Hello. And thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Braemar Hotels & Resorts Inc. First Quarter 2024 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Jordan Jennings, Director of Investor Relations. Please go ahead.

Good morning, and welcome to today's call to review results for Braemar Hotels & Resorts, the first quarter 2024 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 Chris Nixon, Executive Vice President and Head of Asset Management. The 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 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 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 the company's tables or schedules, which have been filed on Form 8-K with the SEC on May 8, 2024, 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. Also, unless otherwise stated, all reported results discussed in this call compared to the first quarter ended March 31, 2024, with the first quarter ended March 31, 2023. I'll now turn the call over to Richard Stockton. Please go ahead, Richard.

Good morning, and welcome to our 2024 first quarter earnings conference call. I'll begin today's call by providing an overview of our business and update on our portfolio and our recently announced plans to create additional shareholder value. Then Deric will provide a review of our financial results, and Chris will provide an update on our asset management activity. Afterwards, we will open the call for Q&A. We have several key themes for today's call. First, we're pleased to report that while our overall RevPAR performance for the quarter was essentially equivalent to last year, our luxury resort portfolio had positive RevPAR growth in the first quarter. Second, our last two acquisitions, the Ritz-Carlton Reserve Dorado Beach and the Four Seasons Resort Scottsdale at Troon North are each performing well and continue to exceed our original underwriting. Third, as we continue to diligently work through our refinancing program. We have refinanced, extended or paid down almost all of our 2024 debt maturities. And fourth, we are excited to have announced a shareholder value creation plan which comprises selling select assets in order to repurchase common and preferred shares to improve our capital structure and opportunistically arbitrage the gap between our share price and net asset value per share. Let me first turn to our results. We are pleased with our portfolio's first quarter performance. In light of challenging year-over-year comparisons at our Four Seasons Resort Scottsdale, which benefited from demand related to the Super Bowl and the Phoenix open occurring in the same week last year. We reported comparable RevPAR of $368 which was essentially equivalent to the prior year quarter and hotel EBITDA of $71 million. We are very encouraged by the overall performance of our luxury resort portfolio which posed a positive year-over-year growth in both RevPAR and…

Thanks, Richard. For the quarter, we reported net income attributable to common stockholders of $3.5 million or $0.05 per diluted share and AFFO per diluted share of $0.42. Adjusted EBITDAre for the quarter was $66.2 million, at quarter end, we had total assets of $2.3 billion. We had $1.2 billion of loans, of which $44 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 at a blended average interest rate of 7.8%, taking into account in the money interest rate caps. Based on the current level of SOFR and our corresponding interest rate caps, approximately 77% of our debt is effectively fixed and approximately 23% is effectively floating. As of the end of the first quarter, we had approximately 39.6% net debt to gross assets. We ended the quarter with cash and cash equivalents of $137.1 million and restricted cash of $82.4 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 $23.8 million in due from third-party hotel managers. This primarily represents cash held by one of our brand managers, which is also available to fund hotel operating costs. With regards to dividends, we again announced a quarterly common stock dividend of $0.05 per share or $0.20 per diluted share on an annualized basis. This equates to an annual yield of approximately 7.7% based on yesterday’s stock price. Our Board of Directors will review the company’s dividend policy on a quarter-to-quarter basis with a view to increasing it as financial performance improves. During the quarter, we extended the loan secured by the Pier House Resort & Spa in Key West, Florida. The loan now has an initial…

Thank you, Deric. For the quarter, comparable hotel RevPAR for our portfolio was nearly flat with the prior year quarter at $368. Comparable hotel total revenue increased by 2% over the prior year quarter. First quarter comparable hotel total revenue was 28% higher than the same quarter in 2019 which represents a 5% compounded annual growth rate over the last five years. This growth has primarily been driven by rooms and food and beverage revenue, which have grown by 35% and 22%, respectively, compared to the same time period in 2019. While the top line has increased, we are also controlling expense growth, which has led to margin improvements in several areas on our hotel P&Ls relative to 2019. This focus on cost controls resulted in hotel EBITDA margin expansion of 95 basis points in the first quarter compared to 2019. I would like to spend some more time highlighting how our team has actively increased our group position across our portfolio, generated margin expansion and capitalized on ancillary revenue initiatives. Group pace continues to accelerate across the portfolio. Group rooms revenue for the full year is pacing ahead of last year by 3% with the second quarter through the balance of the year, pacing ahead by 7%. We are seeing the group booking window continue to expand as meetings are being secured further out. This helps us effectively layer in groups and optimize our business mix. Our 2025 group room revenue pace is currently ahead by 10%. While year-over-year group lead volume has started to normalize, conversion rates remained strong and the average group booking size continues to increase. This has resulted in increased sales efficiency across many of our hotels. We are seeing strength from the incentive market, which represents corporation rewarding their highest performing employees and partners.…

Thank you, Chris. In summary, I’d like to reiterate that we continue to be pleased with the performance of our hotels. We also remain very well positioned with a solid balance sheet and promising outlook. We look forward to updating you on our progress in the quarters ahead. This concludes our prepared remarks, and we will now open the call for Q&A. Please note that due to the ongoing litigation resulting from an activist campaign, we will not be able to respond to questions on that specific matter. Please limit your questions to those concerning the company’s assets, operations, management’s industry outlook and capital allocation priorities as well as our recently announced shareholder value creation plan. Thank you.

[Operator Instructions] And our first question will come from the line of Bryan Maher with B. Riley Securities. Please go ahead.

Thank you and good morning. Just a couple for me today, sticking with your criteria. On the La Jolla property, how is that property marketed? And are there any backup buyers if that deal were to fall apart?

