SVC - NASDAQ

Good morning, and welcome to the Service Properties Trust Fourth Quarter 2024 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please note, this event is being recorded. I would now like to turn the conference call over to Mr. Kevin Barry, Senior Director of Investor Relations.

With me on the call are Todd Hargreaves, President and Chief Investment Officer, Jesse Abair, Vice President, and Brian Donley, Treasurer and Chief Financial Officer. In just a moment, they will provide details about our business and our performance for the fourth quarter of 2024, followed by a question and answer session with sell-side analysts. I would like to note that the recording and retransmission of today's conference call is prohibited without the prior written consent of the company. Also note that today's conference call contains forward-looking statements. Within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based on beliefs and expectations as of today, February 27, 2025. Actual results may differ materially from those that we project. The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call. Additional information concerning factors that can cause those differences is contained in our filings with the SEC, which can be accessed from our website, svcreit.com, or the SEC's website. Investors are cautioned not to place undue reliance upon any forward-looking statements. In addition, this call may contain non-GAAP financial measures, including normalized funds from operations or normalized FFO, adjusted EBITDAre. A reconciliation of these non-GAAP figures to net income is available in SEC's earnings release presentation that we issued last night, which can be found on our website. And finally, we are providing guidance on this call, including adjusted hotel EBITDA, and are not providing a reconciliation of this non-GAAP measure as part of our guidance because certain information required for such reconciliation is not available without unreasonable efforts or at all. With that, I will turn the call over to Todd.

