RLJ Lodging Trust Reports Third Quarter 2019 Results

– Completed sale of 19 non-core hotels

– Repurchased 4.0 million common shares for approximately $68 million year-to-date

– Executed Wyndham termination agreement

BETHESDA, Md.–(BUSINESS WIRE)–RLJ Lodging Trust (the “Company”) (NYSE: RLJ) today reported results for the three and nine months ended September 30, 2019.

Highlights

• Pro forma RevPAR decreased slightly by 0.3%, driven by a decline of 0.8% in ADR, partially offset by a 0.5% increase in Occupancy
• Completed previously announced sale of 18 non-core hotels and sold one additional hotel
• Repurchased approximately 2.8 million common shares for approximately $47.2 million during the third quarter
• Executed final agreement to terminate Wyndham management and NOI guarantee agreements

“We had another successful quarter, coming on the heels of the recent achievement of several significant milestones in our portfolio evolution,” commented Leslie D. Hale, President and Chief Executive Officer. “We continued to build on this momentum by generating solid operating results in a slowing environment and executing on a number of fronts. Despite choppy fundamentals and impact from Hurricane Dorian, which affected South Florida and Charleston, we achieved operating results generally in-line with our expectations. With a fortress balance sheet and over $1 billion of investment capacity, RLJ is well positioned to create shareholder value.”

The prefix “Pro forma”, as defined by the Company, denotes operating results which include results for periods prior to its ownership and excludes sold hotels. Pro forma RevPAR and Pro forma Hotel EBITDA Margin are reported on a comparable basis and therefore exclude any hotels sold during the period and non-comparable hotels that were not open for operation or were closed for renovation for comparable periods. Explanations of EBITDA, EBITDAre, Adjusted EBITDA, Hotel EBITDA, Hotel EBITDA Margin, FFO, and Adjusted FFO, as well as reconciliations of those measures to net income or loss, if applicable, are included within this release.

Pro forma RevPAR for the third quarter declined 0.3%. Pro forma RevPAR was negatively impacted by approximately 40 basis points from Hurricane Dorian. The Company’s top performing markets were Louisville and Austin with Pro forma RevPAR growth of 43.3% and 11.1%, respectively.

Net Income for the third quarter was $32.5 million, a decrease of $42.2 million from the comparable period in 2018. For the three months ended September 30, 2019 and September 30, 2018, net income included $1.0 million and $47.7 million respectively, from sold hotels. Net income for the three months ended September 30, 2018, included a gain on sale of hotel properties of $35.9 million.

Adjusted EBITDA for the third quarter was $106.3 million, a decrease of $26.4 million from the comparable period in 2018. Adjusted EBITDA was impacted by approximately $2.0 million from Hurricane Dorian, and reduced by approximately $1.0 million from the earlier than expected closing of 18 hotels, and by approximately $0.1 million from the sale of Residence Inn Columbia. For the three months ended September 30, 2019 and September 30, 2018, Adjusted EBITDA included $2.1 million and $26.0 million respectively, from sold hotels.

Financial and Operating Highlights

Prior Quarterly Outlook Bridge

The following table reconciles the Company’s results for the third quarter with the outlook issued as of August 7, 2019, which previously excluded Pro forma Consolidated Hotel EBITDA from the 18 non-core hotels sold during the third quarter.

The Company’s Pro forma Consolidated Hotel EBITDA outlook was impacted by approximately $2.0 million due to Hurricane Dorian and reduced by approximately $0.3 million from the sale of Residence Inn Columbia during the third quarter.

Dispositions

The Company closed on the previously announced sale of 18 non-core hotels on August 14, 2019. Separately, the Company also sold the 108-room Residence Inn Columbia in Columbia, MD on September 12, 2019 for approximately $12.7 million.

Share Repurchases

During the third quarter, the Company repurchased 2.8 million shares of its common shares for $47.2 million at an average price per share of $16.94. Year-to-date as of November 7, 2019, the Company repurchased approximately 4.0 million shares of its common shares for approximately $68.0 million at an average price per share of $17.08. As of November 7, 2019, the Company’s share buyback program has a remaining capacity of approximately $192 million.

