American Hotel Income Properties REIT LP (HOTUN) Earnings Call Transcript & Summary

Good afternoon. Welcome to the American Hotel Income Properties REIT LP's Q2 2020 Analyst Call. [Operator Instructions] At this time, I'll turn the call over to Jamie Kokoska, Director of Investor Relations. You may now begin your call, ma'am.

Thank you, Jake, and thank you, everyone, for joining us for our second quarter 2020 results conference call. Discussing AHIP's performance today are John O'Neill, Chief Executive Officer; Bruce Pittet, Chief Operating Officer; and Azim Lalani, Chief Financial Officer. The following discussion will include forward-looking statements as required by securities regulators in Canada. Comments that are not a statement of fact, including projections of future earnings, revenue, income and FFO are considered forward-looking and involve risks and uncertainties. The risks and uncertainties that could cause our actual financial operating results to differ significantly from our forward-looking statements are detailed in our MD&A for the 3 and 6 months ended June 30, 2020, and our other Canadian securities filings available on SEDAR and our website at ahipreit.com. AHIP does not undertake to update or revise any forward-looking statements to reflect new events or circumstances, except as required by law. Listeners are urged to review the full discussion of risk factors on AHIP's annual information form dated March 24, 2020, which has been filed on SEDAR at www.sedar.com. Our second quarter results are made available earlier today. We encourage you to review our earnings release, MD&A and financial statements, which are available on our website as well as SEDAR. On this call, we will discuss certain non-IFRS financial measures, including NOI, FFO and AFFO. For the identification of these non-IFRS financial measures, the most directly comparable IFRS financial measure and a reconciliation between the 2, please see our MD&A. All figures discussed on today's call are in U.S. dollars, unless otherwise indicated. I would like to remind everyone that this call is being recorded today, August 7, 2020. A replay of this call will be available on our website. John will begin today's call with an update regarding recent initiatives and portfolio strategy, Bruce will provide a brief update on hotel operations, and Azim will review our financial results. I'll now turn the call over to John O'Neill, CEO.

The second quarter was certainly the most challenging period for the hotel industry in history. We at AHIP, continued to put the health and safety of our hotel employees and guests at the forefront of all of our decisions, and we'll continue to do so as we navigate this new operating environment. While our financial results reflect the negative impact of COVID-19, we are pleased to see that our portfolio is performing better than our U.S. hotel REIT peers and our occupancy recovery is well underway. In fact, for the month of July, we recorded 55.3% average occupancy. This, combined with our strong cost-cutting measures, has allowed us to achieve our first cash flow positive month since the worst of COVID-19 impacts were seen in April. We are very pleased to no longer be in a cash burn operating situation, given our much improved occupancy and business performance the last several weeks. This is unique among hotel REITs, most of whom are still burning through cash and demonstrates the strength and resilience of our select-service hotel portfolio with hotels strategically located in secondary U.S. markets. As well, for the second quarter, STR metrics indicate our RevPAR was impacted less by the downturn than the U.S. hotel REIT average, and our market share has grown during the past 3 months. I'll quickly highlight what we experienced during the second quarter, and then we'll provide a more detailed update on what we've seen in the last few weeks as that may provide a more meaningful outlook for our business. In April, we saw the most negative impact from COVID-19 measures when average hotel occupancy bottomed out at 21.8%. We took decisive measures to cut costs wherever possible, and made the decision to temporarily close or consolidate 22 of our hotel properties. By May, we saw occupancy improved to 33.3% and reopened all of our properties by early June as business levels warranted. In June, occupancy improved to 49% with all 79 of our hotels open and accepting guests. With these improved revenues and margins, AHIP was able to achieve a positive EBITDA for our hotels in May and June. Within this environment, our second quarter average daily rate declined only 4.3% from last year due in part to the higher quality hotels we now have in our portfolio. But also with a very diligent approach by our hotel manager in marketing our properties to large government and essential service groups. In total, our Q2 RevPAR declined 57.6% from the same quarter last year, better than the 69.9% decline STR had reported for the entire U.S. hotel sector. And far better than the 88% average decrease that our 12 U.S. hotel REIT peers experienced. As we discussed on our last earnings call, we took decisive actions to significantly reduce our costs and preserve liquidity during the second quarter, which ultimately decreased our monthly cash flow by approximately 14 -- cash outflow, pardon me, by approximately $14 million through reduced hotel and corporate staffing levels, corporate salary reductions, deferred capital expenditures, suspended FF&E reserve contributions and suspending our monthly cash distributions, amongst other things. Collectively, these efforts saved approximately $42 million of cash expenses during the second quarter, and have positioned us well today to maintain liquidity and generate positive cash flow. As our occupancy levels have improved, we have increased staffing levels at our properties to appropriately cater to improving business levels. However, hotel staffing levels at the end of June still remained at just 44% of pre-pandemic staffing levels. We have also had many discussions with our lending syndicate over the last few months to waive our financial covenants through the first quarter of 2021 and modified covenants through the remaining quarters to the end of 2021. We're pleased to say these agreements are now in place with the added flexibility to our covenants and have increased revolver capacity. Turning to more recent performance and what we saw in July. Weekly occupancy growth has continued over the last several weeks with the pace of growth starting to moderate compared to what we saw in May and June. It's important to note that we continue to see improving business levels across our portfolio, including in states with high rates of COVID-19. All 79 of our hotels remain open with an ongoing mix of government, essential service and leisure travelers safely staying in our hotels. Our hotel occupancy has continued to improve with average hotel occupancy in July of 55.3%. And our 24 extended stay properties achieving average occupancy of 64.6%. More importantly, July also marked the first month of positive cash flow for us since March. Our hotel performance is rebounding and has turned a corner towards profitable operations just 3 months after the worst of COVID-19's impact on our sector. While it's still early in the recovery, we have achieved this milestone earlier than many other hotel REITs, which positions us very well as we further grow our liquidity and capture market share. And with that update on our recent initiatives, I'll now turn the call over to Bruce to discuss second quarter hotel operations in more detail. Azim will then discuss our second quarter and financial metrics. Bruce?

