Sotherly Hotels Inc.
Q3 2015 Earnings Call Transcript

Published: 11 Nov 2015

[Operator:]

Good morning, and welcome to the Sotherly Hotels Third Quarter Earnings Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference call over to Scott Kucinski, Vice President of Operations & Investor Relations. Please go ahead, sir.

[Scott Kucinski:]

Thank you, and good morning, everyone. Welcome to Sotherly Hotels' third quarter earnings call and webcast. Dave Folsom, our President and COO, will begin today's call with a review of the company's quarterly activities and review portfolio performance. Tony Domalski, our CFO, will provide our key financial results for the quarter and update our 2015 guidance. Drew Sims, our Chairman and CEO, will conclude with an update on our strategic objectives. We will then take questions. If you have not received a copy of the earnings release, you may access it on our website at www. sotherlyhotels.com. In the release, the company has reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirements. Any statements made during this conference call, which are not historical, may constitute forward-looking statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that these expectations will be attained. Factors and risks that can cause actual result to differ materially from those expressed or implied by forward-looking statements are detailed in today's press release and from time-to-time in the Company's filings with the SEC. The Company does not undertake a duty to update or revise any forward-looking statements. With that, I will turn the call over to Dave.

[Dave Folsom:]

Thank you, Scott, and good morning everyone. I would like to start the call today by discussing our transactional activity in the quarter, which was some of the highest we have seen in the Company's history. At the end of July, we completed the acquisition of the Crowne Plaza Hollywood Beach Resort in South Florida by purchasing the 75 interest in the hotel that was held by the Carlyle Group. During our joint venture with Carlisle, we had owned the remaining 25% of that hotel. As a result of the transaction, we booked a $6.5 million non-taxable gain and we anticipate this asset will be a major contributor to the portfolio heading into 2016 and beyond. Also in July, we announced that Company closed on the refinancing of our Jacksonville hotel, the $20 million first mortgage with Bank of the Ozarks carries an interest rate of LIBOR plus 350 basis points on a 4% floor, a four-year term with a one-year extension and with it amortizes on 25-year schedule. The proceeds from this loan were used to repay the existing first mortgage, partially from the renovation project and for general corporate purposes. Subsequent to the loan closing, we have purchased a LIBOR cap, so as to minimize our interest rate risk going forward. At the end of September, we announced that the Company closed on the refinancing of the Crowne Plaza Hollywood Beach Resort, the $60 million first mortgage with Bank of America carries a 4.9% interest rate a 10-year term and amortizes on a 30-year schedule. The proceeds from the loan were used to repay the existing floating rate mortgage and for general corporate purposes. The original loan, which we assumed as part of the acquisition at no cost, was a floater, but that fixing this debt over 90% of the Company's debt is now at a fixed rate. We also recently completed the sale of an out parcel of land adjacent to the Georgian Terrace in Atlanta as well as transferable development rights associated with the property for a combined gross sales price of $2.6 million. In terms of our asset repositionings, our Jacksonville hotel was successfully converted to the DoubleTree by Hilton flag as the Jacksonville Riverfront hotel in early September. This marks a significant up-branding for the asset and the benefits of the new brand renovated product are already being seen. I will speak more about that in a minute. Lastly in September, we launched our boutique Sotherly Hotels collection at the Georgian Terrace in Atlanta. This hotel in the only hallmarks of the collection are representative of the Company strategy going forward to help maximize shareholder value and position our portfolio for long-term success. Turning to our portfolio performance, for the quarter portfolio RevPAR was $90.32, an increase of nearly 1% over prior year, with 4.5% increase in rate and occupancy declining 3.6%. Regarding our occupancy declines, in the quarter we had approximately 12,500 room nights out of service for renovations in our Laurel Atlanta and Houston hotels, which represented over 20% of the inventory of these hotels. This obviously impacted our occupancy for the quarter. Excluding the impact of the renovations at these properties RevPAR increased 4.4%, driven by a 3% increase in rate and 1% increase in occupancy. Hotel EBITDA for the portfolio increased 6% to approximately $8 million for the quarter. To review individual property highlights, specifically where renovation projects have been on ongoing, first in Jacksonville as I previously mentioned, the hotel successfully converted to DoubleTree flag in early September. The renovation has been substantially complete since that time, with no further impact to operations. In the quarter at this hotel, we increased RevPAR share by 10.8% and in the month of September alone, the month of the conversion RevPAR share was up 14.4%. These results are a great indicator of how we believe the hotel will respond in 2016 both, operationally and financially. Booking pace is strong with the new flag and transient rates are up over $20. Laurel the renovation proved to be extremely impactful to operations as the window for the conversion became increasingly tight. We completed a comprehensive product improvement plan in eight months and the hotel successfully converted DoubleTree flag on October 20th, with all renovation work now complete. With the renovation impact to the operation over and with the new high-quality product itself and with much stronger DoubleTree flag compared to the old Holiday flag, we expect this hotel to reverse course very quickly. Since the conversion not too long ago, we are already seeing transient ADR bookings increase by $20 to $25, which is in excess of 25% ADR growth. In Houston, we substantially completed a full room refresh in the quarter, resulting in significant impact to occupancy that was concluded at the end of September and we are now in the final stages of preparation to convert the hotel to The Whitehall, an independent hotel affiliated with Preferred Hotels group. Upon conversion, this hotel will be the second addition to our Sotherly Hotels collection. This will take place in April of next year. While the Houston market continues to show negative trends, we should see an end of the rate cap associated with the Crowne Plaza flag and also see initial margin expansion as we conclude the repositioning of this asset. With the market recovery performance will be even further enhanced. In Atlanta, the guestroom renovation project continues to progress and is expected to conclude next spring. As you can see from property level detail, while [ph] saw a decline occupancy due to limited inventory caused by the renovation, ADR was up nearly 11% showing the benefits of a high-quality product and our positioning in the market. We expect hotel to be poised for our performance in the market once the renovations are concluded. In terms of our relative overall market performance, our southern and mid-Atlantic markets performed fairly well as 9 off 12 over markets showed quarterly year-over-year RevPAR growth. Our share performance was mixed. We saw slight overall decline in share performance for the quarter, mainly due to the impacts of the aforementioned ongoing renovations at our properties in Houston, Laurel and Atlanta. If not for that activity, we believe our overall share would have met or exceeded the market. With those notes, I will now turn over the call to our CFO, Tony Domalski.