Thank you, Kevin, and good morning. Last night, we reported solid fourth quarter earnings results that reflect SBC's strongest hotel revenue growth in almost two years, as well as continued steady performance from our net leased retail properties. I'll begin today's call by providing an overview of the hotel portfolio, including an update on the process of the sales of 114 Sonesta hotels, before turning it over to Jesse to discuss our net lease portfolio and Brian for financial results. Overall, comparable hotel RevPAR grew 4.2% year over year, outpacing the industry by 60 basis points, despite meaningful revenue displacement from renovation activity. Excluding 14 hotels under renovation during the quarter, comparable RevPAR increased 6.8% driven by increased transient and group occupancy. The continued effects of hotel renovations and pressures on expenses, including labor and real estate taxes, impacted overall hotel profitability with GOP flat year over year and adjusted hotel EBITDA declined 2.4%. Our full-service hotels reported an increase in RevPAR of 4.3%. Strength within group and transient was partially offset by a modest decline in contract. Excluding the three full-service hotels under renovation during the quarter, full-service portfolio RevPAR grew by 6.3% year over year. Seven of our top ten performing hotels in terms of year-over-year improvement were Sonesta full-service hotels. More specifically, our three Sonesta hotels in downtown Chicago benefited from citywide compression and double-digit market share gains from improved group, corporate, and OTA performance. The Royal Sonesta Hotel in New Orleans benefited from improved transient results. From citywide demand, and an increase in contract business drove strong top-line growth at Royal Sonesta San Juan and Chase Park Plaza in St. Louis. Our select service portfolio produced exceptional growth with RevPAR up 9.6% year over year, mainly driven by occupancy growth in both our Hyatt Place and Sonesta Select portfolios. Notably, RevPAR growth grew to 26% year over year as recently renovated Hyatt Place hotels. RevPAR's Nestor Select grew approximately 4% driven by occupancy and discount in contract segments, specifically in Miami, Philadelphia, and Atlanta. In our extended stay portfolio, RevPAR grew 1.2% with increased occupancy more than offsetting a decline in ADR. Renovation activity continues to have a more pronounced impact on our ES Suites portfolio performance. The ten hotels were under renovation during the fourth quarter compared to one in the prior year period. To mitigate this disruption, Sonesta remains focused on driving short-term stays and additional room nights with transient discounts and targeted marketing at government and wholesale channels. As we announced in October, we are marketing the sale of 114 focus service Sonesta Hotels with a total of 14,925 keys across the ES Suites, Simply Suites, and Select brands, and plan to utilize the proceeds to reduce SVC's leverage. We launched our formal marketing effort in January to sell the properties and have asked interested buyers to submit offers for one or more sub-portfolios ranging from eight to eighteen hotels, that are grouped based on change scale and regional geography. Earlier this month, we received first-round offers. As we expected, the buyer pool is deep and well-capitalized and resulted in more than fifty sub-portfolio bids with multiple bids for each portfolio. Given the strength of the initial bids, we expect SBC to net sales proceeds of at least $1 billion. Most, if not all, the hotels will likely remain under the Sonesta brand, which we believe will provide a long-term benefit to SVC as it is a 34% owner of Sonesta to our share of related royalty fee streams. We have moved to a second round of bidding with the goal of selecting buyers and entering purchase and sale agreements in March, and if begin closing our sub-portfolios during the second quarter. In addition to commencing our marketing of the 114 Sonesta hotels, we further executed on the plan we announced early in 2024, to sell 22 non-core underperforming hotels. During the fourth quarter, we sold eight of these hotels with 1,004 keys at an aggregate sales price of $49.1 million, increasing the total number of hotels sold for the year to fifteen. Since quarter-end, we have sold one additional hotel with 149 keys for a sales price of $4 million. We have also reached agreements to sell five hotels with an aggregate of 623 keys for a combined sales price of $28.5 million. Further, we have commenced marketing the sale of our remaining IHG managed hotel, a 495 key property in the premier submarket of Atlanta. Assuming the completion of the sales, SBC's portfolio will have 83 retained hotels, which during the fourth quarter experienced a RevPAR increase of 6.3% to approximately $101, and adjusted hotel EBITDA increase of 10% year over year to $30.6 million. In comparison, for the 123 exit hotels, RevPAR grew 60 basis points to $64 and adjusted hotel EBITDA declined 23% year over year to $12.4 million. As we enter 2025, our focus remains on strengthening our balance sheet through asset sales and reinvesting in our hotels with the highest opportunity for upside. We expect 14 hotels will be under renovation this year. Notable completions will include the renovation of our Sonesta Los Angeles Airport and our Sonesta Hilton Head during the first half of 2025. In our Sonesta in Atlanta and Simply Sweet in Burlington, Massachusetts, during the back half of the year. We remain confident that the current renovation program coupled with our portfolio rationalization efforts will lead to continued meaningful occupancy and rate gains in the year ahead. I will now turn it over to Jesse to discuss the net lease portfolio.

Thank you, Todd. Our net lease portfolio continues to generate stable and reliable cash flows for SVC. As of December 31st, we own 742 service-oriented retail net lease properties, with annual minimum rents of $381 million. Our net lease assets, which represent 44.2% of our overall portfolio based on investment, were 97.6% leased with a weighted average lease term of eight years. Our diverse tenant base consists of 177 tenants, operating under 136 brands spanning 21 distinct industries, thereby mitigating our exposure to any one retail sector and offering opportunities to grow our existing relationships with a variety of different operators. Our lease maturities remain well-laddered with only 2.2% of our net lease minimum rent scheduled to expire in 2025, and approximately 3% in each of the following years through 2029. The aggregate coverage of our net lease portfolio's minimum rents was 2.1 times on a trailing twelve-month basis as of December 31, 2024, which was down less than one-tenth of a point on a sequential quarter basis. Excluding our TA travel center properties, which are backed by BP's investment-grade credit, it was essentially unchanged compared to the prior quarter. In light of the strong credit of our TA leases, and healthy coverage for the balance of the portfolio, combined with our diversified tenant base, and staggered expiration schedule, we expect our net lease portfolio will continue to serve as a dependable income stream for SDC. On the transaction side, we sold three net lease properties during the quarter, for $7.1 million in aggregate proceeds. Since the end of the quarter, we have sold or entered into agreements to sell an additional four net leased properties for an aggregate price of $7.1 million. Given the consistent performance of our net leased assets, we are evolving our strategy to focus on growing this portfolio through well-vetted acquisitions. Our investment criteria for externally sourced growth will prioritize properties leased to operators expanding their networks with established brands and that are in retail corridors that exhibit durable land values with appealing demographics. Properly curated, these acquisitions can enhance our tenant and geographic diversity, increase portfolio weighted average lease term, and offer flexibility in terms of future reuse. To this end, SBC is under agreement to acquire a net lease retail property with an eighteen-year remaining lease term for $5.3 million. We are actively evaluating additional targets as we build out our acquisition pipeline. We are also seeing meaningful growth opportunities within our existing portfolio and are expanding our outreach efforts to identify tenants with whom we can partner for organic growth. With proactive asset management efforts, and opportunistic acquisitions in the coming year, we believe we can drive Walt upward, optimize the makeup of the NetBeans portfolio, and ultimately increase the portfolio's economic contributions to the SBC platform. I will now turn the call over to Brian to discuss our financial results.

