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Edited Transcript of SOHO earnings conference call or presentation 6-Aug-19 2:00pm GMT

Q2 2019 Sotherly Hotels Inc Earnings Call

WILLIAMSBURG Aug 9, 2019 (Thomson StreetEvents) -- Edited Transcript of Sotherly Hotels Inc earnings conference call or presentation Tuesday, August 6, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Andrew M. Sims

Sotherly Hotels Inc. - Chairman & CEO

* Anthony E. Domalski

Sotherly Hotels Inc. - VP, Secretary & CFO

* David R. Folsom

Sotherly Hotels Inc. - President, COO & Director

* Scott M. Kucinski

Sotherly Hotels Inc. - VP of Operations & IR

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Conference Call Participants

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* Alexander David Goldfarb

Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research & Senior REIT Analyst

* Jason Haviland

* Tyler Anton Batory

Janney Montgomery Scott LLC, Research Division - Director of Travel, Lodging and Leisure

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Presentation

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Operator [1]

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Good day, and welcome to the Sotherly Hotels Second Quarter 2019 Earnings Conference Call and Webcast. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Mr. Scott Kucinski, Vice President, Operations and Investor Relations. Please go ahead.

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Scott M. Kucinski, Sotherly Hotels Inc. - VP of Operations & IR [2]

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Thank you, and good morning, everyone. Welcome to Sotherly Hotels Second Quarter Earnings Call and Webcast. Dave Folsom, our President and COO, will begin today's call to review the company's quarterly activities and a review of portfolio performance. Tony Domalski, our CFO, will provide our key financial results for the quarter and review our 2019 guidance. Drew Sims, our Chairman and CEO, will conclude with an update on our strategic objectives. We will then take questions.

If you did not receive a copy of the earnings release, you may access it on our website at sotherlyhotels.com. In the release, the company has reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirements. Any statements made during this conference call which are not historical may constitute forward-looking statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that these expectations will be attained. Factors and risks that can cause actual results to differ materially from those expressed or implied by forward-looking statements are detailed in today's press release and from time to time in the company's filings with the SEC. The company does not undertake a duty to update or revise any forward-looking statements.

With that, I'll turn the call over to Dave.

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David R. Folsom, Sotherly Hotels Inc. - President, COO & Director [3]

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Thank you, Scott. Good morning, everyone. I'll start off today's call with a review of our portfolio's key operating metrics in the quarter.

Looking at results for the composite portfolio, which represents the company's wholly-owned properties and the participating condominium hotel rooms from the Hyde Resort & Residences. For the quarter, portfolio RevPAR increased 4% over prior year to $128.05, reflecting a 0.9% increase in occupancy and a 3% increase in ADR. Year-to-date, portfolio RevPAR increased 6.1% over prior year to $124.97, with a 2.7% increase in occupancy and a 3.3% increase in ADR. With RevPAR growth for the U.S. lodging industry of 1.1% for the quarter, the competitive sets in our markets underperformed with RevPAR relatively flat at 0.4%. Year-to-date, RevPAR in our market is up 2.3% compared to 1.2% for the U.S. lodging industry. Our portfolio is performing favorably compared to these metrics given the repositioning efforts executed over the past few years.

Looking at some individual property highlights in the quarter, Hotel Ballast in Wilmington, North Carolina, grew RevPAR 23.5% in the quarter, driven by a 10.3% increase in ADR and a 12% increase in occupancy, validating our repositioning strategy to convert the property to a boutique concept last year. Market RevPAR grew an impressive 18% in the quarter with our property taking 4.6 percentage points in fair share.

The DoubleTree Philadelphia Airport property increased RevPAR 9.4% in the quarter, fueled by an 11% increase in ADR. The market grew a healthy 5.7% with our property taking 3.5 percentage points in fair share during the quarter.

Lastly, the Hyatt Centric in Arlington, continued its stellar performance with RevPAR increasing 4.9% in the quarter, fueled by a 5.9% increase in ADR. Market RevPAR decreased 1% during the quarter with our hotel taking 6% in share to remain the market leader.

In June, we completed the renovation and conversion of our Tampa, Florida Crown Plaza to Hotel Alba. The approximate $11.3 million renovation reimaged the entire property with key elements that include the Spaniard, our new, locally inspired, chef-driven food and beverage concept; Buffalo Bayou Coffee, a curated art exhibit from Savannah College of Art & Design; along with local flair and southern hospitality touches similar to other Sotherly conversions. We believe, this property is now positioned to outperform the market moving forward.

