Condor Hospitality Trust, Inc.
Q3 2017 Earnings Call Transcript

Published: 12 Nov 2017

[Operator:]

Good morning, and welcome to the Condor Hospitality Trust conference call to review the Company's results for the third quarter 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. Before Management begins, I would like to remind you that this call may include forward-looking statements concerning the Company’s operations and financial condition, including markets and industry trends, the Company’s forecasted operating results, the Company’s business and investment strategy, the Company’s projected capital expenditures, and the Company’s 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 the Company’s SEC reports, including the Company’s third quarter 10-Q filed yesterday evening. The Company assumes no obligation to update or supplement forward-looking statements that may become untrue because of subsequent events. During this call, the Company 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 risks of these non-GAAP measures and applicable reconciliations to GAAP measures can be found in both the Company’s earnings release and the Company’s 10-Q, both filed yesterday evening. I would now like to turn the call over to Bill Blackham, President and Chief Executive Officer.

[William Blackham:]

Good morning, and welcome to Condor Hospitality’s Third Quarter 2017 Earnings Conference Call. On our call today, we will discuss our operational performance, our acquisitions and dispositions during the quarter, and the continued execution of our strategy. Jonathan will review our financial results and balance sheet. We are extremely pleased with our performance and accomplishments during the third quarter. We continue to fire on all cylinders and successfully execute our communicated strategy, which has delivered a third consecutive quarter of RevPAR outperformance. In the third quarter, for our new investment platform hotels on a same-store basis, we delivered RevPAR growth of 5.5%. This growth was driven by gains in both occupancy and ADR. Occupancy increased 4.3% year-over-year and ADR increased 1.2% year-over-year. Our 5.5% RevPAR growth for this quarter substantially exceeds industry-wide RevPAR growth of 1.5% and is well ahead of the RevPAR growths achieved by our already announced direct public REIT peer group. Importantly, we realized positive RevPAR growth broadly across our hotels and markets. In fact, four of our hotels had double-digit RevPAR growth. As you are aware, we have a differentiated investment strategy of investing in young, high-quality assets in the top 100-ranked MSAs, with a focus on MSAs ranked 20 through 60. The positive results this quarter continue to indicate that this differentiated strategy is resulting in outperforming assets and markets at this stage in the lodging cycle. Our year-to-date RevPAR growth of 5.8% is impressive given industry performance and we are highly confident that our differentiated investment thesis should continue to deliver RevPAR outperformance. Not only did we produce RevPAR outperformance, we also produced strong operational performance in terms of margin expansion. During the third quarter, despite cost pressures, we drove hotel EBITDA margins of 36.4%, representing an expansion of 50 basis points over last year’s quarter. We take an intensive approach to asset management and work very closely with our third-party managers in order to achieve these positive results. While our hotels already run quite efficiently, we believe there remain opportunities to realize additional flow-through. Some of these initiatives include optimizing our mix and pursuing higher rated business, implementing additional actions for incremental improvements to our operating efficiency, and beginning to realize benefits from our growing scale. Despite our significant RevPAR growth and margin expansion, the quarter was not without its challenges. As we are all aware, many parts of the United States faced incredibly difficult circumstances and devastation caused by hurricanes Harvey and Irma. Condor owns hotels in the regions that were impacted by these hurricanes, our three Florida hotels and our Texas hotels. We were very fortunate that all of our employees and guests were safe, and that none of our hotels sustained any meaningful damage or business interruption as a result of the storms. Nevertheless, it was a difficult time as we prepared for the storms and through the aftermath. All of our employees exhibited compassion and hard work, and we sincerely thank them for their dedication to Condor and to our guests. As we look into the fourth quarter, we expect to continue to see solid operational performance. The supply and demand dynamics in most of our submarkets remain attractive, and we have young, high-quality assets that are still ramping and gaining market share. This backdrop, combined with proactive asset management, should result in ongoing impressive results relative to the industry and our peers. Aside from our leading operational performance, during the third quarter we continued to make strides in our portfolio transformation. During the third quarter, we entered into an agreement to purchase three high-quality Marriott-branded hotels for $58.6 million. The portfolio includes the Fairfield Inn & Suites El Paso Airport, the Residence Inn Austin Airport, and the Towne Place Suites Austin North Tech Ridge. During the quarter, we completed the acquisition of two of these hotels for $38.8 million, the Fairfield Inn & Suites El Paso and the Residence Inn Austin Airport. We expect to close on the third asset, the Town Place Suites Austin Tech Ridge, early in the first quarter of 2018. We were also successful in the continued disposition of our legacy assets. During the third quarter, we sold two legacy hotel assets, the 81-room Quality Inn Morgantown, West Virginia for $2.6 million and the 176-room Days Inn in Bossier City, Louisiana, for $1.4 million. These two closings brought the number of legacy hotel dispositions to seven since the beginning of 2017. Our portfolio is now primarily comprised of young, high-quality assets in attractive markets. Since the beginning of 2015, we have sold 49 legacy hotels, generating over $140 million in gross proceeds. Commencing in the fourth quarter of 2015, we have closed or placed under contract 13 high-quality assets, for a total purchase price of approximately $260 million. We have only six legacy assets remaining, including one which is now under contract subsequent to the end of the quarter and three which are listed and actively being marketed for sale. It is clear that the quality of our portfolio has greatly improved. The average age of our new investment hotels is just four years and are of the quality and style that is highly appealing to the modern traveler. I am extremely proud of the progress we have made transforming our portfolio. We maintain a robust pipeline of opportunities, and we remain focused on expanding our portfolio with young, high-quality select-service hotels with premium flags in attractive secondary markets. We are extremely disciplined in which acquisitions we pursue, but remain confident in our ability to continue to find attractive assets to add to our portfolio. This portfolio transformation is supported by the ongoing enhancements we have made to our capital structure, which positions us very well going forward. Subsequent to quarter end, we successfully refinanced $26 million of mortgage debt, using proceeds to reduce our floating-rate revolving line of credit and further enhancing our balance sheet to provide us with the support to pursue our growth strategy. Jonathan will provide additional details on this recent refinancing. We are singularly focused on creating value for our shareholders. We have a young, high-quality, premium-branded portfolio that currently generates impressive performance, resulting in strong yields on investment and cash flow, that we seek to reinvest in portfolio growth, with the objective to return value to our shareholders. To reiterate our key accomplishments for the third quarter

