Dori Kesten

Dori Kesten of Wells Fargo inquired about the rationale behind the lower implied RevPAR guidance for Q2-Q4, considering strong calendar events, and the conservative assumptions regarding leisure trends, group pickup, and macro uncertainty.

Answer

Jon Bortz, CEO and Chairman of the Board, explained the conservative outlook for the last nine months of the year (1%-2% implied RevPAR growth) does not fully account for potential benefits from events like the World Cup, America250, or a re-correlation of demand with GDP. He cited past disruptions and geopolitical risks as reasons for prudence, noting current positive trends despite weather impacts.

Dori Kesten of Wells Fargo inquired about the rationale behind the lower implied RevPAR guidance for Q2 through Q4, despite a strong calendar of events, and asked for details on the conservative assumptions regarding leisure trends, group pickup, and macro uncertainty.

Answer

Jon Bortz, CEO and Chairman of the Board, explained that the outlook is very conservative due to past disruptions and unforeseen events, implying 1%-2% RevPAR growth for the last nine months, which doesn't fully account for benefits from events like the World Cup or America250. He noted that current underlying demand trends are positive and re-correlating with GDP, despite recent weather impacts.

Dori Kesten inquired about Pebblebrook's expectations for out-of-room spend growth in 2025 and any anticipated differences in transient spending patterns between its urban and resort properties.

Answer

Jon Bortz, Chairman and CEO, stated that Pebblebrook anticipates out-of-room spend will grow at a faster rate than RevPAR in 2025. This growth is expected across various non-room revenue streams, including food and beverage, parking, resort fees, and spa services. Bortz noted that clients are demonstrating healthy spending habits, often exceeding their initial contractual commitments, which supports this optimistic outlook.

Dori Kesten of Wells Fargo Securities inquired about the potential for the LaPlaya resort to exceed its original $24 million EBITDA forecast in the upcoming year and asked about property enhancements made to mitigate future storm damage.

Answer

Jon Bortz, Chairman and CEO, stated that exceeding the original EBITDA forecast is a 'reasonable scenario' for next year, contingent on meeting the reopening timeline. This optimism is driven by a significant increase in group bookings and continued growth in the property's club membership. Bortz also detailed numerous storm-resilience enhancements, including relocating critical systems to upper floors, installing hurricane-proof windows and sliders, and implementing new permanent and temporary protections to mitigate water intrusion.

Dori Kesten asked about the allocation strategy for the remaining $600 million in proceeds from the Four Seasons sale, outside of the taxable gains, inquiring which options (dividends, buybacks, reinvestment, acquisitions) appear most attractive currently.

Answer

President and CEO Jim Risoleo explained that the decision for the remaining $600 million is not immediate and will evolve over time. He stated that the company will take a measured approach, evaluating market conditions and operating performance throughout the year before determining the highest and best use of the capital.

Dori Kesten of Wells Fargo Securities inquired about InvenTrust's full-year same-store NOI guidance, asking for the drivers behind the expected deceleration from the strong 6.1% growth seen in Q1. She also asked about the potential leasing spreads for the few expiring anchor leases, given the portfolio's near-full occupancy.

Answer

CFO Michael Phillips explained that the implied deceleration in NOI guidance is due to three main factors: the full-year bad debt reserve of 75-100 basis points (compared to zero in Q1), higher percentage rent from grocers in Q1, and lower expenses in Q1 that will normalize. CEO Daniel Busch added that while leasing activity is strong, the company is being cautious about potential bad debt in the back half of the year. Regarding anchor leasing, Busch stated that it's a case-by-case decision, and they might accept a lower spread for a key tenant that significantly improves a center's merchandise mix.

Dori Kesten of Wells Fargo Securities questioned the conservatism of the $100 million net acquisition guidance for 2025 and inquired about expectations for tenant retention rates and re-leasing spreads in the coming year.

Answer

President and CEO Daniel Busch explained that the $100 million net acquisition figure signals their intent to be a net acquirer, with the gross number potentially being much higher depending on the success of dispositions in California. He noted the 94% retention rate from 2024 is likely higher than what's expected for 2025 due to known exits like Party City, with 90% being a more typical target. Chief Operating Officer Christy David added that leasing spreads in 2025 should remain similar to the run rate seen in 2024.

Dori Kesten of Wells Fargo asked for early commentary on 2025 same-store NOI growth expectations, the company's view on a normalized bad debt level, and an update on the value and definition of its noncore assets.

