Condor Hospitality Trust, Inc.
Q2 2017 Earnings Call Transcript

Published: 11 Aug 2017

[Operator:]

Good morning and welcome to the Condor Hospitality Trust Conference Call to review the Company's results for the Second Quarter of 2017 and its outlook for the remainder of the year. On the call this morning will be Bill Blackham, President and Chief Executive Officer; and Jonathan Gantt, Chief Financial Officer. I will now turn the conference call over to management, who will review the Company’s filings. Sir.

[William Blackham:]

Thank you, operator. Good morning everyone and welcome to the second quarter 2017 earnings call and webcast for Condor Hospitality Trust. We appreciate having the opportunity to update you on the Company and to review the Company's results. We will provide you with an update and the current status of our 2017 initiatives as well as the second quarter and year-to-date financial results of the Company. We are happy to address any specific questions that you may have at the end of our prepared remarks. As we continue successfully divesting of the legacy hotels, it should be recognized that their contribution to the financial results of the Company continues to diminish. We have encouraged and continue to believe that the results of the new investments strategy hotels should be [engage] (Ph) by which the Company being evaluated. Our same-store RevPAR growth for the second quarter grew by 4.4% over the same period in 2016 for the 11 new investment strategy hotels owned at the end of the quarter. Year-to-date for this same 11 hotel RevPAR grew by 7.4% over the same period in 2016. The two consecutive quarters our new investments platform also delivered RevPAR growth that substantially exceeds the national average and our public group peers. According to Smith Travel Research the national average RevPAR growth was 3.4% in the first quarter compared to our 7.7% and 2.7% in the second quarter compared to our 4.4% . We are not currently providing formal RevPAR guidance due to the continued transition of the portfolio and our active acquisition activity, but our investments strategy is based on our strong belief that secondary markets will continue to outperform other markets, because of the favorable supply and demand dynamics in many of these markets. Additionally, we believe [Indiscernible] will continue to outperform other chain scale because of the growing population of this product offering with the younger generation of travelers especially the growing popularity of what we consider to be life style [Indiscernible] which includes the Aloft and Home2 Suites brands. Condor has robust pipeline of acquisitions in various stages of consideration that have been generated through our industry contracts including management companies owners, developers, brokers, financial institution, law firms, private equity firms, investment banks and consultants. Notwithstanding our historic age limitations, our quality criteria and our yield expectations. Condor currently has a robust pipeline of over $300 million of hotels as appear to meet our criteria under consideration, which almost 150 million are in the analysis stage and several are heading towards the negotiation take. The Company recently announced that its signed the contract to acquire a portfolio of three Marriott branded hotels for $59.6 million. That hotels are The Fairfield Inn & Suites El Paso Airport, the TownePlace Suites Austin North Tech Ridge, and a Residence in Austin Airport. This acquisition presents a unique opportunity to acquire three high-quality hotels that fits squarely within our investment strategy of investing in newer premium branded select service assets in secondary markets. The hotels have an average age of less than two years, have a design aesthetic that we believe appeals to the modern traveler and are located in growing attractive secondary markets. We expect to close the acquisition of the Fairfield Inn & Suite and Residence Inn in the third quarter of 2017 and the TownePlace Suites in early 2018. We expect that the hotels will continue to be managed by Aimbridge Hospitality and we are pleased to welcome Aimbridge as another alliance partner to Condor. Assuming we move forward with this acquisition Condor will have a corporate 13 new investment strategy hotels comprising 1715 rooms and including a Hilton Garden Inn Solomons, Condor will own 14 new investments platform hotels comprising 1815 rooms. In summary the Company has successfully executed on the objectives clearly beat that with the start of 2017. We successfully increased the size of our credit facility to $150 million. We identified and closed to acquisitions in the second quarter bringing our total to high highly attractive premium branded select service hotels acquired through the initial two quarters of 2017. Furthermore, we have a contract to buy three additional high quality Marriott branded hotels in Texas with two of those assets expected to close in the third quarter. The aggregate investment achieved $150 million. We sold three legacy hotels in the second quarter bringing our total year-to-date hotels divested to five. Additionally, we have two more under contract and may accelerate plans to dispose of five additional legacy assets through the acquisition contract hotels not reveal issues during our due diligence. Our investment strategy hotels delivered a second consecutive quarter positive RevPAR growth with 4.4% RevPAR expansion. The year-to-date RevPAR growth for these new investment hotels was 7.4%, interestingly for the 10 assets acquired under the current management team, RevPAR growth for the second quarter was even higher at 4.5% and hotel EBITDA margin for the second quarter for these 10 assets was greater than 39%. We believe these statistics speaks volumes about our investment strategy and our ability to continue to create value for our shareholders. Our recent acquisitions not only have performed in accordance with our underwriting projections, but also have created shareholders value, a couple of examples illustrate this statement. First, the three hotels we acquired in the fourth quarter of 2015 generated increased operating income of approximately 9% higher than the trailing 12 months preceding our acquisition. Assuming the same cap rate at acquisition, the value of these properties has subsequently increased 9% in the 20 months since closing or approximately an increase of $4 million. Said in other way the yield on these three assets has increased nearly 100 basis points since the acquisition due to the improved performance of the assets. The second example is that approximately two blocks from our downtown Atlanta Aloft, one of our peer select service hotel REIT just acquire the AC Hotel for about $230,000 a key some $60,000 per key more than the approximately 170,000 per key we paid for the 254 room Aloft. The attractive pricing last August was the compelling reason we pursued acquiring hotel in a top 10 market. In conclusion, we continue to execute our strategy and in a highly disciplined manner and strive to continue to deliver outperformance as we seek to build the highest quality portfolio of select service hotels in secondary markets in the hotel public REIT sector. With that, I will now turn the call over to Jonathan Gantt, our Chief Financial Officer.

