Smedes Rose

Smedes Rose sought clarification on the combination of the two Venetian leases, specifically whether the rent going forward would be the same as this year, or if escalators were reduced. She also asked about the loan book, inquiring if there are any other loans on VICI's watchlist or concerns about coverage, given one loan recently moved to non-accrual status.

Answer

John Payne, President and COO, explained that the Venetian lease combination simplified the escalation structure and removed volatility by eliminating percentage rent. David Kieske, CFO, clarified that the aggregate rent does not change, but the potential escalation going forward is different, resulting in a cleaner, simpler fixed structure. Gabe Wasserman, Chief Accounting Officer, stated that all other loans in VICI's portfolio are performing and current. He described an active asset management approach, with quarterly reviews of all investments and deep insight into partners' financial performance and business plans.

Smedes Rose sought clarification on the combination of the two Venetian leases, specifically if the escalators going forward were reduced, even though there was no change in rent this year. She also asked about VICI's loan book, inquiring if there are any other loans on a watchlist or causing concern about coverage, given one loan recently moved to non-accrual status.

Answer

John Payne (President and COO, VICI Properties) explained that the combination simplified the escalation structure by removing the volatility of percentage rent. David Kieske (CFO, VICI Properties) confirmed that the aggregate rent does not change, but there is a change in potential escalation going forward, resulting in a cleaner, simpler fixed-rent structure. Gabe Wasserman (Chief Accounting Officer, VICI Properties) stated that all other loans in the portfolio are performing and current. He described VICI's active asset management approach, involving quarterly reviews of all lease and loan investments, maintaining close insight into partners' financial performance and business plans. Edward Pitoniak (CEO, VICI Properties) added that Mr. Wasserman's background from Blackstone Mortgage Trust provides relevant experience in this area.

Smedes Rose from Citigroup asked about VICI's potential involvement in the upcoming New York gaming license awards, specifically if MGM is obligated to use VICI for financing at its Yonkers facility and if VICI could participate with other potential licensees.

Answer

President & COO John Payne clarified that MGM has the option, but not the obligation, to use VICI's capital for a potential Yonkers expansion. He also confirmed that VICI has no restrictions and would be able to participate in financing opportunities with any of the other potential licensees in the New York market.

Smedes Rose asked for an update on the New York casino licensing process and questioned the demand for the ultra-luxury One Beverly Hills project given the existing supply in Los Angeles.

Answer

President & COO John Payne commented that the New York process seems to be making progress, with a decision still aimed for year-end, but the outcome remains uncertain. Regarding One Beverly Hills, CEO Ed Pitoniak and executive Samantha Gallagher highlighted the unique, ultra-high-end brand power of Aman, which operates in a league of its own globally and will bring a level of luxury to Beverly Hills that does not currently exist.

Smedes Rose of Citi inquired about the current trends in group bookings, specifically asking about the composition of groups and the types of clients attending.

Answer

Jon Bortz, CEO and Chairman of the Board, explained that the pace advantage is primarily in transient business (leisure, business transient, and contract), with group room nights slightly down but ADR up. He noted continued softness in government and government-related industries, adding that properties are now washing group bookings more realistically based on recent attrition and attendance trends.

Smedes Rose of Citi inquired about the current trends and composition of group bookings, seeking better visibility into this segment.

Answer

Jon Bortz, CEO and Chairman of the Board, explained that most pace advantage is in transient and contract business, with group room nights slightly down (0.6%) but ADR up (2.4%), resulting in a 1.8% increase in group revenue. He noted continued softness in government-related groups and a more realistic wash of group bookings compared to the previous year.

Smedes Rose of Citigroup asked for clarification on Los Angeles's performance, noting a discrepancy between Pebblebrook's results and broader STR data, and inquired about potential labor impacts from recent ICE activity.

Answer

Chairman & CEO Jon Bortz explained that the negative impact was concentrated in the high-end West LA market, where Pebblebrook's assets are located, contrasting with fire-related demand boosting lower-end suburban markets. He clarified that exaggerated media coverage around ICE raids, not the raids themselves, created a false perception of city-wide safety issues, leading to cancellations. He confirmed no labor impacts have been observed at their hotels.

Smedes Rose asked about the potential impact of trade tariffs on hotel-specific costs, such as food and hard goods. He also questioned whether the company's exposure to government-related demand is concentrated in any particular markets.

Answer

CEO Jon Bortz stated that tariffs would likely impact costs for new construction and renovations, particularly for imported items like FF&E and lighting, with some potential effect on operating supplies. Executive Raymond Martz added that their teams proactively adjust menus and pricing to mitigate rising food costs. Regarding government demand, Bortz confirmed it is spread across the portfolio but has higher concentrations in Washington, D.C., and San Diego.

Smedes Rose of Citigroup questioned the outlook for wage and benefit growth in the coming year and inquired about the specific percentage increases being settled in new union contracts.

Answer

Jon Bortz, Chairman and CEO, indicated it was early but expects average wage increases to be slightly lower than last year due to moderating inflation, with the exception of markets with new union agreements, which will see larger increases. He declined to provide a specific percentage for union contracts, deeming it potentially misleading. Raymond Martz, Co-President and CIO, added that non-labor costs, which constitute 40% of total expenses, are seeing easing pressure and even some cost reductions, helping to offset wage inflation.

Smedes Rose asked for an update on the potential sale of the ground lease in Sullivan County. She also questioned whether recent disruptions and management changes in the theme park industry were creating new opportunities for EPR Properties.

Answer

Chairman and CEO Greg Silvers stated that there have been no meaningful conversations with the operator regarding the Sullivan County ground lease, and it is not factored into EPR's current plan. Regarding the theme park industry, Greg Silvers and Executive Vice President Ben Fox confirmed that EPR partners with many of the key players in the space, view the business as stable, and are enthusiastic about opportunities within the attractions sector, as demonstrated by recent acquisitions.

Smedes Rose asked for an update on the potential sale of the Sullivan County ground lease. She also inquired about the theme park industry's recent disruptions and management changes, asking if these opportunities are appearing on EPR Properties' radar.

Answer

Chairman and CEO Greg Silvers stated there have been no meaningful conversations with the operator regarding the Sullivan County ground lease, and it is not factored into EPR's current plan. Regarding theme parks, Greg Silvers and EVP and CIO Greg Zimmerman confirmed that EPR partners with many of the names involved in the industry, viewing it as a stable cash cow business, and expressed enthusiasm for the attraction space, noting a recent acquisition in Q4.

Smedes Rose of Citigroup inquired about the new ATM program, asking about the investment spreads required to trigger equity issuance. She also sought confirmation on whether the company's guidance still includes a bond deal for later in the year.

Answer

CEO Greg Silvers and CFO Mark Peterson explained that while they historically look for a 100-basis-point accretive spread for investments, the ATM program is primarily a tool to provide future capital optionality, with no imminent equity issuance planned. Mark Peterson also confirmed that the current guidance does contemplate a bond deal later in 2025 to pay down the credit line.

