COMPANY CONTACT
Sean Mahoney
(240) 744-1150
FOR IMMEDIATE RELEASE
DIAMONDROCK HOSPITALITY COMPANY REPORTS THIRD QUARTER 2017 RESULTS
Raises RevPAR Guidance
BETHESDA, Maryland, Monday, November 6, 2017 – DiamondRock Hospitality Company (the “Company”) (NYSE: DRH), a lodging-focused real estate investment trust that owns a portfolio of 28 premium hotels in the United States, today announced results of operations for the quarter ended September 30, 2017.
Third Quarter 2017 Highlights
| • | Net Income: Net income was $21.6 million and earnings per diluted share was $0.11. |
| • | Comparable RevPAR: RevPAR was $195.13, a 2.1% increase from the comparable period of 2016. |
| • | Comparable Hotel Adjusted EBITDA Margin: Hotel Adjusted EBITDA margin was 31.70%, a decrease of 115 basis points from the comparable period of 2016. Comparable hotel operating expenses increased approximately 1.6% from 2016. |
| • | Adjusted EBITDA: Adjusted EBITDA was $63.1 million, a decrease of $2.5 million from 2016. |
| • | Adjusted FFO: Adjusted FFO was $50.1 million and Adjusted FFO per diluted share was $0.25. |
| • | Dividends: The Company declared a dividend of $0.125 per share during the third quarter, which was paid on October 12, 2017. |
Mark W. Brugger, President and Chief Executive Officer of DiamondRock Hospitality Company stated, “We are pleased with our third quarter results and positive momentum entering the fourth quarter that allowed us to raise full year RevPAR guidance. Our third quarter results benefited from outperformance in Chicago, Fort Worth and Salt Lake City, as well as our asset management team's strong execution limiting comparable hotel expense growth to 1.6%. As we look forward, with approximately $167 million of cash on hand, no borrowings on our $300 million credit facility and most of our hotels unencumbered by debt, DiamondRock is well-positioned for capital deployment.”
Operating Results
Please see “Non-GAAP Financial Measures” attached to this press release for an explanation of the terms “EBITDA,” “Adjusted EBITDA,” “Hotel Adjusted EBITDA Margin,” “FFO” and “Adjusted FFO” and a reconciliation of these measures to net income. Comparable operating results include our 2017 acquisitions for all periods presented, exclude the Frenchman's Reef and Morning Star Marriott Beach Resort ("Frenchman's Reef") and the Inn at Key West for all periods presented due to the closure of these hotels and exclude our 2016 dispositions. See “Reconciliation of Comparable Operating Results” attached to this press release for a reconciliation to historical amounts.
For the quarter ended September 30, 2017, the Company reported the following:
| Third Quarter | ||||||||||
| 2017 | 2016 | Change | ||||||||
Comparable Operating Results (1) | ||||||||||
| ADR | $228.85 | $227.01 | 0.8 | % | ||||||
| Occupancy | 85.3 | % | 84.2 | % | 1.1 percentage points | |||||
| RevPAR | $195.13 | $191.06 | 2.1 | % | ||||||
| Revenues | $210.9 million | $211.2 million | -0.1 | % | ||||||
| Hotel Adjusted EBITDA Margin | 31.70 | % | 32.85 | % | -115 basis points | |||||
Actual Operating Results (2) | ||||||||||
| Revenues | $223.5 million | $220.2 million | 1.5 | % | ||||||
| Net income | $21.6 million | $29.9 million | -$8.3 million | |||||||
| Earnings per diluted share | $0.11 | $0.15 | -$0.04 | |||||||
| Adjusted EBITDA | $63.1 million | $65.6 million | -$2.5 million | |||||||
| Adjusted FFO | $50.1 million | $52.1 million | -$2.0 million | |||||||
| Adjusted FFO per diluted share | $0.25 | $0.26 | -$0.01 | |||||||
(1) Comparable operating results exclude Frenchman’s Reef and the Inn at Key West for all periods presented and include pre-acquisition operating results for L'Auberge de Sedona and Orchards Inn Sedona from July 1, 2016 to September 30, 2016. The pre-acquisition operating results were obtained from the seller of the hotels during the acquisition due diligence process. We have made no adjustments to the amounts provided to us by the seller. The pre-acquisition operating results were not audited or reviewed by the Company's independent auditors. Additionally, 2016 amounts exclude the operating results of hotels sold during 2016.
(2) Actual operating results include Frenchman’s Reef and the Inn at Key West for the period the hotels were open in 2017 (July 1, 2017 to September 5, 2017) and the full third quarter of 2016. Actual operating results for 2016 include the operating results of hotels sold during 2016 for the Company's respective ownership periods.
For the nine months ended September 30, 2017, the Company reported the following:
| Year to Date | ||||||||||
| 2017 | 2016 | Change | ||||||||
Comparable Operating Results (1) | ||||||||||
| ADR | $226.51 | $224.03 | 1.1 | % | ||||||
| Occupancy | 81.2 | % | 80.5 | % | 0.7 percentage points | |||||
| RevPAR | $183.91 | $180.26 | 2.0 | % | ||||||
| Revenues | $610.8 million | $605.4 million | 0.9 | % | ||||||
| Hotel Adjusted EBITDA Margin | 31.21 | % | 31.94 | % | -73 basis points | |||||
Actual Operating Results (2) | ||||||||||
| Revenues | $663.0 million | $689.9 million | -3.9 | % | ||||||
| Net income | $67.1 million | $90.9 million | -$23.8 million | |||||||
| Earnings per diluted share | $0.33 | $0.45 | -$0.12 | |||||||
| Adjusted EBITDA | $188.1 million | $200.1 million | -$12.0 million | |||||||
| Adjusted FFO | $150.2 million | $158.0 million | -$7.8 million | |||||||
| Adjusted FFO per diluted share | $0.75 | $0.78 | -$0.03 | |||||||
(1) Comparable operating results exclude Frenchman’s Reef and the Inn at Key West for all periods presented and include pre-acquisition operating results for L'Auberge de Sedona and Orchards Inn Sedona from January 1, 2017 to February 27, 2017 and January 1, 2016 to September 30, 2016. The pre-acquisition operating results were obtained from the seller of the hotels during the acquisition due diligence
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process. We have made no adjustments to the amounts provided to us by the seller. The pre-acquisition operating results were not audited or reviewed by the Company's independent auditors. Additionally, 2016 amounts exclude hotels sold during 2016.
(2) Actual operating results include Frenchman’s Reef and the Inn at Key West for the period the hotels were open in 2017 (January 1, 2017 to September 5, 2017) and the full year to date period of 2016. Actual operating results for 2016 include the operating results of hotels sold during 2016 for the Company's respective ownership periods.
Update on Impact from Natural Disasters
The Company was impacted by recent natural disasters. As previously disclosed, the Company is pursuing insurance claims for the remediation of property damage and business interruption income at each of the impacted hotels. The Company is insured for up to $361 million for each covered event, subject to certain deductibles and sub limits.
| • | Frenchman’s Reef: The hotel sustained significant damage from Hurricanes Irma and Maria. The hotel closed on September 6th and is currently expected to remain closed through the end of 2018. |
| • | The Inn at Key West: The hotel sustained substantial wind and water-related damage from Hurricane Irma. The hotel closed on September 6th to comply with a mandatory evacuation order and is currently expected to remain closed into the second quarter of 2018. |
| • | Sheraton Suites Key West: The hotel sustained minimal wind and water-related damage from Hurricane Irma. The hotel closed on September 6th to comply with a mandatory evacuation order and re-opened on September 16th. |
| • | Westin Fort Lauderdale Beach Resort: The hotel experienced minimal water intrusion from Hurricane Irma. The hotel closed on September 7th to comply with a mandatory evacuation order and re-opened on September 12th. |
| • | The Lodge at Sonoma Renaissance Resort & Spa: The hotel was impacted by smoke infiltration during the recent wildfires and was closed from October 10th through October 19th. The smoke infiltration has been remediated and the hotel re-opened on October 20th. |
Hotel Manager Changes
In August 2017, the Company terminated its management agreement with Marriott International for the Courtyard Manhattan/Midtown East and entered into a new 10-year management agreement with HEI Hotels & Resorts. The Company also entered into a franchise agreement with Marriott International to continue the hotel's Courtyard brand affiliation. In connection with the termination of the Marriott International management agreement, the Company recognized $1.9 million of accelerated amortization of key money and incurred approximately $0.5 million of severance and other costs, which are excluded from Adjusted EBITDA and Adjusted FFO.
In October 2017, the Company terminated its management agreement with Joie de Vivre Hotels for the Hotel Rex and entered into a new 10-year management agreement with Viceroy Hotels & Resorts to operate the hotel.
Capital Expenditures
The Company spent approximately $77.5 million on capital improvements during the nine months ended September 30, 2017, primarily related to the third phase of the Chicago Marriott Downtown renovation and guest room renovations at the Gwen, Worthington Renaissance, Charleston Renaissance, and The Lodge at Sonoma. The Company expects to spend between $110 million and $120 million on capital improvements at its hotels in 2017. Significant projects include the following:
| • | Chicago Marriott Downtown: The Company has completed the third phase of the multi-year renovation, which included the upgrade renovation of approximately 340 guest rooms. The Company expects to renovate the final 258 of 1,200 guest rooms during late 2017 with completion in early 2018. |
| • | The Gwen: The Company completed the renovation of the hotel's 311 guest rooms in April 2017. |
| • | Worthington Renaissance: The Company completed the renovation of the hotel's 504 guest rooms in January 2017. |
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| • | Charleston Renaissance: The Company completed the renovation of the hotel's 166 guest rooms in February 2017. |
| • | The Lodge at Sonoma: The Company completed the renovation of the hotel's 182 guest rooms in April 2017. |
During the third quarter, the Company recognized impairment losses of approximately $2.4 million, which consisted of $1.8 million related to construction in progress that it determined is not recoverable and $0.6 million related to property damage at the Sheraton Suites Key West. The impairment losses are excluded from Adjusted EBITDA and Adjusted FFO.
Balance Sheet
As of September 30, 2017, the Company had $166.6 million of unrestricted cash on hand and approximately $940.8 million of total debt, which consisted of property-specific mortgage debt and $300.0 million of unsecured term loans. The Company has no outstanding borrowings on its $300 million senior unsecured credit facility and 20 of its 28 hotels are unencumbered by debt.
Dividends
The Company’s Board of Directors declared a quarterly dividend of $0.125 per share to stockholders of record as of September 30, 2017. The dividend was paid on October 12, 2017.
Guidance
The Company is providing updated annual guidance for 2017, but does not undertake to update it for any developments in its business. Achievement of the anticipated results is subject to the risks disclosed in the Company’s filings with the U.S. Securities and Exchange Commission. Comparable RevPAR excludes Frenchman’s Reef and the Inn at Key West for all periods and assumes that L'Auberge de Sedona and Orchards Inn Sedona were owned since January 1, 2016.
The Company is revising its 2017 guidance for the following: (1) impact of natural disasters, (2) an improved RevPAR growth outlook following 7.9% RevPAR growth in October 2017 and (3) an improved group outlook for the fourth quarter. The Company's revised full year 2017 guidance is as follows:
| Previous Guidance | Change from Midpoint | Revised Guidance | |||||
| Metric | Low End | High End | Natural Disaster Impact | Portfolio Outlook | Low End | High End | |
Comparable RevPAR Growth | 1.0 percent | 2.0 percent | N/A | 0.75 percent | 2.0 percent | 2.5 percent | |
Adjusted EBITDA | $245 million | $253 million | ($6.0 million) | N/A | $239 million | $247 million | |
Adjusted FFO | $196 million | $203 million | ($4.7 million) | N/A | $192.3 million | $197.3 million | |
Adjusted FFO per share (based on 201.5 million shares) | $0.97 per share | $1.01 per share | ($0.025 per share) | N/A | $0.95 per share | $0.98 per share | |
Although the Company is actively pursuing advance payments under its property and business interruption insurance claims, the above guidance does not reflect any proceeds from business interruption insurance. The full year guidance range above reflects expected income tax expense of $8.1 to $11.2 million, expected interest expense of $38.5 to $38.6 million and expected corporate expenses of $25 million.