In April, the company closed the sale and issuance of 1,080,000 shares of its 8.25% Series D cumulative redeemable preferred stock for total proceeds of $27 million.

In May, the company closed the sale and issuance of an additional 120,000 shares of this series of preferred stock for gross proceeds of $3 million, in connection with the partial exercise of the underwriters' option to purchase additional shares. The net proceeds were used to redeem in full the operating partnership's 7.25% senior unsecured notes due in 2021 and for working capital.

In addition, during April, we announced the company amended the original $19 million mortgage secured by our Tampa, Florida asset with its existing lender, Fifth Third Bank. With the amendment, the loan's principal amount remains at approximately $18.2 million with a new 3-year term plus 2 1-year extensions. The mortgage's interest rate will remain equal to LIBOR, 30-day LIBOR plus 3.75%, reducing the 30-day LIBOR plus 3.00% if the property achieves certain performance hurdles. The loan amortizes on a 25-year schedule.

Finally, last month, we announced a quarterly dividend of $0.13 per share, representing an annualized dividend of $0.52 per share with a yield of 7.5% based on yesterday's close.

With that, I'll turn it over to Tony Domalski, our CFO.

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Anthony E. Domalski, Sotherly Hotels Inc. - VP, Secretary & CFO [4]

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Thank you, Dave. Reviewing performance for the period ended June 30, 2019. Total revenue for the quarter was $51.5 million, representing a decrease of 0.03% or approximately $13,000 over the same quarter a year ago. For the first 6 months, total revenue was approximately $98.9 million, representing an increase of 6.1% over the prior period. For the quarter, hotel EBITDA was approximately $15.6 million, representing a decrease of 4.2% over the same quarter a year ago. And for the first 6 months, hotel EBITDA was approximately $28.8 million, representing an increase of 1.7% over the prior period.

For the quarter, adjusted FFO was approximately $7.2 million, representing a decrease of 14.1% over the same quarter a year ago. For the first 6 months, adjusted FFO was approximately $12 million, representing a decrease of 8.7% over the prior period.

The decrease in adjusted FFO is attributed to the stellar second quarter in 2018, the best in the company's history, that also included some onetime gains. Please note that our adjusted FFO excludes charges related to the early extinguishment of debt, gains and losses on derivative instruments, charges related to aborted or abandoned securities offerings, changes to the deferred portion of our income tax provision as well as other items.

Hotel EBITDA excludes these charges as well as interest expense, interest income, corporate general and administrative expenses, the current portion of our income tax provision and some other items. Please refer to our earnings release for additional detail.

Looking at our balance sheet. As of June 30, 2019, the total book value of our assets was approximately $493.1 million, which includes net investment in hotel properties of approximately $436.5 million. The company had total cash of approximately $37.3 million, consisting of unrestricted cash and cash equivalents of approximately $32.4 million as well as approximately $4.9 million, which was reserved for real estate taxes, capital improvements and certain other expenses.

As of the end of the quarter, the company had principal balances of approximately $364.7 million in outstanding debt at a weighted average interest rate of 4.98%. Approximately 86% of the company's debt carries a fixed rate of interest. Total stockholder and unitholder equity was approximately $104.4 million at the end of the quarter, of which stockholder equity was approximately $104.7 million and unitholder's equity had a deficit of approximately $0.3 million. At the end of the quarter, there were approximately 14.2 million common shares outstanding, of which approximately 600,000 are owned by the ESOP. There are also approximately 1.8 million limited partnership units also outstanding.

At the end of the second quarter, the principal balance on our interest bearing debt was approximately $115,500 per room.

Turning to guidance. We are reiterating our guidance for 2019, which accounts for current and expected performance within our portfolio as well as other factors. For the year, we're projecting total revenue in the range of $184.2 million to $187.1 million. At the midpoint of the range, this represents a 4.2% increase over last year's total revenue. Hotel EBITDA is projected in the range of $49.2 million to $50.2 million, and at the midpoint of the range, this represents a 4.2% increase over last year's hotel EBITDA.

And lastly, adjusted FFO is projected in the range of $15.8 million to $16.8 million or $1.02 to $1.08 per share. At the midpoint of the range, this represents a 2.4% increase over last year's adjusted FFO per share. Additional details can be found on the Outlook section of our earnings release.

And I will now turn the call over to Drew.