Thanks, Jesse, and good morning. Starting with our consolidated financial results for the fourth quarter of 2024, normalized FFO was $28.6 million or $0.17 per share versus $0.30 per share in the prior year quarter. Adjusted EBITDAre declined 7.4% year over year to $130.6 million. Financial results this quarter as compared to the prior year quarter were impacted most by a $9.4 million increase in interest expense and an $8.4 million decline in interest income. For our 205 comparable hotels, this quarter RevPAR increased by 4.2%. Gross operating profit margin percentage declined by 160 basis points to 25.3% and GOP was flat compared to the prior year period. Below the GOP line, costs at our comparable hotels increased $759,000 or 1.7% from the prior year, driven primarily by increased real estate taxes. Our 206 hotels generated adjusted hotel EBITDA of $43.1 million, a decline of 2.4% from the prior year, exceeding our guidance range. By service level, adjusted hotel EBITDA year over year decreased $900,000 for our 47 full-service hotels, increased $1.6 million at our 59 select service hotels, and decreased $1.8 million for our 100 extended stay hotels. For the 14 hotels that were under renovation during the quarter, adjusted hotel EBITDA declined $8 million. In 2025, we plan to sell 123 hotels with 16,426 keys. In the fourth quarter, these 123 hotels generated RevPAR of $64 and adjusted hotel EBITDA of $12.4 million, representing a decline of 23% year over year. Assuming we sell the 114 Sonesta Hotel portfolio for at least $1 billion, that pricing would imply a 16.5 times multiple on 2024 hotel EBITDA of $60.5 million. This valuation is well above SVC's multiple of approximately ten times full-year 2024 adjusted EBITDAre. As it relates to the retained portfolio, the 83 hotels SVC plans to keep generated RevPAR of $101 and adjusted hotel EBITDA of $31 million during the quarter, or an increase of 9.7% year over year. Turning to our expectations for Q1, we are currently projecting full quarter Q1 RevPAR of $82 to $84 and adjusted hotel EBITDA in the $20 million to $24 million range. We will continue to see softer seasonal results through the remainder of the winter months before activity picks up in the spring. Our portfolio will also see continued disruption in 2025 at hotels we have under renovation. And the timing of our dispositions may impact our results. Turning to the balance sheet. At quarter-end, we had $5.8 billion of debt outstanding with a weighted average interest rate of 6.4%. Our next debt maturity is $350 million of senior unsecured notes maturing in February 2026. We currently have $61 million of cash on hand and $50 million outstanding on our $650 million revolving credit facility. Starting to our investing activity, we made $85 million of total capital improvements at our property during the fourth quarter, bringing our full-year spend to $303 million, which is in line with our previous guidance. We completed renovations at 28 hotels in 2024, with the largest spend for our Hyatt Place portfolio, full-service Sonesta hotels at White Plains, New York, and Miami Airport. We currently expect full-year 2025 capital expenditures to be approximately $250 million. Notable initiatives will include the kickoff of multi-year projects to convert our Royal Sonesta, Washington DC and DuPont Circle and the Nautilus in South Beach to the James brands as well as projects at New Royal Sonesta in New Orleans and Cambridge. Of the 2025 capital spend, we expect $110 million to $130 million of maintenance capital with the rest going towards renovation initiatives. Beyond this year, we expect our total capital spending to continue to trend lower in 2026 and 2027 as the pace of our hotel renovation program slows. That concludes our prepared remarks. We are ready to open the line for questions.