Answer

President and CEO DJ Busch indicated that for 2025, InvenTrust expects a similar same-property NOI growth cadence to what was seen in the last two years. He confirmed that 75 basis points is the typical starting benchmark for bad debt. Regarding noncore assets, Busch explained the focus is on methodically recycling capital from properties outside the Sun Belt when opportunities arise, but they are not actively marketing them.

Dori Kesten from Wells Fargo inquired about the internal discussions and rationale behind the recent share repurchase, the first since 2018, compared to other potential uses of capital.

Answer

Conor Flynn, CEO, explained that a significant and rapid drop in the stock price created a compelling opportunity. With strong free cash flow and disposition proceeds, the FFO yield and discount to NAV made the buyback the most attractive use of capital at that moment. He emphasized the team's quick action to capitalize on the market dislocation, especially after having issued equity at a much higher price months earlier.

Dori Kesten of Wells Fargo asked for a breakdown of the 2% same-store NOI growth guidance, specifically comparing the expected growth for the legacy RPT portfolio versus the legacy Kimco portfolio.

Answer

CFO Glenn Cohen stated that the portfolios are now fully blended and viewed as one company, with growth expected to be in a very similar range across both former portfolios. CEO Conor Flynn added that Kimco still sees significant upside to harvest from the former RPT assets, particularly in small shop leasing and anchor conversions, highlighting a recent BJ's deal in Delray, Florida.

Dori Kesten asked about the strategy and timing for activating the 12,000 newly entitled multifamily units, including potential costs and whether they would be developed, put into JVs, or sold.

Answer

COO David Jamieson emphasized a disciplined approach, stating that activations depend on market fundamentals and costs. He outlined the options as self-development, joint ventures, ground leases, or selling the entitlements. CFO Glenn Cohen provided context, noting 3,500 units are already operational and the company has historically activated one to two projects per year.

Dori Kesten of Wells Fargo asked about the timing for activating the newly entitled 12,000 multifamily units and requested guardrails around total costs and potential timing.

Answer

COO David Jamieson emphasized maintaining strict discipline and monitoring market fundamentals, with some opportunities being considered for 2025. He noted that options like ground leases or selling entitlements are also on the table. CFO Glenn Cohen added that 3,500 units are already operational and the company has historically activated 1-2 projects per year.

Dori Kesten asked for quantification of the management fees from the GIC joint ventures and whether the trend of achieving 3%+ fixed rent bumps on small shop leases would continue.

Answer

CFO Heath Fear stated that the specific fee structure for the GIC JVs could not be disclosed but confirmed they are at 'market' rates. CEO John Kite expressed confidence that signing small shop leases with rent bumps north of 3% remains a 'very comfortable' assumption for the company going forward.

Dori Kesten requested an update on the assets currently held for sale, including the competitiveness of the process and the expected closing timeline. She also asked if achieving impressive rent bumps of over 4% on new small shop leases requires making concessions in other areas of the lease contract.

Answer

CFO Heath Fear confirmed the asset held for sale is expected to hit the market imminently and that they are confident of a closing within the next 12 months. On lease terms, CEO John Kite and COO Thomas McGowan stated emphatically that they are not making concessions to achieve higher rent growth. McGowan elaborated that the leasing team remains focused on securing favorable terms on all fronts, including exclusives and CAM language, to ensure long-term asset flexibility and value.

Dori Kesten asked if the company has observed any recent slowing in the receipt of rent payments from tenants, whether in specific retail categories, markets, or from particular retailers.

Answer

CFO John Caulfield responded directly that they have not seen any slowing. He stated that rent collections remain consistent, bad debt expense was lower year-over-year, and the company has not noted any concerning payment trends on a regional or use-specific basis.

Dori Kesten asked whether the seller financing provided on a recent disposition should be considered a one-off event or part of a larger, ongoing program.

Answer

CEO Jeffrey Edison confirmed that the seller financing should be viewed as a one-off strategy. He explained it was used in a very specific case to achieve significantly better proceeds on the sale and is not expected to become a significant or recurring part of the company's disposition strategy.

Dori Kesten questioned whether the joint venture with Cohen & Steers has increased the deal flow for PECO and asked if the company is likely to finish the year at the high or low end of its acquisitions guidance.

Answer

CEO Jeffrey Edison explained that as a long-time major buyer, PECO already sees all market deals, but the JV with Cohen & Steers expands their investment criteria, allowing them to consider assets they previously would have passed on. Regarding the acquisition guidance, Mr. Edison expressed optimism, citing strong activity in the pipeline for the fourth quarter, suggesting a positive outlook.

