Greetings, and welcome to Pebblebrook Hotel Trust Fourth Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Raymond Martz, Co-President and Chief Financial Officer. Thank you. Please go ahead.

Thank you, Donna, and good morning, everyone. Welcome to our fourth quarter 2025 earnings call. Joining me today is Jon Bortz, our Chairman and Chief Executive Officer; and Tom Fisher, our Co-President and Chief Investment Officer. Before we begin, I'd like to remind everyone that our remarks are as of today, February 26, 2026, and comments may include forward-looking statements that are subject to various risks and uncertainties. Please refer to our SEC filings for a detailed discussion of these risk factors and visit our website for reconciliations of any non-GAAP financial measures mentioned today. Now let's jump into the fourth quarter and full year results. We wrapped up 2025 with stronger-than-expected fourth quarter growth despite the demand disruption from the government shutdown. Same-property total RevPAR increased 2.9% and same-property hotel EBITDA grew 3.9% to $64.6 million, $2.2 million above the midpoint of our outlook. This was led by continued strength in San Francisco and better-than-expected performance in Boston, Chicago and at our recently redeveloped resorts. Year-over-year, adjusted EBITDA climbed 11.1% to $69.7 million, about $6 million above the midpoint, supported by strong hotel results, lower corporate G&A and slightly higher-than-expected business interruption income related to LaPlaya. And with the benefit of a reduced share count from buybacks, adjusted FFO per share increased to $0.27, $0.05 above the midpoint of our outlook and up a robust $0.07 and 35% higher than the fourth quarter of 2024. From a full year perspective, 2025 was defined by 2 very different storylines. Our redeveloped resorts and our urban recovery markets, especially in San Francisco, drove strong tangible growth while markets like Los Angeles and Washington, D.C. weighed on the headline numbers due to unexpected events that obscured the underlying strength across much of our portfolio. The key point as we enter 2026 is…

Thanks, Ray. I believe that we may finally be reaching a favorable transition point in the industry and for Pebblebrook. I'm going to detail the fundamentals behind that view. So I'm going to spend a little time providing some color on Q4 of last year, but my focus will be on the setup for 2026 and what we're already seeing happening here in the first quarter. After all, we're already at the end of February, so it's important that you understand how we think the full year sets up for Pebblebrook and how the first quarter is going so far. In Q4, our operating performance turned out better than we expected despite the government shutdown and the resulting travel disruptions that followed. This better performance was primarily driven by 3 factors. First, stronger leisure demand throughout our upper upscale and luxury leaning portfolio, and that strength more than made up for the negative impacts from the shutdown and the softer group demand. Second, San Francisco outperformed our expectations. And third, we again delivered strong growth in out-of-room spend, which is being led by the performance of our resorts, particularly our more recently redeveloped resorts. Our RevPAR in Q4 increased 1.2%, not bad considering the impact from the government shutdown, while the industry's RevPAR declined 1.1%. San Francisco RevPAR increased a massive 37.9%. San Francisco is benefiting from a recovery in all travel demand segments, leisure, business transient and group and convention. For those who believe it's being driven by the recovering citywide convention business, that is true, but it's only part of the story. And as an example, in December, with 0 conventions in San Francisco, that's right, 0 conventions, RevPAR for our San Francisco portfolio climbed 16.2% while the rest of our portfolio, excluding our San Francisco properties experienced…

[Operator Instructions] Today's first question is coming from Smedes Rose of Citi.

Jon, I appreciate all your opening remarks. And I guess I was just wondering on kind of the one piece where there is maybe some better visibility. Could you just talk a little bit about what you're seeing on the group side and sort of maybe sort of the composition of those groups in terms of kind of who's coming?

Sure. Well, when we look at our pace, most of our pace advantage is in transient, both leisure and business transient and contract business. So group itself, group room nights right now are down 0.6% for the year. ADR is up 2.4% and group revenue is up 1.8% whereas transient room nights up 11.6%, ADR plus 0.6% and revenue plus 12.2%. Now the one thing I'd say about the group pace, it's still very widespread. We do continue to see the same softness when it comes to government and government-related government-impacted industries. But one of the things our properties are doing based upon their experience last year is the group that's on the books is washed to a greater extent than it was going into last year. So I think it's a little bit more realistic when you consider what the trends were in terms of attrition and attendance compared to this year where at least right now, I think it's more representative of the trends that we were seeing late last year.

The next question is coming from Rich Hightower of Barclays.

