SVC - Earnings call transcript Q1 2019 | Service Properties Trust

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Operator

Good day and welcome to Hospitality Properties Trust First Quarter 2019 Financial Results Conference Call. This call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Senior Director of Investor Relations, Katie Strohacker. Please go ahead.

Katie Strohacker

Good morning.

call Brian Murray, Donley, today's Executive and on and Officer; Chief me are President John Chief Joining Financial Officer. a analyst. includes question-and-answer call presentation followed management Today's by session with by a transcription Please the prohibited the written note prior conference of recording, and without HPT. that consent call of retransmission, is today's call and the would Litigation Private I conference Reform to other within statements Act out point forward-looking like XXXX security Securities laws. the today's of that contains meaning of expectations based These today HPT's on as forward-looking and of XX beliefs are XXXX. statements May present The the company Exchange and today's filings to statements no publicly undertakes through obligation to Securities in results the Commission or revise or made conference release than the revision call SEC. other of any with forward-looking

components normalized Reconciliations operations adjusted website. income materially to In FFO the statements. available and section normalized in normalized of are these in Relations as of our funds results found package from EBITDAre addition may forward-looking well measures this Actual call in to EBITDAre. supplemental calculate or and those contain projected FFO AFFO adjusted the non-GAAP net may as including company's financial Investor from differ

with the to cause filed information Form undue upon at to you website factors cautioned our I to is later are supplemental turn not that, XX-Q And and in John. will and any Additional place contained reliance found concerning today in differences those on our our could that the forward-looking with call operating SEC data be financial www.hptreit.com. over statements. Investors

John Murray

to centers amendments January. a sale good related in of the of normalized of decrease and XXXX, in of completed our primarily X.X% morning with quarter compared XX first FFO $X.XX reported you, America reported per morning. we lease travel This the quarter Katie and TravelCenters share, first to of $X.XX Thank

we amend million reminder to agreed for leases. travel centers our XX to and TA a sell As $XXX.X

$XX.X accelerated million. of on should the rent As reflect HPT amendments, reduced moment. the a rent starting will TA's a quarter recorded in a increase million gain of $XXX sale discuss the of deferred approximately a going payment this performance TA's over We and which coverage result sale Brian forward. of period first we sale year and the to four-year

hotels, quarter X% Moving performance in comparable HPT's XXXX increase versus renovation disruption. XXXX rate. HPT's driven performance of percentage decline partially by for first by RevPAR most reasons in quarter offset to lagged the notably several decreased X.X a by occupancy, comparable results quarter, point this industry RevPAR X.X%

full-service full had last hotels we of year hotels which quarter three This XX compared under including XX to renovation only XX were hotels service.

The first renovations we negative impact quarter this as our is many that during quarter stronger into was weakest it quarters. we could scheduled to design as seasonally generally period reduce and our by

or percentage XXXX. supply and quarter returns that RevPAR increased these renovations by hotels new HPT's from impact growth due FEMA negative disruption impact XX increased disruption, various with events In to experienced available for addition collaborate GOP post-renovation X.X%. room minimum operators our revenue XXX of by XX%. first for to RevPAR hotels from primarily and associated XX the in strategies new increased on post-renovation by on to to main and and of reduce with these have The recovery from increased that sales, the renovation shutdown to room supply. in in loss hotels the storms weather-related completed margin RevPAR X.X%. the cash We headwinds continue demand U.S. points results. be marketing impact confirmed hurricane deployed proactive and might that of not XXXX competition million pre-and comparable asset managers be basis the winter the occurred we government to impacted by $X.X XXXX experienced management

performance. more to managers addition insightful renovations, on to of property's our flow and data is as conditions responses market our to the as well with and our and with leading changing part share on this collaboration associated that pre each focused hotel operator the improved GOP, measuring coverage RevPAR, we The improvement cash teams. post-renovation In coupled asset

