Greetings. Welcome to the Chatham Lodging Trust's Second Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Chris Daly. You may begin. Thank you, Swali. Good morning, everyone, and welcome to the Chatham Lodging Trust's S econd Quarter 2021 Results Conference Call. Please note that many of our comments today are considered forward-looking statements as defined by federal securities laws. These statements are subject to risks and uncertainties, both known and unknown, as described in our most recent Form 10-K and other SEC filings. All information in this call is as of August 3, 2021, unless otherwise noted, and the company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations. You can find copies of our SEC filings and earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call, on our website at chathamlodgingtrust.com. Now, to provide you with some insight into Chatham's 2021 Second Quarter R esults, allow me to introduce Jeff Fisher, Chairman, President, and Chief Executive Officer, Dennis Craven, Executive Vice President and Chief Operating Officer, and Jeremy Wegner, Senior Vice President and Chief Financial Officer. Let me turn the session over to Jeff Fisher. Jeff? Thanks, Chris. Good morning, everyone. I appreciate everyone who's joining us this morning. Good to be here and talk quite a bit about our quarter and the successes that we had. We became cash flow positive after corporate G&A after all debt service in April, the second hotel rate to reach that achievement. For the quarter, we generated FFO per share of $0.10, up $0.36 over the same quarter last year. We successfully executed our first preferred stock offering, which was well oversubscribed, raising $120 million. Using a portion of those proceeds, we are positioned to acquire two incredible premium-branded extended stay hotels adjacent to the Domain in Austin, Texas, a market that we all know is absolutely thriving and will generate meaningful RevPAR growth and EBITDA growth for us going forward. Our RevPAR continues to grow meaningfully each month, driven, of course, by strong leisure travel but aided by a bit of business and other non-leisure travel. Our operating margins continue to accelerate, now at 43%, and not far off 2019 operating margins of 46%, despite much lower RevPAR, and the brands are finally tweaking housekeeping standards and other complementary service requirements that we have been asking and talking about with the brands for many years. Before I touch on operating trends, I want to emphasize our corporate efforts because we've emerged from the pandemic with a stronger balance sheet and more liquidity than we had going into the pandemic. Our liquidity was $135 million on March 31, 2020, and it sits at $253 million as of the 2021 second quarter. Our leverage ratio was 36% on March 31, 2020, and is now 29%. I'm real proud of that. Our lowest level in a decade. Reinforcing my point, when EBITDA recovers, many probably do not realize that our debt to EBITDA ratio is going to be lower than it was heading into the pandemic, to the tune of one and a half to two full turns lower, excluding the preferred, and half to a full turn lower, including the preferred. Since April 2020, we have raised proceeds of approximately $251 million, consisting of the $116 million preferred offering, $70 million of asset sales at a premium cap rate, a $40 million construction loan, and common equity proceeds of $25 million. We are using $141 million of those proceeds to construct the 170 room Homewood Suites in Los Angeles, which is expected to open in the fourth quarter, as well as to acquire the 132 room Residence Inn and the 137 room TownePlace Suites in Austin, Texas. All three of these assets are expected to generate stabilized cash yields well over 8%. We've repaid a $13 million mortgage that matured this year and have no debt maturities until 2023. Lastly, I want to highlight that our cumulative cash burn throughout the pandemic was only $35 million, only about $0.70 of lost equity value. Our asset class is going to continue to produce the highest occupancies and profits over the next year or two. I think we'll be among the first to benefit from the return of the business traveler and other non-leisure travelers. We should be cash flow positive from here on out, even if there is a period post Labor Day when leisure travel slows down a little bit, and of course, we expect business travel to start to pick up. We have the confidence to go on the offensive. We've signed a contract to acquire these two hotels after successfully managing our way through the worst era in the history of our industry. As we look to grow our portfolio, we are going to increase our exposure to premium-branded extended stay hotels in markets that appeal to a diverse set of demand generators. Our Austin acquisitions are ideal