Thank you, sir. We will now begin the question and answer session. To ask a question, you may press star. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time a question has been addressed and you would like to withdraw your question, please press star then two. To a similar roster. The first question we have will come from Dori Kesten, Wells Fargo.

Thanks. Good morning. Now that you will not be spending CapEx for the 115 assets to be sold, how would your return expectations change for the remaining assets?

Good morning, Dori. Thank you for the question. This is Brian. I will take that one. I think generally speaking, our expectations are the same. We have that high sort of single-digit return versus prior positioning of the property before the renovations. That can fluctuate depending on the property in the market and depending on the scope of the project. For example, the James conversion for the Nautilus property in South Beach and our upscale lifestyle brand initiative there in Washington. We expect much higher returns, as we reposition the property that these projects were expecting ROI in the twenty to thirty percent range. So it will differ across the portfolio, but on average, it is still sort of a high single-digit target.

Okay. And then you mentioned a new focus on acquiring net leased assets. Can you put some context around what that acquisition volume may be on an annual basis?

Yeah. I think for particularly the first half, this is Jesse. Dori, for the first half of the year, I think the intent here is just to get out, get a feel for what is out in the market, build out our pipeline. I think initially this will be relatively small volumes, small dollars, you know, individual asset acquisitions. And then I think as we towards the middle and the end of the year, we can kind of reevaluate the strategy at that point once we have a better sense of kind of where we are transacting.

Okay. And then just a few balance sheet questions. How much of the $150 that you borrowed on the line in Q4 has now been paid back, I guess, to date in Q1?

It is there is $50 outstanding today. We made that draw at the end of the year for liquidity management purposes. Where our hotel results are pretty soft in December, January, and February. And just from a working capital standpoint, we made that draw. But, again, $50 is outstanding for the.

Okay. And then, the goes in maybe it was this month you amended the credit facility to reduce the minimum debt service coverage. It is down to, I think, was 1.3 from 1.5. What are you modeling for that ratio, I guess, throughout this year?

Yeah. There are a couple of reasons we did that. Dori. The hotel portfolio that secures the credit facility includes a lot of the hotels we are selling. It includes properties that we have been renovating so that the results have been declining. We were getting up against it in some of the covenants within the credit agreement. Which are different than how the calculations are done for the public debt. Yeah. So we wanted to make sure we were not in breach of anything, so we were able to reach an agreement to amend. We are swapping out hotel collateral to release all the Sonesta hotels that are in that collateral package as we are selling a good portion of them. We are swapping that out with one of the travel center pools.

Okay. So, I mean, throughout this year, would you would are you expecting to get close to that 1.3, or do you think it will stay around where it ended the year around 1.5 and change?

Yeah. I do not think we will get we are not going to dip really below that 1.5. It was more precautionary, but also making sure there is adequate cushion and we will have much more stability with the way the collateral package works, for the revolver covenants.

Okay. Great. Thanks so much.

Again, if you would like to ask a question, please press star then one on a touch-tone phone. Again, at a star then one. Next, we have Tyler Batory of Oppenheimer.

Hey. Good morning. Thank you. So I want to start on the hotel portfolio. Specifically the guidance for Q1. You got a lot of moving pieces. The twenty to twenty-four hotel EBITDA number, I mean, applies a margin that is down a little bit year over year. Is there a way to isolate or think about the performance of the eighty-three retained hotels in Q1 and additionally, when you think about those eighty-three hotels, and I am not sure if you gave this number, what was the EBITDA contribution or the EBITDA margin for those properties for the full year 2024?

