Park Hotels & Resorts - Earnings Call - Q2 2021

Transcript

Speaker 0

and welcome to Park Hotels and Resorts Inc. Second Quarter twenty twenty one Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Ian Weissman, Senior Vice President, Corporate Strategy. Thank you. You may begin.

Speaker 1

Thank you, operator, and welcome, everyone, to the Park Hotels and Resorts second quarter twenty twenty one earnings call. Before we begin, I would like to remind everyone that many of the comments made today are considered forward looking statements under federal securities laws. As described in our filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed, and we are not obligated to publicly update or revise these forward looking statements. In addition, on today's call, we may discuss certain non GAAP financial information such as adjusted EBITDA. You can find this information together with reconciliations to the most directly comparable GAAP financial measure in last night's earnings release as well as in our eight ks filed with the SEC and the supplemental information available on our website at pkhotelsandresorts.com.

This morning, Tom Baltimore, our Chairman and Chief Executive Officer, will provide an overview of the industry as well as a review of Park's second quarter performance and thoughts on the balance of this year. Sean Dell'Orto, our Chief Financial Officer will provide additional color on second quarter results as well as more detail on our balance sheet and liquidity. Following our prepared remarks, we will open the call for questions. Questions. With that, I would like to turn the call over to Tom.

Speaker 2

Thank you, Ian, and welcome, everyone. I am pleased to report that widespread leisure demand accelerated during the second quarter, leading to stronger than expected operating performance, which ultimately drove breakeven results at the corporate level during the month of June, well ahead of expectations. We continue to make progress on strengthening our balance sheet, raising an additional $750,000,000 of attractively priced senior secured notes and announcing nearly $480,000,000 of asset sales with net proceeds being used to repay debt. Given the meaningful improvements to both operations and the balance sheet, we are in a great position to once again prioritize growth opportunities, including ROI projects and selective acquisitions. On the macro front, the combination of strong economic growth and stimulus, high personal savings, widespread availability of vaccines, and the corresponding easing of COVID related restrictions has fueled a resurgence in leisure travel.

The pace of economic growth has accelerated meaningfully since our last call. GDP reached an all time high during the second quarter and is now forecast to increase 6.6% for 2021. Non residential fixed investment, which is highly correlated with lodging demand, is estimated to grow by 8.4% this year, 60 basis points higher than our last call, and by an additional 6% in 2022. US savings sat at $1,700,000,000,000 as of June, and with roughly two thirds of The US population over twelve years old now vaccinated, all signs still point to a return to in person schooling and work for many people post Labor Day, assuming for now that the Delta variant does not alter this progression. The ongoing return of normalcy is an important catalyst for our industry's recovery.

While we have all benefited from strong leisure demand in recent months, this next step should allow for the resumption of business travel, corporate group, and convention business. None of us can be certain of the shape or the pace of the recovery, but I strongly believe that the fundamental desire to be with people face to face will again prevail. We continue to work closely with our brand partners to ensure we are offering our customers what they need, enhanced safety and cleanliness, more automated and digital amenities, and flexible workspaces to blend between business and leisure. I am thrilled with Hilton's recent announcement for opt in housekeeping at the majority of its hotels. We believe that measures like these will push the industry in the right direction, not only from a profitability standpoint, but also from an environmental standpoint.

For Park, we have five key priorities that I would like to highlight. First, we are focused on reopening our three remaining suspended properties located in the New York and San Francisco metro areas. Second, we are seeking to maximize RevPAR by pushing average rates in the strong leisure demand markets while positioning ourselves for select business and smaller smurf and corporate group opportunities to build occupancies in urban, suburban and airport locations. Third, we remain laser focused on implementing operational efficiencies to increase profitability and realize the $85,000,000 in cost savings or nearly 300 basis points of margin improvement we've mentioned on previous calls. Fourth, we continue to make progress of deleveraging our balance sheet through asset sales.

And finally, pivoting now to offense to drive earnings growth through accretive investments, including value enhancing ROI projects like Arbonnet Creek Signia conversion and meeting space expansion, while eyeing several other potential brand conversions and repositionings within the portfolio. With respect to future acquisitions, we anticipate being very active as we head into 2022 with a continued focus on upper upscale and luxury hotels in top 25 markets and premium resort destinations. Turning to our second quarter results. Consolidated RevPAR came in 25% higher than expected driven by incremental growth in both occupancy and ADR in select markets. Performance at our hotels and leisure oriented markets helped us generate $33,000,000 of adjusted EBITDA, more than $60,000,000 ahead of the forecast we set at the beginning of the quarter.

Results at our leisure focused properties continue to surprise to the upside with five of our hotels meeting or surpassing twenty nineteen occupancy levels, while 10 of our hotels surpassed twenty nineteen ADRs by an average of 25% during the quarter. The phenomenon of revenge spending is very real and has led to price insensitivity fueled by higher than average savings and cabin fever. Our Royal Palm Hotel in Miami, for example, grew ADR by $47 or 25% over the second quarter of twenty nineteen. While our two resorts in Key West, which have continued to see incredible demand, recorded quarterly occupancy of over 92% and an ADR of nearly $500 leading to nearly 50% RevPAR growth over the second quarter of twenty nineteen. In total, our open hotels saw ancillary out of room spend increase 65% to $26 on a per occupied room basis during the second quarter compared to the same time in 2019, highlighting the pent up demand for perceived extras such as golf or spa treatments, as well as the appeal of drive to destinations, which provided incremental parking revenue.

Note that this figure excludes food and beverage as many of our outlets were closed during the quarter. As our food and beverage outlets reopen, we expect to see incremental growth in our total RevPAR stats. As restrictions eased during the quarter, we reopened the W City Center in Chicago in mid May, followed by the Hilton San Francisco Union Square just before Memorial Day, and the Hilton Chicago in mid June. We were able to move up the full reopening of all five towers at Hilton Hawaiian Village through the robust demand we've been seeing in Hawaii. We now have 90% of our total portfolio rooms open and hope to reopen our remaining three hotels over the coming months as we evaluate the near term business demand trends in these markets.

From a segmentation perspective, leisure demand doubled from the first quarter and accounted for roughly 70% of total demand, benefiting from strong performance in Hawaii in particular. While we are still seeing very modest numbers overall, both business transient and group revenues also doubled from the first quarter, which support the trend we are seeing of increased mobility. Over one third of our total group business for Q2 was picked up in the quarter for the quarter as people gained confidence and restrictions eased. We are seeing group pace picking up beginning in the fourth quarter with confirmed bookings pacing at roughly 50% of 2019 revenues. Looking ahead to 2022, we are trending at 72% of pace for 2019 at the same time in 2018.

