CorePoint Lodging (CPLG) Financial Report Summaries

Risks

• The ongoing COVID-19 pandemic has caused severe disruptions in the U.S. and global economy and to our business and is expected to continue to adversely impact our business at least for the near term. The overall impact on our business, operating results, cash flows and/or financial condition has been and may continue to be material.
• We are subject to the business, financial and operating risks inherent to the lodging industry, any of which could reduce our profits, the value of our properties and our ability to make distributions and limit opportunities for growth.
• Macroeconomic and other factors beyond our control can adversely affect and reduce lodging demand.
• Contraction in the global economy or low levels of economic growth could adversely affect our revenues and profitability as well as limit or slow our future growth.
• A significant percentage of our hotels are concentrated in three states, which exposes our business to the effects of certain regional events and occurrences.
• Our hotels operate and we compete for acquisitions in a highly competitive industry.
• We are subject to risks associated with the concentration of our portfolio in the La Quinta brand. Any deterioration in the quality or reputation of the La Quinta brand, including changes to loyalty programs, or our relationship with the La Quinta brand could have an adverse impact on our financial condition or results of operations.
• We are dependent on the performance of LQM and other future third-party hotel managers and could be materially and adversely affected if LQM or such other future third-party hotel managers do not properly manage our hotels or otherwise act in our best interests.
• Certain of our hotel franchise agreements contain provisions limiting or restricting the sale of our hotels, which could materially and adversely affect our profitability.
• If we are unable to maintain good relationships with LQM, LQ Franchising and other third-party hotel managers and franchisors that we may engage in the future, profitability could decrease, and our growth potential may be adversely affected.
• Our efforts to reposition, renovate, redevelop or develop our hotels could be delayed or become more expensive, which could reduce profits or impair our ability to compete effectively.
• The lodging industry is subject to seasonal and cyclical volatility, which may contribute to fluctuations in our financial condition and results of operations.
• Our expenses may not decrease even if our revenue decreases.
• Our business is capital intensive and our failure to make necessary investments could adversely affect the profitability of our properties.
• We are exposed to the inherent risks resulting from our investments in real estate, including the relative illiquidity of such investments, which could increase our costs, reduce our profits and limit our ability to respond to market conditions.
• We face various risks posed by our disposition activities as well as our acquisition, redevelopment, repositioning, renovation and re-branding activities.
• Required capital expenditures and costs associated with, or failure to maintain, brand operating standards may materially and adversely affect our results of operations and profitability.
• If we were to lose a brand license at one or more of our hotels, the value of the affected hotels could decline significantly and we could incur significant costs to obtain new franchise agreements, which could materially and adversely affect our results of operations and profitability as well as limit or slow any future growth.
• Cyber threats and the risk of data breaches or disruptions of our hotel manager or our own information technology systems could materially adversely affect our business.
• The growth of internet reservation channels could adversely affect our business and profitability.
• A disruption to the functioning of the reservation system for our hotels, or decrease in the efficiency of the rate management tools to which our property manager has access, has in the past had and could in the future have an adverse effect on our business.
• The cessation, reduction or taxation of program benefits of loyalty programs or our access to them could adversely affect the La Quinta brand and guest loyalty.
• A number of our hotels are subject to ground leases; if we are found to be in breach of a ground lease or are unable to renew a ground lease, we could be adversely affected.
• We will not recognize any increase in the value of the land or improvements subject to our ground leases and may only receive a portion of compensation paid in any eminent domain proceeding with respect to the hotel.
• We may be subject to unknown or contingent liabilities related to our hotels and the hotels that we may acquire in the future, which could materially and adversely affect our revenues and profitability growth.
• We depend on external sources of capital for future growth; therefore, any disruption to our ability to access capital at times and on terms reasonably acceptable to us may affect adversely our business and results of operations.
• Governmental regulation may adversely affect the operation of our hotels.
• U.S. environmental laws and regulations may cause us to incur substantial costs or subject us to potential liabilities.
• Asbestos, lead-based paint, mold and other hotel related issues could expose us to substantial liability.
• The loss of senior executives could significantly harm our business.
• We are subject to risks associated with the employment of hotel personnel, particularly with hotels that employ unionized labor, which could increase our operating costs, reduce the flexibility of our hotel managers to adjust the size of the workforce at our hotels and could materially and adversely affect our revenues and profitability.
• If the insurance that we carry does not sufficiently cover damage or other potential losses or liabilities to third parties involving our hotels, our profits could be reduced.
• We have experienced increased premiums and retention requirements from insurance carriers and further historical losses paid by insurance carriers could result in further increases in premiums and deductions.
• Terrorism insurance may not be available at commercially reasonable rates or at all.
• Terrorist attacks and military conflicts may adversely affect the lodging industry.
• Changes to estimates or projections used to assess the fair value of our assets, or operating results that are lower than our current estimates at certain properties, may cause us to incur impairment charges that could adversely affect our results of operations.
