Braemar Hotels & Resorts Inc.

Greetings. Welcome to Braymore Hotels and Resorts' fourth quarter 2019 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. Please note, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Jordan Jennings, with Braymore Hotels and Resorts. Thank you. You may begin.

Good morning and welcome to today's call to review results for Braemar Hotel and Resort for the fourth quarter and full year 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, and Jeremy Walter, Chief Operating Officer. Your 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. Statements made during this call do not constitute an offer to sell or a solicitation of an offer to buy any securities. Securities will be offered only by means of a registration statement and prospectus, which can be found at www.sec.gov. 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 February 26, 2020, and may also be accessed through the company's website at www.bhre.com. Each listener is encouraged to review those reconciliations provided in the earnings release together with all other information provided in the release. I'll now turn the call over to Richard Stockton. Please go ahead, Richard.

Good morning. Welcome to our fourth quarter and year-end 2019 earnings conference call. I will begin by giving a brief overview of our financial results. I will then provide an update on our major capital expenditure projects. Finally, I will conclude with an update on our investor outreach efforts. After that, Derek will provide a more detailed review of our financial results, and Jeremy will provide an update on our asset management activity. Afterward, we'll open the call for Q&A. For the fourth quarter, comparable rev par for all hotels increased by 6.2%, while actual rev par for all hotels increased 9.9%. Comparable total rev par increased 10.2%. These significant increases are a direct result of the strategy we put in place in 2017 focused on repositioning our existing portfolio as well as growing it with high-quality assets. I'd like to point out that Smith Travel Research recently reported that REVPAR for the luxury chain scale grew 6% in January compared to the same period last year, highlighting the benefit of having a portfolio like ours that is focused on the luxury segment. We reported adjusted EBITDA RE of $25.5 million, which represents growth of 25% over the prior year quarter and AFFO per share of 27 cents, which represents 93% growth over the prior year quarter. Our overall portfolio trailing 12-month comparable red par of $233 continues to be the highest in the lodging REIT sector. We are extremely pleased to reopen the Ritz-Carlton St. Thomas Hotel two years after Hurricane Irma. The property, which had been operating with minimal operations, underwent approximately $100 million in renovations that were substantially funded by insurance proceeds. The renovation provided us with the opportunity to accelerate value-added capital projects that will both drive incremental revenue and improve the guest experience. We have completely renovated all 180 guest rooms, and there are new F&B outlets, new pre-function space, and a new family pool. The result of all these efforts is a spectacular resort product that we believe to be on par with the finest resorts in the Caribbean. Additionally, the USVI hotel market has not reinstated all of its inventory, which positions our property well for a strong ramp-up. Throughout this process, we work closely with our insurers, both to seek property recoveries as well as to minimize the impact of the hotel's P&L through BI insurance recoveries, which totaled $2.8 million in the quarter. We are very excited about the prospects for the Ritz-Carlton St. Thomas in 2020 and believe it is well-positioned to outperform. We are also pleased with the progress we have made on our strategy to up-brand our Courtyard San Francisco property to an autograph collection hotel. We expect to complete the conversion to the Clancy in May. During the fourth quarter, we reported 12.4% comparable road park growth at the hotel, even while the property was under renovation, which, when combined with the only modest supply growth in the recent reopening of the expanded Moscone Convention Center near the hotel, continues to fuel our excitement for the upcoming repositioning of this property. As you may recall, in July, we announced the completion of the conversion of our Courtyard Philadelphia property to the Notary Hotel. In the fourth quarter, the property began its ramp-up. reporting an impressive 21.4% rev bar growth. The renovation and up branding of this property has been an undisputed success and is now ramping up even more quickly than we had anticipated. In October, we announced the opening of the Maple Grove Presidential Villa at the Bartisano Hotel and Spa in Yachtville, California. The new 3,705 square foot presidential villa is available at a published rate of $9,000 per night, or is also available as three separate luxury suites. Each has a distinctive gray room, stately king bedroom, spa bathrooms, and a courtyard. The suites are now starting to ramp up, currently generating an additional approximately $50,000 per month, and we believe will begin to generate significantly more revenue in the coming months. On the capital markets front, during the year, we pushed out our maturities and lowered our cost of capital. Derek will discuss this in more detail, but all of our loans continue to be non-recourse, and as a result of our financing activity over the last year, We have a very attractive maturity schedule with no final maturities until 2022. We have also been active on the investor relations front. Over the past few months, we have attended several bank and industry conferences and participated in numerous investor meetings. We held a well-attended investor day in New York in early October. Looking ahead to 2020, we will continue to get out on the road to meet with investors to communicate our strategy and the attractiveness of an investment in Braemar. One topic of interest with many investors is the impact of the coronavirus on the travel and lodging industry. As it relates to Braemar, we currently expect to see an immaterial impact on our hotel results in 2020 from cancellations by China-based hotel guests. To date, we have identified a total of approximately $80,000 in lost revenue directly associated with coronavirus-related cancellations across eight of our properties. Excluding the Ritz-Carlton St. Thomas, our 2020 definite group revenue pace stands at plus 9% for 2020. Another point of interest with investors is the recent impact of rising wages, property taxes, and insurance. As you'll see from our quarterly figures, despite a comparable hotel EBITDA margin decline of 197 basis points, we were able to generate comparable hotel EBITDA growth of 2.6%. And while it is possible that we will see some continuing EBITDA margin pressure this year, based on the investments we have made over the past two years, we believe our portfolio will continue to produce industry-leading revenue growth that will more than offset these modest increases in expenses. Jeremy will address these trends further in a few moments. Lastly, we recently updated our website with a new and improved investor section. The new website is meant to highlight the quality of our portfolio and provide easy-to-find resources for investors. please visit our website at www.bhrreit.com. We hope you find it to be a useful research tool. We believe we have made great progress executing on our strategy this past quarter, and we are optimistic about the upcoming performance of the portfolio. We continue to believe there are several unique stories in our portfolio that could result in REVPAR performance in excess of the broader market.