Our top group markets for 2022 include Hawaii, New Orleans, Key West and Orlando. As we mentioned on our last call, we have been working tirelessly to reimagine the operating model to find incremental permanent savings across our portfolio. Adopting the adage of never waste a crisis, we've identified $85,000,000 of savings, which translates into nearly 300 basis points of margin improvement on an annualized basis. All across our portfolio, our asset managers have challenged our operating partners to think creatively, cross utilize staff, and reexamine contracts and procedures. In Hawaii, for example, we combined management of our two resorts under one executive leader and implemented several new operational synergies, which resulted in roughly $1,500,000 in savings in the second quarter.

We have modified operating hours or changed food and beverage outlet concepts to mitigate losses stemming from low occupancies, And we have reimagined how these outlets can operate more profitably moving forward. We remain confident that with the support of our brand partners, we can translate these modifications into permanent practice going forward. As another example of proactively sourcing operating efficiencies across our portfolio, we are very pleased to have transitioned our four self managed select service hotels to third party management arrangements in July. Combined with our exit from these three laundry facilities last year, we no longer directly manage any properties, which is a significant savings to our operating model going forward. Markets.

As we have forecasted on our last call, Hawaii has seen a huge acceleration in demand. Many travelers are opting to take advantage of the ability to work from anywhere before a return to work and school after the summer, and this is especially true for Hawaii. Increased domestic airlift to the state, particularly from Southwest, has provided US air travelers with ready access to a tropical destination when many international destinations remain restricted. For our two resorts, RevPAR exceeded the first quarter by 104 or nearly 210%. At Hilton Hawaiian Village, occupancy at our nearly 3,000 room resort jumped from 44% in April to 84% in June, all from domestic leisure strip.

We have reopened all five towers and most of our food and beverage outlets have reopened, some with operational modifications to increase profitability. Operating margins at the property exceeded 34% for the second quarter or just five seventy basis points shy of the level achieved during the same period in 2019. At Waikoloa, occupancy increased from 70% in April to nearly 90% in June. Even more impressive, we've been able to maximize rate over 2019 with June's ADR of close to $300 coming in $81 higher than June 2019. In fact, Ykelowa generated more EBITDA this past June with half the number of rooms available than it did in June 2019.

Clear proof that we made the right decision to transfer 600 rooms to HGV and right size the hotel to maximize operating efficiencies, yield higher rates, and drive better margins. Furthermore, many guests are taking full advantage of all of our resorts have to offer. Ancillary spending such as luau's, parking, spa, and resort rentals increased 33% over the second quarter of twenty nineteen to $116 on a per occupied room basis for our two Hawaii properties during the quarter. While we expect these leisure driven trends to moderate some after Labor Day, we remain very bullish on Hawaii going forward. We expect strong demand over the winter holidays, where we are already seeing rates in excess of $1,000 per night with that momentum expected to continue well into 2022 and beyond as we anticipate the resumption of Asian travel to Hawaii later next year.

In terms of group demand, some headwinds persist from restrictions against gatherings that remain in place statewide. However, group pays for Hawaii hotels is currently up over 20% for 2022. And at this time, we have every expectation that these groups will be able to meet, albeit with potential attrition from international attendees in the early part of the year. Moving to Florida. Our resorts across the state continue to have strong performance, fueled by leisure strength as well as small groups.

In Key West, RevPAR at our two resorts was up nearly fifty percent twenty nineteen levels as we continue to reap the benefits from our renovated assets and complementary branding strategy. We are seeing incredibly strong out of room spend in Key West with total RevPAR for our two assets reaching $663 for q two, which is 37% ahead of 02/2019. On the group side, our hotels hosted 5,200 group room nights during the quarter. And local catering was up 26% in 2019 driven by weddings. The resorts have more weddings on the books than they have had in any prior year, with a 136 weddings on the books in 2021 versus a 122 in 02/2018.

In Miami, our teams have employed aggressive rate strategies to drive ADR 23% higher than the second quarter of twenty nineteen. Our rates this summer have been more in line with peak season rather than the typical post spring break discounting we see. Although we do expect that this to moderate post Labor Day and then reaccelerate as we move into the peak winter holiday season. In Orlando, we are starting to see the return of traditional group demand. Our newly rebranded hotel, Signia by Hilton Bonnet Creek, has over 50,000 group room nights on the books for the back half of the year, which is down just 5% to twenty nineteen levels.

In addition, the Orange County Convention Center lifted all capacity restrictions in June. And the convention calendar for the balance of the year sits at roughly 75% of twenty nineteen levels in terms of room nights. Based on past trends, we expect Orlando and Florida to continue to remain accommodating of both transient and group visitors, which should continue to translate into increased bookings going forward. Moving to our capital allocation successes. We made significant progress at reshaping our balance sheet and reducing leverage during the quarter, issuing attractively priced corporate debt and also executing strategic asset sales.

I'm especially proud of the team's efforts on the capital recycling front. Given the strong appetite for institutional quality assets in major markets by private equity, we took advantage of market conditions and are on track to exceed our stated goal of $300 to $400,000,000 worth of asset sales this year with our recently completed and pending transactions. We remain disciplined throughout the pandemic as the bid ask spread narrowed significantly following the widespread distribution of the vaccine. Further supported by our most recent completed and pending San Francisco hotel sales, which went under contract at less than a 2% to 3% discount to pre COVID levels. Despite increased price transparency in the private markets, the valuation gap between public and private pricing remains at among the widest gaps in recent memory.

Similar to previous cycles, however, we expect the valuation gap to narrow as the lodging recovery continues to take shape and the pace of private market transactions accelerate over the coming months. With respect to additional asset sales over the balance of the year, while we do not have anything to report at this time, we are always seeking to maximize shareholder value and will entertain attractive offers as they arise. As we look ahead, we are encouraged by the healthy lead volumes we've seen since the start of the second quarter, which have held steady at roughly 80% of 2019 levels. We are seeing larger corporate and citywide meetings planned for 2022 and beyond in our major group markets, while on average our more near term groups scheduled for the next couple of quarters are seeing smaller projected group sizes compared to historical levels, which is not surprising given the current uncertainty surrounding the Delta variant. However, we expect this trend to normalize over the next few months as we get past these next few weeks and as vaccination rates continue to increase.

