Braemar Hotels & Resorts Inc.

Good day, ladies and gentlemen, and welcome to the Braemar Hotels and Resorts Incorporated First Quarter 2019 Results Conference Call. Please note today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Jordan Jennings. Please go ahead, ma'am.

Good morning, and welcome to today's call to review results for Braemar Hotels and Resorts for the first quarter of 2019 and to update you on recent developments. On the call today will be Richard Stutton, President and Chief Executive Officer, Derek Eubanks, Chief Financial Officer, and Jeremy Walter, Chief Operating Officer. The results, as well as the notice of the accessibility of this conference call on a listen-only basis over the Internet, were distributed yesterday in a press release that has been covered by the financial media. 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 safe harbor provisions of the Federal Securities Regulations. Such forward-looking statements are subject to numerous assumptions, uncertainties, 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 of 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 May 1, 2019, and may be also accessed through the company's website at www.bhrreat.com. Each listener is encouraged to review those reconciliations provided in the earnings release together with all other information provided in the release. And I'll turn the call over to Richard Stockton. Please go ahead, Richard.

Good morning. Thank you for joining us to discuss our first quarter results. In January of 2017, we announced a revised strategy with a focus of investing in the luxury hotel segment. Since that time, we have taken concrete steps to realign our portfolio to the strategy, including selling two non-core properties, announcing an agreement to up-brand two properties, and acquiring four high-quality luxury properties. We are excited about the meaningful progress we are making and believe the continued execution of this strategy will will lead to solid growth and strong financial performance for the company going forward. Our strategy to focus on the luxury segment of the hospitality market continues to be supported by the current performance of this segment. Empirical evidence has shown that over the long term, the luxury segment has had greater rent part growth than the other lodging segments. Looking ahead, the economic outlook continues to be favorable and consistent with our long term growth thesis for luxury, STR and other forecasters are predicting the luxury sector to outperform the modest rev part gains expected in 2019 for the industry. By clearly aligning our platform with this segment, we believe Braemar is well positioned to capitalize on these trends and continue to outperform our REIT peers. Before turning to our operational results, I'd like to take a moment to discuss the key highlights of our Enhanced Return Funding Program, or ERFP, with our advisor, Ashford Inc., that we announced in January of this year. The ERFP is a $50 million funding commitment that is provided to Braemar to facilitate accretive growth. Simply put, Ashford, Inc. contributes 10% of the purchase price of qualifying acquisitions up to the agreed maximum funding commitment. The program has a two-year term with one-year renewals and the ability to be upsized to $100 million based upon mutual agreement. This programmatic funding arrangement provides us with a competitive advantage and significant potential to meaningfully drive performance. With the ability to add an estimated 100 to 200 basis points to unlevered returns on our future hotel acquisitions, we believe the ERFP will be a key differentiator behind our ability to increase shareholder value. We put the ERFP program to work immediately with our January 2019 acquisition of the Ritz-Carlton Lake Tahoe. This landmark luxury hotel, built in 2009, consists of 170 rooms with over 37,000 square feet of indoor and outdoor meeting space and sits mid-mountain on the ski slopes of the North Star Ski Resort. Raymar will receive approximately $10 million of ERFP funding as part of this acquisition. We anticipate that the ERFP funding will increase our returns on this acquisition from a projected 10% to 12% unlevered IRR. While we were already excited about this acquisition, The hotel's performance in the first quarter fueled our further optimism and significantly exceeded our expectations. Early season winter snowfall created very strong demand that drove high rates on the tail end of the holiday season and over MLK weekend. This led to significant rev par growth of 32.8% over the prior year quarter. Let me now turn to our first quarter results. For the first quarter, actual rev par growth was 14.3% for all hotels. This significant increase is a direct result of our portfolio repositioning efforts to acquire higher REVPAR hotels and dispose of our lowest REVPAR assets. Comparable REVPAR for all hotels grew by 3% during the quarter, while comparable REVPAR for hotels not under renovation increased 2.6%. We reported adjusted EBITDA RE of $34.8 million and AFFO per share of 44 cents for the quarter. Our overall portfolio folio trailing 12-month comparable rev far of $233, continues to be the highest in the Lodging Reeds sector. During the quarter, we continue to actively manage our insurance recoveries at the Ritz-Carlton St. Thomas related to Hurricane Irma. We're working closely with our insurers to both seek recoveries for physical damage to the hotel, as well as to minimize the impact to the property's P&L through BI insurance recoveries, which totaled $6 million in the quarter. We expect recoveries to continue at least through our planned reopening in October 2019. We also continue to be on track with the rebuilding and renovation program at the property, and Jeremy will provide more detail on our progress in a few minutes. We are also pleased with the progress we are making on the conversions of our Courtyard Philadelphia and Courtyard San Francisco properties to autograph collection hotels. Both projects remain on track with a planned early summer opening of the converted Courtyard Philadelphia aptly named the Notary Hotel, since the building itself used to house the city's official notarial offices in the 1900s. Listed on the National Register of Historic Places, the property is undergoing a $20 million plus renovation, fusing Philadelphia's unique soul with its historic legacy. Originally designed by prolific architect Philip Johnson in the classical revival style, the Notary Hotel is a landmark in the heart of Center City, Philadelphia, boasting sophisticated 1920s-inspired decor and furnishings. The 15-story building dates back to 1926 and is ideally located across from City Hall as well as one block from the Pennsylvania Convention Center. The redesign uses a combination of original finishes and stylish upgrades including marble floors, chandeliers, coffered plaster ceilings, and decorative bronze molding. Throughout the property, elements of Philadelphia history and culture as well as unique items from local artisans will be prominently featured to create a distinctive feel. The rebranding of the Courtyard San Francisco as an autograph collection property is expected to be completed by the end of the year. During the first quarter, we reported 29.6% rev par growth at the hotel, even while the property was under renovation. Additionally, San Francisco's Moscone Convention Center expansion was completed in late 2018, which, when combined with only modest supply growth, continues to fuel our excitement for 2019 and the upcoming repositioning. Thus far, we have spent approximately $25 million on these conversions and anticipate spending an additional $32 million during the remainder of 2019. On the capital markets front, during the quarter, we completed the refinancing of our Capital Hilton and Hilton Torrey Pines, as well as the financing of our acquisition of the Ritz-Carlton Lake Tahoe. With all of our recent financing activity over the last year, We now have a very attractive maturity schedule, and our next hard maturity is not until March 2020 and is an amount representing less than 10% of our assets. We've also been active on the investor relations front. In April, we hosted a first-of-its-kind Key West market tour that not only included our pier house resort property, but also included several of our re-pierce properties and management teams. The event was very well attended by investors and analysts. We hope to do similar events in other markets in the future. During the remainder of 2019, we will continue to get out on the road to meet with investors to communicate our strategy and the attractiveness of an investment in our platform. We believe we have made great progress in advancing our strategy this past quarter and expect for these trends to continue through 2019. We are optimistic about the upcoming performance of the portfolio as we believe there are several unique circumstances that could result in Red Park performance in excess of the broader market. I will now turn the call over to Derek.