I will now turn the call over to Derek. Thanks, Richard. As Richard mentioned, during the fourth quarter, we recognized $2.8 million of BI income for the Ritz-Carlton St. Thomas, which is reflected in the other hotel revenue line of our income statement. These insurance recoveries related to the months of September 2019 through November 2019. We expect these insurance recoveries will taper off as the hotel has reopened. For the fourth quarter of 2019, we reported net income attributable to common stockholders of $12.7 million, or 36 cents per diluted share. For the full year of 2019, we reported a net loss attributable to common stockholders of $9.8 million, or 32 cents per diluted share. For the quarter, we reported AFFO per diluted share of 27 cents, which reflected a 93% growth rate over the prior year quarter. For the full year of 2019, we reported AFFO per diluted share of $1.41. Adjusted EBITDA RE for the quarter was $25.5 million, which reflected a 25% growth rate over the prior year quarter. Adjusted EBITDA RE for the full year was $121.5 million. At quarter's end, we had total assets of $1.8 billion. We had $1.1 billion of mortgage loans, of which $49 million related to our joint venture partner share of the loan on the Capital Hilton and Hilton La Jolla Torrey Pines. Our total combined loans had a blended average interest rate of 4.0%. Our loans are entirely floating rate, and the vast majority have interest rate caps in place. As of the end of the fourth quarter, we had approximately 50% net debt to gross assets, and our trailing 12-month fixed charge coverage ratio was approximately 1.7 times. Our next final loan maturity is not until April 2022. Our cash and cash equivalents at the end of the quarter was $65 million, with an additional $56 million of restricted cash. As of December 31, 2019, our portfolio consisted of 13 hotels with 3,487 net rooms. Our share count currently stands at 37.4 million fully diluted shares outstanding, which is comprised of 32.9 million shares of common stock and 4.5 million OP units. In our financial results, we include approximately 6.6 million shares in our fully diluted share count associated with our Series B convertible preferred stock. On the capital markets front, during the quarter, we entered into a new $75 million secured credit facility, which replaced our previous credit facility that was scheduled to mature in November 2019. The new credit facility provides for a three-year revolving line of credit and bears interest at a range of LIBOR plus 2.25% to 3.5% depending on the leverage level of the company. There are two one-year extension options subject to the satisfaction of certain conditions. The new credit facility includes the opportunity to expand the borrowing capacity by up to $175 million to an aggregate size of $250 million. In October, we announced the stock purchase agreement with Ashford, Inc., under which Ashford, Inc. purchased 19,897 shares of its common stock from us, resulting in total proceeds of approximately $600,000. The purchase price reflected a premium of approximately 20 percent based on the price of Ashford common stock on October 1, 2019. Also in November, we distributed the remaining 174,983 shares of our Ashford common stock on a pro-rata basis to our common shareholders and unit holders. In December, we filed a prospective supplement under which we may issue and sell from time to time up to an aggregate of $40 million of our Series B cumulative convertible preferred stock under an at-the-market equity offering program. Since the inception of the ATM program, we have sold $1.25 million of the Series B cumulative convertible preferred stock at an average price of $19.02, and expect to use the proceeds for general corporate purposes. Also during the quarter, we filed a registration statement for the issuance of up to $700 million of Series E or Series M non-traded perpetual preferred stock that we expect will permit us to issue securities through the Financial Advisor and Registered Investment Advisor networks over the next three years, market conditions permitting. We are currently targeting to raise $350 million over that period and have registered a larger amount to allow for a dividend reinvestment program, as well as the potential for a more favorable reception to the offering concurrent with a more attractive hotel investment market. That registration statement is now effective. Ashford Securities, a division of Ashford, Inc., has been established and licensed by FINRA as a broker-dealer in order to act as dealer manager on behalf of the company in respect of the Series E and Series M non-traded perpetual preferred stock. We expect to use any proceeds from the sale of the Series E or Series M non-traded perpetual preferred stock for general corporate purposes and to enable the company to continue to grow at a time when the retail capital markets are strong and the traditional equity markets are less favorable. With regard to dividends, the Board of Directors declared a fourth quarter 2019 cash dividend of 16 cents per share or 64 cents per diluted share on an annualized basis. This equates to an annual yield of approximately 8.8% based on yesterday's stock price. This concludes our financial review, and I'd now like to turn it over to Jeremy to discuss our asset management activities for the quarter.