[Tony Domalski:]

Thank you, Dave. Reviewing performance for the period ended September 30, 2015. Total revenue for the quarter was approximately $33.9 million, representing an increase of 6.9% over the same quarter a year ago. For the nine months ended September 30th, total revenue was approximately $101.8 million, representing an increase of 9.3% over the same period a year ago. For the quarter, adjusted EBITDA was approximately $6.4 million, representing a decrease of 5% over the same quarter a year ago. However, for the nine months ended September 30th, adjusted EBITDA was approximately $24.4 million, which is a 4.7% increase over the same period a year ago. For the quarter, adjusted FFO was approximately $1.8 million compared to adjusted FFO of approximately $3 million for the same quarter a year ago. For the nine months ended September 30th, adjusted FFO was approximately $11.8 million compared adjusted FFO of approximately $12.3 million for the same period a year ago. Please note that both our adjusted FFO and adjusted EBITDA exclude charges related to the early extinguishment of debt losses on derivative instruments the gain and value of our non-controlling interest in the joint venture and the Crowne Plaza Hollywood Beach Resort, acquisition costs, changes to our deferred portion of our income tax provision as well as other items. Please refer to our earnings release for additional detail. Looking at our balance sheet, as of September 30th, the total book value of our assets was approximately $395.2 million, which includes net investment in hotel properties approximately $354.9 million. The Company had total cash of approximately $21.8 million consisting of unrestricted cash and equivalents of approximately $15.5 million as well approximately $6.3 million, which was reserved for real estate taxes, capital improvements and certain other expenses. As of September 30th, the Company had approximately $321.7 million in outstanding debt at weighted average interest rate of 5.24%. As Dave said, with the Hollywood refinance and purchase of an interest rate cap for substantial portion of the balance on our Jacksonville mortgage essentially 90% of the company's debt carries fixed rate of interest. Total stockholder and unitholder equity increased to approximately $55.3 million at the end of the quarter, which stockholders equity was approximately $51 million and approximately$14.5 million shares outstanding. Unitholders' equity was approximately $4.3 million, with approximately 2.2 million limited partnership units outstanding. At the end of the third quarter, our interest-bearing debt was approximately $103,450 per room. Additionally, the ratio of debt to total asset value as defined in the indenture agreements to our senior unsecured notes was 55.4% based on the total asset value of approximately $581.3 million at the end of the quarter and total debt of approximately $321.7 million. Turning to guidance, we are updating our previous guidance for 2015, which accounts for current and expected performance within our portfolio. The impact of recently completed renovations in Jacksonville and Laurel as well as other items, for the year we are projecting total revenue in the range of $136.4 million to $139.1 million. At the mid-point of this range, this represents 12.1% increase over last year's total revenue. Hotel EBITDA is projected in the range of $37.1 million to $37.6 million, and at the mid-point of the range this represent a 16.4% increase over last year's hotel EBITDA and adjusted FFO is projected in the range of $15.4 million to $16 million or $1.4 to $1.8 per share. Additional details can be found in the outlook section of our earnings release. I will now turn the call over to Drew.