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Andrew M. Sims, Sotherly Hotels Inc. - Chairman & CEO [5]

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Thank you, Tony. From a top line revenue perspective, we are relatively pleased with the results for the second quarter with the majority of our portfolio outpacing the markets and the industry, primarily driven by rate growth. It's important to note that year-over-year results were muted due to the Easter holiday shift from March to April, causing a negative impact on the second quarter. As a result, an analysis of the combined results from the first half of the year paints a more accurate picture of the company's performance, which we believe is healthy with a 6.1% RevPAR increase for the estate.

We remain cautious regarding the state of the industry with minimal growth anticipated in most of our markets for the balance of the year. Bottom line results were a bit lackluster on a year-over-year basis, but there are nonrecurring items in addition to the holiday shift that need to be concluded for a fair comparison.

In the second quarter of 2018, our Houston asset booked an insurance payment of approximately $250,000 related to an electrical casualty. Also in the second quarter of 2018, our Hollywood asset booked a construction impact fee of approximately $300,000 related to the neighboring development. Neither of these items recur in 2019.

The cooling of the South Florida market has resulted in negative occupancy growth and has had a significant impact on portfolio performance. Unfortunately, at our DoubleTree Resort in Hollywood, we are underperforming in a competitive set while construction of the Hyde Beach House Resort has been ongoing. With the completion of this project slated to occur in the third quarter of this year, we believe the impact will lessen, and we hope to get back on track shortly thereafter.

In June, we successfully completed the renovation and conversion of our Tampa property, which relaunched as Hotel Alba, part of Hilton's Tapestry Collection. Significant improvements to the product are driving a superior guest experience that has received rave reviews from our customers.

Brand conversions are always impactful and the results for this hotel were down in the second quarter as a result. It's important to note that the completion of this project marks the beginning of an extended period without significant disruption across the portfolio, the first in over 4 years for the company.

Looking ahead, although growth has slowed in the industry as a whole, we see reasons to be helpful as the economy is generally healthy with consumer spending growing at a strong 4.3% annual rate and the country experiencing low unemployment. We continue to monitor acquisition opportunities and remain steadfast to our conservative approach to underwriting, as we believe the market is still overheated in terms of pricing in most cases. We focus on identifying long-term value-creation opportunities for our shareholders, and we'll act if and when we find the right fit. We are diligently managing our balance sheet as evidenced by the recent refinancing activity, which addressed the company's only short-term maturity.

With that, I'll now open the call up with questions -- for questions.

Operator, we're ready to open up for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question comes from Tyler Batory of Janney Capital Markets.

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Tyler Anton Batory, Janney Montgomery Scott LLC, Research Division - Director of Travel, Lodging and Leisure [2]

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Just a couple of questions from me. And first, I wanted to start and ask about Hotel Ballast. Can you guys talk a little bit about the ramp of that property? And how that is progressing versus your expectations?

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Andrew M. Sims, Sotherly Hotels Inc. - Chairman & CEO [3]

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It's exceeded our expectations in terms of the growth for the beginning of this year. We've exceeded budget each and every month this year, which has been a welcome surprise. The market has come back very strong, which we didn't anticipate. Scott, if you have a number, that will be good.

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Scott M. Kucinski, Sotherly Hotels Inc. - VP of Operations & IR [4]

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18% for the quarter.

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Andrew M. Sims, Sotherly Hotels Inc. - Chairman & CEO [5]

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Yes. For the quarter, the market was up 18%. And we attribute that to the addition of a new Embassy Suites in the market that is married to the convention center. And now there's a much larger inventory of guest rooms available to take care of state association business. So we think that the group component has increased significantly.

Also, there were several hotels in Eastern North Carolina that were damaged by hurricanes in last year's Michael incident up in Morehead City, Atlantic Beach and a couple of other properties, and they have yet to reopen. So a lot of that business got transferred into our market, which was -- has really driven these incredible increases in market occupancy and RevPAR.

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Tyler Anton Batory, Janney Montgomery Scott LLC, Research Division - Director of Travel, Lodging and Leisure [6]

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Okay. Got it. That's helpful. And then I also wanted to ask about Hotel Alba, and you mentioned that the conversion has been well received by your guests. How are things over there progressing against your expectations? You're having some disruption in the quarter about what you've expected, more or less. And any comment there would be helpful.

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Andrew M. Sims, Sotherly Hotels Inc. - Chairman & CEO [7]

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Yes. I mean, Tyler, anytime you switch brands, you have to go -- you have to reestablish yourself online and it takes time. So there's usually 2, 3, 4-week period. We don't control all the levers there so you are beholden to a lot of the OTAs and your franchisor and other service providers to make sure that you maintain your visibility online. And it just takes a little time for us to get things going.

