Just want to thank everyone for coming, and support. It's been an interesting couple of weeks. You know, this presentation, I believe, will take you through our business, answer any and all questions that you have. Again, appreciate the support, appreciate all you coming. With that, Shanoop's gonna take us away on the presentation, and then, we're here to answer any questions, follow-ups after. But really drill into the business, and really give clarity around what we're doing, how we're doing it, and the opportunity that's in front of us.
All right. Thank you, Brian. So again, thank you all for coming. We've got a little bit more robust slide deck than we typically do to go through some additional points we wanna really drill into and hammer. And look, we're, we're still very, very, very bullish about the opportunity. You know, we're, we're big owners, you know, management's big owners of the stock. You know, we can't sell the stock. We're not here to look at it from a short term. We're here to look at it from a long term, and we've really crafted the business to leverage really the lifetime opportunity we see in front of us, which is taking advantage of the dislocation in commercial real estate. So, so who we are, you know, very, very quickly here.
First, we require long-term operating rights for hotels facing looming debt maturities in our destination core cities. Look, it's pretty important. We evolved from dislocation out of COVID to dislocation commercial real estate. We've continued to grow the business at a very fast rate, and so we feel like this is a perishable opportunity. We want to take advantage of it. Look, asset-light business model, we'll go through a lot of these points more in detail. Secure long-term lease for cash flows properties at carrying asset values at generational lows.
So again, you know, we're entering into this, a debt service at a time where the asset value has been brought down significantly, and we reap the benefits, you know, and deal with the risks associated with the long-term lease to these properties. Look, you know, we also manage our entire business as a portfolio. You know, what's unique to us is that we can operate all of them together. There's a number of different synergies we have in this. Other operators and managers individually operate in silos. We can share resources across. We do that every day. We do it, you know, as a team, multiple times a week. Lease versus buy. Look, we've done. You know, there's a lot of questions on: Should we buy the asset versus lease it? It's a 10x opportunity.
So for every unit we acquire, you know, we could buy, it's 10x the opportunity, and, you know, in a situation where the perishability will go, you know, we'll run out of runway, we wanna pounce on that with driving unit growth. Look, our majority of our portfolio is 3-4 star. We've got, you know, a recent announcement that's more into the 4.5-5-star category. We'll talk about that, a little bit, you know, more into the presentation, how we plan on managing that, how that's gonna tailor into our, into our portfolio. And then, look, consistent revenue growth, you know, you know, real EBITDA, you know, GAAP net income last quarter.
We're doing what we can to drive value now, you know, unoptimized, without ancillary revenue, you know, strong ancillary revenue, impact, without the strength in the return of business travel, and really, really, you know, not fully optimizing our ADRs at a property level. Look, also, capital structure's improved over the last year. We'll go through that a little bit later. And then finally, what we're really proud of, too, is we're Wyndham franchisee, and we completed that integration this last quarter. You know, with any integration, you know, there's some hiccups associated to it, but we got through it, and, you know, we're fully invested in the Wyndham platform. So quick snapshot of the business. 18 currently operating properties. You know, we're really moving to operations versus MLA.
We'll go through that a little bit later in the presentation. Five cities, New York, Miami, Los Angeles, New Orleans, D.C., and targeting Boston and U.K. You know, none of that's changed from before. And look, we're, you know, we're 600 employees strong, you know, and continuing to grow that number. Look, just a very quick evolution of the business. We've transitioned this business, and, you know, we're really sort of honing in the business model. I mean, the business model still has some variability, but we're getting closer to kind of what we feel like it is optimized. So business founded in 2017, you know, really, as an apartment rental business. 2020, COVID hit. 2021, we entered into our first hotel. In 2022, we really started growing the hotel business. We did an initial public offering.
We changed our name to LuxUrban Hotels. We fully exited the apartment rental business, really just saw capital allocation, resource allocation, you know, A versus B. Opportunity set was really in the hotel business. We ended the year, eight operating hotels, 840 units, including our first property in New York City. 2023, this is what we've accomplished, you know, year- to- date. So some of this is as of September, some of this is through the end of the year. But look, we eliminated all our senior debt. We extinguished our future revenue share payment obligations. We onboarded, you know, we signed, entered an agreement, onboarded with Wyndham. Monumental, huge task in and of itself.
We did a Series A Preferred offering, and, you know, without sort of giving too much details on the full year numbers, you know, we more than doubled our revenue during that period. And then we had significant opportunity to grow in 2024. So all in the course of, you know, our first sort of few quarters after being a public company. Look, in 2024, what we've done so far to date, you know, one month in, we acquired The James, our largest property to date, our best property in terms of quality, asset quality. Look, our goals are to continue acquiring larger scale.
So you'll see acquisitions that are, you know, greater unit count, so we have to do less of these, higher quality, what's in the pipeline as well. Pipeline will change. And then, look, we wanna add some more industry expertise to the company. So fundamentally, the opportunity set is, the large bit of refinance from 2023- 2027, right? So, so coming off of short-term refinance that was sort of geared off of COVID, the looming debt maturities are significant, and the cost of capital has changed and the terms have changed, right? So, so loans are coming due at an increasing, you know, increasing rate that are much more risk-averse than they were pre-COVID.
So basically, what that means is owner-operated manager franchise assets are no longer financeable based on the variability of cash flow, right? And so that's really the premise that we come in. We offer fixed rental rates, corporate guarantee. We get all the upside, but we also take on the downside associated to that, right? And that's financeable, for the lender. It allows landlord to preserve the asset and to reap in the upside of the asset in the future, right? So asset preservation for them. They have other alternatives, but the alternative to not go out of pocket really is one of us coming in. So continuing on. So look, asset light, we'll spend just a second on this page.
The real benefit here is, look, asset light versus, you know, acquiring actual property, allows us to grow at a much faster pace, right? So we mentioned before, it's 10x opportunity, you know, identifying low cost, long term. You know, we're targeting 20-30 years now, with full extension options, triple net lease opportunities. We'll go through what triple net, you know, means in our terms. We're looking at turnkey, high-quality properties that are operating, that are successful on an operating basis, but that are dislocated on a capital structure perspective, right? So the capital structure is dislocated based on the refinance situation, not based on the economics of the property. We think we can do better, but we don't have to, to make it work.
And then, you know, we're taking on the full benefit for a long-term period, of course, along associated risk associated to it. So look, we wanna leverage our relationships, increase RevPAR, we're calling it Total RevPAR, to be fully transparent. Drive margin expansion, increase cash flow, drive ancillary revenue to the business. All right, so property acquisition map. We'll go through this, and then there's some other slides that actually take it to what the pipeline looks like right now. So if you look at our historical average acquisition cost, this is through the, you know, 18 operating properties, is $13,465 a unit. Our Total RevPAR, you know, Total RevPAR, we'll define it here in a second.
But it's basically all revenues associated to our business, which is ancillary revenues, secondary fees, taxes, you know, all of the, you know, all, all pass-through fees that are to the guests. So it's total revenue divided by average unit count, with the EBITDA margin of 24%, so roughly six months of payback period straight on EBITDA. If we were to factor in some of the other drain on cash flow, maybe it's 6-9 months, right? So let's talk about what, what the, the world was like beforehand and how we come into play, and what really does a franchisor, do, with regard to our business. So, so, you know, before the model, you got an owner who's got variable cash flow from maybe a management company, maybe he's operating the business himself.
And, you know, the lender gets a fixed payment. In the revised model, which we're coming in as the operator, we provide a fixed rental rate to the landlord, which is financeable, and then we deal with the variability of the cash flow. So look, the brands are a critical part of this. They provide a bunch of support associated to it. I'll go to exactly what how we quantify it. But they're really, truly a toll collector. They don't operate the properties, they don't deal with guests, they don't check people in. They collect toll from either the owner on the prior business model or sort of how we come in, they collect the toll on us. Going specifically to what brands do and don't do. So brands provide branding, expertise, and support, manage the rewards program.