[Drew Sims:]

Thank you, Tony. As Dave described, the third quarter contained a high level of transactional activity for the Company in terms of capital markets acquisition and disposition and hotel repositioning efforts. While we were pleased with the results of these individual transactions and are confident they will reap benefits to our shareholders going forward, the unfortunate result was a negative impact to quarterly earnings. Transaction costs were significant, including legal fees, accounting opinions, investment banking fees and start up cost at our repositioned hotels. Most of this is behind us now. The acquisition of the remaining interest in our Hollywood hotel was also a negative for the quarter given the timing of the transaction. We increased our share count to make the acquisition at the end of the second quarter. However, we only owned the increased ownership interest for two months, August and September, which seasonally are the two lowest revenue months for the year for this hotel, therefore the acquisition was a drag on earnings for the third quarter. Another negative impact came as a result of real estate tax assessments in Georgia that were dramatically increased, we are refuting these assessments along with the rest of our fellow hoteliers and expect a reasonable outcome. However, we do have to account for the potential increases at this time. From an operational perspective, our combined portfolio's performance was significantly muted by the impact of our renovation activity, with 12,500 room nights out of service in the quarter and four of our 12 hotels under some stage of renovation, this represented the highest level of renovation activities we have seen as a Company since 2008. The impact was not solely caused by renovations as the industry as a whole experienced an exceptionally weak August, with the stock market sell-off in mid August transient business travelers seem to disappear overnight resulting in a very soft month. Our portfolio was down 7.5% in August. Fortunately, August proved to be an anomaly as September was strong with RevPAR up 6.7% for the portfolio. October was the best month in the Company's 58-year history and as many of our peers have report signs of weakness in the fourth quarter, we are seeing a very strong quarter materialize. We believe that next several quarters will provide exceptional growth for our shareholders. With Jacksonville Laurel now fully renovated and converted, we expect these assets to produce significant year-over-year growth going forward. I would like to note that the conversion of the Laurel to DoubleTree by Hilton, from the Holiday Inn marks our Company's exit from the mid0scale hotel business to something we been working towards for the past several years. We believe the Company will benefit greatly from all the hard work completed in the third quarter. We are poised outperform our markets and peers heading into next year. We look forward to reporting greatly improved operating results in the fourth quarter and thereafter. We will now open the call up for questions.

[Operator:]

Thank you. We will now begin the question and answer session. [Operator Instructions] The first question comes today from Carol Kemple with Hilliard Lyons. Please go ahead.

[Carol Kemple:]

Good morning.

[Drew Sims:]

Good morning Carol.

[Carol Kemple:]

Your G&A expense looked to be up quite a bit in the quarter. I am guessing some of that is transaction cost. Was there anything else one-time or should we back out that transaction cost and use that as a run rate going forward.

[Dave Folsom:]

Tony, I am going to defer that over to you.

[Tony Domalski:]

Carol, you can cut off that transaction cost, which was about $600,000 or so. We also had some one-time cost associated with the launch of the Sotherly brand in September, probably a $200,000 there, so I think you can take that out of the run rate there. You are asking about the G&A particularly right?

[Carol Kemple:]

Correct.

[Tony Domalski:]

That is what I reviewed.

[Carol Kemple:]

Okay. Then your food and beverage department sales looked to be down. Was that just purely based on occupancy or were you seeing less - in conferences and events in the quarter.

