Greetings and welcome to the Pebblebrook Hotel Trust Fourth Quarter and Year-End Earnings Conference Call. At this time all participants are in a listen-only mode. A question and answer session will follow the formal presentation [Operator Instructions] It is now my pleasure to introduce your host, Raymond Martz, Chief Financial Officer. Thank you, sir. Please go ahead.

Thank you, Donna. And good morning, everyone. Welcome to our fourth quarter 2021 earnings call webcast. Joining me today is Jon Bortz, our Chairman and Chief Executive Officer. But before we start, a reminder that many of our comments today are considered forward-looking statements under federal securities laws. These statements are subject to numerous risks and uncertainties as described in their SEC filings and future results could differ materially from those implied by our comments. Forward-looking statements that we make today are effective only as of today, February 23rd, 2022, and we undertake no duty to update them later. We'll discuss non-GAAP financial measures during today's call. We provide reconciliations of these non-GAAP financial measures on our website at pebblebrookhotels.com. While 2021 was another challenging year for the hotel industry and Pebblebrook, we made significant progress on a road to recovery. We thank our hotel teams and operating partners for their hard work, sacrifices, and creativity over the last two years. Our portfolio continues to benefit from their tremendous efforts as we enter the recovery and growth phase following the pandemic. For 2021, our same-property hotel revenues increased by over $280 million or 65% versus 2020, with hotel EBITDA at a positive $132.1 million. This marked a tremendous improvement from 2020 when our hotel EBITDA was negative $27.5 million. Our adjusted EBITDA finished at $88.3 million compared with negative $69.7 million in 2020, again, considerable progress from a year ago. And while we still have much work ahead, we believe we have considerable upside to come. Adjusted FFO per share ended 2021 at a negative $0.32. A substantial improvement from 2020, at -$1.46 per share. And during the second half of 2021, we generated positive Adjusted FFO of $0.22 per share, it was trading a trajectory of rapid improvement in…

Thanks, Ray. I'm going to try to be reasonably brief and point it so that we can get to the Q&A. Demand has firmed since the January pullback. Business travel, which took a break in January from a material recovery in the fourth quarter is noticeably improving. Citywise and larger business group meetings are happening. Group lead volume, site tours, and bookings have increased substantially in the last few weeks. Most groups that canceled for January and February have rebooked and done so at higher rates. February is turning out to be much better than we expected just a few weeks ago, particularly the second half of the month. We expect same-property revenues to be down between 25% and 28% versus 2019. Pick up in March has accelerated in just the last two weeks. Both holiday weekends in February turned out well and Super Bowl in LA for u, added $3 million to $4 million as we achieved around 90% occupancy of our 1786 West LA rooms at a rate of around $800 per night for four nights. Our revenue management teams did a terrific job. We're seeing a significant increase in business transient, and group travel as Omicron recedes and masking and vaccine mandates are relaxed or eliminated. We believe there is significant pent-up business demand to aid a continuing robust level of leisure demand. And there is currently little to no price sensitivity from either leisure or business customers. We're very optimistic about an accelerating recovery in business travel over the next three to four months, and we're already seeing it for March and April. And we're extremely excited about the potential growth in occupancy and rate, in particular, over the next few years. There will be limited new supply over the next three to four years in…

Thank you. Ladies and gentlemen the floor is now open for questions. [Operator Instructions]. In the interest of time, we do ask that you please limit yourself to one question and one follow-ups. [Operator Instructions]. Our first question today is coming from Gregory Miller of Truist. Please go ahead.

Thanks. Good morning. I look to start off asking about San Francisco, as investors remain focused on your exposure there. Jon, I learned yesterday evening that you were with Park Hotels CEO, Tom Baltimore, meeting with city leaders. Could you share your latest views on the hotel market and your portfolio there?