Thank you, John, and good morning, everyone. This past quarter has been an incredibly difficult time for our industry and for our hotels. We are thankful for all the hard work and the quick and definitive actions our hotel manager, Aimbridge, undertook to safeguard our hotel employees, guests and our hotel assets. Q2 provided a very complex operating environment, and our focus was on operating hotels as safely and efficiently as possible. The unprecedented loss of demand required unwavering focus on mitigating the cost of operating the hotels while adapting quickly to a new operating environment. Between March 21 and April 10, we made the decision to temporarily close 6 hotels, including 4 embassy suites and consolidate 16 hotels into other neighboring AHIP properties. Although the impacted properties still have on-site staff presence 24 hours a day, these actions allowed us to quickly reduce our operating footprint and expenses. Our 57 hotels that remain fully open during all of Q2 have been operating on a skeleton staff, especially through April and May. In Q2, we saw 2 major demand drivers in our hotels. Early in the quarter, we began to see essential service business: medical, traveling nurses, government and logistical group demand. Closer to Memorial Day, we saw a strong uptick of the leisure segment. As demand improved, we were able to reopen all of our hotels by mid-June and 3 of our closed embassies by the end of May. Since the low -- since the occupancy low watermark around the week of April 6, we saw week-over-week occupancy improvement through the remainder of the quarter. Total occupancy for the second quarter averaged 34.7% with June's occupancy at 49%. In the second quarter, our best-performing market was Tennessee, where our 2 properties there recorded average occupancy of 73.3% driven by restoration, recovery and insurance group demand due to tornadic storms in early April. Other regions also demonstrated strong resilience and occupancy demand. Our hotel in Kansas achieved 72.8% occupancy. Our 4 new properties in West Texas, Midland and San Angelo achieved 58% occupancy, and our 6 properties in New Jersey achieved 54.7% occupancy during the quarter. Our 5 Embassy Suite hotels, which are generally located in larger secondary markets and have exposure to meetings and conference business segments were the most challenged properties in our portfolio, with 4 of these hotels closed to guests for approximately 7 to 9 weeks during the quarter. As with the broad industry, AHIP's 24 extended stay properties were the best-performing segment within our portfolio, averaging 54.1% occupancy during the second quarter with an average rate of $106.05. Our 10 Residence Inn by Marriott Hotels led the performance within this segment with an aggregate occupancy of just under 66%. In fact, our 24 extended stay properties accounted for 49% of the revenue we generated in the second quarter. Average daily rates across our 79 hotels only -- declined only 4.3% during the second quarter relative to the same period last year to $95.13, helped in part by having a higher quality hotels in our portfolio this quarter. On a same-store basis, AHIP's original 67 Premium Branded Hotels saw ADR declined 20.3% to $92.47. Our 12 hotels acquired in December 2019 have proven to be some of the best-performing assets in our portfolio. 8 of the 12 hotels are extended stay properties, which as mentioned, has been the strongest performing segment. From an occupancy and rate perspective, these 12 hotels outperformed the rest of our portfolio, running 45.3% occupancy in Q2 at $108.31 ADR. RevPAR index for these properties during the quarter was an impressive 168 with 100 representing fair market share. As John previously mentioned, RevPAR for the second quarter declined 57.6% compared to the same period last year. When we compare the performance of the 79 hotels in the second quarter to the same period last year, RevPAR declined 61.6%. In both instances, a significantly better result than what other hotel owners have recently reported and the 69.9% decline STR is reporting for the entire U.S. hotel sector. Our Q2 STR performance demonstrates the relative strength of our portfolio and how we are better positioned than most to withstand this downturn with a portfolio of select-service, drive-to hotels in secondary markets and with the benefit of 30% of our portfolio in the extended stay segment. The STR RevPAR index, which compares RevPAR performance of our hotels with their identified direct competitive set, indicates AHIP's 79 branded hotels significantly outperformed their direct competition with an average index rating of 136 during the quarter, up from 118 in the same quarter last year. Operationally, our hotel manager has been diligent in adjusting to state, local and brand health and safety requirements and recommendations to ensure the well-being of hotel employees and guests. In March, all of our food and beverage outlets and breakfast rooms closed to ensure sufficient social distancing and to meet COVID-19 health and safety protocols. As a result, food and beverage revenues for the second quarter were suppressed and will remain challenged throughout 2020. Our hotel manager and brand partners have made every effort to ensure the health and safety of our hotel guests and employees. Not only have social distancing protocol has been put in place, operations in our hotels have changed significantly. Housekeeping has not been provided on a daily basis for occupied rooms and less requested and complementary services have been significantly altered. Cleaning processes have been updated with more frequent cleaning of high-touch public areas, procedures to ensure physical distancing and most recently, a requirement for all staff and guests where masks when inside public and shared spaces of the hotels. We believe these protocols will stay in place for the remainder of 2020 and anticipate the operating model of our hotels will look different going forward compared to historic norms. In March and April, we took quick action to reduce operating expenses wherever possible, including a dramatic reduction of our staffing model, which include -- which had reduced headcount by as much as 70%. As hotels have reopened and occupancy has improved, our staffing levels have been cautiously adjusted to meet the needs of growing business levels. Today, our hotel staffing levels are approximately 49% of pre-pandemic levels. We have also limited our maintenance CapEx programs to only emergency requests primarily asset integrity and life safety items. We have deferred all previously planned hotel renovations for 2020 into future years as agreed to by our brand partners. Both of these decisions were made as part of our cash preservation and liquidity strategy. With the growth of the leisure segment, we have seen a shift of peak occupancy in our hotels from midweek to weekends. We're also seeing shorter booking windows with the vast majority of our rooms now being reserved within 3 days of guest check-in, excluding our extended stay hotels. Lastly, I would like to thank our hotel manager and their property level teams for all their hard work and efforts adapting quickly to this new operating environment through these evolving and unprecedented times in our industry. And with that update on our hotel operations, I'll now turn the call to Azim to discuss financial and capital metrics. Azim?