[Tony Domalski:]

Well, I would say Carol that in Houston in particular, we have seen a massive decrease in our food and beverage component, Chevron was is our biggest client in that market. While we are still seeing a good volume of business on the rooms' side, they have cut out completely their food and beverage component, so that was a major hit to food and beverage. Generally, I would say that the renovation activity had a negative effect certainly in Laurel the hotel was for the month of August and September appear to be closed that is how extensively the renovation appear to be, so we really hurt ourselves there. Then in the Jacksonville market as well we in July and August, we did the lobby renovations and the ballroom renovation, some of the ballrooms were shutdown for two months, so all these things are unfortunate, but necessary to improve the hotels on a go-forward basis.

[Carol Kemple:]

Okay. Then can talk about for, I know you are not giving 2016 guidance, but your expectations for occupancy and ADR next year?

[Drew Sims:]

Dave, can I defer to you on that one?

[Dave Folsom:]

I think we are going to announce those numbers a little bit later Carol. I think we got buyers this year that are going to be very attractive given what we have done at the hotels with our renovation activity, so I think on that basis we talk about 12,500 room nights out of inventory. Those room nights are going to be in inventory next year.

[Carol Kemple:]

Okay. Thank you.

[Operator:]

Next question is from Whitney Stevenson with JMP Securities.

[Whitney Stevenson:]

Hi, There. Good morning everyone. I was wondering, I appreciate the month-by-month detail that you gave on August and September, could you just talk a little bit more about some of the positive trends that you saw in October. That is it for me. Thank you.

[Dave Folsom:]

Sure. Well, October generally is a good month for us and obviously adding Hollywood to the portfolio is huge. It's going to be a big part of our overall performance on a go-forward basis. When we bought the hotel Hollywood, we had the activity in August and September, which are their absolute lowest performing months of the year. October starts to ramp up a little bit, so that certainly helped us from that perspective. When we look around the portfolio, last year we were in the final stages of renovating our hotel in Philadelphia, so we had similar issues that we saw in the quarter this year there and we obviously do not have that problem this year, so we had huge increases in that market. Wilmington, North Carolina had a huge month and certainly performed at a very, very high level, so when you look at some of our bigger box stores, October they just knocked it out of the park, so we have actually had just a great October, we are looking at November that is going to be considerably up over last year and we are pretty bullish even about December, so we have got some really bullish view here from this point forward and feel like when we report in February for the fourth quarter I think that everyone is going to be pleased with the results.

[Operator:]

The next question today comes from Daniel Donlan with Ladenburg Thalmann.

[Daniel Donlan:]

Thank you. Good morning.

[Andrew Sims:]

Hey, Dan.

[Daniel Donlan:]

Hey. Drew and Dave, Just kind of curious, you guys put together the guidance, obviously you knew that you are going to be renovating these assets, so I was just kind of curious if the displacement was greater than you anticipated or how much of the reduction in guidance is related to just general market weakness as well as Houston being weaker than expected relative to renovation disruption given that you knew that going in this year?

[Andrew Sims:]

Yes. I mean that is fair, Dan. We saw a real impact, increasing impact in Laurel that surprised us. The problem there was we had a delay as a result of getting approvals from Hilton back in January. Then we put our POs in for orders in the goods did not start showing up until April and May, so all of a sudden we were faced with - we have got to do a full-blown renovation to all the public space in about five months and we accomplished that, but to accomplish basically you have shut the hotel down, we had to tear down the [ph] issue in front of the building, we had to rebuild that. We had to redo the lobby and all the public space. The hotel looked like it was closed and it performed like it was almost closed, so that one was huge. Then on top of that, we were at the very impactful part of the Jacksonville renovation as well, where we had the shutdown all the meeting space, ballrooms and we try to plan for that, because quite frankly, in the Jacksonville market the slowest time of the years is August and September, so we thought we are going to bite the bullet let us do it then, so we kind of saved that until the end of the project. It takes where, our group business, because we do not have any facilities to accommodate the group segment. As far as Houston goes it is kind of an A plus B scenario there, Dan, because we have got all these rooms out of service. We had two floors out of services for the entire summer, so that we could expedite the renovations and trying to those renovations during the slow season in Houston, which is the summer time, yet the markets down as you all know, we underperformed the market and that is understandable given that we have got so many rooms out of service. I guess, we were a little surprised that how well the Houston market did and I know that sounds counterintuitive, but it did better than we thought, so the impact was greater than we thought. Because generally we would just take one floor out of service, but since we thought we are going to have a terrible summer, we figure we just go ahead and bite the bullet and get it all done real quickly, which is what we did, so it was a little more impactful than we thought. In terms of the overall market, I mean, August was just a whiff. I do not know what to tell you. It was very strange circumstances and it had something to do with the calendar, but we pretty much took it on the chain in every market. I do not really understand exactly why, but I am glad that it was just a one-time thing, because September was good and October was great, so and we think we will be back on track.

