Yahoo Finance

Robert Springer

Thanks, Bryan. We are very pleased to have the Andaz Miami Beach open and expect the resort will be a fitting addition to [Mid] Beach, which is defining itself as the more elevated and sought-after destination of Miami Beach. In addition to the amenities that are available today, over the coming months, we will introduce Olazul, a members only beach club, which will operate from a historic home in the resorts backyard. Later, the resort will also debut The Bazaar by José Andrés, which we expect will further increase the appeal of the property and serve as a dining destination for local rents and guests from nearby hotels. Elsewhere across the portfolio, we have recently completed a rooms renovation and lobby refresh at the Wailea Beach Resort and are in the process of creating 2 additional residential style oceanfront [Billy] units following the positive reception we received from those that came online at the end of last year.
In San [Antonio], we will begin renovating the meeting space in the third quarter. We expect to move efficiently through this project and be complete by the end of the year. Part of what appeals to us in acquiring this hotel is the opportunity to reprogram the lower lobby level to take advantage of the new development activity happening next door at the [Alamo] visitor center in museum. We are still in the planning stages of this effort, but look forward to updating you as we progress. In San Diego, we are in the final planning stages for a renovation of the meeting space at our Hilton Bayfront and expect to be in a position to begin work late in the year.
We will complete the median space update in phases, resulting in minimal disruption, which is included in our outlook. Corporate meetings are the core business of this very productive hotel and by upgrading the space, we will enhance its ability to attract the best groups in the market. As we shared with you last quarter, we expect our capital investment activity for this year will be in the range of $80 million to $100 million. While there is too much uncertainty to accurately assess the impact of the recent tariff announcements on our future capital projects, the largest components of our spend for this year relate to projects that were already underway at the start of the year and for which materials had largely been procured. While this certainly does not mean we are not at risk for cost inflation in certain areas, based on what we know today, we expect to be able to complete our planned activities for this year within our prior estimated range.
Now turning to the transaction market. As we moved into 2025, we had higher hopes that the setup for the year would support a more robust transaction market. However, the uncertainty that has permeated the environment since that time makes finding and getting deals done much more challenging. As Bryan noted, recycling capital is a primary component of our strategy. And so despite the recent volatility, we can just seek out opportunities to drive growth and create value through accretive transaction activity.
We hope to have more to share with you on this front as the year progresses. With that, I'll turn it over to Aaron. Please go ahead.