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Selected Quarterly Comparable Operating Information
The following table is presented to provide investors with selected quarterly comparable operating information. The operating information includes our 2017 acquisitions and excludes our 2016 dispositions, Frenchman's Reef and the Inn at Key West for all periods presented.
| Quarter 3, 2016 | Quarter 4, 2016 | Quarter 1, 2017 | Quarter 2, 2017 | Quarter 3, 2017 | |||||||||||
| ADR | $ | 227.01 | $ | 233.04 | $ | 209.73 | $ | 238.43 | $ | 228.85 | |||||
| Occupancy | 84.2 | % | 76.1 | % | 73.1 | % | 85.1 | % | 85.3 | % | |||||
| RevPAR | $ | 191.06 | $ | 177.45 | $ | 153.32 | $ | 202.88 | $ | 195.13 | |||||
| Revenues (in thousands) | $ | 211,179 | $ | 198,968 | $ | 175,563 | $ | 224,299 | $ | 210,889 | |||||
| Hotel Adjusted EBITDA (in thousands) | $ | 69,367 | $ | 63,646 | $ | 44,418 | $ | 79,351 | $ | 66,852 | |||||
| % of full Year | 27.0 | % | 24.8 | % | 17.6 | % | 31.4 | % | 26.4 | % | |||||
| Hotel Adjusted EBITDA Margin | 32.85 | % | 31.99 | % | 25.30 | % | 35.38 | % | 31.70 | % | |||||
| Available Rooms | 829,012 | 830,024 | 811,980 | 821,002 | 825,472 | ||||||||||
| Reconciliation to Previously Reported Available Rooms: | |||||||||||||||
| Frenchman's Reef Available Rooms | 43,240 | 43,240 | 42,300 | 42,770 | 43,240 | ||||||||||
| Inn at Key West Available Rooms | 9,752 | 9,752 | 9,540 | 9,646 | 9,752 | ||||||||||
| Temporary Closure of Other Hotels Due to Natural Disasters | — | — | — | — | 4,552 | ||||||||||
| Previously Reported Available Rooms | 882,004 | 883,016 | 863,820 | 873,418 | 883,016 | ||||||||||
Earnings Call
The Company will host a conference call to discuss its third quarter results on Tuesday, November 7, 2017, at 9:00 a.m. Eastern Time (ET). To participate in the live call, investors are invited to dial 844-287-6622 (for domestic callers) or 530-379-4559 (for international callers). The participant passcode is 96252070. A live webcast of the call will be available via the investor relations section of DiamondRock Hospitality Company’s website at www.drhc.com or www.earnings.com. A replay of the webcast will also be archived on the website for one week.
About the Company
DiamondRock Hospitality Company is a self-advised real estate investment trust (REIT) that is an owner of a leading portfolio of geographically diversified hotels concentrated in top gateway markets and destination resort locations. The Company owns 28 premium quality hotels with over 9,600 rooms. The Company has strategically positioned its hotels to be operated both under leading global brand families such as Hilton and Marriott as well as unique boutique hotels in the lifestyle segment. On November 6, 2017, the Company relocated its corporate headquarters to 2 Bethesda Metro Center, Suite 1400, Bethesda, Maryland 20814. For further information on the Company and its portfolio, please visit DiamondRock Hospitality Company’s website at www.drhc.com.
This press release contains forward-looking statements within the meaning of federal securities laws and regulations. These forward-looking statements are identified by their use of terms and phrases such as “believe,” “expect,” “intend,” “project,” “forecast,” “plan” and other similar terms and phrases, including references to assumptions and forecasts of future results. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially from those anticipated at the time the forward-looking statements are made, including statements related to the expected duration of closure of Frenchman’s Reef and the Inn at Key West and anticipated insurance coverage. These risks include, but are not limited to: national and local economic and business conditions, including the potential for additional terrorist attacks, that will affect occupancy rates at the Company’s hotels and the demand for hotel products and services; operating risks associated with the hotel business; risks associated with the level of the Company’s indebtedness; relationships with property managers; the ability to compete effectively in areas such as access, location, quality of accommodations and room rate structures; changes in travel patterns, taxes and government regulations which influence or determine wages,
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prices, construction procedures and costs; and other risk factors contained in the Company’s filings with the Securities and Exchange Commission. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this release is as of the date of this release, and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.
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DIAMONDROCK HOSPITALITY COMPANY
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
| September 30, 2017 | December 31, 2016 | ||||||
| ASSETS | (unaudited) | ||||||
| Property and equipment, net | $ | 2,688,214 | $ | 2,646,676 | |||
| Restricted cash | 42,317 | 46,069 | |||||
| Due from hotel managers | 98,292 | 77,928 | |||||
| Favorable lease assets, net | 26,795 | 18,013 | |||||
Prepaid and other assets (1) | 77,694 | 37,682 | |||||
| Cash and cash equivalents | 166,619 | 243,095 | |||||
| Total assets | $ | 3,099,931 | $ | 3,069,463 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Liabilities: | |||||||
| Mortgage debt, net of unamortized debt issuance costs | $ | 642,768 | $ | 821,167 | |||
| Term loan, net of unamortized debt issuance costs | 298,037 | 99,372 | |||||
| Total debt | 940,805 | 920,539 | |||||
| Deferred income related to key money, net | 17,028 | 20,067 | |||||
| Unfavorable contract liabilities, net | 71,212 | 72,646 | |||||
| Deferred ground rent | 85,047 | 80,509 | |||||
| Due to hotel managers | 70,972 | 58,294 | |||||
| Dividends declared and unpaid | 25,627 | 25,567 | |||||
Accounts payable and accrued expenses (2) | 56,618 | 55,054 | |||||
| Total other liabilities | 326,504 | 312,137 | |||||
| Stockholders’ Equity: | |||||||
| Preferred stock, $0.01 par value; 10,000,000 shares authorized; no shares issued and outstanding | — | — | |||||
| Common stock, $0.01 par value; 400,000,000 shares authorized; 200,305,232 and 200,200,902 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively | 2,003 | 2,002 | |||||
| Additional paid-in capital | 2,059,919 | 2,055,365 | |||||
| Accumulated deficit | (229,300 | ) | (220,580 | ) | |||
| Total stockholders’ equity | 1,832,622 | 1,836,787 | |||||
| Total liabilities and stockholders’ equity | $ | 3,099,931 | $ | 3,069,463 | |||
(1) Includes $41.8 million of insurance receivables as of September 30, 2017, $23.1 million of deferred tax assets, $5.4 million and $6.0 million of prepaid expenses and $7.4 million and $8.6 million of other assets as of September 30, 2017 and December 31, 2016, respectively.
(2) Includes $20.5 million of deferred tax liabilities, $14.9 million and $12.1 million of accrued property taxes, $4.4 million and $10.8 million of accrued capital expenditures, and $16.8 million and $11.7 million of other accrued liabilities as of September 30, 2017 and December 31, 2016, respectively.
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DIAMONDROCK HOSPITALITY COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Revenues: | |||||||||||||||
| Rooms | $ | 167,990 | $ | 163,158 | $ | 483,305 | $ | 498,714 | |||||||
| Food and beverage | 42,651 | 44,069 | 140,191 | 151,850 | |||||||||||
| Other | 12,845 | 13,012 | 39,472 | 39,373 | |||||||||||
| Total revenues | 223,486 | 220,239 | 662,968 | 689,937 | |||||||||||
| Operating Expenses: | |||||||||||||||
| Rooms | 41,945 | 39,766 | 120,411 | 121,737 | |||||||||||
| Food and beverage | 30,794 | 29,103 | 93,324 | 97,718 | |||||||||||
| Management fees | 5,356 | 7,655 | 18,317 | 23,036 | |||||||||||
| Other hotel expenses | 77,769 | 74,123 | 228,036 | 232,576 | |||||||||||
| Depreciation and amortization | 25,083 | 23,605 | 75,031 | 73,731 | |||||||||||
| Hotel acquisition costs | (245 | ) | — | 2,028 | — | ||||||||||
| Corporate expenses | 6,109 | 4,684 | 19,199 | 17,420 | |||||||||||
| Impairment losses | 2,357 | — | 2,357 | — | |||||||||||
| Total operating expenses, net | 189,168 | 178,936 | 558,703 | 566,218 | |||||||||||
| Operating profit | 34,318 | 41,303 | 104,265 | 123,719 | |||||||||||
| Interest and other income, net | (372 | ) | (333 | ) | (923 | ) | (451 | ) | |||||||
| Interest expense | 9,692 | 9,504 | 28,790 | 32,242 | |||||||||||
| Loss on early extinguishment of debt | — | — | 274 | — | |||||||||||
| Gain on sales of hotel properties | — | (2,198 | ) | — | (10,319 | ) | |||||||||
| Total other expenses, net | 9,320 | 6,973 | 28,141 | 21,472 | |||||||||||
| Income before income taxes | 24,998 | 34,330 | 76,124 | 102,247 | |||||||||||
| Income tax expense | (3,375 | ) | (4,393 | ) | (9,019 | ) | (11,357 | ) | |||||||
| Net income | $ | 21,623 | $ | 29,937 | $ | 67,105 | $ | 90,890 | |||||||
| Earnings per share: | |||||||||||||||
| Basic earnings per share | $ | 0.11 | $ | 0.15 | $ | 0.33 | $ | 0.45 | |||||||
| Diluted earnings per share | $ | 0.11 | $ | 0.15 | $ | 0.33 | $ | 0.45 | |||||||
| Weighted-average number of common shares outstanding: | |||||||||||||||
| Basic | 200,834,910 | 201,297,846 | 200,767,104 | 201,188,563 | |||||||||||
| Diluted | 201,424,400 | 201,739,604 | 201,353,649 | 201,572,206 | |||||||||||
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Non-GAAP Financial Measures
We use the following non-GAAP financial measures that we believe are useful to investors as key measures of our operating performance: EBITDA, Adjusted EBITDA, Hotel EBITDA, Hotel Adjusted EBITDA, FFO and Adjusted FFO. These measures should not be considered in isolation or as a substitute for measures of performance in accordance with GAAP. EBITDA, Adjusted EBITDA, Hotel EBITDA, Hotel Adjusted EBITDA, FFO and Adjusted FFO, as calculated by us, may not be comparable to other companies that do not define such terms exactly as the Company.
Use and Limitations of Non-GAAP Financial Measures
Our management and Board of Directors use EBITDA, Adjusted EBITDA, Hotel EBITDA, Hotel Adjusted EBITDA, FFO and Adjusted FFO to evaluate the performance of our hotels and to facilitate comparisons between us and other lodging REITs, hotel owners who are not REITs and other capital intensive companies. The use of these non-GAAP financial measures has certain limitations. These non-GAAP financial measures as presented by us, may not be comparable to non-GAAP financial measures as calculated by other real estate companies. These measures do not reflect certain expenses or expenditures that we incurred and will incur, such as depreciation, interest and capital expenditures. We compensate for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our reconciliations to the most comparable GAAP financial measures, and our consolidated statements of operations and cash flows, include interest expense, capital expenditures, and other excluded items, all of which should be considered when evaluating our performance, as well as the usefulness of our non-GAAP financial measures.
These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP. They should not be considered as alternatives to operating profit, cash flow from operations, or any other operating performance measure prescribed by GAAP. These non-GAAP financial measures reflect additional ways of viewing our operations that we believe, when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. We strongly encourage investors to review our financial information in its entirety and not to rely on a single financial measure.
EBITDA and FFO
EBITDA represents net income excluding: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sale of assets; and (3) depreciation and amortization. We believe EBITDA is useful to an investor in evaluating our operating performance because it helps investors evaluate and compare the results of our operations from period to period by removing the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortization) from our operating results. In addition, covenants included in our debt agreements use EBITDA as a measure of financial compliance. We also use EBITDA as one measure in determining the value of hotel acquisitions and dispositions.
The Company computes FFO in accordance with standards established by NAREIT, which defines FFO as net income determined in accordance with GAAP, excluding gains or losses from sales of properties and impairment losses, plus depreciation and amortization. The Company believes that the presentation of FFO provides useful information to investors regarding its operating performance because it is a measure of the Company's operations without regard to specified non-cash items, such as real estate depreciation and amortization and gain or loss on sale of assets. The Company also uses FFO as one measure in assessing its operating results.