Thank you, Derek. Comparable red par for our portfolio grew 6.2% during the fourth quarter. The strong growth represents increases of 5.5 percentage points and 4.1 percentage points relative to the total United States and the luxury class nationally, respectively. Our portfolio outperformed both its competitive sets and submarkets. By all of our commonly used metrics, comparable rev par was strong, and this growth occurred despite PG&E power outages impacting our Northern California assets. Fourth quarter hotel EBITDA grew $768,000, or 2.6%. For full year 2019, comparable rep part grew 1%. During the fourth quarter, while hotel operating income results were solid, hotel EBITDA faced a number of headwinds. First, property tax expense increased 33.6%, or $1.5 million. We're contesting property taxes in a number of our properties. For instance, property taxes at the Sofitel Chicago increased $372,000 or 80.1%. We successfully reduced the amount of taxes in 2018 by obtaining a real estate assessment reduction and we expect similar success with our other years under appeal in Cook County. Second, incentive management fees increased $791,000 or 144.5%. For example, the incentive management fee at a Courtyard San Francisco downtown increased $294,000, or 824.3%. For both this hotel and our recently converted Autograph Collection Hotel, the notary, we were able to negotiate substantial changes to both owner's priority, and in the case of the Courtyard San Francisco downtown, the incentive management fee percentage. Going forward, these changes should lead to increased profitability at these hotels. As expected, the Ritz-Carlton St. Thomas reopened in November after two years of reconstruction due to Hurricane Irma. The $100 million plus renovation completely transformed the hotel, including new guest room finishes, the addition of a new specialty restaurant, Alloro, featuring Sicilian cuisine, renovated meeting space, a remodeled infinity pool, a new family-friendly pool with a slide, renovated club lounge, and a new grab-and-go market trade winds. Guests can also enjoy our new luxury catamaran, the Lady Lindsay II, for sunset cruises, snorkeling cruises, and private events. During the fourth quarter, comparable rev par of the hotel grew 21.9%. Full-year comparable 2019 rev par grew 33.7%. During the fourth quarter, Hotel Ibida increased $1.4 million, and for full year 2019, Hotel Ibida increased 10.8%. We're now positioned as one of the finest resorts in the Caribbean and expect to continue to see our growth outpacing that of the new region. Speaking of recent renovations, I am pleased to say the Notary Philadelphia is ramping up well. The successful conversion of the Courtyard of Philadelphia downtown to Marriott's autograph collection occurred on July 16th, with the grand opening celebration on August 15th. Comparable rent part during the fourth quarter grew 21.4%. This growth represents increases of 17.5 percentage points and 17 percentage points relative to the Philadelphia market and the hotel's competitors, respectively. This top-line growth also more than doubles the $540,000 in revenue impact from the renovation during the fourth quarter of 2018. Rate growth for the fourth quarter this year was 7.6%, or $15. In the month of December, Comparable Red Park grew 42.8%, leading to increases of 41.1 percentage points and 37.1 percentage points relative to the hotel's competitors and the Philadelphia market, respectively. In addition, Hotel EBITDA increased 7.2%. We expect to see this impressive growth continue throughout the balance of 2020. Looking ahead a few months, we continue to be excited about the Courtyard San Francisco Downtown and its upcoming conversion to the autograph collection under the name The Clancy. The hotel is currently scheduled to convert in May. In November, a portion of the new lobby opened, including the new front desk, Selma Mercantile, and the radiator coffee shop. The hotel's performance continues to be strong. Comparable rep part grew 12.4% during the fourth quarter. This rep part growth represents increases of 6.2 and 1.1 percentage points relative to the upscale San Francisco San Mateo market class and the hotel's competitors, respectively. There were also strong citywide growth during the fourth quarter, leading