Smedes Rose of Citi asked for the company's outlook on the 2025 box office and for an update on the transaction market, including any changes in pricing for experiential assets.

Answer

CEO Gregory Silvers indicated that while EPR has not finalized its own forecast, the market consensus for the 2025 box office is around $9.5 billion. He also noted that pricing for acquisitions has remained stable, with deals in the 8% cap rate range, and emphasized the company's disciplined investment approach. CIO Gregory Zimmerman added that the investment pipeline remains full across most verticals.

Smedes Rose asked about the volume of acquisition deals Tanger has seen in 2026, the nature of competition from private capital, and whether deals are primarily marketed or off-market. She also sought an update on shifts in customer demographics at outlets and overall consumer health.

Answer

Michael Bilerman (EVP, CFO, and Chief Investment Officer, Tanger) stated that the acquisition pipeline remains active, focusing on value creation in outlet and open-air lifestyle centers, leveraging Tanger's platform. Stephen Yalof (President, CEO, and Director, Tanger) attributed demographic shifts to population growth in Tanger's markets, attracting younger, family-oriented consumers. He noted success in family apparel, health and beauty, and younger-driven brands, supported by enhanced digital marketing and loyalty programs.

Smedes Rose asked about the assumptions behind Realty Income's 2026 guidance, specifically regarding slightly lower occupancy expectations and same-store rent assumptions.

Answer

President and CEO Sumit Roy stated that the 98.5% occupancy guidance is conservative and reflects smaller concepts/assets expiring (3% of rent in 2026). CFO and Treasurer Jonathan Pong added that the 1-1.3% same-store rent guidance captures potential credit-related losses and the annualized impact of Q4 restructurings, noting the portfolio's contractual CAGR is 1.5%.

Smedes Rose asked about the assumptions behind Realty Income's slightly lower occupancy expectations and same-store rent assumptions for the year.

Answer

Sumit Roy, President and CEO, attributed the slight occupancy movement to smaller concepts and the nature of expirations (3% of rent in 2026, mostly smaller assets). He expressed confidence in the 98.5% guidance, noting conservatism. Jonathan Pong, Chief Financial Officer and Treasurer, added that the 1-1.3% same-store rent guidance captures potential credit-related losses (unidentified) and the annualized impact of Q4 restructurings.

Smedes Rose of Citigroup inquired about the reasons for a low investment selectivity rate (<3%) despite a record $43 billion in sourced volume, and asked about the primary asset class focus in Europe during the quarter.

Answer

CEO Sumit Roy clarified that the low selectivity rate demonstrates a disciplined investment approach, noting the company passed on approximately $3.7 billion of otherwise suitable deals due to pricing. He stated that European investments were primarily focused on the industrial sector, a shift from the retail park opportunities highlighted in previous quarters.

Smedes Rose asked about the significantly better holiday programming results, questioning if guidance was conservative and what marketing or ticketing strategies were changed, and also inquired if the 2026 outlook incorporates construction disruption, similar to the $23 million EBITDA disruption in 2025.

Answer

Patrick Chaffin, Chief Operating Officer, explained that research indicated a cost-conscious consumer, leading to a marketing shift towards early booking and bundling opportunities, which successfully drove early demand and solid revenue. Jennifer Hutcheson, Chief Financial Officer, confirmed that the 2026 outlook does incorporate construction disruption from ongoing projects at Opryland, Gaylord Texan, and JW Hill Country, with impacts not expected to be meaningfully different from 2025.

Smedes Rose asked about the significantly better holiday programming results, specifically if the company was conservative, what marketing/ticketing changes were made, and lessons learned. She also inquired if the 2026 outlook incorporates construction disruption, following $23 million in 2025.

Answer

Patrick Chaffin, Chief Operating Officer, explained that research indicated a cost-conscious consumer, leading to a shift in marketing towards early booking and bundling opportunities, which drove early demand and solid revenue. Jennifer Hutcheson, Chief Financial Officer, confirmed that the 2026 outlook does incorporate ongoing construction projects, primarily at Opryland, Gaylord Texan, and JW Hill Country, with expected impacts similar to 2025.

Smedes Rose of Citigroup questioned why transient weakness at the Gaylord Opryland was impacting guidance now, given Nashville's long history of supply growth, and sought confirmation on the company's ability to meet its 2027 EBITDA targets.

Answer

Executive Chairman Colin Reed provided a bullish long-term outlook for Nashville, citing unique demand drivers like music tourism and major development projects. EVP & COO Patrick Chaffin described the current rate pressure as a short-term issue caused by competitors' reactions to a recent supply influx. Executive VP & CFO Jennifer Hutcheson affirmed that the company remains confident in achieving its previously stated 2027 EBITDA targets.

Smedes Rose of Citigroup requested more color on the types of groups canceling near-term bookings and asked for an update on the anticipated impact from a new competitive property opening.

Answer

Executive Patrick Chaffin stated that the increase in cancellations is dominated by government-related business across the portfolio, while other segments remain within normal ranges. Regarding the new competitor, Executive Mark Fioravanti noted they have not seen a negative impact on forward bookings and have actually seen rotational business from that region at a 9% higher rate. Executive Colin Reed added they will monitor the situation closely post-opening.

Smedes Rose inquired about the rate of labor and wage cost increases in 2024 and the assumptions for 2025, and also asked for color on the changing profile of group bookings.

Answer

EVP and COO Patrick Chaffin reported a 3.3% wage increase in 2024 and projected a similar rate for 2025, emphasizing that wage margins have remained flat due to productivity management. He explained that the investment strategy is successfully remixing the portfolio toward higher-rated premium corporate business, particularly at Gaylord Opryland. Chairman and CEO Colin Reed added that the overarching strategy is to attract higher-rated groups across all segments.

Smedes Rose of Citigroup inquired about leisure travel trends for the fourth quarter, particularly any changes in consumer behavior, and sought clarification on whether the new Chula Vista property is benefiting the company's group bookings.

Answer

CEO Colin Reed and EVP & COO Patrick Chaffin explained that Q4 leisure trends remain consistent, with Orlando being the most challenged market. Lead indicators like ICE ticket sales are pacing to expectations. President & CFO Mark Fioravanti and Patrick Chaffin confirmed that the Chula Vista property is beneficial, driving over 200,000 new room nights into their portfolio at a 9% ADR premium.

Smedes Rose of Citigroup inquired about Easterly Government Properties' acquisitions guidance, particularly the unchanged $50 million target despite a $1.5 billion pipeline, and asked for insights into the near-term opportunities within that pipeline. Rose also followed up on Same-Store NOI growth, asking if the new GSA Administrator's focus on efficiency and owning versus leasing might lead to changes in federal lease structures, making them more competitive with state and local partnerships.

Answer

Darrell Crate, Chairman and CEO, expressed optimism for 2026, noting the team is actively evaluating numerous transactions in the pipeline, where Easterly's reliability provides an advantage. He emphasized the company's strong balance sheet and focus on delivering growth into 2027. Regarding the GSA Administrator, Mr. Crate stated that early conversations suggest a focus on efficiency, capital market costs, and public-private partnerships, which he believes will evolve positively.