[Dave Folsom:]

Dan, let me add one thing is, when Tony mentioned the tax assessments and how that relates to our guidance, those are not just a few thousand dollars. Those are very meaningful and impactful to the guidance that we have issued. For instance, in Savanna at the Hilton, of the assessment came back and our taxes tripled from $300,000 to $900,000. That is a material impact to the Company, which we are going to take action to address that with the city and the country and to a lesser extent we had probably $200,000 plus or minus in Atlanta in reassessment cost. It was just our hotel. The entire hotel community in Savanna was reassessed and it was dramatic, so when you look at the guidance we are issuing, the accounting rules force us to recognize this implies tax liability that we now face. I do not think we are going to pay those taxes, because we are going to get them reduced on appeal and either that in the court along with the rest of the hotels in the market, but we do not get to do that until we actually win the day in court or upon appeal, so it is now as insignificant amount of money. It is a lot.

[Daniel Donlan:]

No. I was just looking at the hotel EBITDA and it is not down anymore than anybody else's in the hotel REIT space, so I was just kind of curious it sounded to me basically what you said you guys had to squeeze on some of the time constraints relative to the renovations, so I was just trying to better understand that?

[Andrew Sims:]

Yes. At the end of the day, Dan, I think it is better that we just go ahead and get it done and get it behind us, which we have and then up brand on these two hotels and going from IHG brands to Hilton brands is going to be huge for us.

[Daniel Donlan:]

I would agree. As we look forward to '16, on maybe some capital improvements just kind of curious what your thoughts are there. I am just looking at the three months and nine months ended results for the Hilton Wilmington and know it is down from where it was in '13, so just kind of curious if you are planning a refresh there in order to kind of bring the property more updated I was just curious on capital improvement for '16?

[Andrew Sims:]

Well, on the capital front, obviously our license terms dictate when we do major renovations. We are always doing routine CapEx and generally that is $3 million a year plus or minus. Tony jump in here and help me if I am way off on that.

[Tony Domalski:]

It is close to $5 million for the recurring CapEx.

[Andrew Sims:]

Yes since we took Holiday Inn and we have got some

[Tony Domalski:]

Okay, so somewhere in the $5 million range, but then this year we are going to spend upwards of $15 million or $16 million on our product that we that would normally do that and next year that number is probably going to be a third of that, because we will be starting renovations in Savanna and we will be finishing up our renovations in Atlanta and that is basically it for the next year, so it is going to be pretty light next year in terms of what our capital commitments are, our needs are.

[Daniel Donlan:]

Okay. That is helpful. As far as your debt maturities go, I think you took care of Jacksonville obviously, but you it looks to be two mortgages coming due next year I do not know if you can extend those out, on the Crown Plaza Houston and then if you have got a couple more coming due in '17, so we are just kind of curious how you plan to tackle that some of this stuff is not repayable some of it is. We are just kind of curious what your plans were there to get it done ahead of time or how you are looking at that those maturities?

[Tony Domalski:]

Yes. I think on our long-term hold [ph] properties, we obviously want to lock-in long-term rates as soon as we can and I think we will be working towards that end. On the properties that are not it is going to be long-term halt for us and I think - those are those properties will probably be marketed sometime between now and in that time if the market is receptive to that. I think generally our plan is to walk in fixed-rate debt for 5 years to 10 years on the properties that we are very bullish on and I think that Atlanta for instance a share we locked into a 10 year loan. Hollywood obviously is a long-term home for us we locked into a 10 year loan and Jacksonville recently we got added a new five year [ph] so that is the plan. The ones that are maturing our hope for the most part of this smaller loans that, we have in a loan portfolio.

[Daniel Donlan:]

Okay. That is it for me. Thank you.

[Andrew Sims:]

Yes. Thanks.

[Operator:]

Our next question comes from Scott Williams with Palogic Capital. Please go ahead.

[Scott Williams:]

Good morning, Drew.