[Jonathan Gantt:]

Thank you, Bill. Prior to discussing our financial results, I will provide a summary of our portfolio activity. We began the year with 13 legacy hotels and six new investment platform hotels, for a total of 19 hotels. Year to date, we have acquired seven assets, including two in the third quarter. We have also sold seven legacy hotels year to date, including two in the third quarter. As of today, our portfolio is comprised of 13 new investment platform hotels and six legacy hotels, for a total of 19 hotels. These 19 hotels are in nine states and represent 2,247 rooms. As Bill mentioned, Condor delivered strong results for the third quarter of 2017. Condor’s third quarter 2017 revenue increased $2 million, or 15.1 percent, to $15.6 million, compared to the same 2016 period. Importantly, the majority of Condor’s revenues moving forward are generated by the high-quality, premium-branded new investment platform hotels. Revenues from our new investment platform hotels totaled $11.7 million for the third quarter, with $3.9 million contributed by our legacy hotels. Third quarter net loss attributable to common shareholders was negative $1.2 million, or negative $0.11 per basic and diluted share, compared to net earnings of $1.8 million, or $2.41 per basic and $0.39 per diluted share, for the same 2016 period. In last year’s quarter, the Company recognized a $3.6 million gain on disposition of assets. Funds from operations, or FFO, for the three months ended September 30, 2017 increased about 100% to $2.2 million, as compared to $1.1 million for the same prior year period. The third quarter increase in FFO was primarily driven by higher revenue and higher margins from our new investment platform hotels. Adjusted funds from operations, or AFFO, for the quarter increased almost 180% to $3.3 million, as compared to $1.2 million for the same period in prior year. The Company’s AFFO per diluted share for the third quarter was $0.28, as compared to $0.31 for the same period of 2016. The decrease in AFFO per diluted share for the third quarter was primarily caused by the increase to share count as a result of the conversion of the Series D preferred stock and the equity raise completed in the first quarter. Earnings before interest, taxes, depreciation and amortization, or EBITDA, for the three months ended September 30, 2017 was $3.1 million, as compared to $6.1 million for the same period prior year, due primarily to a reduction in net gains on the disposition of assets as we approach the end of legacy hotel sales. This will cause future comparisons to be made more easily. Adjusted EBITDA for the three months ended September 30, 2017 increased almost 50% to $5 million, as compared to $3.3 million for the same period prior year. The increase in Adjusted EBITDA was primarily driven by strong top line performance and higher margins from the new investment platform assets. Hotel EBITDA for the new investment platform, which is pro-forma for the EBITDA contribution from hotels prior to our ownership period and excludes the Residence Inn Austin, due to the lack of same-store comparable financial information, was $5.2 million for the third quarter, a 7.7% increase from the $4.9 million in the prior year quarter. This growth in Hotel EBITDA is a direct result of our RevPAR growth of 5.5% and our success driving margin expansion. Turning now to our acquisition and disposition activity, during the third quarter, as Bill mentioned, we closed on the acquisition of two hotels for $38.8 million, and have an additional asset under contract for $19.8 million, which we expect to close on in the first quarter of 2018. The acquisitions were financed utilizing availability on our revolving credit facility. As we have previously announced, after completing our 2017 plan of selling seven legacy hotels, we are accelerating the disposition of four additional legacy assets. As of today, one of these