Sure. Hey, thanks, Greg. So yes, Tom Baltimore and I went out to San Francisco in mid-December for a meeting arranged by the California Hotel and Lodging Association. And we met with the Mayor and we met with the chief of police, and we met with the head of economic development for San Francisco, and had a lot of conversations both before and after that. Went in to the meaning extremely skeptical with a concern that the focus the rejuvenated focus by the Mayor related more to the issue of the smash-and-grabs that took place -- the mass smash-and-grabs that took place in Union Square in early December. And concerned that they were not really focused on the issues that had been increasing over really the last five years or so related to the quality of life on the streets in San Francisco. And I would say that both Tom and I, but I won't speak for Tom, but I think we walked away, all of us who are at the meeting, thinking there -- I guess maybe a little like AA, alcoholics anonymous, that the first step in solving your problem is recognizing that you'd -- that you have a problem. And I think we walked away not only thinking that they'd made the first step and that the Mayor was highly focused on fixing San Francisco and turning around the deterioration that have taken place in the last five years in the environment there. But they understood the issues and had the courage to take some bold steps and was particularly impressed that I would say the Marriott kind of said she'd had enough. And I think she got that message, frankly, from the local population where people were fed up and had an up and the city…

It does. I think it was very, very helpful for all of us to get an update. Switching gears on my follow-up question. I thought also I'd ask you about the margin discussion that was in your prepared remarks and related to ADR growth. The significant room rate growth that you have spoken to for several quarters is clearly materializing. I did sense from the prepared remarks that the 100 and 200 bases point margin gains above pre-pandemic levels appear to be driven more from operating savings, not from the profit flow from room rate gains, and maybe you could correct me if I'm wrong. to for those of us who are trying to model, the puts and takes. Could you provide your latest inside and how we should balance out top line growth particularly from room rates of with your long-term profit expectations.

Sure. So it's probably one of the most complicated questions there is because of course, the whole idea of talking about margins compared to 19. It's a moving target, right? With a lot of variables that are moving around, including inflationary increases in costs increases in wages, and then the pricing increases that we've been able to take in all different products and services, including in room rates at this point. But I think what we're trying to get across as it relates to costs because we none of us know what the future is going to bring and what kind of price increases we will ultimately achieve over the next few years. And what the cost increases are going to be over that period of time. But what we do know is we took I think between a hundred and two hundred basis points of cost permanently out of the operating models of our hotels. So what is that mean? It means the clustering that we did probably took 50 basis points or more. The collecting the executive teams and in some cases, even middle management across two or more properties managed by the same property in a market have had big reductions. I mean, if we want example in Boston, we clustered, if you will, the Westin Copley and the W in that market under one executive team. And in many cases, one set of middle managers now. And that's provide, we believe it took out a million dollars of costs permanently, so long as we own the properties, out of operating those two properties on a combined basis. And we have that throughout our portfolio, some of which we started doing pre-pandemic. but the annualized nature of those cost reductions had not yet been fully achieved. So…

Greg, just to add to Jon 's comments, our focus is really more as you think about your modeling, none of the margin side, but the hotel EBITDA side. How do we grow EBITDA and ensure we are confident we can eliminate 100 to 200 basis points from our operating model? But that's from a bottom-up buildup approach versus a top-down approach. So we really look at it more in the hotel EBITDA, how do we expand that? The margins or function of the revenues and expenses, that's not what's driving it, it's how do we grow that? How do we remerchandise the underutilized space? What can we do to add additional rooms or other restaurants in there? Because that ultimately grows EBITDA, which is ultimately what's the biggest focus for us, and not the ultimate margin that's a result of that.

And those are very fair points. I appreciate the detailed responses, especially on these complex topics. Thanks.

Hey, thanks, Greg.

Thank you. Our next question is coming from Bill Crow of Raymond James. Please go ahead.

Good morning, guys. I got one for Ray and one for Tom, assuming Tom's in the room. John earlier brought up the topic of resort fees and I'm just curious if you could tell us the total resort fee income in 2021, how that compared to 2019, how you kind of think about the growth in resort fees going forward. And I guess how important is resort fees and the growth of resort fees in the margins of growth fees to you achieving that goal of 100 to 200 basis points of higher margins this cycle?