So very powerful. 100 million rewards on the Wyndham platform. We have access to all that. They book directly, so we get an OTA out of them, which we'll go through the benefits of that, but it's margin benefit. They have a website, they have apps, right? Tools associated to the hotel operations. Property-level software as well, allows us to enter into larger hotels, right? So we integrated with Oracle and Opera, which was Wyndham's software packages, allows us to do bigger things than we normally would without investing capital into it. It is a misnomer, what they don't do. So what don't they do? They don't manage revenue. We do the revenue management. We deal with. We'll go through a slide with occupancy.
We deal, you know, with selling vacant rooms, right? So how your real Total RevPAR, the primary component of RevPAR is occupancy, right? So we manage that. We interact with the guests. We check them in, we clean the rooms, we check them out, we maintain the property, we get reviewed, they don't get reviewed, right? And as we all know, reviews are nearly always negatively tilted. People don't give you an attaboy on a good stay. They really, you know, it's a, it's a tool to complain about a bad stay, and we're dealing with thousands of people a day, we're gonna make mistakes. All right, so let's talk about the Wyndham collaboration. Look, the way I would define this is, this is a really good deal for us and a really good deal for them, right?
So when you think about a true partnership, it's when you can, both sides can say that we're, we're really getting a significant value out of it. So, excuse me. So they provide us key money on a property-by-property basis, right? It's development incentive dollars or advances. We'll go through that in a little bit later. And they provide us systems and support from an operating perspective, as we talked about before, our Oracle Opera, their app associated to their rewards program and guests. So if we think about on the right side of the page, like, what's the real sort of trigger points that we think about? So financing on development incentive dollars.
We'll go through kind of how we look at the model as we're evolving with regard to, you know, the financing, you know, indirect financing that they're giving us. Total RevPAR, so there's a benefit associated to increasing RevPAR, global sales team, corporate accounts, you know, you know, a different approach to selling rooms in the future. We would benefit over time. Remember, we just integrated, in greater RevPAR, and then margin improvement, right? So it's cheaper for us if a guest books on the Wyndham platform than if they book on a third-party OTA. As we progress over time, we will see that benefit. We're, you know, in the, in the realm of break even.
When I say break even, pre-Wyndham versus now, in terms of operating costs, 'cause we do have to pay them, but as we move forward, it's a benefit to us. Whoops! All right, so development incentive dollars. So Wyndham provides us development incentive dollars, which we call key money. There's different terms for it, Dan, as well. The way it's structured is it shows up on our balance sheet as a liability, it gets amortized to other income over the course of the agreement. As long as we maintain, you know, good-- we're a good franchisee, there's no obligation to pay it back, right? So I think the opposite of that would be on their side, they record it as an asset, and they amortize it as expense over time as well.
So that's the way it runs through the financial statements. You know, and it's very powerful for us in terms of, you know, as we enter into new properties, that's in most cases, our significant capital outlay is associated to security deposits, and it's an offset to that. Cash is fungible. Allows us to accelerate growth as well as mitigate risk in the business. So we've got a couple other partnership opportunities that are in the pipeline, but before we go through that, I just wanted to, you know, explain as to why would someone like Wyndham or some of the other partners consider us, right? So for one, you know, they also recognize the generational opportunity, right? So we're not alone in this, that we've found something that no one else sees this going on, right?
We have the ability to capture it, which we believe no one else has the ability to capture it, but we're not alone in terms of seeing the opportunity that's in front of us. So they see that. The opportunity to capitalize on the current and future cash flow generation of this opportunity is significant. A 20-year, 30-year lease, think about it, right? Think about what RevPAR revenue rates will be in 20 years, and, you know, they get a portion of that, right? So, so, so very lucrative for both sides. You know, obviously, we get the benefit of their support, but they get the benefit of, you know, a very long revenue stream associated to it.
Just one thing to add. If you go back to the ecosystem slide, you know, what we have done is, and you see it in the partnership with Wyndham and with potentially others, we created a new category, right, in the hotel space, right? So we have a place in the ecosystem, and obviously, the industry sees it from the real estate side, right? Large property owners, multi-billion-dollar property owners, Wyndham, the largest franchise hotel company in the world, and some of the largest management companies in the world, that are looking to utilize LuxUrban as a new category within the hotel space on the MLA structure.
Yeah, and you know, if we look at the last bullet here, you know, not only do they see the opportunity now, but as we optimize the business, they share in that optimization, right? As we generate more revenue per guest, you know, they will share in that. And so they're fully vested to help us succeed in that regard, right? So and again, going back to a good deal from both parties, you know, if we succeed, you know, they succeed, right? So look, we're very pleased with that, and this is really, if you think about the question, is why would they choose us? They see the opportunity, and they're gonna reap the rewards, right? Based on how we structured the deal. So that's a good lead into a couple of recent developments.
You know, obviously, you know, we announced this transaction going forward. We're gonna limit the announcements of MLAs. We're gonna really tie it to more operations, just based on the variability of the deal cycles. And, you know, what can happen, what can go wrong associated to it. It's a very complex transactions from taking over operations. I think we simplify the complexity, so people think it's a very simple process, but there's a number of steps that go through that have to get done, and so things can go sideways throughout this process. So we're changing our approach to it. This is something we announced already, so you're not gonna see a whole lot of these going forward. But what makes this relevant is really two specific things. One is, it's our largest acquisition to date.
So what, what we're seeing now in the pipeline are bigger acquisitions, greater impact to unit count growth with less individual transactions, right? So, scaling, you know, really sort of coming down and making the larger impact with smaller, with less deals. The second is our highest quality today, right? So, in terms of star category, it's 4.5-5 stars. You know, slightly better than where we are, you know, maybe at this property or some of the other properties in our portfolio. Has on-site facilities that are gonna be third-party operated. And it's a, you know, New York City landmark property, right? So, we're very, very proud of this.
You know, just shows the ability, you know, of our team to execute as well as the support that we're getting, not only from our partner, but also from third parties, you know, like The James. So a couple of things that, you know, we wanna go ahead and just talk about that, you know, may come down the pipe here. So look, we're in discussions with operators. And we've got one that's under an LOI. You know, the purpose of it is really to operate some of these higher-end properties, right? So we're good at... You know, what-- We know what we're good at, right? We're good at the three, four star. We've done a good job with it. We've got a good team around it.
But as we elevate to higher end, we're looking to leverage the partner, again, establish a really good partnership and deal for both parties. And not only just operate the property, but allow us the benefit to pool internal expertise with expertise from the operator, greater economies of scale, greater, you know, leverage with regard to the New York union as well. So, you know, it's strength in numbers. You know, as we've grown, we've seen you've got more leverage in these things, and, you know, it allows us access to that, while also solving potentially a need, which is, you know, how are we gonna operate higher-end properties in the future?
And also major pipeline opportunity with existing owners-
That's right.
where they're already operating. This particular manager operates 12,000 keys in the city. In New York City alone, 87,000 worldwide. So, they're in, you know, in the hotel, managing it existingly. It becomes turnkey, sign the lease, no changeover in operations, contributes to revenue immediately. So we see that as a major pipeline opportunity that we're gonna be taking advantage of.
Yeah, which we normally wouldn't have access to.
Yes.
That's a good point. Thank you, Brian. And then other property partnership opportunities include co-branding at the hotel site. A number of different other opportunities that have approached us, that we're evaluating, gives us really sort of, you know, momentum with scale, and lower costs. So let's spend a little bit of time going through all the numbers. You know, as a company, we're very analytical, right? So we look at... You know, we keep score amongst ourselves, and we hold people accountable, and that's, you know, really the only way we really can see if we're making progress. So a couple numbers on the left. Look, cash balance as of September is $4.8 million, you know, versus what was in December.
Look, a net cash position for debt, in September, $21 million of shareholders' equity. If we look at our net rental revenue, and EBITDA, you know, very robust growth, you know, 169% year-over-year. But if you look at the quarter right before we went public to our last quarter, it's 370% growth. Like, just for one second, think about that, right? Before the IPO, right, we said, we're gonna take the proceeds, we're gonna do this thing, crazy model called triple net, long-term master lease in a dislocated environment. I would tell you that not a lot of people believed we could, but from that period to now, it's 374% growth, right?
