Cooper Clark

Cooper Clark questioned the discrepancy between Grand Hyatt Scottsdale's strong group pace (up 8% from March to December) and its lower RevPAR growth of 1.75%.

Answer

Barry Bloom, President and COO, clarified that the group pace is expected to moderate as the year progresses due to limited availability. He noted that lower growth from business transient and leisure segments, when blended, results in the overall RevPAR forecast. Atish Shah, EVP and CFO, added that group is expected to be the strongest performer, followed by business transient and leisure, with leisure showing a better outlook for 2026 due to special events. Regarding Nashville F&B, Barry mentioned a quick ramp-up for Zaytinya, but stabilization timing is uncertain. Atish emphasized that the F&B relaunch's real benefit will be seen over several years, enhancing the hotel's overall appeal as a destination across all segments, rather than just F&B profitability.

Cooper Clark from Wells Fargo asked for clarification on the apparent discrepancy between the strong group pace at Grand Hyatt Scottsdale (up 8% from March to December) and the lower overall RevPAR growth for Scottsdale (up 1.75%), seeking insights into the contributing factors. He also inquired about the timeline for the W Nashville's new food and beverage outlets to ramp up and reach stabilization.

Answer

EVP and CFO Atish Shah explained that the group pace number is expected to moderate as the year progresses due to limited availability, and while business transient and leisure are expected to grow, it will be at much lower levels, leading to the blended full-year RevPAR forecast. He noted that group is expected to be the strongest performer, followed by business transient and leisure, with a better leisure outlook for 2026 due to special events. President and COO Barry Bloom discussed the Grand Hyatt Scottsdale's transient performance, noting fantastic results year-to-date in its first full season post-renovation, with strong pace for March and April, and the hotel successfully charging premium rates. Chairman and CEO Marcel Verbaas added that while 2025 met underwriting targets, it was driven more by group due to softer leisure demand in Phoenix/Scottsdale, and continued leisure recovery is desired for stabilization. Regarding W Nashville F&B, Barry Bloom mentioned Zaytinya's quick ramp-up and that José Andrés operations tend to ramp quickly, but a precise stabilization timeline is hard to predict. Marcel Verbaas clarified that the F&B relaunch's main benefit is not just F&B profitability but its role in making the hotel a more attractive destination across all segments, playing out over several years.

Cooper Clark asked for an update on the group business mix for the year and how it's impacting the spread between RevPAR and TRevPAR assumed in guidance, and sought additional details on the 2.5% RevPAR midpoint within the 6% group pace context, considering last year's higher initial RevPAR guidance on lower group pace.

Answer

Patrick Chaffin, Chief Operating Officer, indicated a 3-point higher corporate mix, which positions the company well for outside-the-room spend. Mark Fioravanti, President and Chief Executive Officer, explained that RevPAR growth typically finishes lower than initial group pace due to in-the-year bookings, attrition, cancellations, and leisure business. He noted the guidance reflects flattish leisure and a prudent, conservative view due to macroeconomic uncertainty. Colin Reed, Executive Chairman, added that their strong business model helps them navigate shifts in meeting planner sentiment.

Cooper Clark inquired about the group business mix for the year and its impact on the spread between RevPAR and TRevPAR assumed in guidance, and sought additional details on the 2.5% RevPAR midpoint within the context of a 6% group pace, considering potential headwinds.

Answer

Patrick Chaffin, Chief Operating Officer, noted a 3-point higher corporate mix, which positions the company well for outside-the-room spend. Mark Fioravanti, President and Chief Executive Officer, explained that RevPAR growth typically actualizes lower than group pace due to in-year bookings, attrition, cancellations, and flattish leisure, citing macroeconomic uncertainty as a reason for a prudent, conservative demand view.

Cooper Clark from Wells Fargo inquired about the Opry Entertainment Group (OEG), asking about the Q2 contribution from Southern Entertainment, future seasonality, and the timeline for a potential spin-off. He also asked if expectations for the JW Desert Ridge acquisition had changed.

Answer

Executive VP & CFO Jennifer Hutcheson stated the company does not break out financials for individual OEG businesses but noted Southern Entertainment's seasonality heavily weights Q2. On the JW Desert Ridge, President & CEO Mark Fioravanti confirmed expectations are unchanged and the acquisition remains on track to be accretive in FY26, noting the purchase timing missed the asset's most profitable first quarter.