Anything related to resort or guest amenity fees has nothing to do with 100, 200 basis points, that's separate. Overall, it's an important part of overall revenue. But again, we're a little bit different as you look at a lot of our properties. We have a host of other different amenities and services and asset. That's part of what we look at the guests many fees and driving all that side and their expenses certainly associated with that as well. So it's a host of different areas there, but we don't want [Indiscernible] again to it, specific details of providing that, but I think what the positive is we are seeing the brands become more receptive to this, so between Marriott and others are being more open to having this. So this is becoming more standard throughout the industry, which I think it'll be a good sign as we enter this new cycle here.

And apps become our accepted. Perhaps grudgingly, but certainly more accepted by the customer. So and the customer is getting value, I think -- look we can't speak for others but at our properties, we try to create these in a way where there's four or five times worth of value for every -- for every dollar of that guest amenity fee, whether it's in a resort market or it's an urban property, or sort of an urban resort property of like properties we have in Santa Monica and in West LA, where the pool complex as an important part of the amenities being provided.

Jon, were resort fees 20% of your total revenue last year or what's -- do you have a number and maybe a comparison to 2019?

No, we don't split out those revenues, just like we don't split out a lot of the different revenues. But it's an important component but it is a relatively small percentage of overall revenues. I think billing it maybe is in 3%-4% range of revenues.

Okay. Jon, one of the comments we get from investors is that there's pretty good clarity on what's going on in Sunbelt Resort market trades, but very little activity so far in urban markets. And I'm just wondering what you're seeing from a prospective buyer perspective, I guess, and you being a prospective seller of some urban assets and what's going on with valuations at interest level on the more typical urban assets side.

Yeah. Well, thank you, Bill, and good morning. I think clearly there is becoming a transition and a pivot from the investor universe where obviously it was all about leisure destinations and resorts over the course of the last 12 to 18 months. The conversations that I'm having directly with investors and with brokers is that that still remains a very critical piece for people, but obviously you're looking at COVID premium pricing for those assets. And I think people are looking at, where are the markets, supply demand dynamics in terms of the urban markets where we can get in? And there's kind of been of -- I don't want to say it's necessarily contrarianship, but there's a lot of capital out there that's chasing deals. They're looking at it for where can they get the best risk adjusted returns, and they're turning to the cities because I think that they think that maybe the worst is behind us. And there is a little more optimism and there is -- maybe it's not called the stress, but there's certainly some opportunity in terms of a basis play from where the urban markets have been to where the potential upside is now. And so we're seeing from a number of the private equity funds and a number of other high net worth that transition to urban. Now, there's not enough data points, so I would say the conviction level is emerging, but we'll see more and more of what I'll say pipeline in the urban markets coming through over the course of the year.

And where the urban markets are a little different than the resort in Sunbelt markets are. Urban markets are still a challenge to obtain debt. It is still a much more difficult in urban CBD locations to get enough deep lending pool for having the transaction. So I look there's lot of capital out there so a lot of these P buyers were maybe could be buying with all cash that that's one thing. But if you need financing to get the transactions, it certainly works in the resort in Sunbelt states. Plenty of lenders out there to provide bids there at reasonable spreads. But once you start getting urban side, it sends out pretty quickly and you're left a lot of debt funds and those terms you're more owners. And it's a lot more expensive.

Pushing the color guys. Thanks.

Thanks, Bill.

Thank you. Our next question is coming from Smedes Rose of Citigroup. Please go ahead.

Hi, thanks. I just wanted to ask you what you are seeing and doing on the housekeeping side [Indiscernible] that's a fairly large piece of expenses. And maybe you could talk about what you're doing in non-branded hotels and what the message has been at branded hotels. It seems to me like it's going a little bit inconsistent on the branded side. I was just wondering if you're seeing that or what you're hearing from that side.