additions to our portfolio. We are really excited about those hotels. These two hotels are two of our youngest four hotels, with the TownePlace Suites having just opened in June. We expect both hotels will enhance our portfolio RevPAR. The Domain in Austin is a massive, rapidly growing mixed-use submarket within Austin that is seeing the highest amount of growth in one of the fastest growing markets in the country. There is already 4 million sq ft of office space in the Domain, with another 3 million under construction and another 4 million planned thereafter. By the way, that 3 million under construction is, of course, not spec space. It's mostly all spoken for, with large, mostly tech names that we are very familiar with from Silicon Valley and our ownership and operation in the valley for over 25 years. It includes significant retail and entertainment options, as well as a multifamily growing rapidly for all the new workers that need to be housed to work in the market that's growing so fast. There's a brand new stadium for the Austin FC just opened and that is already benefiting from other games, such as the U.S. men's soccer team in the Gold Cup and the U.S. women's soccer team in a friendly just before the Olympics. The Domain is home to a who's who of today's top companies: Apple, IBM, Amazon, Facebook, Expedia, VRBO, Indeed, Trend Micro, and many others. As I said, I think our familiarity with these customers, specifically booking rooms, should really enhance our operations, both in Silicon Valley and our ability to ramp these hotels up, particularly the brand new TownePlace Suites, very rapidly. Acquisitions that match our strict underwriting criteria remain difficult to find. We'll stay disciplined and we'll use our precious capital and our liquidity to acquire assets that are going to be accretive to earnings, value-enhancing, and really are based on a diverse set of demand generators. Certainly, the pandemic has taught us a lot of lessons, and being in a market that has the ability to generate great midweek corporate business, yet have the base around it and the demand generators around it to enhance weekend business is obviously very important and is going to continue to be important. Portfolio RevPAR performance continues to experience meaningful growth month to month in 2021. Second quarter occupancy was almost 70%, and July occupancy was a strong 75%. We're seeing demand from leisure, healthcare, government, and military, as well as the business traveler. ADRs are already showing great growth, as second quarter ADR of $127 has been far outpaced by July ADR of approximately $152. July RevPAR of $113 is up 18% over June and up 30% over second quarter RevPAR. With only a handful of our 39 hotels located in pure leisure markets, our performance throughout the pandemic and continuing this summer proves the high quality of our assets and the flexibility that we've talked about with the extended stay business model and the strength of our operating teams. Our portfolio sees demand from all types of travelers up and down the segments. We have seen the return of the non-leisure traveler, as evidenced by occupancy patterns that are developing midweek. Our week day first quarter occupancy was only about 48%. That's jumped to week day occupancy of 65% in the second quarter. I'd like to also point out that our RevPAR performance throughout the pandemic continues this impressive performance. This is important despite what I call sluggish performance in our most significant market, Silicon Valley. Silicon Valley RevPAR was only $73, one of the weakest of our top markets, but first quarter Silicon Valley RevPAR was $54. It is beginning to show signs of life. We know that most of the tech companies, and you read about it every day, have said that they will come back to their offices after Labor Day. We've all read about Apple postponing that for about a month or a month and a half because of Delta, but we still are hearing that other companies plan on resuming office operations, which, of course, should favorably impact our RevPAR in the valley. Among our top markets, South Florida remains on fire, and our Fort Lauderdale Residence Inn posted the highest RevPAR of all our top markets, with RevPAR of $170, up almost $40 from the second quarter of 2019. Second quarter 2021 ADR was $195, almost $30 higher than 2019. As we've said on our last quarter call, we expected our predominantly leisure markets to excel, and of course, that's what we've experienced. Savannah and Portland, Maine continue to outperform. As we look to the second half of the year, we all know that July and August, as we're living it right now, are going to remain strong. The question everyone's asking, and honestly, nobody knows the answer to, is what's going to happen after Labor Day. The Delta variant, as I