Smedes Rose • Citigroup

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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EVP & CFO Sourav Ghosh explained that the 6% increase is market-dependent and significantly influenced by recently finalized collective bargaining agreements. While it is too early to provide a specific number for 2026, Ghosh stated the expectation is for wage and benefit growth to be lower than the rate seen this year.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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