As we think about transient demand for the balance of the year, we expect domestic leisure to continue to lead the way combined with an uptick in business transient post Labor Day. Before I hand the call over to Sean, I want to emphasize the important milestones we have reached with regards to achieving breakeven at the corporate level, coupled with our initiatives to sell assets and improve the overall quality of our balance sheet, all well ahead of expectations. This along with our operational improvements and expectation for continued improvements in overall travel demand positions Park for ongoing success for the coming quarters. We believe our diversified portfolio will allow us to benefit from all demand segments, group, business transient, and leisure throughout all phases of the lodging recovery. With over $1,800,000,000 in current liquidity, we are also poised to move to offense by unlocking embedded value through targeted ROI initiatives as well as strategic acquisitions that fit our strategic profile.

We look forward to updating you on future calls. And with that, I would like to turn the call over to Sean, who will provide you with some more color on our results and an update on our balance sheet and liquidity. Thanks, Tom. Overall, we

Speaker 3

were very pleased with our second quarter performance with pro form a RevPAR sequentially increasing 92% over Q1, driven by a 1,600 basis point improvement in occupancy, while average daily rate exceeded $185 accounting for a 19% pro form a increase from the previous quarter. Driven in large part by the strong leisure demand, we generated positive adjusted EBITDA of $33,000,000 for the second quarter, well ahead of expectations, representing the first time since the first quarter of twenty twenty that we generated positive adjusted EBITDA. We are very encouraged by the pace of improvement throughout the summer as performance accelerated in June with a number of breakeven consolidated hotels increasing to 34 hotels, up from just 12 during the first quarter, allowing us to achieve breakeven at the corporate level during the month as well, a meaningful improvement from the $23,000,000 burn rate achieved in April. In light of this past quarter's strong results and the momentum we anticipate throughout the summer, we expect to exceed breakeven levels for the third quarter as well. In addition to strong top line results, performance throughout the second quarter was further enhanced by ongoing operating efficiencies, especially within our resort properties, with hotel adjusted EBITDA margins exceeding 35% or 30 basis points higher than 2019.

Looking ahead to the third quarter, July gave us a very strong start with occupancy for all open hotels improving sequentially by over 800 basis points to approximately 64%, while ADR is expected to reach approximately $220 for sequential improvement of over 10% from June. Overall, we expect to finish the third quarter with an average occupancy in the mid 50% range for our consolidated portfolio, while RevPAR is projected to exceed $100 overall, an expected sequential increase in excess of 30% over Q2. Turning to the balance sheet, as Tom noted, our liquidity currently stands at over $1,800,000,000 including nearly $1,100,000,000 available on our revolver and $800,000,000 of cash on hand. Taking into account the sale of the two San Francisco hotels this quarter, our net debt, which was $4,400,000,000 at the end of Q2, is expected to decrease by nearly 300,000,000 with 100% of the net sales proceeds used to partially repay our sole remaining bank term loan, leaving just an estimated $80,000,000 balance versus the $670,000,000 outstanding at the start of this year. Over the past two years, we have made incredible progress in improving the overall quality of our balance sheet, raising $2,100,000,000 of public corporate debt while paying down over $2,300,000,000 of bank debt and extending our weighted average maturity profile by almost a year.

The public debt markets remain open, while other debt markets are becoming more constructive. As the lodging recovery gains more traction over the coming months and into 2022, we will continue to evaluate options to refinance our $725,000,000 CMBS loan coming due in late twenty twenty three and anticipate refinancing the $650,000,000 of senior secured notes that we issued in May of last year. This concludes our prepared remarks. We will now open the line for Q and A. To address each of your questions, we ask that you limit yourself to one question and one follow-up.

Operator, may we have the first question please?

Speaker 0

Thank you. Ladies and gentlemen, at this time, we will be conducting a question and answer session. Our first question comes from the line of David Katz with Jefferies. Please proceed with your question.

Speaker 4

Hi, good morning, everyone. Thanks for taking my question. I appreciate it. Tom, it sounded in some of your opening commentary that we heard some appetite on both the buy side and the sell side. Any chance you can elaborate and maybe set some boundaries or give us just a little bit more color on what Park would find compelling in either direction?

Speaker 2

David, it's a great question. I would remind listeners if you think back to the journey over the last sort of five years, we have worked really hard to reshape the Park portfolio. So we have sold now 30 assets for about 1,700,000,000. Obviously, we bought 18 assets, obviously, as part of the Chesapeake deal for 2,500,000,000.0. So we have been very active in toggling between obviously both the sale and repositioning as well as on the buy side.

I think the message that I'd really like to leave with you and with listeners today is we are laser focused on reopening hotels as we talked We've got the three remaining, and, again, we'll we'll wait for the right the right conditions to open those. We have worked tirelessly on reimagining the operating model and are confident that we've been able to pull out $85,000,000 in cost savings. And I think Hilton's announcement about opt in on housekeeping is a great example. But as we mentioned on the last call, we've taken out about 1,200 FTEs, and that's result resulting in about eight percent of the workforce, plus or minus, at the property level. And we've also, again, really been thinking out of the box.

And what we what we shared in our prepared remarks about Hawaii is a great example, Taking a great leader in Debbie Bishop and having her over both properties and, again, taking another million and a half in admin out of those two great assets as an example. So you'll see you'll continue to see those types of initiative. Those will certainly continue to grow cash flow. And then there are many options available within our portfolio for embedded ROI opportunities. Obviously, the Bonnet Creek that we've talked about, that has been reactivated.

We're really excited about that. One, the name change, and then two, the repositioning of that world class resort. The Doubletree in San Jose is another great conversion opportunity for us, taking that up brand like we did with the Doubletree in Santa Barbara where we've got incredible results. And then, of course, the Casa Marina in Key West is another that you'll see us reposition as well even though it's having phenomenal results in this time. We had great success converting the reach to a Curio, and we're evaluating our options for for the CASA as well.

You know, regarding kind of the next growth lever, single asset acquisitions. I mean, we will we will, like many of our peers, focus on top 25 markets and upper upscale and luxury assets and and top 25 markets and premium resort destinations. We too will, you know, certainly like to take a more active role as we look at opportunities both in the Southwest and in the Southeast. That's going to be incredibly competitive for everyone, but we will continue to look at that. We'll be cautious.

We're not ruling out some of the other markets that some people are redlining. We certainly believe that deals happen opportunistically and that these markets will come back, albeit perhaps a little slower. There's no doubt that that some of the great urban markets are certainly gonna recover. And then, of course, you know, we're we're gonna be very interested as we as we look at creative ways. Given the the huge discount between the public and private markets right now, we we are not gonna be issuing equity.