said, adds another layer of unknowns, but we do know that in most markets, kids are going back to school in person. Companies are getting their employees back in the office. Although some major companies, as I said, have delayed reopening by a month or so, companies will get their employees back to work, and occupancies, particularly in ADRs midweek, will rise. We certainly believe that leisure travel is going to remain strong, especially on the weekends and holidays, but with kids in school, as I said, and employees back in the office, leisure, obviously, as the fall sets in, will tick down. We think that business will continue to cautiously expand their travel patterns, and those travelers will be looking for cost conscious options, as well as accommodations that, in today's economy, allow for a longer use than one or two-night stay. Obviously, our extended stay hotels suit that perfectly. As the recovery continues and the business traveler does come back, we'll continue to get more than our fair share of revenue because we've got the largest concentration of extended stay rooms of all lodging rates at almost 60%, and the business traveler is going to get the most value and flexibility in our kind of hotels. Our upscale extended stay hotels provide us the flexibility during periods of growth or weakness to diversify our customer base to maximize revenue, a thesis we believed and espoused for almost four decades with these hotels. With that, I'd like to turn it over to Dennis. Thanks, Jeff. Good morning, everyone. All but two of our 39 hotels had occupancy over 50% in the quarter, and that compares to 20 of our 39 hotels in the first quarter. 21 of our hotels had occupancy over 50% in the quarter, with a third of our hotels that had occupancy over 50%, and a third of our hotels had RevPAR over $100 in the second quarter. Looking at our most recent trends, our portfolio continues to rise. Since the start of the pandemic, we've produced the highest weekly ADRs over the last most recent four weeks and our highest RevPAR over the most recent three weeks. In June, six of our 39 hotels had higher ADRs than 2019, and three of our hotels had higher RevPAR compared to 2019. In July, 14 of our 39 hotels had higher ADRs than 2019, and 11 of our hotels had higher RevPAR compared to 2019. Just this past weekend, over half of our portfolio produced higher RevPAR again compared to 2019. Our most significant brands in the quarter had the highest occupancies with Residence Inn at 73%, Homewood Suites at 70%, and Hampton had the highest occupancy at 78%, bolstered by strong performance at our Portland, Maine, and Exeter, New Hampshire hotels that had occupancies of 72% and 85%, respectively. Looking at our top markets, our suburban New York assets in New Rochelle and White Plains had average occupancy of over 90% in the quarter, up from 72% in the first quarter, and ADR of about $150. Our New York market hotels have performed best of our top markets since the start of the pandemic, something you certainly aren't hearing about from any hotels in the Manhattan area. In Los Angeles, we've shifted away from a lot of medical and government-related business to leisure guests visiting Disney in Southern California and a little bit of corporate demand in our Marina del Rey Hilton Garden Inn. In Dallas, we were able to secure a significant block of business related to the immigration department and our downtown Courtyard hotel, and in Houston, we're seeing a meaningful increase in demand attributable to the Houston Medical Center and M.D. Anderson. Our five highest hotels with absolute RevPAR in the second quarter were our Residence Inn in Fort Lauderdale that Jeff spoke about, our Spring Hill Suites in Savannah, our Hampton Inn in Portland, Maine, our Residence Inn in New Rochelle, New York, and the Residence Inn in White Plains, all with RevPAR of at least $130. Our top five absolute occupancy hotels in the quarter were the Residence Inn in New Rochelle, the Spring Hill Suites Savannah, our Residence Inn in Charleston, Somerville, our Residence Inn in White Plains, and then our Residence Inn in Fort Lauderdale, all with occupancy of at least 87%. Again, reinforcing the diversity of our portfolio, only two of those five hotels would be considered predominantly leisure hotels. Although our length of stay has clicked down a bit from the first quarter, we continue to see an average length of stay much longer than historical levels for our portfolio. At our Residence Inn hotels, our average length of stay was 3.4 nights, which is down a bit from the four and a half nights in the first quarter, but well above the 2.4 nights in the pre-pandemic 2020 first quarter. For our Homewood Suites hotels, our average length of stay was 3.4 nights compared to 3.7 nights in the first quarter and 2.7 nights in the 