BETHESDA, Md.–(BUSINESS WIRE)–$PEB #PEB–Pebblebrook Hotel Trust (NYSE: PEB):
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Q3 FINANCIAL |
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Q3 OPERATING |
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STRATEGIC |
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BALANCE SHEET |
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2019 OUTLOOK |
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During the third quarter, we continued to execute on our strategic disposition program, completing property sales in Los Angeles and Washington, D.C. at very favorable prices and EBITDA multiples. We’re now three quarters of the way to our 2019 property disposition financial goal. Pursuant to our plans to create long-term value, we’ve made further progress on our redevelopment plans, making operator changes at two properties in Washington, D.C. to be redeveloped and repositioned next year, as well as announcing our future plans to comprehensively renovate and rebrand Paradise Point Resort & Spa as a Margaritaville Island Resort. We also managed to meet our overall corporate performance outlook for the quarter, despite slightly weaker than expected results at the property level due to transient travel demand moderating further and lost business due to the negative impact of Hurricane Dorian in September.” –Jon E. Bortz, Chairman, President and Chief Executive Officer of Pebblebrook Hotel Trust |
(1) See tables later in this press release for a description of Same-Property information and reconciliations from net income (loss) to non-GAAP financial measures.
Third Quarter and Year to Date Highlights
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Third Quarter |
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Nine Months Ended |
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2019 |
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2018 |
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2019 |
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2018 |
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($ in millions except per share and RevPAR data) |
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Net income |
$30.0 |
$29.9 |
$96.2 |
$112.7 |
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Same-Property RevPAR(1) |
$226.67 |
$231.73 |
$215.28 |
$213.29 |
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Same-Property RevPAR growth rate |
(2.2%) |
0.9% |
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Same-Property Total RevPAR(1) |
$323.82 |
$327.07 |
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$311.83 |
$306.86 |
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Same-Property Total RevPAR growth rate |
(1.0%) |
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1.6% |
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Same-Property Total Expenses(1) |
$275.3 |
$269.5 |
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$818.6 |
$791.7 |
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Same-Property Total Expense growth rate |
2.2% |
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3.4% |
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Same-Property EBITDA(1) |
$145.1 |
$155.1 |
$405.7 |
$413.1 |
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Same-Property EBITDA growth rate |
(6.5%) |
(1.8%) |
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Same-Property EBITDA Margin(1) |
34.5% |
36.5% |
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33.1% |
34.3% |
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Adjusted EBITDAre(1) |
$136.5 |
$69.4 |
$378.5 |
$201.4 |
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Adjusted EBITDAre growth rate |
96.7% |
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87.9% |
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Adjusted FFO(1) |
$100.5 |
$51.2 |
$272.9 |
$153.4 |
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Adjusted FFO per diluted share(1) |
$0.77 |
$0.74 |
$2.08 |
$2.21 |
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Adjusted FFO per diluted share growth rate |
4.1% |
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(5.9%) |
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(1) |
See tables later in this press release for a description of same-property information and reconciliations from net income (loss) to non-GAAP financial measures, including Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), EBITDA for Real Estate (“EBITDAre”), Adjusted EBITDAre, Funds from Operations (“FFO”), FFO per share, Adjusted FFO and Adjusted FFO per share. |
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For the details as to which hotels are included in Same-Property Room Revenue Per Available Room (“RevPAR”), Same-Property Total Revenue Per Available Room (“Total RevPAR”), Average Daily Rate (“ADR”), Occupancy, Revenues, Expenses, EBITDA and EBITDA Margins appearing in the table above and elsewhere in this press release, refer to the Same-Property Statistical Data table footnotes later in this press release. |
- Net Income: The Company’s net income was $30.0 million in the third quarter of 2019, an increase of $0.1 million as compared to the same period of 2018.
