Greetings. Welcome to the Ashford Hospitality Trust third quarter 2022 results conference call. At this time, all participants are in a listen-only mode. A question- and- answer session will follow the formal presentation. If at any time you require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Jordan Jennings, Director of Investor Relations. Thank you. You may begin.
Good day, everyone, and welcome to today's conference call to review the results for Ashford Hospitality Trust for the third quarter of 2022 and to update you on recent developments. On the call today will be Rob Hays, President and Chief Executive Officer, Deric Eubanks, Chief Financial Officer, and Chris Nixon, Executive Vice President and Head of Asset Management. The results as well as notice of accessibility of this conference call on a listen-only basis over the internet were distributed yesterday afternoon in a press release. At this time, let me remind you that certain statements and assumptions in this conference call contain or are based upon forward-looking information and are being made pursuant to the Safe Harbor provisions of the Federal Securities Regulation.
Such forward-looking statements are subject to numerous assumptions, uncertainties, and known or unknown risks which could cause actual results to differ materially from those anticipated. These factors are more fully discussed in accompanying filings with the Securities and Exchange Commission. The forward-looking statements included in this conference call are only made as of the date of this call, and the company is not obligated to publicly update or revise them. In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in the company's earnings release and accompanying tables or schedules, which have been filed on Form 8-K with the SEC on November 1, 2022, and may also be accessed through the company's website at www.ahtreit.com. Each listener is encouraged to review those reconciliations provided in the earnings release together with all other information provided in the release.
Also, unless otherwise stated, all reported results discussed in this call compare the third quarter of 2022 with the third quarter of 2021. I will now turn the call over to Rob Hays. Please go ahead, sir.
Good morning and welcome to our call. After my introductory comments, Deric will review our third quarter financial results, and Chris will provide an operational update on our portfolio. I'd like to highlight some of our recent accomplishments and the main themes for our call. First, we saw ongoing RevPAR improvement in the third quarter versus 2019 and expect continued strength through the fourth quarter. Additionally, we're excited that September's RevPAR performance was the first positive month we've had versus 2019 thus far in the recovery. Second, our liquidity and cash position continue to be strong. We ended the quarter with approximately $602 million of net working capital, which equates to approximately $17 per diluted share.
With yesterday's closing stock price of $7.88, we believe we are trading at a meaningful discount to both our net asset value per share and our net working capital per share. Third, we are now effective and have commenced the offering of our non-traded preferred equity security. Importantly, we believe this offering will provide an attractive cost of capital and allow us to accretively grow our portfolio over time, subject to future market conditions. We believe access to this attractive growth capital is a significant competitive advantage, particularly given the fact that lodging REITs are currently trading at material discounts to their net asset values. To the extent we are successful with our non-traded preferred capital raise, our preference would be to use that capital for future growth.
We currently anticipate very little of this capital will be raised in the fourth quarter of this year, but believe that fundraising may accelerate as we get into the back half of 2023. Let me now turn to the operating performance of our hotels. The lodging industry is clearly recovering with strength. RevPAR for all hotels in the portfolio increased approximately 29% for the third quarter versus last year. This RevPAR result equates to a decrease of approximately 4% versus the third quarter of 2019. I'm pleased to note that September was the best-performing month of the third quarter, along with the best month we've had versus 2019 during this recovery, with RevPAR up 0.4% versus 2019.
Looking ahead to the remainder of 2022 and into 2023, we believe our geographically- diverse portfolio, consisting of high-quality U.S. assets with best-in-class brands and management companies, is well-positioned to capitalize on the strong demand we're seeing across leisure, business, and group segments. We also believe that our relationship with our affiliated property manager, Remington, really sets us apart. Remington has been able to consistently manage costs and optimize revenues aggressively, enabling us to outperform the industry from an operations standpoint for many years. Additionally, capital recycling remains an important component of our strategy, and we continue to pursue some opportunities to sell certain non-core assets.
During the quarter, we sold the Sheraton Ann Arbor in Michigan for $36 million, of which $34.5 million was in cash and $1.5 million is due in the future, equating to an estimated trailing 12-month cap rate of 3.9% and a 2019 cap rate of 7.7%. We have another asset currently in the market for sale and have identified several additional assets that we may bring to market for sale if market conditions warrant. We expect any net proceeds from these sales will go towards paying down debt. Turning to Investor Relations, we continue to have a robust outreach effort to get in front of investors to communicate our strategy and explain what we believe is an attractive investment opportunity at Ashford Trust.