Hi, Tyler. For the eighty-three retained hotels, we were about a fifteen percent margin and for the Sonesta Hotel, we were sixty million of EBITDA. Brian, do you have the EBITDA for the other two portfolios? Yeah. It was is yeah. The high place portfolio. Yeah. That those properties were under renovation still and just coming out of renovation, so it was, you know, call it ten percent on average. Yeah. As we look to Q1, remember, the retained hotels are heavily concentrated with full-service hotels. So we do expect that year-over-year decline, you know, we will continue to see softness in Q1 from, you know, our concentrations in Chicago and some other areas where margins are definitely weaker in Q1. So we see we will see that degradation, as you said, that decline year over year. In margins. But, yeah, the typical seasonal patterns plus throw in the weight of some of the renovations at the boxes, you know, LAX, for example. That will not be done till the end of Q1. And, you know, Hilton Head, we are also doing the public space there. So some other hotels will continue to have meaningful impact on our results early in Q1. Right. And then if you look at the fourth quarter, the adjusted EBITDA for those eighty-three retained hotels actually increased ten percent relative to the overall portfolio, which declined a couple of percent.

Okay. Okay. Thank you. Follow-up on the asset sales and you gave some good commentary on the process, which I appreciate. But I know a lot of investors are really focused on what is going on here. So just talk a little bit more about how the process is going versus your expectations. You know, maybe the interest is perhaps a little bit higher than you might have thought. I am not sure. And then the comments in terms of selling all of those hotels with the Sonesta brands, is that a little bit of a change from what you were thinking before and kind of walk through the price dynamics of selling those assets encumbered versus unencumbered, please.

Sure. Yeah. The process has gone very well so far. Probably a little better than expected, but we have been in the market with a lot of hotels over the past few years. So I think we have a pretty good sense of who the buyers are, what the interest level is, and these hotels in particular the select service and extended stay hotels, there is just not a lot of portfolio sales, of this scale and this magnitude that have been in the market, that are in the market, that are or are coming to market, and there is a lot of groups that want to grow these service levels in their portfolio. So I am not surprised by the level of interest that we have gotten from a lot of larger institutional hotel owners. In terms of price, you know, we were already close to what our initial guidance was if you take the top bids from each of the sub-portfolios. Again, not a surprise, but certainly a positive and, I think, an indication of how strong and deep and competitive the process and buyer pool have been so far. So, again, we are very pleased with where things are so far and ideally, groups will come up even more in the second round. In terms of the encumbrances, most, if not all these hotels, we do expect to be sold with long-term Sonesta franchise agreements. I would not say that is unexpected. In the past, the hotels that we have sold that were Sonesta branded and managed, I would say on average, about eighty percent of the hotels were sold encumbered and the ones that were sold unencumbered were from groups that came in and either wanted to redevelop the properties and convert the use to multifamily and move on to pay a significant premium above the incumbent offers to do that. Or they were hotels that were in markets that other brands other competing brands might not have had a presence in, so they were a lot more aggressive in terms of key money or trying to get their flag on the hotels. I think these hotels are a little different for the most part. They are strong performing hotels. They are in better markets than what we have sold in the past. So a lot of the competing brands are already there. And, you know, if we do receive on we, the way we look at that relative to encumbered offers is we put a value on the royalty fee stream. Look at SBC's thirty-four percent share as a thirty-four percent owner of Sonesta. Apply an appropriate multiple to that, apply an expense load to that, and then compare the two offers. And that is how we would look at any unencumbered offers versus incumbent offers. To the extent we receive those. On this portfolio.

Okay. Okay. Very good detail. Thank you. Follow-up on the CapEx the $250 million number. Is any of that spent on hotels that are going to be sold this year? And then the $110 to $130 maintenance portion, is that a good run rate to be thinking about for the eighty-three retained hotels going forward?