Aaron Reyes

Thanks, Robert. As we noted at the top of the call, our earnings results for the first quarter came in ahead of expectations, as stronger ancillary revenue, better hotel expense management and savings at the corporate level offset lower rooms revenue growth, which was driven primarily by a more challenging top line performance in March. Comparable rooms RevPAR increased 3.8% in the first quarter, and total RevPAR grew 4.3%, contributing to an 80 basis point expansion in hotel margins. Adjusted EBITDA in the first quarter was $57 million and adjusted FFO was $0.21 per diluted share, which reflects a 17% increase from the prior year given the contribution from our recent investments in the portfolio with the added benefit of our accretive share repurchase activity. Our balance sheet remains strong with net leverage, including our preferred equity of only 4.5x trailing EBITDA.
While our outlook had [a rated] we still expect our leverage and balance sheet capacity to improve as we move through the year and benefit from the embedded growth in the portfolio. Subsequent to the end of the quarter, we exercised the extension option on our $225 million term loan. Together with the extension options we have in place on other debt, we don't have any maturities for the remainder of the year. As of the end of the quarter, we had nearly $150 million of total cash and cash equivalents, including our restricted cash. Together with capacity on our credit facility, this equates to nearly $650 million of total liquidity.
Included in our earnings release this morning are the details of our updated outlook for 2025. As Bryan noted earlier, this revised projection is based on expectations and the information we have available today, that could be impacted either positively or negatively based on how the macroeconomic environment and business and consumer sentiment evolve from here. Based on what we see today, we expect that our total portfolio RevPAR growth will range from 4% to 7% as compared to 2024. This range reflects the early May opening of Andaz Miami Beach which is a few weeks later than what was assumed in our prior outlook. For the balance of the portfolio, excluding Andaz, we now anticipate that RevPAR will (inaudible) between 1% and 4%.
With these revised top line growth projections, we now estimate that full year adjusted EBITDAre will range from $235 million to $260 million and our adjusted FFO per diluted share will range from $0.82 to $0.94. Despite the headwinds from the more volatile operating environment, the midpoint of our updated outlook for EBITDA and FFO, which still equate to healthy annual growth rates of 8% and 10%, respectively, and as a direct result of our recent portfolio investments. As it relates to some of the quarterly assumptions that comprise our updated full year outlook, we would expect our total portfolio RevPAR growth to remain in the low single-digit range for the second quarter before increasing more meaningfully in the third and fourth quarters, driven by increased contribution from Andaz Miami Beach, continued growth in Long Beach and the easier comparison from the impact of the strike in San Diego. In terms of the distribution of our EBITDA by quarter, based on the midpoint of our revised outlook, the first quarter contributed 23% of our expected full year total. As is typical of our portfolio, we expect the second quarter to be the largest contributor of the year at approximately 28% and the third quarter to comprise nearly 23%.
This would lead the balance or approximately 26% in the fourth quarter, which is a bit higher for us than usual, but is when we expect to generate the bulk of the current year earnings from Andaz. As noted in the 2025 outlook section of our press release, the remaining components of our full year projections remain unchanged from the prior quarter. Now shifting to our return of capital. In addition to the accretive share repurchase activity we have completed so far this year, our Board of Directors has authorized a $0.09 per share common dividend for the second quarter and has also declared the routine distributions for our Series G, H and I preferred securities. While we retain ample capacity for additional capital return, the full year outlook that was discussed earlier does not assume the benefit of any additional share repurchase activity.
And with that, we can now open the call to questions so that we are able to speak with as many participants as possible, we ask that you please limit yourself to one question. Operator, please go ahead.

Question and Answer Session

Operator

(Operator Instructions) David Katz, Jefferies.

David Katz

I wanted to just go back to the confident. It has Obviously, the world has maybe changed just a little bit since it was conceived and executed and now open. I wonder if you could just talk about what your underwriting trajectory looks like today versus where it may have been 12 or 18 months ago or 24 months ago. And what we can sort of reasonably expect in terms of returns, let's say, next year and what's realistic?

Bryan Giglia

I'm happy to do that, David. First of all, I'm not familiar with the Andaz, but I'd be happy to speak about the Andaz.

David Katz

I apologize.

Bryan Giglia

First, we're very excited that we -- that the hotel -- the resort is now open. It was a long road to get there. And again, with the Miami Beach approval process, closing a hotel in Miami in Miami Beach and doing a major renovation is probably something that we would think twice about doing right now, but we are very happy to be where we are. And so when you look at the hotel and you look at the market when we underwrote the -- our projections, our expectations for the market, the [mid-beach] market and the luxury set that we will draft under and compete with was lower than what actually happened in going back to 2023 and then you saw a pullback in 2024, that 2024 set was still running at a rate that was much higher than where we initially thought in some kind of the 800-plus range. Again, as we've said, our success here is being able to provide a product that is comparable to those hotels and having just been to the resort, it absolutely is.
We have we have a luxury resort with luxury amenities, the luxury food and beverage and the appropriate suite count. As you recall, we lowered the number of rooms to increase the fleet count. And so we were targeting somewhere in the mid-$500 to $600 rate for us to be successful there. That still completely holds. The market is still well above that.
And so we feel very confident that while the opening date was later than anticipated, the end result will be what we expected. And with the hotel opened now and site visits and groups coming in. Remember, we are just getting into and maybe a little bit before, but coming up quickly into the booking window for the fourth quarter and the first quarter. And this is a hotel that will do 60% to 70% of its EBITDA in the fourth quarter and the first quarter of the year. So we are ready and open right in time to book that business and the resort with its food and beverage, with José Andrés group concepts in there.
We are very excited and very confident that we will be able to hit those our marks for the end of the year and into 2026. With the delayed open, we're looking at, call it, [6 million to 7 million] EBITDA for the resort this year, most -- the majority of that coming in the fourth quarter. And then as we get to next year, there's no reason why we would not revert back to the cadence of EBITDA growth that we were thinking earlier this year where that would be in the high teens to 20-ish EBITDA range and then growing from there into the third year thinking that it would be about a 3-year ramp-up here.

