Braemar Hotels & Resorts Inc.

Greetings and welcome to the Braemar Hotels and Resorts Incorporated fourth quarter 2020 results conference call. At this time, all participants are in a listen-only mode. A brief 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. It is now my pleasure to introduce your host, Jordan Gentry. You may begin.

Good morning and welcome to today's call to review results for Braymore Hotels and Resorts for the fourth quarter and full year 2020 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 Welter, 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. 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 Harbor provisions of the Federal Security 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 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 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 8A with SEC on February 25, 2021, and may also be accessed through the company's website at www.dhrweek.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 Sutton. Please go ahead, Richard.

Good morning, and welcome to our fourth quarter 2020 earnings conference call. I'll begin by providing an overview of our business and an update on our portfolio, which includes our hotels again achieving positive hotel EBITDA for the quarter. After that... Derek will provide a 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. The four key themes for today's call are luxury resort outperformance resulting in positive portfolio-wide hotel EBITDA, very strong forward bookings, significantly reduced monthly cash utilization, and no near-term debt maturities. 2020 was an extraordinary year, and while the COVID-19 pandemic has created both social and economic disruption on an unprecedented level and has created a volatile landscape throughout the hospitality industry, the rollout of vaccines gives us hope that the hospitality industry can return to a more normal environment in the near future. In the meantime, we are proactively navigating through any potential challenges, And as I have said previously, our entire leadership team has been steadfast in our commitment to protect all of our stakeholders during this unprecedented time. I am pleased to report that during the fourth quarter, all of our properties remained open, and we continued to achieve positive hotel EBITDA across the portfolio. In December alone, we delivered positive hotel EBITDA of $3.3 million, our highest month since March of last year. This dollar performance in the quarter was driven by strong occupancy levels at our resort properties and a 10.8% increase over prior year ADR, with three luxury resorts achieving an ADR of over $1,000 during the holiday season. While leisure demand is holding up nicely, particularly on weekends, any significant uptake in REVPAR performance is likely to rely on the recovery of corporate transient demand and ultimately group demand as a result of widespread vaccination or achieving herd immunity. We are encouraged to see a significant decline in the number of daily new cases, which we believe to be a precursor to the end of the pandemic. Overall, our resorts continue to perform well, and forward bookings are solid throughout our portfolio. For the month of January, our rev bar was down 55% to $104, which demonstrates continued improvement. It looks like February will finish with an occupancy of close to 40% and an ADR of around $400, resulting in rev bar of approximately $160. Our current bookings for March and April look strong, with current ADR above $500 for reservations on the books for the month of March. Many of our hotels are in drive-to leisure markets and have been well-positioned to benefit from the resurgence of pent-up leisure demand in recent months. In total, eight of our 13 hotels are considered resort destinations. These hotels include the Ritz-Carlton Sarasota, Bartisono, Hotel Yonville, Ritz-Carlton Lake Tahoe, Pier House Resort, Park High at Beaver Creek, Hilton La Jolla at Torrey Pines, and Ritz-Carlton St. Thomas. We are pleased to report that this thesis has played out just as we expected as these hotels have a combined facility bidet of $7.1 million for the quarter. While it is still early in recovery and the impact of the virus is still unpredictable, it is clear from the early feedback we are hearing from guests that they are enthusiastic about traveling again. We are also excited about the Clancy opening at the beginning of the fourth quarter. Located in San Francisco's vibrant Soma District, the former Courtyard San Francisco downtown underwent a rebranding and renovation in excess of $30 million to create the Clancy. It joins Marriott International's Autograph Collection Hotels, and the property features 410 guest rooms and over 11,000 square feet of modern meeting space throughout 16 event rooms. While construction restrictions delayed the Clancy's reopening by several months, and we expect that occupancy levels will be challenged in the near term given COVID-19's negative impact on group and business transient demand in this market, we look forward to realizing enhanced financial performance from this property over the long term as a result of the rebranding and renovation. While we continue to face the challenges of the pandemic and the uncertainties that go with it, we have taken proactive and aggressive actions to protect and enhance our corporate liquidity. This includes cutting expenses at the corporate level and significantly reducing our planned cap expense for the year. We will continue to preserve cash until we have more clarity on the recovery and the direction of the lodging industry. Our focus on the luxury segment, with many properties in drive-to markets, positions us to perform well in the near term, as well as for the ultimate recovery in our industry. Looking forward, we continue to believe that Braemar presents a compelling opportunity in the lodging REIT space. We are a unique story, with the majority of our assets in very desirable resort locations, a portfolio that is generating positive hotel EBITDA, and what we believe is a solid liquidity position and balance sheet with attractive debt financing in place as we come out of this pandemic. I will now turn the call over to Derek.