Hotel EBITDA
Hotel EBITDA represents net income excluding: (1) interest expense, (2) income taxes, (3) depreciation and amortization, (4) corporate general and administrative expenses (shown as corporate expenses on the consolidated statements of operations), and (5) hotel acquisition costs. We believe that Hotel EBITDA provides our investors a useful financial measure to evaluate our hotel operating performance, excluding the impact of our capital structure (primarily interest), our asset base (primarily depreciation and amortization), and our corporate-level expenses (corporate expenses and hotel acquisition costs). With respect to Hotel EBITDA, we believe that excluding the effect of corporate-level expenses provides a more complete understanding of the operating results over which individual hotels and third-party management companies have direct control. We believe property-level results provide investors with supplemental information on the ongoing operational performance of our hotels and effectiveness of the third-party management companies operating our business on a property-level basis.
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Adjustments to EBITDA, FFO and Hotel EBITDA
We adjust EBITDA, FFO and Hotel EBITDA when evaluating our performance because we believe that the exclusion of certain additional items described below provides useful supplemental information to investors regarding our ongoing operating performance and that the presentation of Adjusted EBITDA, Adjusted FFO and Hotel Adjusted EBITDA when combined with GAAP net income, EBITDA, FFO and Hotel EBITDA, is beneficial to an investor's complete understanding of our consolidated and property-level operating performance. Hotel Adjusted EBITDA margins are calculated as Hotel Adjusted EBITDA divided by total hotel revenues.
We adjust EBITDA, FFO and Hotel EBITDA for the following items:
| • | Non-Cash Ground Rent: We exclude the non-cash expense incurred from the straight line recognition of rent from our ground lease obligations and the non-cash amortization of our favorable lease assets. We exclude these non-cash items because they do not reflect the actual rent amounts due to the respective lessors in the current period and they are of lesser significance in evaluating our actual performance for that period. |
| • | Non-Cash Amortization of Favorable and Unfavorable Contracts: We exclude the non-cash amortization of favorable and unfavorable contracts recorded in conjunction with certain acquisitions because the non-cash amortization is based on historical cost accounting and is of lesser significance in evaluating our actual performance for that period. |
| • | Cumulative Effect of a Change in Accounting Principle: Infrequently, the Financial Accounting Standards Board (FASB) promulgates new accounting standards that require the consolidated statement of operations to reflect the cumulative effect of a change in accounting principle. We exclude the effect of these adjustments, which include the accounting impact from prior periods, because they do not reflect the Company’s actual underlying performance for the current period. |
| • | Gains or Losses from Early Extinguishment of Debt: We exclude the effect of gains or losses recorded on the early extinguishment of debt because these gains or losses result from transaction activity related to the Company’s capital structure that we believe are not indicative of the ongoing operating performance of the Company or our hotels. |
| • | Hotel Acquisition Costs: We exclude hotel acquisition costs expensed during the period because we believe these transaction costs are not reflective of the ongoing performance of the Company or our hotels. |
| • | Severance Costs: We exclude corporate severance costs incurred with the termination of corporate-level employees and severance costs incurred at our hotels related to lease terminations or structured severance programs because we believe these costs do not reflect the ongoing performance of the Company or our hotels. |
| • | Hotel Manager Transition Costs: We exclude the transition costs associated with a change in hotel manager because we believe these costs do not reflect the ongoing performance of the Company or our hotels. |
| • | Other Items: From time to time we incur costs or realize gains that we consider outside the ordinary course of business and that we do not believe reflect the ongoing performance of the Company or our hotels. Such items may include, but are not limited to the following: pre-opening costs incurred with newly developed hotels; lease preparation costs incurred to prepare vacant space for marketing; management or franchise contract termination fees; gains or losses from legal settlements; bargain purchase gains incurred upon acquisition of a hotel; costs incurred related to natural disasters; and gains from insurance proceeds. |
In addition, to derive Adjusted EBITDA we exclude gains or losses on dispositions and impairment losses because we believe that including them in EBITDA does not reflect the ongoing performance of our hotels. Additionally, the gains or losses on dispositions and impairment losses are based on historical cost accounting and represent either accelerated depreciation or excess depreciation in previous periods, and depreciation is excluded from EBITDA.
In addition, to derive Adjusted FFO we exclude any fair value adjustments to debt instruments. We exclude these non-cash amounts because they do not reflect the underlying performance of the Company.
10
Reconciliations of Non-GAAP Measures
EBITDA and Adjusted EBITDA
The following tables are reconciliations of our GAAP net income to EBITDA and Adjusted EBITDA (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Net income | $ | 21,623 | $ | 29,937 | $ | 67,105 | $ | 90,890 | |||||||
| Interest expense | 9,692 | 9,504 | 28,790 | 32,242 | |||||||||||
| Income tax expense | 3,375 | 4,393 | 9,019 | 11,357 | |||||||||||
| Real estate related depreciation and amortization | 25,083 | 23,605 | 75,031 | 73,731 | |||||||||||
| EBITDA | 59,773 | 67,439 | 179,945 | 208,220 | |||||||||||
| Non-cash ground rent | 1,591 | 1,568 | 4,756 | 4,230 | |||||||||||
| Non-cash amortization of favorable and unfavorable contract liabilities, net | (478 | ) | (478 | ) | (1,434 | ) | (1,434 | ) | |||||||
Hotel acquisition costs (1) | (245 | ) | — | 2,028 | — | ||||||||||
| Natural disaster costs | 1,493 | — | 1,493 | — | |||||||||||
| Impairment losses | 2,357 | — | 2,357 | — | |||||||||||
Hotel manager transition costs (2) | (1,362 | ) | — | (1,362 | ) | — | |||||||||
| Loss on early extinguishment of debt | — | — | 274 | — | |||||||||||
| Gain on sale of hotel properties | — | (2,198 | ) | — | (10,319 | ) | |||||||||
Severance costs (3) | — | (682 | ) | — | (563 | ) | |||||||||
| Adjusted EBITDA | $ | 63,129 | $ | 65,649 | $ | 188,057 | $ | 200,134 | |||||||
(1) During the three months ended September 30, 2017, we recorded a refund of $0.2 million of transfer taxes originally paid to the City and County of San Francisco in connection with our acquisition of the Hotel Rex.
(2) Includes items related to the hotel manager change at the Courtyard Manhattan Midtown East during the third quarter, as follows: (a) employee severance costs of approximately $0.4 million, (b) transition costs of approximately $0.1 million offset by (c) $1.9 million of accelerated amortization of key money received from Marriott.
(3) Amounts are classified as corporate expenses on the consolidated statements of operations. During the three months ended September 30, 2016, we reversed $0.7 million of previously recognized compensation expense for forfeited equity awards related to the resignation of our former Executive Vice President and Chief Operating Officer.
| Full Year 2017 Guidance | |||||||
| Low End | High End | ||||||
| Net income | $ | 81,603 | $ | 87,603 | |||
| Interest expense | 38,600 | 38,500 | |||||
| Income tax expense | 8,100 | 11,200 | |||||
| Real estate related depreciation and amortization | 100,000 | 99,000 | |||||
| EBITDA | 228,303 | 236,303 | |||||
| Non-cash ground rent | 6,300 | 6,300 | |||||
| Non-cash amortization of favorable and unfavorable contracts, net | (1,900 | ) | (1,900 | ) | |||
| Hotel acquisition costs | 2,028 | 2,028 | |||||
| Natural disaster costs | 3,000 | 3,000 | |||||
| Impairment losses | 2,357 | 2,357 | |||||
Hotel manager transition costs (1) | (1,362 | ) | (1,362 | ) | |||
| Loss on early extinguishment of debt | 274 | 274 | |||||
| Adjusted EBITDA | $ | 239,000 | $ | 247,000 | |||
11
(1) Includes items related to the hotel manager change at the Courtyard Manhattan Midtown East during the third quarter, as follows: (a) employee severance costs of approximately $0.4 million, (b) transition costs of approximately $0.1 million offset by (c) $1.9 million of accelerated amortization of key money received from Marriott.
Hotel EBITDA and Hotel Adjusted EBITDA
The following table is a reconciliation of our GAAP net income to Hotel EBITDA and Hotel Adjusted EBITDA (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Net income | $ | 21,623 | $ | 29,937 | $ | 67,105 | $ | 90,890 | |||||||
| Interest expense | 9,692 | 9,504 | 28,790 | 32,242 | |||||||||||
| Income tax expense | 3,375 | 4,393 | 9,019 | 11,357 | |||||||||||
| Real estate related depreciation and amortization | 25,083 | 23,605 | 75,031 | 73,731 | |||||||||||
| EBITDA | 59,773 | 67,439 | 179,945 | 208,220 | |||||||||||
| Corporate expenses | 6,109 | 4,684 | 19,199 | 17,420 | |||||||||||
| Interest and other income, net | (372 | ) | (333 | ) | (923 | ) | (451 | ) | |||||||
Hotel acquisition costs (1) | (245 | ) | — | 2,028 | — | ||||||||||
| Loss on early extinguishment of debt | — | — | 274 | — | |||||||||||
| Natural disaster costs | 1,493 | — | 1,493 | — | |||||||||||
| Impairment losses | 2,357 | — | 2,357 | — | |||||||||||
| Gain on sale of hotel properties | — | (2,198 | ) | — | (10,319 | ) | |||||||||
| Hotel EBITDA | 69,115 | 69,592 | 204,373 | 214,870 | |||||||||||
| Non-cash ground rent | 1,591 | 1,568 | 4,756 | 4,230 | |||||||||||
| Non-cash amortization of favorable and unfavorable contract liabilities, net | (478 | ) | (478 | ) | (1,434 | ) | (1,434 | ) | |||||||
Hotel manager transition costs (2) | (1,362 | ) | — | (1,362 | ) | — | |||||||||
| Hotel Adjusted EBITDA | $ | 68,866 | $ | 70,682 | $ | 206,333 | $ | 217,666 | |||||||
(1) During the three months ended September 30, 2017, we recorded a refund of $0.2 million of transfer taxes originally paid to the City and County of San Francisco in connection with our acquisition of the Hotel Rex.
(2) Includes items related to the hotel manager change at the Courtyard Manhattan Midtown East during the third quarter, as follows: (a) employee severance costs of approximately $0.4 million, (b) transition costs of approximately $0.1 million offset by (c) $1.9 million of accelerated amortization of key money received from Marriott.
FFO and Adjusted FFO
The following tables are reconciliations of our GAAP net income to FFO and Adjusted FFO (in thousands):
12
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Net income | $ | 21,623 | $ | 29,937 | $ | 67,105 | $ | 90,890 | |||||||
| Real estate related depreciation and amortization | 25,083 | 23,605 | 75,031 | 73,731 | |||||||||||
| Impairment losses | 2,357 | — | 2,357 | — | |||||||||||
| Gain on sales of hotel properties, net of income tax | — | (1,877 | ) | — | (8,887 | ) | |||||||||
| FFO | 49,063 | 51,665 | 144,493 | 155,734 | |||||||||||
| Non-cash ground rent | 1,591 | 1,568 | 4,756 | 4,230 | |||||||||||
| Non-cash amortization of favorable and unfavorable contract liabilities, net | (478 | ) | (478 | ) | (1,434 | ) | (1,434 | ) | |||||||
Hotel acquisition costs (1) | (245 | ) | — | 2,028 | — | ||||||||||
| Natural disaster costs | 1,493 | — | 1,493 | — | |||||||||||
Hotel manager transition costs (2) | (1,362 | ) | — | (1,362 | ) | — | |||||||||
| Loss on early extinguishment of debt | — | — | 274 | — | |||||||||||
Severance costs (3) | — | (682 | ) | — | (563 | ) | |||||||||
| Fair value adjustments to debt instruments | — | — | — | 19 | |||||||||||
| Adjusted FFO | $ | 50,062 | $ | 52,073 | $ | 150,248 | $ | 157,986 | |||||||
| Adjusted FFO per diluted share | $ | 0.25 | $ | 0.26 | $ | 0.75 | $ | 0.78 | |||||||
(1) | During the three months ended September 30, 2017, we recorded a refund of $0.2 million of transfer taxes originally paid to the City and County of San Francisco in connection with our acquisition of the Hotel Rex. |
(2) Includes items related to the hotel manager change at the Courtyard Manhattan Midtown East during the third quarter, as follows: (a) employee severance costs of approximately $0.4 million, (b) transition costs of approximately $0.1 million offset by (c) $1.9 million of accelerated amortization of key money received from Marriott.