[Jonathan Gantt:]

Thank you Bill, and thank you to everyone for joining our call this morning. Before we begin the financial review, I would like to remind you that this call may include forward-looking statements concerning the Company's operations and financial condition, including market and industry trends, our forecasted operating results, our business and investment strategy, projected capital expenditures and our ability to obtain capital. Such statements are subject to various risks and uncertainties. Actual results could materially differ from results currently anticipated due to a number of factors, which are identified in our SEC reports, including our second quarter 10-Q filed yesterday evening. The Company assumes no obligation to update or supplement forward-looking statements to become untrue because of subsequent events. During this call, we will also discuss non-GAAP financial measures such as FFO, adjusted FFO, hotel EBITDA, EBITDA and adjusted EBITDA. Management’s view of the usefulness and risk of these non-GAAP measures and applicable reconciliations to GAAP measures can be found in both our earnings release and 10-Q filed yesterday evening. I will now transition to a review of the Company’s performance. Prior to any discussion of any financial measures, it is important to review the status of the portfolio as it provides the necessary context to understanding the financial results. We continue to have success selling the legacy hotels at what we consider to be attractive valuation, while also closing on highly attractive acquisitions that meet our investment criteria. We began the year with 13 legacy hotels and six new investment platform hotels for a total of 19 hotels. During the second quarter, we have sold three legacy hotels bringing the total of legacy assets sold year-to-date to five. Thus we currently have remaining just eight legacy hotels, two of which are under contract to sell. In the second quarter, we closed on two acquisitions. The Home2 Suites in Memphis South Hilton and the Hampton Inn and Suites Lake Mary, Orlando. In the first quarter, we closed three acquisitions Thus we have acquired five assets year-to-date. As of today, our portfolio is comprised of 11 new investment platform hotels and eight legacy hotels for a total of 19 hotels. These 19 hotels are in 11 states and represents 2,260 rooms. We previously publicly announced that by mid 2017 we aim to sell or have under contract to sell seven legacy hotels. We have achieved this objective. Year-to-date, we have sold five of these seven hotels and have the remaining two under contract to be sold. Additionally, we have announced that due to the signing contracts we have acquired three additional hotels in Texas. With one of these assets expected to close in 2018, we may accelerate the disposition of up to five more of the legacy assets. Should we close on the new acquisitions and decide to accelerate additional legacy hotel dispositions, we would anticipate we have sold or have under contract to be sold in additional assets by year-end 2017. Post achievement of this accelerated disposition plan, we would have only one legacy asset remaining through quality Inn Solomons Island. We are currently evaluating options to maximize value to our shareholders given the in intrinsic value of the land of this particular hotel. I will now turn my attention to the financial results of the Company. Condor’s second quarter 2017 revenue from continuing operations was $14.3 million compared to $14.2 million in the same 2016 period. Condor year-to-date 2017 revenue from continuing operations was $24.6 million compared to $26.7 million at the same 2016 period. The declines over the same period last year we call it by the continued transition of the portfolio. Importantly the majority of Condor revenue moving forward are generated by the high quality premium brand and new investment platform hotels, revenue from our new investment platform hotel totaled $16.4 million for the six months ended June 30, 2017 with the balance contributed by our legacy hotels. Second quarter net earnings attributable to common shareholders was $4.7 million or $0.40 per basic and $0.37 per diluted share compared to $7.1 million or $9.36 per basic and $1.17 per diluted share for the same 2016 period. Year-to-date net loss attributable to common shareholders was negative $9.3 million or negative $1.28 per basic and diluted share compared to negative $3.3 million or negative $4.39 per basic and diluted share for