Greetings and welcome to the Apple Hospitality REIT Fourth Quarter and Full Year 2023 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Kelly Clarke, Vice President, Investor Relations for Apple Hospitality REIT. Thank you, you may begin.

Thank you and good morning. Welcome to the Apple Hospitality REIT’s fourth quarter 2023 earnings call. Today’s call will be based on the earnings release and Form 10-Q, which we distributed and filed yesterday afternoon. Before we begin, please note that today’s call may include forward-looking statements as defined by federal securities laws. These forward-looking statements are based on current views and assumptions and as a result, are subject to numerous risks, uncertainties, and the outcome of future events that could cause actual results, performance or achievements to materially differ from those expressed, projected or implied. Any such forward-looking statements are qualified by the risk factors described in our filings with the SEC, including in our 2022 annual report on Form 10-K and speak only as of today. The Company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law. In addition, non-GAAP measures of performance will be discussed during this call. Reconciliations of those measures to GAAP measures and definitions of certain items referred to in our remarks are included in yesterday’s earnings release and other filings with the SEC. For a copy of the earnings release or additional information about the Company, please visit applehospitalityreit.com. This morning, Justin Knight, our Chief Executive Officer; and Liz Perkins, our Chief Financial Officer, will provide an overview of our results for the fourth quarter 2023 and an operational outlook for the remainder of the year. Following the overview, we will open the call for Q&A. At this time, it is my pleasure to turn the call over to Justin.

Good morning, and thank you for joining us today. We're pleased to report another year of strong operating performance, portfolio growth, and total returns for our shareholders. During the year, operating fundamentals continue to strengthen, and we thoughtfully grew our portfolio with the acquisition of six hotels, enhanced the quality of our hotels through capital improvement projects, provided our shareholders with attractive distributions, and positioned our balance sheet for continued growth by raising net proceeds of $216 million through our ATM program. Our accomplishments in 2023 and our outperformance since the onset of the pandemic are a testament to the merits of our strategy of owning a diversified portfolio of rooms-focused hotels with broad consumer appeal while maintaining financial flexibility with low leverage and speak to the strength of the brands and management companies we work with and the diligent efforts of our experienced team. With resilient leisure demand and steady improvements in business travel, we are pleased to report Comparable Hotels' RevPAR growth of more than 2% for the fourth quarter and 7% for the full year 2023 as compared to the same periods of 2022, primarily driven by increases in Comparable Hotels' ADR of nearly 3% and 5% respectively. Comparable Hotels' occupancy for the fourth quarter of 2023 was essentially flat to the fourth quarter of 2022 and for the year was up approximately 2% as compared to 2022. Comparable Hotels' adjusted hotel EBITDA was $104 million for the quarter and $500 million for the year, down 2% and up 5% respectively as compared to the same periods of 2022. Our portfolio continues to perform ahead of pre-pandemic levels with Comparable Hotels' RevPAR up approximately 8% relative to both the fourth quarter and full year 2019, despite continued opportunity to rebuild occupancy, especially mid-week. Comparable Hotels' adjusted hotel…

Thank you, Justin, and good morning. We are pleased to report another strong quarter for our portfolio of hotels. Comparable Hotels total revenue was $315 million for the quarter and $1.4 billion for the year, up 3% and 7% as compared to the same period of 2022, respectively. Continued strength in leisure demand and recovery in business travel during the quarter enabled us to achieve Comparable Hotels RevPAR of $105 and $116 up 2% and 7% as compared to the same periods of 2022, with ADR of $151 and $157, up 3% and 5% and with occupancy of 70% and 74%, essentially flat and up 2% to fourth quarter and full year 2022, respectively. Looking day over day, leisure travel was resilient during the quarter with weekend occupancy stable compared to the fourth quarter of 2022, with continued improvement in business travel. We anticipate leisure demand will remain stable through 2024 and that most of our growth in occupancy will come from continued improvement in weekday demand which, while elevated relative to the prior year remains meaningfully below pre-pandemic levels. Same-store room night channel mix remains relatively stable in the quarter with brand.com bookings at 40%, OTA bookings at 13%, PropertyDirect at 25% and GDS bookings at 16%. Our channel mix continue to highlight the power of our brands and the strength of our property direct sales efforts that our properties maintained in the field. Fourth quarter same-store segmentation was largely consistent with the third quarter. Bar remained strong at 33%. Other Discounts remained seasonally elevated at 30%. Group continued to make up 14% of our mix, almost 200 basis points higher than the same period in 2019. And the negotiated segment was 17% of our mix, in line with the same period in 2022, but still lower than 2019,…

