Condor Hospitality Trust Reports Second Quarter 2019 Results

BETHESDA, Md.–(BUSINESS WIRE)–Condor Hospitality Trust, Inc. (NYSE American: CDOR) (the “Company”) today announced results for the second quarter ended June 30, 2019.

SECOND QUARTER RELEASE FINANCIAL HIGHLIGHTS

• Revenue in the second quarter 2019 of $16.2 million, comprised of $16.2 million generated entirely from New Investment Platform Hotels, a 1.2% decrease from $16.4 million generated by New Investment Platform Hotels in the $17.8 million 2018 second quarter Revenue that included $1.4 million of Legacy Hotel Revenue.
• Same-Store Revenue of $37.5 million for the first six months of 2019 increased $0.5 million over the first six months Same-Store Revenue of $37.0 million in 2018.
• Same-Store RevPAR for the New Investment Platform Hotels in the 2019 second quarter decreased 0.7% compared to the same quarter in 2018, affected by a weak convention schedule in San Antonio that had a direct impact on the SpringHill Suites. Excluding the SpringHill Suites, New Investment Platform RevPAR increased by 0.4%. Same-Store RevPAR of $105.47 for the New Investment Platform Hotels for the first six months of 2019 Increased 1.6% over 2018 first six months RevPAR of $103.84.
• Net Earnings (Loss) Attributable to Common Shareholders of ($1.4 million), or ($0.12) per Diluted Share, compared to $2.7 million, or $0.23 per share, in the 2018 second quarter. Decline in Net Earnings Attributable to Common Shareholders primarily caused by no Legacy Hotels remaining in the second quarter 2019, compared to $0.4 million of EBITDA generated from Legacy Hotels in the second quarter 2018, $0.8 million in Equity Transaction and Strategic Alternatives costs incurred in the second quarter 2019, $0.4 million increase in income tax expense, and $0.5 million Decline in Net Gain on Derivatives and Convertible Debt for the quarter. Additionally, the second quarter 2018 included a $1.9 million gain from Legacy Hotel sales.
• Adjusted Funds from Operations was $3.5 million, or $0.28 per Diluted Share, a $0.9 million Decline from $4.4 million, or $0.34, in the 2018 second quarter. The decline was a result of a $0.4 million increase in income tax expense, and a $0.2 million increase in stock-based compensation expense in the second quarter 2019 and the second quarter 2018 included $0.4 million of EBITDA from Legacy Hotels.
• Same-Store Hotel EBITDA decreased to $7.5 million from $7.6 million, a 1.3% decrease over prior year second quarter influenced by the weakness in the San Antonio market mentioned above and the positive impact of FEMA business in hurricane affected Texas and Florida markets in Q2 2018.

MANAGEMENT COMMENTARY

Bill Blackham, Condor’s Chief Executive Officer, commented:

“For the first six months of 2019 our portfolio has outperformed the overall market when compared to the U.S. national RevPAR growth of 1.3% for all chain scales excluding luxury and upper upscale reported by Smith Travel Research. Our proforma same-store RevPAR for the second quarter 2019 excluding the SpringHill Suites increased 0.4% as compared to (0.4)% for upscale and 0.0% for upper midscale, as reported by Smith Travel Research. Importantly for the first six months our operating results as a portfolio are slightly ahead of our projections. In the first six months of 2019 Same-Store Hotel EBITDA is approximately 0.7% higher than the same period in the prior year at $14.9 million compared to $14.8 million, and our margins while declining in the quarter, did so moderately reducing 30 bps from 40.2% in 2018 to 39.9% in 2019 and were 39.8% for the first six months of 2019 compared to 40.1%. Additionally, we have elected to not renew 3 hotel management contracts and with new management we believe we will be better positioned to increase performance on our San Antonio and Jacksonville assets which experienced $0.33 million in revenue decline and $0.28 million in EBITDA decline in the quarter compared to 2018. On July 22, 2019 Condor announced the conclusion of a strategic alternatives process with the signing of a definitive agreement that contemplates the merger of the Company with the operating partnership of NexPoint Hospitality Trust, an unincorporated, open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario and listed on the TSXV, resulting in a $11.10 per share cash price to be paid to common shareholders and a $10.00 per share cash price to be paid to Series E preferred shareholders at closing. We anticipate completing and closing the mergers during the fourth quarter of 2019.”