We did that, you know, with the group of folks in this room.
Yeah.
some of the folks behind us, right?
Yeah.
So that is what we've achieved in terms of revenue growth. You know, look, These numbers, there's a footnote here. Look, there's a little bit of a revenue impact associated to joining the Wyndham platform. You know, we've screamed at them.
Yeah.
They've listened, you know, they've reacted. But look, every integration has hiccups, right? So we've never done one before. Hopefully, we don't have to do another one. But you look, you know, I would say overall, doing what we did in the period of time that we've done it in, we're extremely successful and very proud of our achievements associated to it. A couple of other points here is, look, our targets, we wanna remain the same. Gross margin, 30%-40%, SG&A, 10%-12%, and EBITDA, 20%-25%. Again, you know, as we optimize, we'll change these targets. You know, talking a little bit about MLAs and why the MLAs, you know, have significant amount of variability associated to them. So they come with multiple layers of approval.
You know, the document that governs it primarily is the lease. From there, there's a number of other documents that have to get done, agreed to, signed off. There's transition, there's union, there's operators, there's all kinds of complexity to it. Again, we oversimplify the business from an investor perspective, but there's a number of layers and complexity associated to it. The transition time from MLA to possession varies. We've got two examples on the right, 57 took three weeks, and 123 Washington's former W took about six months, right? So they can vary drastically to when we get off the phone and say, "We have a deal," to when we actually generate revenue. Hence, part of the change in how we're approaching this going forward. A little bit more about RevPAR, total RevPAR.
So again, total RevPAR includes room rentals, ancillary fees, taxes, cancellation, and other revenues. We've got to build up on the next page. It goes through how we get to 274. You know, look, there's some report out there that challenges it, so we wanna have, you know, our rebuttal associated to it. Look, we've grown RevPAR. You know, RevPAR is gonna be primarily the two key drivers are ADR and utilization. As we continue to grow the portfolio, more on a four-star, that's gonna go upwards. As we grow it on a three-star, it's gonna probably go down, right? It's just the nature of the quality of the properties.
But we're comfortable at $250-$280, what we said before, and our breakeven economics, we've got it at $150-$170. We'll go through two specific examples of that in just a second. Breakeven economics are on a portfolio basis, but we'll give you two examples on a three-star and four-star in just a second. And look, you know, occupancy, you know, again, we drive to fill perishable inventory. Certain markets were near capacity, certain markets, seasonal or less, but we look at the entire portfolio, when we operate the business. All right, so components of total RevPAR. So on the right, we've got the $274 that we've already published today. Rental revenue of it is $109-$89, right?
Cancellation fees is $25, ancillary revenue is $19, taxes and other pass-through items are $41. That reconciles to the $274. But again, you know, comparing it to a concept that was presented to us in a, in a third-party report, we're kind of in the middle of the pack, but the real driver here, if you think about the two points that I brought up earlier, ADR and occupancy, we've got much better occupancy than the comp set, right? So wanted to lay it out on an apples-to-apples basis, not manipulated data. You know, DiamondRock was... We couldn't reconcile the total RevPAR, but it shows their occupancy there. Drivers of RevPAR growth. Look, overall occupancy, ADR, quality of properties, ancillary revenue, all the factors. We've talked about that before.
The other thing that, you know, I think we don't talk about enough is, you know, we're able to recycle some rooms through cancellation policies, right? So that's a big part of our revenue management strategy. So you may see a room at slightly lower rates, but if you've sold that room, you know, twice or maybe 20% more than you would, that's what goes into our RevPAR calculation. The other potential upsides is, look, travel is expected to rebound, continue to rebound in 2024. Business travel is forecasted to rebound as well. The economy still is continuing to be strong. Interest rates look like they're gonna stay higher, which continues with our pipeline opportunities.
So look, you know, the macroeconomic environment for us is to capture this perishable concept in front of us and reap the rewards of economic rebound that's gonna occur, especially business travel. Got a couple slides on our balance sheet, or actually one slide on the balance sheet, one on cash flow statement. So questions on our balance sheet came up, and so wanted to address them. The certain items, you know, actually, majority of these items did not exist a year ago, and so year-to-year comparison. Some of them did, were part of Q2 and Q1, but not in the comparative December to September balance sheet. So, you know, the breakout there is 8% charged back to landlords. We manage certain common spaces.
As part of our leases, we bill back our costs associated to managing those spaces. We have transitioned away from our core OTA. They have different payment terms associated to that. You know, our core OTA paid daily. You know, our other OTAs have are billed with typical billing cycles, 30 days or 45 days. So there's a balance at period end that gets collected 30-45 days later.
That was pre-Wyndham transition as well. So Wyndham pays daily.
Yeah. And then, we entered into two properties that were legacy migrant programs, both of which have been canceled, but there's receivables associated to that normal cancellation period. You don't cancel on a dime with the city. There's some legacy periods that you have to deal with in a cancellation term, and so there's receivables associated to that. Now, look, there's working capital aspects to growing a business. As I mentioned earlier, it's 370% quarter to quarter from Q2 2022 to Q3 2023, right? So in five quarters. What we had said, and I apologize, we didn't put the data here for processor retained funds at December. We had the same conversation about processor retained funds.
So when you grow precipitously, credit card processors view it as a red flag, right? Could indicate fraud. You know, we're growing at a rate that could be alarming when you're just looking at data. And we peaked at processor retained funds in December of 2022. What we said to investors was, "We peaked, and it's gonna come down." And that's what occurred. We're in the same sort of situation here with other receivables. We think as we continue to grow and mature, it'll be about 10% of quarterly revenues, and that'll occur over the next few quarters. Cash flow reconciliation to EBITDA, I'll get a number of questions on this. So our EBITDA year to date was $20.8 million. This is a waterfall that sort of reconciles where...
How do we get that back from cash flow from operations? So look, you know, our goal here is to efficiently use cash and generate in our business to drive long-term growth, right? Net rental revenue, EBITDA, operating units, total RevPAR, right? So that's the reinvestment into the business. So -$7 million, nine months ended September 30, cash flow from operations, of which GAAP requires us to put security deposits in that bucket. So there's about, you know, $9 million or $10 million security deposits. We have prepaid expenses that are, you know, part of acquiring new properties. For example, insurance is paid in advance, one year in advance. And then we talked about the receivables and the change in OTA strategy. And there are some other miscellaneous items.
That full reconciliation, you can pull straight from our financials, gets to the $20.8 million of EBITDA, reported EBITDA. Again, these are numbers directly from our financial statements. You can reconcile this yourself. What's not in reconciliation to EBITDA is what we talked about, the key money development incentive dollars. We had a stub period where we got some money from Wyndham, some key money, and we had that, too, and we're at about $22 million-$23 million of cash flow in the business over this period. And keep in mind, you know, again, 370% growth over this period as well. So a couple... So slide on. On the business model is evolving.
Look, I'm not a fan of apples to oranges, which I think that's what this third-party report provided, a bunch of facts out of context, misleading, comparing apples to oranges. But this is a little bit of apples to oranges, but there's a point to why I'm going through it in this fashion. So we've talked about $13,645 is our average unit acquisition cost over the life of the company as of September. That number is right there at the bottom left. This page shows four deals in the pipeline, which we believe are the four most actionable deals. The net average cost is $3,640. Now, this is net of Wyndham key money, right?
So we, you know, as agreement with our partner, we can't disclose specifics, but we laid out four different opportunities and what that number is. Each one has different reasons why it's higher or lower than the other, but the average is $3,640. So what I want to point out, there's a couple of things here, right? One is all of the numbers are lower than the $13,000, right? Again, this is net of the dollars that are provided. So a little bit of apples to oranges, but still pretty powerful. The other point I want to point out is, if you look at Deal C, it's actually net dollars to us, net of the security deposit.