We have attended numerous industry and Wall Street conferences, which have led to over 400 investor meetings year- to- date. We have several more conferences coming up in the remainder of the year, including REITworld and Deutsche Bank's Lodging and Gaming Conference, and we look forward to speaking with many of you during those events. We believe we have the right plan in place to move forward and maximize value at Ashford Hospitality Trust. This plan includes continuing to grow liquidity across the company, optimizing the operating performance of our assets, improving the balance sheet over time, and looking for opportunities to invest and grow the portfolio. We have a track record of success when it comes to property acquisitions, joint ventures, and asset sales, and we expect they will continue to be part of our plans moving forward.
We ended the third quarter with a substantial amount of cash in our balance sheet, and with the launch of our non-traded preferred offering, we are excited about the opportunities we see in front of us. I'll now turn the call over to Deric to review our third quarter financial performance.
Thanks, Rob. For the third quarter, we reported a net loss attributable to common stockholders of $25.2 million or $0.73 per diluted share. For the quarter, we reported AFFO per diluted share of $0.52, which represents a growth rate of 373% over the prior year quarter. Adjusted EBITDAre was $82.1 million for the quarter, which reflected a growth rate of 75% over the prior year quarter. At the end of the third quarter, we had $3.8 billion of loans with a blended average interest rate of 6.7%. Our loans were approximately 8% fixed rate and 92% floating rate. We utilize floating rate debt as we believe it is a better hedge of our operating cash flows.
However, we do utilize caps on those floating rate loans to protect the company against significant interest rate increases. We currently have interest rate caps in place on all of our floating rate debt. Taking into account the current level of LIBOR and the corresponding interest rate caps, approximately 59% of our debt is now effectively fixed, and approximately 41% is effectively floating. If LIBOR, which is currently at 3.8%, goes above 4%, all of our debt would be effectively fixed as all of our interest rate caps would be in the money. These caps are typically structured to expire simultaneously with the maturity dates of the underlying loans, and the vast majority of these caps will expire during 2023, as we have several loans with initial maturity dates in 2023.
Most of these loans have extension options that include the requirement to purchase additional interest rate caps. We recently purchased forward-starting interest rate caps in anticipation of these extension options. We have no final debt maturities for the remainder of the year and have only two loans with balances of approximately $98 million with final maturities in 2023. Some of the company's loans will be subject to extension tests, and with our significant cash balance, we believe we are well prepared to meet any potential loan paydowns required to meet those tests. Our hotel loans are all non-recourse, and currently 85% of our hotels are in cash traps. A cash trap means that we are currently unable to utilize property-level cash for corporate-related purposes.
As the properties recover and meet the various debt yield or coverage thresholds, we will be able to utilize that cash freely at corporate. At the end of the third quarter, we had approximately $18.6 million in these cash traps, which is reflected in restricted cash on our balance sheet. We ended the quarter with cash and cash equivalents of $505.5 million and restricted cash of $132.1 million. The vast majority of that restricted cash is comprised of lender and manager-held reserve accounts. At the end of the quarter, we also had $27.4 million in due from third-party hotel managers. This primarily represents cash held by one of our property managers, which is also available to fund hotel operating costs.
We ended the quarter with net working capital of approximately $602 million. As Rob mentioned, I think it's also important to point out that this net working capital amount of $602 million equates to approximately $17 per share. This compares to our closing stock price from yesterday of $7.88, which is an approximate 54% discount to our net working capital per share. Our net working capital reflects value over and above the net value of our hotels. As such, we believe that our current stock price does not reflect the intrinsic value of our high-quality hotel portfolio. As of September 30, 2022, our portfolio consisted of 99 hotels with 22,116 rooms.
Our share count currently stands at approximately 36.2 million fully diluted shares outstanding, which is comprised of 34.5 million shares of common stock and 1.7 million OP Units. In the third quarter, our weighted average fully diluted share count used to calculate AFFO per share included approximately 1.7 million common shares associated with the exit fee on the strategic financing we completed in January 2021. Assuming yesterday's closing stock price, our equity market cap is approximately $285 million. While we are currently paying our preferred dividends quarterly, we do not anticipate reinstating a common dividend for some time. Over the past several months, we have taken numerous steps to strengthen our financial position and improve our liquidity, and we are pleased with the progress that we've made. Our cash balance is solid.