2020 first quarter before the pandemic. From an operating expense standpoint, we continue to be hyper-focused on every expense, and we've been able to produce incredible cash flow through of 65% on the sequential revenue improvement from the first to the second quarter. On an $18.6 million increase in hotel revenue, we drove an increase in GOP of $12.2 million, which is particularly impressive given the fact that portfolio occupancy rose from about 52% in the first quarter to almost 70% in the second quarter. Because of that significant occupancy jump, we've needed to bring on more staff or use outside labor to service our front-of-house operations as well as service our rooms. We continue to invest in data analysis on the operating expense side, and working alongside island, we have a best in class operating model that drives premium operating margins. We've generated positive GOP and hotel EBITDA each month during 2021. Our second quarter operating margins were 43% on RevPAR of $87, which is a 43% increase over our first quarter operating margins of 30% on RevPAR of $55. Flow-through and operating leverage within our portfolio remains strong. If you look at our 39 hotels, 38 of our hotels generated positive GOP in the second quarter compared to 32 in the first quarter. Even if you look back over the trailing 12 months, all but two of our 39 hotels generated positive GOP, and all but six of our hotels generated positive hotel EBITDA. Just a remarkable performance during this pandemic. Our top five producers of GOP in the second quarter were the Residence Inn Gaslamp in San Diego, which is doing very well despite there being zero convention business downtown, the Spring Hill Suites Savannah, the Hampton Inn Portland, which are both leisure markets, followed by the Residence Inn New Rochelle, and then the Courtyard Dallas downtown. Again, multiple different brands represented in our top five list. On a per-occupied room basis at our 39 comparable hotels, payroll and benefit costs were approximately $22, which is down about 27% or $8 from first quarter cost per occupied room of 30 bucks. Our employee count as of the end of the quarter was 1,067, up about 150 employees since the end of the first quarter, but still down about 40% compared to pre-pandemic levels of almost 1,700. The current employment environment remains challenged. We are doing everything we can to attract and retain talent. We have gotten some traction with the brands when it comes to housekeeping standards that Jeff talked about, and Hilton was certainly the first company to introduce new standards for our guests who must opt in to have their room cleaned, and if they do not, rooms will be cleaned less frequently. Since our hotels have a longer length of stay, we should see some meaningful decreases in housekeeping costs that other owners who have a much shorter average length of stay and more transient guests will not be able to get the benefit as travelers check in and out more frequently, and rooms will have to certainly be flipped to be resold. On the food and beverage side, you've only got one or two dedicated employees in a select service hotel anyway to do the breakfast and to do the evening complimentary cocktail hour, which, again, as we've talked about for a couple of quarters, the extended stay hotel brands have generally gotten rid of all of the evening cocktail hours, so we should, and we will, we have seen savings there, and we're certainly looking forward to limited items on the breakfast menu from what it was prior to the pandemic, which, again, should help with some savings. In addition to the expected labor savings based on feedback from premium travelers, brands have worked with owners to reduce the offerings that will be provided. Of course, breakfast is still getting up to speed as coronavirus-related restrictions have lessened, but we are seeing a nice reduction in cost. Compared to the 2019 second quarter, our complimentary food and beverage costs have come down 55% from that period. Our breakfast cost per occupied room has come down from about $2.90 to about $1.84 in the 2021 second quarter, a decrease of 37%. Of course, since with the evening hospitality hours basically eliminated, our costs have come down essentially $300,000 from 2019. On the CapEx front, we spent approximately $2 million in the quarter with our budget for the full year still about $6.5 million, and that, again, is capital excluding the Warner Center development. With respect to our Homewood Suites at the Warner Center in Los Angeles, we have spent about $59 million on that hotel versus a budget of $70 million, and we, as Jeff said, we're looking forward to that opening here in the 2021 fourth quarter. With that, I'll turn it over to Jeremy. Thanks, Dennis. Good morning, everyone. Chatham's Q2 2021 RevPAR of $87 