Balance Sheet

As of September 30, 2019, the Company had $845.9 million of unrestricted cash on its balance sheet, $600.0 million available on its revolving credit facility, and $2.2 billion of debt outstanding.

The Company’s ratio of net debt to Adjusted EBITDA for the trailing twelve-month period ended September 30, 2019, was 3.2x.

Dividends

The Company’s Board of Trustees declared a cash dividend of $0.33 per common share of beneficial interest in the third quarter. The dividend was paid on October 15, 2019, to shareholders of record as of September 30, 2019.

The Company’s Board of Trustees declared a preferred dividend of $0.4875 on its Series A cumulative convertible preferred shares. The dividend was paid on October 31, 2019, to shareholders of record as of September 30, 2019.

Outlook

The Company’s full-year outlook includes all hotels owned as of November 7, 2019. Potential future acquisitions, dispositions, financings, or share repurchases are not incorporated into the Company’s outlook below and could result in a material change to the Company’s outlook.

For the full year 2019, the Company is updating its outlook to incorporate actual third quarter operating results and the sale of Residence Inn Columbia.

Additionally, key assumptions underlying the Company’s full year 2019 outlook include:

• Net interest expense of $85 million to $87 million, which excludes the impact of unrealized gains or losses related to interest rate hedges
• Capital expenditures related to renovations in the range of $90 million to $110 million and approximately 40 bps to 50 bps of renovation related RevPAR disruption
• Cash income tax expense of $3 million to $4 million
• Diluted weighted-average common shares and units of 172.2 million, assuming no additional share repurchases

Earnings Call

The Company will conduct its quarterly analyst and investor conference call on November 8, 2019, at 10:00 a.m. (Eastern Time). The conference call can be accessed by dialing (877) 407-3982 or (201) 493-6780 for international participants and requesting RLJ Lodging Trust’s third quarter earnings conference call. Additionally, a live webcast of the conference call will be available through the Company’s website at http://www.rljlodgingtrust.com. A replay of the conference call webcast will be archived and available online through the Investor Relations page of the Company’s website.

About Us

RLJ Lodging Trust is a self-advised, publicly traded real estate investment trust that owns primarily premium-branded, high-margin, focused-service and compact full-service hotels. The Company’s portfolio consists of 108 hotels with approximately 23,170 rooms located in 23 states and the District of Columbia and an ownership interest in one unconsolidated hotel with 171 rooms.

Forward Looking Statements

The following information contains certain statements, other than purely historical information, including estimates, projections, statements relating to the Company’s business plans, objectives and expected operating results, and the assumptions upon which those statements are based, that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements generally are identified by the use of the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “plan,” “may,” “will,” “will continue,” “intend,” “should,” or similar expressions. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, beliefs, and expectations, such forward-looking statements are not predictions of future events or guarantees of future performance and the Company’s actual results could differ materially from those set forth in the forward-looking statements. Some factors that might cause such a difference include the following: the current global economic uncertainty, increased direct competition, changes in government regulations or accounting rules, changes in local, national, and global real estate conditions, declines in the lodging industry, seasonality of the lodging industry, risks related to natural disasters, such as earthquakes and hurricanes, hostilities, including future terrorist attacks or fear of hostilities that affect travel, the Company’s ability to obtain lines of credit or permanent financing on satisfactory terms, changes in interest rates, access to capital through offerings of the Company’s common and preferred shares of beneficial interest, or debt, the Company’s ability to identify suitable acquisitions, the Company’s ability to close on identified acquisitions and integrate those businesses, and inaccuracies of the Company’s accounting estimates. Given these uncertainties, undue reliance should not be placed on such statements. Except as required by law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. The Company cautions investors not to place undue reliance on these forward-looking statements and urges investors to carefully review the disclosures the Company makes concerning risks and uncertainties in the sections entitled “Risk Factors,” “Forward-Looking Statements,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report, as well as risks, uncertainties, and other factors discussed in other documents filed by the Company with the Securities and Exchange Commission.