We have an attractive maturity schedule, and our non-traded preferred security offering is effective. We believe the company is well-positioned to benefit from the improving trends we are seeing in the lodging industry. This concludes our financial review. I would now like to turn it over to Chris to discuss our asset management activities for the quarter.
Thank you, Deric. We are proud of the work that our asset management team has done to drive operating results during the third quarter. Comparable RevPAR for our portfolio increased by 29% during the third quarter relative to the same time period in 2021.
The third quarter, our portfolio recovered 96% of its RevPAR relative to the comparable 2019, with September being the first month since the pandemic that we have exceeded comparable 2019. Our asset management team has done a great job capitalizing on the recovery of the industry. I would like to spend a few moments highlighting some of the broader trends and successes we are seeing across our portfolio. During the third quarter, our portfolio recovered 98% of our group room revenue relative to the same time period in 2019, and we continue to see acceleration from this segment. For comparison, we entered the quarter with definite group room revenue pacing at approximately 90% relative to 2019. Throughout the quarter, our booked group room revenue for the third quarter exceeded comparable 2019 by 38%.
Our long-term group momentum shows encouraging signs, with group lead volume generated during the third quarter exceeding the previous two quarters. In fact, August and September were the best months this year in terms of lead generation. We are even seeing instances of group lead volume exceeding 2019 levels in some of our larger central business districts. We are also seeing continued ADR growth within our portfolio. Our third quarter ADR this year exceeds comparable 2019 and 2021 by 7% and 15% respectively. We remain encouraged by the continued resurgence of our urban assets throughout our portfolio. During the third quarter, our urban assets grew ADR by 9% compared to 2019.
The asset management team has done a great job in aggressively challenging each of the property managers to drive pricing premiums in markets with outsized demand and in identifying new inventory opportunities through physical room alterations or digital inventory audits. In addition, I want to highlight how well our asset management team handled the recent storms in the Southeast. Our commitment to keep our hotels open during these natural disasters provided refuge to locals and accommodations to disaster relief groups. During the third quarter, our Florida hotels increased hotel EBITDA by 24% compared to the same period in 2019. Despite the hurricane impact, eight of our 10 assets outperformed third quarter total revenue relative to 2019. I'd also like to quickly highlight that we had a substantial number of property performance records broken during the third quarter.
In fact, over 1/3 of our assets broke their previous third quarter RevPAR records. Collectively, these hotels exceeded comparable 2019 RevPAR by 15%. Moving on to capital expenditures. We've noted in previous calls how we were proactive prior to the pandemic in renovating our hotels. For 2022, our CapEx spending is higher than the previous two years, but will still be well below our historical run rate for CapEx. CapEx spend during the third quarter was approximately $25 million, and we currently anticipate strategically deploying approximately $100 million-$110 million in capital expenditures in 2022. We recently completed the guest room renovation at Marriott Fremont, as well as public space renovations at Residence Inn Fairfax Merrifield, Residence Inn Salt Lake City, and Courtyard Newark Silicon Valley. We are also currently renovating the meeting space at the Hyatt Regency Coral Gables.
As we look ahead to 2023, we are currently expecting total CapEx spend between $100 million and $120 million. Before moving on to Q&A, I would like to reiterate how encouraged we are about the recovery of our portfolio and the industry as a whole. Each quarter this year has shown improvement, with many of our hotels already outpacing their 2019 performance. During the first quarter of this year, 11% of our hotels exceeded their comparable 2019 hotel EBITDA. During the second quarter, 25% of our hotels were exceeding their comparable 2019 hotel EBITDA. Now for the third quarter, 36% of our hotels have exceeded their 2019 hotel EBITDA. There are also a number of broader signs of the industry recovery, including TSA throughput data, which has shown an improvement every quarter this year.
With the portfolio's trajectory and travel industry momentum, we believe that our portfolio is well positioned to capitalize on the industry's continued recovery. That concludes our prepared remarks, and we will now open up the call for Q&A.
Thank you. We will now be conducting a question- and- answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for your questions. Our first question comes from the line of Tyler Batory with Oppenheimer. Please proceed with your questions.
Good morning. Thanks for taking my questions. First one for me on margin and labor costs. Are you seeing any pressure on margin from higher labor costs? What does the hiring situation look like right now? Where are you on FTEs now versus pre-COVID? And any other areas of cost inflation that are worth calling out besides potentially labor?