assets is already under contract for sale, with the remaining three actively being marketed. Post the disposition of these four assets, only two legacy assets will remain. In terms of our balance sheet, as of September 30, 2017, we had total outstanding long-term debt of $121.4 million associated with assets held for use, with a weighted average maturity of three years and a weighted average interest rate of 3.97%. Subsequent to quarter end, we refinanced three new investment platform hotels. The effect of this refinancing was to increase the ratio of fixed rate to total debt and to increase the credit facility availability for future acquisitions. The refinanced hotels were previously encumbered by floating-rate debt totaling $25 million, with a weighted-average rate of 4.2%, which was refinanced with a $26.5 million mortgage loan with an effective fixed rate of 4.44% and a five-year maturity. We were pleased to partner with Wells Fargo for this refinancing. Wells Fargo is a highly respected lender in the industry and their partnering with us further validates the quality of our assets and the attractiveness of the markets we target. As of quarter end, we had cash and restricted cash of $10.6 million and available revolver of $8.3 million. We also established an ATM program in the quarter to raise capital in a disciplined manner. During the third quarter, we sold 5,950 shares of common stock for net proceeds of $61,232, at an average price of $10.50. Subsequent to quarter end, we sold an additional 15,763 shares for net proceeds of $161,588, at an average price of $10.46. With regards to our common dividend, Condor’s Board of Directors declared a common stock dividend of $0.195 per share related to the third quarter of 2017. This represents $0.78 per share on an annualized basis and an annualized yield of approximately 7.5%, based on the closing price at the time of announcement. We continue to maintain highly attractive dividend coverage. Condor’s Board of Directors will continue to evaluate the Company’s dividend policy on a quarterly basis, evaluating the appropriateness and amounts of any future common dividend. Finally, in July, Condor’s common stock moved from NASDAQ to the New York Stock Exchange American market exchange. We had the privilege of ringing the opening bell of the New York Stock Exchange on July 21, and were honored to share the moment with many of our partners who have played a role in the remarkable transformation of Condor over the past two years. I concur with Bill that I am pleased with our accomplishments and I am excited about the future for Condor and our shareholders. With that, Bill and I will be happy to address any specific questions. Moderator?

[Operator:]

[Operator Instructions] Our first question comes from Austin Wurschmidt with KeyBanc Capital Markets. Please proceed with your question.

[Austin Wurschmidt:]

I was wondering if you could provide us with an update of what the dry powder is here today. I think you mentioned $8.3 million of availability on the line. I know you’ve got a couple deals being marketed and under contract today. So, how does that shake out in terms of available dry power?

[William Blackham:]

I’m going to first give a larger explanation and then I’m going to have Jonathan drill down. Basically, realize that we still have noise going on with the disposition of legacy hotels between now and the end of the quarter, some closing, some expected to go under contract, and when we acquire hotels, besides availability under the line of credit, we then also have finance-ability on the specific asset. So, with that that, I’ll let Jonathan give you the specific numbers of availability under the line of credit, total availability, including debt financing on the specific assets, and then availability post-closing of the Town Place Suites, which we expect to close in January, based on our expectation of our closing legacy hotels.