Smedes Rose asked about the unchanged acquisitions guidance despite a $1.5 billion pipeline, inquiring about near-term opportunities and evaluation stages. She also asked about conversations with the new GSA Administrator regarding potential changes in lease structures to make them more attractive compared to state and local partnerships.

Answer

Darrell Crate, Chairman and CEO of Easterly Government Properties, expressed optimism for 2026, noting the team is evaluating many transactions and that reliable buyers have an edge. He emphasized searching for assets with a strong spread to the cost of capital. Regarding the GSA Administrator, Mr. Crate mentioned having spent time with him and believes the government is focused on efficiency, cost understanding in capital markets, and public-private partnerships, expecting this to evolve.

Smedes Rose asked about the expected earnings trajectory for Park Hotels & Resorts' Hawaii properties, including group pace given the Honolulu convention center closure, and their anticipated EBITDA contribution for the year. She also inquired about the portfolio-wide group revenue pace for the current year.

Answer

Sean Dell'Orto, COO and CFO, explained that while the convention center closure impacts 50,000 room nights, the properties have replaced 60% with in-house group and 20,000 room nights with crew business. He projected Hawaii properties to achieve RevPAR growth at the higher end of the 2% range and mid-single-digit EBITDA growth combined, with Waikoloa seeing low double-digit EBITDA growth. Tom Baltimore, Chairman and CEO, added that Japanese visitation shows green shoots, expecting mid-single-digit growth. For the portfolio-wide group revenue pace, Tom Baltimore stated it's up about 3% for 2026 (excluding Miami, Hilton Hawaiian Village, and New Orleans) and 4-4.5% for the core portfolio in 2027.

Smedes Rose asked about the expected earnings trajectory for Park Hotels & Resorts' Hawaii properties throughout the year, including the impact of the convention center closure on group pace and the anticipated EBITDA contribution from these assets. She also inquired about the portfolio-wide pace of group revenues for the current year.

Answer

Sean Dell'Orto, COO and CFO, explained that while the convention center closure impacts 50,000 room nights, the properties have replaced 60% with in-house group and 20,000 room nights with crew business. He projected Hawaii's RevPAR growth at the higher end of the 2% range and mid-single-digit EBITDA growth combined, with Waikoloa seeing low double-digit EBITDA growth. Tom Baltimore, Chairman and CEO, added that Japanese visitation shows green shoots, expecting mid-single-digit growth. For portfolio-wide group revenues, Tom Baltimore noted a 3% increase for 2026 (excluding Miami, Hilton Hawaiian Village, and New Orleans) and 4-4.5% for the core portfolio in 2027.

Smedes Rose inquired about the Q2 guidance bridge, specifically how significant expense savings were able to offset revenue declines, and asked about the outlook for group booking strength into 2026.

Answer

CFO Sean Dell'Orto detailed approximately $24 million in bottom-line benefits from several initiatives. These included a $10 million GOP benefit from asset management deep dives, $7.5 million in property tax appeal savings, and $6 million from a 25% reduction in property insurance premiums. Chairman and CEO Thomas Baltimore added that while 2026 group pace is currently flat, 2027 is up 4-5%, with strong performance expected in markets like Bonnet Creek, San Diego, and Chicago.

Smedes Rose inquired about the significant 8% RevPAR decline in Hawaii during the quarter, seeking to understand the key drivers beyond prior expectations and the underlying health of U.S.-based leisure demand.

Answer

Chairman and CEO Thomas Baltimore attributed the decline to several factors: lapping benefits from the Maui situation, tough year-over-year comparisons at Hilton Waikoloa, and unexpected weather events in Japan that disrupted travel. He affirmed that the company is not alarmed by underlying U.S. leisure demand trends and remains bullish on Hawaii long-term. CFO Sean Dell'Orto added that hurricane activity specific to Hawaii also contributed to the disruption in August.

Smedes Rose asked about GLPI's willingness to add new projects to its robust $2.6 billion pipeline, considering the challenged cost of equity capital and increased leverage, and the nature of conversations with potential capital seekers.

Answer

Desiree Burke, Chief Financial Officer and Treasurer, stated that GLPI's leverage ratio is 4.6x (just below 4.9x with Lincoln), well within target, and the company has sufficient balance sheet capacity, free cash flow, and forward equity to fund current projects without immediate need for new capital. Steven Ladany, Senior Vice President and Chief Development Officer, affirmed GLPI's continued activity in pursuing accretive transactions, underwriting based on current capital costs, and leveraging balance sheet flexibility for development projects. He noted that GLPI is not turning away new business.

Smedes Rose questioned GLPI's willingness to add new projects to its robust pipeline, given the challenged cost of equity capital and increased leverage, and asked about the tenor of conversations with potential capital seekers.

Answer

Desiree Burke, Chief Financial Officer and Treasurer, addressed leverage, stating it's at 4.6x (below target) and that GLPI has sufficient free cash flow and ATM availability to fund current projects without immediate need for debt or equity markets. Steven Ladany, Senior Vice President and Chief Development Officer, affirmed continued activity in pursuing accretive transactions, leveraging GLPI's flexible balance sheet, and not turning away new business despite existing commitments.

Smedes Rose from Citi requested an update on the Las Vegas ballpark development and any change in thinking regarding GLPI's commitment to the associated Bally's Casino Hotel project.

Answer

President & COO Brandon Moore expressed excitement about the A's project and confirmed GLPI is still working with Bally's on the master plan for the rest of the site. He reiterated GLPI's commitment to fund its remaining $125 million, but stated any additional investment would depend on the final financing plan for the resort. Chairman & CEO Peter Carlino added that the 'final script has not been written' and that GLPI will not 'do anything stupid.'

Smedes Rose from Citi inquired about the timing and rationale for the Ione tribal deal, including its 11% financing rate, and asked for an update on the funding timeline for the Bally's Chicago development.

Answer

President and COO Brandon Moore described the Ione deal as a unique, mutually beneficial transaction where the tribe needed financing and GLPI sought a partner to validate its tribal leasing structure with the NIGC. SVP & Chief Development Officer Steven Ladany provided an update on Chicago, stating that the first funding drawdowns for hard construction costs are expected to begin in the first quarter of 2025.

Smedes Rose inquired if the downward trend in total capital expenditure spending is expected to continue and how this might influence the board's thinking on quarterly dividend payments versus year-end true-ups.

Answer

President and CEO Jim Risoleo stated that Host continuously seeks opportunities to invest in assets that generate acceptable returns, noting that 33 assets have undergone transformational renovations, leaving the portfolio in excellent condition. Regarding dividends, he reiterated the objective to pay out taxable income and a sustainable dividend, which is periodically reviewed. He confirmed the upcoming $0.20 quarterly dividend and advised to stay tuned for future announcements.

Smedes Rose from Citigroup inquired if the downward trend in total CapEx spending, as transformational programs conclude, is expected to continue, and how this might influence the company's quarterly dividend payments versus year-end true-ups.