Thank you, Bruce. Good morning, everyone. While ADR declined only 4.3% compared to the second quarter last year, COVID-related occupancy declines led to an overall RevPAR decline of 57.6%. This, coupled with lower food and beverage revenues, resulted in a 69.7% decline in total revenues to $27.3 million. Despite the significantly lower revenues, AHIP was able to generate positive NOI during the quarter. NOI declined to $4.3 million, and NOI margins declined to 15.8%. The loss and comprehensive loss for the second quarter was $20.8 million compared to net income of $5.8 million in the second quarter last year. Contributing to the reported loss this quarter was lower operating income and approximately $3.7 million of noncash impairment charges related to 3 hotels. Diluted loss per unit for the quarter was $0.26 compared to diluted income per unit of $0.07 last year. Diluted FFO per unit was negative $0.12, down from $0.23 last year, and diluted AFFO per unit was negative $0.11, down from $0.21. It is important to note that our portfolio has changed quite significantly during the past 12 months, with the sale of 45 economy lodging properties and the acquisition of 12 Premium Branded Hotels at the end of last year. As a result, our same-property results represent the 67 hotels owned continuously since January 1, 2019. For the quarter, same-property revenues declined 68.9% to $22.3 million, and same-property net operating income was $2.8 million, down from $26.6 million in the second quarter last year, reflecting the impacts of COVID-19. For the first 6 months of 2020, total revenue declined 47.7% to $89.1 million due to occupancy declines beginning in mid-March when the pandemic began impacting the U.S. hotel market. ADR during this period actually improved 8.9% compared to the same period of 2019 as a result of our capital recycling activities and the higher quality hotels in our portfolio today. RevPAR for the first 6 months declined 30% to $51.87. Despite the significant revenue declines, net operating income for the first 6 months was positive at $22.2 million with NOI margins declining 9.2 percentage points to 24.9%. The loss and comprehensive loss for the first 6 months of 2020 was $33.4 million, including $5.5 million of noncash impairment charges on 4 hotels since January. FFO for the first 6 months of 2020 was negative $4.4 million or negative $0.06 per unit, and AFFO was negative $5.1 million, also negative $0.06 per unit. Turning to capital and liquidity metrics. As of June 30, AHIP had unrestricted cash balances of $27.1 million, restricted cash balances of $28.8 million and available revolver capacity of approximately $11.4 million. I wanted to highlight some of the liquidity-enhancing initiatives undertaken during the quarter. We completed an amendment to our credit facility agreement, where we negotiated covenant waivers through the first quarter of 2021 and modified waivers through December 2021. At the same time, we increased our available capacity on our revolver by $11 million. We are appreciative of our relationship with our lending syndicate to help us manage through this challenging period. We also completed negotiations with our CMBS loan servicers that allowed us to utilize restricted cash reserves to fund debt service for the next 90 days as well as a deferral on funding FF&E reserves for 90 days. So far, we have signed agreements addressing 12 out of our 20 CMBS loans, which represents about $400 million of our total CMBS loans. We expect to sign agreements on similar terms on the remaining $180 million of CMBS loans in the coming weeks. The total immediate cash benefit of these negotiations is approximately $9.4 million. During the second quarter, we also received approximately $9.9 million of U.S. government-guaranteed loans under the CARES Act to offset the COVID-related impacts to the hotel business. These loans can be forgiven if utilized in a prescribed manner for specific expenses. And we will be working with our hotel manager to maximize the amounts forgiven in the coming weeks. At the end of June, we had a weighted average remaining term on our total debt of 5 years and a weighted average interest rate of 4.54%. We don't have any immediate debt maturities with our first loans maturing in June 2022. We are also current on all of our debt service payments, and we're compliant with all of our lending agreements for the quarter ended June 30, 2020. As we mentioned on our last call, we expect it to reach cash flow breakeven after debt service once we hit a sustained 50% occupancy level. With July's occupancy reaching 55.3%, we have achieved positive cash flows for the month and plan to apply any positive cash flow generation over the next several months towards paying down debt and further enhancing our liquidity. We believe this is a prudent and conservative approach given the ongoing pandemic and economic environment. In July, we entered into agreement to sell our Wingate Tampa hotel for gross proceeds of $7.5 million. We expect the transaction to close by the end of this month. All net proceeds from the sale of this property will be used to pay down our revolver. The transaction allowed us to monetize on a noncore asset with a very large potential PIP with limited upside. With that financial discussion, I'll turn the call back to John for some closing remarks. John?