So Wyndham's funding an amount, which is pre-agreed upon, that is, that is based on the deal mechanics, is greater than the amount that we're outlaying as a security deposit. Now, we still have working capital, we still have to get insurance. There's other factors to it, but with regard to how that piece of it works. And then the other point to point out here is, if you look at the deals, the sizes of the deals, you know, they're 200+ units, right? So again, we're leveraging larger unit acquisitions. We're gonna grow less in terms of each individual acquisition, more coming from larger units. So this is the break-even economics of two different separate properties. So this property is a four-star property, property A.
Property B is a three-star property, both in the same same jurisdiction, so comparable location. And look, you know, you know, these amounts compare to total RevPAR that we've disclosed, right? So this is an apples-to-apples comparison, not cherry-picked information. This is an apples-to-apples comparison to how we disclose total RevPAR to our break-even economics. What I said earlier was $150-$170. One property, four stars, $187. That's the portfolio. One property is $137, right? And we have shared these details with, you know, research analysts, with our partner. We have shared this with a number of well-versed individuals in the space and, you know, and this has been vetted through that. This is not something that's, you know, we've just created.
We've actually tracked this per unit, per property for every property we have. All right, so, look, as we reflect on the last week or two, we've made significant progress. We've grown a business from really something that no one really supported us, you know, and thought we could. But we've made a ton of mistakes, and we will continue to make mistakes. As part of growing a business, we're gonna find things we didn't do as well. We're gonna change our approach, we're gonna do it better the second time around, and we're gonna do it better the third time around, right? Anyone who's grown a business knows that, you know, there's things that you wish you would have done differently.
That doesn't mean we don't actively think about it, doesn't mean that we don't communicate, doesn't mean that we don't debate particular outcomes, and we admit that we make mistakes post, right? So I'll be the first to admit that we've all... I made mistakes myself. I know Brian, he doesn't make mistakes. My mistakes are the ones that he makes. But look, we're gonna, we've taken it to heart, and we're gonna do better, right? And that's the only thing you can ask for, right? We are large shareholders of the business. We can't sell our stock, right? So we're in it in the long haul. By nature of our engagement, we're in the long haul. We're not... The maximum value we get out of this is improving the stock price, right?
We don't get cash comped in a way that doesn't really negate that. The increase in your value is increase in our value as well. So a couple of things we've laid out. We've got to do a better job of developing efficiencies and leveraging our scale. We have the scale now. It's not quite where we want it to be, but we're starting to see that... We're gonna maximize daily room rates, especially during tight windows. I think what we've done in the past is we've missed tight windows, and you've seen our properties be a little bit lower than competition in these tight windows. We gotta do a better job with that. We're gonna do more services, drive more revenue per room, right? Than the initial rental rate. That is common in the business. It's not unique to us.
We've all gotten a hotel where it's $200 and a bill that's $320, right? There's resort fees, there's taxes, there's ancillary fees, there's late checkout, late check-in, baggage fees, et cetera. So we gotta do a better job with that. We gotta better leverage our landlord relationships. Our landlords are well connected. We've got to improve our working capital, right? We've gone through that in sort of cash flows every quarter since we've been public, but we're gonna continue to do that. We're gonna build better brand strength with industry expertise. Talked about some ways we're gonna do that, you know, to reflect our growth and maturity. And you know, we're gonna continue to evolve our shareholder base to long-term institutions.
There's you know, as we grow, we wanna invite long-term shareholders into the business. It will, it'll support less volatility in the stock. And then just generally speaking, you know, we're gonna change the way we communicate. You know, we're not gonna communicate on that basis, and we're gonna try to do more events like this to consolidate communications. We are running a business, we're growing a business, we have an incredible opportunity to drive shareholder value, and, you know, shareholder communications are a distraction to that. Like, well, yes, we want you informed, but that said, we also wanna run the business to the best possible way we can. I'm almost done. Bear with me. Value proposition and areas for focus.
So, asset-light, you know, look, we talked about this asset-light model, capitalizing on historic disruption, growing portfolio for properties and rooms, a data-driven approach. We look back, we analyze, we review, we recast, and then, you know, reset, and we go forward, right? We do that all the time, right? We probably can't tell you how many times we reset our expectations on things. We admit when we shouldn't have done something, we could have done a better job with it. Again, high insider ownership. As we look at 2024, focus on expansion, add density.
There's extreme benefits to economies of scale in this business that I think is really left on the table by other folks, because they don't have the scale, expanding in new cities and drive, you know, more efficiencies at the property level. All right, so last couple things. So I've got some questions that we get typically asked, so I wanted to address that first. What is Triple Net Lease? Basically, Triple Net Lease means the lessor pays for all the operating expenses, including taxes. So the way we describe it is we are responsible for what's inside the four walls, and the walls and the roof are typically the landlord's responsibility.
Our competition, l ook, we're a hotel operator, our competition's a hotel down the street, but in terms of, you know, what we do in terms of acquisition, there's really no competition. We provide a solution. There's other solutions, but our solution is unique. We have the business to support that, right? And the credibility. Why would we pass on MLA? We're data-driven. If economics don't work, we pass, right? We pass on deals at various stages. Sometimes they show up at bad stage, sometimes they come back, and we do diligence. There's one deal that we're in the process of now, in which the labor costs are extremely high, so we're looking at potentially restructuring the deal, maybe not doing it. What level of in-industry experience throughout the company?
Look, our hotels are run by hotel professionals, but people incumbent in the history. There's folks around this room that are part of that group, in the back. But, you know, from a senior management level, you know, we have limited experience, but, you know, we've got good experience overall in business, and so we're looking to add some more bench strength associated to that. Is your guidance conservative? We think so. I mean, we beat our guidance so far to date. Doesn't mean we're always gonna beat it. We're gonna miss at some point, but we're giving you our best guess of where we think we're gonna be, and, you know, we'll figure it out when we get there, right? And we'll let you know as soon as we know. Are you cash flow positive?
We went through that, right? We went through the cash flow profile. Then lease accounting. So lease accounting is complicated, but in simplistic form, we have to capitalize a lease, and, you know, we have 2%-3% escalations throughout the lease. That cost is—that escalation cost is amortized on a straight line basis throughout the lease. What that means is, in a nutshell, is leases on year-1 have a non-cash component, and leases on year- 20 or year-30 have the opposite non-cash component, right? So it's more cash goes out the door at lease 30 than the actual GAAP expense. And that's just a straight line throughout, so there's a significant amount of cash expense that's non-cash related in our financials due to the way the accounting works.
I don't make the rules, I can't change the rules, but that's just GAAP. A couple other things that I wanna address before we open it up for questions is, Look, we got, you know, there's a report issued that, you know, painted an unfavorable light to the company, right? So I think addressed majority of the comments in this, in this presentation associated to it. And, you know, look, you know, have we, you know, made mistakes? I've already said, yes, we have. But I think we've built a pretty good business. So a couple points that I wanna go through more verbally. One is our financial auditor. You know, look, we have a very strong relationship with our auditor. We are lockstep with them in terms of how we do our accounting.
We call them proactively to help us through complicated pieces of our business. And they're, they're, they're very smart, right? And they're very experienced. There's no knock to not using a Big Four. I personally worked at a Big Four firm. I understand the complexities associated to it. They're, they're not very user-friendly. It's difficult to get access to them, and it's difficult to work through, you know, with tight timelines, right? We're a public company. Yeah, and they're expensive, but, yeah, that's also a factor, too. I am extremely happy with them. I would challenge anyone who's done my job to give me a different solution, right? So do my job before you throw stones at that, right?
And again, you know, we have a very, very good team that is very engaged in us, that's helped us through getting to this stage, right? Second, I'd like to go through some comments about Brian's prior situation with the SEC. He's available after this to actually go through the actual document with it. But I wanted to do this. This is my, my, my choice to go through this. It's come up a number of times, as you can imagine, throughout us growing this business. Just first off, there's no fraud or no negligence associated to it, right? So just take it off the table.
Yeah.