to performance. Turning hotel portfolio

Marriott percentage RevPAR a declined one X.X% increase partially in Our rate. offset X.X% number decline caused portfolio occupancy, in X.X by point by

under gains for X.X% RevPAR segmentation in renovation large Excluding group increased business. XX hotels and showed negotiated portfolio. during Portfolio quarter, this corporate the

enough one to helped of at portfolios were from Bowl. rates. hotels room the not suburban percentage strong However, a trailing the This the Marriott transient this our four XX caused XXX times at point number in by by Coverage X.X portfolio's declines for in agreement X% non-repeat portfolio increase in at impacting RevPAR remains declined Four declined Boston X.XX Super occupancy, declines a months. X.X% our corporate partially rate. Marietta by one percentage business offset account offset point. hotels were was project RevPAR the and Atlanta decline in

Excluding RevPAR hotels six increased of this during portfolio. renovation quarter, X.X% under the

X.X quarter, five supply in Our This portfolio negatively in Francisco growing rate of decline was this in Dallas, hotels Comparable impacted was pressure by Moscone XX.X%. decrease and the occupancy. point which by X.X% Center RevPAR the by Nashville. percentage benefited and offset Charleston, reopening under hotels X.X% San caused IHG RevPAR a down agreement new a this room

for hotels portfolio. XXXX out were the during X.X% due quarter, of were service demand RevPAR polar this to rooms declined last under the four Excluding that first quarter declines XX vortex and for hurricanes in year's primarily associated responsible renovation the hotels. all Non-repeat with of

comparable aided reporting government the the of Sonesta hotels adversely in by decline rate. by The competition partially at X.X%, caused new XX supply. offset from was X% Bowl. well, our were percentage partially RevPAR hotels due XXXX by RevPAR X.X% five increased Another quarter hotels remaining occupancy, in Super this by growth to room down demand performed shutdown point and X.X affected increase

in X.X% by related was non-repeat to increased amounts Wyndham the coming on the discussions increased RevPAR occupancy. in declines Hotels FEMA the did than caused for A in and by a full-service under $X not We're at XX% HPT percentage CBD to our the project due portfolio due three a months. this contractual hopeful Wyndham approximately repeat double-digit Wyndham Post-renovation Wyndham business pay which extended to room restructuring in business. hotels less hotels first point certain RevPAR and we with may the due that the Excluding agreement at quarter, Chicago portfolio. quarter. are citywide by softness supply returns offset decreased and Houston, million in portfolio during decline with RevPAR left recovery them in reduction hurricane currently for under stay continued rate decline events. in full-service and the X.X X.X% X.X% renovation agree management a experienced of

increased portfolio this were in X.X%, primarily to declines portfolio Hyatt due occupancy positive experienced supply several associated Our due with declines Group to trends high citywide in RevPAR markets. associated of with growth. demand room

this Lake comparable during Our hotels was four point comparable to rate Radisson in quarter hotel including group portfolio decline XX.X largest eight of City was our two of our quarter this RevPAR in by as the compared offset undergoing last year. hotels percentage XX.X% portfolio increase renovations occupancy. Salt in down X.X% We had

to our Turning activity. investment

space. IHG the Wisconsin Crowne acquired to located Plaza million the purchase this added IHG Hotel first square agreement. Washington of May, flexible we in $XXX.X feet new Milwaukee, for for added and over XXX-room hotel quarter, acquired of D.C. features price Palomar to This hotel and In million located in Kimpton XXX-room the our a we During $XX our X,XXX it agreement.