Dori Kesten inquired about the specific demand trends (leisure, business transient, group) underlying the 1-3% RevPAR guidance, the current state of the hotel transaction market, and whether 2025 guidance includes further operating efficiencies.

Answer

CEO Jeff Donnelly explained that portfolio footprint drives demand trends, with leisure weakness concentrated in Florida's 'popular priced' assets. He noted they don't budget by segment for a precise breakdown. President & COO Justin Leonard described the transaction market as quiet and down ~75% from pre-COVID levels, with a significant bid-ask spread remaining. Leonard also confirmed that the 2025 outlook anticipates a slowing of expense growth, aided by new business intelligence tools enhancing productivity.

Dori Kesten of Wells Fargo Securities inquired about DiamondRock's future capital plans, asking if the three-year ROI project list is likely to change and how to model total capital spend. She also asked for an outlook on labor costs and the 2025 convention calendar.

Answer

CEO Jeff Donnelly confirmed the company aims for capital spending to remain in the 7-9% of revenue range and that the project pipeline is under constant review. COO Justin Leonard described labor costs as 'fluid,' with pressure cooling in resort markets but rising 3-5% in unionized urban markets. Jeff Donnelly noted a slight negative bias for the 2025 convention calendar, citing weakness in Chicago and D.C., but added they are leaning into group business at smaller assets to compensate.

Dori Kesten inquired about the potential annual acquisition volume for new net lease assets, the amount of the Q4 credit line draw that has been repaid, and the company's modeling for its minimum debt service coverage ratio following a recent amendment.

Answer

Jesse Abair, Vice President, explained that net lease acquisition volume would start small in the first half of the year as they build the pipeline, with a reevaluation of the strategy mid-year. Brian Donley, Treasurer and CFO, clarified that $50 million of the credit line remains outstanding, the draw was for liquidity management, and the credit facility amendment was a precautionary measure, not expecting the ratio to dip below 1.5x.

Dori Kesten asked for clarification on the capital investment a new owner might need for the 114 hotels slated for sale, relative to their EBITDA per key. She also inquired about the current and long-term target margins for the retained hotel portfolio and whether SVC has received any inbound interest since announcing the disposition plan.

Answer

President and CIO Todd Hargreaves estimated new buyers would likely invest $25,000 to $50,000 per key for the sale portfolio, which generates about $60 million in annualized EBITDA. Vice President Jesse Abair explained that the retained portfolio's current 15% margin is weighed down by renovations in the full-service segment, while the retained focused-service hotels operate at healthy 30% margins. The goal is to lift full-service margins to the 20-30% range. Mr. Hargreaves confirmed they have received significant inbound interest from institutional groups, validating their belief in strong market demand.

Dori Kesten asked for the company's expectations on demand and rate for urban leisure versus resort leisure in 2025 and requested an update on the San Diego lease negotiation.

Answer

President and CEO Leslie D. Hale stated that urban leisure is expected to outperform broader leisure, driven by a strong calendar of special events in key markets. Regarding the San Diego lease, she reported that discussions are active and progressing favorably, with an update anticipated later in the year.

Dori Kesten asked if external growth prospects for 2025 are expected to be comparable to 2024.

Answer

President and CEO Leslie D. Hale focused on organic growth drivers for 2025, such as outperforming urban markets and ramping conversions. EVP and CFO Sean Mahoney added that from a capital allocation perspective, the company has the balance sheet flexibility for acquisitions if market conditions improve, but share repurchases remain an attractive option.

Dori Kesten inquired about the normalized operating expense growth for 2025, excluding one-time benefits from 2024, and asked about the profile of hotels being sold and their potential buyers.

Answer

CFO Liz Perkins clarified that normalizing for a $3.2 million year-over-year fixed cost hurdle would bring total expense growth below 4%. CEO Justin Knight added that 7-10% of the portfolio fits the profile of assets being sold—smaller hotels with significant CapEx needs—and that the primary buyers have been local owner-operators, which allows for competitive pricing on individual assets.

Dori Kesten inquired about the current rate gap between business transient and leisure travel compared to historical levels, the RevPAR growth assumptions for the remainder of Q4, and the expected trend for expense growth in 2025.

Answer

CFO Liz Perkins noted the rate gap is shrinking, with year-to-date weekday ADR up approximately 6% versus 2019, while weekend ADR is up about 18%. Perkins also confirmed positive booking trends for November and December, projecting RevPAR growth for both months. CEO Justin Knight added that 2025 expense growth trends are likely to continue from 2024, absent major environmental changes.