David Katz

Understood. Good luck with the Andaz.

Operator

Dany Asad, Bank of America.

Dany Asad

Aaron, I just want to go back to your updated outlook that you kind of walked us through. Maybe can you just give us some buckets -- Bryan just touched on beyond as now going at $6 million to $ 7 million. But can you just maybe walk us through the -- what is changing and from a more moderated view on Wailea and then the change in Andaz and kind of what is left with the core of the portfolio.

Aaron Reyes

Sure, Dan. Thanks for the question. Happy to do that. So certainly, I think when you look across the portfolio and you translate that back to the EBITDA and FFO revisions that we did in the quarter that kind of discretely fall into, I'd say, 3 buckets in total to the range that Bryan alluded to for the revised expectation for Andaz of $6 million to $7 million. That's about $2 million less than what we thought when we were thinking of the original opening date when we spoke in February, that's the first 2 of it.
And then the other relates to -- we've seen a more challenging operating environment in Maui as the -- as Kaanapali reopens and the (inaudible) kind of transitions and normalize back to what it was before the fire. And so that's about $4 million of forecast revision there. And then the last piece is about $2 million of headwind from San Diego. And really, that's just more of what we saw in Q1 and into the middle part of this year, which is just a lower -- a less strong transient backdrop there in that market.

Bryan Giglia

And so Dan, what we did is where we saw some of the -- in San Diego, we saw some transient weakness in the first quarter, some other government weakness in other markets, we took with the hotels we're giving us as for their forecast and then extrapolate it out a little bit further into the year until these -- until they would come back and normalize. So that's something where we felt it was -- based on the information we had, it was an appropriate decision and update the forecast that way. Again, there are so many unknowns at this point. If we start to see those change, then that could not could prove to be more conservative. And as we get into the summer, as you see the weaker dollar, we're not anticipating any sort of international travel increases.
That's something that we could benefit from, from a weaker dollar. And so again, I think we have to take a conservative, realistic approach. That said, in a quarter or 2 there could be several changes, both to either the negative or the positive.

Dany Asad

Understood. And congrats on the Andaz opening.

Operator

Duane Pfennigwerth, Evercore ISI.

Duane Pfennigwerth

Just a follow-up there, maybe 2 markets. Hawaii, what do you think held back the asset in the first quarter? And why do you think your at least near term or 1Q commentary differs from one of the main peers with exposure to Maui? And then on San Francisco, obviously, a strong first quarter. How do you see that playing out over the balance of the year?