the same 2016 period. The net earnings for the 2016 and 2017 periods reflected the impact of substantial declared dividends and undeclared and end time dividend on preferred stock representing $11.9 million and $18.8 million in the six months ended June 30, 2017 in 2016 respectively. FFO, for the three months ended June 30, 2017 increased to $2.6 million as compared to $0.9 million for the same period prior year. The second quarter increase in FFO was primarily driven by a higher margin and lower interest expense and no loss on debt extinguishment. FFO for the six months ended June 30, 2017 decreased to $2.0 million as compared to $6.7 million for the same period prior year. AFFO for the second quarter of 2017 increase to $2.8 million as compared to $7.0 million for the same period in 2016. The increase in FFO which is excluded net gains on derivatives and convertible bet was primarily driven by higher revenue and margins. Similarly, AFFO for the six months ended June 30, 2017 increased to $3.2 million as compared to $0.2 million for the same period prior year. The Company's adjusted FFO per diluted share for the second quarter decreased 13.7% to $0.24 as compared to $0.28 for the same period of 2016. The decrease in adjusted FFO per diluted share for the second quarter is primarily caused by the continued transition of the portfolio and an increase to share count as a result of the conversation of the preferred D and the equity raise completed in the first quarter. The Company's adjusted FFO per diluted share for the six months ended June 30, 2017 increased 98.6% to $0.40 as compared to $0.20 for the same period of 2016. The increased in adjusted FFO per diluted share for the six months ended June 30, 2017 was primarily the result of strong top-line and margin performance from our new investment platform hotel. EBITDA for the three months ended June 30, 2017 decreased to $8.4 million as compared to $11.9 million for the same period prior year, a decrease of 28.9%. The decrease in EBITDA for the three months ended June 30, 2017 was primarily driven by decrease in net gains on the disposition of assets as we approached the end of like hotel sales which decreased by $4.0 million between the second quarter period. EBITDA for the six month ended June 30, 2017 decreased to $9.9 million as compared to $22.5 million for the same period in the prior year. Adjusted EBITDA for the three months ended June 30,2017 increased to $4.1 million as compared to $3.1 million for the same period of prior year an increase of 34%. The increase in adjusted EBITDA was primarily driven by higher margin and strong top-line performance in the new investment platform assets. Adjusted EBITDA for the six months ended June 30,2017 increased to $6.6 million as compared to $4.5 million for the same period prior year. As of June 30, 2017, we had approximately of $128.8 million of debt outstanding including our JV partners' pro forma $6.7 million shared of debt on the Atlanta Aloft. We had approximately $54.8 million of outstanding debt on our secured credit facility, this provides us with approximately $19 million of net availability based on the currently contributed assets to the borrowing base. We have the ability to lever the $19 million into $47.4 million of total dry powder. Again, solely on the assets currently contributing to the credit facility. We successfully closed the increase to our credit facility to $150 million on May 11, 2017 and we continue to have the ability to exercise an accordion feature of $400 million contingent upon additional lender commitments. Total net debt to enterprise value at the end of the second quarter was approximately 49%. The additional dispositions of legacy hotels that the Company is currently marketing will help reduce our overall debt and enhance our coverage ratio. In addition, upon execution of these dispositions we will have increased capacity on our balance sheet to make additional accretive acquisitions. With regards to common dividend, Condor Board of Directors declared a common stock dividend of $0.195 per share related to the second quarter of 2017. This represents a $0.78 per share on an annualized basis. The second quarter dividend was paid on July 7, 2017 to shareholders of record on June 30, 2017. Condor Board of Directors will continue to evaluate the Company's dividend policy on a quarterly basis, evaluating both the appropriateness and amounts of any future common dividend. This concludes the review of the financial highlights. Bill.

