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.