But to answer your question, we -- in anticipation of that, what we did was we loaded up the hotel with a lot of group at a rate that's probably less than what we wanted to be ultimately. But because we knew that our transient business was going to fall off because when you change from IHG at Hilton, there's going to be a time period there where you just -- you lose your visibility and you lose your guest and you're booking window disappears on you. So all of the sudden, you've got a situation where your transient segment just goes almost nothing for a couple of weeks. So we fill the hotel with group, and it's doing well. We're really hopeful that this fall, it's going to show really strong results. I think you've seen that in other markets that we've done, where we switched, for instance, Raleigh or Jacksonville or Wilmington like we're just talking about to -- from either IHG to Hilton or even within Hilton, one brand to another, we've seen good increases. The product is superior. It is absolutely fabulous. I hope you come down and join us for our grand opening in September because it's really a great product and I think it'd been for us.

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Tyler Anton Batory, Janney Montgomery Scott LLC, Research Division - Director of Travel, Lodging and Leisure [8]

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Okay. Great. That's helpful. And then I also wanted to ask about Hollywood. I appreciate some of the comments are in the prepared remarks. Can you elaborate a little bit more about what's going on in terms of trends in South Florida, generally? And then I know the past couple of quarters, you guys have had some disruption that's been out of your control with construction and whatnot. Can you just address where we are as far as that disruption goes?

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Andrew M. Sims, Sotherly Hotels Inc. - Chairman & CEO [9]

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Yes, sure. So I mean, you've got 2 issues here. You've got the market, which is suffering a little bit. We've had a fair amount of new product added, especially in the Hollywood submarket. There's been a lot of product added in that area, on the Barrier Island or near the Barrier Island. And then the part 2 of that is this construction activity that's going on next door to us that's -- that we are involved in, in partnership with the Related Group, as we move forward to acquire all the public space in the new condominium hotel. So they're building a 44-story building less than 50 feet from the backdoor of our hotel. So it is disruptive here. Noise and all the things you would expect that's related to high-rise construction. And as a result, our competitors are using that against us, especially in the group segment where they say why would you want to go there and put up with all the construction activity.

We are just about past that. We are past that. I mean the exterior of the building is finished. It's topped off. It's all cleaned up the outside landscape now. And so all the worst is behind us. It's probably going to take us a quarter to regain our footing and get back at it. So whereas we were outperforming the market before this happened, we're now underperforming the market and the market's down. So you've got some other parts here that creates a fairly significant downward trend for this asset.

Long term, we are absolutely confident that once everything shapes out, that the Hollywood market is going to be a solid performer long term. I think the reason for the market downturn is the South American countries that travel to this market, especially this time of year, we're just not seeing the travel. So there's Argentina, Brazil, Peru. Those are the countries that, especially with the condominium hotel, the Hyde Resort, those are the countries that support this asset, and we're just not seeing the travel this year. So Miami is one of the largest, the deepest hotel markets in the world. We know that eventually, these things will get put back to a more stable situation.

Dave, you've got any comments you want to add to that?

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David R. Folsom, Sotherly Hotels Inc. - President, COO & Director [10]

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No. You've covered it.

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Tyler Anton Batory, Janney Montgomery Scott LLC, Research Division - Director of Travel, Lodging and Leisure [11]

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One last question for me here. Some of your peers are having issues with labor costs and other cost increases. What are you guys seeing with respect to labor and other cost increases in the business model?

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Andrew M. Sims, Sotherly Hotels Inc. - Chairman & CEO [12]

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Well, one of the benefits of being in the Southlands it's -- the cost to do business here is a little less than other places. But in terms of increase, we've seen the trend stay about where it has been. I mean we haven't seen any significant increases. Our trend has been 2% to 3% increase in our labor expense in total and that's about what we're seeing this year.

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Anthony E. Domalski, Sotherly Hotels Inc. - VP, Secretary & CFO [13]

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This is Tony. I will just add. There are -- it's different from market to market. We see some markets where there's been huge increase of supply of hotels where there's a lot more demand for hotel workers. And so we see tightening in those markets and other markets are very stable. We don't see any effect on wage increases in those markets.

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Operator [14]

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The next question comes from Alexander Goldfarb with Sandler O'Neill.