Great. Thank you, Azim. Like all hotel owners, AHIP felt the worldwide negative impacts from COVID-19 during the second quarter in what was the worst drop in overall hotel occupancy across the sector in history. As we are now almost halfway through the third quarter, our select service, premium branded hotel portfolio continues to demonstrate outperformance compared to most of our direct competitive set. Our market-leading RevPAR numbers, which were more resilient than other U.S. hotel REITS, combined with our strong cost-cutting measures have enabled AHIP to turn cash flow positive just 3 months after the worst of COVID-19's impact on the sector and the global economy. We're exceptionally proud of this given most other U.S. hotel REITs are still operating with negative cash flow and talking about cash burn rates. We have $27 million of unrestricted cash and are current on all of our debt obligations. All of our mortgages are current and in good standing. We are now looking ahead, and we're well positioned during this recovery. Should these trends continue for us, we will soon be focusing on growth opportunities, profitability and sustainability rather than just liquidity. Our strong portfolio of select-service hotels in strategic secondary markets has proven to be resilient and less impacted by these unprecedented times and events. And we will be recognized by investors as we return to a normalized market valuation. Our portfolio is well positioned with 83% of our guestrooms in the upper and upper mid-scale chain scales, and 30% of our hotels being extended stay properties, which continues to be the best-performing segment of the hotel sector in these circumstances. I would like to thank our hotel manager, all hotel staff, our lending partners and fellow unitholders for their continued support and patience over these last several months. We are committed to doing everything we can to ensure we emerge with a stronger market position when more normal economic conditions return. We will also continue to do everything we can to properly protect the health and safety of our hotel employees and guests in these circumstances. So with that overview of our second quarter and recent initiatives, we'll now open the call to questions from analysts. Operator?