We have been crystal clear through this cycle, through the difficult period, and I think we've demonstrated. Last year, even when our burn rate was at 85,000,000 and given the challenges, we made all the right moves. We've gotten back to breakeven, and we didn't have any kind of dilutive equity raise. We're not gonna do anything like that as we move forward. Clearly, we're we're trading at such a a significant discount to NAV and certainly the replacement cost.

So but there are lots of things that we can do within this portfolio. We can we can sell other assets and recycle that capital. We could joint venture assets. We've got an iconic portfolio. Our top 28 assets, the core, you know, account for 90% value and give us incredible optionality.

So we'll be very thoughtful, but we wanna make sure that as we raise capital, that it's done at prices that reflect NAV and are accretive. You know, we're clearly not gonna be doing anything that that's dilutive. I've been a passionate proponent. I've said that repeatedly to investors, and we stand by that. And you'll see that behavior as we move forward.

Speaker 4

Perfect. Thank you so much. And as my follow-up, I just wanted to ask about that Chesapeake portfolio. If we can go back in time, a part of the thesis was the opportunity to grow margins with a less of the OTA channel. I I realize it may be a a little bit of an unfair comparison, but can you just talk about progress to that end if it's available at this stage?

Speaker 2

Yeah. There's there's there's no doubt that it still remains available, David. Look, we we stand by the Chesapeake acquisition. We believe then as we do now that it really improves the overall portfolio quality. We have brand and operator diversification.

It gave us geographic diversification. It improved our growth profile and again embedded value both from ROI opportunities, margin and grouping up. So Sean and the asset management team continue to work on those initiatives. We have sold some of the assets in the Chesapeake portfolio, but candidly, those were assets in almost every situation but one, where really those were not really compliant with our intermediate or long term asset goals. So we're we've got 11 remaining out of the 18 and are confident that all of those provide the kind of opportunities that we underwrote initially.

And you may recall that right before getting hit by the asteroid, you know, we had 21 of the 24,000,000 in synergies really already identified and accounted for. So still very, very bullish on the Chesapeake acquisition as we move forward.

Speaker 0

Our next question comes from the line of Floris van Dijkum with Compass Point.

Speaker 5

Tom, I love hearing your view on not issuing equity below NAV. Maybe if you could, you know, give us some of your thoughts on on on NAV. And, obviously, it's an evolving target. But presumably, with some of the transactions that have occurred and some of the increased activity that we're seeing in the market right now, what do you think I mean, how should we think about your NAV right now going forward? And also, how is that how much has that increased since the dark days in January, February?

Speaker 2

Of course, it's a great it's a great question. You could imagine we feel a lot better today than than certainly sixteen months ago, and I'm sure our peers feel the same way as as we were in the dark days, obviously, of the of the pandemic. I think our consensus NAV is somewhere in the $27 a share. You know, the reality is pre pandemic, we were probably closer to 30, if not above that. You know, there's been about $3 of scarring from the pandemic in terms of the amount of cash that we had to really expend in terms of the carry during that period of time.

We've recovered significantly as you look at our balance sheet and the moves that we've made. A lot of credit to Sean, our finance team, and just how proactive. This is a very seasoned and experienced team. We knew what to do. We went into action.

We never panicked. We didn't panic then. We're certainly not gonna panic now. And I think it ties into your comment about about dilutive equity moves. We avoided.

We were crystal clear and and firm in our position that we wouldn't do a dilutive equity trade, and that still applies today. So, you know, we traded probably one of the widest discounts at NAB today. And so we clearly are not gonna be looking to do any kind of equity offer or any kind of ATM program. It doesn't in our view for Park, doesn't make sense at all to be selling equity at at such a huge discount. Again, this portfolio provides such great optionality.

And I alluded to it in the question that David asked is, look, we we can recycle assets out of certain other markets. We could joint venture assets. The market and we've demonstrated and we've shown there's so much liquidity on the private side. We can get NAV or above NAV. So it makes no sense to be selling equity in our view.

And you'll see us continue to be creative and thoughtful, but rest assured, we will create value. Either the public markets will recognize our value or the private markets, but we will create value for shareholders.

Speaker 5

Thanks, Tom. And if I can follow-up on that vein. In terms of obviously, you've got a couple of irreplaceable assets, multibillion dollar assets, in Hawaii that was, believe, institutionally owned in the past. Would you consider selling a stake in Hawaii Village to a large institutional investor or one of your other trophy assets?

Speaker 2

Yes. I think we would clearly explore with a trophy asset. Obviously, the last on that list, as you can imagine, would be Hilton Hawaiian Village. We get calls all the time. I would respectfully submit that I I can't imagine that there is a REIT asset across any sector as valuable as Hilton Hawaiian Village.

22 acres, five towers. We're working on the sixth tower and getting the optionality of adding another tower there, world renowned. But we will do what's in shareholders' best interest, and we will create value for shareholders.

Speaker 0

Our next question comes from the line of Rich Hightower with Evercore ISI. Please proceed with your question.

Speaker 6

Hey, good morning, guys.

Speaker 2

Good morning, Rich.

Speaker 6

Tom, I to follow-up on the investments question. And you sold two San Francisco assets for reasons I think all on this call, we understand. But I'm curious for your longer term expectations for that market knowing that it's it's always gonna be a relatively low supply market and and, you know, demand is gonna grow eventually once we get out of out of COVID here, you know, maybe back prior peak levels, you know, whenever that happens. So how do you how do you how do you sort of pair the the income and the value foregone from selling those assets versus maybe what you're looking at currently in terms of future acquisitions as we think about a use of proceeds there?

Speaker 2

Yeah. It's a it's a great question, Rich. And and, you know, the reality is we we love the San Francisco market long term. When you think to the point that you made, you've got one huge barriers to entry and real supply constraints there. You've got multiple sources of demand, corporate convention and clearly on the leisure front.

We do believe that San Francisco will come back. I would not bet against great cities of the world, and I clearly would put San Francisco in that bucket. You know, for us, it became really two issues. It was both a concentration issue. San Francisco's about 17%.

We'd really like to be sort of inside of 15. And candidly, the need to delever. We thought it was really important to have the optionality on the balance sheet. And so we looked at the the six holdings, six assets that we owned in the CBD and concluded, obviously, Adagio was better better hands in private equity given the adjacent parcel and the optionality there and sort of a small box. You know, La Meridian in a perfect world and and normalized conditions, probably one that we would have liked to keep.