- Same-Property Operating Statistics: Same-Property Total RevPAR declined 1.0 percent from the third quarter of 2018. Same-Property RevPAR for the third quarter decreased 2.2 percent from the prior year to $226.67, with Same-Property ADR declining 0.6 percent to $259.96 and Same-Property Occupancy decreasing by 1.6 percent to 87.2 percent.
- Same-Property EBITDA and Margins: The Company’s hotels generated $145.1 million of Same-Property EBITDA for the quarter ended September 30, 2019, down 6.5 percent versus the same period of 2018. Same-Property Revenues declined 1.0 percent, while Same-Property Expenses increased 2.2 percent, resulting in Same-Property EBITDA Margin for the quarter decreasing 202 basis points to 34.5 percent.
- Operating Performance: Excluding the mandatory California Proposition 13 increases in real estate taxes for the California properties acquired as part of the Company’s corporate acquisition in November 2018, Same-Property Expenses increased just 1.2 percent during the third quarter, resulting in Same-Property EBITDA Margin for the quarter decreasing 143 basis points. Year to date through September, also excluding the Proposition 13 impact, Same-Property Expenses increased 2.4 percent, and Same-Property EBITDA margins declined 53 basis points.
“During the third quarter, our overall performance versus our expectations was impacted by weaker performance in San Diego, Los Angeles, San Francisco and Washington, D.C.,” said Mr. Bortz. “We also lost business at our hotels and resorts located in South Florida, due to the threat of Hurricane Dorian in early September. Despite the moderating demand growth environment, our hotel teams working closely with our asset managers continue to do a tremendous job limiting expense growth and finding creative and sustainable ways to increase efficiencies and productivity and take advantage of our larger scale through executing on new portfolio-wide initiatives, which are now running at an annual rate of savings of $5 million, halfway to achieving our $10 million objective. We expect to steadily execute on our portfolio-wide initiatives program to generate additional expense savings and operating synergies, create long-term value and achieve our objective by the end of next year.”
Update on Strategic Property Redevelopment Plan
The Company continued to implement its Strategic Property Redevelopment Plan during the third quarter. On July 1, 2019, the Company completed two third-party operator transitions: Mason & Rook Hotel and Donovan Hotel, both in Washington, D.C., are now operated by Viceroy Hotels & Resorts. On July 15, 2019, the Company announced that it had executed a license agreement to convert its Paradise Point Resort & Spa in San Diego, California, to a Margaritaville Island Resort after a comprehensive renovation. Year to date, the Company has made considerable progress on its strategic property repositionings, completing third-party operator or brand changes at 9 hotels and resorts across the portfolio.
Capital Investments
In the third quarter, the Company completed $42.1 million of capital investments throughout its portfolio. The Company has completed $111.1 million of capital investments and projects year to date through September 2019, including the first phase of major renovation and property improvements at Hilton San Diego Resort & Spa, which was completed in the third quarter.