(3) Amounts are classified as corporate expenses on the consolidated statements of operations. During the three months ended September 30, 2016, we reversed $0.7 million of previously recognized compensation expense for forfeited equity awards related to the resignation of our former Executive Vice President and Chief Operating Officer.
| Full Year 2017 Guidance | |||||||
| Low End | High End | ||||||
| Net income | $ | 81,603 | $ | 87,603 | |||
| Real estate related depreciation and amortization | 100,000 | 99,000 | |||||
| Impairment losses | 2,357 | 2,357 | |||||
| FFO | 183,960 | 188,960 | |||||
| Non-cash ground rent | 6,300 | 6,300 | |||||
| Non-cash amortization of favorable and unfavorable contract liabilities, net | (1,900 | ) | (1,900 | ) | |||
| Acquisition costs | 2,028 | 2,028 | |||||
| Natural disaster costs | 3,000 | 3,000 | |||||
Hotel manager transition costs (1) | (1,362 | ) | (1,362 | ) | |||
| Loss on early extinguishment of debt | 274 | 274 | |||||
| Adjusted FFO | $ | 192,300 | $ | 197,300 | |||
| Adjusted FFO per diluted share | $ | 0.95 | $ | 0.98 | |||
(1) Includes items related to the hotel manager change at the Courtyard Manhattan Midtown East during the third quarter, as follows: (a) employee severance costs of approximately $0.4 million, (b) transition costs of approximately $0.1 million offset by (c) $1.9 million of accelerated amortization of key money received from Marriott.
13
Reconciliation of Comparable Operating Results
The following presents the revenues, Hotel Adjusted EBITDA and Hotel Adjusted EBITDA Margin together with comparable prior year results, which includes the pre-acquisition results for our 2017 acquisitions and excludes the results for our 2016 dispositions (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Revenues | $ | 223,486 | $ | 220,239 | $ | 662,968 | $ | 689,937 | |||||||
Hotel revenues from prior ownership (1) | — | 6,870 | 3,422 | 20,101 | |||||||||||
Hotel revenues from closed hotels (2) | (12,596 | ) | (15,779 | ) | (55,639 | ) | (59,344 | ) | |||||||
Hotel revenues from sold hotels (3) | — | (152 | ) | — | (45,316 | ) | |||||||||
| Comparable Revenues | $ | 210,890 | $ | 211,178 | $ | 610,751 | $ | 605,378 | |||||||
| Hotel Adjusted EBITDA | $ | 68,866 | $ | 70,682 | $ | 206,333 | $ | 217,666 | |||||||
Hotel Adjusted EBITDA from prior ownership (1) | — | 1,312 | 229 | 4,281 | |||||||||||
Hotel Adjusted EBITDA from closed hotels (2) | (2,013 | ) | (2,629 | ) | (15,938 | ) | (16,963 | ) | |||||||
Hotel Adjusted EBITDA from sold hotels (3) | — | 4 | — | (11,650 | ) | ||||||||||
| Comparable Hotel Adjusted EBITDA | $ | 66,853 | $ | 69,369 | $ | 190,624 | $ | 193,334 | |||||||
| Hotel Adjusted EBITDA Margin | 30.81 | % | 32.09 | % | 31.12 | % | 31.55 | % | |||||||
| Comparable Hotel Adjusted EBITDA Margin | 31.70 | % | 32.85 | % | 31.21 | % | 31.94 | % | |||||||
(1) | Amounts represent the pre-acquisition operating results of the L'Auberge de Sedona and Orchards Inn Sedona for the period from January 1, 2017 to February 27, 2017 and January 1, 2016 to September 30, 2016, respectively. The pre-acquisition operating results were obtained from the respective sellers of the hotels during the acquisition due diligence process. We have made no adjustments to the amounts provided to us by the seller. The pre-acquisition operating results were not audited or reviewed by the Company's independent auditors. |
(2) | Amounts represent the operating results of Frenchman's Reef and Morning Star Marriott Beach Resort and Inn at Key West as they are closed due to hurricane damage. |
(3) | Amounts represent the historical operating results of the Orlando Airport Marriott, Minneapolis Hilton and Hilton Garden Inn Chelsea for their respective ownership periods. |
14
Comparable Hotel Operating Expenses
The following table sets forth hotel operating expenses for the three and nine months ended September 30, 2017 and 2016 for each of the hotels that we owned during these periods. Our GAAP hotel operating expenses for the three and nine months ended September 30, 2017 consisted of the line items set forth below (dollars in thousands) under the column titled “As Reported.” The amounts reported in this column include amounts that are not comparable period-over-period. In order to reflect the period in 2017 comparable to our ownership period in 2016, the amounts in the column titled “Adjustments for Acquisitions and Dispositions” represent the pre-acquisition operating costs of the L'Auberge de Sedona and Orchards Inn Sedona for the period from January 1, 2017 to February 27, 2017 and January 1, 2016 to September 30, 2016 and excludes the operating costs of the Orlando Airport Marriott, Minneapolis Hilton and Hilton Garden Inn Chelsea for the time periods presented. The amounts in the column titled “Adjustments for Closed Hotels” represent the operating costs for all periods presented of Frenchman's Reef and Morning Star Marriott Beach Resort and Inn at Key West as they are closed due to hurricane damage. We provide this important supplemental information to our investors because this information provides a useful means for investors to measure our operating performance on a comparative basis. See the column titled “Comparable."
These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP in this release. They should not be considered as alternatives to operating profit, cash flow from operations, or any other operating performance measure prescribed by GAAP. These non-GAAP financial measures reflect additional ways of viewing our operations at our hotels that we believe, when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. We strongly encourage investors to review our financial information in its entirety and not to rely on a single financial measure. In particular, we note the pre-acquisition operating results set forth in the column titled “Adjustments for Acquisitions” were obtained from the respective sellers of the hotels during the acquisition due diligence process. We have made no adjustments to the amounts provided to us by the respective sellers. The pre-acquisition operating results were not audited or reviewed by our independent auditors.
15
| As Reported | Adjustments for Acquisitions/Dispositions | Adjustments for Closed Hotels | Comparable | ||||||||||||||||||||||||||||||||||
| Three Months Ended September 30, | Three Months Ended September 30, | ||||||||||||||||||||||||||||||||||||
| 2017 | 2016 | % Change | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | % Change | ||||||||||||||||||||||||||||
| Rooms departmental expenses | $ | 41,945 | $ | 39,766 | 5.5 | % | $ | — | $ | 1,266 | $ | (1,764 | ) | $ | (2,495 | ) | $ | 40,181 | $ | 38,537 | 4.3 | % | |||||||||||||||
| Food and beverage departmental expenses | 30,794 | 29,103 | 5.8 | % | — | 1,980 | (4,161 | ) | (3,849 | ) | 26,633 | 27,234 | (2.2 | )% | |||||||||||||||||||||||
| Other direct departmental | 3,082 | 3,022 | 2.0 | % | — | 350 | (664 | ) | (636 | ) | 2,418 | 2,736 | (11.6 | )% | |||||||||||||||||||||||
| General and administrative | 19,181 | 17,742 | 8.1 | % | — | 586 | (1,394 | ) | (1,761 | ) | 17,787 | 16,567 | 7.4 | % | |||||||||||||||||||||||
| Utilities | 6,487 | 6,740 | (3.8 | )% | — | 156 | (1,229 | ) | (1,349 | ) | 5,258 | 5,547 | (5.2 | )% | |||||||||||||||||||||||
| Repairs and maintenance | 8,776 | 8,578 | 2.3 | % | — | 308 | (724 | ) | (907 | ) | 8,052 | 7,979 | 0.9 | % | |||||||||||||||||||||||
| Sales and marketing | 15,155 | 14,765 | 2.6 | % | — | 432 | (1,167 | ) | (1,131 | ) | 13,988 | 14,066 | (0.6 | )% | |||||||||||||||||||||||
| Franchise fees | 6,231 | 5,484 | 13.6 | % | — | (13 | ) | — | — | 6,231 | 5,471 | 13.9 | % | ||||||||||||||||||||||||
| Base management fees | 3,373 | 5,393 | (37.5 | )% | — | 196 | (351 | ) | (437 | ) | 3,022 | 5,152 | (41.3 | )% | |||||||||||||||||||||||
| Incentive management fees | 1,983 | 2,262 | (12.3 | )% | — | — | — | — | 1,983 | 2,262 | (12.3 | )% | |||||||||||||||||||||||||
| Property taxes | 13,078 | 12,302 | 6.3 | % | — | 44 | (54 | ) | (62 | ) | 13,024 | 12,284 | 6.0 | % | |||||||||||||||||||||||
| Ground rent | 2,573 | 2,596 | (0.9 | )% | — | — | — | — | 2,573 | 2,596 | (0.9 | )% | |||||||||||||||||||||||||
| Insurance | 1,526 | 1,693 | (9.9 | )% | — | 68 | (331 | ) | (443 | ) | 1,195 | 1,318 | (9.3 | )% | |||||||||||||||||||||||
| Other fixed expenses | 1,680 | 1,201 | 39.9 | % | — | 62 | (95 | ) | (79 | ) | 1,585 | 1,184 | 33.9 | % | |||||||||||||||||||||||
| Total hotel operating expenses | $ | 155,864 | $ | 150,647 | 3.5 | % | $ | — | $ | 5,435 | $ | (11,934 | ) | $ | (13,149 | ) | $ | 143,930 | $ | 142,933 | 0.7 | % | |||||||||||||||
