Hello, and welcome to Braemar Hotels & Resorts Second Quarter 2020 Results Call [Operator Instructions]. As a reminder, this conference is being recorded. Its now pleasure to turn the call over to Jordan Jennings, Investor Relations for Braemar Hotels & Resorts. Please go ahead.

Good morning. And welcome to today's call to review results for Braemar Hotels & Resorts for the second quarter of 2020, and to update you on recent developments. On the call today will be Richard Stockton, President and Chief Executive Officer; Deric Eubanks, Chief Financial Officer; and Jeremy Welter, Chief Operating Officer. The results, as well as notice of the accessibility of this conference call on a listen-only basis over the Internet, were distributed yesterday in a press release. 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 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. 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 8-K with SEC on July 30, 2020, and may also be accessed through the company's website at www.bhrreit.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 2020 earnings conference call. I will begin by providing an overview of our business and an update on our portfolio, including the reopening of almost all of our hotels. After that Deric will provide a review of our financial results. And then Jeremy will provide an update on our asset management activity. Afterward, we will open the call for Q&A. The COVID-19 global pandemic has created both social and economic disruption on an unprecedented level, has created a volatile landscape throughout the hospitality industry. As I have said previously, this has been an extraordinary period for all of us and our entire leadership team has been steadfast in our commitment to protect all of our stakeholders during this unprecedented time. A few objectives have continued to guide us, the health and well being of the employees, our hotels, our hotel guests, and the communities in which we operate have been a top priority. And we have taken a number of preventative measures to keep them safe. As stay at home orders were implemented. We quickly adapted to the restrictions and challenges affecting our properties and adjusted the staffing model at our hotels, while reducing other operating expenses, in an effort to preserve cash and minimize near term losses. The vast majority of our portfolio had suspended operations for a significant portion of the second quarter. As we discussed on our last call, we believe that our portfolio was well positioned to benefit as our hotels resumed operations, given that eight of our 13 hotels generated a significant amount of leisure demand. These include the Ritz Carlton Sarasota, Bardessono, Hotel in Yountville, Ritz-Carlton Lake Tahoe, Pier House Resort, Park Hyatt Beaver Creek, Hilton La Jolla Torrey Pines and Ritz-Carlton St. Thomas. We are pleased…

Thanks, Richard. During the second quarter, we recognize $390,000 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 month of March through May 2020. As I mentioned last quarter, we expect these insurance recoveries will taper off going forward. For the second quarter of 2020, we reported a net loss attributable to common stockholders of $46.3 million, or $1 41 per diluted share. For the quarter, we reported AFFO per diluted share of negative $0.58. Adjusted EBITDAre for the quarter was negative $18.5 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 share of the loan on the Capitol Hilton and Hilton La Jolla Torrey Pines. Our total combined loans had a blended average interest rate of 2.6%. Our loans are entirely floating rate and the vast majority of interest rate caps in place. As of the end of the second quarter, we had approximately 53% net debt to gross assets. We ended the quarter with cash and cash equivalents of $103 million and restricted cash of $41 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 $9 million in due from third party hotel managers, this represents cash held by one of our property managers, which is also available to fund hotel operating costs. As Richard mentioned, we have been and continue to work with our property managers and lenders in order to utilize these lender and manager health reserves to fund operating shortfalls at our hotels. To date, we have signed forbearance agreements on…

Thank you, Deric. Comparable RevPAR for our portfolio decreased 91.8% during the second quarter. Business in April was driven by COVID-19 responders and healthcare workers with transient leisure travel, especially on weekends, returning later in the quarter. There was very little corporate business travel, generally RevPAR bottomed out by mid April, and experienced steady week over week growth over the next few months. When it became apparent that the COVID-19 pandemic was going to severely impact our hotel's performance, we took swift action put ourselves in position to weather this crisis. During the second quarter, we significantly reduced operating expenses by 71.8% or $52.1 million relative to the second quarter of 2019. These cuts resulted in hotel in flow through a 49% which is a remarkable accomplishment by our asset managers and our property managers working together. We respond quickly and aggressively to reduce costs in response to the unprecedented decline in hotel revenues. We also temporarily suspended services at 11 hotels. None of those hotels have reopened. For a total of 11 hotels operating for some period of time during the second quarter. We suspended services at these hotels in order to minimize costs, where there was little business in the market. These are unprecedented times, asset management, property management, and brands are all working together. We want to bring back as many associates as soon as we can, once performance justifies bringing them back. Our associates have been stretched to their limits, working through a challenging situation. Folks have risen to the occasion. We're proud as a management team to see how everyone has contributed. We'll been asked to do more for less. We're also seeing our property managers emphasize and focus on newly implemented cleanliness and safety standards. Many of our hotels are in drive to leisure…