Cooper Clark asked about the RevPAR uplift from the World Cup and America 250 celebrations embedded in the guidance, specifically if the World Cup's impact is primarily from the Hilton Midtown asset. He also inquired about the total RevPAR and EBITDA disruption from renovations this year compared to 2025, and potential tailwinds from renovations in 2027.

Answer

Sean Dell'Orto, COO and CFO, estimated the full-year portfolio impact from the World Cup and America 250 celebrations to be 30-35 basis points, with approximately 20 basis points from New York, 10 from Boston, and 5 from other markets. Regarding renovations, he noted Royal Palm's significant impact, causing a 300 basis point RevPAR disruption in Q1 but only 30 basis points for the full year. Other projects contribute 20-30 basis points of disruption. For 2027, he expects Miami to provide a 100+% positive impact, along with strong recovery and tailwinds from investments in Hawaiian assets and New Orleans.

Cooper Clark asked about the RevPAR uplift from the World Cup and America250 celebrations embedded in the guidance, and if the World Cup's impact is primarily from the Hilton Midtown asset. He also inquired about the total RevPAR and EBITDA disruption from renovations this year compared to 2025, and potential tailwinds from renovations in 2027.

Answer

Sean Dell'Orto, COO and CFO, estimated a 30-35 basis point RevPAR uplift for the full year from these events, with approximately 20 basis points from New York, 10 from Boston, and 5 from other markets. Regarding renovations, he noted Royal Palm's significant impact (300 bps RevPAR in quarters, 30 bps for the full year), with other projects having a minor 20-30 basis point impact. He anticipates Royal Palm to provide a 100+% positive basis point impact to the portfolio as it ramps up, along with nice recovery from Hawaiian and New Orleans assets in future years.

Cooper Clark inquired about the expected ramp-up of the renovated Royal Palm South Beach hotel in 2026, including the impact of the World Cup, and asked about the pipeline for future large-scale CapEx projects.

Answer

Chairman and CEO Thomas Baltimore stated the Royal Palm renovation is projected to yield a 15-20% unlevered IRR and double its EBITDA to nearly $28 million at stabilization. CFO Sean Dell'Orto clarified that because the hotel reopens in May 2026, it will miss the peak season and is expected to ramp toward its target EBITDA in 2027. For future projects, Baltimore mentioned the final renovation phase in New Orleans for 2026 and a potential New York renovation being studied for a later date.

Cooper Clark from Wells Fargo asked about the most attractive allocation options for the $600 million in proceeds from the Four Seasons sale (excluding taxable gains), considering dividends, buybacks, reinvestment, or acquisitions.

Answer

Jim Risoleo, President and CEO, Host Hotels & Resorts, stated that the allocation decision for the remaining proceeds would evolve over time, without a short-term deadline. He indicated that the company would take a measured approach, evaluating market conditions and operating performance throughout the year before making a decision on the highest and best use of the cash.

Cooper Clark asked for early thoughts on Maui's recovery momentum and how to consider its pace into 2026 from an earnings perspective, given the $110 million guide implied in 2025 guidance and the strong 2026 group pace.

Answer

Sourav Ghosh, Executive Vice President and Chief Financial Officer, confirmed Maui's strong recovery, noting that the total group revenue pace for 2026 is up 13% year-over-year. He highlighted that 67,000 group room nights are already on the books for 2026, representing 92% of 2019 levels at attractive rates. Ghosh expressed confidence in Maui's continued recovery and anticipated positive incremental EBITDA in 2026 beyond the $110 million forecasted for 2025, though an exact number is still preliminary.

Cooper Clark asked for insights into Maui's recovery momentum and the expected pace of recovery into 2026 from an earnings perspective, considering the $110 million guide implied in 2025 guidance and the strong 2026 group pace.

Answer

President and CEO Jim Risoleo reported that Maui's recovery is strong, with 2026 total group revenue pace up 13% year-over-year. He noted 67,000 group room nights on the books for 2026, representing 92% of 2019 levels at attractive rates. While exact incremental EBITDA for 2026 beyond the $110 million forecast for 2025 is still preliminary, he expressed optimism for positive incremental progress.

Cooper Clark asked about the non-core dispositions assumed in guidance, specifically regarding expected pricing and whether they primarily consist of power centers. He also inquired about the product type and 'buy box' for the assumed 1031 acquisitions, considering tax implications.