FINANCIAL SUMMARY

At June 30, 2019, the Company’s total portfolio included 15 hotels, representing 1,908 rooms. The Company’s last remaining legacy asset was sold during the first quarter of 2019.

PORTFOLIO ACTIVITY

The Company’s investment strategy is to assemble a portfolio of premium-branded, select-service hotels in the top 100 Metropolitan Statistical Areas (“MSAs”) with a particular focus on MSAs ranked between 20 to 60. Since restarting its portfolio transformation in 2015, the Company has acquired 14 high-quality select-service hotels representing 1,808 rooms in its target markets for a total purchase price of approximately $277 million. Additionally, during this time, the Company has sold 55 legacy assets for a total gross sales price of approximately $170 million. Following the sale of the Quality Inn Solomons in the first quarter of 2019, there are no legacy hotels remaining in the Company’s portfolio.

BALANCE SHEET AND CAPITAL MARKETS ACTIVITY

As of June 30, 2019, the Company had cash and cash equivalents (including restricted cash) of $8.9 million and available revolver borrowing capacity of $9.0 million. As of June 30, 2019, the Company had total outstanding long-term debt of $136.0 million associated with assets held for use with a weighted average maturity of 2.0 years and a weighted average interest rate of 5.12%.

CAPITAL INVESTMENTS

The Company invested $0.3 million in capital improvements throughout the portfolio in the three months ended June 30, 2019 to upgrade its properties and maintain brand standards.

OUTLOOK AND GUIDANCE

The Company has suspended guidance until further notice.

DIVIDENDS

On May 23, 2019, the Board of Directors declared a quarterly cash common stock dividend of $0.195 per share for the second quarter of 2019. The common stock dividend represented an annualized yield of approximately 8.1% based on the closing price of the Company’s common shares on June 7, 2019. The second quarter dividend was paid on July 1, 2019 to shareholders of record as of June 24, 2019.

On July 19, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with NHT Operating Partnership LLC, a Delaware limited liability company (the “Parent”) and other parties thereto. During the term of the Merger Agreement, the Company may not pay cash dividends to holders of the Company common stock or the Series E Preferred Stock, except the Company is permitted to declare and pay a dividend to shareholders during the month in which an extension option for the closing of the transactions contemplated by the Merger Agreement is exercised by the Parent, subject to limitations as set forth in the Merger Agreement and the disclosure schedule delivered therewith on amount and the our prior month adjusted funds from operations. The holders of the Series E preferred stock have agreed to waive accrual of any unpaid dividends between signing and closing.

EARNINGS CALL

The Company will not be conducting a second quarter earnings conference call.

About Condor Hospitality Trust, Inc.

Condor Hospitality Trust, Inc. (NYSE American: CDOR) is a self-administered real estate investment trust that specializes in the investment and ownership of upper midscale and upscale, premium-branded, select-service, extended-stay, and limited-service hotels in the top 100 Metropolitan Statistical Areas (“MSAs”) with a particular focus on the top 20 to 60 MSAs. The Company currently owns 15 hotels in 8 states. Condor’s hotels are franchised by a number of the industry’s most well-regarded brand families including Hilton, Marriott, and InterContinental Hotels.

Forward-Looking Statement

This news release (including statements about the expected timing, completion and effects of the mergers and the other transactions contemplated by the Merger Agreement) may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that are not historical facts, and in some cases, can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” “project”, “plan”, the negative version of these words or other similar expressions. Readers are cautioned not to place undue reliance on any such forward-looking statements.