represents a 57% increase versus our Q1 RevPAR of $55. During the quarter, RevPAR increased from $75 in April to $88 in May and $96 in June, and Q3 is off to a great start with RevPAR of $113 in July. Our $87 Q2 RevPAR represents a 39% decline from our RevPAR in Q2 2019, and our July 2021 RevPAR of $113 represents a decline of 26% to July 2019. Through our significant efforts to contain costs, we were able to generate a Q2 hotel EBITDA margin of 31.2% and GOP margin of 43.3%, which are quite strong in light of the $87 RevPAR in the quarter and are higher than many other hotel owners' margins before the pandemic. Our Q2 2021 hotel EBITDA was $15.6 million, adjusted EBITDA was $12.5 million, adjusted FFO was $0.10 per share, and cash flow before capital, which represents hotel EBITDA less corporate G&A cash interest and $2.1 million of principal amortization, was positive $4 million for the quarter. I think it's worth noting that these solid results were achieved even with a very limited amount of business travel demand in Q2. Some of our largest and most profitable hotels before the start of the pandemic, like the four Residence Inns in Silicon Valley and the Residence Inn Bellevue, are very dependent on business travel and have seen the least amount of recovery of all our hotels to date. Whenever business travel starts to recover in a more meaningful way, our portfolio should experience significant upside from its current performance. Chatham's portfolio has demonstrated remarkable resilience during the pandemic, and our unique focus on extended stay hotels has enabled us to get through the worst of the pandemic with significantly less cash burn than most of our peers. In addition to the outperformance of our hotels during the pandemic, as Jeff mentioned earlier, we have taken a number of actions to reduce leverage and increase liquidity during the pandemic in ways that will not reduce the long-term upside to shareholders as performance continues to recover. Over the course of the last year, the steps we have taken, such as selling the Residence Inn Mission Valley at a 6.5% cap rate, obtaining a construction loan for our Warner Center development, issuing $120 million of common equity, have generated over $250 million of incremental liquidity. From Q2 2020 through Q1 2021, our cash burn before capital was only $35 million. We are coming out of the pandemic with a stronger balance sheet and significantly more liquidity than we had going in. At June 30, we had $253 million of liquidity between our unrestricted cash balance of $131 million and $122 million of revolving credit facility availability. The $120 million preferred equity offering we completed in Q2 closed on June 30, which is why our cash balance was so high at the end of the quarter. On July 1, we used $116 million of net proceeds to repay credit facility borrowings. After we closed the $71 million acquisitions of the Residence Inn and TownePlace Suites Austin at the Domain, our pro forma Q2 liquidity will be $182 million. Our monthly free cash flow is now meaningfully positive, so we expect our liquidity will continue to increase going forward, even when there is a reduction in leisure travel after the peak summer months and even if the expected recovery in business travel is pushed back a couple of months. Our positive free cash flow and our solid liquidity put us in a great position to opportunistically pursue attractive investments. In addition to coming out of the pandemic with a better balance sheet than we had going in, we're also going to be exiting the pandemic with a better hotel portfolio than we had going in. The pending acquisitions of the Residence Inn and TownePlace Suites Austin, which are expected to close in the near future, and the completion of the development of the Homewood Warner Center, which is expected in Q4, will meaningfully enhance Chatham's growth and the quality of our portfolio by adding three newly constructed high RevPAR hotels in markets that have very strong demand growth. We are very optimistic about the future given the potential for significant improvements in operating performance as business travel begins to recover, the growth that we expect the Austin acquisitions and the Warner Center development to generate, and our ability to pursue additional growth opportunities given our strong balance sheet and significant liquidity. This concludes my portion of the call. Operator, please open the line for questions. At this time, we will be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question is from Ari Klein with BMO Capital Markets. Please proceed with your question. Thanks, and good morning. Maybe first, just on the labor front, I think they're probably about 1,000 basis points below 2019 on occupancy, and I think you mentioned 40% below on FTE. So could you just talk