Answer

Chairman and CEO John Kite indicated that dispositions would be similar to 2025, focusing on moving away from larger format centers towards neighborhood, grocery, lifestyle, and mixed-use assets, with a goal of increasing embedded rent growth. EVP and CFO Heath Fear added that 1031 acquisitions are primarily for shielding gains from the previous year and managing taxes, while simultaneously de-risking the portfolio.

Cooper Clark asked about the non-core dispositions assumed in guidance, inquiring about pricing expectations and whether these assets are primarily power centers. He also asked about the type of product Kite Realty Group is targeting for 1031 acquisitions and the company's buy box strategy.

Answer

Chairman and CEO John Kite indicated that the dispositions would be similar to 2025, noting a healthy market and strong demand for such products. EVP and CFO Heath Fear added that both acquisitions and dispositions serve to shield gains/losses and de-risk the portfolio. John Kite further explained that the company aims to shift away from larger format centers towards neighborhood grocery, lifestyle, and mixed-use assets, focusing on embedded rent growth and tax efficiency.

Cooper Clark of Wells Fargo asked about the joint ventures with GIC, inquiring about the pipeline of potential deals and how the JV portfolio might grow as KRG executes its strategic goals.

Answer

CEO John Kite expressed satisfaction with the GIC partnership, noting that while they don't comment on specific underwriting, there are opportunities for larger-scale JV deals. CFO Heath Fear added that the partnership is not exclusive and opportunities will arise when both parties find a deal interesting, highlighting that the relationship is repeatable and grew from zero to over a billion dollars in value quickly.

Cooper Clark of Wells Fargo asked for more color on the pipeline of deals with GIC and the potential for the joint venture portfolio to grow over the long term.

Answer

CEO John Kite expressed great satisfaction with the GIC partnership, highlighting its rapid growth to over $1 billion in gross asset value. CFO Heath Fear clarified that the relationship is not exclusive, and future JVs will be pursued on a deal-by-deal basis when an opportunity is mutually attractive. Both executives indicated a strong potential for the relationship to grow.

Cooper Clark of Wells Fargo & Company asked for more details on the joint ventures with GIC, including the current deal pipeline and the long-term vision for growing the partnership.

Answer

CEO John Kite expressed high satisfaction with the GIC relationship but declined to comment on any specific deal pipeline. CFO Heath Fear clarified the partnership is not exclusive and that future deals will arise from mutual interest in specific opportunities. Mr. Kite highlighted the partnership's rapid growth, noting it went "from 0 to a billion pretty quickly."

Cooper Clark asked about Federal Realty's multifamily development and asset recycling strategy, specifically how much more peripheral multifamily product could be marketed for sale and the current yields on the entitled multifamily development pipeline.

Answer

Donald Wood, Chief Executive Officer, indicated there is potential to monetize another $400 million-$500 million of peripheral residential product at cap rates of 5% or lower. He noted that new residential developments are underwritten at 6.5%-7% yields, which are expected to grow faster due to their integration with fully amenitized shopping centers.

Cooper Clark inquired about Federal Realty's multifamily development and asset recycling plan, asking how much more peripheral multifamily could be marketed for sale and the current yields on the entitled multifamily development pipeline.

Answer

Donald Wood, CEO, indicated that there is potentially another $400 million-$500 million in peripheral residential product that could be monetized at cap rates of 5% or lower. He noted that new residential development is underwritten at 6.5%-7% yields, but these assets typically trade at low 5% cap rates due to strong growth and retention at fully amenitized shopping centers.

Cooper Clark of Wells Fargo asked about Federal Realty's development pipeline, seeking color on expected yields versus underwriting hurdles and how much development activity could increase in a more favorable economic environment.

Answer

President, CEO & Director Donald Wood explained that development focuses on retail redevelopments and monetizable residential projects. He stated they target yields of 7% or better for residential and high-single to low-double digits for retail, noting that activity could ramp up if interest rates decline.

Cooper Clark asked about the current opportunity set for Kimco Realty regarding larger portfolio deals versus one-off transactions, and how pricing considerations differ between these types of sales.