Yeah, this is Chris. I'll take that. Great question. I mean, we are still seeing labor pressures. We're seeing, you know, wages continue to increase. It's definitely been a challenge. I think wages are up over 30% since 2019. In terms of being able to staff and hire, it does remain a challenge. We're seeing some signs of encouragement. The recent trends are showing the quick quits are down. Those are employees that quit, you know, within 90 days of being hired. Where we've had to turn away demand based on labor needs, but we have more heavily utilized contract labor where needed than we have in the past.
One of the things we're encouraged by though is that we pulled forward a lot of the efficiencies that we found through COVID, and we're actually seeing low double-digit improvements in productivity across our portfolio. Some of the other issues that are factoring into margins as you mentioned, the costs, inflationary pressures, the cost of supplies are up. We're also seeing utility costs increase. On a POR basis, we're seeing utility costs that are up about 25% over 2019. Those are some of the major issues playing into margin. I mean, the one thing we are encouraged by is Q3, our EBITDA margin improved significantly over third quarter of 2021.
Again, we pulled forward a lot of those efficiencies, and as we move forward through the recovery, we expect to see continued margin improvement. You asked about kind of FTE count to pre-COVID levels. Right now we're between 75% and 80% of pre-COVID staffing levels through the third quarter across the portfolio.
Okay. Great. Thank you for that. Then follow-up question on the cash traps. The percentage of hotels in cash traps was flat quarter-over-quarter, doesn't really seem to line up with improvements in fundamentals. Is that really just a function of how those cash traps are calculated? Can you help us think about your expectation for what percentage of hotels could still be in cash traps by the end of the year?
Yeah, Tyler, this is Deric. I'll take that. It varies by loan and depends on the performance of the underlying assets in each loan. They're mostly debt yield tests that are backward-looking on a trailing 12-month basis, and you take the NOI over a trailing 12-month basis as a % of the existing loan balance. You're right, so very few hotels came out of traps this quarter. We anticipate that probably a few more will come out at the end of the year. Do not anticipate that a significant amount will come out prior to their extension tests, which will happen in 2023. You know, the good thing is any cash that's sitting there in the trap is available to fund any potential pay down that's needed for those extension tests.
That's a positive. We anticipate that the vast majority of those hotels will continue to be in trap over the next 12 months or so.
Yeah, Tyler, I mean, I think the reality is that the first quarter of this year was obviously soft with the Omicron variant. As we've seen, since most of those tests are on a TTM basis, there's a little bit of headwinds on that test until we kind of get past that year-over-year comparison.
Okay, great. That makes sense. Okay. That's all for me. Thank you.
Thank you. Our next question comes from the line of Chris Woronka with Deutsche Bank. Please proceed with your questions.
Hey, guys. Good morning. Wanted to ask also on margins as to whether you're seeing any meaningful difference in kind of the ability to push on select- serve versus full- serve. I know you're tilting a little bit more towards full- serve, but you know, given some of the. Is it just more difficult to you know, find ways to optimize select- serve given that there's kind of less to be flexible with?
There is less to be flexible with. I think our employees at our select- service hotels are great at wearing multiple hats and, you know, they're cross-trained, and so there are some efficiencies that we're able to pull through. I think from a wage standpoint, to your question, we're seeing in Q3 that wages grew a little bit higher at our select- service hotels than our full- service hotels. We saw an increase of about 5% across full- service, and that was 8% or 9% across select- service.
I think it speaks to some of the challenges we're experiencing hiring at the select- service hotels and kind of that, you know, they might have a lower, you know, hourly starting point, you know, depending on the market that they're in. The positive thing we're seeing, though, is that we believe wages are starting to level off. In talking with our brand partners and our management companies, I mean, what they're expecting is, you know, somewhere around 5% growth to kind of the prior year on a go-forward basis. That's in line with what we saw broadly when you average those two across our portfolio for Q3, we were at about 6%.
Okay. Thanks, Chris. Very helpful. Then, follow-up. Rob, you mentioned the valuation metrics on the sale of the Ann Arbor Hotel. I guess you mentioned you have another one for sale and maybe more down the road. How are they underwriting? Are they purely looking at 2019 and just kind of saying that's the run rate? Or are they, you know, kind of underwriting economic softness next year? I know the trailing number is a much lower cap rate than the 2019 cap rate.
Yeah. I mean, as you can imagine, Chris, it really varies by property and market and the story. You know, the buyer that we had for this previous one is someone that owns other assets in that market, so knows that market well and has a very bullish view of that market, probably more so than we did, which is why that transaction made sense. I think it really varies. I mean, I think you're seeing people that are looking at leisure-heavy southern warmer markets. I think some of them a re potentially pulling back either rate or RevPAR a little bit, or at least not growing it as aggressively as other parts of the country.
