Ashford Hospitality Trust (AHT) Q2 2022 Earnings Call Transcript

Ashford Hospitality Trust (AHT 0.76%)
Q2 2022 Earnings Call
Aug 03, 2022, 11:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the Ashford Hospitality Trust second quarter 2022 results conference call. [Operator instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to Jordan Jennings, investor relations for Ashford Hospitality Trust. Thank you.

You may begin.

Jordan Jennings -- Investor Relations

Good day, everyone, and welcome to today's conference call to review the results for Ashford Hospitality Trust for the second 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, senior 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 regulations.

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 the company's 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 August 2nd, 2022, and may also be accessed through the company's website at www.hcreit.com.

Each one is encouraged to review those reconciliations provided in the earnings release together with all information provided in the release. Also, unless otherwise stated, all reported results discussed in this call compared to the second quarter of 2022 with the second quarter of 2021. I will now turn the call over to Rob Hays. Please go ahead, sir.

Rob Hays -- President and Chief Executive Officer

Good morning, and welcome to our call. I'll start by providing an overview of the current industry environment and how Ashford Trust has been navigating it. After that, Deric will review our financial results, and then Chris will provide an operational update on our portfolio. I'd like to highlight some of our recent accomplishments and the main themes for the call.

First, we saw sequential RevPAR improvement each month as we move through the second quarter and expect continued strength through the third quarter. And additionally, we're excited that June's RevPAR performance was the best month we've had versus 2019 thus far. Second, our liquidity and cash position continue to be strong. We ended the quarter with approximately $615 million of net working capital, which equates to approximately $17 per diluted share and is an increase from where we ended the first quarter.

With yesterday's closing stock price of 923, we believe we are trading at a meaningful discount to both our net asset value per share and our net working capital per share. I'm also pleased to report that we generated approximately $23 million of positive cash flow in the quarter after capex and our preferred dividends. Third, we have lowered our leverage and improved our overall financial position. Since its peak in 2020, we have lowered our net debt plus preferred equity by over $1 billion, equating to a decrease in our leverage ratio, defined as net debt plus preferred equity to gross assets by approximately 12 percentage points.

Fourth, in the last quarter, we filed a registration statement with the SEC for a future offering of nontraded preferred equity. Importantly, this announcement demonstrates our strategic pivot from defense offense as we believe this offering will provide an attractive cost of capital, 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 large journeys are trading at material discounts to their net asset values. We are now effective on this offering and expect to commence issuing limited amounts of the nontraded preferred equity beginning in the third quarter of 2022.

We are optimistic about the long-term outlook for the company and by taking strategic actions to strengthen our balance sheet, we feel well positioned to capitalize on opportunities we are seeing in the hospitality industry. Having said that, we have refrained from raising any common equity capital this year. Given the softness in our stock price and our current circumstances, we don't currently anticipate raising common equity capital at these levels. To the extent we're successful with our nontraded preferred capital raise, our preference would be to use that capital for future growth.

We expect several of our loan pools to remain in cash traps over the next 12 to 24 months. However, we're pleased to note that several of our hotels, including the Renaissance Nashville and Hilton Back Bay have recently come out of their respective cash traps. We believe several other of our loans may be successful in exiting their traps in 2022 and including KEYS pools, D and E and our Marriott Crystal Gateway. For 2022, our capex spending is higher than the previous two years but still well below our historical run rate for capex.

Capex spend during the second quarter was approximately $20.1 million. Additionally, while we're monitoring risks related to the current high inflation environment and the potential impacts of our portfolio, CBRE recently issued an industry report that highlights the benefits of hotels as a good hedge against inflation. Their model cited that due to the uniquely short lease periods measured in days rather than months or years, hotels have been seen as an effective hedge against inflation, given hotels can adjust prices rapidly to account for any short-term variations in inflation. In fact, the report highlighted that historically during periods of high inflation, hotels have shown their ability to grow profits above the inflation rate.

We are seeing this play out during the current high inflation period we are experiencing in the industry. Let me now turn to the operating environment -- performance of our hotels. The lodging industry is clearly showing signs of improvement. RevPAR for all hotels in the portfolio increased approximately 73% for the second quarter versus last year.

This RevPAR result equates to a decrease of approximately 6% versus the second quarter of 2019. June was the best performing month of the second quarter, along with being the best month we've had versus 2019 thus far, with RevPAR down only 4% versus 2019. Preliminary numbers from July are consistent with what we saw in June across the portfolio with RevPAR for the month down about 5% versus 2019. Looking ahead to the remainder of 2022, 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. We also believe that our relationship with our affiliated property manager, Remington, really sets us apart. We believe 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 are pursuing opportunities to sell certain noncore assets.