Thank you, Jeremy. In summary, our focus during the quarter was on quickly adapting to the unprecedented disruptions and uncertainty caused by COVID-19 pandemic, and wide ranging public health efforts to control it. We have taken decisive actions to navigate the near term challenges of this crisis. And while we cannot predict the trajectory of the pandemic, we are encouraged as we look ahead. 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 the balance of this year. This concludes our prepared remarks and we will now open the call for Q&A.

Thank you. [Operator Instructions] Our first question today is something from Bryan Maher, B. Riley FBR. Your line is now live.

Good morning, everyone. A couple of questions. And I apologize if I missed it. I'm guessing that the Courtyard San Francisco is going to open when the construction is completed in September. Is that correct?

That's correct.

And then the Capitol Hilton, what were the thoughts there on getting that reopen?

We're going to try to have that open by the end of August.

And then, and maybe this is a question for Deric. You know, you ran through the numbers, I guess, on the monthly burn rate that were pretty helpful. But to just kind of clarify, it's roughly $5 million for the hotels, $2.5 million on interest expense. Was that all interest expense or was that just, you know, one component of it?

Yeah, no, that includes all interest expense. Even though we do have some forbearance agreements in place where you're not currently paying interest, but it is assumed that we were paying the full load [ph]

And what happens? When is the interest that's being forbear when is that paid back at the end of the loan, at some point over the next year or two? How is that handled?

Yeah, it really it differs by agreement. But on the five that I mentioned, that we have signed, that would be paid at the final maturity.

Okay. And then the last component was, I think you said $1.3 million to G&A-ish type expenses. So that gets about a $8.8 million a month burn rate, would that be roughly accurate?

Yes, that's right. And let me just clarify on the G&A, that includes both our corporate G&A and the reimbursable expenses under our advisory agreement, really have to kind of look at those together.

Okay, great. That's, that's helpful. And then can you talk briefly about – you talked about 25% SG&A cost savings. How sustainable is that? I mean, as you look out 6, 12, 18 months from now, you know, clearly there's some things you're probably putting in place that might carry over. You know, how should we think about that? You know, down the road a little bit?

Yeah, I think that's a sustainable run rate. I think if you look at our second quarter numbers, it won't fully reflect those cuts. There were some things in the second quarter that just from a seasonal - seasonality standpoint, we won't have going forward. But when you look at it, our ongoing annual run rate and excluding one time items that we add back, and when you combine G&A with the reimbursable expenses, we feel very comfortable with that run rate going forward.

Great. And then just last from me, on the Ritz Carlton, St. John [ph] can you give us an update on what's going on there as it relates to, customers actually getting to that property from an airlift standpoint?

Yeah, I I'll take this and then Rich will jump in. Yeah, so the Ritz Carlton St. Thomas, you know, it's phenomenal. After, you know, we basically rebuilt the hotel. And it's just, it's, it's fantastic. And there's just a lot of, you know, pent up demand for folks to get out and travel. You know, there is a requirement coming from states it has a threshold of 10% of positivity rate, that you actually have to receive a negative COVID test before you travel to the US Virgin Islands. But that hasn't really hurt demand so much, because what we're seeing is, is that a lot of folks that otherwise would want to go to a Ritz Carlton, you know, in locations that are, you know, other islands, other countries in the Caribbean, or were in you know, places like Bali or wherever, they want to get out, and any including why as well, they want to get out and travel. And so what we're getting is, is we're getting a lot of first time guests to our hotel, which I think is a great opportunity for us because a lot of folks never really considered the US Virgin Islands are staying in the US Virgin Islands. And so our, you know, our goal is to recapture that business going forward as well. So, it's just a change in, it makes a demand what we're getting. But given that, you know, the fact that it's not a drive to market, we're seeing some pretty good numbers coming out of that hotel, much more so than we would have ever anticipated. If you asked us, you know, four weeks ago, six weeks ago or eight weeks ago, it's just been very positive. Rich, you want to…

Yeah, I know. I'm going to be a little bit more specific with the numbers. I think it's worth saying, to give you a sense of how surprised we are, we're running over 70% occupancy at the hotel at a rate that is exceeding our premium levels. So one of the things that the government of St. Thomas is doing is requiring testing for people entering the country. And we were concerned that that would dissuade people from traveling. I think it's as much of a tractor in that people know if they go to St. Thomas, they're relatively safe from contracting the virus. So it's just going great. It's been a fantastic investment. We're very happy with it.