Thanks, Richard. For the fourth quarter of 2020, we reported a net loss attributable to common stockholders of $28.3 million, or 77 cents per diluted share. For the quarter, we reported AFFO per diluted share of negative 17 cents. Adjusted EBITDA RE for the quarter was negative $1.4 million. At quarter end, we had total assets of $1.7 billion. We had $1.1 billion of mortgage loans, of which $49 million related to our joint venture partner's 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 2.5%. Our loans are entirely floating rates. As of the end of the fourth quarter, we had approximately 54% net debt to gross assets, and our next final debt maturity is in April 2022. We ended the quarter with cash and cash equivalents of $78.6 million and restricted cash of $34.5 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 $12.3 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. All of our loans are current and out of default. As we highlighted with our positive hotel evens offer the quarter, our monthly cash burn in our hotels has been reduced to close to zero. Richard mentioned that our hotel EBITDA in December was positive $3.3 million. There are some additional items that are below the line at the properties, so hotel operating cash flow was approximately $3 million. Our current monthly run rate for debt service is approximately $2.6 million. Our current monthly run rate for corporate G&A and advisory fees is approximately $1.5 million. That equates to a monthly cash utilization of of approximately $1 million. If you were to take into account our preferred dividends, it would bring our monthly cash utilization to $2 million. With all of our hotels currently open and operating, $78 million of cash and cash equivalents at the end of the quarter, and based on realistic yet conservative assumptions for future hotel operations, we believe we have sufficient liquidity to outlast the COVID-related downturn in our business. During the quarter and subsequent to the end of the quarter, we issued approximately 2.7 million shares under our ATM, raising approximately $12 million in gross proceeds. Subsequent to the end of the quarter, we also entered into a standby equity distribution agreement, or CEDA, with Yorkville Advisors, pursuant to which we were able to sell up to approximately 7.8 million shares of our common stock to Yorkville at any time during a 36-month commitment period. We view these capital raising transactions as an important way to improve our liquidity at an uncertain time in our industry. Earlier this week, we completed an amendment to our term loan that extended our covenant waiver period through the fourth quarter of 2021 and reduced our fixed charge covenant through the end of 2022. As of December 31, 2020, our portfolio consisted of 13 hotels with 3,487 net rooms. Our share count currently stands at 44.7 million fully diluted shares outstanding, which is comprised of 40.5 million common shares of common stock and 4.3 million OP units. In our financial results, we include approximately 6.7 million shares in our fully diluted share count associated with our Series B convertible preferred stock. This concludes our financial review. I'd now like to turn it over to Jeremy to discuss our asset management activities for the quarter.