[William Blackham:]

And that concludes our prepared remarks. Jonathan and I are now happy to take any questions you may have.

[Operator:]

Thank you. At this time we will be conducting a Question-and-Answer Session. [Operator Instructions]. Our first question comes from Austin Wurschmidt with KeyBanc Capital Markets. Please state your question.

[Austin Wurschmidt:]

Hi, good morning gentlemen. Bill, I appreciate the update you gave us on the investment pipeline. And I imagine that it is a little fluid, but it did decline since last quarter $200, $300 form $400 million. I was wondering if there was anything in particular that's driving that or whether you are seeing a reduced opportunities to set out there in the transaction market.

[William Blackham:]

No. There is no external factors that are giving rise to that. What I have decided is to set back from a portfolio opportunity and that simply was reflective of the demand number. Now I would expect go to the next six to eight weeks as we get pass Labor Day more offerings will come back in and then we will grow again, that's really what is giving rise to it.

[Austin Wurschmidt:]

Thanks for the detail there. And then just a clarification on the $150 million that you mentioned is in the analysis phase, does that include or exclude the three Marriott branded hotels that you recently sourced?

[William Blackham:]

That excludes the three hotels that we have under contract.

[Austin Wurschmidt:]

Okay, and then Jonathan maybe if you could just give a little more color on the dry powders. I think you said you have $47 million of potential drive powder today, when you taken into consideration the three Marriott hotels that you recently announced as well as the planned sales of the five remaining legacy or five of the six remaining legacy hotels, where does that leave you from the capacity perspective?

[Jonathan Gantt:]

Sure, so it's a little bit fluid as you can imagine with assets coming in and out of the credit facility. Since it is secured basis the numbers I related was simply based on what is contributed to this asset pool currently. The different moving pieces assuming we move forward or successful selling with the two that are under contract and with the three additional assets, we have additional dry powder still on the credit facility somewhere in the range between $15 million and $20 million. That will keep us in-line with our covenants with the credit facility.

[Austin Wurschmidt:]

Thanks Jon, and then just last one from me. You talked about there been some tailwinds within the portfolio that could drive above the average RevPAR growth. I know you are not providing formal guidance, but should we continue or that will continue to be the case in the back half of the year and can you just give us a couple of potential or some tidbits on either supply or the demand drivers through the back half of the year?

[William Blackham:]

This is Bill. I think that obviously we are going to continue near-term to back away from providing portfolio guidance on RevPAR, but I think that what is evolving in our new investment platform hotels is a number of different factors that are contributing to the growth we are seeing. Since the hotels are all very young in age we are still benefitting from the expansion still a market share stealing if you will, related to a superior quality product against the competitive set. We are also as a result of our asset management over site continuing to gain the benefit of removal of certain less desirable and lower rated business and taking the risk of replacing that business with higher rated customer base in the markets. For example, in the Indigo Hotel in Atlanta, actually that particular hotel did not be favorable as the portfolio, but that was because we consciously took advantage of removing the [indiscernible] business from the hotel and rebuilding that business with market rated corporate and transit business. So we expect that hotel as we get through the second half of this year to do better than it did in the first six months. We are experiencing similar things in the Aloft in downtown Atlanta, where we consciously eliminated selling rooms to the convention center almost across the street and taking market rated business and so that hotel frankly outperformed the portfolio in terms of its RevPAR growth and we expect near-term that it will continue to do so. So those were a couple of examples of what we are seeing. In Lexington, Kentucky we are experiencing the same kind of benefits from our asset management of going after higher rated business. So that asset management function is part of what is producing the results. I think the other thing that is happening across the board and our new acquisitions is, there is an increased focus on revenue production, Jeff Dugan is spending much of his time not on cost containment measures although that’s not to say they are not important, we are going to continue to focus on that but our margins are certainly good. I think that most of his time is pushing the need and making sure that we are maximizing revenue. You are seeing that and I think you will continue to see that because remember a number of the hotel have just come into the portfolio. for example, these numbers were the second quarter are two weeks short of a full quarter with respect to Southaven and we closed Lake Marriott. I believe it was in the middle of June and so there is only two or three weeks of numbers that are in the quarterly numbers. And so those two hotels in particular, you should see similar types of trends coming out of them then the second half of year. I think that gives you some vision on your question.