to our group room nights and rate increasing nearly 30% and 9%, respectively. Transit growth was driven by special corporate room nights increasing 14% and rate increasing 4%. For full year 2019, comparable rep part has grown 9.5%, representing increases of 5.3 percentage points and 5.4 percentage points relative to the San Francisco San Mateo market and the upscale and above chains in the San Francisco market street sub-market, respectively. Hotel EBITDA grew $414,000 for full year 2019. This hotel is undergoing a major repositioning, has been under renovation all year, making the REV part and EBITDA growth all the more remarkable. While our properties Undergoing major renovations received most of the attention this past year. I would be remiss not to mention the outstanding performance of the Ritz-Carlton Sarasota. During the fourth quarter, comparable red part grew 17.3%, representing increases of 9.8 percentage points and 16.8 percentage points relative to the hotel's competitors and the Sarasota Bradenton market, respectively. Strong performance during the Thanksgiving, Christmas, and New Year's Eve holidays drove these results. In addition, no red tide, coupled with the Longboat Key Club's renovation, aided our hotel. Fourth quarter hotel EBITDA increased 22.7%, and hotel EBITDA margin increased 7%. 2019 was the hotel's first full year in our portfolio, and for the year, comparable red par grew 4.5%, and hotel EBITDA increased $917,000. This red par growth represents increases of 7.4 percentage points and 7.2 percentage points relative to the Sarasota Bradenton market and the upscale and above chains in the Sarasota beaches sub-market, respectively. Another of our iconic hotels, the Hilton La Jolla Torrey Pines, experienced a tougher fourth quarter. Comparable rev par decreased 7.7%. This decrease actually represents gains of 1.2 percentage points and 1 percentage points relative to the upper upscale San Diego market class and the upscale and above chains in the San Diego La Jolla sub-market, respectively. A reduction in city-wise affected performance as the American Society of Hematology, San Diego's largest convention with 17,000 peak room nights, met in December 2018 but will not repeat until December 2020. Another large city-wide, Neuroscience, also did not repeat in 2019. Despite the headwinds, during the fourth quarter, hotel EBITDA for the full year 2019 grew $227,000 or 1.5% with comparable REBPAR outperforming the market. I will now turn to capital investment. Looking ahead to 2020, we anticipate spending approximately $45 to $65 million in capital expenditures, exclusive of capital expenditures funded with insurance proceeds. These expenditures will be comprised predominantly of the completion of the Courtyard San Francisco downtown conversion to the Clancy, a guest room renovation at the Marriott Seattle Waterfront, and a spa renovation at the Ritz-Carlton Sarasota. As Richard mentioned, I do want to reiterate how well positioned we are to outperform going forward. We'll have two newly renovated and converted autograph collection hotels. The Park High Beaver Creek Lobby and the Bartisano Villa construction projects were recently completed. The Ritz-Carlton Sarasota Beach improvement is complete. There is no government shutdown that impacted the Capitol Hilton last year in the fourth quarter. And finally, the Ritz-Carlton St. Thomas is open post-hurricane recovery. In addition to the property-specific factors I just mentioned, we are currently experiencing some favorable portfolio-wide dynamics. First, group revenue pace is up 7% for 2020, driven by increased room nights sold. For 2021, this number is an even more impressive 31%. Second, we are seeing new supply in our markets decelerate throughout our portfolio. Over the past two years, our portfolio sub-markets have experienced 2% to 3% annual supply growth. We estimate this number to reduce to less than 2% annually over the next two years. This decrease in supply growth will be especially prominent for the Marriott Seattle waterfront. In addition, over the past year or so, we have focused a great deal of our attention on non-rooms revenue. We're proud to say comparable total hotel revenue, excluding rooms revenue, increased $12.7 million or 7.4% in 2019.