But when you compare that against the other assets, we really thought that one, it had a lot of optionality. We could achieve a a really respectable pricing comparable to 2,019. You do recall a year ago, Rich, everybody said there was gonna be all this distress and and assets were gonna be trading at 40% discounts. I think you will recall and listeners will recall, I was crystal clear in saying that Park would not participate and we wouldn't sell assets at that kind of pricing. We waited prudently and appropriately, and obviously realized in both assets attractive pricing.

So proud of the team, proud of the discipline. We certainly made the right move. You know, regarding other markets, everybody's chasing the Southeast now. We've been to this movie before. Remember ten years ago when when everybody wanted lifestyle hotels in New York, and everybody ran to buy lifestyle, and I respectfully submit that didn't work out so well.

I think here in the in in what's happening in the Southwest and what's happening in the Southeast, we certainly agree.

Speaker 7

It's a

Speaker 2

business friendly. You're seeing the change in population growth and demand growth. Those markets are gonna be attractive. It's gonna be competitive. We are well positioned in in Florida right now.

And but we too will be looking opportunistically, and we'll have to evaluate the pricing and and the situation where it makes sense. I think investors need to understand that we have great optionality in our portfolio. Just not sure we're getting the the credit that people understand that there's lots we can do with this portfolio to continue to create tremendous value for shareholders.

Speaker 6

Alright. Thank you, Tom. That's all I got.

Speaker 0

Our next question comes from the line of Smedes Rose with Citi. I

Speaker 8

just I wanted to ask you a little bit more about the $85,000,000 of cost savings. What the recent announcements Hilton made around housekeeping, is that factored into those cost savings? Or do you think there's going be upside to that? Or does it just give you more kind of certainty around meeting that number?

Speaker 3

Yes, Sweetheart, this is Sean. The recent Hilton policy change there or locking in opt in housekeeping is not included in the 85,000,000 The $85,000,000 is an exercise of us looking at department head roles, manager roles within what they call front desk or ultimately F and B outlets and whatnot. So it's kind of going kind of position by position within each property and kind of thinking through the org chart and not so much about brand initiatives. So certainly some upside potential there with Hilton's opt in, change going forward.

Speaker 8

Yeah. And it seems like there would be. I mean, do you have any sense any any way to kinda quantify it a little bit, or is it too early?

Speaker 3

I think it's too early to tell. Certainly, you got to get into you got to kind of get the business traveler back here to kind of get a sense. We certainly just have looked and seen how the Clean Stay program has worked over the last couple of quarters. It's not exact science, not perfect, but we certainly think that we've seen gains in and above the upfront expense of having to clean the room with additional protocols and whatnot each time there's a checkout, which clearly that's coming off and the opt in kind of strategy remaining. So I think certainly we'll see some benefits going forward from it.

But still a little bit early to kind of quantify at this point.

Speaker 8

Okay. And then I also just wanted to ask you, you mentioned you'll be cash flow positive in the third quarter, but fourth quarter is left out. And is that is do you think you'll be cash flow negative in the fourth quarter? Or is it, again, too early to tell? And maybe just can talk a little bit about how the transition, I guess, from the leisure season into a more business travel group centered season, how that's going or kind of what you see in the near term?

Speaker 3

Sure. I think the certainly, we look it's more kind of near term focus for us just to kind of look at the cash positions for Q3. Certainly had a very strong July. And we'll see as we transition from August, which obviously will be a little bit could be a little bit lighter as people think about going back to school and getting prepared to go back to the office. We certainly see that leisure could ultimately be slowing down a little bit.

Traditionally, it does. And we're certainly seeing August kind of holding its own. But for the most part, July was certainly a very strong month for us. So we feel good about the quarter overall. Going into Q4, we certainly think there's a leisure component that really comes back around the holidays.

And so the question really remains around the business transient, which we've certainly seen great business transient, we think, progress over the last several months. We've kind of looked at midweek occupancies across non resort oriented hotels in our portfolio, a couple of dozen or so. We've seen it go from about 35% to 65% from April through mid July. So we certainly feel that there is some data that kind of goes along with some of the certainly the anecdotes we've seen and experienced ourselves with people come to visit us and having meetings externally. So I think there's people out there traveling ahead of their offices reopening.

We certainly expect that to continue and pick up as we get into the September and post Labor Day month, should say. But ultimately, we got to certainly be respectful of fact that the Delta variant could ultimately have some impact as well. So certainly still a lot of visibility for us to kind of get better visibility on as we get into Q4. So not so much to say that we don't think Q4 is that way, just kind of more keeping it near term focused.

Speaker 0

Our next question comes from the line of Ari Klein with BMO Capital Markets.

Speaker 9

Thank you. Maybe on the optionality within the portfolio, you noticed some opportunities, but how are you thinking about timing there, especially for some of the bigger ones? When could we expect to see more progress on those?

Speaker 2

We continue to evaluate opportunities. You'll hear more probably as we get third, fourth quarter and beyond. These things tend to be opportunistic. And candidly, that will depend on how the overall demand patterns unfold. I think it will depend on discussions that we have.

We get lots of inbound calls all the time about different ways to work together. There's no shortage of of private capital. And there's no shortage of obviously, private capital is prepared to pay NAV or above. And, you know, the part the public markets are dragging. We we've been to this movie before.

As we get more visibility, we think the public markets will catch up. We're certainly not gonna wait. We're gonna continue to execute the initiatives that we talked about, both on continuing to right size the operating model, looking at embedded ROI, and then other ways that we can unlock. So it could be that we sell some additional assets and recycle capital. It could be that we look to partner and unlike unlock capital that way.

Some of the tax implications of the spin go away here at the end of the year. So that makes it a lot gives us even more optionality as we get into 2022. The other thing to keep in mind, and again, I don't think the market always appreciates just the complexity of the spin. We sold 30 assets, 14 of those international. We inherited a laundry business.

We've gotten rid of that. We had four assets that we had to self operate as part against some of the requirements of the spin. We've now solved that problem and we've got third party operators. So, you know, the park team has been incredibly busy, Proud of our work. Obviously, of us expected to get hit by the asteroid in the pandemic.

We quickly retooled. We've managed it. Our balance sheet is in outstanding shape. And we have a lot of optionality. And we can toggle between defense and offense, but you can certainly begin to see us positioning to offense.

We've got scale, and we will be a player. So make no mistake about that.

Speaker 9

Thanks. And then on the group side, as businesses book events, are there any new trends or differences that you're seeing relative to how how groups were booked previously? And then are they are they asking for for different things? And and are you seeing like for like events booked for fewer people, you know, especially as you look out to 2022?