[Jonathan Gantt:]

The answer is consistent with what we related last quarter. We have $8.3 million of available revolver today, that we can lever at 60% to acquire additional assets. We have four assets that we’re actively marketing. One of those is already under contract for sale. While we haven’t related on the exact amount that we believe those assets will generate in sales proceeds, we have related that we believe that those will be consistent with previous asset sales. We also have the one additional asset under contract for the first quarter of 2018. So, when the dust settles, with the current availability, plus the four additional asset sales, and then the acquisition of the Town Place Suites, we have available dry powder of $20 million to $25 million total levered availability for acquisitions.

[Austin Wurschmidt:]

Thanks for the explanation and detail there. Then, Bill, how do you think about executing on the Company’s next stage of growth? Given the situation, are you considering recycling capital into the new investment platform at this point?

[William Blackham:]

Obviously, we’re going to take a look at all of the alternatives. Part of it will be driven by whatever our stock price is. Part of it will be driven on performance and yield on existing assets, including the new investment platform assets, in relationship to opportunities. Remember that I’ve said before on prior calls that our measure, on a constant basis, is to review what our yield is on our invested capital, because from that metric, on an unleveraged basis, we evaluate our best strategies for maximizing shareholder value; i.e., redeployment of capital as one of the options. So, yes, specifically, that could be considered. There’s nothing at this stage that has been identified to do that. Now, with that, some of the other options that we have - of course, we want to continue to grow this Company. It’s important to get the size of this Company, the scale significantly larger than an enterprise value of, you know, $300 million. In fact, one could argue that we have to be moving rapidly down a path to get it to $1 billion, in terms of enterprise value. Now, if we’re going to continue to march down that path, obviously, we’re going to need to raise capital in order to do so, but our ability to do so is going to be, frankly, a function of what the stock price is, in relationship to the yields that can be driven on what it is that we want to acquire in order to build the Company and create shareholder value. So, we’ll use debt, we’ll use recycled proceeds. Potentially, we will use equity, if and when it’s appropriate to do so. Frankly, there are other alternatives that we may consider. I know in some ways that’s specific and some it’s ambiguous, but it’s going to depend on variables we don’t control.

[Austin Wurschmidt:]

No, I still appreciate the thoughts there. Then, you’ve got the two remaining legacy assets with, once you remove what’s being marketed and under contract. You’ve talked about Solomons, evaluating the highest and best use before looking to dispose of that. What are thoughts on holding onto the Super 8 in Creston at this point?

[William Blackham:]

The Super 8 in Creston had a period of time - rail business in the United States has been off markedly and that business has a significant amount of its demand generated from rail, and so to sell now on that asset would be to - since it is an asset that still will be a gross income multiplier - would be to not realize for shareholders value that will, potentially, be available in a 12- or 18-month time period, based on potential bounce-back, if you will, of volume coming in to the hotel as a result of picking up of the market for rail transportation. With that, while we’re holding it, the actual yield, if you will, on what we believe is the value is fairly attractive. So, it’s not a negative to hold onto it. Now, that being said, obviously, it doesn’t fit the investment platform that we’re creating, but we also don’t want to do anything that is undisciplined and simply throw away value that otherwise could be used for a newer acquisition, and the effect of that is less dilution through share issuance. So, it’s a delicate balance. Solomon, you didn’t ask about, but there’s similar dynamics going on there, and that has to do with the fact that the sum of the pieces of that asset are most likely worth considerably more than just continuing to maintain that operation as a hotel that happens to collect income from a marina. In fact, one of the things that we are beginning to explore is the physical separation of the property rights surrounding the marina area, either through lease structure or physical subdivision, so as to make the marina itself, potentially, saleable, because the value of that is quite significant, and then take a look at the incremental value of selling the hotel, on a multiplier basis, compared to the value of that hotel as a tear-down and a condominium construction project, the amount that a developer would pay per entitled unit for a condominium development against the hotel value. We’re fairly far along in looking at that, but that takes time, there’ll be entitlements involved, and so near term, we expect to continue to own that asset.