Answer

President and Chief Investment Officer Ross Cooper explained that while larger M&A and portfolio acquisitions are always part of the playbook, the current market is challenging due to increased competition from private investors with attractive financing. He noted that in 2025, all acquisitions were from existing investments where Kimco already had a stake or a right of first offer/refusal, a strategy they will continue to lean into.

Cooper Clark asked about the current opportunity set for Kimco Realty regarding larger portfolio deals versus one-off transactions, and any pricing considerations between these two types of sales.

Answer

Ross Cooper, President and Chief Investment Officer, stated that while larger M&A is always part of Kimco's playbook, the current focus is on opportunities arising from their existing JV and structured investment programs due to intense competition and tighter return hurdles in the private market. He highlighted that all 2025 acquisitions originated from investments where Kimco already had a stake or a right of first offer/refusal.

Cooper Clark asked about Kimco's appetite for larger portfolio deals in 2026, given their strong execution on such transactions in recent years, and the current pricing dynamics in the private transaction market.

Answer

Ross Cooper, President and Chief Investment Officer, and Conor Flynn, CEO, acknowledged the competitive environment for both single assets and portfolios. They stated that while large portfolio acquisitions are part of their playbook, current market conditions make it difficult, with the best risk-adjusted returns currently coming from internal opportunities like JV and structured investment programs.

Cooper Clark asked about Kimco's appetite for larger portfolio deals in 2026, given their strong execution on such transactions in recent years, and the current pricing dynamics in the private transaction market.

Answer

Ross Cooper, President and Chief Investment Officer, and Conor Flynn, CEO, acknowledged the competitive environment for both single assets and portfolios. They stated that while large portfolio acquisitions are part of their playbook, current market conditions make it difficult, with the best risk-adjusted returns currently coming from internal opportunities like JV and structured investment programs.

Cooper Clark from Wells Fargo & Company asked about the types of private buyers Kimco competes with and whether larger portfolio deals offer better pricing than one-offs.

Answer

President & CIO Ross Cooper identified competitors as primarily unlevered pension funds and sovereigns targeting mid-to-high single-digit IRRs. He stated that currently, large portfolios are pricing as aggressively as one-off assets, offering no arbitrage opportunity.

Cooper Clark asked for details on InvenTrust's $300 million net acquisitions guide, specifically regarding the volume and pricing in the current pipeline, and the proportion of acquisitions already under contract versus speculative. He also questioned the disposition cadence for 2026, particularly concerning the last California property and the strategy for recycling out of other lower-growth assets.

Answer

President and CEO DJ Busch stated that nearly half of the $300 million net acquisitions are either awarded or under contract, with expected closures in early 2026. He noted a competitive market but highlighted InvenTrust's ability to find opportunities with going-in yields in the high 5s to low 6s and unlevered returns in the low-to-mid 7s, primarily in Sun Belt markets like Phoenix and the Carolinas. Regarding dispositions, Busch explained that 2025 was unique due to California sales. For 2026, dispositions will be timed with acquisition opportunities, with the last California asset expected to close this year. Beyond that, dispositions will serve as a capital source once acquisition targets are identified.

Cooper Clark asked about InvenTrust's $300 million net acquisitions guide, seeking details on the current acquisition pipeline's volume and pricing. He also wanted to know how much of the guided acquisition volume is already under contract or has a high certainty of closing, versus more speculative opportunities. Additionally, he inquired about the disposition cadence for the year, specifically regarding the last California property and potential recycling out of other lower-growth assets.

Answer

President and CEO DJ Busch stated that the $300 million net investment activity guidepost reflects their intent to grow the business and leverage the balance sheet. He noted that almost half of this amount is either awarded or under contract, with expected closures in early 2026, providing good visibility. The pipeline remains competitive, with opportunities fitting their criteria of high 5s/low 6s going-in yields and low-to-mid 7s unlevered returns in Sun Belt markets. Regarding dispositions, DJ Busch explained that 2025 was unique due to California sales. For 2026, dispositions will be timed with acquisition opportunities, with the last California asset expected to close this year. Beyond that, dispositions will serve as a capital source once acquisition targets are identified.

Cooper Clark asked for clarification on the current net investment range, specifically the factors influencing the timing of the last California disposition and the acquisition pipeline into year-end. He also questioned the confidence level for achieving accretive growth from acquisitions in 2026, particularly as funding shifts towards balance sheet capacity after the California dispositions.