I think generally, first of all I think at our higher-end properties, any of the luxury properties, any of the resorts that are -- that have pretty healthy rates, we have full services back and in fact, they've been back for quite a bit. The customer who's paying $500 or $800 or $1,000 or more is looking for that service while they are there and we're providing it. Things like -- interestingly, people talked about the demise of room service. Room service came back with the pandemic at our properties. Now, it came back in slight -- in many cases in a different form. It was a little bit more like a typical delivery. Although, again, even at the luxury properties like LaPlaya, we brought back, in fact, I don't know that we ever eliminated regular room service. So what we've been trying to do, Smedes, is gear the services for what the customer wants and what they're willing to pay for. And I as -- I think the brands have some standards, the brands are not all the same. They've -- some have taken an opt-in approach for service during your stay. Some have taken an opt-out approach. Sometimes it varies by city and market as well. And I think it's not surprising, it is perhaps a little bit more confusing when you're looking at the brand properties. I think that our portfolio, I think we've done a really good job of gearing the service towards the customer desires. And I think it's evidenced by the trip advisor reviews that we get and the fact that pretty consistently across our portfolio. I think Ray mentioned, we've climbed 8 spots in our portfolio, which is pretty significant on average with many properties climbing significantly more than that. So it's a little bit all over the board. Again, I think when we think back to the earlier question of costs and margins if you will, we've not been under the impression that on an exhaustive basis those services wouldn't come back. We fully expected them to come back in better quality properties. And I think in sort of the, the mid-scale and down, I'm not sure it does come back. We don't really have properties in those categories. And then in -- between luxury and mid-scale, so you get to upscale or upper upscale, I think it's going to vary by the market by rate and by the property.

Okay. That was it from us. Thank you. Appreciate it.

All right. Thanks, Smedes.

Thanks, Smedes.

Thank you. Our next question is coming from Michael Bellisario of Baird. Please go ahead.

Thanks. Good morning, everyone.

Morning.

I guess two-part question. 1. I assume you're $30 to $35 per share NAV, that still holds. But my real question on follow-up to that is [Indiscernible] your replacement costs estimate. How do you triangulate that $700,000 to $750,000 key number versus what's implied by your -- the estimate, call it mid to high 500s? Really what I'm asking is what does your placement cost tell you and how does that drive your view of value?

Sure. Mike, as it relates to the NAV range, yes, you'll notice we didn't change it. We do think it's probably a little late right now, particularly on the leisure-oriented properties, given not only where the cash flows have moved, but where the transaction market has continued to move and follow that cash flow. But two, we'd like to get a little bit more, to use your word, triangulation, a little more data on the urban market transactions. Of course, we've had a few on our side, but we think the market has moved in the last three to four months. Particularly we think it will move even further over the next couple of months. As we see this, what we think will be a fairly rapid acceleration in the recovery of business travel. In particular, over the next few months. So from that perspective, I think if anything, we might be a little light, but what we hope will be able to feel comfortable updating it next quarter as it relates to what is the replacement costs mean? It's sort of means what it the way we think about it, is it has a lot to do with the protection from new supply in a particular market now, keep in mind, people don't have to provide the same properties in that market. If you're providing select service into an urban market, it's not relevant to giving you protection on the full-service side because those rooms will still be competitive. On the other hand, the fact that these costs have gone up by 25% to 35%. Interestingly, in some markets, the cost of select service is now equivalent to where the full-service was pre-pandemic. So I think, we think of it as a big positive for the space, both in terms of protection of new supply and also ultimately the way people look at values in the transaction market compared to, what can I buy something for on a price per pound basis versus what does it cost to recreate that product if it's worthy of being recreated?

That's helpful. Thank you.

Thanks, Mike.

Thank you. Our next question is coming from Floris Van Dijkum of Compass Point. Please go ahead.

Thanks for taking my question, guys. Just getting back on the NAV question a little bit more. Clearly, there's been a lot more comfort from investors on the resort side and I guess from some private equity guys on the select service side. How sustainable in your -- is the rise in resorts values in your view? And what can we expect to happen to the growth in values there? Is that going to plateau or is it will continue to go up if you're able to continue to push the rates there?