[Operator Instructions] Our first question comes from the line of Michael Bellisario with Baird. Please proceed with your question.

Thanks. Good morning, everyone. Two questions for you. But first on capital allocation. I know you mentioned it briefly in your prepared remarks, but can you maybe big picture remind us of your math on kind of how and when you think about equity issuance? And then also your targeted returns when underwriting acquisitions? And then sort of separately on the same topic, just regarding the disposition, should we view those as one-off sales? Or do you have more older in need of CapEx hotels in the portfolio that you might look to sell at least over the near term? Thanks

So to answer your first question, when looking to issue equity, or to fund acquisitions. We're mindful of the spread and look to issue equity only when we have confidence that we can drive incremental value for our existing shareholders. I highlighted in my prepared remarks, the spread investment specific to all of the assets that we acquired in the fourth quarter. But we've also released specifics to the Vegas asset, which if you remember was acquired at a 10.7 multiple on trailing EBITDA through November of last year. That hotel has continued to do exceptionally well. And as is the case with the majority of the assets that we acquired, our expectation is that they will continue to produce growth rates in excess of our portfolio average. Importantly, the acquisitions -- when we look at acquisitions from the beginning of the pandemic, we've been looking to continue to position the portfolio for our outperformance and making adjustments on the margin. And this will feed into a response to your second question. But on average, looking at all of our acquisitions activity from the beginning of the pandemic. On average, the hotels that we've acquired were 10 years younger. Produced $21 higher RevPAR and drove 5% higher margin. So when you look at the evolution of our portfolio over time, we're continuing to keep it fresh through acquisitions and then that's supplemented through dispositions activity. The two hotels that we sold were, on average, just over 20 years old, and both in need of significant end of franchise renovations, which is what drove the higher per key renovation dollar that I quoted in my prepared remarks. In terms of quantity of assets that fit that category within our portfolio, we think there's a manageable amount. And it's our expectation that we'll continue to be opportunistic. We're continually exploring market conditions. Conditions are such to date that there's a reasonable amount of competition that we can generate around some of the smaller, lower-priced assets within our portfolio, and we'll continue to transact where that makes sense. On the two assets, we drove meaningful gains over our hold period. The hotels have done incredibly well. But when we looked at the market and our positioning relative to significant new supply that was coming online, we felt we would be best served by taking our chips off the table and reinvesting elsewhere, and we'll continue to do that proactively where we see opportunities within our portfolio.

Got it. That's very helpful. And then just one quick follow-up just on the guidance, thinking about the high end of RevPAR 4%. Maybe what needs to happen? What do you need to see in terms of pickup? Is it really just midweek business travel? Trying to understand what needs to happen to achieve that high end?

To achieve the high end, we'll need to see and really throughout the guidance range, we're assuming continued recovery in BT. But I guess, more strength and continued opportunity maybe on the leisure side. I think in general, our assumption is BT will grow and Leisure will remain stable on the high end. I think you would not have as much potential pullback in leisure making up continued strength there and some BT recovery.

Our next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets. Please proceed with your question.