Paint it into different lights. Long report, but there's only three or four items that really are relevant: the violations. So regardless of what you view the situation, let me just be clear. The NYSE and NASDAQ approved our listing, right? With what was there, right? The most stringent individuals on the planet. The NYSE is a brand that they protect at all costs, right? So just think about that, right? Both applications were approved. We chose NASDAQ for various reasons, but I want to say that I was involved in that, directly involved in that process. Also, during the periods in question, there's a lot of misstatements associated with what was said. A lot of, a lot of things that were taken out of context, as you can imagine, in these sort of situations.
So during the periods in question, Brian was a director, not an officer of the company, right? His obligations were as a director. During this time as a director, the 10-Q and 10-K were filed, which he gave management proxy to approve and sign on his behalf, which there were some issues in around that. But again, he was not an officer, he was a director. And then also during this time, two Form 4s were filed two days late, and a 13D was also not updated timely. These are ownership forms, right? That's the nature of the allegation. Look, again, Brian's willing to sit down with anyone after this to actually go through the agreement word for word. Last bit here is, look, we have navigated this business.
We have built it. The people in this room that are with LuxUrban know how much blood, sweat, and tears associated to it. We are very engaged in this. We talk probably every day. We have a scheduled call six days a week. We check in guests every day, right? We have thousands of people we check in on a weekly basis. Thousands, okay? This is the nature of our business. We touch human beings, right? And we do a really good job dealing with that. Like, I'm very pleased at the team's performance, except for Paul back there. So if you look at what's happened to the stock in the last week or so, I would...
If you just go through, our one-year return on our stock is about 100%, right? I don't know what it is exactly right now, but I looked at it a few minutes ago. It's moving a lot, around a lot lately. But, like, one-year return is 100%. Let's just stop and think about that. Like, we can't get caught up in daily stock movements. Stock's gonna go up, stock's gonna go down. You know, Tesla's, you know, Elon Musk is a genius. He's getting some flak for what's going on at Tesla. That company is gonna be worth more tomorrow than it is today. We all know that, right? But there's volatility in stock for timing.
Look, if you look back at the one-year chart, there's been five instances where the stock's run up, it's come back down, and then it goes back up again, right? So it's the nature of the way our stock trades. So I just wanted to say that. I want people to go through that and understand that it's part of nature of being a public company. And if, and if not, if the kitchen's too hot, you can always leave the kitchen, right? And then look, I mentioned from Q2 of 2022 to Q3 of 2023, our quarterly revenue, I'm gonna say this for the last time, is 370%, right? We have built a business that is growing, you know, and with any growth, we're gonna have some broken glass, right?
But we're still very proud of that, and we have another opportunity to do that again in the next four or five quarters as well. You know, since the IPO, we've closed this hotel. We've closed 57. We've closed the Washington, right? These are properties that you would have never thought that we would have been, have access to. A former W, right? I mean, we're, we're – we have no business, you know, you know, no one thought we had any business doing what we did. We eliminated all our senior debt, and we are able to sign up a really monumental partnership with a world-class brand in Wyndham and onboard, all in the course of four or five months. So with that, I'll turn it over to questions.
Go back, please.
I wanted to follow up on the city of New York. How much actually stuck over there in terms of payments?
It's about $2.7 million or $2.6 million.
It's-
Any continuing relationship potentially with the city of New York continuing?
You know, so, yeah. So if you could Google it or look at a press. They haven't paid since August. So it's publicly owned about $138 million as of last month to Hotel Association owners. But it's about $3.3 million, $3.4 million at the end of the year, so.
That's, that's the fixed number. There is more.
Yeah, we terminated, so yeah, yeah. It doesn't go up.
Okay.
Yeah.
Yeah. So there's a cancellation period, where once you terminate, you have to give them notice.
Yeah.
There's no more.
Allen? I'm sorry. Oh, I appreciate it. Oh.
We've got a broadcast.
Okay.
Ask property once you get questions.
Okay, sure.
Sorry, Allen.
Can we drill down on the listing versus average daily rate issue, just to get that over with? And so I know it's a portfolio, but you look at a property level like this property that's listed $100-$150 per night, and you did a good job of showing ancillary revenues, bringing it up, and you did say it's seasonal. So does that imply a property like this in the second, third, and fourth quarter going to see substantially higher ADRs?
Yeah, it's the worst time. It's the worst time of the year, right? It's the worst time of the year, so it's listed at a rate, but that rate does not include all of the aspects that we did the build-up on. So the $189 for the nine months ended included that first part of the year, which is lower, but it has a build-up to that, right? So that, you know, there's an additional ramp associated to ancillary revenues, cancellations, taxes, other pass-through things, right? So the way I'd look at it is, you know, what you - if you stay in a property and you get a bill, like, that's really the - what we're looking at is the bill.
Total part, yeah.
Not what you're booking online.
Room rate, right. So, yeah, it could, it could be a, a build-up of 100%.
Yeah, so one of the properties in the pipeline charges $45 as a... They don't call it resort fee. They've actually gotten more clever with it. If we take that property, we would keep that fee. They've been very successful in it. They have a very consistent client base. And, you know, we've been told that we shouldn't eliminate that. That is not in that number that you quoted.
Sure.
You have the mic still, so.
Okay, let me-
Oh, wait, Allen's first.
Sorry, yes.
Okay, go ahead.
Yeah, on the-
Oh, you want to go?
I have the-
Okay.
The Wyndham money that they put in for originally, when you're opening new units, my understanding was it used to be around half of the security deposit you had to put up, but it looks like now that it's that you're getting more benefit from them, which should improve the ability to grow your units and stuff. Is there a way to think of if you're doing, you know, four-star type hotels, like how to think about how much they're putting up of the cost? And then following up on that, your pipeline that you have of properties to close, can you talk a little about how you think about how much of how confident you feel or whatever of how to close that to get to your guidance for 2024?
I'm so sorry. Finally, the LOI you had for an 80,000-unit, is that something similar to like what you have with Wyndham, potentially? That's it.
I'm gonna answer the first because Wyndham's part of this group and are on the, on the line, too, and we have to be very careful based on our agreement with them, how we answer that question, so it depends on a property-by-property basis. I would say that overall deposits are coming down. It's the nature of credit. As we improve, we are gonna drive that down further. And so it just depends on a property-by-property basis. What we gave you is a snapshot, really, of kind of four star. You know, certain ones are 4-4.5 star, so I think that's the way to look at it. Now, from an accounting perspective, we have to break out to both pieces individually. They are separate, right? So you're gonna see a higher number.
That's why it's a little bit apples to oranges, and I'm not a fan of that, but I wanted to show power of that, right? And again, we're not allowed to disclose the specifics, but the generalities are there. And then,
On the management, it would be a, you know, similar stature to a Wyndham type, and structure would be similar on the management, the management company.
This question is kind of related, but on the new James Hotel and then that future pipeline you put on the next slide, is The James Hotel dislocated or distressed at all, or is that sort of just a new direction the company's going in?
So when we talk about dislocation of distress, we're really talking about debt maturities, right? Owners who have managed assets or owner-operated assets or even franchised assets with variability in payment are having very difficulty, great difficulty restructuring debt or extending or maturing. Avi here is an expert in that, and he really is an industry expert on that. He does a lot of debt refinancing, but that's that when we talk about dislocations on the cap structure side, not on the performance side.
It's not a new direction to just like-
No, everyone we've done recently are operating.
Yeah, turnkey.
We're taking over successfully operating properties. They're not unsuccessful in operations. That said, since I run operations, I think we do it better. I would probably not be here if we didn't do a little bit better, but, I mean, they're operating pretty well, right? It's not, they're not dislocated. Now, look, historically, we have taken over not operating properties, but recent pipeline are all operating, all successfully operating.
Hi, guys. Thank you so much for having us. My colleague and I, we are staying at the Blakely right now. We're from out of town.
Yeah.
We booked through Wyndham, so that's good for us. I would say that the Blakely is a bit tired, right?
Yep.
Do you guys have any plans to improve some of the assets, the buildings that you operate to increase RevPAR? Is that an opportunity? We also do some construction, so we can bid out some of these jobs. I'm just kidding. Thank you, guys.
Short, short answer is no.