I will now hand it back to Richard. Thank you, Jeremy. We're extremely pleased with our fourth quarter performance and continue to believe Braemar is well positioned for strong growth in 2020. While industry forecasts remain tepid, our portfolio has a number of drivers that should allow us to deliver material red part growth in excess of anticipated expense growth in order to deliver increased profitability this year. This concludes our prepared remarks and we'll now open up the call for Q&A.

At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A 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. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, as we poll for questions. Our first question comes from the line of Tyler Batory with Jenny Montgomery. Please, see with your question.

Good morning. Thanks for taking my question. First one, probably for Jeremy, can you talk a little bit more about what you're seeing at the Ritz St. Thomas? You know, talk about the guest feedback thus far, booking trends, and then additionally, can you discuss group bookings at that property specifically and some of the changes you made to the meeting space?

Yeah, sure. So far, you know, we're still ramping at the hotel. We were there early January and they still had, I think, 40 open positions and I think that we're in process of filling all the positions and there's a substantial amount of onboarding and training. Fortunately, we're able to retain a lot of our former associates pre-IRMA, so that's helped a lot, but there is definitely some opportunities across the board from a guest satisfaction and service level perspective that we're working with Ritz-Carlton on. As you know, Ritz is has a great culture, great history of providing exceptional service. So I think that going forward, we'll be at that place. It's just part of the process of basically just reopening a hotel. In terms of the condition of the hotel, it's remarkable. I mean, it's just across the board, massive upgrade to the property in terms of our total quality finish out, design. As you know, And we've described in previous calls, we elected to do some other upgrades that were non-insurance funded. And looking back, I think that was definitely the right call. We have this new family pool, which is amazing. It's got a water slide. The guests love it. It's been very, very, very positive feedback to that new pool, new splash pad. Really, really nice finish out in the reposition lobby. And as you mentioned, the meeting space, what we did is we actually took out, we reconfigured our entire kitchen. The kitchen needed to be redone. We actually had a capital plan to do that pre-IRMA. But that, as part of that process, we made it a smaller footprint, but more efficiently laid out. And by doing that, we recaptured some pre-function space that we didn't have at the hotel. And so that allows us to have some redundancy if we want to have outdoor events, but then we have bad weather that we have to move inside. And it is remarkable. The finish out of the mini space, I think, has been very well received by the customer site business. Specifically going to your question on group room revenue, it's ramping up incredibly well. I would anticipate that 2021 will exceed pre-IRMA profitability at the hotel. And as it relates to group revenue, what's interesting is we're up 25% to pre-IRMA levels in terms of 2021 group room revenue. But what's more interesting is that it's mostly ADR related. ADR at that hotel for our group business in 2021 is up 40%. And that just tells you there's a lot of pent-up demand for incentive groups and other weddings and just social groups that want to give back to the islands and a lot of pent-up demand. And so we're very, very excited about the repositioning of that asset. And there's still a lot more work to do from a service perspective, but we'll get there with Ritz-Carlton.

Okay, great. I appreciate that detail. My follow-up question for Richard, do acquisitions make sense here? And how are you thinking about balancing the capital that's presumably going to be coming in from Ashford Securities with where your share price is and your current leverage levels?