Thank you, Derek. Comparable red bar for our portfolio decreased 59.8% during the fourth quarter, and we were able to generate hotel EBITDA flow-through of 59%. As Richard mentioned, our hotel EBITDA in December was solid, driven by our resource, which saw strong demand over the holiday season. Despite all the closures and travel restrictions, our resort hotels actually did quite well in 2020 relative to our urban assets. Fourth quarter comparable hotel EBITDA for resorts was $7.1 million compared to negative $5.5 million of comparable hotel EBITDA for our urban hotels. When you look at full year 2020 results, the story is the same. $31 million of comparable hotel EBITDA for resorts and negative $17.5 million of comparable hotel EBITDA for our urban hotels. We expect our resorts to continue to outperform our urban hotels for some time, but we are optimistic the demand at our urban properties will continue to accelerate as we progress through 2021. Our Ritz-Carlton, St. Sarasota, is an excellent example of the outperformance we are seeing from our resorts. The property had ADR growth of 7.3% in the fourth quarter over the prior year quarters. and had the highest total room revenue in the resort's history during the festive season, which is what we call the period from December 23rd until right after New Year's Day. The property generated nearly $100,000 more in rooms revenue during that time than in any previous year, and its ADR achieved $1,200. Another resort that has outperformed extremely well is our Ritz-Carlton St. Thomas, which had a red bar increase of 18.5% during the fourth quarter compared to the year prior, and hotels strong continued into this year. AER over Valentine's Day weekend was over $1,300. There are now direct flights to St. Thomas from 12 major metro areas in the U.S., and airlines continue to increase capacity. With the recent requirement to have a negative COVID test to return to the U.S., we believe the USVI will benefit as vaccinators change plans to stay within the U.S. The property is ramping up faster than we expected after the recent renovation, and the team there is doing a fantastic job. That property has become one of the top-performing Ritz-Carlton's in the world. The rest of our resort hotels also finished a year strong. For the full year 2020, the Pier House Resort had $6.7 million in comparable hotel EBITDA, and the Park High at Beaver Creek had $5 million of comparable hotel EBITDA. Our California properties, Bar de Sono, Hotel Yachtville, Fulton La Jolla Torrey Pines, and the Rich Carlton Lake Tahoe collectively generated $3.2 million in comparable hotel EBITDA for the year. Moving to capital investment, in 2019, we invested heavily in our portfolio to enhance our competitive positioning. These investments include the conversion of the Courtyard Philadelphia downtown to the Notary Hotel, the completion of the three-suite presidential villa at the Porta Sona Hotel, and value-add projects during the rebuild of the Ritz-Carlton St. Thomas. These initiatives have allowed us to dramatically limit capital spend during the COVID-19 pandemic. In 2020, despite curtailing our capital expenditures significantly, we completed the conversion of the Courtyard San Francisco downtown to the Clancy, as well as the renovation of the guest rooms at the Pier House Resort in Key West. In total, we spent $25.6 million in capital expenditures in 2020. In 2021, we are planning to spend between $20 to $24 million in capital expenditures. As we entered 2020, we were optimistic about the performance of our portfolio given the recent capital investments and disruption that we had experienced. While we started the year off strong, the pandemic dealt us a significant blow that we are still recovering from. That being said, we are already seeing the incredible potential this portfolio has as we look forward. Even though occupancy was negatively impacted, the ADR of our portfolio grew by an impressive 11% in 2020. The Park High Beaver Creek, Ritz Carlton Sarasota, and Ritz Carlton St. Thomas all generated growth in ADR over 2019. With the notary and the client fee completed, Pure House's guest rooms now complete, and Bartisano's new villa, this portfolio is well positioned to significantly outperform as we emerge from this pandemic. I will now turn the call back over to Richard for final remarks. Thank you, Jeremy. In summary, we're in early stages of the recovery, but we can now see a clear path to normalcy. This sets us up nicely for a slow but steady recovery in our financial results. We've taken decisive actions to navigate the near-term challenges of this crisis, and we are well-positioned moving forward with a solid balance sheet and a unique, diversified portfolio. We are encouraged as we look ahead that we have in place the appropriate runway to get back to positive cash flow this year. I'm proud of our efforts to protect our assets and maintain financial flexibility to position us for future success. We look forward to updating you on our progress as we move through 2021. This concludes our prepared remarks, and we will now open 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. A confirmation tone will indicate that your line is in the question queue. You may also press star 2 if you would like to remove your question from the queue. One moment, please, while we now poll for questions. Our first question comes from Alex Kubitschek with Baird. Please proceed with your question. Good morning.

Richard, I wanted to start with just a high-level question for you. How do you position yourself today to be in a better place, to be a potential acquirer down the road, whether it's 12, 24 months? You know, obviously fundamentals improving is a big help, but just curious what defense do you think you still have to play before you can turn to offense?