Answer

DJ Busch, President and CEO, explained that the net investment range was adjusted due to the timing uncertainty of two awarded deals closing in either late 2025 or early 2026. He noted the California disposition is expected in early 2026 due to administrative issues. Mr. Busch emphasized that while the California rotation was a unique opportunity for portfolio upgrade, future balance sheet-funded acquisitions will be evaluated with a different cost of capital, focusing on responsible and accretive growth for shareholders through the scalable platform and diverse market opportunities.

Cooper Clark asked for clarification on the current net investment guidance range, specifically regarding the timing of the last California disposition and the closing of awarded acquisitions by year-end 2025. He also questioned InvenTrust's confidence in achieving accretive growth from acquisitions in 2026, considering the shift to funding with balance sheet capacity after the California dispositions.

Answer

DJ Busch, President and CEO, explained that the net investment range reflects the uncertainty of whether two awarded deals will close in 2025 or early 2026, while the California disposition is expected in 2026 due to administrative issues. He affirmed confidence in accretive growth, noting that the cost of capital for balance sheet-funded acquisitions is different, requiring a focus on opportunities that deliver creative cash flow and responsible, scalable growth.

Cooper Clark from Wells Fargo asked for details on the current acquisition pipeline's size and pricing, the company's confidence in hitting its $100 million net acquisition target, and what factors would lead to results at the low end of the FFO guidance range.

Answer

CEO Daniel Busch reported that the acquisition pipeline consistently holds about $1 billion in opportunities and expressed high confidence in meeting the $100 million net acquisition guidance, with the potential to exceed it if more deals materialize. Busch clarified that the primary variable for the FFO guidance range is the timing of transaction activity; if activity were to freeze, they would be at the low end, while bringing deals forward would push them toward the high end.

Cooper Clark inquired about Brixmor's disposition pipeline, including expected volumes and cadence for the year, given strong market pricing. He also asked about the depth of bidder pools and the types of buyers aggressively pursuing deals.

Answer

CEO Brian Finnegan noted strong demand in the disposition market, allowing Brixmor to exit lower-growth assets at better-than-expected cap rates (low 7s in 2025) and recycle capital into higher-growth opportunities. He described a healthy market with pension funds, high net worth individuals, and local groups, with bid pools varying by asset size, being very large for smaller assets but smaller for larger, operating-nature deals.

Cooper Clark inquired about Brixmor's disposition pipeline, including expected volumes and cadence throughout the year, given strong market pricing and opportunities for accretive reinvestment. He also asked about the depth of bidder pools and the types of buyers actively pursuing deals.

Answer

CFO Steve Gallagher noted strong demand in the disposition market, allowing Brixmor to exit lower-growth assets at better-than-expected cap rates (low 7s) and recycle capital into higher-growth opportunities (IRRs of 9%-10% for Brixmor vs. 7%-8% for buyers). He explained that bidder pools vary by asset size, with many buyers (pension funds, high net worth, local groups) for smaller assets, but fewer for larger deals.

Cooper Clark from Wells Fargo Securities asked about the $2-$3 million decrease in G&A during the quarter, inquiring about the drivers and whether $26 million is a sustainable run rate or if it was due to a one-time item.

Answer

Steve Gallagher, CFO, explained that the decrease was primarily due to a restructuring charge in the prior year's comparable quarter, which resulted in a reduced G&A run rate going forward. He stated that the current G&A level reflects this improved run rate and that the company feels comfortable with where G&A stands today.

Cooper Clark inquired about the $2 million-$3 million reduction in G&A during the quarter, asking what drove it and if $26 million is a good run rate moving forward or if it was a one-time item.

Answer

Brian Finnegan, Interim CEO and COO, explained that the reduction was due to a restructuring charge in the prior year, which resulted in a better, reduced G&A run rate year-to-date. He expressed comfort with the current G&A level.

Cooper Clark from Wells Fargo & Company inquired about the current acquisition pipeline and the competitive landscape, asking what types of buyers Brixmor is encountering in the market.

Answer

An executive, likely EVP & CIO Mark Horgan, noted that competition for open-air retail assets is intensifying, with increased private capital from high-net-worth individuals and pension funds compressing cap rates, especially for grocery-anchored centers. He affirmed that Brixmor will remain disciplined, focusing on value-add opportunities within its existing footprint.