Dori Kesten inquired about the growing acquisition pipeline, the intended use of proceeds from the recent delayed term loan, and the expected EBITDA trajectory for the W Nashville.

Answer

CEO Marcel Verbaas confirmed a modest increase in potential acquisition opportunities but stressed a patient approach, weighing deals against other capital uses like buybacks. CFO Atish Shah stated the term loan is for general corporate purposes. COO Barry Bloom noted W Nashville's 2024 was a transitional year, with a successful strategy shift toward group business that is expected to drive improved performance in 2025.

Dori Kesten asked for more detail on the ramp-up timeline for the Grand Hyatt Scottsdale to reach its target in the low $40 million EBITDA range, noting that initial rates appear to be trailing peers before narrowing the gap by mid-2025.

Answer

Chair and CEO Marcel Verbaas explained that reaching the stabilized EBITDA target will take a few years. He expressed encouragement about the group revenue pace for Q2 through Q4 2025, which is already comparable to 2019 levels, driven by significantly higher booking rates. Verbaas acknowledged that the ramp-up would be slower in the first couple of quarters of 2025 before gaining momentum as meeting planners see the finished product.

Dori Kesten questioned the expected EBITDA ramp-up for the Andaz Miami Beach in 2026, following the initial 2025 projection of $8 million to $9 million.

Answer

Bryan Giglia, Chief Executive Officer, projected that the Andaz Miami Beach's EBITDA in 2026 should "easily double" the $8 million to $9 million forecast for 2025. He added that the property is expected to reach stabilization with EBITDA in the high $20 million range by 2027.

Dori Kesten inquired if the stabilized yield expectations for the Andaz Miami Beach have changed with the increased $95 million cost, and whether the strong 2025 group revenue pace included the Andaz property.

Answer

CEO Bryan Giglia responded that the stabilized yield expectation remains within the 8% to 9% range, though likely toward the lower end due to the higher investment. He also confirmed that the double-digit 2025 group revenue pace deliberately excludes the Andaz Miami Beach to avoid distorting the data.

Dori Kesten questioned whether the company is considering more large-scale meeting space expansions similar to the Opryland project, or if the capital expenditure plan outlined through 2027 is now firmly set.

Answer

Chairman and CEO Colin Reed responded that future expansions are possible and would be driven by demand, highlighting strong forward bookings and the potential for expansion at the Hill Country property. President and CEO of Opry Entertainment Group Jennifer Hutcheson and Colin Reed both noted that an expansion at Gaylord Rockies is becoming a more near-term possibility due to the success of recent investments at that property.

Dori Kesten from Wells Fargo asked about the expected group revenue pace for 2025 based on Q4 bookings and requested more context on the renovation-related headwinds and tailwinds for the upcoming year, including the reversal of entertainment segment disruptions.

Answer

EVP & COO Patrick Chaffin noted strong booking momentum but declined to give a specific 2025 pace, highlighting that year-to-date revenue on the books is a record. CEO Colin Reed and Executive Jennifer Hutcheson added that the Entertainment segment will have minimal disruption next year and should see decent growth, while hotel renovations will create significant value in 2026 and beyond. The recent dividend increase was cited as a sign of confidence.

Dori Kesten asked if the various 2025 renovations effectively offset each other from a RevPAR perspective and questioned the low end of the operating cost growth guidance given labor cost headwinds.

Answer

CFO Sean Dell'Orto confirmed the renovation disruptions largely lap each other with minimal net impact on 2025 RevPAR. He explained that while union wage growth is in the 5-6% range, it is offset by lower growth in non-union wages and other costs like insurance and utilities, bringing the overall expense growth assumption to the 3-3.5% range.

Dori Kesten asked about the likelihood of the Royal Palm renovation project commencing in 2025 and questioned if cancellation policies for transient guests at the Hilton Hawaiian Village are being relaxed during the strike.

Answer

Chairman and CEO Thomas Baltimore indicated a 'greater than a high probability' that the Royal Palm project will proceed, with design and permitting underway. He compared the project's potential to the successful renovations at Casa Marina and Bonnet Creek. Regarding cancellations in Hawaii, he explained that the on-site leadership team has the discretion to offer solutions like discounts or rescheduling, while stressing the hotel remains open.

Dori Kesten inquired about the materialization of the expected acceleration in transaction volume and the near-term funding strategy for acquisitions.