Yeah. I think there's -- there are -- God, there's so many things going on, right, Floris? I mean, just even by the nature of your question, there's a lot of variables that are moving around then. And I mean, we'll give you our perspective, but again, it's only our perspective. It certainly factors into how we view values and risk adjusted return perspective and how that drives what we buy and what we sell. But I think from an underlying operating perspective, I think we feel that certainly a significant part of the growth in -- and recovery in cash flows in resorts and leisure-focus properties, some of it is a structural repricing. Pricing doesn't -- outside of economic recessions, it doesn't often turn down and often. And often, in economic recessions, if it does turn down, it doesn't turn down much. So there are some unique variables here and it's really hard to measure some of the compression that's happening because of a lack of alternatives or alternatives that have been eliminated for some period of time. But there have been a lot of gains made in the leisure focus side, the resort side, related to -- you look at our properties in terms of quality, there is I think we said a third of our gains related to rate have been share gain in rate. That's permanent, that's a reflection of the investments that we've made over the last four years in the resorts. Every one of these resorts has been materially renovated or in many cases re-positioned up within the portfolio. So for us we think most of it sticks not all of it, but we still have inflation, we still have growth that's happening. When we look at this year, we didn't go into the…

Thanks John. Maybe one quick follow-up. Does that mean that you're going to be allocating capital more capital towards resorts? You have been doing that and pivot more away from the urban markets or will you try to be sort of counter and potentially do the opposite? How, how do you think about that?

So we've simplified sort of that thinking. And because we're purely a risk, a return adjusted investors, so we have our views of what risks are and what returns should be for those risks. But by type of property by-market about we focusing on individual properties. And so, no different than when people looked to buy stocks, the values of those underlying assets have an impact on what we ultimately buy. And so let's wait and see how other people value those risks and returns. Do they have similar views of those risks? The returns that are required? And then as it relates to us, for us, we've said this consistently. We tend to be more focused on properties where we can change the property, where we can upgrade it, we can reposition it both operationally and physically, and create value beyond looking at things like a commodity which are not the kind of assets we buy anyway.

Thanks, Jon. Appreciate it.

Thanks, Floris.

Thank you. Our next question is coming from Shaun Kelley of Bank of America. Please go ahead.

Hey, everyone. Thanks for putting me on Sue. Ray Jon, I just want to ask a little bit about what you're seeing on business rates versus leisure rates. So I think your comments have been pretty clear on the broad rate environment, what you've been able to get there. But can you can you just give us any color there about like what you're seeing maybe on forward pricing. The one relative to the other, and how strong is the mix positive as you typically get business rate back now, or is it more? I mean, I think we know it's about filling in the mid-week gaps, but sort of trying to figure out what that pricing does to overall mix. Thanks.

Yeah. It's a really good question and it's all a moving target, right? But what we're -- what we've been seeing, Shaun, is we've -- and we talked about this a little bit last quarter and the quarter before that, we're seeing a recovery in all rates, all segments, whether it's a business transient, whether it's group, whether it's leisure. When we look at our urban properties, we've seen rates continue to recover. And I think as we might have mentioned in the call, but to reiterate, when we got to December, which gets influenced by the last week of the year, there was a really strong two weeks of business travel. We saw our weekly urban rates end up at almost 2% higher than December of 2019. That was coming from in October, which is a pretty good business month as well even better than December, which was down 11.5%. When we look at just weekday, again, we're trying to isolate the best we can from the sort of the anecdotal stuff and look at the data. When we look at weekday ADR for our urban properties, it went from down 15.7% in October to down 4.6% in December. Now again, there are weekdays during the holiday week, and that helps, but it's a pretty continuous -- when we look at these by quarter, every quarter has improved from a rate perspective in each of its markets, whether it's San Francisco or it's South Florida, they're just doing so at a different pace. So all the rates are climbing at this point, which is why we're so bullish, if you will, of where we think pricing is going. And frankly, we've been saying this for over a year now as it relates to pricing. So we have even more confidence today as we see business transient pricing rise. As we see group get re-booked and get booked at higher rates than in 19. And then versus last year and it's and we continue to see leisure rates increase as well.