Yeah.
Because the capital allocation to that, the best use of that capital is to increase the portfolio. In the future, the optimization can include some of that. So it is underwritten to that level. So what the economics are-
That's our least expensive.
That is a-
In the portfolio.
Yeah, that is our... One of our most highest cash flow contribution properties because it's underwritten to that level. So by adding to it, we're taking away from getting new units that is perishable, right? So, yes, in the future, no, not right now.
Right.
We'll maintain it. We do maintain it. You know, the team, for example, giving you, you know, answer as to how we do it, you know, that property is nearly sold out every night. Rooms that are, you know, offline because of damage from facade or something, this always happens. These are older buildings, they've been cannibalized, right? So we've taken stuff out of it. If we go down, we go in and try to fix whatever issues are there before the next guest checks in, so it's done in the morning to allow for late check-in. I mean, there's some sophistication in the way it's done to maximize the operations.
Sorry, in the future, you guys will pay to improve the building and not necessarily the owner, or would it be a combination of both?
Combination, and then probably Wyndham contribution as well. As well as we do have reserves, in place-
Yeah
- on those properties, 3%-4% reserves that we pay in monthly for CapEx improvement.
Some leases have actual where we set it aside.
All right.
So.
Yeah.
Thank you.
Did you tell us what the Key Money was on The James Hotel, and if-
We're not allowed to tell you.
Okay.
Yeah.
All right. And could you also, like, the footnote in this slide, you know, talks about looking forward to collaborating on additional deals. Is that... Should we read into that? Can we talk about what that opportunity might be to partner with them for going forward?
Yeah, so they're bringing deals. You know, they have contacts that we don't. They're bringing opportunities to us. So one of the opportunities we're looking at was generated through their contacts and their relationships, and they, you know, they came to us with, you know, to have the conversation with the landlord.
A couple quick ones as well. So on the receivables, so the mix of your receivables are gonna change going forward, and it's gonna be much more transacted through the Wyndham. So your DSO, Days Sales Outstanding, we should expect to come down pretty significantly, I would guess. Is there a way you can quantify that?
5%-10% of quarterly revenue.
Versus what is it now, roughly?
It's probably 30% as of the September quarter.
Got it. Then one more question, just, your cancellation revenues?
Mm-hmm.
That seemed high to me, just off the cuff. Is that... What, what does that compare to the industry standard?
I don't know what it compares to.
The 10% turnover?
Yeah.
You're doing non-refundable rates at lower prices. You get a cancellation, you rebook the room, right? That all goes into T RevPAR. But you do 5%-10% cancellation.
Wanted to follow up on James. Rebranding James to J, why is that important?
The name change?
Yes.
You have to, yeah-
Sonesta owns the name.
Yeah, Sonesta owns the name.
Okay. And-
If you have a better name, we can consider it.
Understood. I wanted to follow up, for example, your business model versus traditional REITs. Any-
A REIT, a REIT is, you know, collects a rent-
Right.
- and distributes.
Right.
Right? It's fixed, right?
Right.
I mean, our kids could do that business, right?
Yes.
You know, there's a lot more complexity to our business, right? We have booking windows where we actually generate significant, you know, incremental revenue associated to it. There's also some art and science to it as to raise rates, you know, as you see pickup in transactions. You know, there's a number of other aspects too, you know, and look, COVID really hurt the industry as well. So there's significant opportunities as well as there's other risks to the business, right? REITs, contractually, same, same rates.
Fixed cash flow.
Yeah, fixed cash flow, you know, you know, not, not really much in terms of risk associated to that.
Okay, and I wanted to follow up. For example, previous owner of James, considering what you're doing, why is it not valuable to them to do the same as you do or any other company?
Yes, we had a slide on that. If they manage the property, they have to come out of pocket for refinance, right? So the willingness of a lender to refinance an owner-managed property is lower, right? So there's one other property that I can think of, where the owner operates it with a management company, and they want, they don't wanna come out of pocket, right? They don't wanna come out of pocket with financing. They can't. I mean, it could be millions of dollars, right? So in order to do that, they're entertaining us coming over to take over the property.
The last question, Bogart in Brooklyn, is it still yours?
Yeah.
Yeah.
Okay. Okay. All right. Thank you.
Guys, can you comment on the level of commitment Wyndham is making to you in terms of overall capital that they're providing, or is that-
I mean, we can't comment interim basis, but you'll see it on our financials.
Yeah.
Right? I mean, they'll-
It's substantial. I mean, it's substantial. I mean, I think a large portion of their allocated key money in their annual budget, you could go on and see what it is, is allocated towards LuxUrban.
They have a ROFR on anything we add. They're, which is all disclosed, right? We've disclosed all of this in our financials. Based on their business model, I think it would be unusual for them not to commit key money to that. I mean, that's their business.
Mm-hmm.
And so why would they not do it, right? If it's high-quality property that they want in their system, they would do it, right? Which is, which is really much more of what the pipeline looks like.
You know, the other question I had was on this LOI for the operator. You say that, over time, they gain certain operating rights as contemplated in the LOI. Can you kinda comment on whether that changes your long-term margin outlook, or is there any impact on the model that you see because of that?
It's a similar thinking to the Wyndham relationship. So when—if you remember, when we did the Wyndham transition, we were 92% OTA driven, paying 15%-18% commission, and the math was such that at about a third of distribution through Wyndham, it was the break-even point of the relationship, meaning we cover their fees, we get economies of scale, and we start to see margin improvement. In about... So we've been on for three, three months, really?
Yeah.
So we're in and around the break-even, and we're starting to move past that. So we were right in our math, and what they told us was correct. So we expect that to kinda normalize at 50%-60% Wyndham distribution over time. This is a similar situation where you have a massive operator with that has economies of scale that can drive margin and also the ancillary pieces, right? So if you keep in mind, when we look at The James Hotel, they have food and beverage, lobby bar. We're getting a revenue share on the lobby bar. You know, again, Shanoop mentioned it, we're not industry experts. You know, we built this business, we built a good business. We wanna build a great company.
And in doing that, we need great managers and people who truly understand how to maximize that. So that relationship is something that, you know, it's, it's gonna be a, you know, I think, a transformational deal for the company as well, both around the higher scale and then leveraging that on the other properties, right? And learning from them, right? On, on how to maximize ancillary revenue, food and beverage, lobby bar. You know, that stuff all adds up. You know, you, you, you're hosting millions of guests a year, and you add $10-$20 to a room night, right? It's, it's material, right? So, that's where we're focused. And also, just even in terms of insurance costs, driving down, other costs on a property level, you know, that, that's a large portfolio.
Yeah, I actually just wanted to follow up on that to make sure I understand it.
Mm-hmm.
And I know it's just an LOI, but, at this point. But it sounded to me like they would be, like, operating the property more so than your... You know, Wyndham doesn't operate-
Right.
your property. So in this case, they would be more handling some of those day-to-day operations because of the size and-
They would, yeah. So union labor, payroll, all the everything. Full operation.
That, I think, is just... Part of that question was, given your... You know, you put up your gross margin and your EBITDA. If you've got to, you know, essentially cut them in, you know-
Mm-hmm.
for lack of a better term, into doing that
Right.
which I think seems smart to me, would that change the gross margin profile for you or via numbers impact?
Yeah, I mean, it's 2%-3% of gross, right, is what the fee would be.
Yeah.
I think we would see improvement somewhere around 5%-8%. Just like with the Wyndham, you know, we're seeing improvement. We should see improvement of about 4%-5%. I mean, I think it flips because of the economies of scale.
Yeah.
They have, they, you know, even just down to payroll companies and HR and insurance and healthcare, all those types of things, because of the scale-
Yeah.
it reduces costs.
On a net basis, it's not-
It's net neutral or positive.
Two, two aspects.
Yeah.
One is it's a specific higher-end type of property. That's where it starts.
Mm-hmm.
Right? And leveraging that benefit throughout the portfolio.
I got it.
Yeah.