Answer

EVP & CFO Daniel Guglielmone confirmed the balance sheet is well-positioned with significant flexibility and capacity. EVP & CIO Jan Sweetnam added that they are extremely busy underwriting acquisitions due to more product on the market, though competition for larger assets has also increased.

Dori Kesten from Wells Fargo followed up on the NAV commentary, asking where management believes NAV should be and what specific value the market is overlooking.

Answer

CEO Donald Wood declined to provide a specific NAV target but explained that the market undervalues the significant, by-right development potential embedded in their major mixed-use properties, like the 'Big 4'. He argued that the extensive entitlement work already completed creates substantial real estate value that, while not fully reflected in the public stock price, would be recognized in a private market asset sale.

Dori Kesten asked if it was still fair to assume that re-leasing spreads in 2025 could remain at the elevated levels seen in 2024.

Answer

President and COO Brian Finnegan affirmed that this is a fair expectation. He cited record new and renewal spreads last year and a favorable upcoming expiry profile, with anchors expiring at rents well below where new leases are being signed, giving the company confidence in its ability to continue delivering strong rent growth.

Dori Kesten of Wells Fargo questioned if management still expects re-leasing spreads to remain at the elevated levels seen in 2024 through 2025.

Answer

President & COO Brian Finnegan affirmed his confidence in maintaining strong rent growth. He highlighted the significant positive mark-to-market opportunity, with expiring anchor leases at just over $10 per square foot compared to record new anchor leases signed at over $15 per square foot, providing clear visibility for continued strong spreads.

Dori Kesten noted that the in-place rent on 2025 lease expirations is relatively low and asked if this should lead to a particularly strong year for leasing spreads.

Answer

COO Brian Finnegan confirmed that the company is well-positioned to continue driving strong spreads. He highlighted a track record of over three years with renewal growth exceeding 10%, driven by the portfolio's low rent basis, transformation, strong tenant mix, and high traffic. This provides good visibility for continued rent growth in 2025 and beyond.

Dori Kesten noted that rents on 2025 lease expirations are relatively low and asked if this should lead to a particularly strong year for rent spreads.

Answer

President & COO Brian Finnegan confirmed this outlook, highlighting the team's consistent ability to capitalize on the portfolio's low rent basis, with renewal growth exceeding 10% for three consecutive years. He expressed confidence in continuing to drive rents to market levels, supported by the portfolio's transformation, strong traffic, and high-quality tenant demand.

Dori Kesten of Wells Fargo noted that the same-store NOI guidance range was better than expected but also slightly wider than the prior year's initial guide, and asked for the reasoning behind the wider spread.

Answer

CFO Michael Mas clarified that the 3.6% midpoint is slightly above their prior outlook. He explained that the 80-basis-point range is consistent with historical practices, where initial guidance has varied between 50 and 100 basis points. He identified the timing and volume of tenant move-outs and credit losses as the primary variables that will determine the final outcome within that range.

Dori Kesten asked about the types of bidders for assets under contract, the level of competition compared to initial sales, and the reasons for a recent increase in CapEx spend as a percentage of NOI.

Answer

CEO David Lukes identified three main bidder categories: private/family offices (often unlevered), private equity funds, and institutional spread investors, noting the bidding landscape has been consistent. CFO Conor Fennerty explained that the higher CapEx spend is a function of increased leasing volume and that he remains confident in the sub-10% long-term target.

Dori Kesten of Wells Fargo Securities inquired about the cap rates on recent and pending dispositions, the expected pacing of asset sales before the spin-off, and the anticipated rate of convenience asset acquisitions for the Curbline portfolio.

Answer

CEO David Lukes clarified that the over $1 billion in closed dispositions had a cap rate just under 7%, while the $1 billion in the pipeline is at approximately 7%, which is stronger than expected. He noted that closings should be high in the next few months but new deals are unlikely to close before the spin. CFO Conor Fennerty added that convenience acquisitions would likely be in the $25-$50 million per quarter range, with a focus remaining on dispositions.

Asked about the company's confidence in its $100 million to $300 million net acquisition guidance, whether potential acquisitions include OP unit deals, and what assumptions are embedded in the interest expense guidance for the year.

Answer

The company's confidence in its acquisition pipeline stems from seeing sellers come under pressure from maturing debt, creating opportunities for high-quality assets at compelling prices. They confirmed that OP unit deals are also being considered separately. The interest expense guidance is based on refinancing the 2024 bonds using the forward yield curve and assumes $20 million to $30 million in free cash flow that could be used to pay down debt or fund acquisitions.