Hey, Tyler. There will be some spillage for properties we are exiting for projects that were underway or just some maintenance items that we need to do regardless as we get ready for sale. It is not a large percentage, you know, call it twenty to twenty-five million for the hotels that are exiting. As far as the main hundred and thirty that I mentioned. Yeah. We do expect a more normalized range for what is going to be left in this hotel portfolio to be closer to sixty-five to seventy-five million going forward. So we are doing some deferred maintenance catch-up and some of those stuff we are doing will not be repeated, ongoing.

Okay. And then my last one you know, more open-ended perhaps. You know, as we sit here, at the start of the year, just help us think about your capital priorities as you go through 2025. You know, you got a lot going on with asset sales, I am sure focused on leverage. You know, it sounds like they would be going on the offensive side would be at least a little bit probably going to be pretty small. Just kind of walk through kind of rank order, if you will, just what you are prioritizing. As 2025 goes on.

Sure, Tyler. I will start and then others can jump in. But, you know, the priority once we start recognizing the sale proceeds will be to address our 2026 debt maturities that is first and foremost. You have got the $350 million due in Q1 and then another large bullet in the fall of 2026. We are looking to address all that with the hotel sales. And then, you know, as far as, you know, the CapEx investment is next in ranking as far as our priorities to continue to enhance our hotel portfolio and position these properties to succeed longer term. And then, you know, from there, it is starting to recycle net lease and grow net lease. Think of the priorities.

Yeah. No. I will add on to that. I think that you know, I think we see as Jesse mentioned earlier, we see an opportunity in the net lease space. And, you know, I think you have seen what we have done through the asset sales and the planned asset sales as well as the limited acquisitions we have gone over the past few years in terms of what we want this portfolio overall to look like long term. And you have seen us continue to sell some of the select service and extended stay hotels, focus more on the full-service assets, shift more of our mix on the hotel side from business to leisure-oriented, where we have been under contract historically. And on the net lease side, you know, you look at that portfolio, and that portfolio has been an excellent performer for us over the past several years. Backed by the travel center assets with an investment-grade entity behind that. And then a very strong performing other net lease portfolio, the strong off a 3.7 EBITDA to rent coverage. So you know, we think there is an opportunity to add assets to that side of the portfolio. You know, we are really going to be focused on strong operators and good sectors with lease term, and we think we can get decent yield on those assets. So that is again, that is Number one is paying down debt. Priority number two is CapEx into our hotels. And then the third priority is potentially acquiring some more net lease assets throughout the year.

Okay. That is all for me. Thank you.

Next, we have Meredith Jensen of HSBC.

Yes. Good morning. Thanks. Was wondering if you could speak a little bit more about the net lease portfolio. Are there portfolio assets that you would also sort of prune as you add more such that the net amount stays stable? And I guess what I am getting at is sort of the long-term mix in investments, you know, that sort of pie of SVC investments between hotels and net lease.

I think in terms of pruning the net lease portfolio, you know, I think we are pretty consistently going through those assets and identifying sectors we see growth in versus sectors we do not and making decisions along those lines as well as, you know, I think at this point we are really quick to identify when those assets go dark, whether we think there is a relief or a redevelopment scenario. And if not, those will tend to go to just disposition as well. I will let Todd speak to kind of the overall mix between the hotel and net lease assets within the portfolio. But I think historically, we have always shopped for some version of a forty, sixty, split, you know, fifty-fifty somewhere in that, going in either direction.