XXXX renovation in disruption Looking ahead will continue.

last However, there XX under only the are nine three to service which last will XX year. in renovation quarter be full year, compared hotels versus of second

continued benefits. investment to management, confidence active Brian. In that give hotels current renovations on RevPAR and wages locations during XXXX. increased lift X% XXXX now year and operators will be increase combination the our turn RevPAR by over group quarter. I'll managers for despite of such GOP to this comparable us projections. This addition, good and given the margin the project we're continued positive XX that occupancy to see improvement meet growth we RevPAR rate The through is expecting hotels experience between pressure that X%. first their and HPT's capital of regular in will to that will continue completed from X.X% flat brands, strong asset call headwinds expected

Brian Donley

X.X%, Thanks, decreased in percentage growth supply in this John. point points other and versus quarter pay a Starting a operating HPT's X% year as by rents increased with basis occupancy, renovations and last ADR. resulted impact in RevPAR costs. X.X% as decrease by X.X percentage XXX negative increase decrease from this GOP business results operating at RevPAR non-repeat margin offset quarter XXX minimum and comparable partially reflecting of well decreased our available the flow hotels to by XX.X% returns decreased cash

performance had and respectively with the comparable of declines quarter. Wyndham and year Radisson RevPAR Our the portfolios XX.X% X.X% prior weakest versus

had comparable portfolio out four Radisson eight quarter. renovation during Our the hotels of under

portfolio Wyndham in impacted by Houston. soft heavily Our Chicago conditions and market was

portfolio ES full-service offset decreased for several million. Our to from percentage renovated Suites profit activity hotels hotels. and our XXX RevPAR renovation by was prior XX.X% points Sonesta decreased year XXXX the margin basis growth approximately decreased versus at newly quarter quarter X.X% as comparable our operating at the by gross GOP $XX.X comparable

competition million XX.X%, our first Crowne the this gross portfolio XXX of post-renovation. GOP portfolios in a in by resulting worth portfolios driven of activity. comparable Hotel, $X renovation by decreased in the FEMA from reopened ramping basis Plaza experience the XX.X%, closure Crowne decrease $X.X in GOP non-repeat resulting IHG the decrease decrease. profit to but points and quarter caused the Ravinia of a points new the of decreased that XXX in GOP, portfolio noting Radisson in four gross It's profit out to All declines Hotel of driven operating margin our basis comparable at majority million business during margin primarily supply. Ravinia Plaza comparable operating up

XX.X% portfolio full-service Sonesta resulting in to decrease in GOP XXX to three $X.X comparable at renovations margin a by decrease experienced million a point driven hotels. basis Our GOP

basis Cash a flow flow quarter margin operating in market decline experienced lot comparable hotels the the reflect and primarily decrease margins XXXX by profit times point decrease portfolio prior decreased of line in minimum soft of to gross X.X% rents X.XX a returns resulted the rents $X.X year driven coverage our decrease our for in X.XX GOP or million Houston. a comparable available in in hotels Wyndham returns and million A XXX XX.X%. GOP Chicago times conditions to compared that for to to Our quarter. of to and our in $XX XXX costs resulting the bare for cash minimum GOP

operators our weakest traditionally the in available decline cover utilized quarter majority the one first in deposits in cash returns. resulted and activity available guarantees coupled quarters, is from our to hotel coverage renovation flows of our We minimum our pay to which The during with period. the shortfalls of security our

an quarter features security deposits by security our of the guarantees million $XXX.X of quarter, available end million. decreased leaving aggregate $XX.X Our and balance at during

As each calendar minimum basis excess measured a reminder, be cash replenished features by security our on returns flows as above cumulative our a can year.

of performance the to travel Turning centers. our comparable

For fuel of favorable percentage of revenue, growth X.X% prior and compared credit a was store federal versus year. X.X% X.X%, a increased a shop primarily and fuel margin gross margin the the as increase million respectively. quarter, prior primarily gross The by flat year Non-fuel increased volumes exclude a over in TA's the XX.X%. X.X% benefit in XX%. related biodiesel prior increased year the due more Non-fuel revenue to travel at or to increased adjusted tax Fuel which period. in repair prior program by adjusted and included to year purchasing fuel was period the $XX.X center to environment margin reward XXXX result

travel gross As total insurance or of travel and gross million. Non-fuel or quarter maintenance margin of quarter. XX% margins sales to centers by X.X% a XXXX result, generated expenses primarily $X.X versus our our dollars grew driven increased prior million $X.X year centers non-fuel in approximately the the $XXX million costs. X.X% operating Site-level the from