The Company intends to start additional major renovation and repositioning projects in the fourth quarter of 2019 or early next year, with completion expected in the first half of next year, including:
- Donovan Hotel (estimated at $25.0 million, or $130 thousand per key), which will encompass an exhaustive redevelopment and repositioning, expected to begin with the closure of the hotel by the end of November, and upon anticipated completion in the second quarter of 2020, the hotel will be relaunched as the seventh hotel in the Company’s “Unofficial Z Collection” proprietary brand;
- Westin San Diego Gaslamp Quarter (estimated at $16.0 million), which will consist of a guestroom, lobby, restaurant and bar renovation to commence next month, expected to be completed in the first quarter of 2020;
- Embassy Suites San Diego Bay Downtown (estimated at $16.0 million), which will receive a comprehensive guest suite renovation to also commence next month and be completed in the first quarter of 2020;
- Le Parc Suite Hotel (estimated at $12.5 million), which will consist of a comprehensive hotel renovation, including the guestrooms, lobby and public areas, to commence in the first quarter of 2020, expected to be completed in the second quarter of 2020;
- Viceroy Santa Monica Hotel (estimated at $12.0 million), which will undergo a lobby, public area and meeting space renovation, featuring both interior and exterior enhancements, expected to commence late in the fourth quarter of 2019 and be completed in the second quarter of 2020;
- Hilton San Diego Resort & Spa Phase 2 (estimated at $10.5 million), which will undergo a reconfiguration and complete renovation of the public areas including the porte-cochere, lobby, entry, pool, restaurants and bars, retail shop, creation of additional event venues, and upgrading of guestrooms and suites, expected to begin late this year and be completed in the second quarter of 2020;
- Chaminade Resort & Spa (estimated at $10.0 million), which will reposition the property through a redevelopment of the property’s public space, restaurant, lobby, porte-cochere/entry, exterior patio, all meeting space and venues commencing late in the fourth quarter or early in the first quarter, expected to be completed in the second quarter of 2020; and
- Mason & Rook Hotel (estimated at $8.0 million), which will undergo a complete renovation and upgrading of the entry, lobby, guestrooms, restaurant and bar areas, rooftop pool, bar venue and its meeting spaces beginning in the first quarter of 2020, expected to be completed late in the second quarter of 2020, at which time it will be rebranded as the Viceroy Washington, D.C.
Additionally, the Company intends to continue the following upgrade and repositioning program:
- The Marker Resort Key West (estimated at $5.0 million), which commenced in the third quarter of 2019, including a renovation of the lobby, pool area, bar, restaurant, fitness center, corridors, guestrooms and an addition of suites, expected to be completed by the end of 2019.
Update on Strategic Disposition Plan
During the third quarter, the Company completed $138.2 million of property sales, including Hotel Amarano Burbank in Los Angeles, California, for $72.9 million, Rouge Hotel in Washington, D.C. for $42.0 million, and Hotel Madera in Washington, D.C. for $23.3 million. In combination with the $310.8 million of sales from the first and second quarters of 2019, the Company has sold properties for a total of $449.0 million year to date.
In October 2019, the Company also announced it executed a contract to sell the Topaz Hotel in Washington, D.C. for $33.0 million. This sale is subject to normal closing conditions, and the Company offers no assurances that the sale will be completed on these terms, or at all. The Company is targeting to complete the transaction late in the fourth quarter of 2019.
The Company continues to be encouraged with pricing levels and overall buyer interest in the investment markets. The Company estimates it will complete or execute contracts to sell an additional $150.0 million of properties during the fourth quarter, which includes the sale of Topaz Hotel for $33.0 million, and an additional $117.0 million for other properties.
Since the Company commenced its strategic disposition plan on November 30, 2018, and assuming the sale of Topaz Hotel is completed, 13 hotels will have been successfully sold or contracted to sell, generating approximately $1.33 billion of gross sales proceeds. The sales to date, including the assumed sale of Topaz Hotel, reflect a very favorable 15.6x EBITDA multiple and a 5.5 percent net operating income capitalization rate (after an assumed annual capital reserve of 4.0 percent of total hotel revenues) based on the operating performance for 2018 of the properties sold.
Balance Sheet and Shareholder Distributions
As of September 30, 2019, the Company had $2.2 billion in consolidated debt at an effective weighted-average interest rate of 3.5 percent. Approximately $1.8 billion, or 80 percent of the Company’s total outstanding debt, was at a weighted-average fixed interest rate of 3.5 percent, and approximately $0.4 billion, or 20 percent, was at a weighted-average floating interest rate of 3.6 percent. Of the Company’s outstanding debt, $2.0 billion was in the form of unsecured term loans and $100.0 million was outstanding on its $650.0 million senior unsecured revolving credit facility. As of September 30, 2019, the Company had $56.8 million of consolidated cash, cash equivalents and restricted cash.
As of September 30, 2019, the Company’s fixed charge coverage ratio was 3.0 times, and total net debt to trailing 12-month corporate EBITDA was 4.6 times.