Sure. I think you covered it well, Jesse. And the only thing I will add to that is, you know, as we look to kind of buy assets in that portfolio, what you may see us be a little more optimistic in terms of selling leased assets, whether that is as Jesse pointed out, to kind of reduce our exposure to certain industries or brands or tenants that we have concerns about or are not as optimistic on. But you will also see us execute a lease renewal and then sell a property as an example as well. So you could see us doing some more of that and then look to recycle that capital back into that lease space. And then overall, you know, similar to the answer I gave Tyler, is you know, we see the net lease portfolio as a strength of our portfolio, and that does not mean we do not see the lodging as a strength as well. And I think we are optimizing that portfolio now and, you know, if the performance of those hotels this last quarter where you saw that adjusted EBITDA grow ten percent, is that the indication we are keeping the better-performing hotels. We are keeping the hotels that have the most upside. We are keeping the hotels that are going to benefit most from the renovations. So again, we are at before these sales, I think we are fifty-four percent hotels. After the sale, it will be forty-seven percent, and like Jesse said, I do not envision us going below forty percent on the hotels, but anywhere for kind of that forty to sixty percent range long term.

Okay. Great. That is super helpful. And I know there is a lot of matrix and a lot of information in the deck. About geography and sort of location, urban versus suburban. But if you could just narrow the scope to the hotels that you will be keeping, sort of some guidance in terms of seasonality and sort of geography and how to think about you know, basically, through the year in 2026 as we start cross what that portfolio RevPAR and, you know, quarterly sort of cadence will be.

Sure. I can start. So, you know, and I will focus more on this nest of portfolio because that is where we are transacting for the most part. And all those are all good points and were all factors as we selected what we wanted to sell. And what we wanted to keep. But for the most part, on the extended stay select serve, the better performers there on average for twenty-four. Those hotels did over thirty percent margins, so they are good performers. We are selling most of the hotels that are in suburban business parks that really rely on that midweek business traveler that is just really it has really been a challenge for that to come back over the past few years. A lot of the select service and extended stay we have are in good, strong more urban infill markets. And then our full-service portfolio will have, you know, thirty-nine of those hotels in the Sonesta portfolio, all Royal Sonesta. Full-service Sonesta, we also have a couple of hotels that we are converting over to with the James brand. This year as well. Those right now are more focused urban than they are kind of true destination resort hotels. But, you know, over the next few years, I think as we continue to build out the hotel portfolio. I think you will see us acquire more assets like the Nautilus acquisition that we bought a couple of years ago. So that is really what we are more focused on. Right now, our portfolio is more urban, our full-service at least is more urban and more concentrated in the northern part of the US.

Yeah. And for modeling purposes, Meredith, I think from a seasonality standpoint, Q1 2025, Q4 2025, you know, the bell post for the bell curve, you know, where our portfolio will be strongest in Q2 and Q3. So my guidance of twenty to twenty-four million of cash flow, hotel EBITDA, you know, represents, you know, a high single-digit margin. We expect that margin in Q2 to exceed, you know, twenty percent. So you would see the ramp up into our strong summer spring and summer periods. Will affect how the seasonality trends play out for the year. And beyond that, when we sell the hotels, there will be some more normalization of the seasonality trends as we exit so many hotels, but generally Q1, Q4 will continue to be the weaker quarters for SV

Thanks. That is super helpful. Last question. Is it fair you know, it does seem just hearing that the process is going pretty quickly. But in terms of closing and all of that, you think that the sort of debt pay down and full exit could happen all in 2025. Just trying to see when we have a clean slate for the hotel you know, if it is going to be 2027 over 2026 or it will bleed further out.

I think it is safe to assume that the hotels will all be closed by during 2025 and we should be selecting buyers here in the next few weeks and moving to close. You know, we have a goal maybe an aggressive goal to close these by June 30th. Some may go past that, but, you know, we should have all these closed by the third quarter. And, Brian, do you want to talk about the debt repayment?

Yeah. I mean, once we have Yes, certainly and have the cash in hand and have the proceeds at mass, we will look to use that to address leverage as we have talked about with the proceeds.

Great. Thanks so much. That is super helpful.

Thank you. Sharon, thanks for the questions.

Well, this concludes our question and answer session. I would now like to turn the call back over to Mr. Todd Hargreaves for any closing remarks. Sir?

Thank you everyone for joining today's call and for your continued interest in SBC.