[Operator Instructions] We have a question from Lorne Kalmar with TD Securities.

Congrats on occupancy starting to trend up. It looks like things are moving the right way. And just staying on that line of thought. I know it's, I guess, only the first week, but how was the August occupancy in the first week?

Bruce?

Yes. So just over the first 5 days of the month, Lorne, I don't have last night's report yet. We're about 57% occupancy portfolio-wide.

Okay. So still kind of trending in the right direction. And I know you guys kind of mentioned that you haven't seen a big impact from -- in areas where there's really been a surge in cases of the coronavirus cases, is that sort of the outlook you guys have for the quarter? Do you think things will even sort of stabilizing and they should continue to trend upwards?

Yes, Lorne, if I could...

Yes. Go ahead, Bruce.

Sorry, John. I was just going to say, it would appear as if things will continue to trend in that way. Obviously, things change very quickly in today's environment. But we haven't seen impacts in markets where there's been maybe more focus on the virus. So I don't believe going forward, we'll see any additional impacts to any great extent.

Okay. And then just sort of following on that, I guess, have you guys seen positive trends in the reservations still going forward?

Bruce?

Yes. Lorne, it's one of the interesting things that's really happened over the last 3 or 4 months. Our booking window is incredibly close into guest arrival. So it's very difficult for us to get any sort of real horizon. For our select-service hotels, the booking window is 0 to 3 days prior to arrival. For our extended stay hotels, it's more like 5 to 7 days. And really, with the lack of group and conference business, right, which is typically business that books fairly far out, we don't have great visibility on the horizon today. So our operator, our manager, has to react quite quickly to changes in business demand.

Right. Not making anything easy on you guys. And then are -- I know you guys have mentioned sort of the large groups, the governments and health care workers had buoyed occupancy a bit through the worst of things. Is there still an appetite? Is there more of those reservations coming in? Or is it mostly growth in leisure travelers that's driving the occupancy gains?

John, if I could, I'll take this as well. Certainly, we've seen leisure grow since just before Memorial Day, but we continue to see demand from these essential service type group requests. So that hasn't really waned much. It's -- it moves around a little bit. But from a portfolio perspective, we see -- we continue to see the demand. And there's nothing that suggests we won't continue to see this sort of essential service work demand going forward.

And then just one last one on this. Do you guys have an idea of sort of what percentage of the occupancy is made up of the groups versus leisure?

I don't know that off the top of my head. We can do a little homework and talk to our manager about that.

Sure. Yes, I just wonder I figured about if kind of things do get bad again, that would sort of provide maybe a nice floor for you guys. And then just one last one, maybe for John. Any plans on -- or what's your thoughts on reintroducing the distribution?

Well, that's a good question. And I think really, in consultation with our Board, once our business returns, business levels return to a sustainable level, we'll clearly revisit our reintroducing our distribution policy, absolutely would love to be doing that. Really, at this point in time, the pandemic still underway and business levels still moderated to some degree, of course. We believe paying down our debt, further enhancing our liquidity right now is the right course of action. So I think the short answer is when our business levels return to a more sustainable level in consultation with our Board, then clearly, it's our hope and intent to reintroduce a distribution but it will take a little time, and we're watching the market very closely.

Our next question comes from Troy MacLean with BMO.

Just firstly, on the -- for the hotels in Florida, wondering what happened to hotel demand as the number of COVID cases increased. I'm just trying to understand, if we do have a second wave, what you think the impact is on demand for the hotels in your market?

Florida is a very interesting state, and we have 13 hotels there. But the business has remained consistent and growing, but maybe Bruce can talk a little bit about the recent trends there as well.

Yes. Troy, it's quite interesting. As you read in the media, maybe about increased cases and movement of COVID, it is not having any impact on the occupancy of the hotels, meaning we don't see any sort of substantial drop in our occupancies and haven't in those 13 hotels over the last 60 days. And the same can be said of Texas, right? I mentioned in my comments that, in fact, a couple of our Texas markets in West Texas, have been some of our strongest performers over the last in Q2 and which has continued into Q3. So there isn't -- there doesn't appear to be a direct correlation of the virus firing up in any specific location and impacting hotel occupancies.