On September 16, 2019, the Company declared a regular quarterly cash dividend of $0.38 per share on its common shares as well as a regular quarterly cash dividend for the following preferred shares of beneficial interest:
- $0.40625 per 6.50% Series C Cumulative Redeemable Preferred Share;
- $0.39844 per 6.375% Series D Cumulative Redeemable Preferred Share;
- $0.39844 per 6.375% Series E Cumulative Redeemable Preferred Share; and
- $0.39375 per 6.30% Series F Cumulative Redeemable Preferred Share.
2019 Outlook
The Company is adjusting its 2019 Outlook to reflect the third quarter results and the expectation that the slowing hotel demand trends and economic uncertainty experienced throughout the third quarter will continue in the fourth quarter.
The 2019 Outlook, which assumes $600.0 million of assets are sold over the course of 2019, with $449.0 million sold year to date and approximately $150.0 million of additional assets sold by the end of the year, is as follows:
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Updated |
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Variance to Prior |
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Low |
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High |
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Low |
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High |
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| ($ and shares/units in millions, except per share and RevPAR data) | ||||||||
| Net income |
$99.20 |
$103.20 |
($51.00) |
($53.00) |
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| Adjusted EBITDAre |
$472.70 |
$476.70 |
($7.70) |
($9.70) |
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| Adjusted EBITDAre growth rate |
85.50% |
87.00% |
-3.00% |
-3.80% |
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| Adjusted FFO |
$336.90 |
$340.90 |
($7.00) |
($9.00) |
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| Adjusted FFO per diluted share |
$2.57 |
$2.60 |
($0.05) |
($0.07) |
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| Adjusted FFO per diluted share growth rate |
4.90% |
6.10% |
-2.00% |
-2.90% |
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This 2019 Outlook is based, in part, on the following estimates and assumptions: |
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| Asset Sales during 2019 |
$600.00 |
$600.00 |
– |
– |
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| Q4 Asset Sales at a 5.5% 2018 NOI Capitalization Rate |
$150.00 |
$150.00 |
$30.00 |
$30.00 |
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| U.S. GDP growth rate |
1.50% |
2.00% |
– |
– |
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| U.S. Hotel Industry RevPAR growth rate |
0.60% |
1.00% |
(40 bps) | (100 bps) | ||||
| Same-Property RevPAR |
$209 |
$211 |
($1) |
($1) |
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| Same-Property RevPAR growth rate |
0.60% |
1.20% |
-0.40% |
-0.80% |
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| Same-Property EBITDA |
$509.50 |
$513.50 |
($7.70) |
($9.70) |
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| Same-Property EBITDA growth rate |
-2.10% |
-1.40% |
(150 bps) | (200 bps) | ||||
| Same-Property EBITDA Margin |
32.10% |
32.20% |
-0.50% |
-0.50% |
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| Same-Property EBITDA Margin growth rate | (100 bps) | (90 bps) | (50 bps) | (50 bps) | ||||
| Corporate cash general and administrative expenses |
$26.60 |
$26.60 |
($0.50) |
($0.50) |
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| Corporate non-cash general and administrative expenses |
$8.40 |
$8.40 |
– |
– |
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| Preopening and other corporate expenses |
$3.20 |
$3.20 |
– |
– |
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| Total capital investments related to renovations, capital maintenance and return on investment projects |
$160.00 |
$170.00 |
$10.00 |
– |
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| Weighted-average fully diluted shares and units |
131 |
131 |
-0.1 |
-0.1 |
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The Company’s Outlook for the fourth quarter of 2019 is as follows:
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Fourth Quarter |
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Low |
High |
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($ and shares/units in millions, except per share and RevPAR data) |
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Net income (loss) |
$3.0 |
$7.0 |
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Q4 Asset Sales at a 5.5% 2018 NOI Capitalization Rate |
$150.0 |
$150.0 |
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Same-Property RevPAR |
$192 |
$196 |
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Same-Property RevPAR growth rate |
0.0% |
2.0% |
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Same-Property EBITDA |
$103.8 |
$107.8 |
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Same-Property EBITDA growth rate |
(3.5%) |
0.2% |
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Same-Property EBITDA Margin |
28.6% |
29.1% |
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Same-Property EBITDA Margin growth rate |
(75 bps) |
(25 bps) |
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Adjusted EBITDAre |