Thanks and good morning, everybody. Justin, you highlighted an ability to push rate more meaningfully into kind of the seasonally stronger months. And I'm just curious how much pricing power do you think you have today? What segment is going to be the primary driver? It sounds like midweek, maybe BT, but if you could confirm that, that would be helpful. And then how does occupancy play into managing kind of the rate versus occupancy as you see things strengthen into the middle -- early to middle part of the year?

So starting with the last part of your question, we see rate tied very closely to occupancy. So as we compress the hotel, as we fill the hotel, we're able to more aggressively price incremental rooms. And our teams strategically work to fill hotels with base business such that they can meaningfully drive rate as we continue to build the hotels. In terms of where we think the opportunity exists I guess, to the greatest extent. Certainly, you highlighted the opportunity that we have midweek. And when we look at where we're running relative to pre-pandemic levels from an occupancy standpoint, we're pleased with the progress we made over the past year, but certainly believe we have continued opportunity both from an occupancy standpoint and rate standpoint with business transient group and midweek -- other mid-week segments like government. I think we're pleased with how we progress through the fourth quarter, which is one of our weaker occupancy quarters, and yet we were still able to move rate. And even into January, I think we highlighted, which is also one of our weaker occupancy months. We were able to move rate in January. As we move into February, we'll have more challenging comps just given our concentration in Phoenix and the Super Bowl having been in Phoenix last year. Certainly, we're happy with the performance of Vegas, but we only have one asset in that market. And so there will be some trade-offs as we look at February. But as we move into March, excluding the calendar shift related to the Easter holiday and then move specifically into the second and third quarter. We're optimistic based on how business is shaping up. negotiated rates have moved. And I think as we continue to build occupancy, we'll be able to yield out some of our lower-rated negotiated accounts. And then we're pleased with movement that we've seen in Government PerDiem and within our group segment as well. And believe that as we progress through the year, we'll be able to maximize performance in those segments to drive rates more meaningfully.

So is it fair to say that guidance assumes a 50-50 split between ADR growth and Occupancy?

A little, at the midpoint, probably weighted more heavily to ADR, but some Occupancy growth. It's really, as Justin mentioned, it's that incremental occupancy and compression midweek that should help us drive rate.

Understood. And then just maybe one on expenses. What's really holding back from driving agency utilization in lower? It seems like job growth has been pretty strong. I know this is an overall industry phenomenon. But what do you think you need to see to really see that next leg down in agency utilization?

That's a really good question. We're, I think the teams are working really, really hard to continue to leverage in-house labor where markets allow for. I think that while there has been some improvement sort of nationally. I think it's really market dependent. And there are some markets where we have higher occupancies that have always relied on contract labor. And in today's environment, you will unfortunately, have to rely on even more. So I think the efforts that the teams have made to bring more labor in-house and to really put themselves in a position where we have flexibility, and we're maximizing the use of contract labor, where if occupancies are seasonally lower, we can use less contract labor and we're not having to flex or restrict in-house labor hours. I think we're benefiting from it from that standpoint on the culture side. But I think it's going to be slow and steady. I mean, we'd like to see more immigration reform. I don't know if we'll see that in the near term, but that would certainly be more helpful. And I do think that anecdotally, although it's been slower than we like. We continue to hear that availability is easier and easier, but it's just at a slower pace to normalcy than we might like.

Our next question comes from the line of Dori Kesten with Wells Fargo. Please proceed with your question. Thanks. Good morning.

For the assets that you acquired in '23, what was the difference between the trailing 12 EBITDA multiple and what you underwrote for the full 12?

We haven't provided that yet. We have provided guidance for the entire portfolio. And on average, our expectations for the newly acquired assets. are at the high end or exceeding the high end of the range that we provided. As I highlighted in response to one of the earlier questions, we're intentional in targeting hotels that we think will lift the portfolio from a growth standpoint and have been, on average, leaning into markets that have benefited from recent economic and demographic shifts. I think if you look at our activity over the past year, we're pleased with how the hotels have done subsequent to our acquisition and certainly optimistic about how that performed near term and over the long term for us.