Yes. Hey, Bryan. Thank you. Yes. So we hired a broker to market the property, which was Eastdil. And they went out to a very broad set of potential buyers. In fact, we signed over 80 confidentiality agreements with prospective buyers, which were a mix of private equity companies and then some other just kind of privately financed buyers and some of the REITs. And in the end, we received about half a dozen offers there were a dozen or so tours conducted. And then we ran a second round and ultimately ended up with JRK being the highest bidder. They do have a non-refundable deposit down. It’s like I said, only subject to a groundless or consent. So the need – there is no real need for a backup better. But that said, as I said, we had a half a dozen bids come in. So there’s certainly broader interest in the asset than just JRK.

And what inning are you in with the marketing of the other two properties that you’ve mentioned?

On one, we have selected a broker already who is drafting an offering memorandum as we speak. And then the second one that we are looking at for next year, we haven’t yet started the process.

Okay. And then maybe just shifting to some property fundamentals. Can you give us a little color on what’s going on with Cameo? The RevPAR there was pretty light. I didn’t know if there was anything one-off going there in the quarter or if there’s something a little bit more systemic and also the last couple of quarters, we’ve noticed weakness in NAV. Can you give us some color on that market as well? And that’s all for me.

Yes. Thanks, Bryan. I can take that. So in Cameo, we saw for the first quarter, the LA market as a whole was soft. I think occupancy ADR and RevPAR were all down. The hotel had a lot of production last year from Amex’s Fine Hotels and Resorts program. The hotel is no longer in the program as we transition to the Hilton platform, but we are very optimistic that once the conversion is done, we’ll be able to benefit from that program again. The white label with Hilton, obviously, we’re not recognizing all of the upside with associating with LXR until the conversion is complete. The direct contribution from hiltonsbrand.com channel is improving, but obviously, we’d like that to happen much quicker. And so those have been some of the challenges there with that hotel. In terms of Yountville and kind of what we’re seeing there, it’s still broad market softness. We’re seeing some of the high-end luxury hotels doing very aggressive things in terms of rates to try to capture production. We’re still feeling some of the softness from travelers coming out of San Francisco associated with the tech layoffs. And where we’re seeing that they’re just – with fewer employed, they’re not taking those weekend trips to Napa. And so ADR in that market has been challenged. But we also underwent a room renovation at Bardessono in Q1 that further kind of challenge the results there. The renovation is complete. We're optimistic about kind of the outlook and the additional ADR premium we'll get now with the new Rome product there.

Okay. Thank you.

[Operator Instructions] And our next question will come from the line of Tyler Batory with Oppenheimer. Please go ahead.

Good morning. This is Jonathan on for Tyler. Thanks for taking our question. First one for me, helpful commentary so far, but can you just talk about what's driving the strength in the Caribbean and the strength of the leisure customer in your Caribbean markets compared to maybe what you're seeing in the domestic markets?

Yes. Great question. The major benefit was the festive season extended further into January, which helped very, very strong there. In Dorado, you heard us reference in our prepared remarks kind of the impact of the residential program there and the residences, those come in very, very high rates. We've been successful in kind of increasing the distribution platforms that those are sold through. And so we're getting a lot more demand for kind of that high-end room product. Out in St. Thomas, we benefited from an early spring break. We thought there would be a pretty significant impact from some of the recent hotel openings there. And really, there was kind of an initial pop in terms of impact to transient, but that's subsided in Q1. We didn't really feel any impact from Bonvoy. We started kind of proactively grouping up at that hotel to try to insulate ourselves from any impact, but we were very, very pleased with the results.

Yes. And I would add on Dorado Beach specifically, this is a hotel that sits within a almost 2,000 acre master plan development that is experiencing a lot of activity, a lot of demand for residential just as a result of really demographic shifts of U.S. citizens on the mainland moving to Puerto Rico and they're realizing all-time high selling prices for their homes and generating, therefore a lot of ancillary activity related to hospitality demand, too.

Okay. Great. I appreciate the color there. And then maybe just a clarification question or a question on the [indiscernible] disposition. Does that disposition change kind of – I know it's been a while, but change how you think about the joint venture partnerships. And did that kind of – can you just walk us through? Did that have any impact on the disposition?

Yes. Well, I will say this. Park has been a great partner for us on these two hotels, and we've been joined at the hip for several years. There certainly was no – any sort of this quarter or anything else as a result of our relationship with them that caused the sale. But we jointly agree that it would be a good time to monetize this asset, particularly in light of the upcoming capital expenditures that were necessary. As we look to our remaining joint venture asset, Capital Hilton that one, we've just, in fact, completed a major renovation. We're very excited about the election season coming up. As you probably know, hotels such as this, Washington, D.C., tend to perform very well during the election season and we'll have brand-new product to offer the market. So we'll assess whether or not we want to do something with that hotel next year after we get through that. And, yes, I think otherwise, Park and us are quite happy that fellows.

Yes. I'll add one note on the capital renovation. I mean the hotel was under massive renovation for Q1, finishing up the work there. We added nine keys, and we still grew total revenue year-over-year by 5%. The renovation finished on March 9th and when you look at kind of the performance of just March as a whole, that hotel was up 20% year-on-year in transient revenue. And so we're very excited and optimistic about the outlook of that hotel with the new rooms product and what it's going to do there.

Okay. Excellent. Very helpful. Thank you for all the colour. That's all for me.

Thanks Jon.

This concludes our question-and-answer session. I'll hand the call back to management for closing remarks.

Well, thank you for joining us on our first quarter earnings call, and we look forward to speaking with you again next quarter.

That will conclude our call for today. Thank you all for joining. You may now disconnect.