All forward-looking statements speak only as of the date hereof and are based on current expectations and involve a number of assumptions, risks and uncertainties that could cause the actual results to differ materially from such forward-looking statements. They are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. NexPoint Hospitality Trust, an unincorporated, open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario (“NHT”) and listed on the TSXV, and Condor may not be able to complete the proposed transaction on the terms described herein or other acceptable terms or at all because of a number of factors, including without limitation, the following: (i) the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement; (ii) unknown, underestimated or undisclosed commitments or liabilities; (iii) the inability to complete the proposed transaction due to the failure to obtain the approval of Condor’s shareholders for the proposed transaction or the failure to satisfy the other closing conditions to the proposed transaction; (iv) risks related to disruption of management’s attention from NHT’s and Condor’s ongoing business operations due to the proposed transaction; (v) the effect of the announcement of the proposed transaction on the ability of the parties to retain and hire key personnel, maintain relationships with their franchisors, management companies and suppliers, and maintain their operating results and business generally; (vi) the risk that certain approvals or consents will not be received in a timely manner or that the proposed transaction will not be consummated in a timely manner; (vii) adverse changes in U.S. and non-U.S. governmental laws and regulations; and (viii) the risk of litigation, including shareholder litigation in connection with the proposed transaction, and the impact of any adverse legal judgments, fines, penalties, injunctions or settlements.

Actual results may differ materially from those indicated by such forward-looking statements. In addition, the forward-looking statements represent Condor’s views as of the date on which such statements were made. Condor anticipates that subsequent events and developments may cause those views to change. These forward-looking statements should not be relied upon as representing Condor’s views as of any date subsequent to the date hereof. Condor expressly disclaims a duty to provide updates to forward-looking statements, whether as a result of new information, future events or other occurrences.

Additional factors that may affect Condor’s business or financial results are described in the risk factors included in Condor’s filings with the Securities and Exchange Commission (“SEC”), including its Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Additional Information and Where to Find It

The Merger Agreement was filed as an exhibit to the Company’s Current Report on Form 8-K on July 22, 2019 with the Securities and Exchange Commission (“SEC”) and can be obtained free of charge from the sources indicated below.

The proposed transaction will be submitted to the Company’s shareholders for their consideration. In connection with the proposed transaction, the Company will file relevant materials with the SEC, including a proxy statement on Schedule 14A. The definitive proxy statement will be mailed to the Company’s shareholders. This communication is not a substitute for the proxy statement or for any other document that the Company may file with the SEC and send to the Company’s shareholders in connection with the proposed transaction. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION WITH RESPECT TO THE PROPOSED TRANSACTION, INVESTORS AND SECURITY HOLDERS OF THE COMPANY ARE URGED TO READ THE PROXY STATEMENT AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security holders will be able to obtain free copies of the proxy statement (if and when it becomes available), any amendments or supplements thereto and other relevant materials, and any other documents filed by the Company with the SEC through the website maintained by the SEC at http://www.sec.gov. In addition, copies of the documents filed by the Company with the SEC will be available free of charge on the Company’s website at www.condorhospitality.com, or by contacting the Company at Investor Relations by phone at 402-371-2520 or by email at [email protected]. You may also read and copy any reports, statements and other information filed by the Company with the SEC at the SEC public reference room at 450 Fifth Street, N.W. Room 1200, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 or visit the SEC’s website for further information on its public reference room.

No Offer or Solicitation

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

SELECTED FINANCIAL DATA:

Reconciliation of Non-GAAP Financial Measures (Unaudited)

Non-GAAP financial measures are measures of our historical financial performance that are different from measures calculated and presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We report Funds from Operations (“FFO”), Adjusted FFO (“AFFO”), Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”), EBITDA for real estate (“EBITDAre”), Adjusted EBITDAre, and Hotel EBITDA as non-GAAP measures that we believe are useful to investors as key measures of our operating results and which management uses to facilitate a periodic evaluation of our operating results relative to those of our peers. Our non-GAAP measures should not be considered as an alternative to U.S. GAAP net earnings as an indication of financial performance or to U.S. GAAP cash flows from operating activities as a measure of liquidity. Additionally, these measures are not indicative of funds available to fund cash needs or our ability to make cash distributions as they have not been adjusted to consider cash requirements for capital expenditures, property acquisitions, debt service obligations, or other commitments.

FFO and AFFO

The following table reconciles net earnings (loss) to FFO and AFFO for the three and six months ended June 30, 2019 and 2018 (in thousands). All amounts presented include our portion of the results of our unconsolidated Atlanta JV.

Contacts

Arinn Cavey

[email protected]

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