• Political, social and economic uncertainty could impact our financial results and growth.
• Entities in existence prior to the Spin-Off are currently under audit by the Internal Revenue Service and may be required to pay additional taxes for which we would be responsible.
• Our substantial indebtedness could adversely affect our financial condition, our ability to raise additional capital to fund our operations, our ability to operate our business, our ability to react to changes in the economy or our industry and our ability to pay our debts and could expose us to interest rate risk to the extent of our variable debt and divert our cash flow from operations to make debt payments.
• Servicing our indebtedness requires a significant amount of cash. Our ability to continue generating sufficient cash depends on many factors, some of which are not within our control.
• We may be able to incur substantially more debt in the future and enter into other transactions, which could further exacerbate the risks to our financial condition described above.
• Our debt agreements contain, and future debt agreements may contain, restrictions that may limit our flexibility in operating our business.
• The use of debt to finance future acquisitions could restrict operations, inhibit our ability to grow our business and revenues, and negatively affect our business and financial results.
• Changes in interest rates and changes in the method for determining LIBOR and the potential replacement of LIBOR may affect our cost of capital and net investment income.
• If we do not maintain our qualification as a REIT, we will be subject to tax as a C corporation and could face a substantial tax liability.
• Qualifying as a REIT involves highly technical and complex provisions of the Code and therefore, in certain circumstances, may be subject to uncertainty.
• If our TRS lessees are unable to generate sufficient revenue from operating the hotels leased from us then our TRS lessees may
• not be able to make payments under the leases and we may not be able to make sufficient distributions to our stockholders.
• We may face other tax liabilities that reduce our cash flows.
• The ability of our board of directors to revoke our REIT election without stockholder approval may cause adverse consequences to our stockholders.
• Liquidation of assets may jeopardize our REIT qualification and subject us to taxes.
• We have limited operating history as a REIT, and our inexperience may impede our ability to successfully manage our business or implement effective internal controls.
• Complying with REIT requirements may cause us to forgo and/or liquidate otherwise attractive opportunities and limit our expansion opportunities.
• Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities.
• Complying with REIT requirements may force us to borrow to make distributions to stockholders.
• The ownership of our TRSs (including our TRS lessees) increases our overall tax liability.
• Our TRS lessee structure subjects us to the risk of increased hotel operating expenses that could adversely affect our operating results and our ability to make distributions to stockholders.
• Our ownership of our TRSs, and any other TRSs we form, are subject to limitations, and our transactions with our TRSs, and any other TRSs we form, may cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arm’s-length terms.
• If the leases of our hotels to our TRS lessees are not respected as true leases for U.S. federal income tax purposes, we will fail to qualify as a REIT.
• If LQM or any other future third-party hotel managers do not qualify as “eligible independent contractors,” or if our hotels are not “qualified lodging facilities,” we will fail to qualify as a REIT.
• Our charter generally does not permit any person to own more than 9.8% of our outstanding common stock or of our outstanding stock, and attempts to acquire our common stock or our stock of all other classes or series in excess of these 9.8% limits would not be effective without an exemption from these limits by our board of directors.
• Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.
• We may be subject to adverse legislative or regulatory tax changes that could increase our tax liability, reduce our operating flexibility and reduce the price of our common stock.
• The interests of certain of our stockholders may conflict with ours or yours in the future.
• Our charter contains a provision that expressly permits Blackstone, our non-employee directors and their affiliates, to compete with us.
• Our rights and the rights of our stockholders to take action against our directors and officers are limited.
• Our bylaws designate the Circuit Court for Baltimore City, Maryland as the exclusive forum for certain actions and proceedings that may be initiated by our stockholders against us or any of our directors, officers or other employees.
• Certain provisions in our organizational documents might discourage or delay acquisition attempts for us that you might consider favorable.
• The per share trading price and trading volume of our common stock has been and may in the future be volatile.
• Future issuances of common stock or preferred stock by us, and the availability for resale of shares held by Blackstone, may cause the market price of our common stock to decline.
• The cash available for distribution to stockholders may not be sufficient to pay dividends at expected levels, nor can we assure you of our ability to make distributions in the future. We may use borrowed funds to make distributions.
• The stock ownership limits imposed by the Code for REITs and our charter may restrict stock transfers and/or business combination opportunities, particularly if our management and board of directors do not favor a combination proposal.
• Our authorized but unissued shares of common stock and shares of preferred stock may prevent a change in our control that might involve a premium price for our common stock or otherwise be in the best interests of our stockholders.
• Adverse judgments or settlements resulting from legal proceedings in which we may be involved in the normal course of our business could reduce our profits or limit our ability to operate our business.
• Changes in federal, state or local tax law or interpretations of existing tax law, or adverse determinations by tax authorities, could increase our tax burden or otherwise adversely affect our financial condition, results of operations or cash flows.