| Hotel manager transition costs | 1,362 | — | 100.0 | % | — | — | — | — | 1,362 | — | 100.0 | % | |||||||||||||||||||||||||
| Natural disaster costs | (1,493 | ) | — | (100.0 | )% | — | — | 1,351 | — | (142 | ) | — | (100.0 | )% | |||||||||||||||||||||||
| Total adjusted hotel operating expenses | $ | 155,733 | $ | 150,647 | 3.4 | % | $ | — | $ | 5,435 | $ | (10,583 | ) | $ | (13,149 | ) | $ | 145,150 | $ | 142,933 | 1.6 | % | |||||||||||||||
16
| As Reported | Adjustments for Acquisitions/Dispositions | Adjustments for Closed Hotels | Comparable | ||||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||
| 2017 | 2016 | % Change | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | % Change | ||||||||||||||||||||||||||||
| Rooms departmental expenses | $ | 120,411 | $ | 121,737 | (1.1 | )% | $ | 773 | $ | (3,800 | ) | $ | (7,018 | ) | $ | (7,663 | ) | $ | 114,166 | $ | 110,274 | 3.5 | % | ||||||||||||||
| Food and beverage departmental expenses | 93,324 | 97,718 | (4.5 | )% | 920 | (2,698 | ) | (12,622 | ) | (12,887 | ) | 81,622 | 82,133 | (0.6 | )% | ||||||||||||||||||||||
| Other direct departmental | 9,169 | 9,177 | (0.1 | )% | 257 | 935 | (2,128 | ) | (2,044 | ) | 7,298 | 8,068 | (9.5 | )% | |||||||||||||||||||||||
| General and administrative | 56,687 | 58,036 | (2.3 | )% | 416 | (2,306 | ) | (5,236 | ) | (5,577 | ) | 51,867 | 50,153 | 3.4 | % | ||||||||||||||||||||||
| Utilities | 18,627 | 20,035 | (7.0 | )% | 106 | (818 | ) | (3,890 | ) | (3,893 | ) | 14,843 | 15,324 | (3.1 | )% | ||||||||||||||||||||||
| Repairs and maintenance | 26,336 | 27,069 | (2.7 | )% | 209 | (840 | ) | (2,830 | ) | (2,932 | ) | 23,715 | 23,297 | 1.8 | % | ||||||||||||||||||||||
| Sales and marketing | 44,584 | 47,381 | (5.9 | )% | 263 | (2,563 | ) | (3,913 | ) | (3,750 | ) | 40,934 | 41,068 | (0.3 | )% | ||||||||||||||||||||||
| Franchise fees | 17,277 | 16,520 | 4.6 | % | — | (585 | ) | — | — | 17,277 | 15,935 | 8.4 | % | ||||||||||||||||||||||||
| Base management fees | 13,733 | 17,005 | (19.2 | )% | 110 | (719 | ) | (1,573 | ) | (1,674 | ) | 12,270 | 14,612 | (16.0 | )% | ||||||||||||||||||||||
| Incentive management fees | 4,584 | 6,031 | (24.0 | )% | — | — | — | — | 4,584 | 6,031 | (24.0 | )% | |||||||||||||||||||||||||
| Property taxes | 39,178 | 35,212 | 11.3 | % | 83 | (959 | ) | (175 | ) | (183 | ) | 39,086 | 34,070 | 14.7 | % | ||||||||||||||||||||||
| Ground rent | 7,703 | 10,121 | (23.9 | )% | — | (2,901 | ) | — | — | 7,703 | 7,220 | 6.7 | % | ||||||||||||||||||||||||
| Insurance | 4,858 | 5,541 | (12.3 | )% | 45 | (97 | ) | (1,232 | ) | (1,396 | ) | 3,671 | 4,048 | (9.3 | )% | ||||||||||||||||||||||
| Other fixed expenses | 3,617 | 3,484 | 3.8 | % | 41 | 51 | (435 | ) | (382 | ) | 3,223 | 3,153 | 2.2 | % | |||||||||||||||||||||||
| Total hotel operating expenses | $ | 460,088 | $ | 475,067 | (3.2 | )% | $ | 3,223 | $ | (17,300 | ) | $ | (41,052 | ) | $ | (42,381 | ) | $ | 422,259 | $ | 415,386 | 1.7 | % | ||||||||||||||
| Hotel manager transition costs | 1,362 | — | 100.0% | — | — | — | — | 1,362 | — | 100.0% | |||||||||||||||||||||||||||
| Natural disaster costs | (1,493 | ) | — | (100.0%) | — | — | 1,351 | — | (142 | ) | — | (100.0%) | |||||||||||||||||||||||||
| Total adjusted hotel operating expenses | $ | 459,957 | $ | 475,067 | (3.2 | )% | $ | 3,223 | $ | (17,300 | ) | $ | (39,701 | ) | $ | (42,381 | ) | $ | 423,479 | $ | 415,386 | 1.9 | % | ||||||||||||||
17
| Market Capitalization as of September 30, 2017 | ||||
| (in thousands) | ||||
Enterprise Value | ||||
| Common equity capitalization (at September 30, 2017 closing price of $10.95/share) | $ | 2,206,053 | ||
| Consolidated debt (face amount) | 947,757 | |||
| Cash and cash equivalents | (166,619) | |||
| Total enterprise value | $ | 2,987,191 | ||
| Share Reconciliation | ||||
| Common shares outstanding | 200,305 | |||
| Unvested restricted stock held by management and employees | 631 | |||
| Share grants under deferred compensation plan | 530 | |||
| Combined shares outstanding | 201,466 | |||
| Debt Summary as of September 30, 2017 | |||||||||||
(dollars in thousands) | |||||||||||
| Property | Interest Rate | Term | Outstanding Principal | Maturity | |||||||
| Marriott Salt Lake City Downtown | 4.25% | Fixed | $ | 57,122 | November 2020 | ||||||
| Westin Washington D.C. City Center | 3.99% | Fixed | 65,346 | January 2023 | |||||||
| The Lodge at Sonoma, a Renaissance Resort & Spa | 3.96% | Fixed | 28,432 | April 2023 | |||||||
| Westin San Diego | 3.94% | Fixed | 65,220 | April 2023 | |||||||
| Courtyard Manhattan / Midtown East | 4.40% | Fixed | 84,421 | August 2024 | |||||||
| Renaissance Worthington | 3.66% | Fixed | 84,504 | May 2025 | |||||||
| JW Marriott Denver at Cherry Creek | 4.33% | Fixed | 63,790 | July 2025 | |||||||
| Westin Boston Waterfront Hotel | 4.36% | Fixed | 198,922 | November 2025 | |||||||
| Debt issuance costs, net | (4,989 | ) | |||||||||
| Total mortgage debt, net of unamortized debt issuance costs | $ | 642,768 | |||||||||
| Unsecured term loan | LIBOR + 1.45(1) | Variable | 100,000 | May 2021 | |||||||
| Unsecured term loan | LIBOR + 1.45(2) | Variable | 200,000 | April 2022 | |||||||
| Debt issuance costs, net | (1,963 | ) | |||||||||
| Unsecured term loans, net of unamortized debt issuance costs | $ | 298,037 | |||||||||
| Senior unsecured credit facility | LIBOR + 1.50 | Variable | $ | — | May 2020 (3) | ||||||
| Total debt, net of unamortized debt issuance costs | $ | 940,805 | |||||||||
| Weighted-average interest rate of fixed rate debt | 4.22 | % | |||||||||
| Total weighted-average interest rate | 3.75 | % | |||||||||
(1) | The interest rate as of September 30, 2017 was 2.68%. |
(2) | The interest rate as of September 30, 2017 was 2.69%. |
(3) | May be extended for an additional year upon the payment of applicable fees and the satisfaction of certain customary conditions. |
18
| Operating Statistics – Third Quarter | |||||||||||||||||||||||||||||||
| ADR | Occupancy | RevPAR | Hotel Adjusted EBITDA Margin | ||||||||||||||||||||||||||||
| 3Q 2017 | 3Q 2016 | B/(W) | 3Q 2017 | 3Q 2016 | B/(W) | 3Q 2017 | 3Q 2016 | B/(W) | 3Q 2017 | 3Q 2016 | B/(W) | ||||||||||||||||||||
| Atlanta Alpharetta Marriott | $ | 162.05 | $ | 168.83 | (4.0 | )% | 76.1 | % | 74.6 | % | 1.5 | % | $ | 123.25 | $ | 125.87 | (2.1 | )% | 30.57 | % | 36.03 | % | -546 bps | ||||||||
| Bethesda Marriott Suites | $ | 152.68 | $ | 164.31 | (7.1 | )% | 73.2 | % | 69.1 | % | 4.1 | % | $ | 111.79 | $ | 113.56 | (1.6 | )% | 20.10 | % | 23.62 | % | -352 bps | ||||||||
| Boston Westin | $ | 262.82 | $ | 252.89 | 3.9 | % | 81.5 | % | 87.5 | % | (6.0 | )% | $ | 214.21 | $ | 221.19 | (3.2 | )% | 31.31 | % | 32.06 | % | -75 bps | ||||||||
| Hilton Boston Downtown | $ | 321.72 | $ | 319.55 | 0.7 | % | 92.3 | % | 92.6 | % | (0.3 | )% | $ | 297.04 | $ | 295.76 | 0.4 | % | 45.12 | % | 45.15 | % | -3 bps | ||||||||
| Hilton Burlington | $ | 224.97 | $ | 221.77 | 1.4 | % | 92.6 | % | 91.0 | % | 1.6 | % | $ | 208.43 | $ | 201.88 | 3.2 | % | 50.60 | % | 49.40 | % | 120 bps | ||||||||
| Renaissance Charleston | $ | 227.46 | $ | 209.97 | 8.3 | % | 87.4 | % | 92.3 | % | (4.9 | )% | $ | 198.80 | $ | 193.72 | 2.6 | % | 37.61 | % | 37.14 | % | 47 bps | ||||||||
| Chicago Marriott | $ | 225.10 | $ | 223.48 | 0.7 | % | 87.2 | % | 84.5 | % | 2.7 | % | $ | 196.29 | $ | 188.75 | 4.0 | % | 31.71 | % | 31.58 | % | 13 bps | ||||||||
| Chicago Gwen | $ | 223.15 | $ | 222.73 | 0.2 | % | 89.4 | % | 88.9 | % | 0.5 | % | $ | 199.57 | $ | 197.93 | 0.8 | % | 25.48 | % | 38.04 | % | -1256 bps | ||||||||
| Courtyard Denver Downtown | $ | 217.19 | $ | 211.53 | 2.7 | % | 88.1 | % | 88.4 | % | (0.3 | )% | $ | 191.37 | $ | 187.03 | 2.3 | % | 52.49 | % | 52.69 | % | -20 bps | ||||||||
| Courtyard Fifth Avenue | $ | 266.17 | $ | 266.76 | (0.2 | )% | 92.9 | % | 93.7 | % | (0.8 | )% | $ | 247.18 | $ | 250.09 | (1.2 | )% | 21.15 | % | 24.22 | % | -307 bps | ||||||||
| Courtyard Midtown East | $ | 257.35 | $ | 270.70 | (4.9 | )% | 94.7 | % | 95.1 | % | (0.4 | )% | $ | 243.77 | $ | 257.53 | (5.3 | )% | 25.67 | % | 33.38 | % | -771 bps | ||||||||
| Fort Lauderdale Westin | $ | 141.95 | $ | 140.24 | 1.2 | % | 79.9 | % | 85.1 | % | (5.2 | )% | $ | 113.38 | $ | 119.30 | (5.0 | )% | 19.25 | % | 27.77 | % | -852 bps | ||||||||
| Frenchman's Reef | $ | 215.66 | $ | 196.57 | 9.7 | % | 86.6 | % | 81.6 | % | 5.0 | % | $ | 186.74 | $ | 160.31 | 16.5 | % | 13.47 | % | 14.09 | % | -62 bps | ||||||||
| JW Marriott Denver Cherry Creek | $ | 270.39 | $ | 275.52 | (1.9 | )% | 85.6 | % | 87.1 | % | (1.5 | )% | $ | 231.54 | $ | 240.03 | (3.5 | )% | 38.98 | % | 38.30 | % | 68 bps | ||||||||