Speaker 2

Yeah. I I would I'd say a couple things. I think we all can expect that you're you know, I was out at Dallas, obviously, that you had the mask mandate out in LA. But, you know, I think what we're gonna continue to see is you're gonna see more of a return to normal. Like we saw on the leisure front, it accelerated lots of pent up demand.

I think you're gonna see the same thing on both the business and on the group side. For even those companies that have people working remotely, you know, what I hear from CEOs and other business leaders, men and women, that they're gonna look to get their people together more frequently. So you may you may see people getting together in smaller groups or larger groups for training, for innovation, for team building. You know, that need to be together isn't gonna go away. You have to believe that advances in technology and hybrid meetings, that there'll be applications.

I don't know that anybody's perfected it yet. I'm on Zoom calls and combination Zoom meetings, and, they worked fine. And they worked fine during the pandemic because we had no other alternative. Now people wanna be together. They see the benefit of it.

And and I think things will accelerate closer back to where we were, and I think people realize. I I I wanna be on the road. I've been on the road. I'm getting more inbounds of people that wanna come in. And once we get a return to office, once we get schools reopened, once we get past this delta wave and, you know, the more people we can get vaccinated, the sooner, the the better it's gonna be for all of us.

But there's no there's been no real no real change, and you can expect some hybrid stuff on the margin. But, we're we're not all not gonna be doing hybrid meetings. I just don't I don't see that as a new standard as we move forward.

Speaker 9

Thanks for the color.

Speaker 2

Yeah. Thank you.

Speaker 0

Our next question comes from the line of Anthony Powell with Barclays. Please proceed with your question.

Speaker 7

Just a question on Hilton both going to opt in housekeeping and also changing some of breakfast benefits for Elite members.

of full service Hiltons, and I'm some of the customers may be used to, you know, daily housekeeping and and and a generous breakfast. How's that been received by customers? And and and do you worry about any kind of long term impact to, you know, customer satisfaction from these changes?

Speaker 2

No. I I'll I'll jump in here, Anthony, then then Sean can jump in. I I first of all, as I said in my prepared remarks, I really applaud Hilton. We we have got to use the crisis as an opportunity to reimagine the operating model. I think the opt in was the right move.

I think the changing the credit for for elite members was also, I think, a more efficient. And I think we're gonna continue to see changes in food and beverage. Whether that's room service or whether that's grab and go or eliminating three meal restaurants that are unprofitable. We have to think about the business differently. This crisis was painful for all of us, particularly owners, but also for the brands as well.

If they don't have a healthy owner community, they're not gonna continue getting that distribution as as as they'd like to see and need to see. So I think the moves were were the were the right moves as we move forward. Clearly, the luxury product and luxury customer, I think, will be less likely to make those changes. We continue to evaluate it. And I think on the margin, there have been modest have or small complaints.

But the reality is I think people are accepting of where we are right now.

Speaker 3

Yes. I would just quickly add that in the end, as I mentioned before, I mean, we still need to kind of see a good return of that business customer too to kind of test this out. But we certainly early on have not seen many complaints and certainly not have heard from our friends at Hilton around that. Certainly, they're very focused on making sure that they maintain their market share and market premium. So we're certainly in conversation around any of the brand standards as they're thought about being brought back with that in mind, but also within obviously the bottom line in mind as well.

We're certainly having great conversations as we kind of layer things back in or think about it. So I think we're encouraged about how that these things work going forward, but we have to kind of see and test it out over the next several months.

Speaker 7

Got it. And one more on CapEx. You guys have been pretty consistent in your CapEx as a percent of revenue, I guess, up to the pandemic. And I know you have you're working on Sydney in Orlando. Maybe an update on the New Orleans, I guess, convention center expansion there, other projects and just general CapEx levels over the next few years.

Do you think you need to up CapEx going forward? Or is that 7% still kind of where you want to be?

Speaker 2

Anthony, we've been kind of that 6.5% to 7%. I know Sean and the team are looking at possibly increasing that slightly. We've got the three ROI projects that I mentioned, those are probably about $200,000,000 in capital. And we think the returns are probably 14% to 15%, and you're probably looking at EBITDA somewhere in the $30,000,000 range. That does not include New Orleans.

New Orleans is certainly more complex, but keep in mind, we've got the well lot that we often refer to. We've got eight acres plus or minus and we've got 5,000,000 square feet of additional FAR adjacent to the convention center. That's clearly a longer term project and one that we would look for our development partner and others as we proceed. We see huge, huge upside. I mean that could be another sort of LA Live type execution there in New Orleans.

We want to find the right timing for it, but we see huge upside. Again, none of that is factored into NAV or future growth, but it's land that was land banked twenty five plus years ago. And obviously, we appreciate having that benefit for future shareholders of Park.

Speaker 0

Our next question comes from the line of Chris Woronka with Deutsche Bank.

Speaker 10

Tom, I was hoping we could we could circle back to the acquisition topic for just a minute. And, you know, obviously, you guys took on the the Chesapeake portfolio. You sold bought sold a bunch of mostly single assets, including some of the Chesapeake hotels. And you mentioned that you could potentially JV some of your assets and free up a fair amount of capital. So should we triangulate that to mean you might have a preference for chunkier deals or portfolios going forward as opposed to a lot of your peers focusing on a one off acquisition strategy?

Speaker 2

Yes, it's a great question, Chris. I would say it's really to be opportunistic. We want to be nimble enough, and we are nimble enough, whether it's a single asset that's chunky. I mean, we clearly want upper upscale or luxury assets, top 25 markets. By definition, we think those will probably be acquisitions that are certainly north of $100,000,000 or more.

So they, by definition, will be chunky. But we're also not opposed to portfolio or larger deals, and we're also not opposed to m and a. We don't think m and a is the timing is right today for all the obvious reasons. But we still believe that having fifteen, sixteen lodging REITs at some point, we hope that investors and we hope that analysts will start to encourage. We're the most fragmented segment in in all of lodging.

So at some point, you know, that discussion will make sense. Again, not something that we are looking at today, not something we're spending time on. We think it's more important to execute the initiatives and priorities that I already outlined. But we certainly believe long term that you will see the sector consolidate at some point.

Speaker 10

Okay. Very good. Appreciate that. Thanks, Tom.

Speaker 8

Thanks.

Speaker 0

Our next question comes from the line of Bill Crow with Raymond James. Please proceed with your question.