Okay. And then you noted a 1.5 turn spread to where you issued equity versus where you acquired in Q4 based on the assets you noted you're underwriting today and where you're trading today, is that 1.5 turn around the same? Or has it come in?

So based on where we're trading today, I mean, certainly, that impacts the multiple for the company overall. And the assets have, on average, performed better than they did on a trailing basis. So you have kind of some shifts that would impact the math on that. But again, when we look at where we issued, we were able to lock in pricing at that higher multiple, which puts us in a position to drive incremental value through the acquisitions and the fact that they continue to perform incredibly well, we think it's advantageous to us.

No, sorry. I meant the assets that you're underwriting today, if there's...

Pricing today. Oh, sorry, a mix. So when we look at what we've acquired recently, we were able in the fourth quarter to take advantage, especially on larger assets of the lack of availability of financing, which put us in a position to have a meaningful -- meaningfully competitive advantage for assets that require larger levels of financing. We think that, that continues to exist. And so we're optimistic about our ability to continue to acquire assets in and around that price range. Certainly, pricing varies by asset. And we're not at a point in the cycle where there sufficient transactions to drive kind of a constant market clearing price. Assets are being priced individually. And I think we'll continue to transact where we see the greatest ability to drive value. I think you can expect on a go-forward basis that from a quality standpoint, we would be pursuing assets of similar quality. To the extent financing continues to be a challenge for our competitors. You can expect us to pursue those assets which are most challenging for our competitors to acquire and then to pivot as the market becomes more fluid as we move into the year. I think generally speaking, expectations are that we will see more transactions in '24 than we did in '23. And certainly, when we look at refinancings that are coming due, and incremental pressure from the brands around capital improvements that they're adequate catalysts to drive more motivated sellers to market and certainly continues to be a significant interest on the buy side.

Okay. And then one last one. There's a pretty large difference between consensus G&A and what you're guiding for the year. Liz, can you give us a little teach-in on how G&A is set at the beginning of the year? And then, I guess, just how like relative share price performance versus guidance changes can shift that as the year goes on?

Absolutely. So at the beginning of the year, the way that we've historically approached it though, because I keep getting this question, we definitely reevaluate each time we give that guidance. But we typically set guidance at the target compensation. So at the midpoint of compensation, and that aligns with the midpoint of guidance. Now because so much of both the executive team and the internal team here is compensation is tied to how our stock performs on a relative and total return basis, that can fluctuate throughout the year. And so depending on how we perform, we will begin accruing based on how we're performing from a total and relative shareholder return perspective. And as we rounded out last year and even updated guidance for, with the Q3 release, we had a run up at the end of the year, which impacted actual for 2023 and resetting it for this year, we're at the midpoint. And it could increase if we perform well and it should align generally speaking, with how we're performing operationally as well.

Our next question comes from the line of Anthony Powell with Barclays. Please proceed with your question.

Hi, good morning. I guess in terms of fly growth, have you started to track, I guess, the mid-scale properties under construction in the new markets? I'm asking because there's a lot of energy around a lot of the mid-scale brands that the larger brands have introduced. And so I'm curious if you believe those properties may eventually creep up in price and start to compete with your properties?

We have. So our internal modeling allows us to add or subtract different segments. And to look at the potential impact of supply in a number of different ways. While there has been a significant amount of talk about the potential for mid-scale development, when we add midscale and look at the potential impact on our portfolio, it moves the needle very slightly on the margin but keeps us right at and around 50% exposure. So slightly higher, but still not meaningfully higher than the larger the way we've historically looked at it. We will continue to monitor that, and make adjustments to the extent we begin to see more meaningful impact from mid-scale development. But to date, there's been a lot of talk, but very few projects have begun construction at least in the markets where we have ownership.