[Operator:]

Our next question is from Bryan Maher with FBR. Please proceed with your question.

[Bryan Maher:]

Bill, we’ve been hearing from some of your competitors about kind of a wider than usual, maybe, bid/ask spread, particularly in the assets that you seek to acquire, those kind of more upscale select-service hotels, and particularly some of the newer ones. What are you seeing as you go around the country and look at assets to purchase?

[William Blackham:]

Well, I think that we are seeing similar circumstances, depending upon the market and depending upon the size of the transaction. Remember, there’s a number of variables that go into how many potential bidders are going into an asset, and that can influence price, but taking those aside, there is a little bit of a benefit to the secondary markets, in that there are not as many people that are seeking to, potentially, buy in those markets, because of the size, if you will, of the physical transaction. Now, you could argue that should cause a wider spread. However, a number of the sellers in those markets are not expecting to get a MSA one through 25 cap rate. I am still seeing some gap. I’ve recently seen it in two transactions that we decided not to go into. What I will tell you is that on newer assets, one of the advantages that we have is we have taken some ramp-up risk in some of the acquisitions, and so the pricing differential, if you will, is closer, that gap is closer in some of the assets that we are pursuing, because, again, there are not as many people going after them. A dynamic, a projection, that I think is going to drive some of this is that sellers are still expecting that there is a recovery ahead - not a recovery, but a continuation, if you will, of expansion in the economy ahead of us for the next couple of years. And at the same time there is starting to be a widespread conclusion that we’re going into a highly inflationary time, from the standpoint of construction materials and labor, and so, therefore, fixed asset values could, in fact, increase as a result of there, potentially, being declines, if you will, in new construction. Therefore, that’s causing some stubbornness on the part of prospective sellers. The other things that happening, very much so, in this dynamic right now is that in the last 120 days of the year, in the same way that there tends to be a bid-up of pricing from buyers that need to make their numbers for the year, i.e., physical number of transactions or dollars of acquisitions, the same thing is happening with respect to the asset itself being in a situation where people are not pursuing it, and so it’s an interesting dynamic. I’m not sure I made that point well, but I guess what I’m saying to you is that it’s out there, but it’s not as extreme in the secondary markets. I tried to drill down and give you a little bit more flavor on what we’re seeing. Hopefully, that’s responsive.

[Bryan Maher:]

Yes, that’s helpful, but to kind of drill a little bit more on that, who are you bumping into competitively, and do you worry that when you put up numbers like 5.5% RevPAR, and a lot of other companies, public REITs and what have you, are at zero plus or minus 1.5%, do you fear that some of these public REITs might show up in your space?

[William Blackham:]

They could. There’s always the potential risk in anything you do when you outperform, that new competition arises, and that’s simple economics. But, remember that a number of the public REITs still have defined strategies, and so now, to the extent that they’re going to go backwards and say, yes, but that was our strategy, but we’re shifting our strategy, as you know, that raises issues and has some difficulty in terms of time to execute and start to go down that path. I think that some of the players that we’re seeing, there’s no question that the private players are still there. A point I failed to make before in the pricing gap is the following. In the last 120 days, there’s a lot of pressure to get money out the door for refinancing of assets. So, a number of sellers are actually making the decision consciously to refinance rather than sell, it’s a non-taxable event, and to hold on and get another year or two of performance under their belt, so that they can sell the asset for an even higher amount. Now, with that, as we go into markets, I’m seeing the private buyers, of course, they’re still there. What’s interesting is, from time to time, in some of the markets, we’re seeing some public companies, traded and untraded. For example, we’ve run into AHIT in a few transactions. Blackstone, with their recent non-traded hospitality REIT, from time to time, we cross paths in some of the marketplaces. I think that there are a whole host of smaller groups that are doing fund raising to buy hotels, some of them on a non-traded basis, some of them on an equity fund basis. For example, one of our hospitality managers, Peachtree out of Atlanta, has non-traded equity raising going on, and we’ve crossed their path on a couple of acquisitions. So, the landscape is not void of people that are looking to get in. I think the key on this is that, remember, our platform still allows for sellers with management companies to retain management with us, and that remains an important and a distinctive advantage which allows us, in some cases, to be able to consummate where other people cannot.