Speaker 11

Hey. Thanks, Scott. Good morning. Hey, Tom. We've heard some indications on the airline front that they're seeing a greater than seasonal decline in forward ticket sales, and I assume that would be related mostly to to the latest Delta outbreak.

But anything you're seeing from a cancellation front or or, you know, reservations over the next, call it, thirty days that we might be might be entering a little bit of an air pocket?

Speaker 3

Yes, Bill, it's Sean. We have seen in select spots some cancellations. It's kind of concentrated in, as you would expect, markets like Orlando, Florida and New Orleans. I would say that it's also kind of really concentrated in kind of this month and kind of up to mid September in terms of some cancellation activity. It's a few and certainly, notably too, it's been majority of what we've seen, which has not been a lot, it's kind actually been medical groups.

So but in the end, it's interesting because a lot of stuff we saw in Orlando is medical groups, but we haven't seen much impact in our Bonnet Creek complex. Seen some other assets we have in Orlando. So a little bit of activity there. And certainly, we're seeing a little bit of kind of pause, wait and see on some prospecting for groups that might be looking to kind of hold off and make a decision in a few weeks to see how things play out. So potential slight air pocket, Bill, but I would say that I think people most people generally think this kind of peaks pretty quickly.

And I think we just will probably get back to regular activity probably as we get to the end of the month here in early September.

Speaker 2

Hey. Hey, Bill. It's Tom. The other thing I would I would say, as Sean said, look, it's probably small air pockets. We're not overly concerned.

And I think we all we all believe we're we're gonna get to the other side. We need to see vaccinations accelerate. We need people to get their shots, and and we need candidly, as I said in my speech out at Alice, we need leaders to lead, and we need companies and governments to to mandate. I think that's the only way we're gonna get to the other side, and we're beginning to see people do that now, which is encouraging. But I would also say when you if you look at our nonresort markets and if you look at say through mid April to sort of mid July, you know, we saw an uptick in occupancy going from say 35% up to probably 65%.

So we're seeing business transient. And again, these are the non resort. This is not Hawaii or Florida, New Orleans and the other markets where we're getting just that prolific growth. We were seeing that sort of midweek Tuesday, Wednesday occupancy grow. So that's an encouraging sign.

And I I think the other side of it is, look, we're we're we all need to live with the the facts and circumstances, get vaccinated, put your mask on, and get moving. And I think people are people are moving forward. You're not gonna see massive lockdowns. You're not gonna see the, we believe, the panic and hysteria. We we gotta get moving.

And I think you're gonna continue to see that.

Speaker 11

Yeah. I appreciate that, Tom. You led me right into my follow-up questions with question on mandates. Today, United Airlines announced they were going to mandate vaccinations for their employees. So I'm wondering how much pressure you're able to put on Hilton to to to enforce, you know, a mandate to introduce and enforce a mandate.

Speaker 2

Well, I I I certainly am in not gonna try to speak for my good friend, Chris. He's more than capable to to speak and to set that tone. And and he's a dynamic leader, and I would expect that he will arrive at the right conclusion. I'm I was crystal clear in my remarks out at Alice, and I'll say it again. We're not gonna get to the other side until we have leaders leading and mandating.

And we're doing it at Park, and I'm doing it and saying it on this call and any form I get. And, look, there are going to be exceptions, whether it's for medical or religious. But the reality is we've got to get shots in arms to move forward. So I've said my piece.

Speaker 0

Our next question comes from the line of Neil Malkin with Capital One Securities. Please proceed with your question. Neil, your line is live.

Speaker 12

Oh, sorry. I was on mute. That never happens to me. I apologize. Yeah.

Just just thinking about the Delta variant and and things that are, you know, potentially being implemented or things that are being canceled. You know, that one of the things about Delta is that that its, quote, unquote, breakthrough rate is pretty significant in terms of, you know, people who get it already been vaccinated with the from with the original vaccine. So, you know, given given those things and and and you're starting to see companies delay back to work, and, you know, I'm just just wondering, you know, I guess, what do you expect, or what's your view on if, you know, like, the UN Assembly or Fashion Week, Broadway stuff is is, held up as an example? And and, you know, what's your kind of view on if vaccine passports are are mandated in in some of your, you know, your bigger markets, like, call it, New York and California. How do you think that winds up playing out in terms of both business and leisure demand near term?

Speaker 2

Yeah. A couple things. And, you know, I'm not a I'm not a medical professional. But from what I read, obviously, the suite of of vaccines that we have available are holding up really well. The problems are are largely.

I mean, 99 are with people that are unvaccinated. So I think it's important to sort of level set. And I think the more pressure, encouragement that we get from both the federal government, local governments, business leaders, those men and women, and those companies sort of mandating vaccines, the faster we're gonna get to the other side. I don't think you're gonna see widespread lockdowns. We've been there, done that.

I just don't think the nation is ready, prepared, or willing to do that in in my view. And we're watching demand patterns carefully. Part of the reason why New York is certainly remains closed is we wanna make sure that we open at the right time given the size and complexity of that asset among the other s of the large asset that we have in San Francisco. So we'll continue to study it. I suspect if anything, you might see a few companies delay.

But I think the vast majority of people, assuming schools are reopened and some of the childcare issues are addressed, that that people wanna get back to being with their colleagues and and continuing to to interact in person. So, you know, maybe it it gets pushed back a few weeks, maybe it gets pushed back a month, but I do think that becomes the exception rather than the rule.

Speaker 12

Mhmm. Okay. Great. And then, you know, just just kind of looking at I understand booking windows are short, but in terms of business transient and and group, you know, let's call it, post Labor Day or into the fourth quarter, what do you expect demand to be? Or what's a reasonable level of demand for the business transient and group segments relative to 'nineteen levels in sort of later in

Speaker 0

this year. Is 50% a

Speaker 12

good bogey? Or if you could just talk about that maybe, Sean, that'd be helpful in kind of gauging how things are going to progress in modeling.

Speaker 3

Yes. I think that's a fair bogey. We should think about kind of our mix which you kind of as we kind of look out. I think we certainly see Charti getting the mix back to kind of when you think about group and business transient kind of to where it happened of what it was back in 2019. So I think that's a fair thing to say about 50% of normal.

Speaker 12

Okay. Thank you.

Speaker 0

Our next question comes from the line of Brandt Montour with JPMorgan. Please proceed with your question.

Speaker 12

Hello, everyone. Good afternoon. Thanks for squeezing me in here. I just have one question on the dividend. As we think about how you guys are going to deleverage naturally in 2022 and 2023 and the free cash flow associated with the business, what, you know, what how is the board thinking about reimplementing the dividend, you know, under from the context of, you know, what do you think you might need to pay over those two years versus what you might want to pay or, you know, from a REIT perspective versus a just a corporate corporate finance perspective?