Yeah, thanks for that question, Alex. Look, I think in order to be on the front foot in terms of acquisitions, And I look at acquisitions either as, you know, for cash or, you know, by an OP unit acquisition, which is something that we've kind of thought about in the past but still a possibility. But if it's a cash-type acquisition, I think we need to get to a place with our balance sheet that we feel is very comfortable and very comfortable for investors. Right now we have certainly ample liquidity, but we're still – using cash on a monthly basis. I think we have to get to cash flow positive. Then I think we have to stick by our leverage policy and what that's been historically. Historically, we've sought to maintain 10% of our gross debt balance as cash on the balance sheet. We've also sought to have our leverage be 45% net debt to gross assets. We're going to have to let those assets Return to cash flow positive and, you know, if you will, fill the coffers before I think we're getting very aggressive on the acquisitions front. So, you know, we're having the financial discipline. You know, luckily, and I'm sure I'll get many questions about this, we're not seeing a ton of opportunities in the luxury hotel space. And, you know, Frank, I'm not sure we will see a lot of opportunities at very attractive prices. There's just been so much capital raised out there to target on hotel acquisitions that the weight of capital will likely keep prices elevated rather than allowing there to be some sort of a feeding frenzy. So I'm not really anticipating that. So we're kind of sticking to our knitting. We're repairing the company, and we're clearly on the back end of the crisis, if you will. And then that will set us up ultimately – to pursue new acquisitions.

And then as a follow-up, you spoke to cash, to OP units, to equity. Just wondering if you have an updated view on preferred today, given that the Ds are trading a lot closer to par. Just where does that rank on the capital hierarchy you guys have today?

In terms of issuing preferred?

Correct.

Yeah. So our preferred pricing is... It's a little bit wider than where it was when we issued the preferred Ds, the perpetual preferred. Some of our peers have issued convertible instruments. That's something that I wouldn't rule out going forward. I think there's certainly benefits to long-term balance sheet stability to the extent that that is convertible. That's anything that... We're looking to, you know, we'd obviously have to announce. But I can tell you that the pricing is getting increasingly attractive, and you've picked up on that trend. You know, our preferreds at the height of the pandemic were trading at over a 20% yield. They kind of hung around, you know, 10% there for a while, and now we're sub-9. So clearly heading in the right direction. Well, one thing I'd add to that is if you look back to pre-pandemic, we'd had a filing of a non-traded preferred. offering at Braemar that we were planning to do through Ashford Securities. We obviously put that on ice during the pandemic, but one of the things that we do plan to do is utilize our broker-dealer network through Ashford Securities, and we do believe we have a very attractive source of capital that could be beneficial to Braemar, which is a traditionally retail investor and tends to be resilient in terms of being available during all stages of all cycles, even during the pandemic, this market, this alternative investment space was resilient and raising capital. So that's something that is out there, and hopefully we'd be able to share more with you in the future on it.

Yeah, thanks for the caller. And then just one quick housekeeping question. Looks like there's a small reversal in the incentive fee this quarter. Can you remind us of the moving parts there, and should we expect any reversals in 2021?

Yeah, this is Derek. So the reversal of that is, as you recall, there's an incentive fee that can be paid over a three-year period under the advisory agreement. But each of those three payments is subject to an FCCR calculation. And just given the – drop in our earnings, that last tranche of that payment was not triggered. So that's why you saw the reversal of that. It had previously been recorded in our earnings a few years ago, so we reversed that out.

So there shouldn't be any in 2021, given that there wasn't any in 2019?

Well, each year there's a test for the incentive fee, and so that relates to an incentive fee from a few years ago. So there could be, if there's outperformance, it's based on a total shareholder return outperformance calculation. So we'll just have to see how the year plays out.

That's very helpful. Thanks for the time, guys.

Thank you. Our next question comes from Tyler Vittori with Janney Capital Markets. Please proceed with your question.

Hey, good morning. Thanks for taking my questions. First question I have is on ADR, and this is the second quarter in a row that it's been up and quite strong, and the commentary for January and February was also positive as well. So can you touch a little bit more on revenue management and sales strategies in place in terms of driving that strength?