[Operator:]

[Operator Instructions] Our next question is from Michael Bellisario with Robert W. Baird. Please proceed with your question.

[Michael Bellisario:]

Bill, maybe on the macro front, how are you thinking about growth going forward and, maybe, has anything changed in the way you view the world and fundamentals in the last 90 days or so?

[William Blackham:]

I’m chuckling a little, that’s a loaded question. Let me pull out the materials from your presentation last week in Phoenix.

[Michael Bellisario:]

I’m not necessarily looking for a RevPAR range, whether it’s for your portfolio or for the industry, but maybe anything on the ground that you’re seeing that would lead you to be, maybe, at least as optimistic heading into next year as you are now, or maybe more or less optimistic, depending on what you’re seeing, more directionally.

[William Blackham:]

Yes, no question, I was having some fun, just for the levity, but I think, Michael, that we are about equally optimistic for next year. We have not had a reduction as it relates specifically to our investment strategy, but now macro, things that are causing us to continue with that optimism, we believe that there are a number of hotels that were planning to start construction will not start construction next year, and that’s going to be a positive in terms of elongation, potentially, of cycle. We also feel that there could be yet still some additional growth in demand coming from some sectors. Leisure remains very strong. There is going to be some pressure still from companies to grow, and with that corporate demand, what we’re seeing in some of our locations, in terms of the bidding process for next year, is some growth. We’ve seen some contraction, obviously, but we’re seeing some growth, too. So, that remains relatively strong, at least in the markets that we’re in. Interest rates would appear to be moving in a direction which is slower than perhaps some had projected, and I think the other thing that’s happening is that we’re starting to see coming back in, if you will, some increased travel that’s coming in international. Some currencies are starting to fair a little bit better against the dollar; not a lot, but some are. Now with, there’s some negative factors. On the one hand, the run-up in construction costs and labor, which is being exacerbated by the reconstruction work that will be taking place over the next at least two years, with respect to the storm damage. The other side of that is that it’s going to put extreme pressure on margins, because, obviously, labor will cost more, but also materials will cost more, even if it’s just maintenance-type materials, depending upon whether or not they’re a part of what has to be done in the reconstruction activity, and so that’s going to have a negative. But, on balance, we’re looking at a marketplace where we think there’s going to continue to be positive RevPAR growth in the markets that we’re in, and we believe that, while we’re going to have pressure on margins, we still think that we can continue to get some margin expansion out of our portfolio. So, the key for us is going to be to continue to be highly disciplined in our acquisitions, as we have been on the first 13, to make sure that we’re picking the assets as best as we can, that have the same kind of potential as that which we’ve already acquired.

[Michael Bellisario:]

That’s helpful. Then, kind of switching gears a little bit, I know it’s very small dollars that you did on the ATM in the quarter and subsequent to the quarter end, but kind of optically, how should we be thinking about the messaging around selling stock at or below $10.50, versus the kind of sources and uses of proceeds from that, which are, you know, call $100,000 or so?

[William Blackham:]

Yes, as you know, it’s been very small. Within the quarter, we didn’t sell anything below $10.50. I believe that the amount that we did sell in the period past, which we’ve disclosed, was at an average price of about $10.46. We have not been in a hurry to go below $10.50 per share. We’re going to remain highly disciplined. We expect that as we continue to sell under the ATM that our average is going to exceed $10.50 per share, but we have been advised at the same time by our investment bankers that one of the mechanisms that we need to focus on in order to help drive share price is to get some more liquidity in the stock, and so, in doing so, we have selectively set at various times a slightly lower than $10.50 pricing permission, if you will, in order to test what we’re being advised to do. So, bottom line, we’re going to remain highly disciplined with that ATM pricing. As a not insignificant shareholder, I’m not looking to sell a fair amount of stock at something that is less than what I paid for my shares, which was $10.50.

[Michael Bellisario:]

It sounds like it’s more of a liquidity tool to get, maybe, investors interested in the stock more so than it is to kind of very partially fund a potential new acquisition. Is that fair?