[Austin Wurschmidt:]

Very helpful and then you mention the market share stealing, can you provide a RevPAR index for the portfolio in the second quarter.

[William Blackham:]

I think I don’t have that here in front of me, I think Jonathon can get follow-up on that.

[Austin Wurschmidt:]

Great. Thanks for the time.

[Operator:]

Thank you. Our next question comes from Michael Bellisario with Baird. Please state your question.

[Michael Bellisario:]

Good morning gentlemen. From the discussed often a little bit, you have three hotels of your 14 there, may be what do you see in the market and what gives you confidence to have outside this exposure there, I mean if you are seeing with the assets specifically that [indiscernible] that gives you confidence over longer term prospect in that market.

[William Blackham:]

Well I think that you have to take a look at it from a portfolio prospective. If we were making the conscious decision that we were going stay frozen at the size that we were at, perhaps our decision process with respect to what we have done to-date would be different. But we are looking at this in the context of what we would think would be overtime to $1 billion portfolio service assets. With that, as we sit here post the transaction closing, on the three hotels in Texas, about 20% of our EBITDA that will be concentrated in Atlanta and about 19% will be concentrated in Austin and then everything else is sub 10% across the board. I would expect that we will have similar types of concentrations in other markets, I think we've indicated that markets like Scarlet and Phoenix and Tampa to name three off the top of my head, will be markets that we hope to acquire in the near-term assets and so that will change those concentrations. Clearly Austin is a marketplace which right now has experienced run up in supply, there is no question about it. But when you look at the fundamentals of the growth of population and the growth of jobs in that marketplace I mean it's salary with the number one performing from a percentages basis, population growth market in the United States in the period from 2010 to end the of 2015 and the projections going forward are that it’s going to continue to absorb. Interestingly enough, our underlying took into consideration in the specific markets, the submarkets that we were in the supply was identified. One of the things that we do is obviously get pipeline reports with everything that's under construction of the plan when we are doing our underwriting. And so that is factored into our returns when we buy the assets. The other thing that I would say, which is kind of interesting is that our perspective management contract, the terms of which are being negotiated right now and finalized, because we are still in a due diligence as we sit here today on those three Marriot hotels. The management contract that we will have with Aimbridge is based on their projections. They are currently managing all three hotels that we are buying the two in Austin specifically and their projections are higher than our underwriting. And their incentive management fees are based on their projections not ours. So when you look at it from that perspective, taking into consideration the new supply, a manager that's already a managing the hotels has more aggressive projections than ours and at the same time, the actual marketplace and its growth then factor out that we are going to continue to grow in our size. I would expect longer term that Austin and Atlanta and couple of the other market that I had mentioned will have largely concentrations because of the dynamics of those markets. Five years from now Austin is going to continue to be I think in our opinion a terrific place to own assets.

[Michael Bellisario:]

Understood and then may fast forward to when you get to a $1 billion, how do you see the top market percentages shaking, are you thinking kind of 5% per market maybe is it 10%?

[William Blackham:]

Well, that will be a function of the opportunities near-term. Remember that as we are picking down these assets, we are not picking them down because I'm saying okay Austin is next. We are looking at 12 ,14, 15 different markets simultaneously. And when a particular assets meets our criteria and has a distinctively positive presence relative to the competitive set, that's when we decide that we are going to start to take seriously moving forward with that asset. So, we don't have any control over the when they are coming into the queue, but once they come into the queue and we are moving forward, alright let's go to $1 billion. That would suggest - right now our average size transaction has been about $20 million per hotel so that would be 50 hotels. If we shift to be in anywhere from probably 14 to 16 different markets, that would suggest that you would have three or four hotels maximum in each of those markets. That could vary, but as you look out that's kind of a vision today all of the things being equal.

[Michael Bellisario:]

And so some of the geographies are consideration in your underwriting down the road is that fair?

[William Blackham:]

Yes and I would also say that short-term, right now as we speak, I’m really not focusing on our opportunities for example that are coming in, in Atlanta. That’s not to say that we won't do in other one or two hotels there, but near-term my flick is just in other markets.

[Michael Bellisario:]

Okay and then lastly as you guys do your underwriting especially for the hotels that are relatively new, how are you thinking about the timeframe for those hotels to ramp-up and get to the fair market which I know obviously it depends if you are buying 90% RevPAR index hotel versus 100%, but how do you think about the new hotel taking market share in terms of the time to get there?