[Drew Sims:]

Good morning, Scott.

[Scott Williams:]

That the high-level review of ours just kind of quick take of the Fort Lauderdale property suggests there is considerable upside of the current performances, you have got institutional ownership the western [ph] map it is committing big dollars as you got the significant potential development adjacent to you, significant renovations going on at Fort Lauderdale airport, how do you view as you work toward the flag rule, Drew, how do you anticipate positioning the property to succeed and how you think about supply like the Margaretville property in Miami product and online?

[Drew Sims:]

Sure. I think our Hollywood is a separate market than Miami, so a lot of that product in Miami does not seem to affect us too often much. The Margaretville property a very unique product it is targeted at a very unique customer it is the corporate heads folks, so it is kind of a blue-collar twisted to it and it seems to be 100% leisure travel. We really are not anticipating doing any group business, say or are very, very little group business and the location of that is somewhat remote to our hotel although I will say it seem to be on the initial launch have lower the rate considerably which is a little bit of a concern for us on the transient side. We have a great working relationship with the diplomat, so we do considerable amount of the business with them and on an overflow basis or we are one segment below, so they do not feel threatened by us and they feel good about sending us business, so over time we have developed just an excellent relationship with them. In terms of future branding, we really have not made a decision on that yet, Scott. We are looking at a couple of alternatives. Obviously, we like Hilton and we made that note and so we are looking at that alternative. We are in discussions with the hotel to be built next to us, which is a condo hotels so there may be some opportunities there for the Company, which we are looking at and we are not in a position to really divulge anything on that at this point, but those are all things we are working on.

[Scott Williams:]

Okay. The question was asked earlier about the debt maturities, but did you get closer to those it seemingly Savanna Wilmington Louisville would have the opportunity to take out some equity on a secured basis. As you get closer, I mean, you have the ability to prepay the 8% bonds just quarterly how should we think about how you want to design overall leverage and how you want the balance sheet to be restructured?

[Drew Sims:]

Sure. Next year, we have the opportunity to take up those 8%, the first bond issuance and that is something we are going to looking at and would like to figure out a way to do that. Clearly, we are not going to issue any common stock to do that with the levels pricing on our stock today, so we are going to have to scratch our heads and work on that a little bit, but you are right I mean Savanna and Wilmington, we had long-term life company loans on those hotels. We are actually in discussions with them now about our a blend and extend as an option, whether or not we take that option depends on how well the negotiations go, but yes there is considerable equity available there. We will need to refreshes those hotels, but we have got to put pencil to the paper and figure out what our lender how much they will increase our loan at this point and that is kind of what we are working on. That is probably our first quarter project for us for the first half of next year, so that is on our to-do list for the first half of next year's for Savanna and Wilmington.

[Scott Williams:]

Okay. Then last one for me. In every discussion that we tend to have from time-to-time, you have moved back to pretty wide discount. Is there a point where you and the Board would for some period of time would go in another direction whether it would be stock buybacks, asset sales or just some form of commitment to slow the acquisition growth until the cost of capital moves something closer to fair?

[Drew Sims:]

Yes. I mean Scott, I think you have seen over the last 11 years, 12 years as a public company, we have raised capital once right, so we had an asset base at the IPO. It was worth about $200 million. Our asset base now is $600 million more or less and we have grown the Company without diluting the shareholder base. Being one of the largest shareholders, I certainly do not want to loot myself and I think that strategy is going to continue into the future. We are not going to be serial raisers of equity unless of course we find a great acquisition that is accretive for everybody and it makes a whole lot of sense and then we might do that. I think we can allay your fears that we are not going to just raise a bunch of equity, we have got our options and I think one of the things we talked about in the past is recycling hotels, which is going to be again one of the either high priority items on our list for next year is to start selling some of our non-core assets and then trading in the markets that we want to be in and the hard part of that in the last couple of years has been that the market has been so heated up that it is really hard to find an acquisition that is going to be accretive for the shareholders and I think that things slowing down a little bit might be helpful quite frankly, so we believe we did not get out of our hotels that are non-core and get into core markets and that is going to be our mission for next year.

[Scott Williams:]

Okay. Thank you for your time.

[Drew Sims:]

Thanks.

[Operator:]

The next question is from Bob Evans with Pennington Capital. Please go ahead.

[Bob Evans:]

Good morning. Thanks for taking my questions.