[William Blackham:]

I think that’s a fair assessment. I think, given the volume of our stock, it would be unrealistic for us to assume that we’re all of a sudden going to raise $20 million or $30 million on the ATM, unless, you know, somebody came in with a block offer, but certainly that could have pricing implications. So, it’s not as realistic as you’d like for it to be.

[Operator:]

Our next question is from William Ostrand with Ameriprise Financial. Please proceed with your question.

[William Ostrand:]

Yes, I’m sorry, gentlemen, I put myself on mute. This is really more of a comment than a question. I just wanted to take the opportunity to congratulate you, Bill, and your Team in executing on the vision you laid out nine or 10 quarters ago, when you joined. As you know, I’ve been involved in Supertel and Condor for a better part of the decade, but what you’ve delivered on is very impressive and I wish you continued success in the upcoming year.

[William Blackham:]

Thanks, Bill. I’ve appreciated your support from the beginning, the confidence that you had in us, and I appreciate those comments on behalf of myself and my Team.

[Operator:]

Ladies and gentlemen, we’ve reached the end of the question and answer session. I’d like to turn the call back to Bill Blackham for closing comments. Excuse me, someone just jumped into the queue. The question is from Jim Lykins with D.A. Davidson. Please proceed with your question.

[Jim Lykins:]

In addition to the property that you do have, the acquisition you’ve got under contract right now, can you provide any more color on how we should be thinking about the acquisition pipeline right now through 2018?

[William Blackham:]

Actually, I went back through yesterday, in anticipation, obviously, of being asked the question on the call, to just make sure I had an accurate tabulation of what I’ll consider to be pipeline. Our pipeline remains at about $300 million. I counted up 14 different assets that could be of potential interest, that we have done various things on. Obviously, as we sit here today, we have no ability without a capital raise to do all 14 of those, but some of them have some very interesting dynamics and would be attractive fits into the Company. So, I’m optimistic that the pipeline is there. At this point, what it is all about - as I said earlier, fourth quarter, it can be, and it seems to be this year, a time of pressure on pricing, so I have not necessarily been in a hurry to push forward on anything, because we still are maintaining our strict yield on investment criteria in what we’re moving forward on, but I’m confident that we can move forward. If we have the ability to do it, I think we could grow this Company yet again. We did $260 million of acquisitions in a period of time which is - well, it would be, I guess, from where we sit today, 24 months, without all of the noise of dispositions, and, frankly, of that, $200 million was in the last 12 or 13 months. But, without all the dispositions, armed with capital, and capital at a cost which is accretive to shareholders relative to the acquisitions, there’s no reason, with what I see ahead of me, that we couldn’t do $250 million or $350 million next year. I believe that the pipeline is there. So, that’s that balancing question of maintaining the discipline on how we raise the capital and taking a look at the markets in relationship to our costs. It’ll be an ongoing process.

[Jim Lykins:]

And also a RevPAR question. I know you guys don’t provide RevPAR guidance, but just given the momentum that you see right now, do you think that we could see 5.5% again in Q4, or do you think that we might be more at something like the Q2 levels?

[William Blackham:]

Well, I think that, rather than be specific to your 5.5 number, what I will go out on a limb and say is that, as we indicated in the earnings release, we expect that we will continue in the fourth quarter to outperform industry achievements for the fourth quarter. Now, that being said, we actually did extremely well relative to our budgets in the month of October, and our 60-day reforecasts actually have come in with numbers that were higher than what they were at the time that we began the quarter, and that was what gave rise to the comment that we made. Now, beyond that, I’m not going to respond as to whether it’s 5 or 5.5, or 4.5, or whatever, except to say that you’ve now gotten to know us well enough to probably draw the conclusion that for us to say we expect an outperformance, is the closest thing to an optimistic statement that we’ll do.

[Operator:]

Ladies and gentlemen, we’ve reached the end of the question and answer session. I’d like to turn the call back to Bill Blackham for closing comment.

[William Blackham:]

Once again, I’d like to thank everybody on behalf of myself and my team for taking the time to listen and participate in our Third Quarter 2017 Earnings Call. We look forward to follow-up questions with Jonathan and to our next earnings call after the fourth quarter.

[Operator:]

This concludes today’s conference. You may disconnect your lines at this time and we thank you for your participation.