Speaker 2

We're we're certainly gonna see whatever the REIT obligations are. Obviously, coming through this window gives us again a lot of optionality given some of the NOLs that we have and allow us to redirect capital to some of the ROI projects and other initiatives that that we've talked about. So we do appreciate having that flexibility that we candidly did not have at the at the start of the spin just given the the relatively low tax basis for part of the original portfolio. So we, you know, clearly wanna reinstate the dividend, probably more at a very modest level and then, you know, have it we'll top it off at end of the year. But you would expect that our dividend would certainly be lower than what we had historically.

Speaker 0

Okay. Thanks for that, guys. Our next question comes from the line of Gregory Miller with Truist. Please proceed with your question.

Speaker 9

Tom, Good Sean, hey, how are doing, Tom?

Speaker 2

Good.

Speaker 9

Great, great. I'm hoping to follow-up on a topic from your prepared remarks. I appreciate visibility may be limited, but what are your current expectations of the timing and trajectory of the recovery of the Japanese consumer to Oahu and Hawaiian Village? Perhaps how do see 'twenty two playing out at this point?

Speaker 2

Well, Greg, it's a great question. If you think historically, you know, visitation in Hawaii has been eight and a half, 9,000,000. About 62% of that coming from The US, 17% of that coming from Japanese travelers. This will be probably the second year that they have been down. Those trends coming out of Japan have been pretty consistent over the last thirty years.

So about 30% of visitation in Hilton Hawaiian Village international, about 60% of that coming from Japanese travelers. So about 223,000 room nights. So we would we would fully expect that as you see vaccinations ramp up and international begin, that to that to to start to see a ramp up, I would say, the second half of twenty two and then see that just explode into '23. And part of that is, again, you will have had two seasons where that very loyal traveler who visits Japan, visits Hawaii often, and again, given that thirty year history, we would expect just a really strong resumption, sort of that revenge spending, that reclaim, recapture what they've lost, and effectively would have been away from, you know, almost two years from from Hawaii.

Speaker 11

We're not getting that today.

Speaker 2

Yeah. We're not getting any of that today, as you know. But because you're not seeing the international travel, we're getting all the domestic travel. So we see that as just another leg in continued growth for Hawaii. We think Hawaii will continue to to outperform, and that's 25%, 30% of our revenue.

Speaker 9

Makes a lot

Speaker 0

of sense.

Speaker 9

I'd like to follow-up on also on the international front. This is more of a higher level question. But since you mentioned leaders leading, I think you're well suited to address this question. Yeah. I would be interested to hear your thoughts on the travel infrastructure today to induce international demand to your gateway markets as corridors start to reopen.

And I think in particular about how local cities are communicating to international travelers given varied policies in cities and states on items such as indoor mask requirements or perhaps presenting vaccination cards at restaurants. I'm not sure if the confusion may impact near term interest to visit The US or if this is just a nonissue. How concerned are you that travelers may be confused? And what do you think can be done to improve these potential communication issues? You know, should the efforts be at the local CVB level, from hotels and the airlines, perhaps more on a national basis?

Maybe I'm overstepping the issue here, but I'd

Speaker 3

be curious to to hear your thoughts about it.

Speaker 2

Yeah. It's a it's a great question. I don't know that we've got enough time because we could spend thirty, forty minutes on it. And I I go back to my earlier comment. I think the first is we've gotta get people vaccinated, both domestically and I think abroad.

And the sooner we get that, that's gonna provide people with the confidence and protection. And then we've gotta reopen borders. And I think part of it is you gotta have it consistent. Know, we've dealt in markets like Chicago where you had the governor at one point of view and the mayor had another. And until they were aligned, we really couldn't reopen there.

And and I think the same thing applies to many of the other cities. And I also think if you had the travel industry, and you're seeing it now, you're seeing United. I suspect there are other companies or airlines are gonna follow suit. I mean, leaders should lead, and we've got to have a consistent message. You know?

Have the mandate, have a strict policy of of of mask until we can get to the herd immunity and get to the point, and then have some sort of vaccination card. Think many years ago, many of us had it as we were. I'm I'm older than probably a lot of people on the call, but we we had a record of the vaccinations and and we needed to go to school. I I just think we're we're gonna have to figure out a way and a process, and we're gonna have to live with the Delta variant or others until it's eradicated. And it'll we can accelerate that and and the risk by getting people vaccinated.

So I'll stop there just in the interest of time, but, you know, welcome the opportunity to have a sidebar with you at your convenience.

Speaker 9

Thanks. I appreciate the insights.

Speaker 0

Yeah. Our next question comes from the line of Lucas Hartwich with Green Street. Please proceed with your

Speaker 13

question. Thanks. Good morning. Hey. How are you?

Speaker 2

Good. I hope you're well.

Speaker 13

Oh, great. Thanks. So for the unconsolidated portfolio, are there any opportunities to reduce or increase stakes there?

Speaker 2

Yeah. In in terms of in terms of buying and taking an increased interest in them, Lucas, you broke up a little bit. I wanna make sure understand the question.

Speaker 13

Yeah. Sorry. Yeah. The the unconsolidated portfolio, there's some some assets in there, some held by owners that, you know, arguably have higher levels of leverage, may need access to capital. So I'm just curious if there's any opportunities to to increase stakes in some of those or maybe even sell stakes potentially?

Speaker 2

Yes. All the above. And we continue to engage in discussions. Keep in mind, our top core portfolio accounts for 90% of the value. All of those remaining 10 joint ventures have different legal and tax complexities.

Some of that will be easier for us to address here once we get out of the the remaining the the fifth year sort of threshold on the spin. So that'll give us increased optionality next year to continue to accelerate. Some of them have short term ground leases that have to either be extended or modified as well. So everyone has a unique story, but rest assured that the men and women at Park are working hard on that. Like you've seen us clean up in terms of the 30 assets that we've sold and including the international, rid of the laundry business, getting out of the management business.

We've got work streams underway on many of those assets.

Speaker 13

Excellent. Thank you.

Speaker 2

Thank you.

Speaker 0

There are no further questions in the queue. I'd like to hand the call back to management for closing remarks.

Speaker 2

Thank you. We really appreciate everybody taking time today. Hope you enjoy the remaining part of your summer, and we look forward to seeing many of you in person in September, October, and look forward to our next call in early November. Stay safe.

Speaker 0

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.