We have one full-service asset under contract to sell with closing most likely in the third quarter and another full-service asset currently market for sale. We expect any net proceeds from these sales will go toward paying down our strategic financing. Whenever we sell assets, our approach takes into consideration many factors, such as impact on EBITDA, leverage future capex spending potential market growth and RevPAR among others. Turning to investor relations.

We continue to get down the road in order to meet with investors to communicate our strategy and explain what we believe to be an attractive investment opportunity in Ashford Trust. We have attended numerous industry in Wall Street conferences this year, which have led to nearly 300 investor meetings year to date. We have several more conferences coming up in the second half of the year and 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 Trust.

This plan includes continuing to grow liquidity across the company, optimizing the operating performance of our assets, improving our balance sheet over time and looking for opportunities to invest and grow our portfolio. We have a track record of successfully comes from property acquisitions, joint ventures and asset sales, and we expect they will continue to be part of our plans moving forward. 2022 2nd quarter with a substantial amount of cash on our balance sheet. And with the launch of our nontraded preferred stock offering, we are excited about the opportunities we see in front of us.

And now I'll turn the call over to Deric to review our second-quarter financial performance.

Deric Eubanks -- Chief Financial Officer

Thanks, Rob. For the second quarter of 2022, we reported a net loss attributable to common stockholders of $9.3 million or $0.27 per diluted share. For the quarter, we reported AFFO per diluted share of $1.23 in which represents a growth rate of 2,975% over the prior-year quarter. Adjusted EBITDAre totaled $96.4 million for the quarter, which reflected a growth rate of 207% over the prior-year quarter.

This is the company's best quarter for adjusted EBITDAre since the third quarter of 2019. At the end of the second quarter, we had $3.9 billion of loans with a blended average interest rate of 5.6%. Our loans were approximately 8% fixed rate and 92% floating rate. We utilized 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 one loan with a final maturity in 2022 and which is currently under contract for sale and have approximately $98 million in final loan 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 pay downs required to meet those tests. Our hotel loans are all nonrecourse, and currently 85% of our hotels are in cash tracks which is down from 90% last quarter.

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. Importantly, subsequent to the end of the quarter, the Renaissance Nashville and Westin Princeton loan came out of its cash trap and approximately $15 million of cash that had been trapped was released to corporate. We ended the quarter with cash and cash equivalents of $538.4 million and restricted cash of $126.6 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 $24.7 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 also ended the quarter with net working capital of approximately $615 million, which is an increase from $609 million last quarter.

As Rob mentioned, I think it's also important to point out that this net working capital amount of $615 million equates to approximately $17 per share. This compares to our closing stock price from yesterday of $9.23 and which is an approximate 46% discount to our net working capital per share. Our net working capital reflects value over and above the 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 June 30, 2022, our portfolio consisted of 100 hotels with 22,313 net 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 second 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 the closing stock price or equity market cap is approximately $334 million.

While we are currently paying our preferred dividends quarterly, we do not anticipate reinflating a common dividend for some time. Over the past several months, we have taken numerous tests 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, our nontraded preferred security offering is effective, and 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, and I would now like to turn it over to Chris to discuss our asset management activities for the quarter.

Chris Nixon -- Senior Vice President and Head of Asset Management

Thank you, Deric. We are extremely proud of the work that our asset management team has done to drive operating results. Comparable RevPAR for our portfolio increased by 73% during the second quarter relative to the same time period in 2021. For the second quarter, our portfolio has recovered 94% of 2019 comparable RevPAR.

We continue to be encouraged by the recovery signs we are seeing within the group segment across our portfolio. During the second quarter, our portfolio recovered 92% of group room nights relative to 2019. Additionally, our full-year group pace compared to 2019 has improved 6% quarter over quarter. I would like to spend some time highlighting the success that we are seeing in some of our assets.

Renaissance Nashville had a record-breaking month in June with its highest revenue month in the history of the hotel at $8.1 million in total hotel revenue. That represents a 3% increase over the next best month, which was October of 2021. It also had a strong second quarter, which saw total hotel revenue exceeded comparable 2019 by 9%. Group rooms accounted for nearly 58% of all sold room nights during the second quarter, which is a 95% recovery in group room nights sold when compared to 2019.