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Alexander David Goldfarb, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research & Senior REIT Analyst [15]

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First, just going back to the previous analyst. Just 2 questions on the second quarter. One, Easter travel, how much -- or Easter falling in the second quarter versus one quarter last year? How much of an impact is actually? I would think that while there obviously are people who stay home for Easter, I would assume that there are bunch of families who travel. And then two, you mentioned that you benefited at the Ballast this year because you had competitor hotels that were closed from the hurricane. So does this mean next year, there's a reverse of that where the Ballast gets impacted because those hotels are now reopened and maybe offering specials? So maybe if you could just talk about those 2 and then I have a second question.

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Andrew M. Sims, Sotherly Hotels Inc. - Chairman & CEO [16]

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Okay. So the first part of your question -- help me, Alex. You gave me 2 questions real quick, so...

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Alexander David Goldfarb, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research & Senior REIT Analyst [17]

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I'm sorry, sorry, sorry. On Easter, I mean, I understand there a lot of families...

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Andrew M. Sims, Sotherly Hotels Inc. - Chairman & CEO [18]

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Oh, Easter, Oh Easter.

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Alexander David Goldfarb, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research & Senior REIT Analyst [19]

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And I would also like to say that ...

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Andrew M. Sims, Sotherly Hotels Inc. - Chairman & CEO [20]

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Every year it moves about $0.5 million from one quarter to the other in terms of hotel EBITDA. That's our analysis. We have -- we're a big group house. People don't book group events around the holiday period. So it's a negative for us. Wherever Easter falls, that's a negative of about $0.5 million.

In terms of should we expect the market to go down? I don't think so. I -- we just had a huge group last week at the Ballast. And those folks have been going to Atlantic Beach for over the last 15 years, and I said they're never going back over there, but they like Wilmington a lot better. So I think it's a -- this has actually been -- we're getting a chance to show our new product to a lot of folks that hadn't seen it before. And it's been very, very well received. So I think the market is hitting its stride because hereto for, before this -- before the Embassy Suites opened, there was no convention hotel, there was not enough product in downtown, not enough of hotel rooms in downtown Wilmington to support the convention center and all of a sudden, things seem to be maturing to a point where it's a very, very attractive market. It's a beautiful place. It's like a small Charleston, but -- and folks love coming there, but there weren't enough hotel rooms to support a major association meeting. So now that's been solved, I think.

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Alexander David Goldfarb, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research & Senior REIT Analyst [21]

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Okay. And then the second question. Just looking at your guidance, you guys maintained your FFO guidance for the year. Obviously, second quarter was a bit short because of the items that you mentioned. But what gives you confidence that second quarter will be better? I mean it sounds like Hollywood is what it is. There's nothing you can do about the Latin tourists. Hopefully, they'll come back. And it sounds like Alba and Ballast are trending in the right way, but it still seems like a big ramp-up in the second half to maintain your $0.91 to $0.95. So how much -- how can we think about the breakout in contributions from the Alba, Ballast and Hyde Resort versus a core portfolio as far as achieving the guidance for the back half?

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Andrew M. Sims, Sotherly Hotels Inc. - Chairman & CEO [22]

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Well, I would say last year, we didn't have a particularly good back half of the year. So we've got a pretty easy comparable. So we're starting from a baseline that we think we can exceed even if we didn't have any other additional factors, I think that are playing into that.

We have re-forecasted every hotel starting basically -- the same process, we go through budgeting. We did a mid-year reassessment on every single hotel, and we get the GMs very involved in the process. And at the end of the day, we think that we're on queue to make our -- to be well within our guidance range. So that's kind of where we are. That's the process we went through. We have -- so far this quarter, we've seen fairly good results. So we're fairly optimistic about that.

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Alexander David Goldfarb, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research & Senior REIT Analyst [23]

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Okay. So there's not like a -- if we think about the core versus the incremental, you can't -- there's not really a benefit that you can quantify from the incremental from the projects that are now online?

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Andrew M. Sims, Sotherly Hotels Inc. - Chairman & CEO [24]

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On a property-by-property basis, I couldn't do that. Maybe we can reach out to you after and if we can provide that information, we'll try to do that.

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Scott M. Kucinski, Sotherly Hotels Inc. - VP of Operations & IR [25]

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Alex, this is Scott. The only thing I'll add, you're are focused on Hotel Alba and Hotel Ballast, but Savannah, Minnesota are still ramping up for us. They're having an exceptional year in the back half. They have a ton of great group business in October, which is their biggest month. That's going to be a big win for them over prior year. Houston is having a good-looking second half of the year versus prior year. So there are still some of the other hotels that are in the later innings of their ramp-up from earlier conversions versus just a couple that we've recently done.

