- Transformational renovations at key properties in South Florida, Hawaii, and New York impacted Q2 RevPAR, with ramp-up expected in Q4.
- Repositioning efforts include high-occupancy assets and high-value conversions, such as Nashville, Houston Medical Center, and Pittsburgh.
- Renovations and closures, like the Austin Convention Center, caused temporary declines but are expected to support future growth.
- Management highlighted the importance of asset upgrades in driving operational upside and long-term value.
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- Sold 2 unencumbered properties for $16.4 million in Q2, with an additional 3 properties sold in July for $8.8 million.
- Active disposition pipeline includes 53 properties, with 49 under agreements or LOIs for $280 million, mainly in Q3 and Q4.
- Dispositions aim to retire 2026 notes, reduce leverage, and reposition portfolio towards higher-growth SHOP assets.
- Expect most asset sales to close in Q3 and Q4, supporting balance sheet improvement and cash flow enhancement.
- Proactive sale of $60 million in nonowner-occupied CRE hospitality loans during the quarter.
- Resulted in a net $2 million gain and allowed the reversal of related reserves, leading to no provision for the quarter.
- Part of ongoing balance sheet optimization and risk reduction efforts.
- Beaumont, Texas facility fully operational with CHRISTUS Health as of May 2025.
- Transition from previous tenant Steward Health Care.
- Significance of this success in navigating obstacles and tenant retention.
- Management highlighted market conditions such as the 'Liberation Day' market disruption, which influenced their funding approach, shifting towards more equity due to market volatility.
- The company maintains a positive outlook on the senior housing sector, emphasizing organic upside and the pipeline of acquisitions as key growth drivers.
- They are actively monitoring long-term bond rates and plan to utilize public debt to support liquidity and investment strategies, reflecting a flexible and market-responsive approach.
- Completed sale of 5 hotels for $83 million at an approximate 6% cap rate on 2024 NOI levels.
- GOP margin for the quarter was 46.3%, up 30 basis points from Q2 2024 despite flat RevPAR environment.
- Leverage reduced to 21%, with net debt to EBITDA at 3.5x as of June 30, 2025.
- Q2 2025 hotel EBITDA was $30.9 million, adjusted EBITDA was $28.5 million, and adjusted FFO was $0.36 per share.
- Repurchased approximately 20,000 shares at a weighted average price of $7.02 under a $25 million share buyback plan.
- Average occupancy increased by 10 basis points, average effective monthly rents increased by 90 basis points, and bad debt improved by 20 basis points compared to the prior year.
- Core FFO per share was $0.28 in Q2 2025, up from $0.27 in Q1 2025.
- Noncontrollable expenses declined by 3%, including an 18% reduction in property insurance premiums.
- Renewal rate increases of 3.9% and 58% retention supported 70 basis points of blended rent growth in the quarter.
- Same-store NOI grew 2% in the quarter, driven by a 1% increase in same-store revenue and a 60 basis point decrease in operating expenses.
- Same-store operating expenses decreased 60 basis points over the prior year quarter, fully offsetting softer revenue growth.
- Second quarter same-store NOI and core FFO per share results were in line with expectations, with same-store revenues increasing 1% over the prior year.
- Three wholly-owned communities were classified as held for sale during the quarter, and a $10.4 million gain from a JV property sale will be recorded in Q3 but excluded from core FFO.
- AFFO for Q2 was $1.24 per share, up 3.3% from $1.20 in prior year.
- Consolidated debt at quarter end was $2.8 billion with 86% fixed or swapped at blended coupon of ~4.3%.
- FFO as adjusted for Q2 2025 was $1.26 per share, up 3.3% from $1.22 in prior year.
- For the first half of 2025, FFO as adjusted was $2.45 per share, up 4.7% from $2.34 prior year; AFFO was $2.44 per share, up 4.7%.
- G&A expenses increased to $13.2 million from $12 million due to higher payroll and franchise taxes.
- Interest expense increased by $426,000 due to higher weighted average interest rate and additional borrowing.
- Key credit ratios remain strong: fixed charge coverage at 3.3x, interest and debt service coverage at 3.9x, net debt to adjusted EBITDAre at 5.1x (5x adjusted), net debt to gross assets at 39%.
- Liquidity strong with $13 million cash and $405 million drawn on $1 billion revolver.
- Mortgage and other financing income increased by $1.9 million due to additional mortgage note investments.
- Net proceeds from dispositions in Q2 totaled $35.6 million with a net gain of $16.8 million, excluded from FFO and AFFO.
- Percentage rents increased to $4.6 million from $2 million prior year, primarily from one theater tenant.
- Total revenue for Q2 was $178.1 million versus $173.1 million prior year, driven by rental revenue increase of $5.3 million and higher percentage rents.
- Transition from a transactions-oriented culture focused on acquisitions and development to an operations-oriented culture prioritizing earnings growth.
- Implementation of a new operating model to drive cost savings and enhance asset management.
- Focus on strengthening tenant relationships and making leasing decisions based on economic returns.
- Management's tone emphasizes confidence in the new strategic direction after assessing market and internal feedback.
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