I do think as you're looking at assets and markets that are more urban, a little bit more northern, I do think people are starting to underwrite recoveries in those markets more aggressively. I think it really varies by story. I think the smaller assets are ones where you can bring in some owner-operators and, you know, they may be bringing in something they think are different operational strategies. But overall, as you can imagine, things are slowing down. We do have an asset in the market. It's a smaller asset. Even that has been somewhat impacted by the movement in the debt markets and then things going sideways. It's just hard to see the transaction market getting too aggressive until the debt markets at least show some trajectory of recovery, which they aren't quite yet.
Okay. Fair enough. Thanks, Rob. One final one, I guess, for Deric. I think you mentioned 59% of debt being effectively fixed through the swaps. Can that or should that change much going forward? I mean, how much can you or do you want to, you know, move down the fixed curve with, I guess, more swaps?
Yeah. They're not swaps, they're caps that kick in depending on where LIBOR goes. And I'm not sure if you heard the prepared remarks, but once LIBOR goes above 4%, then we would effectively be 100% fixed. LIBOR is currently at 3.8%, so we're almost there, and it looks like we're probably headed there. I would anticipate that we'd be basically at 100% fixed here pretty soon. Now, that will start to trail off as those loans mature and, or at least have their initial maturity date. Our anticipation is that we would extend those loans. The loans that we have obviously have very attractive spreads on them compared to, you know, where spreads are today.
You know, the thinking is that we would need to replace those interest rate caps with new interest rate caps when we exercise those extension options, which is why we've gone ahead and kind of pre-purchased several forward-starting interest rate caps to be prepared for that. I mean, I think the easy way to think about it is if LIBOR is above 4%, we're pretty effectively fixed for an extended period of time. If it's less than that, then we'd be more floating.
Okay. Great. Very helpful. Thanks, guys.
Thank you. Our next question has come from the line of Michael Bellisario with Baird. Please proceed with your questions.
Thanks. Good morning, everyone.
Good morning.
Good morning.
Deric, just one follow-up on that same topic. What's the cost associated with buying interest rate caps today, or presumably what the costs might be in six or nine months? I would think either they'd be more expensive or your cap rate might be higher than 4%, right?
Yeah. It totally depends on the strike rate, the term, how long it goes out, and what the market's expectation is for future rates. It just depends. I'll tell you that the forward-starting rate caps that we just recently bought, we bought on a notional amount of $2.8 billion, which is a pretty significant amount of our floating rate debt, and those cost $25 million.
Got it. That's helpful. Then, along the same lines, can you maybe just update us where you're seeing mortgage debt price today?
Yeah. Thankfully, we're not in the market for any refinancings at the moment. It's not a great time to get a hotel loan. You know, as I've said before, typically, when you're seeing short-term rates go up, we've always seen spreads compress. It's kind of ironic because the credit is getting better. Hotels are more profitable, and they're doing better. So from a credit perspective, the credit's just getting better. But the market's a little dislocated at the moment, and you know, spreads are still relatively wide. You know, for a typical, call it 60% LTV loan, you know, you're probably in the 400-500 basis points spread range. Thankfully, like I said, we don't have a ton of maturities that we're looking at.
We've got extension options on really all of the loans that you see with near-term maturities, except for two in 2023 that have final maturity dates. It's only $98 million that we don't believe we'll have any problem refinancing. Thankfully, we're in a fortunate spot there. I suspect that, you know, once there's some clarity in terms of what the Fed's gonna do with short-term rates, that, you know, the debt markets will soften a little and be a little bit more attractive. I think until we have that clarity, it may be a difficult time on the hotel financing front.
Got it. Thank you. Chris, back to you. Just one more follow-up on the same topic on expenses. It may be asked totally differently. Are you seeing any difference in cost pressures between your brand-managed and your Remington-managed hotels?
I wouldn't say that we're seeing any differences. I think, if anything, you know, Remington is very nimble, and they're able to adjust very quickly. They're typically quicker to roll out creative solutions and test things. We're not seeing any meaningful differences in terms of, broad productivity or broad wage increases. It's between branded and our third-party managed hotels. It's really driven more by markets. That's where we're seeing the big variances. I will say there's a benefit to Remington's kinda just nimbleness in how quickly they can roll out new initiatives or pivots.