Cooper Clark asked about the depth of the bidder pools and the profiles of buyers Phillips Edison & Company is observing in the disposition market.

Answer

Chairman and CEO Jeff Edison described the buyer profile as dispersed and broad, comparable to the previous year, with a variety of buyers including family offices and institutional investors. He noted that each property's unique characteristics attract specific buyers, allowing PECO to find the right match for its assets.

Cooper Clark asked about the depth of the bidder pools and the buyer profiles Phillips Edison & Company is observing when marketing deals for disposition today.

Answer

Chairman and CEO Jeff Edison described the buyer profile as dispersed and solid, comparable to the previous year, with a breadth of interest from various buyer types, including family offices and institutional buyers. He noted that each property's unique character attracts different buyers, and PECO focuses on finding the right buyer for each specific opportunity.

Cooper Clark inquired about the rationale for tightening the bad debt guidance range and what factors could push results to either the high or low end of that updated range.

Answer

CFO John Caulfield explained the range was tightened due to consistent portfolio performance and confidence stemming from strong leasing demand. He noted that there isn't a single driver for the range's boundaries, but rather the cumulative effect of performance across their diversified, small-shop tenant base.

Cooper Clark asked for clarification on the expected mix between ground-up development and redevelopment within the $325 million spend guidance, and for color on the current pipeline for additional ground-up starts in 2026.

Answer

Mike Mas, Chief Financial Officer, stated that the $325 million spend is roughly two-thirds ground-up development and one-third redevelopment. Nick Wibbenmeyer, West Region President and Chief Investment Officer, added that 75% of 2025 starts were ground-up, and he expects a similar 75% mix for the projected $1 billion in new investment over the next three years.

Cooper Clark inquired about the $325 million development and redevelopment spend guidance, seeking clarity on the mix between ground-up development and redevelopment, and the pipeline for additional ground-up starts in 2026.

Answer

Mike Mas, Chief Financial Officer, stated that the $325 million spend is approximately two-thirds ground-up development and one-third redevelopment. Nick Wibbenmeyer, West Region President and Chief Investment Officer, added that 75% of 2025 starts were ground-up and projected a $1 billion pipeline over the next three years, with roughly 75% of that also being ground-up developments.

Cooper Clark asked about the potential for development and redevelopment starts in 2026, considering the competitive transaction market and strong leasing, and requested insight into the expected mix between ground-up development and redevelopment.

Answer

Nick Wibbenmeyer, West Region President and Chief Investment Officer, highlighted Regency's significant development activity, with $800 million in starts over the last three years, and expressed confidence in continuing this run rate into 2026. He noted a shift in the in-process pipeline, with ground-up developments now outweighing redevelopments, a trend he expects to continue.

Cooper Clark asked about the potential for development and redevelopment starts in 2026, considering the competitive transaction market and strong leasing, and requested color on the mix between ground-up and redevelopment moving forward.

Answer

Nick Wibbenmeyer, West Region President and Chief Investment Officer, highlighted the significant increase in development starts over the past three years and expressed confidence in continuing to find opportunities in 2026. He noted a shift in the mix, with ground-up development now outweighing redevelopment in the in-process pipeline, a trend expected to continue.

Cooper Clark of Wells Fargo & Company asked for insights on the potential for more portfolio-style deals and the current cap rates for both single-asset and portfolio transactions.

Answer

West Region President and CIO Nick Wibbenmeyer observed that there is significant capital demand for grocery-anchored centers, which has kept cap rates stable in the low-five to low-six percent range, depending on the asset's growth profile. He emphasized that while Regency is competitive and ready to act on accretive opportunities, its growth objectives are not dependent on acquisitions due to its strong development program.

Cooper Clark of Wells Fargo asked for commentary on the potential for more portfolio-style deals and the current trend in cap rates for both portfolios and single assets.

Answer

CIO Nick Wibenmeyer noted continued strong investor demand for high-quality, grocery-anchored assets, which has kept cap rates stable in the low-five to low-six percent range. He stated that while Regency is always ready to pursue accretive opportunities, its robust development and redevelopment programs mean it does not need to rely on acquisitions to achieve its growth objectives.

Cooper Clarke asked about expense reductions, specifically how full-time employee count shifts contributed to cost improvements and the momentum for cost improvements into 2026. He also inquired if the new AC Hotel acquisitions represent a strategic shift towards a higher chain scale.