That's perfect, Jon. And then the follow-up would be same ilk, would be over President's Day weekend, any signs of let's call it rate fatigue on the part of the consumer? I think your numbers have continued to be very consistently strong, but just anything at the very margin that suggests that whatever you're pushing isn't sticking or that the service levels required to reach those rates are changing materially? Just want to get a sense of the vibe out there because we know these rate increases have been substantial and obviously, when you're getting the numbers that you talked about, I mean, obviously there was Super Bowl, but the $800 number 6 in my head, there is a different customer in the building, they are expecting a different level of service. So just what's your thought there coming on at President's Day?

I mean, President's Day was a blowout from really all perspectives. I mean, rate was up significantly. I mean, we published the weekly numbers, the weekend numbers were huge. And it came with occupancy. So we if we if you check back in those numbers, I mean, we saw if there's fatigue, Shaun, there's still enough of the well-off willing to spend customer to fill our hotels that are charging those rates. And so I think we ran 69.9% for the whole portfolio over Saturday night. I think we ran in the 60's for both Friday and Sunday night. And then the rates were pretty strong, not as strong as New Year's. And for the President's Day isn't traditionally, as strong as well. But they were really healthy, particularly when you consider that Omicron was still an impact on demand as was Valentine's Day, and still being impacted by Omicron demand the weekend before.

Which also mean Shaun, if you haven't booked spring break yet, you really I would like to resorts host.

Ray. I don't get a lot. Right. My life but I booked spring break 14 months ago because I saw.

Well you're one of those below market customers that we're just we're just happy if you cancel

Yeah guys you are waiting for me to cancel. I get it. Thank you guys.

Thank you. Our next question is coming from Rich Hightower of Evercore ISI. Please go ahead.

Hey. Good morning, guys. Thanks for squeezing me in. Just a quick one on the guidance. And I commend you guys for putting a stake in the ground, at least in terms of the first quarter. But just given -- if I look at adjusted EBITDA, there's a $5 million range from top to bottom. Small dollar amount, but large in percentage terms. And so I think we've got five or six weeks left in the quarter here. What factors would cause you to hit the low-end versus the high-end or even materially underperform or materially outperform the range that you've given? Just trying to understand the landscape that we're all playing on here.

It's a good question, and I would say from -- as we talk to our property teams, it's really hard for them to manage the business right now because it's moving so much. And you go from a period where we ran 30 -- 33% or 34% in January to running close to 50% in February, and maybe in the upper 50s to 60% in March. And you get these weeks and weekends that are up and down pretty dramatically, way different than pre-pandemic. And so there's a lot of things going on. We're adding staff back at our properties. We may or may not be able to hire those people when we think we're going to hire them. So it impacts our costs. We don't know how much spend is going to be. We've got a lot of groups. We don't know how much they're going to spend, how much more they're going to spend, how many people call out for COVID, how much overtime we have to run. It's a very difficult environment to forecast the overall business. I mean, revenues are hard enough. Expenses are even harder right now. So we're doing our best to estimate what we think flow is going to be. And it goes back to the comment which I made earlier about, I can't imagine how hard -- it's even harder for you all. And we know that's incredibly hard because it's really hard for us right now to forecast and because they're just so many moving pieces and unpredictable pieces, even on a weekly basis. So we're doing our best. We took a shot at outlook. We gave a wide range just because we have so many variables that are moving around and honestly, we've never been through a pandemic before, so we don't have any history to look back on.

Okay. Either way, that's helpful. Thank you.

Yup.

Thank you. Our next question is coming from Anthony Powell of Barclays. Please go ahead.

Hi, guys. This is Allison on here for Anthony. So you talked about urban transaction values and Sunbelt Resort. What are you seeing regarding trends for urban hotels in the Sunbelt? We've seen more transactions in markets like Austin and you previously were in Atlanta. So could you build up more exposure here this year? Thanks.