Sure. Well, I think ADR, you have to dissect it and look at it by demand segment. And there's kind of two things I'd note there. One is if you look at our segmentation, group business is way down. And group business generally comes at a discount to retail and transient business. Now, that's really helped us in terms of ADR. So ADR, just by virtue of segmentation, would be naturally up. Okay, so that's kind of the first trend. Actually, there's three. The second one is that if you look at retail demand and other transient demand, that's way up. And so, just kind of to give you a sense, if we look at our pace for February, retail demand, the ADR is at 50%. So this is driven by pent-up demand amongst leisure travelers that have been locked up in their homes for a year and can't wait to get out to spend some time at a luxury resort. So that's helping. And then the third thing I'd say, if you look across portfolio-wide, it's down to what is the composition of the hotels driving your APR. And whereas historically it was more balanced between our luxury resorts and urban, We've got our luxury resorts firing on all cylinders, and that's eight properties, and our urban down, but comparatively not down enough to be offset by the composition of our luxury resort ADR contribution. So those three trends are really serving to provide a lot of fuel to our ADR growth and has really sent it soaring. And we're looking at $400 or more ADR plus the portfolio for February. March is currently booked at over $500. So really, ADR that we've never seen before. In the first quarter, we'll have the highest ADR in the history of the company. And one of the things you've got to look at, Tyler, is from a revenue management perspective, is that most of our resources are open. are uniquely positioned. You look at Ritz St. Thomas. A lot of individuals don't want to go to travel outside the U.S., but they want to go to the Caribbean. And so we're getting a lot of first-time guests. And so being one of the only resources essentially is open for U.S. travel. Same thing with some of our Florida markets. We know the high-end traveler is going to be there, and they're willing to travel, and they want to spend money. And so we've been pushing rate because... We just don't have as much competition than what we've had maybe when all the resorts are open. And so I think we're uniquely positioned to do that. And as Richard mentioned, it is definitely a change in segments with group going out. But we've also done a good job marketing our suite inventory, and there's been an increased demand for suites for COVID. And travelers want to have more space and bring their families. So we've been able to do that. And I think we'll continue to do that, and I think you'll see continued desire for resort travel.

Great. And the specific question on St. Thomas, fourth quarter, first quarter, to be honest, I was hoping to take a vacation down there, but I noticed the rates are well over $1,000. Most of the nights are sold out, which is great for you, less so for my vacation plans. But I'm interested if you could just talk more about the demand in St. Thomas, what you're seeing. I think you mentioned that there are new guests that are coming as well. I'm just wondering how the mix of business is looking, new versus repeat guests that maybe you've had in the past, and then any comments just in terms of the guest feedback, and then also how beneficial it is right now just in terms of what's going on with limits on international travel.

Yeah, I'm happy to take that question. It is. We're very fortuitous because we owe specifically to that resort. You've been there and you saw the capital improvements we made, which I think are phenomenal. I think it exceeded our expectations in terms of the outcome with the settlement with the insurance companies and the quality and the design and the level of improvements we're able to make. And all of that was done pre-pandemic. And we just completed, as you know, pretty much, I think, November of 2019. And so If you look at where we were pre-pandemic, we were having significant year-over-year growth in January, February in the portfolio of Raymar, and a lot of that was through St. Thomas, as you're aware. But this was a great opportunity with us, having made those improvements, and then also improvements that we did outside of the insurance proceeds, which is we added that kids' school on the slide. And so this was a good opportunity, as there are an incredible amount of first-time guests. That's definitely been the case. There's a lot of individuals that come certainly from the Northeast that maybe came in or other islands within the Caribbean that they chose to travel to the US and stay within the US. They've been incredibly pleased with the resort. When we bought this resort, it was one of the lowest-risk Carltons in terms of guest satisfaction on a percentile ranking within the risk brand. And we had a plan to continue to upgrade that. And the comments and guest feedback has been great. And that's why you're seeing a lot. We're actually not only seeing the first-time guests that stayed at our resort, but they're coming back months later and returning back to the resort. So I think that this is a unique opportunity for us to showcase this resort. And we're doing a good job. I think the team's done a great job. We've got a great team with Marriott. We've worked with Marriott to develop, I think, a great team within that property. And everybody was just anxious, all the associates, because they've been through so much, going through Irma, then this pandemic. And I think that that property is as energized as it's ever been. And we're very excited on the future of that property.