I'll add that April, May and June, certainly created a lot of pent-up demand with the traveler. And we're seeing travel within states that is, as we said, kind of almost regardless if there's an increase in the cases in that state. Or in some cases, even if there's some beaches closed or whatever, we're still seeing some increases, there's a -- the pent-up demand especially in the drive market, which our hotels clearly cater to. So we're pleased about that. But it is an interesting trend that we're noticing. That's for sure.

The Tampa Wingate, it looks like it's being sold at about $87,000 a door. Just -- do you think that's a good way of looking at value -- floor valuation of a hotel in this market?

That hotel is an older hotel. It's John. An older hotel, also essentially unrenovated. That is actually one of the reasons that we were looking to sell that property, which we actually commenced the sale process and the negotiations with the buyer before the pandemic hit. So it was a preplanned disposition. Not only to -- it is our last Wyndham flagged hotel. It allows us to concentrate more on our Marriott, Hilton and IHG focused branded properties. But it's also facing a rather large renovation. And so for all of those reasons, we've got a good price, improve some -- frees up some liquidity. But given the age and I'd say, the condition of the property, the $87,000 is certainly at the bottom end of a price per room. You certainly, from our point of view, that's approximately what our cost base was on the hotel we purchased 3, 4 years ago. So it was a good sale for us. But I don't think that $87,000 a room, certainly throughout our portfolio, is indicative of the value of our whole portfolio, which is substantially younger and newer and substantially more renovated. So long answer to...

Do you have any color on how much -- how big the PIP program would have been for that hotel if you had kept it?

Yes. About USD 2.5 million and due this year to do it.

So do you think -- I mean, this is such a severe decline in the hotel market. Do you think there's going to be any hotel, any of your competitors closing, permanently closing any hotels in your market and try to -- will there be a decline in supply in hotels over the next couple of years because of what's happened? I'm wondering what you're seeing on the ground.

Couple of things. I think the larger publicly traded U.S. hotel REITs and public hotel companies, by and large, will not be closing hotels. But we will see some modest closures throughout the country with more independent hotel owner operators who maybe are over-levered and unable to withstand, I guess, this market downturn. And some of them are just permanently closing and getting bulldoze. They're repurposing into different uses, residential, seniors housing, et cetera. So we're seeing a little bit of that. So -- but we are overall expecting some rooms essentially out of inventory, somewhat held out of our comps in the years going forward. But there is still now a more modest new construction pipeline of new properties, essentially, properties that were planned and have started before the pandemic hit that will open into 2021. But clearly, the smallest new supply levels of properties that we've seen in many, many years. So from our point of view, that bodes well. Less competition in the market when the markets do return to a more stabilized nature. So our large competitors will not likely be closing properties, but small independent properties around the country, that is happening and will continue to happen. So that's helpful. There was a slight oversupply and better for us with newer renovated properties and a little less competition.

Overall, you were cash flow positive in July. Just wondering, was there any hotels or markets that were still cash flow negative?

Well, the -- and I'll have Azim jump in in a minute, but at the hotel level, for the -- for all 79 properties at the hotel level, we were actually -- yes, cash flow positive, NOI positive in the entire quarter and in May and June, specifically. Adding in corporate expenses, of course, overall, we sort of need to be at about 50% occupancy at these average rates to be sort of overall cash flow positive as a company. So the -- I guess the quick answer on what hotels in that quarter, I'd say is our 5 Embassy Suites. We had 4 of them closed for a good part of the second quarter. There are only properties that are really group focused. So those properties were not cash flow positive throughout the quarter. We kept 1 open the entire -- 1 of the 5 embassies opened the entire quarter in Dallas-Fort Worth Airport. So Azim, do you want to add anything to that?

No. That's correct, John. Certainly, the 2 Ohios or the 3 Ohios and Tempe were the most challenged ones because they had -- they were having an occupancy in the mid-30s to 40% range, and they were closed for part of the quarter.

Are there any other concluding remarks from the presenters?

Great. Well, thank you, everybody, and thank you again for joining us on our call today. I look forward to speaking with you in November when we report our third quarter results. Until then, be well, everyone. Thank you.

Thank you. That now concludes the presentation. You may now disconnect.