$94.2 |
$98.2 |
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Adjusted EBITDAre growth rate |
76.3% |
83.8% |
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Adjusted FFO |
$64.0 |
$68.0 |
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Adjusted FFO per diluted share |
$0.49 |
$0.52 |
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Adjusted FFO per diluted share growth rate |
48.5% |
57.6% |
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Weighted-average fully diluted shares and units |
131.1 |
131.1 |
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The 2019 Outlook excludes the following hotels from Same-Property RevPAR, Same-Property RevPAR growth rate, Same-Property EBITDA, Same-Property EBITDA growth rate, Same-Property EBITDA Margin and Same-Property EBITDA Margin growth rate:
- Liaison Capitol Hill and Hotel Palomar Washington, D.C. for all quarters of both 2019 and 2018 due to their sales during the first quarter of 2019;
- Onyx Hotel for the second, third and fourth quarters of both 2019 and 2018 due to its sale during the second quarter of 2019;
- Hotel Amarano Burbank, Rouge Hotel and Hotel Madera for the third and fourth quarters of both 2019 and 2018 due to their sales during the third quarter of 2019;
- Topaz Hotel for the fourth quarter of both 2019 and 2018 due to its pending sale, expected to be completed during the fourth quarter of 2019; and
- Donovan Hotel for the fourth quarter of both 2019 and 2018 due to its expected closure in the fourth quarter of 2019 for redevelopment, renovation and rebranding.
If any of the foregoing estimates and assumptions prove to be inaccurate, actual results, including the outlook, may vary and could vary significantly from the amounts shown above.
Third Quarter 2019 Earnings Call
The Company will conduct its quarterly analyst and investor conference call on Friday, October 25, 2019, at 9:00 AM ET. To participate in the conference call, please dial (877) 705-6003 approximately ten minutes before the call begins. Additionally, a live webcast of the conference call will be available through the Company’s website. To access the webcast, log on to www.pebblebrookhotels.com ten minutes before the conference call. A replay of the conference call webcast will be archived and available online through the Investor Relations section of www.pebblebrookhotels.com.
About Pebblebrook Hotel Trust
Pebblebrook Hotel Trust (NYSE: PEB) is a publicly-traded real estate investment trust (“REIT”) and the largest owner of urban and resort lifestyle hotels in the United States. The Company owns 57 hotels, totaling approximately 14,100 guestrooms across 16 urban and resort markets, with a focus on the west coast gateway cities. For more information, visit www.pebblebrookhotels.com and follow us at @PebblebrookPEB.
For further information about the Company’s business and financial results, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of the Company’s SEC filings, including, but not limited to, its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, copies of which may be obtained at the Investor Relations section of the Company’s website at www.pebblebrookhotels.com.
This press release contains certain “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Reform Act of 1995. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “seek,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” “forecast,” “continue,” “assume,” “plan,” references to “outlook” or other similar words or expressions. Forward-looking statements are based on certain assumptions and can include future expectations, future plans and strategies, financial and operating projections and forecasts and other forward-looking information and estimates. Examples of forward-looking statements include the following: projections and forecasts of U.S. GDP growth, U.S. hotel industry RevPAR growth, the Company’s net income, FFO, EBITDA, Adjusted FFO, Adjusted EBITDAre, RevPAR, EBITDA Margin and EBITDA Margin growth, and the Company’s expenses, share count or other financial items; descriptions of the Company’s plans or objectives for future operations, acquisitions, dispositions or services; forecasts of the Company’s future economic performance and its share of future markets; forecasts of hotel industry performance; and descriptions of assumptions underlying or relating to any of the foregoing expectations including assumptions regarding the timing of their occurrence. These forward-looking statements are subject to various risks and uncertainties, many of which are beyond the Company’s control, which could cause actual results to differ materially from such statements. These risks and uncertainties include, but are not limited to, the state of the U.S. economy and the supply of hotel properties, and other factors as are described in greater detail in the Company’s filings with the Securities and Exchange Commission, including, without limitation, the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. Unless legally required, the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
All information in this press release is as of October 24, 2019. The Company undertakes no duty to update the statements in this press release to conform the statements to actual results or changes in the Company’s expectations.