With this portion of our business largely recovered at this hotel, it has allowed us to become more aggressive with transient rate strategies. We have recently increased the rate premium for club-level rooms and suites, in addition, the hotels closed out many discounted categories to drive retail rate efficiency. These initiatives resulted in second-quarter transient ADR exceeding comparable 2019 by 12%. There are no signs that these dynamics are slowing down, and we are excited to see the future performance of this hotel.

The Hyatt Regency Coral Gables also broke a second-quarter record with hotel EBITDA coming in at $2.4 million. That is a 28% premium to the second quarter of 2018, which was a previous record. The majority of this success was a result of room rate, which was up nearly 30% during the second quarter relative to comparable 2019. The hotel was able to bring back a large long-term piece of group business, which helped propel the hotel to an 11% growth in group room revenue during the second quarter relative to 2019.

With this core piece of business back in place, the hotel was able to be more selective with remaining groups, which drove the overall group room rate during the second quarter by 15% over the same time period in 2019. Lastly, I would like to highlight the success of Lakeway Resort & Spa in Austin, which also broke a record with hotel EBITDA nearing $2.5 million during the second quarter. The achievement is a 39% improvement over the next best quarter, which is remarkable. The hotel has been incredibly successful in locking in several groups, which resulted in the hotel exceeding sold group room nights by 11% during the second quarter relative to comparable 2019.

Two of these groups signed multiyear contracts with the property. These organizations contributed to our ability to push rates, which outperformed during the second quarter by 36% compared to the same period in 2019. With these contracts already secured for future years, the hotel will be able to replicate the successful rate strategy and capitalize on additional demand. And moving on to capital expenditures.

We've noted in previous calls, how we were proactive prior to the pandemic and renovating our hotels to renew our portfolio. That commitment has now resulted in a competitive and strategic advantage as demand continues to accelerate. We currently anticipate strategically deploying approximately $110 million to $120 million in capital expenditures in 2022. We recently completed the guest room renovation at Marriott Fremont and we'll begin a meeting space renovation at Hyatt [Inaudible] and a lobby and farm renovation at the Ritz-Carlton Atlanta.

Before moving on to Q&A, I would like to reiterate how optimistic we are about the recovery of our portfolio and the industry as a whole. Every month this year through the second quarter, we have seen hotel EBITDA in our portfolio grow over the previous month, with June's hotel EBITDA nearly 10 times larger than that of January. Some of the hotels have already outpaced their 2019 performance. During the first quarter of this year, 11% of our hotels were exceeding the comparable 2019 hotel EBITDA.

Now during the second quarter, 25% of our hotels are exceeding comparable 2019 hotel EBITDA. This trend is accelerating with 31% of our assets exceeding their June 2019 comparable. As we look forward, we are seeing encouraging signs in our group lead volume for a number of markets. With these positive indicators, we believe 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.

Questions & Answers:

Operator

[Operator instructions] Our first question comes from the line of Tyler Batory with Oppenheimer.

Tyler Batory -- Oppenheimer and Company -- Analyst

First one for me, more open-ended in terms of broad trends. When you look at July down 5% with 2019, can you discuss more detail on what you saw in the business in July? And then -- in terms of the recovery trajectory, obviously, lots of momentum here. Is it possible Q3 compared with 2019 is better sequentially than Q2. And kind of how are you thinking about your commentary with revenue compared with 2019 coming back in 2023? Is it possible that maybe we see that a little bit earlier?

Chris Nixon -- Senior Vice President and Head of Asset Management

Yes. Thanks for your question, Tyler. This is Chris. I'll take that.

So we are seeing favorable signs and trends continue into Q3. There's nothing in the down that we're seeing that indicates any kind of a pullback -- and our preliminary forecast for Q3 do show continued improvement over 2019 relative in Q2. And so July performed very consistent with what we saw in June. Broadly, in terms of the segment trends we're seeing, the mix of business is very similar to what we saw pre-pandemic with some slight adjustments.

Group is 25% of our mix now, and it was pretty pandemic. contract has been relatively similar. We're seeing an increase in leisure as a percentage of our mix and a decrease in corporate. So leisure is up to about 48% of our business mix, compared to 42% pre-pandemic and corporates moved from about 29% down to 23%.

We are seeing very encouraging trends from the corporate segment, and we believe those are going to continue as we look ahead. There's been steady recovery out of that segment to kind of paint that picture. If we look back to January, corporate was at 37% of 2019 levels for our portfolio. In June, it was up to 76% recovery.

