Mark Brugger: Yeah. I mean, I think what we’re seeing in the marketplace generally is the stuff that’s of quality is getting pushed another year. The lenders are working with folks, I think, the consensus view. Again, I could be wrong. But between both lenders and owners is — if you have a quality asset, you’re more likely to get a higher price in the market the end of this year or next year. And I think people are working towards that timeline versus bringing things to market now. There’s not a lot on the market now. Worst is first is certainly a motto for now. The stuff that is coming and, I would say, the distress that’s in the market are really pretty terrible hotels that have things that are unfixable, generally. We’re not seeing quality assets come to market right now that are distressed.
We’re seeing people that they’d be motivated if they can get a decent price, but we’re not seeing the kind of assets that we own. We’re not seeing those come to market under distressed terms right now.
Chris Woronka: Okay. Very, very good. Thanks, Mark.
Operator: Thank you. Your next question comes from the line of Floris van Dijkum from Compass Point.
Floris van Dijkum: Hey. Morning, guys. Thanks for taking my question. Just as I — Mark, as I listened to you and Jeff talk a little bit about the attractiveness of your shares — and obviously, you haven’t bought back stock unlike some of your peers — but also weighing some opportunities on the investment side. Maybe if you could talk about your leverage ratio and how comfortable would you be to see that leverage ratio trend a little bit higher. You’re pretty modestly levered today. I think it was at 3.9 times or somewhere around that level. Would you be comfortable operating up to 5 times and then — with the eye of reducing that with asset sales or potential equity down the road?
Mark Brugger: Well, Jeff, why don’t you start off just talking a little bit about capacity? And then I can chime in maybe at the end?
Jeffrey Donnelly: Yeah. Yeah. Floris, right now, we’re about 3.9 times debt to EBITDA. We have about $525 million of liquidity, including our revolver. We certainly do look at share repurchases, as you suggested. It is a leveraging event. And so we just try to be mindful about striking that balance between getting a good return on investment, but, at the same time, recognizing that it does push up your leverage. And historically, that can weigh on your valuation over time. It’s one thing, I think, we try to put a lot of effort into and something that we regularly discuss with our Board is where’s that appropriate ceiling on leverage. And Mark can speak to this, too. But I would say that historically, the lending community, in trying to maintain a good relationship with them, I think there’s comfort that you’re going up to around the level that you spoke to, around 5 times, because you could probably go through a pretty severe downturn and still not run afoul of your credit agreements.
And that I guess is how would you think about that. I think we do have capacity, but it’s also balancing against the opportunities that we like to believe are coming down the road, either in ROI opportunities in our portfolio or potential acquisitions.
Mark Brugger: Yeah. I would just add that Jeff did excellent job describing that. But yeah, 5 times is probably the high end of where we’d be comfortable going. Again, if you’ve modeled down the great financial crisis, you’d still be okay in that situation. We do have dry powder. We think having low leverage is a core strategic move. But if you never use your dry powder, it’s not really that valuable. So yes, we would — if we found great acquisitions, we’d be willing to lever up a little bit. Hopefully, cash flows — we’re optimistic that cash flows in ’25 and ’26 are pretty good. And that growth alone would deleverage the company. But right now, we continue to maintain a fairly conservative, prudent capital allocation strategy.
The debt metrics are getting better. That does make us a little bit more aggressive. And if we find great opportunities that we think create value for shareholders, we’re going to do those deals. We’re just not seeing a ton of those at the moment, but we continue to work hard to try to uncover them.
Floris van Dijkum: Thanks. And maybe my follow-up for you guys — obviously, you’ve done a bit of investing in your portfolio. And The Cliffs at Sedona, I think, are going to be on my bucket list, it sounds like, once you guys are done there as well. Can you just remind us what percentage of your EBITDA has been touched since 2019?
Mark Brugger: 2019?
Jeffrey Donnelly: I know. I was thinking about because we’ve probably touched probably 15 assets in terms of our brandings and just even types — different types of renovation projects. I’m estimating here. I’d say it probably is about 30% to 40% of our EBITDA that has had some work done at the — if I can circle back to you, Floris, on that just so I’m not just shooting from the hip.
Mark Brugger: I would guess in the last six years, we put about $0.5 billion into our portfolio, something like that. So we’ve invested fairly significantly both to maintain our assets at first class of status, but also to make sure we’re maintaining them, too, [indiscernible] and assets that customers want to return to again and again. So we look for ROI opportunities. We’ve done a number. The nature of our assets lend themselves to do that. So whether that’s taking the JW Marriott in Cherry Creek and converting that to The Clio Luxury Collection or taking a Marriott in Vail and making it a Hythe Luxury Hotel, that’s the nature of having these experiential hotels. It gives you more of those kind of opportunities. So probably have touched more than a number of our peers just because there’s more ROI opportunities to reposition these kind of assets. Because they are not standard boxes often in our portfolio.
Floris van Dijkum: Thanks, guys.
Operator: Your next question comes from the line of Anthony Powell from Barclays.