Got it. Okay. And maybe on acquisitions in terms of where you want to buy. I mean, you bought a lot of kind of western states with high population growth, this is friendly areas. You also did some deals in markets like Portland, Oregonthat were a bit more slow to recover. Looking forward, would you do more of those more urban property deals that markets that are a bit more challenged to get pricing? Or are you going to focus mainly on kind of the high-growth Sunbelt kind of Western State that you've been doing so well in recently?

I think you can expect us to look at all markets. And to invest where we think pricing is appropriate to the potential upside. Importantly, the Portland, Oregon asset was acquired as part of our portfolio with two Fort Worth assets. And on a combined basis, we got comfortable with the growth profile and have done incredibly well on that portfolio transaction overall. Certainly, Portland, Oregon has been slower to rebound, and returns that we've gotten to date on that asset are slightly lower than what we've gotten on average. But combined with the two Fort Worth assets, which have performed at or near the high end of returns that we've gotten for all of our acquisitions together, we feel really good about that transaction and about our price of entry into that market. As we begin to see more of the urban markets that have been slower to recovery begin to turn a corner, I think we will look opportunistically to invest where pricing is appropriate. And I think part of the beauty of our model is it's our design and intention to be broadly diversified. And so we are taking a broad view underwriting assets in all markets and looking for opportunities where pricing we're able to achieve matches the upside potential for the assets within those markets.

Our next question comes from the line of Floris Van Dijkum with Compass Point.

Justin, maybe can you talk a little bit about the amount of CMBS maturities in the Select Service segment this year? And what kind of opportunity set that could provide to your company?

Certainly, we watch that closely. We subscribe to a number of lists that provide us with asset level detail on maturing loans. I think it's important to note before I fully answer. This is a trend that has happened in the past. And I think, it's, the industry has a tendency to over-anticipate the total number of transactions that are driven by it. That said, the dynamics are slightly different this time with interest rates being meaningfully higher than where most of these assets were originally financed. And we already have experience with maturing loans forcing assets to market in ways that have enabled us to transact at a very attractive purchase prices for us. So I think, as I've highlighted for some time now, for the foreseeable future, we believe that refinancings and really, the capital investment required as part of those refinancings with loan coverage and higher interest rates being primary drivers. And then continued pressure from the brands around capital improvements to be meaningful drivers or motivators for potential sellers to bring assets to market. And when we think about the need to bridge a bid-ask spread that's existed and suppressed total transaction volume. We think that those two things will increasingly be catalyst pushing increased transaction volume. And certainly, we're optimistic creating that those two factors will create meaningfully greater opportunities for us as well.

And then maybe my thought, so by the way, in your view of the, what's the total volume of the of the maturities in '24? And what percentage do you think would be appropriate for you guys? I guess that's what I was trying to get at.

Historically, we haven't given specific targets because the assets coming to market can vary in quality and attractiveness to us based on price. I think when we look at total transaction volume over the past couple of years and correlate that with maturing financing. We're coming to a point where we should see significant increases in both. They are somewhat correlated, and we see that being a meaningful driver for transactions going forward.

And maybe my follow-up is on Vegas. I like that transaction. Maybe if you can talk about the rationale for getting into Vegas? There are not many Hotel REITs anyway that are active in that market. So a lot of obviously Casino REITs. But if you could talk a little bit about why you think this is good for Apple? And also talk about the opportunity set and how you can expand in that market?