And so we're very encouraged by that continued momentum. We're also seeing some interesting things. The corporate customer is kind of a longer length of stay than they've ever had across our portfolio. We're seeing a lot of our corporate travelers staying through shoulder nights and into weekends.

Funding occupancy in our portfolio for Q2 actually exceeded 2019 levels, which is great. And so we expect these trends to continue into Q3, and we're not seeing any sign of a pullback.

Tyler Batory -- Oppenheimer and Company -- Analyst

OK. Great. Appreciate that commentary. And then a follow-up question, probably for Rob.

Just in terms of the asset sales here. Any more detail you can provide on why you think now is the right time to pull the trigger on this, why you selected these hotels specifically? Any numbers in terms of potential proceeds as well?

Rob Hays -- President and Chief Executive Officer

Sure. So different things. I mean I think it's something where we've -- I don't know if there's any one moment where you can kind of do it all at once, right? So I think our strategy is going to be to continue to kind of layer these on over time. The reason that these assets are currently on the market or for sale was that they are kind of lower RevPAR, full-service assets that potentially had either capex needs that we maybe don't think for the best use of proceeds or more longer-term hold markets for us.

And I think that will be pretty consistent with the assets that you see us sell will probably fall either into the bucket of lower RevPAR full-service assets just because when we look over the life of those assets, we find that they just don't generate as much EBITDA just because you -- with the lower RevPAR just don't generate as much cash flow, but you still have to do the same amount of capex spending times. So I think we're trying to move some of those off our books. And then at some point in time, you'll see us potentially sell off some of our select service assets that aren't long-term holds. But again, that will be kind of so selected.

In terms of what we think the proceeds -- net proceeds may be for kind of at least these two assets, it's probably in the neighborhood of, I'd say, probably $15 million to $20 million is kind of a best guess right now. It could be a little bit higher than that, but somewhere in that range. And given our current strategic financing, those proceeds will need to primarily go to pay down that debt. So that would be our most likely use of proceeds for that.

Operator

Our next question comes from the line of Chris Woronka with Deutsche Bank.

Chris Woronka -- Deutsche Bank -- Analyst

First one might be for Rob. Rob, with -- talked a little bit about with the nonprofit, the opportunity to go back at office at some point. I mean, how do you not looking for super specifics here, but I mean how would you directionally characterize the kind of stuff you're going to look at? Is it going to be full service? Or are you going to tilt toward more toward resorts or urban or some of the same markets you've looked at in the past? Or are you trying to get a little bit more broad?

Rob Hays -- President and Chief Executive Officer

I say the question, Chris. And the answer is a lot of it is opportunistic. I think when we're looking at some of the theses that we want to invest in, some of them are opportunities that we're seeing for repositioning. There are -- so some of the assets that we're looking at are assets that we think are kind of underbranded or independent that maybe could use a brand from a distribution standpoint.

I think we're also looking potentially add markets where we already have markets we like, we already have a little bit of a position just because it really allows us to operate those with a lot of efficiencies. But I also think that we're also seeing opportunities in some of these northern -- more northern and urban markets that are a little bit out of favor because you can get more attractive pricing on them relatively than you can in some of these resorts and southern markets that we're seeing right now. Because we are believers in the recovery of business travel and the recovery of group. And so I think given that there's just some out-of-favor markets kind of in the northern of the U.S., I think there's some interesting opportunities that are going to be coming up over the next few years in that.

So not particularly specific because a lot of it is kind of opportunistic, but I think there's not necessarily a consistent theme in the stuff that we're looking at today. They just all have kind of unique opportunities in their own right.

Chris Woronka -- Deutsche Bank -- Analyst

OK. Fair enough. And then this one might be for Chris. Think about brand standards now that we're back to pretty much have most of our corporate travel back group travel back.

Do you think the group -- the brands have landed on a final resting point in terms of service delivery on housekeeping and some of the food and beverage options?

Chris Nixon -- Senior Vice President and Head of Asset Management

I don't know that they've landed on it and that it's fixed. I mean, we've got a great relationship with the brand. It continues to be fluid. We've got a number of vehicles where we provide heavy, heavy input and our feedback I can't tell you that in addition to the operational efficiencies that our management partners have found, we're very thoughtful about how we deploy capital.

And so we're running more efficient operations, but our guest service scores are increasing over prior year and also over 2019. And so that tells us that we're being very thoughtful in terms of the efficiencies we're driving and how we're deploying capital to be very mindful of the guest experience. So I think -- I don't think they're firm and final. There continue to be changes.

