Braemar Hotels & Resorts Inc.

and welcome to the Braemar Hotels and Resorts Inc. second quarter 2019 results conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jordan Jennings. Please go ahead.

Good morning and welcome to today's call to review results for Braemar Hotels and Resorts for the second quarter of 2019 and to update you on recent developments. On the call today will be Richard Stockton, President and Chief Executive Officer, Derek Eubanks, Chief Financial Officer, Jeremy Walter, Chief Operating Officer. The results as well as 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 risk, 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 July 31, 2019, and may also may also be accessed through the company's website at www.bhreit.com. Each listener is encouraged to review those reconciliations provided in the earnings release together with all other information provided in the release. I will now turn the call over to Richard Stockton. Please go ahead, Richard.

Good morning. Thank you for joining us to discuss our second quarter results. In the second quarter, we continue to make progress on our portfolio realignment strategy, including completing the conversion of the notary hotel and revealing the name of the Clancy, our San Francisco autographed property. We're excited about the meaningful progress we are making and believe the continued execution of this strategy will lead to solid growth and strong financial performance for the company going forward. Our acquisition of the Ritz-Carlton Lake Tahoe in January of this year was our first purchase to utilize the ERFP program with Ashford, Inc., We received $10.3 million from Ashford Inc. related to that acquisition. We anticipate that the ERFP funding will increase our returns on this acquisition from a projected 10% to 12% on levered IRR. We continue to be excited about the prospects for this acquisition, as the hotel's performance during the first six months of this year has significantly exceeded our expectations, with REVPAR growth of 23.3% over the prior year period. Let me now turn to our second quarter results. For the second quarter, comparable rev par for all hotels declined by 2.3%, while comparable rev par for hotels not under renovation decreased 1.9%. Our portfolio was negatively impacted by the weak Seattle market and the renovation disruption at the notary. If you exclude those two properties, comparable rev par growth for the portfolio was positive at 0.8%. We reported adjusted EBITDA RE of $32.8 million and AFFO per share of of 42 cents for the quarter. Our overall portfolio trailing 12-month comparable rev par of $231 continues to be the highest in the lodging REIT sector. During the quarter, we continue to actively manage our insurance recoveries at the Ritz-Carlton St. Thomas related to Hurricane Irma. We are working closely with our insurers both to 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 $6.6 million in the quarter. We expect recoveries to continue at least through our planned reopening, which remains on track for the fourth quarter 2019. We have open reservations starting December 1st and will allow earlier bookings as the completion date approaches. The market has lost approximately 35% of its rooms inventory, positioning us well for a strong ramp-up. Quoted rates of the property are approximately 10% higher than pre-hurricane levels. We're also pleased with the progress we have made on the conversions of our Courtyard Philadelphia and Courtyard San Francisco properties to Autograph Collection Hotels. On July 17th, we announced the opening of the converted Courtyard Philadelphia as the Notary Hotel and Autograph Collection Property. Located in downtown Philadelphia, the property underwent a $20 million plus renovation and features 499 guest rooms over 10,000 square feet of conference space throughout 12 event rooms. We also recently announced the rebranding of the Courtyard San Francisco to the Clancy, an autograph collection property. Expected to be completed in January 2020, the Clancy is ideally situated in San Francisco's vibrant South Market District, which has established itself as a hub for international visitors, regional day trippers, and locals enjoying music, art, multimedia, and technology-driven culture. The hotel, which features 410 guest rooms and almost 10,000 square feet of meeting space, is within walking distance of notable attractions including Moscone Convention Center, Oracle Park, Union Square, Urba Buena Gardens, and the Metreon Complex. During the second quarter, we reported 4.6% Red Park growth at the hotel, even while the property was under renovation, which, when combined with only modest supply growth and the recent reopening of the expanded Moscone Convention Center near the hotel, continues to fuel our excitement for the upcoming repositioning of this property. Thus far, we have spent approximately $37 million on these conversions and anticipate spending an additional $20 million during the remainder of 2019 and the first quarter of 2020. On the capital markets front, as a result of our recent financing activity over the last year, we continue to have a very attractive maturity schedule. 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. During the remainder of 2019, we'll continue to get out on the road to meet with investors to communicate our strategy and the attractiveness and investment in our platform. We'll have our annual investor day in New York City on October 3rd and hope to see many of you there. We believe we have made great progress executing on our strategy this past quarter. We're optimistic about the upcoming performance of the portfolio as demand continues to be strong in our markets with limited new supply. We also continue to believe there are several unique stories in our portfolio that could result in red-par performance in excess of the broader market.