Then one other question, and I'm sorry if I missed it or it's an awkward question, but normally, a company having an investor day like this, they just put out a preliminary Q4. You know, "Hey, here's what Q4 is subject to auditing." You know, "Here's a range.
Yeah.
Did I miss that? Did we not do that? Is that hard?
You did not miss that.
Yeah.
None of the companies mentioned in this presentation, including our partner, have released their fourth quarter, so.
I see.
Yeah, so-
So you were essentially, your hands were tied, is that?
Well, we haven't finished all that, right?
Okay.
Yeah.
All right.
Yeah, yeah, yeah.
All right. Fair enough. Fair enough.
Yeah.
Okay.
I don't have a problem with it.
No, I just was like, you asked today, I want people to get that out of the way so people-
I can tell you what the numbers are, but I'll have to kill you.
Shouldn't be any surprises. Yeah.
So I was thinking about that short report that was written, and, you know, if there is one thing in there that we should all be thinking about is, you know, the capital to drive this growth, right? And I wanted to come at this a little bit differently because it's a good problem to have, that you have this opportunity to grow. But let's suppose you get to midyear, June, and you stop growing. Help me think about what kind of cash you would generate on whatever that portfolio looks like at June 30.
That's what lets me sleep at night, right, is free cash flow, right? So free cash flow is king, right? So this business generates significant cash flow. It would generate significant cash flow if we weren't reinvesting into security deposits, which under lease accounting, right, is OpEx versus CapEx, right? If you were to buy a hotel, you'd put them in as CapEx instead of OpEx, right? So the business from a physical cash perspective is cash flow positive. From a GAAP perspective, accounting perspective, it's not because of the way the security deposit hits OpEx. So with this next round of acquisitions, right, with The James included in that, the business in the second quarter with the Wyndham contribution. So historically, right, we've been putting out the capital ourselves. Now you can see the contribution from Wyndham, right?
You see that whole chain in GAAP, free cash flow or cash flow statement in the second quarter, flip to positive, right? And then increase throughout the year because... And that's where my focus is on building the business is, you know, stock can go up, stock can go down. If you have free cash flow, nothing's happened to the business, right? And, and that's where my focus is in driving free cash flow in the second quarter and incrementally third and fourth quarter through ancillary, through other things. And as the Wyndham contribution really materializes into the business, and we're not putting out millions of dollars, tens of millions dollars in security deposits, and that's offset by a large contribution, the business flips in the second quarter, the free cash flows and accelerates throughout the year, right?
You know, as a percentage of EBITDA, what do you, what do you look at?
So first off, average deposit numbers are coming down, right? So the number we had historically, the numbers are getting-- That's a combination of a number of factors. Some of it's related to us, some it's related to the refinance environment. I mean, we'll get to a stage where the free cash flow contribution of the business cannot be reinvested. Like, we can't grow, we can't physically grow that fast, right? We got operations limitations, right? So maybe 50% needs to get reinvested. It could happen in a few quarters. Like, you know, what I wanna highlight, though, is we've said this before. We've said it's gonna get better. We've given our guidance, we've hit our guidance, right? And so one of the things that was a big talking point was processor retained funds and that whole aspect, right?
And so we've said it's gonna come down to peak, and that's why I brought up the slide. And so it's the same sort of concept, right? I mean, there is such lofty expectations from us, and, and anytime there's some sort of variability, there's huge movements in sort of what, you know, you know, perception is. But, like, let's be realistic, right? We signed the deal in August at a point where he said, "I don't want to do it anymore." And I spent the next two days on the phone with, like, you know, 13 people and me. You know, it worked out well. I mean, there's some, there's some, you know, you know, you know, battle scars that we've got together. And we onboarded that. I believe it was through October, I think maybe even December.
The first property went on at the end of September.
Yeah, but it went through till December, I believe, was sort of the last bit of the properties. We have not been onboarded for a full quarter, right? I mean, let's be realistic with the expectations. We don't really know where this relationship is gonna go. We're very, very happy with where it is. You know, we've got a lot more room to grow. We have been, you know, introduced to their corporate accounts team, where, again, another Zoom call, where there's, you know, it's 80 people, right, selling their brand. We are in cities where they wanna be in, right? They're short, right, in those cities. It's strategic for them. Again, you know, there's a lot more that we can do with this. Like, the other opportunities, we're seeing visibility in that.
But look, you know, you know, these things, you know, we're, we're tied to a stock price, we're tied to quarter-over-quarter. We got to get beyond that and look long term, and which we're starting to do.
Helpful, but this is, this is what I want you to sort of address, right? Because people are worried about access to capital. But the fact of the matter is, where you are now or where you are four months from now, and you stop, let's say you stop growing, then you're, you're a cash-generating machine at that point, I think.
Correct.
So help me-
That's correct.
- quantify what that looks like.
I mean-
At midyear, you stop growing, you just generate cash. How much cash do you generate?
Yeah, I mean, I think we, you know, I'm very confident that we'll hit our financial guidance this year, $270 million, you know, $60 million-$70 million to be, but, you know, pretax cash flow on that is, you know, is-
Almost all of it, right?
Yes.
Interest is de minimis.
It's $50 million-
NOL associated to the business.
Yes.
Right? So taxes is lower, right? There'll be a little bit, but, you know, if we generate that much in profit, we'll have a little bit of tax. CapEx is, you know, sorry, we're not gonna need you for a little bit, but CapEx is gonna be limited.
Yeah. Yeah.
Now, now, now, at that point, if we are generating that, we actually, I take that back. We probably would spend low in CapEx, right? I mean, if we are generating that much in CapEx, in cash flow, we would probably do some, you know, spot renovations where, you know, we'd upgrade some properties, right? Especially ones that still have long-term benefit to them, right?
Just a quick follow-up on the Wyndham agreement. You probably don't want to answer this publicly, but you may. You talked about, you know, what met your expectations? What did not meet your expectations? What were the highs and lows? What did you learn? Can you give any more specifics on that?
So I think from an integration perspective, I mean, personal relationships, their team is phenomenal, right? All the way up to their CEO, who's engaged with us, the CFO, Chief Development Officer. So we're very close with them. We've developed a good relationship with them. They're incredibly supportive. I think the only disappointment I think we had was on technology integration with Wyndham and the move to Wyndham in onboarding 18 properties in a very short period of time. There were some gaps in sales. There were some technology issues, some issues implementing our revenue management software, proprietary revenue management software, and utilizing some of our tools that we use to run revenue management. So that was a little bit of drag.
You know, we're over that, but that was a little drag for three, four, or five weeks. That was frustrating. But outside that, it's been a great relationship.
No quantified in slightly?
Yes.
Yeah, it is. If you add that back in, the guidance doesn't change.
Yeah.
Right? And so the other aspect of it, too, is we're very impatient, right? And so, so what we're describing is something that is pretty much normal to any sort of big integration.
Yes.
Right? The entire system across to a different, you know, whole sys- you know, operating system. So it is normal in that regard. But they have, you know, for a large organization that's not as nimble as we are, they've moved pretty quickly from this.
Yes, and been incredibly supportive.
Yeah. What kind of strategies are you employing to maximize occupancy rates and average daily rates for hotel rooms?
Yeah, so I'll talk about, I'll talk about occupancy, I'll talk about just overall total RevPAR, right? Because that's the way we, we approach the business. So for one, occupancy, we just started this. We're empowering and compensating GMs associated to it. Obviously, not in the high, high occupancy markets, right? But lower occupancy, so we're giving them... We're compensating for it, we're giving them more tools. So, you know, we've implemented grab-and-go breakfast at places. You know, we're bringing in valets, you know, depending on the need at each property, to, to, to have more amenities, to pull more, pull, pull occupancy up. We're running promotions, you know, again, through the Wyndham system as well, so, so-
We're full, but our occupancy is incredibly strong.
Yeah. Yeah, overall.
Yeah.
What was the second part of the question? Oh-
I'd like to get the rate and ancillary higher, right?
Yeah.
The occupancy is there.