Answer

CFO Liz Perkins explained that wage and payroll improvements were largely driven by managing labor in response to occupancy declines, with flexibility in FTE counts, and anticipates continued good labor expense management. CEO Justin Knight clarified that AC Hotels are upscale, not a higher chain scale, and are chosen for their efficient operating model and ability to drive strong margins, especially in markets with higher rates.

Cooper Clarke with Wells Fargo inquired about the drivers of expense reductions, specifically how the full-time employee (FTE) count has changed and its impact on cost improvements, and sought insights into the momentum of these cost improvements heading into 2026. He also asked if the recent acquisitions of AC Hotels indicate a shift towards a higher chain scale or if it's purely opportunistic.

Answer

Liz Perkins, Chief Financial Officer, explained that wage and payroll improvements were largely due to managing labor in response to occupancy declines and less year-over-year wage pressure for hourly associates, emphasizing the flexibility of select-service assets with FTE counts. Justin Knight, Chief Executive Officer, clarified that AC Hotels are squarely in the upscale segment, comparable to existing properties, and the focus on the AC brand is driven by its efficient operating model and ability to achieve strong margins, especially in markets with higher rates.

Cooper Clark of Wells Fargo questioned the source of confidence for a Q4 RevPAR acceleration given weaker bookings for August and September. He also asked if the pace of asset dispositions could increase to fund more share buybacks.

Answer

CFO Liz Perkins cited positive booking positions for Q4, easier year-over-year comparisons without the election, and market share opportunities as reasons for confidence. CEO Justin Knight confirmed the company will continue to opportunistically sell assets to fund share repurchases as long as the significant arbitrage between private market values and its stock price persists, and they are actively testing the market for transactions.

Cooper Clark from Wells Fargo inquired about DiamondRock's capital allocation strategy, specifically balancing share buybacks against redeeming preferred stock, and asked for an update on the Sedona repositioning.

Answer

CEO Jeffrey Donnelly stated that share buybacks remain a very appealing use of capital at a near 10% cap rate. While redeeming the preferred stock is an option the company will weigh, it is not currently in the 2025 guidance. Regarding Sedona, he noted that while it's early, booking pace is encouraging, with rates up significantly year-over-year.

Cooper Clark from Wells Fargo inquired about the strategy for balancing share buybacks with the potential redemption of preferred shares, and requested an update on the Sedona repositioning project's performance and forward booking trends.

Answer

CEO Jeff Donnelly stated that share buybacks remain an attractive use of capital at a near 10% cap rate. He noted that redeeming the preferreds is not in the current guidance but is an option the company will continue to evaluate. Regarding Sedona, he mentioned that while it's early, Q4 group bookings are accelerating at rates $150-$200 higher than the prior year, which is encouraging.

Cooper Clark asked for details on the distribution calculation for the remaining portfolio, specifically the pricing expectations. He also inquired about the sale prospects for the Watergate and Riverside assets, potential policy risks in Maryland, and a comparison of operating trends between the remaining portfolio and the legacy portfolio.

Answer

CFO Steven Freishtat stated that detailed estimates and assumptions for the distribution would be available in the forthcoming proxy statement. CEO Paul T. McDermott added that the Watergate and Riverside assets would be marketed in Q3 and they look forward to seeing market pricing. COO Tiffany Butcher addressed Maryland's rent control, noting it is now factored into investor underwriting, and provided high-level performance trends for the Virginia, Maryland, and D.C. markets, referring to the supplement for asset-level details.

Cooper Clark inquired about the multifamily transaction market in Washington D.C., asking about buyer sentiment and current cap rates. He also asked for context on the timing of a new board member's appointment in relation to the company's ongoing strategic review.

Answer

Paul T. McDermott, CEO, stated that the D.C. market is seeing continued capital flows, with investors viewing the 2026-2028 period as having a strong runway for rental growth. He provided specific cap rates: core deals at 4.25%-5%, core plus at 4.75%-5.25%, and value-add in the low-to-mid 5s. Regarding the board, McDermott explained the strategic review was decided last year, and the new member was added as part of a separate, ongoing board refreshment process.

Cooper Clark of Wells Fargo asked for the new lease rate growth assumption embedded in the revised guidance and questioned if recent capital allocation signals a strategic shift away from mature Sunbelt markets.