about that dynamic, and are you where you want to be from a hiring standpoint? Where do you think you end up with, and are you having to increase pay at all as you bring on new employees? Thanks, Ari. This is Dennis. Listen, we're not at an ideal staffing level, that's for sure. We are supplementing our current labor numbers not only with additional overtime for those employees but also casual labor, which is obviously generally more expensive. In certain of our markets, we have had to increase our pay levels. We were just talking with the operations side yesterday about kind of the challenges that we've seen as we've toured some assets up in the Boston area. Even though there might be some premium hourly rates at the moment, as the labor pool expands, there might be an opportunity to reset some of those that have already seen some increases as you start to replace or hire additional employees. It is a bit more cost at the moment, but we're certainly not of the belief that hourly wages just continue to rise as the employment and labor force starts to become more available. Got it. Just on the seasonality of the business, typically we see a dip in the fourth quarter. Trends are still continuing to improve, but we may have this lag between leisure and business recovery. I guess just how should we think about the fourth quarter relative to what we normally see from a seasonality standpoint? I mean, I'll start, and then Jeff can add in. I mean, I think, one, we do expect there to continue to be seasonality in our portfolio. Generally, August is a bit less than July. Generally, September is a bit less than August, and then October is usually one of our strongest months of the year. We expect there to continue to be seasonality. We saw that even in the first and second quarters of this year. We do not expect there to be any different trends. We do believe, and I think as Jeff talked about in his prepared remarks, that what is a little bit different is we do expect leisure to remain pretty strong on weekends and holidays in the fall and certainly as you get towards the end of the year. The question is, what is that midweek business traveler going to be doing, and how quickly is it going to ramp up post Labor Day. I couldn't do any better. Thanks, Dennis. All right. Thanks for the call, guys. Thanks, Ari. Our next question is from Anthony Powell with Barclays. Please proceed with your question. Hi, good morning. Just a question on the transaction environment. Obviously, branded u pscale, and extended stay have outperformed the past several quarters and through the pandemic. Have you seen values for these hotels reach or exceed pre-pandemic levels, and how did that impact your ability to do more deals this year or next year? Hey, Anthony, it's Jeff. You certainly got the drift of what's happening in the market, and I would say that values are certainly at or pretty close for almost all limited service products, honestly, to pre-pandemic levels, 2019 valuation. That's why I said it's a difficult environment, and we're just having to work really hard to kind of pick and choose, I would say, cherry-pick a few opportunities on a direct basis that might be out there for some folks and some developers that just want to recycle some capital or have some other reasons. As always exists in our world, whether it's a partner issue, whether it's I'm getting old, whether it's estate planning, that kind of thing, whether it's I need to fund some hotels that during the pandemic really, really suffered. I'm not going to lose them, but I absolutely would like to gain some liquidity if I could. Those are the circumstances that now and again I think we'll be able to take advantage of, mostly because of our long-standing kind of just direct relationships with owners and developers within the Marriott and Hilton franchise community, really. I think more so than anything else. Extended stay hotels are hard to come by within the limited service subclass of hotels because of how well they've performed relative to most of the other brands. Do you think this dynamic will lead to maybe a faster resumption of development and supply growth than you originally thought? I still think that from what we're hearing, there's plenty of financing constraints on that front, and more than we thought, more importantly, was just pricing for construction. I mean, Dennis and I were sitting with our contractor in the construction trailer—what was it, two weeks ago now?