RLJ Lodging Trust

Non-GAAP and Accounting Commentary

Non-Generally Accepted Accounting Principles (“Non-GAAP”) Financial Measures

The Company considers the following non-GAAP financial measures useful to investors as key supplemental measures of its performance: (1) FFO, (2) Adjusted FFO, (3) EBITDA, (4) EBITDAre, (5) Adjusted EBITDA, (6) Hotel EBITDA, and (7) Hotel EBITDA Margin. These Non-GAAP financial measures should be considered along with, but not as alternatives to, net income or loss as a measure of its operating performance. FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA, Hotel EBITDA, and Hotel EBITDA Margin as calculated by the Company, may not be comparable to other companies that do not define such terms exactly as the Company.

Funds From Operations (“FFO”)

The Company calculates Funds from Operations (“FFO”) in accordance with standards established by the National Association of Real Estate Investment Trusts, or NAREIT, which defines FFO as net income or loss (calculated in accordance with GAAP), excluding gains or losses from sales of real estate, impairment, the cumulative effect of changes in accounting principles, plus depreciation and amortization, and adjustments for unconsolidated partnerships and joint ventures. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most real estate industry investors consider FFO to be helpful in evaluating a real estate company’s operations. The Company believes that the presentation of FFO provides useful information to investors regarding the Company’s operating performance and can facilitate comparisons of operating performance between periods and between real estate investment trusts (“REITs”), even though FFO does not represent an amount that accrues directly to common shareholders.

The Company’s calculation of FFO may not be comparable to measures calculated by other companies who do not use the NAREIT definition of FFO or do not calculate FFO per diluted share in accordance with NAREIT guidance. Additionally, FFO may not be helpful when comparing the Company to non-REITs. The Company presents FFO attributable to common shareholders, which includes unitholders of limited partnership interest (“OP units”) in RLJ Lodging Trust, L.P., the Company’s operating partnership, because the OP units are redeemable for common shares of the Company. The Company believes it is meaningful for the investor to understand FFO attributable to all common shares and OP units.

EBITDA and EBITDAre

Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”) is defined as net income or loss excluding: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sales of assets; and (3) depreciation and amortization. The Company considers EBITDA useful to an investor in evaluating and facilitating comparisons of its operating performance between periods and between REITs by removing the impact of its capital structure (primarily interest expense) and asset base (primarily depreciation and amortization) from its operating results. In addition, EBITDA is used as one measure in determining the value of hotel acquisitions and dispositions.

In addition to EBITDA, the Company presents EBITDAre in accordance with NAREIT guidelines, which defines EBITDAre as net income or loss (calculated in accordance with GAAP) excluding interest expense, income tax expense, depreciation and amortization expense, gains or losses from sales of real estate, impairment, and adjustments for unconsolidated partnerships and joint ventures. The Company believes that the presentation of EBITDAre provides useful information to investors regarding the Company’s operating performance and can facilitate comparisons of operating performance between periods and between REITs.

Adjustments to FFO and EBITDAre

The Company adjusts FFO, EBITDA, and EBITDAre for certain items that the Company considers either outside the normal course of operations or extraordinary. The Company believes that Adjusted FFO, Adjusted EBITDA, and Adjusted EBITDAre provide useful supplemental information to investors regarding its ongoing operating performance that, when considered with net income or loss, FFO, EBITDA, and EBITDAre, are beneficial to an investor’s understanding of its operating performance. The Company adjusts FFO, EBITDA, and EBITDAre for the following items:

• Transaction Costs: The Company excludes transaction costs expensed during the period
• Non-Cash Expenses: The Company excludes the effect of certain non-cash items such as the amortization of share-based compensation, non-cash income taxes, and unrealized gains and loss related to interest rate hedges
• Other Non-Operational Expenses: The Company excludes the effect of certain non-operational expenses representing income and expenses outside of the normal course of operations

The Company previously presented Adjusted EBITDA with adjustments for noncontrolling interests in consolidated joint ventures. The rationale for including 100% of Adjusted EBITDA for consolidated joint ventures with noncontrolling interests is that the full amount of any debt of these consolidated joint ventures is reported in our consolidated balance sheet and metrics using debt to EBITDA provide a better understanding of the Company’s leverage. This is also consistent with NAREIT’s definition of EBITDAre.