Answer

Jim Risoleo, President and CEO, Host Hotels & Resorts, stated that the company continuously seeks investment opportunities that generate acceptable returns, noting that 33 assets will have undergone transformational renovations. He affirmed the objective to pay out taxable income and a sustainable dividend, with the current $0.20 quarterly dividend on track, and any policy changes would be discussed with the board.

Smedes Rose asked for updated thoughts on wage and benefits increases for 2026 and identified any major markets, besides New York, where labor contracts are due for renegotiation.

Answer

President and CEO Jim Risoleo stated that 2025 wage rate growth is expected at about 6% due to front-end loaded contracts. For 2026, he anticipates lower wage rate growth but cannot quantify it yet as budgets are still under review. He confirmed that New York is the only major market with contracts coming up mid-2026, noting that Host's operators, not Host directly, negotiate with the unions.

Smedes Rose asked for updated thoughts on wage and benefits increases for 2026 and inquired about any major markets, besides New York, where labor contracts are due for renegotiation.

Answer

Jim Risoleo, President and CEO, stated that 2025 wage rate growth is still expected to be around 6% due to front-end loaded contracts. For 2026, he anticipates lower wage rate growth, though the exact amount is not yet determined as budgets are still under review. He confirmed that New York is the only major market with labor contracts coming up for renegotiation in mid-2026, and Host is not directly involved in those negotiations, which are handled by their operators.

Smedes Rose from Citigroup inquired about the drivers behind the 6% increase in wages and benefits for the year and asked for an outlook on how this expense might trend into next year.

Answer

EVP & CFO Sourav Ghosh explained that the increase is primarily driven by the front-loaded impact of finalized CBA negotiations in certain markets. While it is too early to provide a specific figure for next year, he stated the expectation is for the growth rate to be lower than the 6% seen in 2025.

Smedes Rose from Citigroup inquired about the drivers behind the 6% increase in wages and benefits for the year and asked for an outlook on how this expense line might trend into the next year.

Answer

EVP & CFO Sourav Ghosh attributed the 6% increase primarily to the front-loaded impact of finalized CBA negotiations in certain markets. While it is too early to provide a specific number for 2026, he stated that the company's expectation is for the growth rate to be lower than this year.

In a follow-up, Smedes Rose of Citigroup questioned why Host isn't pursuing a more aggressive or programmatic approach to share buybacks, given the stock's compelling valuation.

Answer

President and CEO James Risoleo acknowledged the stock's attractive valuation and confirmed buybacks are a key capital allocation option. However, he rejected a programmatic approach, emphasizing the need to balance repurchases with operational needs and the primary goal of maintaining an investment-grade balance sheet. He also noted that mandatory blackout periods can restrict their ability to buy back shares.

Smedes Rose inquired about Hyatt's decision to exclude EBITDA from non-consolidated joint ventures, asking if this reflects a strategic shift towards monetizing these minority interests for greater model simplicity. She also followed up on potential business interruption insurance claims related to Hurricane Melissa.

Answer

President and CEO Mark Hoplamazian confirmed that while past JV investments propelled brand growth, Hyatt is now actively pursuing the monetization of all JVs over time, including buying out partners to control hotels for sale and divesting public holdings like Juniper. He emphasized that the mandate is set to monetize these interests. CFO Joan Bottarini added that Hyatt would retain management and franchise contracts on any such transactions. Regarding Hurricane Melissa, she confirmed business interruption insurance claims are in process, but proceeds are not included in the 2026 outlook due to uncertain timing and amount, though they will modify the impact.

Smedes Rose asked about Hyatt's decision to no longer include EBITDA from non-consolidated joint ventures (JVs) in its definition, questioning if it makes strategic sense to monetize these interests over time for simplicity and if the benefit will primarily come through the EPS line. She also inquired about potential business interruption insurance claims related to Hurricane Melissa.

Answer

Mark Hoplamazian, President and CEO, confirmed that while past JVs were used to accelerate brand growth, it is no longer a proactive strategy. Hyatt is actively pursuing the monetization of all JVs over time, including buying out partners to control hotels for sale, citing Juniper as an example of a successful investment. Joan Bottarini, CFO, added that Hyatt would retain management and franchise contracts on any such transactions. Regarding Hurricane Melissa, Joan confirmed that business interruption insurance claims exist but are not included in the 2026 outlook due to uncertainty in timing and amount. Mark emphasized that the Jamaica impact is a 2026 issue, with strong government support for reconstruction, positioning the properties for a very strong 2027.

Smedes Rose inquired about Hyatt's group pace in the U.S. and internationally for 2026, seeking any available insights.

Answer

Mark Hoplamazian, President and CEO, Hyatt, stated that pace into 2026 was up in the high single digits at the end of Q3. He noted strong full-cycle bookings in October but weaker-than-expected 2026 specific bookings. Joan Bottarini, CFO, Hyatt, added that Q4 group pace was up 3% due to holiday shifts and strong short-term corporate bookings, with increased booking activity for future years.

Smedes Rose inquired about the current group pace for 2026 in both the U.S. and international markets.

Answer

Mark Hoplamazian, President and CEO of Hyatt, stated that pace into 2026 was up in the high single digits at the end of Q3, with strong full-cycle bookings in October. He expressed high confidence in 2026 group business. Joan Bottarini, CFO of Hyatt, added that Q4 pace is up 3% due to holiday shifts and strong short-term corporate bookings, with increased booking activity for future years.

Smedes Rose of Citigroup asked about the $200 million preferred interest retained in the Playa asset sale and its expected return, and also requested an update on the rollout of the Hyatt Studios brand.

Answer

CEO Mark Hoplamazian explained the preferred interest is structured to encourage the buyer to refinance and is not included in fee guidance. Regarding Hyatt Studios, he stated the rollout is progressing as planned with a strong development funnel, emphasizing the brand's role in capitalizing on the significant "white space" where Hyatt has no presence.

Smedes Rose asked for commentary on the real estate sales environment, particularly for all-inclusive resorts, the nature of the buyer pool, and Hyatt's willingness to offer seller financing.

Answer

President and CEO Mark Hoplamazian described the all-inclusive investor market as being at an 'inflection point,' with institutional capital now entering a space traditionally dominated by family offices. He noted the model's attractive returns are drawing new investors, citing nearly $1 billion in recent institutional transactions. He declined to comment on the potential for seller financing.

Smedes Rose questioned the conservative nature of the year's acquisition outlook, contrasting it with prior commentary on strong infrastructure and market pace, seeking clarification on whether there's an underlying slowdown. She also inquired about the profile of Life Time fitness, now a top-three tenant, asking about coverage levels and the company's comfort with its significant portfolio position given consumer fickleness in the fitness sector.

Answer

Jason Fox, CEO, clarified that there's no market slowdown, and the initial guidance is a conservative starting point, expecting to refine and potentially raise it as the year progresses, similar to 2025. He highlighted the strong start to the year with over $300 million closed and a sizable pipeline. Regarding Life Time, Mr. Fox emphasized it's an existing relationship, a strong, publicly traded credit with a large equity market cap and decreasing leverage. He noted the 10 acquired facilities are well-located in affluent markets, difficult to replicate, with attractive basis, low in-place rents, and strong site-level coverage, describing Life Time's unique "country club" model.