Yeah, thanks, Tyler. Yeah, at the moment, we're not actively looking at acquisitions because, you know, we're at our target leverage, and therefore, you know, we would need to raise additional capital to do so. Now, we have been, you know, very heavily in detail investigating this opportunity to raise non-traded preferred equity. And, you know, we think that that equity is is available at a cost that doesn't necessarily mirror the public equity markets and potentially at a much more efficient cost of capital. So our plan there is to explore the market at a 6.5% cost of preferred equity. So you can marry that up with our average cost of debt of about 4% and say you have a weighted average cost of capital significantly below what we've been targeting on our historic acquisitions. And as you know, our last four acquisitions, we looked at anywhere from a 10 to 12 percent unlevered IRR. So, in our view, accretive. So, that's really the art of it, though, is raising the capital in tune with the available opportunities in the market. I will say that even prior to this this industry scare we're seeing this week, we were seeing luxury hotel assets available in the market at that kind of 6% or plus initial cap rate. And these are deals that we think we can move up to a 10% or lower IRR over time. So we continue to have extraordinarily high level of discipline. And we think that if we're able to bring in this capital at this cost, there will be opportunities down the road. And we'll stick to our same leverage target, leverage target as defined by net debt to gross assets.

All right, great. That's all from me. Thank you.

Thanks, Alan.

Our next question comes from the line of Brian Moore with B Reilly FBR. Please shoot your question.

Yes, good morning. A couple of properties that performed pretty well that I don't think that you talked about on the call, Key West and Beaver Creek specifically. Can you give us a little bit of color on those? And then also, what's your current outlook for the Ritz-Carlton Lake Tahoe property, which I think maybe had like mid-single-digit red bar?

Yeah, sure, I'll take that. So let's start with Beaver Creek. Beaver Creek, since we've acquired that asset, we've had some turnover at the property that we've described in previous calls. We've worked with Hyatt Corporate to put the right team in place, which we believe we have an incredible team now from both the general manager, the director of sales, revenue management, And so we're very, very excited about that team. And it was heading into the season this year, we did a lot better job in terms of our retail pricing. We discounted too heavily last year, or the Hyatt team did, and especially with a relatively strong snow season. So I think that a lot of that performance is, more related to just better management team in place at the property. I want to give them credit because they are a great team, and we're very optimistic about some of the things we have going on at Beaver Creek on a go-forward basis. As it relates to Key West, it took a little bit of time for that market to recover from Irma, not a lot of time, but there was a lot of pent-up demand in that market as well. As you know, it's a remarkable market just because you just have no threats of new supply because you can't build new hotels in that market, and I think that's certainly a factor that's gone on in Key West. And then Tahoe, Tahoe, again, has had another decent snow season, and we did recently put a new GM at that property, and so We're working with the Ritz team. I think we're excited about the top line. The opportunity, though, with that property across the board is on the margin side, and that's where we're really, really focused on. And I said typically with us it takes a couple years to kind of get the margins right at our Ritz-Carlton hotels after we acquire them. I think this hotel is actually going to take maybe a little bit more than a couple years just because of the labor dynamics of that market are very, very difficult. Most of our labor – It comes in from Nevada, long commutes. You've got, you know, dealing with the snow issues. And so it's just more of a labor shortage and access to quality labor from all the hourly associates of the hotel. So that's something that we're working pretty aggressively with Marriott to kind of get the right size on the margin at that hotel. But top line, I think it's still really well positioned. It's clearly the dominant hotel in that market, and you've got great demand generators that are driving distance for weekend ski business and whatnot.

Okay, great. And then we mentioned this in our note this morning on you guys regarding the coronavirus issue. Do you guys see the potential that you could have a stronger 2020 than you were expecting because of more well-heeled, wealthy individuals? Instead of going to Europe or Asia, they stay in the U.S. and maybe frequent some of your higher-end resorts, and it gives you the ability to drive earnings higher this year?

We certainly like that narrative. We hope that that would be the case. In other words, Some mentioned that in the news last night about people deciding to stay in the U.S. for vacations. I think our portfolio being positioned both heavily towards the leisure segment but also with about 50% resorts puts us right in that sweet spot. So we haven't taken any actions to really plan for that, but I think that's certainly a potential scenario that could happen and we'd be happy to see happen.

And then lastly for me, and I really kind of hate to bring this up because I know you guys don't tend to talk about it very often, but the Ashford Group had a strong ability and did buy back a lot of stock in the last downturn. But the Ashfords and Braymar tend to sit on a decent amount of cash, and with the stock weak here, at what point does that become a real consideration, or is it not?