| Inn at Key West | $ | 159.50 | $ | 165.14 | (3.4 | )% | 90.9 | % | 79.1 | % | 11.8 | % | $ | 145.06 | $ | 130.56 | 11.1 | % | 36.37 | % | 37.84 | % | -147 bps | ||||||||
| Sheraton Suites Key West | $ | 221.87 | $ | 218.30 | 1.6 | % | 81.5 | % | 78.4 | % | 3.1 | % | $ | 180.89 | $ | 171.24 | 5.6 | % | 34.94 | % | 33.54 | % | 140 bps | ||||||||
| Lexington Hotel New York | $ | 256.48 | $ | 251.31 | 2.1 | % | 94.0 | % | 94.8 | % | (0.8 | )% | $ | 241.14 | $ | 238.14 | 1.3 | % | 22.74 | % | 20.53 | % | 221 bps | ||||||||
| Hotel Rex | $ | 225.35 | $ | 237.76 | (5.2 | )% | 92.7 | % | 84.9 | % | 7.8 | % | $ | 208.91 | $ | 201.96 | 3.4 | % | 39.93 | % | 38.26 | % | 167 bps | ||||||||
| Salt Lake City Marriott | $ | 170.44 | $ | 165.71 | 2.9 | % | 80.3 | % | 73.4 | % | 6.9 | % | $ | 136.79 | $ | 121.65 | 12.4 | % | 38.64 | % | 39.47 | % | -83 bps | ||||||||
| L'Auberge de Sedona | $ | 478.26 | $ | 436.92 | 9.5 | % | 72.5 | % | 73.0 | % | (0.5 | )% | $ | 346.94 | $ | 318.84 | 8.8 | % | 16.84 | % | 16.49 | % | 35 bps | ||||||||
| Orchards Inn Sedona | $ | 205.50 | $ | 190.59 | 7.8 | % | 79.3 | % | 81.8 | % | (2.5 | )% | $ | 162.99 | $ | 155.85 | 4.6 | % | 24.11 | % | 25.89 | % | -178 bps | ||||||||
| Shorebreak | $ | 281.74 | $ | 256.64 | 9.8 | % | 83.8 | % | 85.7 | % | (1.9 | )% | $ | 236.22 | $ | 220.01 | 7.4 | % | 41.28 | % | 41.33 | % | -5 bps | ||||||||
| The Lodge at Sonoma | $ | 368.44 | $ | 336.17 | 9.6 | % | 80.2 | % | 88.2 | % | (8.0 | )% | $ | 295.50 | $ | 296.45 | (0.3 | )% | 39.17 | % | 38.04 | % | 113 bps | ||||||||
| Hilton Garden Inn Times Square Central | $ | 247.91 | $ | 260.05 | (4.7 | )% | 97.7 | % | 98.1 | % | (0.4 | )% | $ | 242.20 | $ | 255.16 | (5.1 | )% | 30.58 | % | 34.25 | % | -367 bps | ||||||||
| Vail Marriott | $ | 200.36 | $ | 187.56 | 6.8 | % | 78.4 | % | 76.9 | % | 1.5 | % | $ | 157.09 | $ | 144.31 | 8.9 | % | 24.45 | % | 26.12 | % | -167 bps | ||||||||
| Westin San Diego | $ | 200.25 | $ | 193.87 | 3.3 | % | 90.5 | % | 90.9 | % | (0.4 | )% | $ | 181.27 | $ | 176.27 | 2.8 | % | 37.99 | % | 37.99 | % | 0 bps | ||||||||
| Westin Washington D.C. City Center | $ | 188.07 | $ | 198.32 | (5.2 | )% | 86.7 | % | 86.4 | % | 0.3 | % | $ | 163.01 | $ | 171.30 | (4.8 | )% | 31.80 | % | 34.44 | % | -264 bps | ||||||||
| Renaissance Worthington | $ | 177.76 | $ | 170.16 | 4.5 | % | 70.2 | % | 50.2 | % | 20.0 | % | $ | 124.84 | $ | 85.34 | 46.3 | % | 25.89 | % | 19.70 | % | 619 bps | ||||||||
Total (1) | $ | 227.75 | $ | 224.91 | 1.3 | % | 85.4 | % | 84.0 | % | 1.4 | % | $ | 194.42 | $ | 188.88 | 2.9 | % | 30.81 | % | 31.72 | % | -91 bps | ||||||||
Comparable Total (1) (2) | $ | 228.85 | $ | 227.01 | 0.8 | % | 85.3 | % | 84.2 | % | 1.1 | % | $ | 195.13 | $ | 191.06 | 2.1 | % | 31.70 | % | 32.85 | % | -115 bps | ||||||||
(1) | Amounts include the pre-acquisition operating results of the L'Auberge de Sedona and Orchards Inn Sedona for the period from July 1, 2016 to September 30, 2016 and exclude the three hotels sold in 2016. |
(2) | Amounts exclude the operating results of Frenchman's Reef and Morning Star Marriott Beach Resort and Inn at Key West as they are closed due to hurricane damage. |
19
| Operating Statistics – Year to Date | |||||||||||||||||||||||||||||||
| ADR | Occupancy | RevPAR | Hotel Adjusted EBITDA Margin | ||||||||||||||||||||||||||||
| YTD 2017 | YTD 2016 | B/(W) | YTD 2017 | YTD 2016 | B/(W) | YTD 2017 | YTD 2016 | B/(W) | YTD 2017 | YTD 2016 | B/(W) | ||||||||||||||||||||
| Atlanta Alpharetta Marriott | $ | 168.15 | $ | 174.58 | (3.7 | )% | 76.3 | % | 73.7 | % | 2.6 | % | $ | 128.27 | $ | 128.67 | (0.3 | )% | 32.74 | % | 35.86 | % | -312 bps | ||||||||
| Bethesda Marriott Suites | $ | 170.12 | $ | 170.48 | (0.2 | )% | 75.6 | % | 71.4 | % | 4.2 | % | $ | 128.53 | $ | 121.78 | 5.5 | % | 28.23 | % | 28.24 | % | -1 bps | ||||||||
| Boston Westin | $ | 254.66 | $ | 242.15 | 5.2 | % | 79.1 | % | 82.0 | % | (2.9 | )% | $ | 201.37 | $ | 198.46 | 1.5 | % | 31.47 | % | 31.11 | % | 36 bps | ||||||||
| Hilton Boston Downtown | $ | 290.62 | $ | 282.76 | 2.8 | % | 86.3 | % | 87.8 | % | (1.5 | )% | $ | 250.76 | $ | 248.16 | 1.0 | % | 40.20 | % | 40.72 | % | -52 bps | ||||||||
| Hilton Burlington | $ | 180.10 | $ | 180.39 | (0.2 | )% | 81.5 | % | 81.4 | % | 0.1 | % | $ | 146.86 | $ | 146.82 | — | % | 40.39 | % | 41.53 | % | -114 bps | ||||||||
| Renaissance Charleston | $ | 245.39 | $ | 223.06 | 10.0 | % | 79.1 | % | 90.9 | % | (11.8 | )% | $ | 194.10 | $ | 202.75 | (4.3 | )% | 36.72 | % | 39.64 | % | -292 bps | ||||||||
| Chicago Marriott | $ | 218.14 | $ | 219.65 | (0.7 | )% | 73.1 | % | 69.4 | % | 3.7 | % | $ | 159.44 | $ | 152.52 | 4.5 | % | 25.41 | % | 25.77 | % | -36 bps | ||||||||
| Chicago Gwen | $ | 219.29 | $ | 208.80 | 5.0 | % | 73.0 | % | 76.8 | % | (3.8 | )% | $ | 160.17 | $ | 160.33 | (0.1 | )% | 22.46 | % | 29.77 | % | -731 bps | ||||||||
| Courtyard Denver Downtown | $ | 207.87 | $ | 203.60 | 2.1 | % | 81.0 | % | 82.9 | % | (1.9 | )% | $ | 168.46 | $ | 168.86 | (0.2 | )% | 48.97 | % | 49.43 | % | -46 bps | ||||||||
| Courtyard Fifth Avenue | $ | 249.08 | $ | 250.14 | (0.4 | )% | 89.1 | % | 88.2 | % | 0.9 | % | $ | 221.86 | $ | 220.50 | 0.6 | % | 15.55 | % | 17.72 | % | -217 bps | ||||||||
| Courtyard Midtown East | $ | 243.41 | $ | 251.17 | (3.1 | )% | 90.1 | % | 91.9 | % | (1.8 | )% | $ | 219.26 | $ | 230.80 | (5.0 | )% | 24.18 | % | 28.31 | % | -413 bps | ||||||||
| Fort Lauderdale Westin | $ | 192.20 | $ | 196.63 | (2.3 | )% | 86.9 | % | 92.1 | % | (5.2 | )% | $ | 167.03 | $ | 181.03 | (7.7 | )% | 36.53 | % | 39.84 | % | -331 bps | ||||||||
| Frenchman's Reef | $ | 282.62 | $ | 257.46 | 9.8 | % | 87.8 | % | 86.5 | % | 1.3 | % | $ | 248.11 | $ | 222.74 | 11.4 | % | 26.63 | % | 26.32 | % | 31 bps | ||||||||
| JW Marriott Denver Cherry Creek | $ | 262.32 | $ | 270.10 | (2.9 | )% | 81.1 | % | 81.9 | % | (0.8 | )% | $ | 212.70 | $ | 221.10 | (3.8 | )% | 34.60 | % | 36.19 | % | -159 bps | ||||||||
| Inn at Key West | $ | 197.20 | $ | 208.16 | (5.3 | )% | 82.1 | % | 87.1 | % | (5.0 | )% | $ | 161.91 | $ | 181.22 | (10.7 | )% | 47.44 | % | 46.85 | % | 59 bps | ||||||||
| Sheraton Suites Key West | $ | 256.78 | $ | 260.24 | (1.3 | )% | 89.5 | % | 88.2 | % | 1.3 | % | $ | 229.77 | $ | 229.56 | 0.1 | % | 45.38 | % | 44.35 | % | 103 bps | ||||||||
| Lexington Hotel New York | $ | 231.36 | $ | 230.77 | 0.3 | % | 92.1 | % | 90.3 | % | 1.8 | % | $ | 213.14 | $ | 208.44 | 2.3 | % | 13.69 | % | 14.76 | % | -107 bps | ||||||||
| Hotel Rex | $ | 224.87 | $ | 238.58 | (5.7 | )% | 83.9 | % | 83.9 | % | — | % | $ | 188.64 | $ | 200.28 | (5.8 | )% | 35.14 | % | 36.77 | % | -163 bps | ||||||||
| Salt Lake City Marriott | $ | 167.03 | $ | 161.18 | 3.6 | % | 79.3 | % | 71.0 | % | 8.3 | % | $ | 132.49 | $ | 114.44 | 15.8 | % | 40.12 | % | 36.45 | % | 367 bps | ||||||||
L'Auberge de Sedona (1) | $ | 551.56 | $ | 474.28 | 16.3 | % | 76.8 | % | 74.9 | % | 1.9 | % | $ | 423.72 | $ | 355.25 | 19.3 | % | 25.77 | % | 22.28 | % | 349 bps | ||||||||
Orchards Inn Sedona (1) | $ | 231.35 | $ | 207.76 | 11.4 | % | 84.1 | % | 83.5 | % | 0.6 | % | $ | 194.50 | $ | 173.55 | 12.1 | % | 34.34 | % | 32.50 | % | 184 bps | ||||||||
| Shorebreak | $ | 244.28 | $ | 232.01 | 5.3 | % | 76.3 | % | 81.3 | % | (5.0 | )% | $ | 186.38 | $ | 188.73 | (1.2 | )% | 29.54 | % | 34.10 | % | -456 bps | ||||||||
| The Lodge at Sonoma | $ | 326.04 | $ | 294.85 | 10.6 | % | 65.1 | % | 81.4 | % | (16.3 | )% | $ | 212.12 | $ | 240.07 | (11.6 | )% | 27.81 | % | 30.92 | % | -311 bps | ||||||||
| Hilton Garden Inn Times Square Central | $ | 227.06 | $ | 234.74 | (3.3 | )% | 97.0 | % | 96.4 | % | 0.6 | % | $ | 220.20 | $ | 226.36 | (2.7 | )% | 27.25 | % | 29.71 | % | -246 bps | ||||||||
| Vail Marriott | $ | 282.34 | $ | 271.71 | 3.9 | % | 75.0 | % | 73.4 | % | 1.6 | % | $ | 211.68 | $ | 199.34 | 6.2 | % | 35.08 | % | 37.13 | % | -205 bps | ||||||||
| Westin San Diego | $ | 198.46 | $ | 189.79 | 4.6 | % | 86.9 | % | 86.4 | % | 0.5 | % | $ | 172.39 | $ | 163.95 | 5.1 | % | 39.36 | % | 37.74 | % | 162 bps | ||||||||
| Westin Washington D.C. City Center | $ | 223.17 | $ | 222.66 | 0.2 | % | 86.6 | % | 85.9 | % | 0.7 | % | $ | 193.29 | $ | 191.30 | 1.0 | % | 40.03 | % | 38.65 | % | 138 bps | ||||||||
| Renaissance Worthington | $ | 182.09 | $ | 180.21 | 1.0 | % | 75.4 | % | 64.1 | % | 11.3 | % | $ | 137.36 | $ | 115.59 | 18.8 | % | 36.10 | % | 32.89 | % | 321 bps | ||||||||
Total | $ | 228.67 | $ | 225.55 | 1.4 | % | 81.5 | % | 80.9 | % | 0.6 | % | $ | 186.46 | $ | 182.51 | 2.2 | % | 31.12 | % | 31.55 | % | -43 bps | ||||||||
Comparable Total (2) | $ | 226.51 | $ | 224.03 | 1.1 | % | 81.2 | % | 80.5 | % | 0.7 | % | $ | 183.91 | $ | 180.26 | 2.0 | % | 31.21 | % | 31.94 | % | -73 bps | ||||||||