Bryan Giglia

So in Maui, when you look at one hotel in Wailea, and we -- in the Wailea compared to Kaanapali is the luxury market. Our -- we've often said, we have a phenomenal value proposition to guests there to have a luxury resort experience that drafts under the luxury rate a bit. And then the other competition to us would be the West Side in Kaanapali, which is more of a discount to Wailea, still a fantastic market as all of Maui is, but just a different experience and less luxury of an experience. So as Kaanapali gets back to more normalized business, and we've seen good occupancy increases there. We've actually seen airlift increases.
We were down last year, 20% to (inaudible) now the market is down about 13%. So airlift is coming back. Kaanapali is filling. Kaanapali is filling and sometimes discounting their rate a little bit, when that gap to our hotel in Wailea starts to get wide we will see some trade down to the Kaanapali market. This is all part of just the natural growth as the market recovers from the fire, this is actually a very encouraging thing when we look into later in the year, our expectation is this growing pain will continue for a quarter or so and we have -- we start to get better -- we have a good group pace in the fourth quarter.
Our rooms renovation, which added a little bit of displacement during the beginning of the first quarter is done. We continue to do things to elevate our luxury experience. Our [Oaken] pool is, by far, the best luxury pool experience in Maui and Wailea. And the government is -- the stage is doing a good job of putting money in to promote Maui as a full market and when we look into 2026, we had double-digit pace growth there. So everything is lining up for -- as the year progresses, we are going to see our hotel get back to normal and be able to drive that occupancy up, probably about 10 points is what we need there.
When comparing to others, everyone always has their gives and takes. Other competitors have large hotels in Kaanapali, so that's obviously going to benefit. And then room hotels coming off of renovation will we show a distorted view in that coming quarter or 2 following the renovation. So that's the only difference. I think from a market, the good news is the luxury demand there is strong.
And so as Kaanapali fills, we will then as we've seen before, will disproportionately benefit compared to the Wailea (inaudible). When looking at San Francisco, look, San Francisco is again, it's one of the markets where it's taken a bit, but it's been a great story for the last year or so, and we continue to see additional demand coming. We have good pace in the hotel for the remainder of the year. Business transient has been very strong in our submarket. If you went back a decade ago, Union Square was where everyone wanted to be and now Embarcadero Financial District is where, especially call it Monday through Thursday is where business travelers want to be.
We're able to drive our in-house meeting space and be able to drive our own compression that way. And as we look forward, the sentiment for the city is improving. The office demand in the areas where we are improving, and we have very strong pace growth for next year. So our expectation is that San Francisco is a positive story for us for the coming several quarters into '26 and most likely in the 27.

Operator

Michael Bellisario, Baird.

Michael Bellisario

Bryan, just sort of big picture question for you on strategy and value creation. And it sounds like you're inclined to shrink the portfolio a bit more with at least one asset sale or based on how you guys framed it in the prepared remarks, but sort of 2 parts here for you. One, how many more noncore hotels do you have or have you identified it? And two, maybe when do you consider more opportunistic or a larger sale like Miami to just more meaningfully move the needle to repurchase even more stock?

Bryan Giglia

Thanks, Michael. So when looking at -- to your first question, how many more noncore assets do we have? We have a pristine portfolio. We're very happy with our portfolio, and then we've had a several years of recycling and culling the portfolio down to (inaudible).
So your question is, are there hotels that have to be sold? Absolutely no. We're more focused on where can we recycle capital, what is the right time to divest of an asset and redeploy those proceeds when do our returns start to taper off with future capital needs or just the growth isn't there for us. So that's how we identify what we want to recycle. I think at all times, we're going to be looking to recycle assets and that could be our smallest asset or our largest asset.
We look at where spot market value is compared to our internal NAV. And if we can if we can arbitrage that in the private markets, then that's something that we will do, and we have done. And with those proceeds, one of the benefits of being a company our size is we can remain nimble. And we will repurchase shares as we've done in the past, and we have it's ranged from a small amount to a quarter to a larger amount of quarter in the given range right now, as you saw, we've been active this year so far. We think that it's a very compelling value, and we'll put our money where our mouth is and continue to take advantage of that.
And then when you look at -- you go into last year and when there's an opportunity to the stock rebounds and there's opportunity to acquire assets. I still -- we go back to San Antonio, and that was a point in time where it was a very good acquisition and it was the right deployment of capital at that moment in time. But we -- and then a quarter later, we went back and we were repurchasing shares. So we will continue to recycle assets, and we will look in the market and see what the best allocation of that capital is. Right now, I don't think it's any mystery that our stock is that best allocation.
but we'll continue to do that. And the expectation is, is that given the current market dynamics, yes, we would expect to be a net seller. Now the transaction market is a little choppy right now, but I think we're seeing the debt market sort of bounce back and that should lead to additional future transactions. But we would guess -- I would think right now, we would be a net seller. And everything else equal, where we are now that capital would go back into the purchase of our stock.

Operator

Smedes Rose, Citi.

Smedes Rose

I wanted to maybe just follow up on that a little bit and kind of circle in on your Napa assets. It looks like the losses accelerated year-over-year, just something if you put that up to maybe the calendar shift that went on during the quarter? And maybe you could just talk to your overall expectations this year for those assets. And then certainly, kind of, Bryan, I mean, water cooler top would suggest that those 2 properties would be on the short list potentially for recycling capital. And I'm just wondering, without addressing maybe potentially those what are the conversations like for high-end luxury assets I mean, are there buyers?
Is there just big pricing discrepancy or buyers more on the sidelines at this point? Just any kind of discussion around that would be of interest.