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Operator [26]

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The next question comes from Jason Haviland with Cottage Street Advisors.

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Jason Haviland, [27]

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First of all, just a quick thank you. We had asked that you guys release or try to release your information earlier in the morning, and this morning's 6:30 a.m. release is appreciated. So I just want to acknowledge that and say thank you.

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Andrew M. Sims, Sotherly Hotels Inc. - Chairman & CEO [28]

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You're welcome.

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Jason Haviland, [29]

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And then -- so first 2 questions. First just on the interest rate environment. You are probably surprised or potentially surprised with the current environment. So I know you mentioned you had just wrapped up what you believed to be your last refinancing. Do you believe that this interest rate environment and potential other rate cuts would open up new opportunities? Or basically looking at the way you have your debt now seem potentially the less opportunity?

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Andrew M. Sims, Sotherly Hotels Inc. - Chairman & CEO [30]

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I guess our view this time last year was that rates were going up. So we went out and locked in as much as we could lock in, so we don't have a lot of maturities. That's not to say we don't have -- there'd be -- it's a couple of years or more. I guess there could be an opportunity maybe with our preferred if we wanted to do something with that in a couple of years, but right now we're pretty much -- our balance sheet is set. And I guess we just -- our view 24 months ago was we're trying to plan for a downturn and do everything we could to have the certainty in terms of what our debt services are going to look alike. So now we have certainty.

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Jason Haviland, [31]

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Yes. And -- yes, it was very reasonable in that context. I just -- and I was curious if this may have opened up a small window for something else or if they drop enough that something else makes sense, but it sounds like you feel...

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Andrew M. Sims, Sotherly Hotels Inc. - Chairman & CEO [32]

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Well, we have a little bit of floating rate debt, so that -- the floating rate debt ...

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David R. Folsom, Sotherly Hotels Inc. - President, COO & Director [33]

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We'll benefit from that.

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Andrew M. Sims, Sotherly Hotels Inc. - Chairman & CEO [34]

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We'll benefit from that. That would be Tampa and Raleigh.

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David R. Folsom, Sotherly Hotels Inc. - President, COO & Director [35]

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And Houston.

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Jason Haviland, [36]

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All right. And my other question is just maybe interested in some of your commentary, you mentioned some interesting factors that are impacting demand in your Florida properties, specifically the international travel. Will we hear generally about and observe generally about the U.S. economy as the things are very strong, demand in many areas is very high, maybe CapEx spending is down, but sort of travel and trying to develop new business have conventions is up. What's your -- do you have a general view that's consistent with a very strong U.S. economy driving significant demand at your properties? Or do you -- you've mentioned it and you've described it hyper-localized on many of the calls that we participated in, but is there any disconnect in your mind with the strength of the economy and demand for your properties? Or is that consistent? And you just have lots of local issues to manage.

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Andrew M. Sims, Sotherly Hotels Inc. - Chairman & CEO [37]

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It's exactly what you just said. We believe the economy is very strong and that's why we have a kind of a bias towards maybe the upside a little bit. But at the same time, we have to deal with local issues. And most of those local issues that we see are driven by either weather or a new product. So if we get a new hotel down the street, then it becomes an issue. Or if we get some huge weather event that we can't control, that's something that we just have to work through. And I think we've done a really good job in managing through that the last few years. We've had hurricanes, 3 years in a row, and we can manage through without any kind of major impact on our company.

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Operator [38]

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The next question comes from[Ryan Vardeman] with [Palogic].

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Unidentified Analyst, [39]

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I don't know how I got in the queue. I don't have any questions.

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Andrew M. Sims, Sotherly Hotels Inc. - Chairman & CEO [40]

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Thanks for joining us today, [Ryan].

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Operator [41]

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Well, that concludes our question-and-answer session. I would like to turn the conference back over to Mr. Drew Sims, Chief Executive Officer, for any closing remarks.

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Andrew M. Sims, Sotherly Hotels Inc. - Chairman & CEO [42]

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Thank you all for joining us today. We look forward to reporting to you in October. Thanks.

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David R. Folsom, Sotherly Hotels Inc. - President, COO & Director [43]

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November.

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Andrew M. Sims, Sotherly Hotels Inc. - Chairman & CEO [44]

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November. Excuse me, November. All right. Have a good day, everybody.

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Operator [45]

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The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.