(1) | Hotels were acquired on February 28, 2017. Amounts reflect the operating results these hotels for the period from February 28, 2017 to September 30, 2017 and February 28, 2016 to September 30, 2016, respectively. |
(2) | Amounts include the pre-acquisition operating results of the L'Auberge de Sedona and Orchards Inn Sedona for the period from January 1, 2017 to February 27, 2017 and January 1, 2016 to September 30, 2016, respectively, and exclude the three hotels sold in 2016. Amounts exclude the operating results of Frenchman's Reef and Morning Star Marriott Beach Resort and Inn at Key West as they are closed due to hurricane damage. |
20
| Hotel Adjusted EBITDA Reconciliation | ||||||||||||||||||||
| Third Quarter 2017 | ||||||||||||||||||||
| Plus: | Plus: | Plus: | Equals: | |||||||||||||||||
| Total Revenues | Net Income / (Loss) | Depreciation | Interest Expense | Adjustments (1) | Hotel Adjusted EBITDA | |||||||||||||||
| Atlanta Alpharetta Marriott | $ | 4,540 | $ | 994 | $ | 394 | $ | — | $ | — | $ | 1,388 | ||||||||
| Bethesda Marriott Suites | $ | 3,707 | $ | (1,115 | ) | $ | 347 | $ | — | $ | 1,513 | $ | 745 | |||||||
| Boston Westin | $ | 23,444 | $ | 2,945 | $ | 2,194 | $ | 2,261 | $ | (60 | ) | $ | 7,340 | |||||||
| Hilton Boston Downtown | $ | 11,645 | $ | 4,016 | $ | 1,238 | $ | — | $ | — | $ | 5,254 | ||||||||
| Hilton Burlington | $ | 6,034 | $ | 2,541 | $ | 512 | $ | — | $ | — | $ | 3,053 | ||||||||
| Renaissance Charleston | $ | 3,470 | $ | 949 | $ | 388 | $ | — | $ | (32 | ) | $ | 1,305 | |||||||
| Chicago Marriott | $ | 30,712 | $ | 6,367 | $ | 3,751 | $ | 18 | $ | (397 | ) | $ | 9,739 | |||||||
| Chicago Gwen | $ | 7,719 | $ | 878 | $ | 1,089 | $ | — | $ | — | $ | 1,967 | ||||||||
| Courtyard Denver Downtown | $ | 3,328 | $ | 1,438 | $ | 309 | $ | — | $ | — | $ | 1,747 | ||||||||
| Courtyard Fifth Avenue | $ | 4,383 | $ | 429 | $ | 446 | $ | — | $ | 52 | $ | 927 | ||||||||
| Courtyard Midtown East | $ | 7,487 | $ | (265 | ) | $ | 676 | $ | 1,002 | $ | 509 | $ | 1,922 | |||||||
| Fort Lauderdale Westin | $ | 7,673 | $ | 191 | $ | 1,286 | $ | — | $ | — | $ | 1,477 | ||||||||
| Frenchman's Reef | $ | 11,213 | $ | (945 | ) | $ | 1,104 | $ | — | $ | 1,351 | $ | 1,510 | |||||||
| JW Marriott Denver Cherry Creek | $ | 6,193 | $ | 1,192 | $ | 507 | $ | 715 | $ | — | $ | 2,414 | ||||||||
| Inn at Key West | $ | 1,383 | $ | 374 | $ | 129 | $ | — | $ | — | $ | 503 | ||||||||
| Sheraton Suites Key West | $ | 3,334 | $ | 729 | $ | 294 | $ | — | $ | 142 | $ | 1,165 | ||||||||
| Lexington Hotel New York | $ | 17,156 | $ | 411 | $ | 3,478 | $ | 5 | $ | 8 | $ | 3,902 | ||||||||
| Hotel Rex | $ | 2,061 | $ | 684 | $ | 139 | $ | — | $ | — | $ | 823 | ||||||||
| Salt Lake City Marriott | $ | 8,755 | $ | 2,208 | $ | 531 | $ | 644 | $ | — | $ | 3,383 | ||||||||
| L'Auberge de Sedona | $ | 5,213 | $ | 393 | $ | 485 | $ | — | $ | — | $ | 878 | ||||||||
| Orchards Inn Sedona | $ | 1,962 | $ | 198 | $ | 234 | $ | — | $ | 41 | $ | 473 | ||||||||
| Shorebreak | $ | 4,726 | $ | 1,512 | $ | 454 | $ | — | $ | (15 | ) | $ | 1,951 | |||||||
| The Lodge at Sonoma | $ | 7,294 | $ | 2,068 | $ | 495 | $ | 294 | $ | — | $ | 2,857 | ||||||||
| Hilton Garden Inn Times Square Central | $ | 6,394 | $ | 1,161 | $ | 794 | $ | — | $ | — | $ | 1,955 | ||||||||
| Vail Marriott | $ | 8,461 | $ | 1,572 | $ | 497 | $ | — | $ | — | $ | 2,069 | ||||||||
| Westin San Diego | $ | 9,414 | $ | 1,816 | $ | 1,094 | $ | 666 | $ | — | $ | 3,576 | ||||||||
| Westin Washington D.C. City Center | $ | 7,631 | $ | 422 | $ | 1,299 | $ | 706 | $ | — | $ | 2,427 | ||||||||
| Renaissance Worthington | $ | 8,154 | $ | 377 | $ | 919 | $ | 813 | $ | 2 | $ | 2,111 | ||||||||
| Total | $ | 223,486 | $ | 33,540 | $ | 25,083 | $ | 7,124 | $ | 3,114 | $ | 68,866 | ||||||||
Less: Closed Hotels (2) | $ | (12,596 | ) | $ | 571 | $ | (1,233 | ) | $ | — | $ | (1,351 | ) | $ | (2,013 | ) | ||||
| Comparable Total | $ | 210,890 | $ | 34,111 | $ | 23,850 | $ | 7,124 | $ | 1,763 | $ | 66,853 | ||||||||
(1) | Includes non-cash expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations, the non-cash amortization favorable and unfavorable contract liabilities and hotel manager transition costs. |
(2) | Amounts represent the operating results of Frenchman's Reef and Morning Star Marriott Beach Resort and Inn at Key West as they are closed due to hurricane damage. |
21
| Hotel Adjusted EBITDA Reconciliation | ||||||||||||||||||||
| Third Quarter 2016 | ||||||||||||||||||||
| Plus: | Plus: | Plus: | Equals: | |||||||||||||||||
| Total Revenues | Net Income / (Loss) | Depreciation | Interest Expense | Adjustments (1) | Hotel Adjusted EBITDA | |||||||||||||||
| Atlanta Alpharetta Marriott | $ | 5,015 | $ | 1,441 | $ | 366 | $ | — | $ | — | $ | 1,807 | ||||||||
| Bethesda Marriott Suites | $ | 3,789 | $ | (993 | ) | $ | 355 | $ | — | $ | 1,533 | $ | 895 | |||||||
| Boston Westin | $ | 25,683 | $ | 3,804 | $ | 2,193 | $ | 2,298 | $ | (60 | ) | $ | 8,235 | |||||||
| Hilton Boston Downtown | $ | 11,681 | $ | 4,067 | $ | 1,207 | $ | — | $ | — | $ | 5,274 | ||||||||
| Hilton Burlington | $ | 5,834 | $ | 2,365 | $ | 517 | $ | — | $ | — | $ | 2,882 | ||||||||
| Renaissance Charleston | $ | 3,398 | $ | 1,034 | $ | 260 | $ | — | $ | (32 | ) | $ | 1,262 | |||||||
| Hilton Garden Inn Chelsea | $ | 152 | $ | (4 | ) | $ | — | $ | — | $ | — | $ | (4 | ) | ||||||
| Chicago Marriott | $ | 30,621 | $ | 6,651 | $ | 3,449 | $ | (34 | ) | $ | (397 | ) | $ | 9,669 | ||||||
| Chicago Gwen | $ | 7,615 | $ | 2,169 | $ | 728 | $ | — | $ | — | $ | 2,897 | ||||||||
| Courtyard Denver Downtown | $ | 3,234 | $ | 1,413 | $ | 291 | $ | — | $ | — | $ | 1,704 | ||||||||
| Courtyard Fifth Avenue | $ | 4,438 | $ | 554 | $ | 469 | $ | — | $ | 52 | $ | 1,075 | ||||||||
| Courtyard Midtown East | $ | 7,889 | $ | 946 | $ | 669 | $ | 1,018 | $ | — | $ | 2,633 | ||||||||
| Fort Lauderdale Westin | $ | 8,824 | $ | 1,267 | $ | 1,183 | $ | — | $ | — | $ | 2,450 | ||||||||
| Frenchman's Reef | $ | 14,072 | $ | 366 | $ | 1,617 | $ | — | $ | — | $ | 1,983 | ||||||||
| JW Marriott Denver Cherry Creek | $ | 6,504 | $ | 1,258 | $ | 506 | $ | 727 | $ | — | $ | 2,491 | ||||||||
| Inn at Key West | $ | 1,707 | $ | 461 | $ | 185 | $ | — | $ | — | $ | 646 | ||||||||
| Sheraton Suites Key West | $ | 3,679 | $ | 718 | $ | 516 | $ | — | $ | — | $ | 1,234 | ||||||||
| Lexington Hotel New York | $ | 16,641 | $ | (1,369 | ) | $ | 3,413 | $ | 1,366 | $ | 7 | $ | 3,417 | |||||||
| Hotel Rex | $ | 1,968 | $ | 610 | $ | 143 | $ | — | $ | — | $ | 753 | ||||||||
| Salt Lake City Marriott | $ | 7,963 | $ | 1,960 | $ | 521 | $ | 662 | $ | — | $ | 3,143 | ||||||||
| Shorebreak | $ | 4,152 | $ | 1,348 | $ | 383 | $ | — | $ | (15 | ) | $ | 1,716 | |||||||
| The Lodge at Sonoma | $ | 7,324 | $ | 2,108 | $ | 378 | $ | 300 | $ | — | $ | 2,786 | ||||||||
| Hilton Garden Inn Times Square Central | $ | 6,727 | $ | 1,476 | $ | 828 | $ | — | $ | — | $ | 2,304 | ||||||||
| Vail Marriott | $ | 7,772 | $ | 1,553 | $ | 477 | $ | — | $ | — | $ | 2,030 | ||||||||
| Westin San Diego | $ | 9,268 | $ | 1,817 | $ | 1,024 | $ | 680 | $ | — | $ | 3,521 | ||||||||
| Westin Washington D.C. City Center | $ | 7,959 | $ | 763 | $ | 1,251 | $ | 727 | $ | — | $ | 2,741 | ||||||||
| Renaissance Worthington | $ | 6,330 | $ | (247 | ) | $ | 676 | $ | 816 | $ | 2 | $ | 1,247 | |||||||
| Total | $ | 220,239 | $ | 37,536 | $ | 23,605 | $ | 8,560 | $ | 1,090 | $ | 70,682 | ||||||||
Add: Prior Ownership Results(2) | $ | 6,870 | $ | 346 | $ | 934 | $ | — | $ | 32 | $ | 1,312 | ||||||||
Less: Sold Hotels (3) | $ | (152 | ) | $ | 4 | $ | — | $ | — | $ | — | $ | 4 | |||||||
Less: Closed Hotels (4) | $ | (15,779 | ) | $ | (827 | ) | $ | (1,802 | ) | $ | — | $ | — | $ | (2,629 | ) | ||||
| Comparable Total | $ | 211,178 | $ | 37,059 | $ | 22,737 | $ | 8,560 | $ | 1,122 | $ | 69,369 | ||||||||
(1) | Includes non-cash expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations, the non-cash amortization favorable and unfavorable contract liabilities and hotel manager transition costs. |
(2) | Amounts represent the pre-acquisition operating results of the L'Auberge de Sedona and Orchards Inn Sedona for the period from July 1, 2016 to September 30, 2016. |
(3) | Amounts represent the operating results of the three hotels sold in 2016: Orlando Airport Marriott, Minneapolis Hilton and Hilton Garden Inn Chelsea. |
(4) | Amounts represent the operating results of Frenchman's Reef and Morning Star Marriott Beach Resort and Inn at Key West as they are closed due to hurricane damage. |
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| Hotel Adjusted EBITDA Reconciliation | ||||||||||||||||||||