Okay, very helpful. And the last question for me, there's a story out there about an asset in one of your markets that's rumored to be for sale for $2 million per key, which I think at the company really supports the value of your real estate. You know, it appears thus far that there's been a lot less distress out there in terms of assets than perhaps everybody expected. So if you could just talk a little bit more about that fact, what's contributing to to that, you know, and potentially if you think there might be a wave, whether it's from CNBS or other things happening in the future, I'm interested to think there could be more opportunities on the luxury side of things, just in terms of assets on the market at favorable valuations. Thank you.

Yeah, thanks, Tyler. Well, I think there's really two things driving the pricing support in the market. One is, as you know, from the period between kind of March and November, generally forbearance from lenders was widely available. This doesn't apply to the four seasons in Cal-Sovia you're talking about, which I'm happy to mention. But generally, there's been forbearance, so banks have been, and special services to some degree, have been somewhat accommodating. I think that is going to change in the forbearance 2.0 world where, you know, the problem has become sized in such a way that, you know, banks can be a little bit more aggressive and entertain the idea of ownership foreclosure and or sale. So whereas we haven't had much distress yet, you know, you could see more distress sales start to come this year, really kind of starting in a couple of months, maybe in the second half of this year. The second factor that's supporting prices is the weight of capital. There's been hundreds of billions of dollars raised in private equity formats to acquire real estate, and then even more specifically hotel real estate over the last 12 months. And that competition for deals is something that we haven't seen for years. And that's capital that needs to be deployed. And so that's also providing a lot of pricing support in these situations. So I don't necessarily – and I think the weight of that capital is going to be so much that I don't think we're going to see deeply discounted hotel sales. Where you really see that is when you don't have adequate supply of capital. You know, the other thing that obviously from a macroeconomic perspective that's driving all this is, you know, we're in an era of increased money supply. So there is a lot of asset, you know, high asset valuations out there, and, you know, that's providing liquidity to the entire system. So we're going to continue to assess acquisition opportunities, but I really don't think we're planning on deeply discounted, I think one of the things that we do believe is you may get an opportunity to acquire things that wouldn't otherwise come to the market, just kind of based on the dynamics of the pandemic and how things shake out, but not necessarily at generational type attractive pricing.

Thank you. As a reminder to our audience, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question comes from Brian Marr with B Reilly. Please proceed with your question.

Good morning, guys, and thanks for those comments so far. We all know that the resort business has been doing pretty well, and you guys commented that bookings remain strong today. But can you give us a little bit of color on the five urban assets? I mean, are those just kind of dead in the water for a while? Are you seeing a pickup there at all? Is there any inbound group calls for the second half of this year? Just can you give us a little more color there? Sure, Brian. It continues to be a very short booking window without a lot of visibility. I don't think there's anything we can say that we've seen any – that are meaningful at this point. We continue to outpace our internal forecast, which tend to be pretty pessimistic because we want to manage towards very low-cost structures and assume basically the worst and try to drive better performance from a liquidity and a performance perspective. But it just tends to be still very, very short-term in nature. But we are seeing... So when we go through and look at a forecast, what you're saying, January and February, we are seeing pace of bookings increase where we stand like in the month, for the month. And that's not just for the resort location. So there is an acceleration to demand. I wish I could say that it's a significant snapback, but I can't say that as we stand here today. But as you see, the caseloads are coming down. Pretty significantly, you can see that the vaccinations are getting out, and they seem to be working incredibly well and seem to be very, very safe. And so as that continues to be disseminated across the population, we know that people are going to travel again. And it's just a matter of time, not if. And so we're seeing some increased demand, but it's not a snapback yet, and it still tends to be very, very short-term. I'll put some more numbers around that for you, Brian. So our urban portfolio was running in kind of the mid-to-high teens occupancy in the fourth quarter, whereas as of last week, we're at 30% occupancy. So... You know, that's a good trend, right? So we're definitely, in fact, a little over 30% accuracy. So it's a slow grind back, and I think we're going to get there in the second half of the year and have those properties breaking even is the plan, and that way we'll get to a corporate cash flow positive. But, look, you know, with cases dropping the way they are, I think people are gearing up to start taking some business trips. And that's what we're going to need. And that's going to be how we get those properties to break even. And I think thereafter, it's the return of city-wide, some big conferences that will really start to propel the results. Just keep in mind, as you look at our seasonality of our business, that the urban hotels are counter-seasonal to our resort properties. So the resort properties tend to do better this time of year. Irvingston to underperform. And so hopefully as there is an increased appetite to travel for business, we'll start to see that more as early as the second quarter and certainly the third quarter of next year, or this year. Great. And the one kind of resorty hotel that you have that did not perform well, La Jolla, I think Repar was down 73%. We were a bit surprised at that property, given its kind of drive-to ability from San Diego and L.A. Was there something specific going on there that would have caused that? Yeah, that's a tricky one to pigeonhole, if you want to classify. We called it a resort property. Historically, it's performed somewhere in between. There's a lot of biotech business that comprises its demand mix. So it's a really, what do you want to call it? It kind of sits on the fence. We've thrown it into the resort category due to its proximity to the famous Torrey Pines golf course. But yeah, it definitely is performing a little bit differently than the rest of the resort portfolio. The recovery and return of performance of that property will be based on the same trends that we see in the urban portfolio. I think if we were to extricate that from resorts and call it urban, our resort portfolio would be zooming even higher. But that's definitely the case. And one thing about Torrey Pines is it traditionally is one of our few properties where group ADR actually outperforms transit ADR. So it does really well with group business historically. And that group, obviously, has just been non-existent. And if you look through the government restrictions, in November 14th of 2020, San Diego moved into more restrictive, what they call the purple tier. And then early December, they actually did a stay-at-home order, and that increased restrictions, travel restrictions. And then they had another stay-at-home order on the 5th of December. So those restrictions weren't released until after the the fourth quarter. So I think a lot of it has to do with not only that there is about a corporate business and group business, but then also just the heavy restrictions that California has put in place relative to other states across the U.S. Great. And just two quick ones for me. Why did you guys do the standby equity distribution agreement, the 7.8 million shares, instead of a regular ATM?

Hey, Brian. It's Derek. Well, we do have our ATM in place, and that's something that we've got capacity on. The standby equity distribution, it's something that we did years ago at AHP, and there are certain periods of time when you've got to have your ATM turned off. And we just thought it was smart capital management to have another option that's available to us if and when we need it. And so we thought it just made sense to have that put in place. It's kind of like an ATM to some extent, but it has a little more flexibility. So we just thought it was smart capital management to put that in place.

Okay, thanks. And then just quickly, you know, the Waldorf Astority in Chicago just traded for $54 million today. which just screams of a, of a buy. Is that something that you guys bid on or did you pass because it's Chicago and Chicago's tough? And, you know, are you seeing anything else out there like that where you can get a huge discount and you're willing to wait 12 to 24 months? You know, you're going to have love doing that deal later. Yeah. Right. We did look at it. Uh, we saw it, um, that the hotel's not, uh, profitable enough for us. Uh, So that's a very, very competitive luxury market right within that kind of two-mile radius where you've got not only Sobatel, but you've got the Peninsula, you've got the Four Seasons, you've got the Park Hyatt. And that property struggles to get adequate share to be profitable. And so while the headline on a dollar per key does look attractive, and we see that, for a company that, like ours, is interested in generating cash flow for our shareholders, it wasn't the right fit for us. Okay. Thank you for all those comments. I appreciate it. Thanks, Brian.

Thank you. There are no further questions at this time. I'd like to turn the floor back over to management for any closing remarks.

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

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