to compared travel XXXX leases property-level-adjusted EBITDA approximately last was under of our quarter first the year. compared million or $XX.X times quarter increased our of by First X.XX and times coverage adjusted to rent XX.X% centers X.XX

were XXXX reduction in the amendments the to increase Turning share. to rental income decrease Please $X.XX was XXXX first of returns million dates and from to our quarter million due the quarter, $XXX.X expense with financial so million our was and transactions a quarter. Adjusted and in rents executed consolidated EBITDAre dispositions The lease on results. increases million decrease our FFO decrease compared X.X% minimum $XX.X improvements offset prorated different by in properties. were TA XXXX effects GAAP of at transactions TA activity and to the in per first of the primarily in in our the in $XXX.X January, HPT's three from Normalized our note to related interest quarter, transactions acquisition partially was funding $XXX.X XXXX in a that with capital separate quarter. first an the

to for times debt adjusted ratio annualized quarter Our EBITDAre at X.X was to end. coverage times interest was the EBITDAre and quarter X.X adjusted

Turning to improvement We funded in hotel quarter. our commitments. capital and the of $XX.X fundings first million improvements

For expect the no to majority rest travel cash operating to The of improvements. be of hotel funded $XXX and improvements from these million XXXX, are flow. we approximately fund center improvements of expected

Turning to our balance sheet.

to million improvements of total our assets of escrowed and As $XX was of for $XX.X cash million hotels. primarily had we of end future including cash quarter gross debt XX.X%

in announced, in quarter. previously the a of $XXX.X and million for recorded sold January centers As first $XXX.X travel million XX gain we

per we term common dividend $X.XX As quarterly $X.XX and February our to line to we In In maturities outstanding of our until April, remarks $X.XX prepared of paid shareholders that dividend million we're increase facility per on the concludes our February ready quarterly XXXX. today announced $XX credit have or revolving Operator to a share year. open-up questions. our debt regular in no for share. an we per

Operator

Donley. Thank Mr. you.

questions And Please will Bellisario We the begin Michael session. now be your Baird. ahead. [Operator from question-and-answer Instructions] first go of will

Michael Bellisario

Good morning, everyone.

John Murray

Good morning.

Brian Donley

Good morning.

Michael Bellisario

was earlier the year? the added affect for security transaction And the how economics there on this deposit like from then Why Just you? transaction that first D.C. of the does Milwaukee acquisition. no

John Murray

just sufficient approximately the co-invest wanted On the to that of deposit going we felt are we $X renovate. IHG to buy million we we renovation into transaction felt we XX% to them as $X share because pay They or at have We're into Milwaukee for security, very acquisition particular the this bought We them much million. estimating like security to we We to of on have had pay million. would to going close hotel. rather is it. cost negotiated the $XXX hotel the million. but of We're the decided $X as

Michael Bellisario

cap rate estimated your expectation what's property? return And of the for

John Murray

was property significant need need rooms The No. in of renovation. in

So wasn't performance particularly its great.

an from X% in to So return in mid-Xs, was rate going cap on the our investment but going we're IHG. get

the cover the time flow that cash the expect We will by renovation is completed.

Michael Bellisario

with about discussions side maybe the correct? the on the management think How restructuring clarify And if those necessarily the any mentioned the branding there? disruption right you're to then we outcome the you then agreements restructuring. not And related guarantee just potential on Wyndham just waterfall should properties, really in performance to or of any potential the

John Murray

the that I some of privately that and the mean properties a say of possibility Yes disposing with to into addition two get I the or one of the weaker to better in portfolio. are call. both sides I details because want of and them don't we're the performing discussions always goes maybe done to on considering it's But fair properties conference think,

be mix be up we so in well in of And to mix, will down because a and owner's priority the the in result there change we the as properties of a the it as change a buy. go anything for will for ones sell change

portfolio at of can be that return we owner's priority will full the those management return, a be the so priority that main a and has fee. get will revised to goal Wyndham arrive -- owner's a the can So coverage get