Smedes Rose questioned the conservative nature of W. P. Carey's acquisition outlook for the year, contrasting it with previous commentary suggesting a similar pace of activity to the second half of 2025, and asked if there was any disruptive factor causing a slowdown. She also inquired about the profile of Life Time Fitness, including coverage levels, and the company's comfort level with its increased position in the portfolio given potential consumer fickleness in the fitness sector.

Answer

CEO Jason Fox clarified that there are no market slowdowns, and the environment remains strong and constructive. He explained that the initial guidance is a conservative starting point, with expectations to refine and potentially raise it throughout the year, similar to 2025. Mr. Fox described Life Time Fitness as a strong, publicly traded U.S. fitness operator with a significant equity market cap and decreasing leverage. He highlighted the acquired facilities as well-located in affluent markets, difficult to replicate, with attractive basis, low in-place rents, and strong site-level coverage, noting the unique 'country club' model of Life Time.

Smedes Rose requested an update on the Helveg process, including the status of lease terminations, stores sold versus re-leased, and the timeline for reducing exposure. She also asked about the company's rent loss assumptions for next year and any concerns about the underlying economy driving conservative estimates.

Answer

Brooks Gordon, Head of Asset Management, provided a detailed update on Helveg, noting they remain current on rent and are now the 14th largest tenant. He outlined progress on selling three occupied stores, re-leasing two of seven taken-back stores, and plans for the remaining five. Mr. Gordon also mentioned targeting Helveg out of the top 25 by mid-2026. Jason Fox, Chief Executive Officer, and Brooks Gordon, Head of Asset Management, discussed the conservative rent loss assumption, citing improved credit quality and expecting strong earnings growth despite ongoing caution towards Helveg.

Smedes Rose asked for an update on the Hellweg process, specifically regarding lease terminations, sales, and re-leasing efforts, and also questioned the company's rent loss assumptions for the upcoming year given broader economic concerns.

Answer

Head of Asset Management Brooks Gordon provided an update on Hellweg, noting they remain current on rent and are now the 14th largest tenant. He detailed sales of occupied stores, new leases with operators, and properties under contract for sale, aiming to reduce exposure significantly by mid-2026. Regarding rent loss, Mr. Gordon stated that the broader watch list and credit quality have improved, and while a conservative approach will continue for Hellweg, the company expects strong earnings growth.

Smedes Rose of Citigroup Inc. asked for more detail on the drivers behind the increased acquisition volume outlook and the competitive environment. She also inquired about any changes to the tenant watch list, aside from the previously discussed Hellwig situation.

Answer

CEO Jason Fox attributed the strong deal flow to constructive market conditions, particularly a stable interest rate environment that has encouraged 'pent-up sellers.' Head of Asset Management Brooks Gordon addressed the watch list, stating that overall credit quality has improved significantly, with other major tenants like True Value and Hearthside being resolved with minimal impact. He described the current rent loss reserve as a conservative measure against general economic uncertainty.

Smedes Rose of Citigroup asked for more detail on the drivers behind the increased acquisition volume outlook and the competitive environment. She also inquired about any changes to the tenant watch list and credit outlook beyond the Heldig situation.

Answer

CEO Jason Fox attributed the higher volume to favorable market conditions, including stable interest rates bringing 'pent-up sellers' to market. Brooks Gordon, Head of Asset Management, reported that overall credit quality has improved substantially, with major watch list tenants like True Value and Hearthside resolved with minimal impact. He noted the remaining rent reserve reflects general caution in an uncertain environment.

Smedes Rose of Citigroup Inc. questioned the drivers behind the increased acquisition volume outlook and the current competitive landscape. Additionally, she asked for an update on the tenant watch list beyond the previously discussed Heldig situation.

Answer

CEO Jason Fox attributed the higher acquisition forecast to favorable market conditions, including a stable interest rate environment that has encouraged sellers. Brooks Gordon, MD & Head of Asset Management, reported that overall credit quality has improved significantly, with major watch list tenants like True Value and Hearthside being resolved with minimal impact. He noted the remaining rent loss reserve reflects general caution in an uncertain environment.

Smedes Rose questioned the outlook for transaction cap rates given rising interest rates and asked about W. P. Carey's investment approach in Mexico and Canada amid potential tariff uncertainty.

Answer

CEO Jason Fox acknowledged that short-term rate volatility could widen bid-ask spreads and slow transaction volume, contributing to the company's conservative guidance. Regarding Mexico and Canada, he stated that recent investments were structured with strong, U.S. dollar-denominated leases and good credits, and the company's long-term view of these markets has not materially changed despite potential tariff impacts.

Smedes Rose asked about the expected pace of lease termination fees for NNN REIT in 2026, noting they were elevated in 2025 but more normalized in Q4. She also sought insights into the broader competitive landscape for acquisitions, specifically if NNN REIT is seeing incremental competition despite its reliance on long-term relationships.

Answer

CEO Stephen A. Horn Jr. clarified that lease termination fees for the full year 2025 were over $11 million, with Q4 at a more normalized $230,000. He expects a more normalized level of $3 million-$4 million for 2026, consistent with historical averages prior to the last two elevated years. Regarding competition, Mr. Horn stated that NNN REIT has always operated in a highly competitive environment but has not seen incremental competition entering its specific market segment, attributing this to its focus on relationships and smaller sale-leaseback deals.

Smedes Rose asked about the pace of lease termination fees, noting they were elevated in Q3 2025 but more normalized in Q4, and what NNN REIT expects for 2026. She also inquired about the broader landscape of acquisition competition, given the elevated activity, and if NNN REIT is seeing incremental competition.

Answer

CEO Stephen A. Horn Jr. clarified that full-year 2025 lease termination fees were over $11 million, with Q4 at a normalized $230,000. He expects a more normalized level of $3 million-$4 million for 2026, consistent with historical averages. Regarding competition, Mr. Horn stated that NNN REIT has always operated in a competitive environment but is not seeing incremental competition entering its specific market segment. He attributed potential cap rate compression in Q2/Q3 to peers needing to elevate acquisition activity.

An analyst on behalf of Smedes Rose from Citigroup Inc. raised concerns about discretionary-focused tenants like Dave & Buster's and Camping World and asked if there were differentiating factors for NNN's specific locations.

Answer

CEO Stephen Horn expressed high confidence in both tenants, citing a long-standing, actively managed partnership with Camping World and strong property-level coverage. He noted their Dave & Buster's exposure is primarily from well-underwritten Main Event locations with low rents. CFO Vincent Chao added that Camping World's robust used-vehicle business provides a buffer against economic headwinds.

Bennett Rose, on behalf of Smedes Rose, asked about NNN's potential interest in a large family entertainment portfolio and how the company views its investment spread amid compressing cap rates. He also inquired about any concerns related to tenant Denny's.