Right, thanks. That's all for me.

Thank you. [Operator Instructions] Our next question today is coming from Tyler Batory from Janney Capital Markets. Your line is now alive.

Thank you. Good morning. A couple questions from me. And the first one just to follow up on Brian's question about the cash burn. And I just want to be very clear on this, I think last quarter, you're talking about $14 million of cash burn per month, now you are $5 million. So can you please elaborate on the delta between those two numbers?

Yeah, I can. Yeah, just I think it's apples and oranges. The $14.3 was the all in number, and $5 million is just the hotel level burn. So you want to compare the $14.3 to the $8.8, the $8.8 is the total number, including G&A. And as Deric mentioned, that includes an interest expense. That's kind of the accounting interest expense, but some of that has been deferred, due to forbearance agreements, I'd say about half of it is deferred.

Yeah, and the other factor there, Tyler is, you know, last quarter, we had the vast majority of our portfolio closed. And so if you just look at the operating shortfall, the property level, obviously now open and the vast majority the portfolio open and operating and generating revenues. That's what's brought the number down.

Okay, perfectly. That’s clear. Appreciate that. And, you know, look, I know you guys can't give guidance here, but there are a lot of investors now trying to sort through what's going on in July here. So any comments you can make on industry trends in July and then also wondering if you can discuss the luxury sector specifically, its performance thus far and any thoughts on you know, what that sector of the industry may look like? And, you know, in the next couple of months here?

Sure, and you know, one thing that we've seen Tyler's is that in the recovery in the ramp up, it's not necessarily ramping up differently according to change [ph] scale segment, but whether or not your urban or your resort. And there's a lot of enthusiasm about, you know, drive to leisure demand, but as we've seen with the Ritz Carlton St. Thomas, you know, fly to leisure demand is equally strong. So it's really those - that's the tale of two cities, is it resort or urban and the resort are resort properties are - we we're opening many of them in June, and now they've been fully open for July, I'll give you a little insight. We're averaging at least 50% occupancy at those properties with an ADR that is approximately flat to 2019. But if you look at the urban properties, they're not performing very well at all. In fact, we have two of them that are closed, right? So the ones that are open, you know, we're doing something like, you know, 10% occupancy at a rate that's 25% down. So, luckily for us, you know, our portfolio is majority resorts. And so we have, you know, eight properties out of 13 at a resort and we're really benefiting from that, I think will continue to benefit from that as we go into the fourth quarter. The forward bookings look relatively healthy. You know, and it's really because they're being propped up by the continued resort demand and advance bookings. So, you know, as far as corporate transience is concerned, in group business, I think we're really waiting on further medical advancements, to give people confidence to make that sort of travel a big contributor. And my concern is that probably will continue to be weak in the fourth quarter, but hopefully by the first quarter of next year, assuming there is a vaccine, you know, that will begin to recover as well. And I think when it does recover, it will recover pretty quickly.

Yeah. And one of the things I want to add is that, when you look at some of our resort locations like Bardessono or Yountville or Pier House, you know, they're pretty efficient boxes. I mean, there's just not a lot of overhead or labor, and they get - generate pretty attractive ADRs. And so they can, you know, cash flow possibly at a much lower occupancy level than a lot of other traditional resorts that you would think through. So we've got that going for us. And then as well as there's one anomaly that I want to point out in an urban location is that, you know, and so we've actually had some demand for, you know, staycationers, folks that are now from the suburbs, from other parts of, you know, Illinois or northern Wisconsin that are coming in and staying in Chicago for the, you know, for the week or weekend. And so, that's been a little bit of a positive sign that we've seen as well.

Okay, I'll leave it there. Thank you.

Thank you. We reached end of our question-and-answer session. I would like to turn the floor back over to management for any further or closing comments.

Well, thank you everybody, for joining the call for our second quarter earnings. And we look forward to speaking with you again on our next call.

Thank you. That does conclude today's teleconference. You may disconnect your lines this time and have a wonderful Day. We thank you for your participation today.+