Absolutely. So Vegas is a market that we've liked for some time now. Given that the majority of rooms in Vegas are associated with Casinos, there are limited opportunities to invest in rooms-focused hotels that fit our overall investment thesis and are a good fit for the profile of our portfolio. We have historically owned assets in Vegas. We owned a full-service Marriott Hotel and a Residence Inn hotel that we sold before the great financial crisis. And so we have a significant amount of experience in market. And Vegas is unique in that it generates it generates its own demand. And that demand takes many different forms. We found that there is significant demand for hotel rooms that are not associated with Casinos and especially given proximity of this hotel, which is very similar to the hotels that we owned earlier relative to the Convention Center. We found we can do incredibly well in the market. We're incredibly excited about the SpringHill Suites specifically. But we highlighted in our press release and haven't had an opportunity necessarily to discuss it. The hotel came with land, that enables us to potentially develop up to 500 additional rooms. And we are in the process of currently exploring an opportunity to develop on that site. The purchase price for the site is included in the purchase price that we quoted. And so it's not incremental. And certainly, given the scarcity of land and available opportunities for development, in the heart of Vegas with close proximity to the Convention Center. We think we have something very special there. I think it's reasonable to expect in the first, in the near future that we'll have something to, we'll have more to say on that. But certainly excited to be there incredibly pleased with how the hotel has performed for us to date. And if you look at projections for the Vegas market, they're incredibly favorable. And I think interestingly, as we look at leisure specifically and how leisure trends have transitioned. Vegas is on the winning side of those transitions right now and certainly benefited early in the year from the Super Bowl. But even outside of the Super Bowl week has continued to produce incredibly strong numbers for us year-over-year. And I think we feel we'll be meaningfully additive to the performance of our portfolio overall.

Our next question comes from the line of Bryan Maher with B. Riley Securities.

Just two for me, most of mine have been asked and answered. But, when you're looking at trading out of properties, and I know you've discussed trading out of older properties and creating kind of a newer, younger portfolio. But what considerations do you take with respect to kind of business unfriendly states where taxes or laws might make it increasingly difficult to do business there. Is that working into your consideration as well?

It's certainly a factor we consider. And interestingly, when we look at our portfolio, by and large, we're indexed towards business-friendly states. I'd say certainly, we're continually looking at our Chicago presence, which is mostly outside of the city. And submarkets have performed differently from each other. But overall, that's been an area of the country that's been slower to rebound. Outside of that, we're generally happy with our concentration and the performance of our assets overall. And really, what we're looking to optimize around is ability to drive rate relative to potential cost increases. And I think when we underwrite markets, we underwrite them very differently depending on the dynamics there, both as we're looking to acquire new hotels and as we're assessing our existing portfolio for potential dispositions. And I think it's reasonable to expect that we will continue to explore opportunities and pursue opportunities to shift the mix such that we're moving the needle from an overall performance standpoint. Liz and I both in our prepared remarks, highlighted challenges with margins. And one of the ways, in addition to the efforts of our management companies and our asset management team to address those concerns. One of the ways that we can more holistically address those concerns is to adjust the mix of our portfolio. And I highlighted in response to one of the earlier questions, we've been purposeful in pursuing assets in markets where we can drive higher margins, which lead to greater profitability for our investors.

That kind of segues well into my second question, which is you talked a lot about the expense pressures and inflationary and wages in particular. But can you maybe, or maybe better for Liz kind of address the impact of property tax increases, maybe insurance increases, which we hear about repeatedly and, and how much of a pressure is that? And do you think that, that will mitigate?

It's a good question. So in our guidance, for 2024, we have assumed a higher growth rate around property taxes, insurance and other. So more of your fixed cost than your variable crop cost. And we hope that we're conservative there. But we've had a decent run with property taxes and I think prudent to assume that we could have some increases there. And the property insurance, the market is still tough. Hopefully not as tough as last year. We're hearing more positive things. I think the market isn't quite as challenging as last year, but still a harder market than we'd like. And so we've anticipated strong double-digit increases on fixed cost expenses in the guidance range across the scenarios. We are from a variable cost standpoint, lapping ourselves, 2023, when you look backwards, should be a more stable comp year for 2024. That said, really being able to overcome continued expense increases even more moderate will require RevPAR growth.

[Operator Instructions] Our next question comes from the line of Tyler Batory with Oppenheimer & Company.