[Drew Sims:]

Good morning.

[Bob Evans:]

You have touched on this a little bit. I know you cannot give guidance per se, but can you talk a little bit more about the larger puts and takes that would drive EBITDA growth next year?

[Drew Sims:]

Dave, can I hand that all off to you I think about...

[Dave Folsom:]

Yes. Bob, can you just repeat that, I missed part of that.

[Bob Evans:]

Sure. As we look into 2016 just looking at the kind of the more significant items that my drive your EBITDA growth for next year?

[Dave Folsom:]

Yes. Well, I think the renovation projects are going to be very, very accretive. You are going to see substantial EBITDA growth in Jacksonville and in Laurel and we are seeing that already at these hotels, a very substantial not linear growth, but the geometric growth, substantial increases. Based on the new franchises that are on the hotel and also the fact that the comparables year-over-year are going to be quite easy, because of the impact of the renovations, so we should see outsized growth there in Atlanta. Atlanta is a big hotel for us. It is 356-rooms, but these are very large rooms. It acts more like a 700-room hotel, because the size and room types we have there. We went backwards a little bit on occupancy this year, but I think we are going to address that through the completion of the rooms' renovation this spring. Frankly, in Houston, I think another EBITDA driver relative to where the market is now if the market continues to deteriorate in Houston, the pie get smaller. We just want a bigger piece of the share pie of Houston and we think we can do that when we exit the Crowne franchise and the Crowne franchise is frankly not very strong in that market nor is it strong in many of our markets and that is why we are exiting that brand and I think what we should find is some share capture and we get rid of that low rated ADR cap we have that comes with that flag. I think bits and pieces of our EBITDA growth are going to be obviously centered on some of the hard work that frankly has impacted our earnings today. Then lastly on Hollywood, we get the full-year benefit next year of that hotel. As Drew mentioned, we raised equity then we waited a month to buy that hotel and then this quarter that we are reporting on represents only two months of ownership of that hotel, which were the two worse month of the year and that is a very, very strong market right now even with the new supply. Our relationship with the diplomat is good, so we will get a full year's worth of the growth out of the Hollywood assets, so I think the year-over-year numbers like you said we cannot telegraph any earnings right now, but we are very bullish as Drew said on the coming year.

[Bob Evans:]

Okay. Dave, when our earnings in our projections for next year, when are we going publish those stock…

[Drew Sims:]

Probably towards at the end of this quarter.

[Bob Evans:]

Okay. All right.

[Drew Sims:]

Few weeks from now.

[Bob Evans:]

Okay. Can I also ask, I assume you agree either stock is the value and especially given the increase in the asset value that you have created over recently as well as the decline. Any thought of I know you have decent insider ownership, but adding to that and kind of sending a signal to the market about the value of the Company?

[Tony Domalski:]

I do not know if that is something we can discuss openly here, but yes I mean we are always looking at opportunities to buy, so I would not put that out of the - possibilities here.

[Bob Evans:]

Okay. I guess as a shareholder we would certainly encourage Management and the Board send that signal from a insider buying standpoint.

[Drew Sims:]

Understood, I am the largest shareholder, so this is very impactful to me every time we report earnings, so it is near and dear to my hear. We will make sure that we take that advice to heart.

[Bob Evans:]

Thank you.

[Operator:]

[Operator Instructions] The next question comes from Mark Tromba [ph], a Private Investor. Please go ahead.

[Mark Tromba:]

Hi, guys. I am definitely encouraged by your outlook for next year. Could you talk a little bit about the dividend and possible, David I know you held the dividend steady this quarter, but do you think you will be able to increase the dividend next year?

[Dave Folsom:]

Yes. Thanks for joining us this morning. Our philosophy on that has been to have a consistent and rising dividend and I think that if you looked at back in our history, we have raised the dividend three out of four over the last quarter's over I think the last three-and-a-half to four years, so I think you can expect the same kind of growth from the dividend that we had this year next year.

[Mark Tromba:]

Okay. Great. That is encouraging. Thank you, guys.

[Dave Folsom:]

Okay.

[Operator:]

This concludes our question-and-session. I would like to turn the conference back over to Management for any closing remarks.

[Scott Kucinski:]

Thank you all for joining us and we look forward to reporting much improved results for the fourth quarter in February. Thank you all. Bye.

[Operator:]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.