Well, look, I think undoubtedly at this level, this is an attractive stock to own. I mean, look, our dividend yield is 9% now. So I think people will look back and will say, you know, that was a great entry point to buy the stock. Now, when a company buys its own stock, it's different considerations, as you know, right? It has an impact on liquidity and float. So, yeah, I think we continue to analyze those tradeoffs. And that's all I can really say about that. But clearly, I do agree with your perspective that it's an attractive opportunity, both based on where it's trading from an income perspective, but also where it's trading to the streets estimates of NAV and the growth opportunities that we have, which we've talked so much about. We spent a lot of time laying out these growth drivers in Investor Day last year, and you're seeing it start to come through. This is just the beginning. in the fourth quarter. So we're looking forward to a pretty fun year based on what we've invested in the last couple of years.

Okay. Thanks, Richard.

Once again, if you would like to ask a question, please press star 1 on your telephone keypad. Once again, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question comes from the line of Michael Bellisario with Baird. Please do with your question.

Good morning, everyone. Good morning. Just one from me on the ATM program for the preferreds. I know it's small, but why even do that when you have $70 plus or minus million dollars of cash on hand? And then how should we read into the signaling there when you said you're not pursuing acquisition opportunities at this time?

Hey, Mike, it's Derek. I'll address that. I wouldn't read into any signaling there. We thought it was prudent to have an ATM in place for that security. We saw the cost of that security as attractive in the low sevens. And you mentioned our cash balance. It is below our target cash. We do have a strategy to run the company with a decent amount of cash on hand. We are below that level. And so we just thought it's prudent to have that ATM in place. Obviously, we haven't raised a ton of capital under that program. But we thought it was prudent to have it in place, and we think it's a pretty attractive cost at where we issued that capital.

Got it. And then just following up on that, the non-traded preferred, would the source of your equity for deals that get done come from this ATM preferred issuance then? Or how should we think about your portion of that called GPLP capital that's being discussed and thought about for the non-traded preferred issuance?

Yeah, I don't think we're looking at it for that capital for the GPLP. I think when we reference the Series E or the preferred BATM, I think we'll reevaluate that as we get closer to raising capital under the Series E. But as Richard mentioned, the economics of that capital and our ability to deploy it at the returns that we think we can achieve in the market are obviously very compelling for our common shareholders.

It's really amount of quantum, Mike. I think if we're successful in raising this very cheap preferred equity, we can make wholly owned acquisitions. If the amount that we raise is maybe less than we planned, then by necessity we'll have to bring in capital partners and do it that way. So we'll really have to see how things evolve over the next six to eight months.

Thank you.

Our next question comes from the line of Brian Moore with B. Riley FBR. Please do with the question.

Hi. Just kind of a follow-up on that line of discussion. Is the deal with Ashford Inc., the ERFP, still in place, and what's the availability on that?

Yes, it's still in place. We have it available for another year, and it's about $40 million still available under the program, and it pertains to wholly owned acquisitions within the U.S.

Okay. And given that, you know, Braemar is kind of the natural buyer of luxury resorts in North America, And given what's going on in the markets, and maybe this is a question for Richard, are you being approached more with potential acquisition opportunities? And if so, has there been any movement in the cap rates?

So I wouldn't say we've been approached more. I think we source opportunities through both the broker networks and through off-market opportunities. I'd say the level of off-market discussions we're having is more or less the same as it's been over the last couple of years. I think we are continuing to compete with a recapitalization option for many owners of assets. In terms of the cap rates we're seeing, again, I don't see a lot of movement. I feel like maybe they got a little tighter and now they're even a little bit wider. We're talking 10, 20 basis points. I feel like there's more opportunities that we're seeing where we can hit our 6% initial yield than we were seeing maybe, you know, six months ago. But then it's also a question of, you know, are the properties directly comparable? So there's definitely things out there for us to do if we have the capital. And so we continue to sift through deals as they come. Some deals come to the market, and then before you know it, they're pulled off the market, and maybe they do a refinancing, and they're going to come back soon enough. So we've got our eyes on a number of things that we'll be prepared to pursue once we have the capital in hand.

All right. Thank you.

We have reached the end of our question and answer session, and I would like to turn the call back over to management for any closing remarks.

All right, thank you, everyone, for joining us on the fourth quarter earnings call, and we look forward to speaking with you again on our next call. Thank you.

This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation, and have a wonderful day.