Answer

EVP Timothy Argo stated the back-half new lease rate assumption is around -4%, with confidence stemming from strong renewals, high occupancy, and favorable absorption trends. President and CEO A. Bradley Hill clarified there is no strategic shift away from the Sunbelt, detailing that the Kansas City acquisition offers a high-5s NOI yield, rising to 6.3% with a development component.

Cooper Clark asked about how much of the cost is locked in for new development and redevelopment projects, and also inquired about the performance difference between urban and suburban assets.

Answer

CEO Brad Hill explained that development costs are largely locked in, with prepurchase deals having a cost guarantee and in-house projects being about 95% bought out at the start. EVP & COO Tim Argo added that redevelopment costs are stable, with appliance pricing locked in for the next year. Argo also noted that the performance gap between urban and suburban assets has largely converged, though urban may have more upside as supply normalizes.

Cooper Clark of Wells Fargo asked about potential wage pressures from policy initiatives in Los Angeles and San Diego and the timing for the Paradise Point resort conversion, questioning how free cash flow would be prioritized.

Answer

Chairman & CEO Jon Bortz discussed industry efforts to counter adverse wage legislation, including a ballot initiative in LA. Regarding Paradise Point, he stated that a 2026 start for the major renovation is unlikely as they await approvals from the California Coastal Commission. He confirmed that deploying free cash flow toward debt paydowns remains the priority.

Cooper Clark, on for Jamie Feldman, asked if suburban assets are still outperforming urban ones and how a potential urban recovery might affect allocation targets. He also inquired about the drivers of lower resident turnover beyond the reduction in move-outs to buy homes.

Answer

COO Sean Breslin noted suburban assets lead in year-over-year revenue growth, but near-term rent change is more balanced. CIO Matthew Birenbaum affirmed the long-term suburban strategy remains intact. Regarding turnover, Breslin stated that move-outs-to-buy have been stable at low levels, so other factors are driving the continued decline in overall turnover, supported by the high cost of homeownership.

Cooper Clark from Wells Fargo asked about the current yields on development, wholly-owned acquisitions, and JV acquisitions, and for an update on deal flow with the LaSalle JV partner. He also questioned if recent activity signals a shift to a more opportunistic strategy and how it would be funded.

Answer

CFO Joe Fisher stated that the LaSalle JV is actively underwriting deals again, with a potential transaction to announce by the next earnings call. He noted acquisition cap rates are in the mid-4% range for prime assets and can be in the 5s for others, while new development is being underwritten to the low-to-mid 6% range. Fisher confirmed a shift to a more "capital balanced or opportunistic mode," aiming to activate their land pipeline and grow the JV platform. He specified that this activity will be funded primarily through capital recycling via dispositions of assets that are deemed to have less upside.

Cooper Clark, on behalf of Jamie Feldman at Wells Fargo & Company, inquired about the strong Q1 operating expense performance, asking if it was due to timing and which costs were below guidance.

Answer

President Charles Young attributed the favorable OpEx result primarily to a year-over-year decrease in repairs and maintenance (R&M) expense, driven by milder weather and lower turnover. He also credited disciplined execution, scale, and procurement efficiencies for the strong performance, noting that the team is controlling what it can control.

Cooper Clark inquired about the reasons for the manufactured housing (MH) top-line guidance reduction beyond hurricane impacts and asked about recent mark-to-market trends on new leases. He also questioned if the 10-year average length of stay in the MH portfolio had changed from pre-COVID levels.

Answer

Patrick Waite, an executive, explained that the occupancy headwind was almost entirely due to hurricane-related site losses, with underlying demand remaining strong as evidenced by a 14% mark-to-market on new leases. Both Patrick Waite and Marguerite Nader, an executive, confirmed that the 10-year average length of stay has been a consistent metric for the past 30 years and has not changed.

Cooper Clark from Wells Fargo asked for an update on the upcoming insurance renewal, including potential impacts from Denver wildfires, and for details on bad debt levels and trends across markets.

Answer

CFO Bhairav Patel explained that the insurance renewal process is in its final stages. While early indications were favorable, recent storm activity elsewhere could impact final pricing, and there was no specific color yet on wildfire impacts. He reported that Q3 bad debt was 45-50 basis points, at the high end of the annual range, but noted the trend was not concentrated in any specific market and was spread across the portfolio.