Yeah, so ancillary revenue, we've also started, we've kicked that off. You know, we've given our GMs a whole toolbox. What tools they use for each property, again, we're compensating them on this. You know, it's their choice, right? So certain markets, you may choose A versus B, and B versus C. In other markets, you may not have access to parking, so parking, you know, might not be an option. So the... We've rolled that out. Now, that said, you know, if we look to enhancing with an operator, we're going to leverage their expertise associated to it as well.
Oh, um-
Yeah, one question. I'm not a lawyer, but I met a couple here today. And just going back to the short report-
Mm-hmm
-that came out, I read it a couple of times and, looked at the, short volume on the stock, you know, in the back part of the year, and, also correlated with some, coincidentally, a whole bunch of one-star TripAdvisor reviews on your properties. And so when you, when you sort of look at all that, you know, together, you know, my question is like, I'm not a lawyer, but I mean, some of that looks like it's, like, on the borderline of illegality or, potential fraud, or, you know, some kind of, you know, thing-- something that, it, you know, given the amount of evidence that might be collectible, you know, something that, that could be actionable.
I was just wondering if you guys had had conversations with anybody about at least collecting that information to be, you know, put to the appropriate authorities, just to say, "Hey, you know, you, you can see all this activity. Some of it, you know, is, appears to be in a, at a minimum, a legal gray area," and it, it hurts the brand, right? It, it hurts your reputation-
Yes
... you know, with the people that you do business with.
Yeah.
I think that, you know-
Yeah, I mean, the internet's tough, right? So, there's defamation in terms of... You know, the short report was obviously highly inaccurate, right? And, you know, you have people who will post things online or do things that, you know, aren't accurate. So, I mean, it's, you know, is it worth the effort, right, financially, to pursue that?
The best course of action is heads down, execute, and-
Mm-hmm
They'll be out as fast as they got in.
Yeah.
We have a good business. We have great opportunity. We've got a great partner. We've done a great job getting to where we're at. We've made mistakes. I've been the first to admit that. We'll continue to make mistakes, but I really don't care, right?
Yeah.
I don't care. I'm, I'm not a seller of the stock, I can't. We're gonna execute. Look, it's potential opportunity to accumulate more, right? I mean, I'm not re-recommending to do it. Do what you do think is right. But if you look at our statistics for a company that generates $8 million quarterly EBITDA on $32 million, right?
Yeah.
That's got a phenomenal opportunity to grow. I'd challenge, you know, valuation for anybody who's done really true fundamental valuation on the business.
Yeah, I mean, I think you have a young company who's growing very quickly, who's, you know, we've partnered with some great companies, and you have a targeted, you know, kind of short attack on the company after stock has run off, right? And they're gonna be a little malicious in how they do it.
Don't agree with it, but-
Yeah
... it is what it is.
Yeah, I appreciate the answer, and I don't disagree with you. It's just that I've seen this in a couple other situations where-
... you know, the individual has gone to the company's customers and, you know-
Yeah.
said things to them and things that I, again, I'm not a lawyer, but.
Yeah.
Looking at them, it's like, well, there must be some limit to what you can do without running afoul of the legal.
There's our general counsel back there. Matt.
Yeah, so...
You just gave him that.
So the other side of this, and we're gonna limit only one more question or two more questions.
Yeah.
Okay? So, you know, they're clearly doing it for personal gain.
Right.
Right? Take it with a grain of salt. The best of companies have had issues with these sort of things.
We had a conversation with Jefferies.
Yeah.
and they were
Yeah.
They were the target of a short attack.
Yeah, they were the target of a short attack as well.
They were targeted, yeah.
Right. I mean-
Riley's under one right now.
Yeah.
That's very, very, you know, nasty.
Very, yeah, negative.
Yeah.
I work for B. Riley. I know B. Riley, and the guy's, you know, he's very smart.
Yeah.
He's gonna build a great business. It turns up a lot of cash. You know, it's unfortunate, but it's the nature of being a public company. We got two more questions. Go ahead.
You noted in the presentation you were gonna be trying to add more talent. I wonder if you would also be looking at adding some hospitality experience at the board level? That's my first question.
Yes. Yeah, board and executive level.
Yeah. Okay.
Yeah.
And then just for long-term investors, I mean, where do you think this—what does this company look like in three to five years? And can you get there, you know, without having to, you know, issue more equity now that you've got an expanded Wyndham relationship? And then tease out, maybe down the road, I mean, this opportunity, it doesn't last forever, this refinancing thing. How do you think this might transition to more of a cash flow company as opposed to a growth company?
It's a great question. Could you pull up the ecosystem slide? Because I think this is really relevant. You know, it's a great question, exactly how we look at it, so. So this is, you know, before LuxUrban, right? Where you have lender, owner, professionally managed company, and asset hotel, right? And now what you have is, you know, lender, owner, and LuxUrban intermediating and potentially partnering with the professional management company, right? So we've created, on the MLA structure, a new category, right? So right now, our pipeline is so robust because of the debt markets around commercial real estate, in particular, hospitality assets, right? But what you have is us intermediating over a very long period of time.
What's unique about this potential partnership, which is under LOI, is they're the gold standard in hospitality management, right? So what you have is, you have Wyndham, right? You have this potential partner, right, on subject to definitive agreements, and you have LuxUrban that is now providing, right, fixed, fixed, whether the environment comes back and they're not distressed on the cap structure side. Even if the asset value comes back, we believe between how we've positioned ourselves, the longevity of our business is not just around dislocation of distressed assets, right? We've created a new category where owners will still opt for less of the upside, if you will, for a fixed variable and just, you know, more of a, instead of being so involved in the hotel, we will kind of standardize this with the three partners, right?
And then what the business looks like is, you know, as Matt was asking, you know, when do we really get to strong free cash flow, right? When the cash flow, as we get into the end of the year with the acquisitions we've made, are generating significant free cash flow, right? It becomes, you know, when the growth opportunity slows, right, it's a redistribution of cash flow, it's buybacks, right? It's all of that. And, you know, as the largest shareholder in the company, right, when the stock goes up, stock goes down, you know, I look at free cash flow is what drives the business and will drive the business. And we're literally at that point.
And, you know, that turning point is when the business, in my view, becomes bulletproof in terms of, you know, you can attract large institutional investors. If you do have acceleration, you can top up the balance sheet, right, in the stock price. You can be opportunistic about that. But as we have the Wyndham relationship, our focus is on protecting the equity. It always has been. You know, the business has been run historically with working capital deficits, right? And in very challenged... It's been very difficult to do. We've protected our shareholders.
You know, and when you look at, you know, the bumps and bruises, a $30,000 lawsuit from, a vendor or this, I mean, that's all a result of, you know, growing a business 370% with very limited working capital, right? So that smooths out as we accelerate free cash flow. Obviously, it's improved. I think this, this lift on this acquisition cycle becomes extreme. I mean, you know, we do $100,000-$105,000 per key in revenue, so we finish the quarter at, you know, 3,000-3,500 keys, whatever it may be. You know, you're talking about $350 million revenue with 24% margins, right, with no debt. That's a serious business, right? And then you scale it from there. That's, that's how we look at it.
One last question. We're well over our limit. In the back.
Thank you very much. Greg from Goudy Park Capital. Is it right in your mind to model the run rate EBITDA of the business is roughly $10 million per quarter, and roughly in the $40 million-$50 million range per year. And if we think about that on a kind of key basis per 1,000 keys, would it be right to, as we build out our models and think about it, to look at 1,000 keys as being in the $20 million-$25 million revenue range, and on an EBITDA basis, roughly $10 million-$12 million, and then to build a model out from that?
Yeah. So 1,000 keys is approximately $20 million-$25 million of EBITDA. Yeah. That's, that's-
Yeah.
Yeah.
I think so.
Yeah. No, EBITDA. 1,000 keys, $100 million in revenue. 1,000 keys. About $100,000 per key.
Yeah.
Yeah.
It'll be $100 million revenue.
Yeah.
$25 million.
Yeah.
Per thousand.
That's right.
All right, well, we've got cocktails. We'll be around for more questions.
Yes. Thank you, everyone. Appreciate the support.