| Year to Date 2017 | ||||||||||||||||||||
| Plus: | Plus: | Plus: | Equals: | |||||||||||||||||
| Total Revenues | Net Income / (Loss) | Depreciation | Interest Expense | Adjustments (1) | Hotel Adjusted EBITDA | |||||||||||||||
| Atlanta Alpharetta Marriott | $ | 14,845 | $ | 3,696 | $ | 1,164 | $ | — | $ | — | $ | 4,860 | ||||||||
| Bethesda Marriott Suites | $ | 12,629 | $ | (2,024 | ) | $ | 1,039 | $ | — | $ | 4,550 | $ | 3,565 | |||||||
| Boston Westin | $ | 70,371 | $ | 9,024 | $ | 6,567 | $ | 6,738 | $ | (181 | ) | $ | 22,148 | |||||||
| Hilton Boston Downtown | $ | 29,651 | $ | 8,210 | $ | 3,710 | $ | — | $ | — | $ | 11,920 | ||||||||
| Hilton Burlington | $ | 13,083 | $ | 3,740 | $ | 1,544 | $ | — | $ | — | $ | 5,284 | ||||||||
| Renaissance Charleston | $ | 9,948 | $ | 2,635 | $ | 1,113 | $ | — | $ | (95 | ) | $ | 3,653 | |||||||
| Chicago Marriott | $ | 77,887 | $ | 9,895 | $ | 10,965 | $ | 121 | $ | (1,192 | ) | $ | 19,789 | |||||||
| Chicago Gwen | $ | 18,220 | $ | 1,074 | $ | 3,018 | $ | — | $ | — | $ | 4,092 | ||||||||
| Courtyard Denver Downtown | $ | 8,723 | $ | 3,382 | $ | 890 | $ | — | $ | — | $ | 4,272 | ||||||||
| Courtyard Fifth Avenue | $ | 11,689 | $ | 321 | $ | 1,342 | $ | — | $ | 155 | $ | 1,818 | ||||||||
| Courtyard Midtown East | $ | 20,009 | $ | (656 | ) | $ | 1,998 | $ | 2,987 | $ | 509 | $ | 4,838 | |||||||
| Fort Lauderdale Westin | $ | 33,858 | $ | 8,517 | $ | 3,852 | $ | — | $ | — | $ | 12,369 | ||||||||
| Frenchman's Reef | $ | 50,247 | $ | 7,634 | $ | 4,395 | $ | — | $ | 1,351 | $ | 13,380 | ||||||||
| JW Marriott Denver Cherry Creek | $ | 17,771 | $ | 2,496 | $ | 1,522 | $ | 2,131 | $ | — | $ | 6,149 | ||||||||
| Inn at Key West | $ | 5,392 | $ | 2,041 | $ | 517 | $ | — | $ | — | $ | 2,558 | ||||||||
| Sheraton Suites Key West | $ | 13,559 | $ | 5,138 | $ | 873 | $ | — | $ | 142 | $ | 6,153 | ||||||||
| Lexington Hotel New York | $ | 44,658 | $ | (6,266 | ) | $ | 10,422 | $ | 1,932 | $ | 24 | $ | 6,112 | |||||||
| Hotel Rex | $ | 5,529 | $ | 1,520 | $ | 423 | $ | — | $ | — | $ | 1,943 | ||||||||
| Salt Lake City Marriott | $ | 26,042 | $ | 6,942 | $ | 1,580 | $ | 1,926 | $ | — | $ | 10,448 | ||||||||
| L'Auberge de Sedona | $ | 14,573 | $ | 2,579 | $ | 1,177 | $ | — | $ | — | $ | 3,756 | ||||||||
| Orchards Inn Sedona | $ | 5,408 | $ | 1,215 | $ | 545 | $ | — | $ | 97 | $ | 1,857 | ||||||||
| Shorebreak | $ | 10,955 | $ | 1,981 | $ | 1,299 | $ | — | $ | (44 | ) | $ | 3,236 | |||||||
| The Lodge at Sonoma | $ | 16,682 | $ | 2,409 | $ | 1,352 | $ | 878 | $ | — | $ | 4,639 | ||||||||
| Hilton Garden Inn Times Square Central | $ | 17,275 | $ | 2,331 | $ | 2,376 | $ | — | $ | — | $ | 4,707 | ||||||||
| Vail Marriott | $ | 29,663 | $ | 8,911 | $ | 1,496 | $ | — | $ | — | $ | 10,407 | ||||||||
| Westin San Diego | $ | 27,948 | $ | 5,724 | $ | 3,290 | $ | 1,986 | $ | — | $ | 11,000 | ||||||||
| Westin Washington D.C. City Center | $ | 26,452 | $ | 4,591 | $ | 3,887 | $ | 2,112 | $ | — | $ | 10,590 | ||||||||
| Renaissance Worthington | $ | 29,901 | $ | 5,694 | $ | 2,675 | $ | 2,419 | $ | 6 | $ | 10,794 | ||||||||
| Total | $ | 662,968 | $ | 102,754 | $ | 75,031 | $ | 23,230 | $ | 5,322 | $ | 206,333 | ||||||||
Add: Prior Ownership Results (2) | $ | 3,422 | $ | (293 | ) | $ | 522 | $ | — | $ | — | $ | 229 | |||||||
Less: Closed Hotels (3) | $ | (55,639 | ) | $ | (9,675 | ) | $ | (4,912 | ) | $ | — | $ | (1,351 | ) | $ | (15,938 | ) | |||
| Comparable Total | $ | 610,751 | $ | 92,786 | $ | 70,641 | $ | 23,230 | $ | 3,971 | $ | 190,624 | ||||||||
(1) | Includes non-cash expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations, the non-cash amortization favorable and unfavorable contract liabilities and hotel manager transition costs. |
(2) | Amounts represent the pre-acquisition operating results of the L'Auberge de Sedona and Orchards Inn Sedona for the period from January 1, 2017 to February 27, 2017. |
(3) | Amounts represent the operating results of Frenchman's Reef and Morning Star Marriott Beach Resort and Inn at Key West as they are closed due to hurricane damage. |
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| Hotel Adjusted EBITDA Reconciliation | ||||||||||||||||||||
| Year to Date 2016 | ||||||||||||||||||||
| Plus: | Plus: | Plus: | Equals: | |||||||||||||||||
| Total Revenues | Net Income / (Loss) | Depreciation | Interest Expense | Adjustments (1) | Hotel Adjusted EBITDA | |||||||||||||||
| Atlanta Alpharetta Marriott | $ | 15,506 | $ | 4,475 | $ | 1,085 | $ | — | $ | — | $ | 5,560 | ||||||||
| Bethesda Marriott Suites | $ | 12,130 | $ | (2,240 | ) | $ | 1,067 | $ | — | $ | 4,598 | $ | 3,425 | |||||||
| Boston Westin | $ | 73,021 | $ | 9,430 | $ | 6,595 | $ | 6,873 | $ | (181 | ) | $ | 22,717 | |||||||
| Hilton Boston Downtown | $ | 29,583 | $ | 8,406 | $ | 3,631 | $ | — | $ | 8 | $ | 12,045 | ||||||||
| Hilton Burlington | $ | 13,387 | $ | 4,100 | $ | 1,460 | $ | — | $ | — | $ | 5,560 | ||||||||
| Renaissance Charleston | $ | 10,468 | $ | 3,485 | $ | 759 | $ | — | $ | (95 | ) | $ | 4,149 | |||||||
| Hilton Garden Inn Chelsea | $ | 6,413 | $ | 1,057 | $ | 601 | $ | — | $ | — | $ | 1,658 | ||||||||
| Chicago Marriott | $ | 74,356 | $ | 10,074 | $ | 9,867 | $ | 410 | $ | (1,192 | ) | $ | 19,159 | |||||||
| Chicago Gwen | $ | 17,816 | $ | 3,216 | $ | 2,087 | $ | — | $ | — | $ | 5,303 | ||||||||
| Courtyard Denver Downtown | $ | 8,738 | $ | 3,456 | $ | 863 | $ | — | $ | — | $ | 4,319 | ||||||||
| Courtyard Fifth Avenue | $ | 11,645 | $ | (660 | ) | $ | 1,357 | $ | 1,212 | $ | 155 | $ | 2,064 | |||||||
| Courtyard Midtown East | $ | 21,010 | $ | 904 | $ | 2,010 | $ | 3,034 | $ | — | $ | 5,948 | ||||||||
| Fort Lauderdale Westin | $ | 36,822 | $ | 11,149 | $ | 3,520 | $ | — | $ | — | $ | 14,669 | ||||||||
| Frenchman's Reef | $ | 52,794 | $ | 9,060 | $ | 4,834 | $ | — | $ | — | $ | 13,894 | ||||||||
| JW Marriott Denver Cherry Creek | $ | 18,935 | $ | 3,141 | $ | 1,545 | $ | 2,166 | $ | — | $ | 6,852 | ||||||||
| Inn at Key West | $ | 6,550 | $ | 2,521 | $ | 548 | $ | — | $ | — | $ | 3,069 | ||||||||
| Sheraton Suites Key West | $ | 14,298 | $ | 4,797 | $ | 1,544 | $ | — | $ | — | $ | 6,341 | ||||||||
| Lexington Hotel New York | $ | 43,433 | $ | (7,833 | ) | $ | 10,185 | $ | 4,036 | $ | 22 | $ | 6,410 | |||||||
| Minneapolis Hilton | $ | 24,786 | $ | (11 | ) | $ | 2,917 | $ | 2,514 | $ | (482 | ) | $ | 4,938 | ||||||
| Orlando Airport Marriott | $ | 14,117 | $ | 4,481 | $ | 573 | $ | — | $ | — | $ | 5,054 | ||||||||
| Hotel Rex | $ | 5,858 | $ | 1,725 | $ | 429 | $ | — | $ | — | $ | 2,154 | ||||||||
| Salt Lake City Marriott | $ | 22,366 | $ | 4,586 | $ | 1,583 | $ | 1,983 | $ | — | $ | 8,152 | ||||||||
| Shorebreak | $ | 11,078 | $ | 2,692 | $ | 1,130 | $ | — | $ | (44 | ) | $ | 3,778 | |||||||
| The Lodge at Sonoma | $ | 19,662 | $ | 4,069 | $ | 1,111 | $ | 899 | $ | — | $ | 6,079 | ||||||||
| Hilton Garden Inn Times Square Central | $ | 17,810 | $ | 2,910 | $ | 2,382 | $ | — | $ | — | $ | 5,292 | ||||||||
| Vail Marriott | $ | 28,034 | $ | 8,976 | $ | 1,433 | $ | — | $ | — | $ | 10,409 | ||||||||
| Westin San Diego | $ | 26,945 | $ | 5,053 | $ | 3,083 | $ | 2,034 | $ | — | $ | 10,170 | ||||||||
| Westin Washington D.C. City Center | $ | 26,264 | $ | 4,270 | $ | 3,703 | $ | 2,179 | $ | — | $ | 10,152 | ||||||||
| Renaissance Worthington | $ | 26,112 | $ | 4,321 | $ | 1,829 | $ | 2,431 | $ | 6 | $ | 8,587 | ||||||||
| Total | $ | 689,937 | $ | 111,610 | $ | 73,731 | $ | 29,771 | $ | 2,795 | $ | 217,666 | ||||||||
Add: Prior Ownership Results(2) | $ | 20,101 | $ | 1,416 | $ | 2,802 | $ | — | $ | 63 | $ | 4,281 | ||||||||
Less: Sold Hotels (3) | $ | (45,316 | ) | $ | (5,527 | ) | $ | (4,091 | ) | $ | (2,514 | ) | $ | 482 | $ | (11,650 | ) | |||
Less: Closed Hotels (4) | $ | (59,344 | ) | $ | (11,581 | ) | $ | (5,382 | ) | $ | — | $ | — | $ | (16,963 | ) | ||||
| Comparable Total | $ | 605,378 | $ | 95,918 | $ | 67,060 | $ | 27,257 | $ | 3,340 | $ | 193,334 | ||||||||
(1) | Includes non-cash expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations, the non-cash amortization favorable and unfavorable contract liabilities and hotel manager transition costs. |
(2) | Amounts represent the pre-acquisition operating results of the L'Auberge de Sedona and Orchards Inn Sedona for the period from January 1, 2016 to September 30, 2016. |
24
(3) | Amounts represent the operating results of the three hotels sold in 2016: Orlando Airport Marriott, Minneapolis Hilton and Hilton Garden Inn Chelsea. |
(4) | Amounts represent the operating results of Frenchman's Reef and Morning Star Marriott Beach Resort and Inn at Key West as they are closed due to hurricane damage. |
25