Marriott adjusted their housekeeping policy just in July. And we're hoping that the other players don't pull a suit, but I don't think anything is final yet.

Operator

[Operator instructions] Our next questions come from the line of Bryan Maher with B. Riley.

Bryan Maher -- Craig-Hallum Capital Group -- Analyst

Just first, a point of clarity. I think you mentioned $15 million to $20 million proceeds for a hotel sale. Was that the one hotel that's currently under contract, but I guess, looking to close in the third quarter?

Rob Hays -- President and Chief Executive Officer

Yes. That would be both. To the extent that we end up selling the other one that is currently on the market. So it's the combination of those two.

Bryan Maher -- Craig-Hallum Capital Group -- Analyst

OK. And then if memory serves me a few years back five, six years ago, there were plans or considerations to really lighten up on the select service and focus on full service, kind of like what you just talked about maybe stuff that needs some help in some decent markets that you think are going to grow. Is that still the case? I mean, would you anticipate lightening up on select serve? Or is there a thought to really keep that large chunk of that portfolio?

Rob Hays -- President and Chief Executive Officer

Yes. I think over time, the goal would be to lighten up on it. I think the question is what's the right way to do it? Is there a way that makes a broader more strategic sense for the portfolio? So -- but I do think there are some pools and some assets that are select service that I think we are probably going to consider for sale in the next 6 to 12 months. So I think on a net basis, you'll see us continue to lighten up on our select service.

Just given where the debt markets the transaction markets are, it seems unlikely that there's a trade to do kind of all of the select service or a huge part of select service. Realistically, we have some of -- a decent amount of select service that's crossed in debt pools both in our Island portfolio and our let's call our 17 loans where we've got full service and select service crossed -- and so at a minimum to be able to extract that and do something with it, we'll need to refinance that at some point in time in the next few years. So I think as opposed to anything dramatic, I think you will see us kind of lighten up on it over time opportunistically.

Bryan Maher -- Craig-Hallum Capital Group -- Analyst

Yes. That's a good segue into my next question. Maybe for Deric, I guess. What are the mechanics of actually using your large cash position to extract asset from the debt pools to subsequently monetize them at the right time? How do you go about doing that?

Deric Eubanks -- Chief Financial Officer

Well, Bryan, we've got the flexibility to do that. I think from our perspective, holding that cash balance has been strategic for us because -- we know we've got some extension tests coming up on a lot of our loans in 2023. And we're unsure what those extension tests might look like because those are mostly a trailing debt yield at the time of the extension. And so depending on the ramp-up of the recovery, the potential paydown requirements could be nothing and could be significant.

So we wanted to hold that cash on hand for that flexibility and for that. So I think in a perfect world, we just line up the refinancing of those tools at their maturity dates or close to their maturity dates with any sort of releases or changes in the makeup of those tools and portfolios that we want to make and do it at the time of the refinancings. We've contemplated go ahead and do some refinancings now to get in front of some of those extension tests, but the debt markets at the moment are not real attractive, while at the same time, the fundamentals continue to be very attractive. So we've opted to just sit and wait and hope that the market improves.

Rob Hays -- President and Chief Executive Officer

And, Bryan, I'll also say that we've approached -- there's a handful of assets that, again, I think, fall in this category of noncore, non-long-term hold, lower RevPAR, full-service assets that are crossed in pools. And typically, the mechanism to extract those is you're paying about 115% of the allocated loan balance for that asset. But normally, there's other tests involved, meaning that your debt yield isn't any lower, your debt yields above where it was when you originated the loan, etc., etc. And realistic right now, most of the loans don't meet those tests.

And so you actually would have to get some sort of waiver or agreement from your lenders in order to achieve that. And the issue just what are they what do they want? Do they want an additional paydown? Do they want a fee? And so right now, as Deric said, we're trying to be cautious and prudent with our cash, given what's going on in the debt markets but to the extent that we can find a solution with lenders, then there are ways, hopefully to maybe extract some of those assets prior to refinancings.

Bryan Maher -- Craig-Hallum Capital Group -- Analyst

OK. And just last, maybe kind of a housekeeping item. I think suffice it to say, you probably pay down the Oaktree financing when it gets closer to that two-year mark. Is that the thing we should be modeling for kind of late 4Q or early 1Q 20?