Okay. Thanks. Just last one from me for Rob, just on capital allocation. Maybe when does it make sense to start putting some of your cash balance to work on the acquisition front, or is that really solely dependent on the pace of the non-traded preferred?
I think that as of right now, you know, given the you know, we're being, I'd say, a little bit cautious in the sense that we wanna make sure we understand what's going on with the debt financing, you know, markets. We do have extension tests and on some of our loans next year that kind of happen throughout the year. You know, we anticipate that some of those could need some aspect of some pay downs in order to receive extensions. You know, we've obviously begun conversations with lenders as part of all that.
That can be, y ou know, we— as we sit here now, not knowing exactly what's gonna happen next year from an operations standpoint, we don't know if the risk to that is zero or is it something. So obviously that's why we're you know, holding the amount of cash that we are until we feel confident that we see the kind of what the path forward looks like and have some agreements in hand on those loans. The combination of that and yes, the pace of the non-traded preferred can also dictate how aggressive we get. I think to the extent that you see us do something on the acquisition side, it'll be either, you know, some smallish acquisitions, or potentially some joint ventures with partners, where we're probably the smaller piece of that, until we get a little bit more clarity on the debt markets.
That's all for me. Thank you.
Thanks, Michael.
Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next question has come from the line of Bryan Maher with B. Riley. Please proceed with your questions.
Good morning. Staying with the line of putting on the caps, the $2.8 billion in notional value that you discussed for $25 million, how is that being expensed through the P&L?
That's capitalized, so it's not expensed through the P&L. It gets capitalized. It's an asset that we purchased.
You probably have what then, sort of mark-to-market or as you—
Yeah. The value of that would fall through the unrealized gains on derivatives. If it ultimately pays off, that would show up in other income or it would just burn out through ultimately a realized loss at some point through our P&L.
Was the notional value on that, was that assuming also sticking with the 4%, you know, cap, or did you buy that at a higher rate, 5%, 6%, et cetera?
Yeah. It's a blend between 4% and 5.5%, so kind of a weighted average strike rate of 4.75%. It's basically a way to protect us if short-term rates just keep going up. You know, the forward curve right now shows LIBOR starting to come down in sort of April, May of next year. Whether that really happens or not, who knows? We just wanted to protect ourselves because in most cases, the caps that we're gonna have to replace are around a 4% strike.
Okay. Then, you know, lastly kind of on that topic, when you look out to 2023 and you see these, you know, debt pieces maturing, you know, that are associated with certain hotel assets, and you think about the cost of, you know, extending those or refinancing those at a new rate or buying caps, is that influencing your decision on potentially selling some of those hotels? I mean, we found it a little bit interesting that, you know, certain hotel REITs are still having some success transacting, not broadly so, but definitely, you know, assets here or there. Is that how you're approaching 2023, taking that into consideration?
Yeah. I mean, I think we're looking at a. You know, we've got a handful of assets that we're contemplating. I mean, it's let's call it, you know, 7-10 assets that are contemplated. The issue we have is just that some of them are crossed in other pools and other loans. Because of the way that our loans are crossed, to sell, you know, some of these assets would require either one, the ability to extract them. Given that current debt yields and other. You know, you're still amidst the recovery, it's a little bit more difficult to extract the assets than kind of in typical times. We don't quite have as much flexibility as we wish we had to sell off some of these assets.
The answer is, as I think, as operations continue to improve and it gets easier to potentially extract those assets, then I think it's something we'll be, you know, looking at more aggressively. Hopefully, if the debt markets have improved, it can make those transactions a little bit easier as well. It's definitely on the table.
Okay. Last for me, is it still the plan to, you know, retire the outstanding balance on the Oaktree loan in the first quarter, and thus that would impact to some degree your sizable net working capital balance?
Again, I'd say, Bryan, I would like to, but it's just dependent upon what happens over the next several months. I mean, I think as you can imagine, given the way the debt markets have moved, it gives us a little less comfort in the ability to, you know, to do some refinancings and asset sales like we hoped. I think it's gonna be a little bit of we'll just have to see what happens the next few weeks, or next few months, and how the recovery happens. If things go extremely well and there's some, you know, change in trajectory on the debt markets, then perhaps. I think more likely as we sit here now, it may just be a little bit of a waiting game until we, again, get a little more clarity on the debt markets.
Okay. Thank you.
Thanks, Bryan.
Thank you. There are no further questions at this time. I would now like to turn the call back over to management for any closing comments.
Thank you everybody for attending today's call, and we look forward to speaking with you next quarter.
Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.