For additional information or to receive press releases via email, please visit our website at www.pebblebrookhotels.com
| Pebblebrook Hotel Trust | ||||||||
| Consolidated Balance Sheets | ||||||||
| ($ in thousands, except for per share data) | ||||||||
| September 30, 2019 | December 31, 2018 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Assets: | ||||||||
| Investment in hotel properties, net |
$ |
6,329,968 |
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$ |
6,534,193 |
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| Hotels held for sale |
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28,851 |
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– |
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| Ground lease asset, net |
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– |
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199,745 |
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| Cash and cash equivalents |
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29,758 |
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83,366 |
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| Restricted cash |
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27,048 |
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24,445 |
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| Hotel receivables (net of allowance for doubtful accounts of $517 and $526, respectively) |
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70,990 |
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59,897 |
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| Prepaid expenses and other assets |
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57,998 |
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76,702 |
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| Total assets |
$ |
6,544,613 |
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$ |
6,978,348 |
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| LIABILITIES AND EQUITY | ||||||||
| Liabilities: | ||||||||
| Unsecured revolving credit facilities |
$ |
100,000 |
|
$ |
170,000 |
|
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| Term loans, net of unamortized deferred financing costs |
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1,963,828 |
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2,409,284 |
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| Senior unsecured notes, net of unamortized deferred financing costs |
|
99,540 |
|
|
99,469 |
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| Mortgage loans, net of unamortized deferred financing costs |
|
66,360 |
|
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68,145 |
|
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| Accounts payable and accrued expenses |
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537,016 |
|
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360,279 |
|
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| Deferred revenues |
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56,995 |
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54,741 |
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| Accrued interest |
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5,674 |
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|
2,741 |
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| Liabilities related to hotels held for sale |
|
298 |
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|
– |
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| Distribution payable |
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58,436 |
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43,759 |
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| Total liabilities |
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2,888,147 |
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3,208,418 |
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| Commitments and contingencies | ||||||||
| Equity: | ||||||||
| Preferred shares of beneficial interest, $0.01 par value (liquidation preference $510,000 at September 30, 2019 and December 31, 2018), 100,000,000 shares authorized; 20,400,000 shares issued and outstanding at September 30, 2019 and December 31, 2018 |
204 |
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204 |
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| Common shares of beneficial interest, $0.01 par value, 500,000,000 shares authorized; 130,484,956 issued and outstanding at September 30, 2019 and 130,311,289 issued and outstanding at December 31, 2018 |
1,305 |
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1,303 |
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| Additional paid-in capital |
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4,067,529 |
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4,065,804 |
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| Accumulated other comprehensive income (loss) |
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(36,672 |
) |
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1,330 |
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| Distributions in excess of retained earnings |
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(386,631 |
) |
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(308,806 |
) |
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| Total shareholders’ equity |
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3,645,735 |
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3,759,835 |
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| Non-controlling interests |
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10,731 |
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10,095 |
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| Total equity |
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3,656,466 |
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3,769,930 |
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| Total liabilities and equity |
$ |
6,544,613 |
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$ |
6,978,348 |
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Contacts
Raymond D. Martz, Chief Financial Officer, Pebblebrook Hotel Trust – (240) 507-1330