Answer

CEO Stephen Horn indicated that while NNN would look at a large portfolio if the real estate and economics made sense, the company's current acquisition target allows it to be more conservative. CFO Kevin Habicht explained their cost of capital hurdle is in the low 7% range, providing sufficient spread. Regarding Denny's, management noted that their properties were acquired long ago at a low cost basis, with attractive rents, mitigating concerns about the chain's struggles.

Smedes Rose inquired whether the recent sale-leaseback transactions were timing-driven or indicative of broader corporate interest in such structures. She also asked about the medium and longer-term outlook for G&A savings as a percentage of revenue, given the company's efficiency initiatives.

Answer

President and CEO Joey Agree clarified that the sale-leasebacks are specific to existing core tenants, not a broader market trend. Regarding G&A savings, Mr. Agree anticipates approximately 30+ basis points of savings relative to total revenues, driven by IT improvements like ARC 3.0, deployment of AI for lease underwriting and abstraction, and savings from the commercial paper program, which generated over $1 million in 2025.

Smedes Rose questioned whether the recent sale-leaseback transactions were timing-driven or indicative of broader corporate interest in such structures. Rose also asked for the medium and longer-term outlook on G&A savings as a percentage of revenue, considering the company's efficiency initiatives.

Answer

President and CEO Joey Agree clarified that the sale-leaseback activity was specific to two core, relationship tenants and not a broader market trend. Regarding G&A savings, Mr. Agree stated that after 2025 being an investment year with significant team expansion, they anticipate approximately 30+ basis points of G&A savings relative to total revenues due to ongoing IT improvements, including ARC 3.0, a Microsoft backbone, and the deployment of AI for various processes. CFO Peter Coughenour added that the commercial paper program generated over $1 million in savings, further contributing to G&A efficiency.

Smedes Rose questioned the potential upper limit for investment in the development platform and whether the increased focus on development represents a strategic shift to accelerate AFFO growth or if it's simply a concurrent expansion alongside acquisitions.

Answer

President and CEO Joey Agree clarified that the expansion of the development platform is not a capital allocation trade-off against acquisitions; the company has ample liquidity to pursue all attractive deals across its three growth platforms. He stated that the goal is to have all platforms contributing to a higher earnings algorithm in the future and mentioned an intermediate goal of investing $250 million annually in development, though he did not set a firm upper limit.

Smedes Rose from Citigroup asked about the movement in acquisition cap rates relative to rising Treasury yields and whether potential bank regulations could impact competition.

Answer

CEO Joey Agree noted that short-term Treasury volatility doesn't immediately reset seller expectations in a fragmented market, but Agree remains disciplined. He added that he sees no regulatory changes that would increase bank lending capacity, and that challenges for merchant developers enhance the competitiveness of Agree's developer funding platform.

Smedes Rose inquired about Citadel's potential to take additional square footage at 350 Park Avenue beyond their initial 850,000 sq ft, and whether Vornado is engaged in other pre-leasing conversations for the building.

Answer

Steven Roth, Chairman and CEO, stated that conversations with Citadel regarding their space requirements are ongoing, and details will be shared once firm. He highlighted excellent energy and excitement around the spec office space, with presentations being made to many tenants, including those seeking as little as 50,000 sq ft and those with expirations as far out as 2031-2033, underscoring the market's recognition that 350 Park Avenue will be the "best building built in the city by far."

Smedes Rose inquired about Citadel's potential appetite for additional square footage beyond their initial 850,000 sq ft commitment at 350 Park Avenue, and asked if Vornado was engaged in any other pre-leasing conversations for space in the building.

Answer

Steven Roth, Chairman and CEO, confirmed that Citadel's space requirements are still being finalized, and their appetite for space has grown. He also noted significant energy and excitement around the spec office space, with presentations being made to many tenants, including those with expirations as far out as 2031-2033, underscoring the market's recognition of 350 Park Avenue as a premier building.

Smedes Rose asked about underlying trends within the leisure segment, including any uptick in all-inclusive platforms, incremental redemptions for loyalty points, or other overall changes in the leisure category.

Answer

CFO Leeny Oberg stated that loyalty point redemptions remain stable at roughly 5% of nights, with dynamic pricing optimizing demand. She emphasized that strong economic performance is a key driver, and resorts and luxury properties continue to lead leisure. CEO Anthony Capuano added that 'tentpole special events' like the World Cup and Winter Olympics are becoming more common, further bolstering leisure trends. Leeny also noted that leisure's increased share of nights (now 45% globally) since COVID has persisted, while business transient remains lower than 2019 levels, and combined trip purposes are making precise market mix analysis murkier.

Smedes Rose asked about underlying trends within the leisure segment, specifically inquiring about an uptick in all-inclusive platforms, incremental redemptions for loyalty points, or any other significant changes within the leisure category.

Answer

CFO Leeny Oberg noted that loyalty point redemptions remain stable at roughly 5% of nights, with dynamic pricing. She highlighted that the fundamental strength of the economy and the continued leadership of resorts and luxury properties are key drivers for leisure. CEO Tony Capuano added that 'tentpole special events' like the World Cup and Winter Olympics are becoming more consistent, further bolstering leisure trends. Leeny confirmed that leisure's gained share of nights (45% globally) since COVID has stuck, while business transient remains lower than 2019 levels.

Smedes Rose inquired about rooms growth expectations, the impact of the 'K-economy' and low-end consumer on select/limited service RevPAR, and how U.S. developers are assessing returns on such products, including Marriott's potential for market share gains.

Answer

Leeny Oberg (CFO and EVP of Development) highlighted Marriott's significant growth in the mid-scale segment (200 rooms open, 150 in U.S./Canada pipeline), driven by strong interest in conversions due to brand strength and competitive affiliation costs. For new builds, she noted developer reluctance due to interest rates, financing constraints, and increased labor/construction costs, but anticipates a steady drumbeat of new hotels, with developers potentially waiting for more favorable financing conditions.

Smedes Rose inquired about Marriott's rooms growth expectations, specifically addressing developer sentiment and decision-making for select-service and limited-service products in the U.S. amidst current market softness and economic conditions.

Answer

CFO Leeny Oberg highlighted significant interest in conversions to Marriott's mid-scale brands (Studio Red, City Express, Four Points Flex), with 200 rooms open and over 200 in the pipeline, including 150 mid-scale hotels in the U.S. and Canada pipeline. She noted that new-build reluctance stems from interest rate expectations, labor/construction costs, but developers still see strong cash-on-cash yields for limited-service hotels.

Smedes Rose of Citigroup expressed skepticism about the strong 2026 group booking pace, asking about management's confidence level and the risk of future cancellations given the uncertain economic environment.

Answer

President & CEO Anthony Capuano conveyed confidence, emphasizing that the 2026 strength is based on firm contracts, not wholesale cancellations. He noted the pace for 2026 has actually increased by 100 basis points since last quarter. CFO Leeny Oberg added that the food and beverage component of group business remains robust, particularly in luxury, indicating high-quality bookings.