Listen, the Sunbelt is certainly the flavor of the day. I mean, I think when you look at some of the demographics and certainly the headlines, I think that people have looked at markets like Charleston, like Savannah, like Austin. Certainly a lot of that investment activity, I think they're also -- you also kind of follow what's happened just in terms of easing of restrictions and flexibility and businesses are open from that perspective. I think they'll continue to be an attraction to those markets. But I also think that there's probably a feeling up. Is there a maxing out of those markets? And therefore, I think there's going to be a pivoting towards maybe some of the more traditional markets or other markets in the Midwest or in the Northeast or on the West Coast where as we said before, as it relates to replacement costs, maybe there's kind of a better feeling as it relates to a discount to replacement costs as opposed to potentially paying up in those markets given how competitive it's been.

And I think the -- just so you understand how we think about it, I mean, the Sunbelt markets are certainly part of the group of markets that we're evaluating and looking at assets to potentially purchase. The -- traditionally, the challenge of some of those markets is there just aren't any supply constraints in those markets. And so while you have continuing population migration and business migration into the Sunbelt, which has been going on for over 100 years at this point, the challenge has always been that values don't rise as much in those markets and don't have the potential to go up as much because supply more quickly, traditionally has come into those markets. So we look at that from a risk perspective, and that's part of the evaluation, Allison. And so yes, we may end up buying in those markets, but it'll be because we find an asset that probably we can do something with in terms of repositioning it and where we think there are some kind of supply constraints or protection. When we went into Nashville and we bought the Union Station Nashville Hotel, we felt like it had some kind of a moat because it was an incredibly unique asset in that marketplace. And while we substantive. And when we sold it in the summer of 2020, I think we -- it would be that kind of asset, I think, where it's more unique than maybe a typical branded property in the market.

Thanks for the time. Thank you. Our last question for today will be coming from Chris Darling of Green Street. Please go ahead.

Thanks. Good morning. Just took a quick one from me. And going back to the ROI projects that you highlighted earlier, which now sound very promising, I see that several are taking place at hotels subject to a ground lease. So with that in mind, I was hoping you could just help me understand how you think about allocating capital in those instances and when it may or may not make sense to do so.

Sure. So it depends how long the remaining ground lease is, the number of years left on it, and also who the owner of the ground is. So we have a lot of -- frankly, most of our ground leases are with governmental authorities, whether it's the GSA, whether it's the city of San Diego, whether it's the National Park Service at the Oregon, etc. And so traditionally, what we've done is we -- many of those are limited in terms of the term they can have at any point in time. So some of those markets, as an example, are limited to 49 years. So traditionally, when those ground leases get to a point where we feel like we're getting near a point where a buyer couldn't finance them. We'll go back to the governmental authority. Typically alongside of our renovation. And we will get an extension and that has happened at a number of the properties that we've owned when I was Atlas Sal that we continue to own. And that's the history of properties like that in many of the markets I gave an example before we bought Jekyll Island, every property of every kind on Jekyll Island is on a ground lease with the Jekyll Island authority, which is owned by the State of Georgia. They extended every ground lease in that market, whether it was for Jekyll Island Club, whether it was for any of the other hotels on the island, whether it was for the retail, whether it was for the restaurants, or the residential units that are all on the island, they were all extended and they were all extended by the same amount of term. So we're really conscious when we look at assets and then when we invest additionally in those assets to buy assets where we believe there is either a very extensive term. So we're going to get the value back for the investment that we make and the return on that value, or 2. There is an extension that is highly likely to happen because that is the normal process with those ground leases.

Got it. Thank you.

Chris.

Thanks, Chris.

This brings us to the end of our question-and-answer session, I would like to turn the floor back over to Mr. Bortz for closing comments.

Hey, Donna, thanks very much for overseeing our call and thanks everybody for participating. We look forward to updating you about our first quarter and that's just 60 days away. And also will continue to provide those monthly updates that we established during the pandemic.

Ladies and gentlemen, thank you for your participation and interest in Pebblebrook Hotel. You may disconnect your lines of all golf. The webcast at this time and enjoy the rest of your day.