Brian Donley

the XX%. continue as as mean far they I to And disruption, pay

now. think So for we're at I that as as good far modeling level

Michael Bellisario

conversations any topic about Okay. that on X, on the Marriott progress, outcomes kind the portfolio? there That's of same of just update And then fair. the lastly

John Murray

I but both anything the been is acceptable back necessarily more still work that amount have wouldn't a say talking. to We're still have been hopefully in we'll quarter by progress, that time to done before around, there's term be second fourth. of There's and form rolls There fair to sides. sheets share.

yes, a there be weaker-performing -- change may there. that So a credit It of some we report in in similar There reduction may properties. -- in may may really dispose changes to we nothing be some support. result may there's

transpires I respect performance. the and longer-term be will healthy coverage think with portfolio to whatever on view

Michael Bellisario

helpful. me. That’s all you. it. That’s Got Thank for

John Murray

Thank you.

Operator

from Riley [Operator of ahead. be Maher next will Please Instructions] B. questions go Bryan Your FBR.

Bryan Maher

Yes, to deposits, during waived nature, is of you're that kind or renovations could is doing hotels rents housekeeping when security and on place? renovation a shortfall a the property the to underperforms go and the there's against you a stay in minimum still that maybe that

John Murray

That Bryan. place, in stays

Bryan Maher

are of you change economic given the little kind And And then of any availability lateness gears long about very unfold seeing acquisition your appetite a again seeing and/or talk in here? XXXX? you John cycle we're can pricing this shifting of for bit, uncertainty product that and the

John Murray

Yeah, sure.

at a a We're did existing successful properties good for to that's quarter. we acquisition potential think on always I not market the question. looking where couple additions this were portfolios. of We

we So, higher could that low apparently the a we number acquisition so economy -- is did. XXth fairly are unemployment But, that the had cycle, the we strong. of in and to we’re continues year concerned have be potentially

it's some way markets, to of hotel. pressure So hard go benefits. of in you and to wages cases, need And so run lot a all on positions, your it's which feel lot just to a a open there's some times is a agencies very in very and to -- expensive

being real And and particularly about and up. from creeping insurance also maybe are or margin wages we're in and estate cycle taxes -- pressures nervous I late cautious say about so should feeling but benefits,

we're of mindful the be our trying trying amount levels we're be of to conservative And so, we're and more that renovations and doing. leverage to of mindful

that a will more in lot acquisitions couple year. a will invest are of invest we'll in XXXX. think of hundred be in So, I than hotels RIETs million dollars a there in It

think for happy I year. acquisitions renovations that so we've -- hotel be the is coupled this we'll far our will So done with with probably

expect additional I the end of we'll the year. make now that do and Although acquisitions between

Bryan Maher

just names Who's being more And to you specifically, buyers, as aggressive there to? of naming type What in follow-up are without losing out that. marketplace? out a the

John Murray

won an we bids seen announcement lost. of haven't that I who the

seeing the say high investors, sort that I price. cautious family unusual REITs They what individuals. sure. private more we where that worth the But a are. net sense is My invest at have can't some were in accepting of that of situations and think being I as are little taken offices, equity, about they So lodging for most same they approach institutional

Bryan Maher

Thank you, John.

John Murray

Thank you.

Operator

Ladies and session. gentlemen, for would hand to the any to John this will I question-and-answer our closing conclude Murray remarks. conference like back

John Murray

today. Thank look joining Thank you. Conference June. at NAREIT to We us you in seeing you forward early NYU Hotel for The or

Operator

Thank you, concluded. the presentation. At gentlemen, sir. time, Ladies today's your you has disconnect Thank lines. for attending conference you this and may

Service Properties Trust (SVC) 10 May 192019 Q1 Earnings call transcript