Rob Hays -- President and Chief Executive Officer

That's a good question. As we sit here today, I mean, I would love to be able to pay it off in January when the -- when it's kind of the two-year make old burns off in the middle of June -- I mean, middle of January, I say -- but it's really dependent upon the next six months, right? I mean if we -- if the recovery continues like we're hoping, and we're not kicked into a nasty recession, and I think it's a reasonable assumptions to be made that we can pay off maybe sometime around January. But it's still TBD. While I would like to send it.

I'd like to paid off. It also is a substantial amount of cash to spend $200 million off your balance sheet. So we just want to make sure it's the right time to do it and to just be dependent on how this recovery looks in the next few months.

Operator

Our next question has come from the line of Michael Bellisario with Baird.

Michael Bellisario -- Robert W. Baird and Company -- Analyst

Just a couple of follow-ups there focused on the balance sheet, both for Deric, I think. But how much cash is actually trapped at quarter end? And then I know you said I think you had 15% of your hotels are no longer in cash traps, but maybe directionally or if you could put numbers around it, how much of the value of your assets or cash flow is actually no longer in a cash trap today?

Deric Eubanks -- Chief Financial Officer

Yes, Michael, at the end of the quarter, we had about $19 million that was trapped and that would be in our restricted cash on our balance sheet. About like I said, $13 million of that amount has since been released. So there's really only about $6 million to $7 million that's left in the trap as of the end of the second quarter. In terms of the assets, the percent of assets you're right, it's 80% of the assets.

In terms of the value, we haven't really done that math, but I can tell you from a sort of percent of run-rate EBITDA. It's actually pretty close. It's just slightly less than that. So we're going to say it's 85% of the assets, maybe that represents 80% to 83% of our EBITDA because some of our larger assets are out of those traps.

So it's slightly less and as Rob mentioned, we do anticipate that maybe another 10, 13 hotels or so by the end of the year, we'll be coming out of the trap as well. And really, it's really only been in the last quarter or so when those hotels were generating an FX of cash to actually have any cash go into the trap. So I would anticipate that from here, if trends continue, what we've been saying that we would see more and more cash start to accumulate in those traps. And it's also important to note that any trap cash would also be available for any extension test when the -- if we have loans that have attention to test at the time of those extensions has any additional cash that's sitting in restricted cash at trap would also be available for those above paydowns as needed.

Michael Bellisario -- Robert W. Baird and Company -- Analyst

Gota. That's helpful. And then just one more on the bigger picture on the debt side. Can you maybe provide some on pricing changes in LTVs, what you've seen in the mortgage market and the changes that occurred over the last 90 days or so?

Deric Eubanks -- Chief Financial Officer

Yes. I mean it's clearly deteriorated. And I mean, look, we haven't really been in the market to do anything. If we sort of tested the market and pulled back I think from an LTV standpoint, you can probably still get relatively high LTVs, but it's going to cost you.

And so I would say, spreads probably widen 100 basis points or so from maybe 150 basis points from where they were three, four months ago. And that's not typically what we've seen when the index rates have been going up. Typically, when we've seen the Fed raise rates, you've seen credit spreads come down, and so this is a very unique time and at least in my career in terms of the Fed raising rates, and we're also seeing credit spreads go up, when in reality, from a risk perspective, the fundamentals continue to be very attractive. So it feels very technical.

It doesn't feel like there's a reason for the credit spreads to be going up because from a real risk standpoint, like I said, in the fundamentals continue to get better. So we're optimistic that it's a short-term phenomenon and the market will improve here at some point in the near future.

Rob Hays -- President and Chief Executive Officer

Yes. I think some of the quotes that we had seen was basically LIBOR plus or a SOFR plus the kind of $500s, low 500s, if you're going up to 60%, 65% it's obviously a little bit lower than that if you're staying below 50. But it's still, as Deric said gapped out probably at least 150 basis points, I think, probably from where it was four or five months ago.

Operator

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.

Rob Hays -- President and Chief Executive Officer

All right. Thank you, everyone, for joining today's call. We look forward to speaking with you all again next quarter.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Jordan Jennings -- Investor Relations

Rob Hays -- President and Chief Executive Officer

Deric Eubanks -- Chief Financial Officer

Chris Nixon -- Senior Vice President and Head of Asset Management

Tyler Batory -- Oppenheimer and Company -- Analyst

Chris Woronka -- Deutsche Bank -- Analyst

Bryan Maher -- Craig-Hallum Capital Group -- Analyst

Michael Bellisario -- Robert W. Baird and Company -- Analyst

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