Smedes Rose of Citi inquired about the plan to sell the Elegant portfolio in Barbados, including the timeline and potential challenges of selling all-inclusive assets. She also asked for confirmation of the Chicago Sheraton purchase.

Answer

CFO Leeny Oberg stated the plan is to complete renovations on the Elegant portfolio in 2025 before executing a sale, creating a clean transaction for a buyer. CEO Tony Capuano added that growing institutional investment in the all-inclusive space bodes well for a sale. He also confirmed that Marriott did complete the purchase of the Sheraton Chicago.

Smedes Rose asked about the fourth-quarter activity, specifically if a seasonal pickup is observed, details on closed deals, and the LOI pipeline. She also inquired if the settlement of forward equity is reflected in the 2026 guidance's share count.

Answer

Peter Mavoides, President and CEO, indicated that the revised guidance provides a landing zone for Q4, which is expected to be similar to the eight-quarter trailing average (~$300 million), noting the year-end rush had not yet started. Mark Patten, CFO, confirmed that the settlement of forward equity is reflected in both 2025 and 2026 guidance, impacting capital markets activity and the utilization of forward equity to manage the balance sheet.

Smedes Rose inquired about fourth-quarter activity, asking if the company is seeing a seasonal pickup, what has been closed so far, and the state of the LOI pipeline. She also asked if the expectation to settle forward equity is reflected in the 2026 guidance's share count.

Answer

President and CEO Peter Mavoides referred to the revised guidance for Q4 expectations, noting it's early for the year-end rush and no material subsequent activities were disclosed. He expects Q4 to be similar to the trailing eight-quarter average, around $300 million. Chief Financial Officer Mark Patten confirmed that the unsettled forward equity is reflected in both 2025 and 2026 guidance, influencing capital markets activity and the utilization of forward equity to manage the balance sheet.

Smedes Rose from Citi inquired about the plan for settling forward equity and whether leverage would constitute a higher percentage of funding for future growth, given the company's current low leverage.

Answer

CFO Mark Patten confirmed the forward equity would be settled and outlined a typical capital mix of 50-55% equity, 35% debt, and 10% retained cash flow. He noted that while they have ample liquidity for 2025, they will access debt opportunistically and expect leverage to normalize around the 4.5x level seen in recent history.

Speaking on behalf of Smedes Rose, Mattie Fardis asked for feedback from tenants regarding consumer behavior amid inflation. She also questioned if the slight sequential uptick in tenants with rent coverage under 1.0x was a cause for concern.

Answer

CEO Peter Mavoides explained that their financial data from tenants has a one to two-quarter lag, so the most current information they are seeing shows inflationary pressures abating. Regarding the under-1x coverage tenants, he stated the uptick was de minimis and not concerning, as the bucket ebbs and flows, often influenced by development sites not yet producing income. He emphasized that any potential credit issues are already factored into their guidance, which was recently updated with an increase at the low end.

Smedes Rose asked about the sensitivity of acquisition cap rates to the 10-year Treasury yield and the reason for the sequential decline in properties with rent coverage below 1.0x.

Answer

CEO Peter Mavoides stated that competition is more sensitive to the 10-year Treasury, as it impacts private buyers' cost of capital, and a higher 10-year limits this competition. He attributed the improvement in the sub-1.0x coverage bucket to an idiosyncratic event, specifically a successful turnaround by a single early childhood education operator, rather than a broad portfolio trend.

Smedes Rose inquired about the impact of the government shutdown on Hilton's fourth-quarter RevPAR forecast and full-year guidance.

Answer

Kevin Jacobs, EVP and CFO, confirmed that the government shutdown, which was nearly a month old at the time of the call, has been factored into the Q4 RevPAR forecast and the full-year guidance range. He indicated that while it is affecting the numbers, Hilton expects to remain within its stated guidance range even if the shutdown continues.

Smedes Rose of Citi asked for an update on Hilton's strategy in the all-inclusive space, particularly following the transition of some properties, and its plans for future growth.

Answer

President and CEO Christopher Nassetta and EVP & CFO Kevin Jacobs reaffirmed that all-inclusive is an important growth area for serving loyal Hilton Honors members. They noted the current portfolio is around 5,000-6,000 rooms with a similar number in the pipeline. Growth will come from both new-builds and conversions, with recent examples including a new Curio in the Dominican Republic and a Hilton conversion in Cancun.

Smedes Rose asked for additional commentary on the strength in the Group business segment, which was up 6% in the quarter, and its outlook for the remainder of the year, especially concerning large corporate groups.

Answer

President and CEO Christopher Nassetta confirmed that Hilton expects Group to continue to lead segment growth for the full year, supported by a group position on the books that is up mid-single digits. He noted that while overall booking pace has slowed due to macro uncertainty, causing customers to book closer to their travel dates, the underlying demand remains. He pointed to a strong group position for 2026, which is already up in the teens, as a sign of continued strength.

Smedes Rose asked for commentary on U.S. RevPAR expectations, specifically whether management anticipates continued relative weakness in select-service properties compared to luxury and upper-upscale full-service hotels.

Answer

Kevin Jacobs, CFO and President, Global Development, responded that any perceived underperformance is primarily due to tough year-over-year comparisons rather than fundamental weakness. He affirmed that Hilton's brands continue to perform in line with or better than their respective chain scales and are gaining market share, a trend they expect to continue.

Smedes Rose asked for more color on the drivers behind the continued strength in group bookings for 2025, particularly whether it's being led by large citywide conventions or smaller corporate groups.

Answer

President and CEO Christopher Nassetta described the group demand as 'broad-based.' He noted that large citywide conventions are picking up as their longer booking cycles recover, social group business remains strong, and corporate meeting demand is 'terrific.' He attributed the corporate strength to the needs of a normalizing hybrid work environment, where companies require offsite space for culture-building and innovation.

Smedes Rose of Citigroup asked for clarification on management's comments about "stabilization" in its high-end portfolio and questioned the specific drivers for the projected Q3 RevPAR decline, particularly the difficult comparison in Chicago.

Answer

CEO Jeff Donnelly clarified that "stabilization" refers to improving fundamentals across the entire portfolio. President & COO Justin Leonard explained the Q3 weakness is due to a tough year-over-year comparison, specifically citing a non-recurring, high-rate group event (the DNC) in Chicago during the prior year's Q3 which created a difficult comp.

Smedes Rose of Citigroup asked for clarification on DiamondRock's commentary about performance stabilization in its high-end portfolio and questioned the drivers for the projected Q3 RevPAR decline.

Answer

CEO Jeffrey Donnelly clarified that "stabilization" referred to the entire portfolio's demand firming up, not just high-end assets. President & COO Justin Leonard attributed the forecasted Q3 weakness to a difficult year-over-year comparison, particularly from the Democratic National Convention in Chicago in the prior year, which created an unusually strong group comp.

Smedes Rose of Citigroup Inc. inquired about the preliminary portfolio-wide RevPAR for April and asked whether renovation project costs are expected to rise due to tariffs.