Hotel EBITDA and Hotel EBITDA Margin

With respect to Consolidated Hotel EBITDA, the Company believes that excluding the effect of corporate-level expenses and certain non-cash items provides a more complete understanding of the operating results over which individual hotels and operators have direct control. The Company believes property-level results provide investors with supplemental information about the ongoing operational performance of the Company’s hotels and the effectiveness of its third-party management companies.

Pro forma Consolidated Hotel EBITDA includes prior ownership information provided by the sellers of the hotels for periods prior to our acquisition of the hotels, which has not been audited and excludes results from sold hotels as applicable. Pro forma Hotel EBITDA and Pro forma Hotel EBITDA Margin exclude the results of any non-comparable hotels that were under renovation or not open for the entirety of the comparable periods. The following is a summary of pro forma hotel adjustments:

Pro forma adjustments: Acquired hotels

For the three and nine months ended September 30, 2019 and 2018, respectively, no hotels were acquired.

Pro forma adjustments: Sold hotels

For the three and nine months ended September 30, 2019 and 2018, pro forma adjustments included the following sold hotels:

• Courtyard Austin Airport
• Courtyard Austin Northwest Arboretum
• Courtyard Boulder Longmont
• Courtyard Boulder Louisville
• Courtyard Denver West Golden
• Courtyard Fort Lauderdale SW Miramar
• Courtyard Louisville Northeast
• Courtyard Salt Lake City Airport
• Courtyard South Bend Mishawaka
• DoubleTree by Hilton Burlington Vermont
• DoubleTree Columbia
• Embassy Suites Boston – Marlborough
• Embassy Suites Myrtle Beach Oceanfront Resort
• Embassy Suites Napa Valley
• Fairfield Inn & Suites San Antonio Downtown Market
• Hampton Inn Fort Walton Beach
• Hampton Inn Houston Near The Galleria
• Hampton Inn West Palm Beach Airport Central
• Hampton Inn & Suites Clearwater St. Petersburg Ulmerton Road
• Hampton Inn & Suites Denver Tech Center
• Hilton Garden Inn Bloomington
• Hilton Garden Inn Durham Raleigh Research Triangle Park
• Hilton Garden Inn West Palm Beach Airport
• Hilton Myrtle Beach Resort
• Holiday Inn San Francisco – Fisherman’s Wharf
• Hyatt House Austin Arboretum
• Hyatt House Dallas Lincoln Park
• Hyatt House Dallas Uptown
• Hyatt House Houston Galleria
• Residence Inn Austin North Parmer Lane
• Residence Inn Austin Northwest Arboretum
• Residence Inn Boulder Louisville
• Residence Inn Chicago Oak Brook
• Residence Inn Columbia
• Residence Inn Denver West Golden
• Residence Inn Detroit Novi
• Residence Inn Fort Lauderdale Plantation
• Residence Inn Fort Lauderdale SW Miramar
• Residence Inn Longmont Boulder
• Residence Inn Louisville Northeast
• Residence Inn Salt Lake City Airport
• Residence Inn San Antonio Downtown Market Square
• Residence Inn Silver Spring
• Sheraton Philadelphia Society Hill Hotel
• SpringHill Suites Austin North Parmer Lane
• SpringHill Suites Boulder Longmont
• SpringHill Suites Louisville Hurstbourne North
• SpringHill Suites South Bend Mishawaka
• The Vinoy Renaissance St. Petersburg Resort & Golf Club

Contacts

Sean M. Mahoney, Executive Vice President and Chief Financial Officer – (301) 280-7774
For additional information or to receive press releases via email, please visit our website:
http://www.rljlodgingtrust.com

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