. What are the mechanics of actually using your large cash position to extract assets from these debt pools to subsequently monetize them at the right time? How do you go about doing that?

Well, Brian, we've got the flexibility to do that. I think from our perspective, holding that cash balance has been strategic for us because 2023, and we're unsure what those extension tests might look like because those are mostly a trailing debt yield at the time of the extension. And so, depending on the ramp up of the recovery, the potential pay down requirements could be nothing and could be significant. So, we wanted to hold that cash on hand for that flexibility and for that. And we just line up the refinancing of those pools at their maturity dates or post their maturity dates with any sort of releases or changes in the makeup of those pools and portfolios that we want to make and do it at the time of the refinancings. We've contemplated go ahead and do some refinancings now to get in front of some of those extension tests but the debt markets at the moment are not real attractive. While at the same time, the fundamentals continue to be very attractive. So we've opted to just sit and wait and hope that the market improves.

Brian, I'd also say that we've approached – there's a handful of assets that, again, I think fall in this category of non-core, non-long-term hold, lower-rev park full-service assets that are crossed in pools. And typically the mechanism to extract those is you're paying about 115% of the allocated loan balance for that asset. But normally there's other tests involved, meaning that your debt yield isn't any lower, your debt yield's above where it was when you originated the loan, et cetera, et cetera. And realistically right now, most of the loans don't meet those tests. And so you actually would have to get some sort of waiver or agreement from your lenders in order to achieve that. And the issue is just what do they want? Do they want an additional pay down? Do they want a fee? And so right now, as Derek said, we're trying to be cautious and prudent with our cash given what's going on in the debt markets. But to the extent that we can find a solution with lenders, then there are ways hopefully to maybe extract some of those assets prior to refinancings.

Okay. And just last, maybe kind of a housekeeping item, I think suffice it to say you probably pay down the oak tree financing when it gets closer to that two-year mark? Is that something we should be modeling for kind of late 4Q or early first Q 2023?

That's a good question. As we sit here today, I mean, I would love to be able to pay it off in January when it's kind of the two-year make-hold burns off in the middle of June, I mean, middle of January, for my sake. But it's really dependent upon the next six months, right? I mean, if the recovery continues like we're hoping and, you know, we're not tipped into a nasty recession, then I think it's a reasonable assumption to be made that we can pay it off, you know, maybe sometime around January. But, you know, it's still TBD. You know, while I would like to send it, I'd like to pay it off, it also is a substantial amount of cash to send $200 million off your balance sheet. So we just want to make sure it's the right time to do it and So it'll just be dependent on how this recovery looks the next few months.

Thank you.

You got it, Brian.

Thank you. Our next question has come from the line of Michael Bellisario with Barrett. Please proceed with your questions.

Thanks. Good morning, everyone. Good morning, Michael. Just a couple follow-ups there focused on the balance sheet, both for Derek, I think, but How much cash is actually trapped at quarter end? And then I know you said you got 15% of your hotels are no longer in cash traps, but maybe directionally, or if you could put numbers around it, how much of the value of your assets or cashflow is actually no longer in a cash trap today?

Yeah, Michael, at the end of the quarter, we had about $19 million that was trapped and that was being our restricted cash and our balance sheet. About, like I said, $13 million of that amount has since been released. So there's really only about $6 to $7 million that's left in the trap as of the end of the second quarter. In terms of the assets, the percent of assets you write is 85% of the assets. You know, we haven't really done that math, but I can tell you from a sort of percent of run rate EBITDA, it's actually pretty close. It's just slightly less than that. So we're going to say it's 85% of the assets. Maybe that represents, you know, 80% to 83% of our EBITDA because some of our larger assets are out of those traps. So it's slightly less. And, you know, as Rob mentioned, we do anticipate that, you know, maybe another 10, 13 hotels will be coming out of the traps as well. It's really only been the last quarter or so when those hotels were generating enough excess cash to actually have any cash go into the trap. I would anticipate that from here, if trends continue like we've been seeing, that we would see more and more cash start to accumulate in those traps. It's also important to note that any trap cash would also be available for any extension cash that a trap would also be available for those bump paydowns if needed.

That's helpful. And then just one more on the bigger picture on the debt side. Can you maybe provide some perspective on pricing changes in LTVs, what you've seen in the mortgage market and the changes that occurred over the last 90 days or so?

Yeah, I mean, it's clearly deteriorated. And, I mean, look, we haven't really been in the market to do anything. We sort of tested the market and pulled back. You know, I think from an LTV standpoint, you could probably still get relatively high LTVs, but it's going to cost you. And so, you know, I would say it spreads probably wide at 100 basis points or so from, you know, maybe 150 basis points from where they were three, four months ago. And that's not typically what we've seen when the index rates have been going up. Typically when we've seen the Fed raise rates, you've seen credit spreads come down. And so this is a very unique time, at least in my career, in terms of the Fed raising rates and we're also seeing credit spreads go up when in reality, from a risk perspective, the fundamentals continue to be very attractive. So it feels very technical. It doesn't feel like on the market will improve here at some point in your future.

I think some of the quotes that we had seen, you know, was basically, you know, LIBOR plus or SOFR plus, you know, the kind of 500s, low 500s, if you're going up to 60, 65%. You know, it's obviously a little bit lower than that if you're staying below 50, but it still, as Derek said, gapped out probably at least 150 basis points, I think, probably from where it was, you know, four or five months ago.

Thank you.

Got it, Michael. Thank you. There are no further questions at this time. I would now like to turn the call back over to management for any closing comments.

Thank you, everyone, for joining today's call. We look forward to speaking with you all again next quarter.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time.

Enjoy.