[William Blackham:]

[indiscernible] there are so many different variables per hotel or what is happening with the new supply in that exact competitive set, where does it currently sit, what product are we competing against, what is the pricing point versus what we are trying to accomplish, there is so many different in metrics. But I think that being said, we are tending to look at things from a 12 to 24 months time period for full penetration on assets when we are doing our underwriting that can vary but I think that's a good guide.

[Michael Bellisario:]

That's helpful. Thank you.

[Operator:]

Thank you. [Operator Instructions] Our next question comes from Jim Lykins with D.A. Davidson. Please state your question.

[James Lykins:]

Hey good morning guys. So for the Texas portfolio, can you tell us if there are any meaningful differences in the underwriting assumptions versus just some of the recent acquisitions?

[William Blackham:]

I would say that the only parallel in the new acquisitions would connect between Round Rock Home2 Suites which we have own and the TownePlace Suites Tech Ridge that we would be acquiring just after the first of the year. The Residence Inn is a different submarket in Austin and off course El Paso Fairfield is completely different market. So in those two markets, we supply projections, [indiscernible] supply really did not change between the two and then that's logical because we acquired the Home2 Suites Round Rock in March of this year, underwriting was done in January, February and we acquired or will acquire - I guess a better way to say it is we've signed the contract for the TownePlace Suites in July and so there has only been a six month difference and very little change now in additional supply coming into those markets. I think that there has been no meaningful change in what we've looked at from the standpoint of occupancies on Round Rock versus Tech Ridge, but we believe relatively conservative on Round Rock to begin with in terms of what we would have seen for our expansion. So Jim, I don’t really think there has been a meaningful change in the underwriting.

[James Lykins:]

Okay, and the for this three hotels, is there anything that you can tell us about RevPAR occupancy, ADR?

[William Blackham:]

No, I think not yet, it's premature. I think at some point, I would expect that we will start to have more transparency in the portfolio as it gets larger and as some of the things that we are doing to improve results start to take shape and I think it will be important for you to understand not only what we have done, but what we see near-term for the portfolio going forward, but right now, I don’t think so.

[James Lykins:]

Okay and then one last thing. Can you provide us with the separate on the two legacy assets under contract?

[William Blackham:]

That’s one Jonathan may have to get back to you on, I don’t have that on top of my head. Do you Jonathan?

[Jonathan Gantt:]

And I will sure get back.

[James Lykins:]

Okay. All right. Thanks guys.

[William Blackham:]

Thank you.

[Operator:]

Our next question comes from Steve Shaw of Compass Point. Please state your question.

[Steven Shaw:]

Hey, Bill you have talked about the value that could be sitting in the Atlanta Aloft, I do think I missed it. Atlanta is an atypical markets for your guys. Have you yet thought about monetizing that, or are getting close to thinking about that obviously you are growing that portfolio does that look like a nice opportunity at the moment.

[William Blackham:]

It’s a great question, I think that we certainly have had internal discussions about the benefit versus the burden of capturing that profit and then reinvesting not just the base proceeds, but the profit as well and what that could do for the Company. The other side of that discussion deals with how quickly and where is the money redeployed and what are the implications of that in terms of continuing to move forward with the expansion of this Company, which is obviously very important to get over and other things scaled. We also have had some projections about the near-term prospects for Atlanta and as best as we have preliminarily - we determined avail of good near-term. And so our thought was that the hotel is probably going to enjoy some even additional increase value. It’s our understanding that the Hyatt House which is very close to us as well about four blocks away is either close to or is under contract at an even higher per key price than the 230,000 which then gives rise to some continuing pressure on cap rates in the marketplace. So I guess what I'm saying is, I don’t think we have down side risk by not doing it currently, I will response and say that we have taken a look at it.

[Steven Shaw:]

Thank you.

[Operator:]

Thanks you ladies and gentleman, it appears that there are no further questions. I will now turn the floor back to management for closing remarks. Thank you.

[William Blackham:]

I want to thank everybody for participation today and our interest in Condor Hospitality Trust. We look forward to speaking with you again during our third quarter conference call, and of course we will follow-up with any of the unaddressed questions. Thank you.

[Operator:]

This concludes today's conference. All parties may disconnect. Have a great day.