—in Warner Center, and I said, "So what's this going to cost me to build if you were pricing it today?" And they kind of looked around at each other and came back and said, "Jeff, at least 25% more." When you look at that kind of increase, whichever way you want to look at it, even if you just automatically assume 2019 RevPAR and then you put a little growth on it, I think there's a lot of deals that just don't pencil for developers. You see a little bit of a sequential decrease. I was just reading in Marriott's numbers. It's small, but it's probably larger than what you're reading per se. I think we still feel pretty good about where we've come, where we're headed from a cyclical upswing perspective. You have to remember, with Chatham's assets, and you lived through it with us in 2017, 2018, and 2019, we experienced a disproportionate share of supply increase in Silicon Valley and in the Bellevue, Washington area, and other areas. Frankly, most of our hotel clusters did, Dallas, w e can go on and on. A lot of the brands that really would be directly competitive have come in the market two or three years pretty new prior to the pandemic. That in and of itself, I think, presents somewhat of a barrier to entry for us. Got it. Got it. Maybe just one more unrelated. In markets like Fort Lauderdale or Portland, where you're charging more than you charged in 2019, but guests aren't getting daily housekeeping or the breakfast may be downgraded, how are the guests reacting? Are they taking that, I guess, that lower service level okay, or are they complaining? What's kind of the reaction on the ground? Generally speaking, as we look at our guest service scores and look at customer complaints, and of course, the Hampton Inn brand has a 100% satisfaction guarantee, we do not really see much more of an uptick giving money back, for example, in Portland, Maine, what we are charging there. That experience has been pretty good, frankly, and we will see how that continues going forward. So far, so good. I think people are very happy, obviously, just to get out of their house, get in the hotels, and experience what they are experiencing in the markets they are visiting. All right. Thank you. Our next question is from Kyle Menges with B. Riley Securities. Please proceed with your question. Morning. This is Kyle. I'm for Bryan. I was hoping if you could provide a little bit more detail on the two announced acquisitions and how they were sourced, and then any cap rate or expected return information would also be helpful? Yeah. We would expect about an 8.5% return on those once that TPS—we think the Residence Inn, because it was open a couple of years before the pandemic—will just continue to increase RevPAR along with the pandemic recovery. TPS will take 12-18 months to ramp up. Within that period of time, that's our expected yield at least. Of course, there's a heck of a lot of activity in Austin, so we hope we're going to err on the conservative side. I think we have with that number. We actually bought—we'll buy this because, to be clear, closing should be this week from somebody that we have transacted with on two or three different occasions before, even going all the way back to our or my Innkeepers USA Trust days. Kind of long-standing, almost 25 or 30 year relationship, we were able to avail ourselves. These are pretty attractive opportunities, obviously, and we're just, I think, cherry-picking some great assets here. Great. Thanks for that, color. Also, could you talk a little bit about leverage? Just as you look to grow the portfolio, what leverage level would you be comfortable with? Jeremy, you want to pop that one up? Yeah. I think as we come out of the pandemic and business gets back more normal, I think we would probably target a net debt to EBITDA before the preferred of something like four and three quarters to five and a quarter times, that sort of ballpark. Great. Thanks. That's all for me. Thanks, Kyle. As a reminder, if anyone has any questions, you may press star one on your telephone keypad in order to join the queue. Our next question is from Tyler Batory with Janney Capital Markets. Please proceed with your question. Good morning. Thanks for taking my questions. I appreciate all the commentary so far. First question for me, just in terms of the improvements in July versus June, can you get a little bit more specific in terms of what drove that? I mean, was that corporate getting a little bit better? And then have you seen any impact from the Delta variant on your results yet? Yeah. I'll work backwards. We really haven't seen any impact on the Delta variant, any significant impact on the Delta variants. We did have a book of business in Silicon Valley that is expected to come back in the fall. It's been kind of delayed. They were going to have a little mini session here this summer, which is now pushed to a bigger session in the fall. Outside of that, no meaningful events. I think certainly as we look at July over June, you continue to see for us our Portland, Maine asset, our Portsmouth, New Hampshire, Hilton Garden Inn. Those are two hotels, especially in the northeast, where really the leisure traveler is a little bit