Answer

Briony Quinn (Executive) stated that preliminary April RevPAR showed approximately 2% growth. CEO Jeff Donnelly explained that the impact of tariffs on renovation costs is complex, noting they expedited an FF&E order to avoid tariffs and are pausing on future orders to assess the landscape.

Speaking on behalf of Smedes Rose, Bennett Rose asked for details on property-level labor cost growth in 2024 and 2025, and whether the company expects to pay a special 'stub' dividend in 2025 based on current guidance.

Answer

President & COO Justin Leonard reported that 2024 wages grew about 7%, driven by F&B labor, but slowed to a 4% rate by year-end. Executive Briony Quinn added that 2025 guidance assumes a similar 4% growth rate. Quinn also confirmed that despite a tax loss from the Westin D.C. sale, she currently expects the company will pay a stub dividend in Q4 2025.

Smedes Rose of Citigroup inquired if management is still comfortable with Andaz Miami Beach contributing high-teens to $20 million in EBITDA for 2026 and asked for the specific financial impact of the tax refund at Montage Healdsburg.

Answer

CEO Bryan Giglia confirmed the positive impact from the tax appeal at Montage was approximately $1 million. For Andaz Miami Beach, he stated that despite a slower start, they remain confident in the 2026 growth trajectory and expect to be at the lower end of their previously communicated stabilization range.

Smedes Rose of Citigroup followed up on capital recycling, focusing on the Napa assets. He asked about their Q1 performance, their potential for disposition, and the current transaction environment for high-end luxury hotels.

Answer

CEO Bryan Giglia clarified that Q1 is a seasonally weak quarter for the Napa resorts and that they are showing year-over-year EBITDA improvement. Regarding dispositions, he noted that while luxury assets have a specific buyer pool, they are not immune to debt market challenges. He reiterated that all assets are candidates for recycling and they will act when market conditions are favorable, especially given the compelling value of their stock.

Smedes Rose asked for details on the pace of wage and benefit increases at the property level in 2024 and the expectations for 2025.

Answer

Bryan Giglia, Chief Executive Officer, stated that wage and benefit increases were in the mid-4% range in 2024. For 2025, he expects this to rise to the higher end of the historical 4% to 6% range due to front-loaded collective bargaining agreements. Giglia anticipates the growth rate will moderate back down in 2026 and 2027.

Smedes Rose asked if the Wine Country assets could be sold for more than their acquisition basis and whether San Antonio's strong performance could be extrapolated into 2025, potentially exceeding the initial EBITDA forecast.

Answer

CEO Bryan Giglia stated that a sale of the Wine Country assets today might be slightly below their basis, as they need to realize more of the cash flow upside. Regarding San Antonio, he noted that while performance is strong, 2025 expectations remain similar due to a planned renovation, with significant long-term upside expected post-Alamo redevelopment in 2027.

Smedes Rose sought clarification on the full-year rent loss assumption now being 25 basis points. She also asked about the company's plans for settling its outstanding forward equity by year-end versus holding it as dry powder.

Answer

CEO Mark Manheimer confirmed the full-year credit loss assumption is now 25 basis points. He also explained that the decision to settle forward equity is governed by their leverage targets, specifically keeping debt-to-gross-assets below 35%. He anticipates drawing down some equity in Q3 and a 'healthy chunk' in Q4.

Smedes Rose sought clarification on whether the 25 basis points of guided rent loss was for the second half or the full year. She also asked about the company's plans for settling its outstanding forward equity by year-end.

Answer

President & CEO Mark Manheimer clarified the 25 basis points credit loss assumption is for the full year. CFO & Treasurer Daniel Donlan explained that leverage is calculated including the forward equity, and the decision to settle is governed by maintaining debt-to-gross-assets below 35%. He anticipates settling a healthy chunk in Q3 and Q4.

Smedes Rose sought clarification on the updated 25 basis points rent loss assumption for the full year and asked about the company's plans for settling its outstanding forward equity by year-end.

Answer

President & CEO Mark Manheimer confirmed the 25 basis points credit loss assumption is for the full year 2025. He also explained that leverage is calculated including the forward equity, and the decision to settle it is governed by maintaining debt-to-gross-assets below 35%. He anticipates settling some in Q3 and a 'healthy chunk' in Q4.

Smedes Rose sought clarification on the updated rent loss assumption, confirming if the 25 basis points is for the full year. She also asked about the company's plans for settling its outstanding forward equity by year-end.

Answer

CEO Mark Manheimer confirmed the 25 basis points of credit loss is the revised assumption for the full year. Regarding the forward equity, he explained that the decision to settle is governed by the need to maintain debt-to-gross-assets below 35%. With leverage at a comfortable 4.6x, he anticipates settling some equity in Q3 and a 'healthy chunk' in Q4 to fund acquisitions while managing leverage targets.

Smedes Rose asked about the disposition strategy for Dollar Tree/Family Dollar combo stores following the brands' separation and whether the company still plans to settle its forward equity in the second half of the year.

Answer

CEO Mark Manheimer confirmed they are actively selling combo stores to reduce Family Dollar exposure. CFO Daniel Donlan stated that while the bulk of the forward equity would likely be settled in Q4, they have the flexibility to extend it if market conditions warrant.

Inquired about the timeline and rationale for the Los Cabos renovation, the pacing of MICE business for 2025, and the possibility of an insurance claim for Hurricane Beryl.

Answer

The disruptive jackhammering in Cabos will end in August, though some rooms will remain out of service into Q1 2025. The work was accelerated, increasing the disruption impact. MICE business for 2025 is pacing down 25% as expected due to the renovations. No business interruption claim will be filed for Hurricane Beryl as there was insufficient property damage to meet the deductible.

Smedes Rose asked about the specific conditions needed to close the Creative Solutions lease, the details of the personal and corporate guarantees, and the board's plans for the dividend going forward. Michael Bilerman followed up, pressing management on why the board wouldn't provide certainty by setting a new dividend policy immediately.

Answer

Chairman and CEO John McRoberts stated the only remaining condition is state regulatory approval for the operational transfer. Executive VP and CFO Jeff Walraven detailed that the combined personal and corporate guarantees cover 30 months of rent, approximately $19.5 million. McRoberts noted that even at the previous dividend rate, the payout ratio would be in the acceptable mid-80s. In response to Michael Bilerman, McRoberts reiterated the board's prudence in waiting to see the transaction fully completed and cash flowing before making a final decision on the dividend.

Smedes Rose from Citigroup inquired about the company's growing interest in behavioral health facilities, asking about the types of products they are targeting, the attractiveness of the sector versus skilled nursing, typical cap rates, and the potential acquisition volume for 2018.

Answer

CEO John McRoberts highlighted the appeal of the behavioral sector, including addiction, psychiatric, and youth services, due to strong funding and significant need. He stated they focus on established operators with institutional backing rather than small 'mom and pops'. The target cap rate range is 8.5% to 9%. For 2018, McRoberts suggested a potential acquisition volume of $150 million to $200 million, contingent on access to capital, noting their robust pipeline is sustained by relationship-based deals.