Bryan Giglia

So first quarter in one country, like any other kind of seasonal resort market is going to -- it will always be the weakest quarter. Our goal is at some point to probably get as close to breakeven as we can in that quarter, but that's not where the money is made. And so ships by a couple of hundred thousand dollars from here year-to-year is just -- that could be the difference of one group. And so when we look at what -- where we are with those 2 resorts, together, they put off a couple of million dollars more of EBITDA last year. They're going to put off a couple of million dollars more on EBITDA this year.
And so we have -- we continue to fine-tune, get them to the right group mix. I think we've made tremendous progress there. We have work with the brands and some third-party consultants to get costs down while keeping guest satisfaction at the same level. So all of those things are working in the right direction. When it comes to the disposition of those assets or any assets in our portfolio, luxury assets tend to be a smaller, more focused group of investors, they tend to own that type of asset, understand the scarcity value of that asset and have a little bit of a longer horizon when it comes to their whole periods and asset performance.
So that's -- those are conversations that we have, we continue to have, we always have. And I think at any given time, we're probably having some form of conversation or another on a good portion of our portfolio. That's what happens when you have assets that are great performers and high demand. So the luxury buyer is not immune from debt markets, it's not immune from the cost of debt and that. And so while it might not be a driving factor, it is another factor when it comes to valuation.
So when you have slower transaction volumes across all asset types, it tends to slow this down, but as I said on the question before, I think we are focused on recycling capital. And so that includes our highest end luxury assets that ranges to every asset in our portfolio. So it's something we're focused on. It's something that when we have the ability to take advantage of the private market values we will, especially when our stock is trading where it is. It's pretty compelling trade.

Operator

Chris Woronka, Deutsche Bank.

Chris Woronka

Just to [be] kind of a follow-up on the as Miami. So I assume kind of your revised outlook with EBITDA includes any kind of, I don't know -- I know there were some customers that had to be, I think, rebooked and I (inaudible) work with Hyatt. But the question really relates more towards the rest of the year, especially in Q4, given your expectation. Is there any -- what kind of visibility do you think you have? Or maybe you can give us a little bit of a sense on what you expect at that asset in terms of booking window?
Is it going to be -- if we think about it compared to other luxury resorts, which typically book a little longer out, just how do you expect that to kind of unfold over this year and then beyond.

Bryan Giglia

Yes. Thanks, Chris. To answer the first part of your question, yes, there were -- when we had to walk and move some customers that's absolutely incorporated in all of our costs that you'll see in our (inaudible) EBITDA reconciliation. So that's all included in there. The booking window is actually not -- at the end of the day, this is a 287 room resort.
And so the booking window even for group is -- it's not like San Diego. And so we are opening right now and being able to do site visits and for corporate events. And again, this is going after financials in automotive and luxury apparel, pharmaceutical, that type of business, a lot of social business. The hotel is already booking weddings for the end of the year. And so for the fourth quarter, that booking window is just opening now.
And so while our opening date is not impacting our ability to have a successful fourth quarter and first quarter into next year. So when we look at the cadence of -- but just occupancy and rate, we'll obviously run in May and June and probably in the 30s and 40s percent. And then when we get to November and December, we're probably up in the 70%. And the rate summertime rate in the market is $300 or $400 a night. And in the fourth quarter, it's $600, $700, $800 a night.
And so I think we are in the prime spot to be able to book that business and to be able to really yield the hotel for the fourth quarter. Most of the site visits and everything, the people that are going through the resort right now, they're looking for third and fourth quarter right now and a little bit in the first quarter.

Operator

And that concludes our question-and-answer session. I will now turn the call back over to Bryan Giglia for closing remarks.

Bryan Giglia

Thank you, everyone. We look forward to meeting with many of you at upcoming conferences and those that were able to see the Andaz during construction. We look forward to having everyone back and being able to tour the resorts and see the finished product. Thank you.

Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect.