Kevin Milota; Senior Vice President of Corporate Finance; Summit Hotel Properties Inc
Jonathan Stanner; President, Chief Executive Officer, Director; Summit Hotel Properties Inc
William Conkling; Chief Financial Officer, Executive Vice President; Summit Hotel Properties Inc
Austin Wurschmidt; Analyst; KeyBanc Capital Markets Inc
Dany Asad; Analyst; BofA Securities, Inc.
Michael Bellisario; Analyst; Robert W. Baird & Co.
Chris Woronka; Analyst; Deutsche Bank
RJ Milligan; Analyst; Raymond James
Operator
Welcome to the Summit Hotel Properties 2024 fourth-quarter and full-year earnings conference call. I will now be passing the line to Kevin Milota, Senior Vice President of Corporate Finance.
Kevin Milota
Thank you, Michelle, and good morning. I'm joined today by Summit Hotel Properties President and Chief Executive Officer, John Stanner; and Executive Vice President and Chief Financial Officer, Trey Conkling. Please note that many of our comments today are considered forward-looking statements as defined by Federal Securities laws.
These statements are subject to risk and uncertainties, both known and unknown as described in our SEC filings. Forward-looking statements that we make today are effective only as of today, February 25, 2025, and we undertake no duty to update them later. 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 www.shpreit.com.
Please welcome Summit Hotel Properties President and Chief Executive Officer, John Stanner.
Jonathan Stanner
Thanks, Kevin, and thank you all for joining us today for our fourth quarter and full year 2024 earnings conference call. 2024 was another year of effective execution and meaningful progress for Summit, positioning the company for continued success in 2025.
Today, Trey and I will discuss our solid full year operating and financial results, highlight our recent transaction activity and its role in driving outsized future growth, provide an update on our balance sheet and your term ROI driven capital expenditures and share our outlook for 2025.
Summit delivered another successful year in 2024 as the strength of our operating platform coupled with well executed transaction activity resulted in full year AFFO per share growth of nearly 6%. For the third consecutive year, the company's RevPAR growth exceeded the industry average, with pro forma RevPAR growth increasing 1.8% for the year.
Our operating team and management company partners continue to do a terrific job managing expenses as pro forma hotel EBITDA margins were essentially flat year over year, driven by operating expense growth of just 1.5% on a per occupied room basis.
Pro forma Hotel EBITDA increased 2% year-over-year despite the low RevPAR growth environment and difficult year over year property tax expense comparisons. Historically, our business model has required 2.5% to 3% RevPAR growth to maintain operating margins.
In 2024, we significantly surpassed these expectations, driven by ongoing tight cost controls and our ability to manage hotel level turnover as well as reduce our reliance on more expensive and less efficient contract labor, further validating our thesis for investing in hotels with efficient operating models.
Our RevPAR growth in 2024 was predominantly driven by occupancy gains as group demand remained robust and the gradual recovery of business transient demand drove weekday RevPAR growth of 3% for the year, primarily through outsized growth on Tuesday and Wednesday nights.
While midweek urban market demand has been the primary driver of our RevPAR growth for two consecutive years, it also represents the biggest opportunity for future growth, as many of these markets have lagged in their recoveries from the pandemic.
At the start of 2024, we identified six markets we believe were poised for outsized growth given improving operating fundamentals, including Baltimore, Louisville, Minneapolis, New Orleans, San Francisco and San Jose.
Aside from the well-documented challenges in San Francisco, the remaining five markets performed exceptionally well, achieving RevPAR growth of over 13%, which drove a 35% increase in hotel EBITDA. Minneapolis, San Jose, Baltimore and New Orleans, all had double digit RevPAR growth for the year, with the latter two markets achieving nominal RevPAR that exceeded 2019 levels for the first time.
A hallmark of the Summit investment thesis has been value creation through effective acquisitions and dispositions. In 2024, we continued this disciplined approach, culminating with the acquisition of the Hampton Inn Boston-Logan Airport and Hilton Garden Inn Tysons Corner for $96 million through our joint venture with GIC.
The well-located hotels and dynamic submarkets of Boston and Washington DC feature industry-leaning brands and minimal near-term capital needs. The purchase price represents an attractive 8.8% capitalization rate based on 2024 net operating income and a significant discount to replacement costs.
RevPAR growth for the two hotels was over 6% in 2024, and we expect growth for these assets will continue to exceed our portfolio average given strong market dynamics and our ability to optimize operations. We now own 41 hotels in our joint venture with GIC, the vast majority of which have been acquired since 2022.
Operating performance in this portfolio has been terrific as RevPAR grew nearly 3%, driving 5% hotel EBITDA growth in 2024. The strength of our operating platform is particularly evident with the significant improvement in performance we've experienced in many of these assets since taking ownership, further validating our ability to identify investment opportunities and develop and implement business plans in a value accretive manner.
Over the last three years, our RevPAR market sharing index has increased nearly 300 basis points, while hotel EBITDA margin has expanded by over 200 basis points during that same period. These improvements demonstrate our ability to refine revenue management strategies and identify efficiencies throughout the operating cost structure.
Our most recent acquisitions have been funded by a thoughtful and methodical disposition strategy, selling 10 hotels over the past 18 months for nearly $150 million of gross proceeds while eliminating approximately $50 million of near-term capital needs.
Our target approach to dispositions resulted in a sales price that represents a blended trailing 12 month net operating income capitalization rate of less than 5% at the time of sale when including the foregone CapEx requirements.
Importantly, the investment profile of our acquisition activity compares favorably to our disposition activity, resulting in a positive NOI spread, yield spread of over 400 basis points, and a RevPAR premium of approximately 70% between our acquisition and disposition portfolios.
Over the past two years, we've deleveraged our balance sheet by nearly a full turn of EBITDA, grown adjusted EBITDA by over 6%, and increased the common dividend by nearly 40% on an annual basis, all while strengthening the portfolio's long-term growth profile.
We also continue to invest in high ROI capital projects designed to drive incremental EBITDA growth. For example, we are nearing completion of a comprehensive repositioning of our Courtyard Fort Lauderdale Beach Hotel.
This hotel sits on an irreplaceable oceanfront location and will re-launch this spring with a full guest room, corridor and public space renovation, an expanded and modernized fitness center and a reconcepted restaurant.
Additionally, we are making a significant investment in the outdoor experience at the hotel, including a poolside bar and an enhanced pool deck that is expected to drive significant incremental EBITDA. While the hotel has always been a top performer in our portfolio, we have identified significant rate and ancillary revenue opportunities. We intend to capture post renovation in a market where it is virtually impossible to build new competitive supply.
Before I turn the call over to Trey, let me briefly discuss our outlook for the year. As we enter 2025, the lodging sector remains stable and well positioned for continued topline growth, as we expect many of the same trends that drove our performance in 2024 to continue. Robust group demand and the ongoing recovery of business transient travel are expected to lead growth, particularly in urban markets where midweek occupancy is steadily improving.
With corporate budgets normalizing and organizations increasingly prioritizing in-person meetings and conferences, we expect business-oriented demand to further strengthen, driving higher rates and occupancy in key markets.
Our first quarter of RevPAR growth is tracking slightly below the midpoint of our full year guidance range of 1% to 3% growth. January winter storms resulted in airport closures in major markets across the south and east coast, resulting in a modest decline in RevPAR for the month. We have made up for much of that disruption with a strong start to February, driven by Super Bowl-related demand in New Orleans, where we own six hotels.
As I previously mentioned, we had tremendous success managing expenses in 2024. And while our year over year comparisons are more difficult in 2025, we are confident in our ability to continue to control operating expenses driven by the benefits of our efficient operating model and the strength of our operating team.
One of the most significant long-term tailwinds for the industry is the persistent lack of meaningful new supply, as elevated construction costs, higher relative interest rates and tight construction lending standards continue to constrain hotel development, particularly in the majority of our key markets.
Looking beyond 2025, the lodging industry stands to benefit from a powerful long-term consumer shift towards experiences over material goods. Consumers, particularly younger demographics continue to prioritize travel, unique destinations and high-quality accommodations as part of their lifestyle and spending habits.
This secular trend reinforces our expectation for a strong and stable future demand outlook for lodging. Summit's well located high quality portfolio is well positioned to capture this long term growth. We've continued to improve the overall quality of our portfolio through strategic capital investments in a discipline, effective capital allocation approach.
Driven by the combination of these factors, we expect another solid year of performance in 2025 with a favorable long-term trajectory for both the industry broadly and Summit more specifically.
With that, I'll turn the call over to Trey.
William Conkling
Thanks, John, and good morning, everyone. For the full year 2024, RevPAR growth was driven by strength in the company's urban and suburban portfolios for which RevPAR increased nearly 3% and 4% respectively. It's outpaced the total industry by 100 basis points and 220 basis points respectively.
Growth in our urban and suburban markets was driven by continued strength and slower to recover markets that John previously highlighted, but also from core markets such as Boston, Chicago, Denver, Houston and Indianapolis, all of which experienced full year RevPAR growth of 5% or higher.
In particular, our urban and suburban hotels benefited from robust group demand for which RevPAR increased 10% and 12% respectively over 2023. Pro forma for our recent acquisitions of the Hampton Inn Boston-Logan Airport and Hilton Garden Inn Tysons Corner, our urban and suburban hotels comprise 73% of our total guest room count.
As we look to 2025, we believe our portfolio is well positioned for continued outperformance as growth in group and business transient serve as the primary demand catalyst for the industry moving forward.
Turning to our resort and small-town metro assets, full year 2024 RevPAR declined modestly year over year, primarily related to displacement from both the impact of Hurricane Helene on our Indigo Hotel in Asheville, North Carolina, as well as the transformative repositioning of our courtyard Fort Lauderdale Beach Hotel, which will be completed in March of this year.
When adjusting for these two assets, resort and small-town metro 2024 RevPAR was essentially flat to 2023. With significant tailwinds for these two assets in 2025, the company anticipates improved performance in our resort and small-town metro portfolios moving forward.
Pro forma RevPAR for the full year 2024 was 1.8%, while pro forma expenses increased less than 3% or just 1.5% on a per occupied room basis. The intense focus on expense management resulted in positive flow through and hotel EBITDA margins that were essentially flat to prior year despite modest RevPAR growth.
Pro forma hotel EBITDA and adjusted EBITDA increased for the full year 2024 to $264.7 million and $192.2 million respectively. Adjusted FFO for full year 2024 was $119.2 million, an increase of nearly 6% versus 2023 as the company continues to benefit from recent capital allocation decisions. In particular, the $150 million of accretive asset sales that has reduced corporate leverage by approximately [one turn]. AFFO increased to $0.96 per share in 2024 from $0.92 per share in 2023.
Moving to the fourth quarter, pro forma RevPAR increased 1.4% year over year, and acceleration from our third quarter RevPAR growth of 0.3%, driven by gains in both occupancy and average rate. Similar to the full year, fourth quarter pro forma RevPAR growth was driven by our urban and suburban portfolios, which produced RevPAR increases of 2% and 3% respectively.
Key markets driving fourth quarter growth include New Orleans, Indianapolis, Chicago, Houston, Minneapolis and Tampa, all of which significantly outpaced the pro forma portfolio. Moderating expense growth continued in the fourth quarter as operating expenses in our pro forma portfolio increased 2.2% year over year or just 1.7% on a per occupied room basis as expense trends continue to exhibit a more normalized cadence representative of a stabilized cost structure.
The company continues to benefit from reductions in contract labor, which declined 17% on both a nominal basis and per occupied room basis versus fourth quarter 2023. Contract labor now represents 10.5% of our total labor costs, which is 800 basis points below peak COVID era levels, but 300 basis points above 2019 levels, suggesting the opportunity for further improvement.
We also continue to see improvement in employee retention, which results in improved productivity in the hotels and reduced training costs. Full year 2024 wages increased 3.4% versus prior year as the right sizing of labor force wages have mostly been absorbed.
We continue to be encouraged by expense trends in our portfolio and how the current baseline cost structure positions the company for future bottom-line growth. Pro forma hotel EBITDA for fourth quarter of 2024 was $60.4 million which represented a modest decline to prior year as the company faced a difficult year over year comparison due to property tax refunds realized in the fourth quarter of 2023.
Pro forma hotel EBITDA margins contracted 140 basis points in the corner with property taxes accounting for over 50 basis points of that decline. Adjusted EBITDA for the fourth quarter was $42.1 million while adjusted FFO was $25.2 million or $0.20 per share. From a capital expenditure standpoint, in the fourth quarter, we invested $27.5 million in our portfolio on a consolidated basis and $23.3 million on a pro rata basis.
For the full year, we have invested $89.3 million on a consolidated basis and $75.6 million on a pro rata basis. In 2024, our design and construction team executed several notable renovations, including the Courtyard New Haven, Hotel Indigo Asheville, Courtyard Grapevine, SpringHill Suites Dallas Downtown, Hyatt House Denver Tech Center, and Residence Inn Portland Hillsboro.
The company's continued investment in our portfolio has resulted in a RevPAR index of 114 for the trailing 12 months ending December 2024. This investment ensures the quality of our portfolio and that positions the company to drive profitability in the future.
Turning to the balance sheet to recap our 2024 capital markets activities, we successfully refinanced our $225 million unsecured term loan in February 2024 with a new $200 million unsecured term loan that matures in 2029.
In June, we repaid our $42 million Medibank loan at a $3 million discount using proceeds from asset sales, which also allowed the company to facilitate the sale of the Four Points San Francisco airport. Finally, in December, the company's GIC joint venture drew $50 million on the accordion of its credit facility to partially fund the $96 million acquisition of the Hampton Inn Boston-Logan Airport and the Hilton Garden Inn Tysons Corner.
We continue to observe a very constructive capital markets environment for the lodging industry. Overall, the balance sheet continues to be well positioned with total liquidity of approximately $350 million, an average length of maturity of nearly three years, an average interest rate of approximately 4.6% and a leverage ratio that is nearly a full turn lower than when we initiated our disposition activity in 2023.
As a result of our interest rate management efforts, our interest rate exposure continues to be effectively managed with a swap portfolio that has an average fixed SOFR rate of approximately 3%, and 72% of our pro rata share of debt is fixed after consideration of interest rate swamps.
When accounting for the company's series E, F, and Z preferred equity within our capital structure, we were over 78% fixed at year end. With no significant maturities until 2026, a staggered maturity schedule and a strong liquidity profile, we believe the company is well positioned to achieve its growth objectives.
On January 23, 2025, our Board of Directors declared a quarterly common dividend of $0.08 per share. Which represents a dividend yield of approximately 5% based on the annualized dividend of $0.32 per share.
The current dividend rate continues to represent a modest AFFO payout ratio of approximately 35% at the midpoint of our guidance range, leaving ample room for potential increases over time, assuming no material changes to the current operating environment.
The company continues to prioritize striking an appropriate balance between returning capital to shareholders, investing in our portfolio, reducing corporate leverage and maintaining liquidity for future growth opportunities.
Included in our press release last evening, we provided full year guidance for key 2025 operational metrics in addition to certain non-operational items. This outlook does not include any additional acquisition, disposition or capital markets refinancing activity beyond what we have discussed today.
For the full year, we anticipate RevPAR growth of 1% to 3%, which translates to an adjusted EBITDA a range of $184 million to $198 million and an adjusted FFO range of $0.90 to $1 per share.
At the midpoint of our RevPAR guidance range, we would expect Hotel Ita margins to contract 50 to 100 basis points year over year, which incorporates approximately 30 basis points of headwinds from higher property taxes.
We expect pro rata interest expense, excluding the amortization of deferred financing costs, to be $50 million to $55 million. Series E and Series F preferred dividends to be $15.9 million. Series Z preferred distributions to be $2.6 million and pro rata capital expenditures to range from $65 million to $85 million.
Finally, the increased size of the GIC joint venture results in fee income payable to Summit, covering approximately 15% of annual cash corporate G&A expense, excluding any promote distributions Summit may earn during the year.
And with that, we will open the call to your questions.
Operator
(Operator Instructions) Austin Wurschmidt, KeyBanc Capital Markets.
Austin Wurschmidt
Great. Thanks, and good morning, guys. John, you had highlighted the first quarter's tracking slightly below the midpoint of your full year guidance and just wondering if you can provide some detail or proper context around the booking pace over the next 30 to 60 days.
And as you look through some of the weather-related disruption, the Super Bowl benefit in January and February, how's really that business-oriented demand that you and Trey referenced in your prepared remarks tracking relative to the last three to six months or so.
Jonathan Stanner
Thanks. Good morning, Austin. Well, I think as you referenced, January was choppy for us and a lot of it just had to do with disruptions related to the storms. There were airport closures in Dallas and Houston and Atlanta and Charlotte, all of which were disruptive mid-week for BT travel. And we finished the month down slightly year over year.
We did make up some of that or I think a lot of that in February, and our February RevPAR growth, one, was driven just by the strength of the Super Bowl in New Orleans where we have six assets, but also by -- we think a little bit of a catch up from what happened in January where people rebooked that were displaced in January ended up booking into February.
When we look out into March and April, I think what we see from a pace perspective is that there are fairly stable trends. Our April pace is a little bit hard to interpret, one, given we're not in the key-booking window yet. And two, there's some difficult comps from the solar eclipse of last year.
But when we look at March and particularly, when I look at kind of the peak spring break weeks of March, I think that the demand pace all looks solid. Again, our expectation for the year is this, as you alluded to, continuation of some of the trends we saw in '24 and all of that supported by the data we're looking at currently.
Austin Wurschmidt
That's helpful. And look, you guys have continued to cobble together small portfolios to recycle capital and I'm just curious what the next act is for some it could be and whether the playbook is somewhat consistent with what you've done the last two years in light of maybe a relatively quiet transaction market overall?
Jonathan Stanner
Yeah. We've been more active than most I would say. We did a couple $100 million of transactions last year. Over the 18 months, we've done about $300 million worth of deals, and we did it over 10-plus transactions. So, as you alluded to, a lot of that was being thoughtful around some of the lower RevPAR, lower margin hotels in our portfolio that really needed a lot of capital.
And so, I think one of the things we're really proud of has just been the difference in profile of what we've bought versus what we've sold. We have less of the low hanging fruit at the bottom end of our portfolio than we did 18 months ago.
That being said, we're always trying to be very thoughtful around how we manage capital needs in the portfolio. And we do have a high quality portfolio. So we get a fair amount of reverse inquiry to our portfolio to sell assets, and we try to always be thoughtful around being opportunistic on asset sales and what we ultimately can redeploy those proceeds into.
And so, again, I think one of the things, and we said this in the prepared remarks, one of the ways we believe we create value for shareholders is by being transaction oriented and despite the fact that it's been a slower transaction environment, I think what we should expect us to continue to try to do that in 2025.
Operator
Dany Asad, Bank of America.
Dany Asad
Hi. Good morning, John, Trey, and Kevin. Guys, if we're just thinking about your RevPAR guide of 1% to 3%, it's pretty much in line with pro forma RevPAR of just under 2% for 2024. So if we wanted to think about puts and takes, can you just maybe walk us through what's getting better in 2025 and if there's any offsets to get us to that range?
Jonathan Stanner
Yeah, sure. Look, Dany, I think a lot of it is a continuation of what we've seen. We still expect better performance in urban and suburban markets. We still expect better growth rates mid-week, and a lot of that's driven by the ongoing strength of group demand and this kind of consistent recovery on the BT side.
I think what we expect this year is probably a little less lift from these lagging markets that we pointed out from last year, the five markets in particular that grew 15% RevPAR growth in '24. We expect that to normalize in '25. We have a little bit more of a balanced growth profile across the portfolio in '25 versus '24.
And I think that the expectations broadly for the industry or for leisure to kind of continue on its current normalized pace. I do think that's where the upside exists for the industry and for some in particular. We alluded to the renovation that's going on at the Courtyard in Fort Lauderdale that is going to create some disruption in our first quarter numbers.
We do think there's a significant upside in that asset beginning in the second half of the year. And I think broadly speaking, we think the expectations for leisure travel are relatively low for '25, and if there is an upside to the broad industry forecast, we think it's likely in that segment.
Operator
Michael Bellisario, Baird.
Michael Bellisario
Thank you. Good morning, guys. John, big picture question just on some of the management company changes that you've made. Looks like there has been some turnover recently, I guess one, what's driving those changes?
And then two, are those changes leading to the better expense management and flow through that you referenced and maybe any more changes to come on that front? Just any thoughts around the management company changes would be helpful.
Jonathan Stanner
Yeah. Look, the first thing I would say is that we're happy with our management companies and with the performance of the management companies in general. And again, a lot of that will point back to what was incredibly strong expense management last year and a continuation of doing a good job driving market share in an environment where RevPAR grew slower than we would have otherwise expected it to at the beginning of the year.
The changes we made to the management companies were really driven by opportunities to create cluster opportunities and more efficient management of more efficient operations in certain markets. I think the performance of what we've done has worked out in line with what our expectations are.
We're always trying to be very thoughtful and opportunistic around how we allocate management agreements across the portfolio. Today, there's nothing that we're contemplating on additional moves, but certainly, it's something that we continuously evaluate. But I would say, again, we're very happy with the management companies across the portfolio today.
Michael Bellisario
Got it. Fair enough. Thanks. And then switching gears just on the December acquisitions. You maybe provide some background on that transaction and then how you're thinking about longer term returns and underwriting for those hotels above and beyond the eight-day cap and then how you think about and adjust for those assets being a little bit older in terms of vintage? Thanks.
Jonathan Stanner
Yeah. No problem. Well, look, we were really excited about the transaction. I think, as you alluded to, one, it's just a really strong going in yield in markets that are hard to get access to. These are submarkets of really strong gateway cities. We have relatively less exposure in both of those markets.
And so, we expect those markets to continue to be strong performers over the next several years. We are just in the two assets that we bought from [Magna], it was an off-market transaction, fit in this bucket. We are underwriting to unlevered IRRs that are a couple 100 basis points higher than what we underwrote to pre-pandemic. It's probably 300 to 400 basis points higher than the IRRs we've underwritten our dispositions to.
And so, we do think that this is an interesting time to be a buyer in this market. Yields are higher, the expectation for rate declines, I think, has come out of the market. You don't have to be overly aggressive in terms of what we're underwriting for future growth from an NOI perspective in our out years.
And so, again, that translates particularly when you can go in at stronger going in yields. That translates just into higher hold period IRRs. These are older vintage assets. We have allocated some capital to them in the out years. They don't have any near-term capital needs.
We'll likely commence a renovation in Boston towards the end of next year. But for the most part, they've been kept in very good physical condition and again, I think their locations keep them relevant despite the vintage for a long time.
Operator
Chris Woronka, Deutsche Bank.
Chris Woronka
Hey guys. Good morning. Thanks for taking the question. I would agree with your observation, John, that there's -- leisure is probably more of an opportunity than a threat this year hopefully. But as I think about really the corporate side, are you seeing any changes in whether it's the type of customer you're getting, large or small or booking pattern in terms of closer in, further out or direct, non-direct, anything like that? Are there any changes you noticed throughout '24 heading into this year?
Jonathan Stanner
Yeah. There have been gradual changes in the business as the recovery has evolved coming out of the pandemic. The booking window is starting to lengthen, but it's still relative to pre-pandemic levels, a short booking window. The type of customer initially in the pandemic, the BT customer was all kind of a local drive to regional type of BT traveler. Obviously, that's changed.
And we're getting the bigger more national accounts have started to return. I would say that it's been much more of a slow evolution. I don't think we expect any meaningful changes in those patterns in 2025. As we said, 2025 is set up to be a lot of continuation for the trends that we saw in 2024. It feels fairly stable.
I do think the incremental push from corporations to get back into the office and just do things more in person is something that will ultimately benefit the business longer term. I don't expect it to create any significant changes in segmentation or channel booking mix from what we've seen in '24.
Chris Woronka
Okay. Appreciate that, John. And then this question dovetails with the Mike's question about the changes in management companies, but even putting that aside, just on the labor front, you guys had a very successful -- I think on a relative basis, '24 in terms of cost, how much visibility do you have on that?
And is there anything we need to think about in terms of not so much unions, but any labor availability in any of your markets or whether the new managers might make any changes, just anything that we are unknown setting into this year on that. Thanks.
Jonathan Stanner
No. Look, again, it feels fairly stable. I will take a second just to go back and '24 was an incredibly successful year from an expense management perspective, operating expenses increase 1.5% on a per occupied room basis. For us to get to essentially flat margins on sub 2% RevPAR growth is very difficult. So we're very pleased with the outcome.
We've kind of guided to 3% to 4% expense growth for 2025. Our hope is we'll continue to do better than that. We do feel like on a relative basis we're going to be able to manage expense growth at the lower end of where a lot of other hotel owners are going to broadly.
Some of that is market and location mix as you alluded to, but the team and our partners at the management company on management company side have done a very good job of that. We have seen the deceleration and wage growth stagnate over the back half of the year.
I wouldn't say we've seen any noticeable tightening in the labor markets, but the pace at which it is loosening slowed. But we do feel like wages are relatively stable where they're at today, assuming there are no significant changes to the macro environment, expect that to continue to be stable in '25.
Chris Woronka
Thanks, John. If I could sneak one more quick one in here, just on the dispositions, I know a lot of cases that it's kind of a market decision as well as a CapEx decision, and I'm just curious as to if it's more of a CapEx decision or the brand, is there any -- do you think going forward there's more negotiation to be done there? Or do you think that you're more likely to just continue selling stuff where the CapEx is too onerous and maybe the newer has a different plan or something like that?
Jonathan Stanner
Yeah. Look, it's a balance for us, Chris. Like we have tried to find assets where the ones we've sold that needed capital, we felt like there was a way for a buyer to underwrite something that we weren't able to underwrite. And we have renovated a lot of assets and not sold them.
We'll renovate 7 to 10 assets every single year. That's our expectation going into '25 as well. We do have one big significant transformational renovation going on in Fort Lauderdale that we think there is even more lift than we would expect from a traditional renovation.
But it is a real balance, and we try to take a very objective approach to where we think the return and the lift is from a renovation. The brands have generally been very good supporters. They're obviously pushing to get their hotels renovated, but that isn't the primary input in our determination of when and where to renovate.
Operator
RJ Milligan, Raymond James.
RJ Milligan
Hey, good morning, guys. Obviously, some activity with GIC in the fourth quarter. I'm just curious how your conversations are with GIC and what's their appetite now for growing the JV in '25?
Jonathan Stanner
Yeah. Well, as we say almost every quarter, they've been great partners. It's really been a wonderful partnership for us. We've got 41 assets in the venture. The venture has performed very well, particularly in light of the macro backdrop in the environment in lodging broadly.
I think they have, obviously, a continued appetite to grow the joint venture. We want to make sure that we're always balancing our investment activity and managing our balance sheet in the appropriate leverage range, but I think it continues to be an attractive vehicle for us to look to future growth and they're certainly have the appetite to continue to grow with us.
RJ Milligan
And Trey, you mentioned a pretty favorable capital markets environment just for the general lodging space. I'm just curious, what do you think needs to happen or improve to start seeing a more meaningful increase in transaction activity?
William Conkling
Well, I would just say from a capital market standpoint, whether we're looking at our balance sheet from a refinancing standpoint or from acquisitions, you look at whether it's the secured markets, the unsecured markets, the bank market has opened up quite a bit as well, the convert markets, kind of all of the different paths that you would need for financing are accessible now.
And I think that they're improving, and I think you've actually seen a noticeable shift in tone in some of those just as we've crossed over the new year. And so, from a financing standpoint, it feels like at least for the types of assets and the yields that we're buying at, as John alluded to, in these mid 8% to 9% cap rates. It's accretive way to be able to finance your transactions.
I can't speak to the other asset classes and what other people are underwriting, but from our perspective, the financing markets are definitely constructive, and there's a solid spread between where we can finance and where we can buy.
Operator
Austin Wurschmidt, KeyBanc Capital.
Austin Wurschmidt
Yeah. Thanks for taking the follow up. And Trey, your last answer might be a good segue. I'm just curious how you're -- still early, but how you're thinking about the plans to address the 2026 convertible notes maturity?
William Conkling
Yeah. I should repeat the last answer I just gave you. No, look, the convert is it's a year out at this point. It's obviously a large size maturity related to our balance sheet. It's a 1.5% piece of paper. I think the tone of the capital markets that we've seen makes us very comfortable that it's something that we have time to address here in 2025.
I would say, Austin, that all options are on the table. We're obviously looking at the best way to do that to minimize any type of mark to market on what a rate would be, but there's a variety of paths open there. As I said, the secured markets, whether it's in the bank market or in CMBS, the unsecured markets, the bank market has become particularly attractive, and the convert market is actually there as well if that's something that we want to access.
So I think we'll probably be patient with refinancing that here over the first part of the year given what the coupon is on the existing security, but we feel very confident based on our conversations with our banking partners that's something that we'll be able to refinance here.
Operator
I show no further questions in the queue at this time. I would now like to turn the conference back over to John for closing remarks.
Jonathan Stanner
Yeah. Well, thank you all for joining us today for our fourth quarter and full year earnings conference call. We look forward to seeing many of you at our upcoming conferences over the next few weeks. I hope you all have a nice day. Thank you.
Operator
This concludes today's conference call. Thank you for participating. You may now disconnect.