This is Jonathan on for Tyler. And [indiscernible] so far. First one for me, just a clarification question on the guidance probably for Liz. Helpful commentary on the high end of the range, but maybe conversely on the low end, is that assuming flat BT and stable leisure? Or does that low range still assume some level of recovery in BT?

I still assume some continued improvement in BT, and that's what we're seeing. I mean, really, even as we crossed over into January, we've seen, and we gave you an indication of where January ended up, which was an improvement from a RevPAR increase perspective to December. Where that really came from was leisure hanging in there, but recovery in mid-wave occupancies, which we believe are related to business travel recovery. And so I think throughout the range, we anticipate continued improvement midweek. Related to business transient.

Okay. Great. And then switching gears I appreciate all the commentary on acquisitions Justin so far. In light of that outlook for this year on picking up acquisition activity, any additional color on how you're thinking about new development acquisitions? And I guess with the anticipated acquisition dates of those two developments that are under contract due to more of these deals kind of make sense for you going forward?

Certainly, we continue to underwrite and I highlighted in response to one of the earlier questions, we are currently exploring an opportunity to build on the land adjacent to the Vegas asset that we recently acquired. The same challenges that are keeping supply growth low for the industry overall impact our underwriting. It's expensive to build hotels. And while we feel we have partnered with developers who have a competitive advantage in that arena and are able to deliver assets at attractive pricing for us. There are very few markets where the underwriting makes sense. We're incredibly optimistic about the two projects that we have currently under contract. They're super well located in markets that we think will be very strong for us long term. And I think it's reasonable to expect that in the near term, we could add one or two more to that group, but it's challenging. And I think in the near term, while we will be active in underwriting both new development deals and existing assets, it's more likely, or it's likely that the majority of the transactions we complete over the next year or so will be around existing assets.

Our next question comes from the line of Michael Herring with Green Street.

Just a quick one on the Las Vegas acquisition again. Can you just talk about whether or not the union labor agreements in the market are impacting that hotel and how that's impacting your underwriting there in the market?

Absolutely. So in any market where there's significant union activity, that impacts pricing for labor within the market. And so I think relative to other market labor is more expensive in that market for us. That said, it's a market that also is positioned to drive higher rates. And so when we look at the margin profile, we feel very comfortable with that. We look at cost of labor in markets and Union is only Union activity in the market is only one factor that impacts those costs. The bigger factor in most markets is availability. And I think we have effectively underwritten assets looking at all of the assets we have acquired recently in a way that we feel very comfortable with their long-term profitability.

And just one other on, I know you just updated us a little bit on the purchase contracts. But I'm just curious if the supply dynamics in those markets have changed at all? Or if yes, if that's changed at all in the last 6 months or so? Or if you're still feeling pretty good about that?

In our markets overall or in the markets very recently acquired assets?

In the, sorry, for the ones that are under contract in Madison and Nashville, if the [indiscernible] have changed at all?

No, they've remained relatively constant. I think Nashville is a market that's seen significant supply growth. We knew that going in. And I think our selection of a site within Nashville reflected our view of potential exposure. That said, supply has been coming down in most markets. And we spent a lot of time talking about Vegas on this call. Vegas is actually a market that has very little supply coming online near term. And across the board, we feel very good about supply. When we look at the overall trend for our portfolio, again, looking at a 5-mile radius to the assets that we own. The supply picture has become increasingly favorable over time, not less so. And that's even taking into consideration the new acquisitions which, in some cases, have been in markets that have performed incredibly well. And that, as a result, more attractive for new development.

That concludes our question-and-answer session. I'll turn the floor back to Mr. Knight for any final comments.

Thank you, and thanks for spending time with us this morning. We appreciate your questions and your continued interest in our company. As always, as you have the opportunity to travel, we hope you'll take the opportunity to stay with us in one of our hotels. And we look forward to meeting with many of you here in the near future at conferences or in individual meetings.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.