A question on your resort portfolio and specifically the portion that's been -- that's had sort of heavy renovation CapEx over the last number of years. I guess if we look to the end of 2026, embedded with the guidance, what sort of unlevered cash returns do you anticipate on that spend? Or what's baked in the guidance? And then obviously, those assets are still ramping to stabilization. So what's sort of the ultimate stabilized target on that spend, if you don't mind?

Sure, Rich. Yes. and we updated some good detail in our investor presentation, which I encourage you to look at, which talks a lot about these redevelopments where we lay each of these out. The good news is on the 2023 and '24 projects where we invested a little over $100 million of ROI capital, we've realized already about $20 million of that, some of it we talked about today with Newport, a pretty phenomenal improvement during the year. And we have a remaining kind of $4 million to $8 million that we expect here in the next 2 to 3 years as it's further realized. So we've been -- and for these projects, that's actually closer to an ROI -- a cash ROI in that 22% to 26% range. So that's...

Annual cash yield.

Yes. Annual cash yield. So that's the ROI increased cash that we're generating the properties. And then when you look at the projects, overall, our strategic reinvestment program, and that's the one where for the last several years, we invested since 2018 in number of projects, we're averaging closer to that 16% to 17% annualized cash-on-cash ROI return. So these projects that were done recently from these resorts, it's adding on a lot of additional areas where we have additional food and beverage outlets, other revenue-generating areas that creates a lot of out-of-room spend. And that's where we touched upon earlier, our focus has been the occupancy-driven approach, especially at our resorts because when the guest comes to the resort, they stay and they spend a lot of money. That's why these returns have been very healthy and encouraging, and we feel good about the progress. We expect more in '26.

The next question is coming from Cooper Clark of Wells Fargo.

I appreciate the color on the strong first quarter. Curious as we think about the lower implied RevPAR guidance for 2Q through 4Q despite your higher exposure to really strong calendar events. Can you walk us through some of the puts and takes embedded in guidance with respect to leisure trends in the year for the year group pickup or other items where you maybe started a bit more conservatively, as you mentioned earlier, given the macro uncertainty?

Sure. So when we look at last year, we went from a very significant advantage in pace when we reported same time last year to a decline in pace by the end of the year. And that all had to do with events, starting with the fires, the first week of the year that -- where the impact really lingered through much of the year, really 9 months. And so our outlook for this year, and I'm trying to be clear in my comments that we're being very conservative where we don't have full visibility, knowing that there are disruptions that can pop up that we don't anticipate pretty much any given day of the year. And so when we look at the last 9 months of the year, it really is an implied RevPAR growth of 1% to 2% for our range. And that really doesn't take into account significant benefit from World Cup, from America250, from other events, from the benefit of the holiday calendar. And it doesn't really take into account the assumption that demand re-correlates with GDP because otherwise, with forecast of GDP in the 2%, 2.5% range, our forecast for the industry would be higher than the range that we laid out at 0% to 2%. So we're being very conservative. We think very prudent right now given our experience last year with our outlook for the last 3 quarters. In terms of the trends we're seeing right now, they're all positive. I mean, other than the weather, where we had a second weather event, a blizzard with Winter Storm Hernando, which really put a damper on what was looking to be a really great month in February for the industry and clearly impacted travel all over the country. So we're still seeing the trends be positive. We are seeing this re-correlation with GDP, but for the weather. And we think so far, despite all the things that have happened geopolitically so far this year, it hasn't really had a big impact on the underlying demand trends. So from that perspective, despite all those things, travel demand seems to be continuing to improve. Does that address your question, Cooper?

[Operator Instructions] Our next question is coming from Aryeh Klein of BMO Capital Markets.

Jon, maybe just on the transaction market. You did sell a couple of hotels late in the year. Just curious what you're seeing about the out there, how you're thinking about the portfolio and just the potential to maybe sell a few more assets this year?

Aryeh, it's Tom. Yes, I mean, obviously, what you've seen is the market is becoming certainly more constructive. You've been reading about more trades, especially kind of the bid for luxury. And I think a number of the trades that have been announced recently have also skewed to much larger transactions. So I think that's a trend that you're going to continue to see. And part of that is the debt markets and the cost and availability of debt continues to improve. Brokers are certainly more optimistic. Buyer debt seems to be improving. There's a lot of equity capital out there looking for opportunities. But as we've talked about for the last 18 months, they're looking for conviction. And what does that mean? That basically means growth. And as we all know, performance or capital follows performance. So I think everybody is kind of waiting to kind of see if the setup that we've set out for 2026 kind of comes to fruition, you'll continue to see momentum as it relates to the transaction and trades in the market. And I think you'll continue to see us be engaged and be heavy participants in the market as well.

Aryeh, one other thing just to add on the transaction side. We did do those 2 transactions in November. And there were quite a number of sell-side analysts who never updated their numbers for 2026 for the lost EBITDA from those assets sold at the end of 2025. And at least for the community that's on the phone, we'd ask if you could please update your numbers because it's inappropriately skewing consensus numbers for 2026 and then really doing a disservice to the investment community out there. So if the sell side could keep their models up, particularly for these material events that occur that impact future numbers, we think that would be much better for the investment community. That was not directed at you, Aryeh.

For what it's worth, it was out of our numbers, but...

The next question is coming from Michael Bellisario of Baird.

Sort of along those same lines, just relative to your very positive outlook, good start to the year. I mean how do you balance that better performance with those potential asset sales you talked about and further deleveraging in the balance sheet? I guess, maybe said another way, do you rely a little bit more on organic growth to delever in 2026 as opposed to maybe selling a few more hotels to get you to your balance sheet targets?

Yes. I mean I think our strategy continues to be a dual approach. First, it's how do we create value for the shareholders. And one of the ways we do that is by buying our existing assets back at a big discount to what they would trade for in the marketplace. And so I think what the improving underlying performance does is it's going to have an impact on the buyer community. And as Tom said, help it become more constructive because to date, the buyer community, one, has been in no hurry and two, hasn't really been underwriting growth in the future. And for the most part, for the last couple of years, that -- those assumptions have been right. We haven't had growth. We've had shrinkage. So I think as we get on this positive trend, I mean, remember, we have extremely limited supply growth for the next 3 to 4 years. If you don't start this year, you're not delivering for 3 years at a minimum in the major urban markets and in the resort market. So I think for us, as long as this public-private arbitrage opportunity exists, we're going to continue to sell assets. And we're going to -- we'll pay down debt in order for our ratios to remain the same with the organic growth in EBITDA really driving down the overall ratio because we're not at a stabilized level of EBITDA given the impact on the markets during the pandemic and post pandemic, particularly the urban market. So we think that will naturally recover as we laid out in our investor presentation in a very significant way. Start -- some of it started over the last couple of years, and it's accelerating, particularly in markets like San Francisco and with the snapback in L.A. from the fire impact last year. So we're really going to focus on taking advantage of the public-private arbitrage opportunity. We'll continue to sell assets as the transaction market allows, if you will, as a functioning market. And we'll use that capital to do 2 things. One is pay down debt related to the EBITDA that we're selling and two, to buy back our stock, both common and preferred, trading at material discounts.

Got it. If I could just sneak in a quick follow-up. Just the new slide in your deck on the brand management encumbrances that you added. What drove that? And what should we read into that data?

Yes. I mean I think the reason we put it together are some misconceptions out in the industry about what unencumbered means and what the impact of being unencumbered has on values. A lot of times, people have this tendency just to look at cap rates, which our industry doesn't really trade at cap rates. Cap rates are really the result of how people are underwriting the future performance of an asset. And as I said in my earlier comments, the buyer community hasn't been underwriting any growth in the future. And that's not normal, but it is consistent with an operating environment that hasn't been increasing. And so as I said, the buyer community is right. But we wanted to lay out the fact that the vast majority of our portfolio is unencumbered by both brand and by operator, 77% of the portfolio. And those assets trade historically at a 10% to 20% premium on EBITDA multiples or on underwriting future because the buyer community is as broad as it possibly can be. So you get the greatest competition, you get strategic buyers, you get capital being provided by strategic buyers that increases transaction values. And you have upside that people assume from being able to put a flag on or changing operators that improves future performance that also leads to higher values. So we wanted to provide that detail so people could understand it. It's not always clear, particularly in cases where we have rights like termination on sale that will free an encumbrance that is otherwise a long-term encumbrance for us. But to a new buyer, it becomes free and clear. So we've laid that out here. We also wanted to clarify the understanding about ground leases from 2 perspectives. First, there's some out there who actually take the future liability of ground leases and put that as a liability in calculating NAV. And that's -- it's double counting because we're already reducing EBITDA by the ground rent payments, and therefore, it's factored in. They do tend to trade at higher cap rates, resulting cap rates or lower EBITDA multiples in some cases, because it's not fee simple, and that, of course, makes sense. But also, the ones that have public entities, those tend to get extended on a regular basis over time because the public entity has no interest in owning the asset. It wants the income and it wants the income to increase over time. So there is a difference, just like there's a difference in debt between CMBS and bank debt. There's a difference between ground leases depending upon whether they're privately -- the landlord is a private entity or whether it's a public entity. And so we wanted to call that out, Mike.

The next question is coming from Gregory Miller of Truist Securities.

I wanted to ask about the Boston market. I was looking on Page 12 of your investor presentation, where you analyze market level anticipated upside from a continued urban recovery. And one of the parts of that slide noted that Boston ranks third on the implied EBITDA recovery despite 2025 occupancy already at 80%. The anticipated EBITDA recovery is almost as big as San Francisco, which remains a more depressed market. So I'm curious where you see Boston's EBITDA growth coming from in the next couple of years? Just general thoughts about the upside in the market going forward.

Sure. Thanks, Greg. So first of all, it's a couple of things. And when comparing it to San Francisco, it's a much bigger market for us in terms of the asset base that we have in that market. We have 5 assets, but they tend to be larger assets and they tend to be higher ADR assets in the marketplace. So those assets have historically run in the upper 80s, mid- to upper 80s and in '19, ran at 88%. Our forecast is to get it to 80%. So Boston as a market and those properties as well have historically run at a higher level. I think when we look at San Francisco, we're being very -- we're still being conservative with where we think that market can run at. But you can see in the slide, it's very similar to Boston in terms of the recovery range that we've laid out, 80% to 85%. We also think there's more growth in total revenues in that market. We have a lot more meeting and event space in that marketplace. We have a lot more ancillary revenues in that marketplace. And those we think will continue to grow and drive a significant operating leverage in that business because while we've had a decent recovery in Boston, our assets were still running below '19 from an EBITDA perspective, we think there's a lot more upside there.

[Operator Instructions] The next question is coming from Chris Darling of Green Street.

Thinking about your CapEx outlook for the year, obviously, a lower near-term run rate there, and that is supportive from a free cash flow perspective. But the flip side of that equation is obviously the potential over time for deferred maintenance and/or loss of market share. So hoping you could speak to how you balance that trade-off. And maybe you could speak to balancing that trade-off both from sort of a corporate level financial perspective, but also from the standpoint of maximizing value with any future dispositions.

Yes. So first of all, we don't have the issue. We're not doing a trade-off in capital. We're not deferring capital. In fact, we continue to do what we've always done, which is protect the real estate, do all the infrastructure improvement and capital investing, improve systems when new technology comes out and we can lower operating expenses. A significant part of our overall capital relates to that infrastructure, whether it be HVAC systems or modernizing elevators or new roofs or new windows in -- at our properties. And as it relates to the ongoing -- and of course, there's little to no revenue that we get from those infrastructure investments, but it obviously protects the downside. So the trade-off is if you don't do that stuff is exactly what you're talking about. As it relates to maintaining the interiors, we do that on a regular basis. The major redevelopments that we've done, we did because we bought the asset or we bought LaSalle, and we saw that there was very significant opportunity to reposition those assets. And in some cases, we had to invest capital because capital was deferred. And so we did that. So we don't wait around for 8 years or 10 years to do major renovations in order to catch up on deferred maintenance or deferred investment in the interiors. We're doing that constantly within the portfolio. And fortunately, because we do it at a very high-quality level, we invest very significant dollars in the kind of case goods we buy, the quality of the fabrics that we buy, the lighting, et cetera. Those generally are fairly limited in terms of how much capital we need to invest. They last longer because we're designed forward in our hotels, they tend not to go out of style.…

And Chris, also, what we found is this leads to better ROI and look at a lot of the capital we've invested into our resorts since we don't have any branded resorts. We have complete discretion on how we want to choose to invest the capital versus a brand telling us, oh, you need to replace that door lock because this is a new brand standard, which has no ROI. So we can really target the capital, which is why in our investor presentation, we detailed some of those returns, and I encourage our investors to look at that. It's some really high returns because, again, a lot of that capital is areas where, to Jon's point, it's going to speak to what the customer is looking for. It's going to lead to higher revenues and other revenue sources, and that also leads to higher ROI and EBITDA growth.

Unfortunately, that is all the time we have today for questions. I would like to turn it back over to Mr. Bortz for closing comments.

Thank you all for participating today. Look, we're -- we'll be back to you in the next 60 days. And of course, we're going to see many of you down at the Citi Conference down in Hollywood, Florida. And let's all continue to root for a more stable environment because that will have a big positive impact on the industry and our own performance over the course of 2026. And we look forward to catching up with you in the not-too-distant future. Thank you.

Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.