Braemar Hotels & Resorts Inc.

Greetings. Welcome to the Braemar Hotels and Resorts Inc. Second Quarter 2021 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 will now turn the conference over to your host, Jordan Jennings, Investor Relations for Braemar. Thank you. You may begin.

Good morning and welcome to today's call to review results for Braymore Hotels and Resorts for the second quarter of 2021 and to update you on recent developments. On the call today will be Richard Stockton, President and Chief Executive Officer, Derris Eubanks, Chief Financial Officer, and Jeremy Walter, Chief Operating Officer. Your results as well as notice of 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 and this conference call contain or are based upon forward-looking information and are being made pursuant to the safe harbor provisions of the federal securities regulations. Such forward-looking statements are subject to numerous assumptions, uncertainties, and known or unknown risks, which could cause actual results to differ materially from those anticipated. These factors are more fully discussed in the company's filings with the Securities and Exchange Commission. Before-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 the SEC on July 29, 2021, and may also be accessed through the company's website at www.dhrb.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. Welcome to our second quarter earnings conference call. I'll begin by providing an overview of our business and an update on our portfolio. After that, Derek will provide a review of our financial results and then Jeremy will provide an update on our asset management activity. Afterward, we'll open the call for Q&A. We have five key themes for today's call and they are, first, Our luxury resort portfolio continues to outperform, resulting in $24.7 million of hotel EBITDA for our company and an average daily rate of over $380 for the quarter. Second, for the second quarter in a row, we were cash flow positive at the corporate level. Third, our portfolio is well positioned to continue to outperform with very strong forward bookings for the third quarter. Fourth, our balance sheet is in good shape with no near-term debt maturities. And fifth, we announced the planned acquisition of the Mr. C. Beverly Hills Hotel in Los Angeles, California, a luxury hotel ideally located in close proximity to high-end shopping on Rodeo Drive and business demand from Century City and Culver City. I am pleased to report comparable hotel EBITDA of $24.7 million during the quarter, which was driven by strong occupancy levels at our resort properties and a 35.1% increase in ADR over the prior year quarter. Additionally, rev par for all hotels in the portfolio increased approximately 875% for the second quarter of 2021 compared to the second quarter of 2020. Our portfolio rev par decreased approximately 20% when compared to second quarter 2019 rev par. EBITDA margins continue to be healthy at over 25% across the entire portfolio. This result is accentuated by particularly strong results at the Bar de Sono, Pier House, and Hotel Yonville, each of which had margins in excess of 40%. While leisure demand continues to be strong, particularly on weekends, any significant uptake in Red Park performance is likely to rely on the recovery of corporate transient demand and ultimately group demand. Overall, our resorts continue to perform well, and forward bookings continue to look strong with occupancy for July for our portfolio looking like it will come in over 70% at a rate of over $350. 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, Bar De Soto, Hotel Yonville, Ritz-Carlton Lake Tahoe, Pier House Resort, Park High at Beaver Creek, Hilton La Jolla at Torrey Pines, and the Ritz-Carlton St. Thomas. We are pleased to report that this segment delivered a combined hotel EBITDA of $26.3 million for the quarter. I'm also encouraged by the advancing recovery of our urban properties. These properties include the Capitol Hilton, the Marriott Seattle Waterfront, the Notary Hotel, the Clancy, and the Soap Hotel Chicago. For the second quarter, two of these five properties posted positive hotel EBITDA, while one of the negative quarter results properties was only down approximately $150,000. This is a significant turnaround and demonstrates that demand is quickly returning to our cities, both amongst the leisure and, to a lesser extent, the corporate transient segment. We expect this trend to accelerate as office reopenings continue during the second half of 2021. Additionally, we were cash flow positive again at the corporate level for the second consecutive quarter. While our balance sheet was in good shape as we entered 2021, this puts us in a much stronger position financially. We're also very happy to resume our growth strategy with the planned acquisition of the 138-room Mr. C. Beverly Hills Hotel in Los Angeles, California for $77.9 million. An irreplaceable luxury property in a premier location in Los Angeles, this acquisition fits perfectly with our strategy of owning high rev par luxury hotels and resorts and further diversifies our portfolio. There's also an attractive price per key of $474,000 for fee-simple ownership of a luxury hotel. It's an impressive property in the middle of over 45 million square feet of office space, supporting substantial corporate demand and a wide array of world-renowned leisure demand generators, including unrivaled shopping with high-end retailers, vibrant restaurants, and various art and cultural attractions. As part of the transaction, we will also acquire five luxury condominium residences adjacent to the hotel, which will be offered for extended stay rentals prior to being ultimately monetized. Additionally, Remington will take over management of the hotel post-acquisition which we believe will help drive superior operating performance at the property going forward. The Mr. C represents our first acquisition during the current industry cycle, and we believe this property will be a great addition to our portfolio. On the capital markets front during the quarter, we completed a private placement of $86.25 million aggregate principal amount of 4.5% convertible senior notes due 2026. Importantly, we used a portion of the net proceeds of the offering to repay the amount outstanding under our secured term loan. The prior corporate term loan had restricted covenants that not only severely limited our capital expenditure program, prohibited property dispositions, and disallowed common dividends, but also would not have allowed us to complete the Mr. C acquisition. We were also recently added to the U.S. small-cap Russell 2000 Index and the U.S. broad-market Russell 3000 Index, and the Russell Microcap Index as part of the Russell Index's annual reconstitution. We believe our addition to the indexes will increase our visibility within the investment community as we execute on our strategic initiatives. Looking ahead, our unique portfolio, focused on the luxury segment, with many properties and drive-to leisure markets, positions us to perform well in both the near term and the long term as business and group travel resumes. We continue to believe that Braemar represents a compelling opportunity in the lodging REIT space. We are a differentiated story with the majority of our assets in very desirable resort locations, the highest quality portfolio in the public markets, a portfolio that is generating positive cash flow at the corporate level, and what we believe is a solid liquidity position and balance sheet with attractive debt financing in place. I will now turn the call over to Derek.