more frequent and less rate resistant in July versus June. We certainly saw some increases there month over month. As Jeff talked about and I've talked about, we've seen no other real what I would call drivers other than just still kind of steady accumulation of occupancy from month to month. I think that's pretty consistent for us that we've seen over the last few months. Really the only incremental spike would be in those kind of northeastern leisure hotels. Great. To follow up on some of the other questions and perhaps get at some of these topics in a different way. On the margin side of things, I think clearly very impressive where you are right now versus where you were pre-pandemic, considering where RevPAR and occupancy are. As trends hopefully continue to improve into the fall, I mean, how sustainable do you think these margins are? I mean, given some of the labor pressures that are out there, if we see occupancy go a little bit higher or guest expectations ramp up, is that something that you're concerned about or something that you're considering as you're looking at where margin might go in the back half of the year? I mean, listen, we certainly believe on an apples-to-apples basis that our operating margins should be a bit better on a stabilized basis than they were in 2019. I think, listen, there is going to be a lot of bumps in the road between now and then with respect to staffing, especially. The one thing that is fundamentally different now than it was in 2019 from an operating standpoint is the likes of Hilton, the likes of Marriott officially changing the housekeeping standards, which is obviously where our biggest cost component is. Tyler, you have heard us talk about this for several years now, but that is a big driver, and it is going to benefit companies that have portfolios that are not flipping their rooms every one and a half nights more so than others. We certainly believe we're going to have to continue to add more staff as we move from 75% to what was historically our portfolio occupancy was in the low to mid-80%. We're not far away from that. We have been bringing back staff. As I talked about earlier, we've had to use casual labor and overtime to close some of the gap. We are at least encouraged that our operating model from a profitability standpoint is going to be better on a long-term basis. Okay. Very helpful. Last question for me, just in terms of capital allocation, I mean, you talked about leverage. I think the liquidity position you have right now is extremely strong. Just help us think a little bit more about the priorities for that. I mean, it sounds like acquisitions are really priority number one. What other sort of avenues could you look at in terms of deploying some of that capital? How conservative would you like to be with that going forward? Also, if you could touch on potentially when a dividend might start to make more sense. Let me just start and then Dennis could pick up. Yes. Acquisitions and growth, I think, are first and foremost on our mind. As we said kind of when we were talking on the prepared remarks, barring a real shutdown, we think we've got cash burn behind us. The need to maintain and be ultra-conservative with our balance sheet and liquidity probably obviously is not as great as it was. That is why we want to be in a growth mode. That is really what we are thinking about on the capital allocation side. By the way, we still are trying to recycle some capital as well and talking about selling a couple of hotels that we just think are a little bit older in the portfolio that once the brands do come back with some resumption of renovation requirements and otherwise are probably going to take an outsized amount of capital for a return that we don't think is there. That may provide even more liquidity for us in the near term if we're successful in that endeavor. We feel pretty good about where we sit as Jeremy was talking on the balance sheet side. Did you have something else on that? Yeah. On the dividend, look, our board's perspective on that has always been to pay taxable income. We would think that there is some dividend, obviously some dividend resumption, most likely next year, not this year, based on our numbers and carry forwards. Okay. That's all for me. Appreciate the detail. Thank you. Thanks. Thanks, Tyler. We have reached the end of the question and answer session. I'll now turn the call back over to Jeff Fisher for closing remarks. I would like to say we appreciate everybody being on the call today. We look forward to continuing our successes and moving forward in a very positive manner, hopefully with more good news as the third quarter winds itself up. We will talk to you then. Thanks. This concludes today's conference, and you may disconnect your line at this time. Thank you for your participation.