Financial

RLJ Lodging Trust Third Quarter 2012 Total Revenues Up 14.2%

Pro forma RevPAR increased 7.9%, ADR increased 6.4% and occupancy increased 1.4%

RLJ Lodging Trust

RLJ Lodging Trust (NYSE: RLJ) reported results for the three and nine months ended September 30, 2012.

“Management’s Discussion and Analysis of Results of Operations and Financial Condition”

Third Quarter Highlights

  • Pro forma RevPAR increased 7.9%, ADR increased 6.4% and occupancy increased 1.4%
  • Pro forma Hotel EBITDA Margin increased 97 basis points to 34.5%
  • Excluding the Company’s New York assets, RevPAR would have increased 9.5% and Pro forma Hotel EBITDA Margin would have increased 178 basis points
  • Pro forma Consolidated Hotel EBITDA increased 10.9% to $77.4 million
  • Adjusted FFO increased 28.4% to $50.6 million
  • Declared a quarterly cash dividend of $0.165 per share, or $0.66 on an annualized basis

“Our strong results are reflective of the quality of our assets and the market diversification in our portfolio,” commented Thomas J. Baltimore, Jr., President and Chief Executive Officer. “We expect that our active asset management and the tailwind created by our extensive two-year capital plan that is nearly complete will continue to drive robust growth.”

Financial and Operating Results

This press release presents 2011 data that combines the financial and operating results of the Company’s predecessor entities prior to the consummation of the Company’s initial public offering (“IPO”) on May 16, 2011, and the results of the Company post-IPO. Pro forma RevPAR, Pro forma Hotel EBITDA, and Pro forma Hotel EBITDA Margin exclude non-comparable hotels that were not open for operation or closed for renovations for comparable periods. The prefix “pro forma,” as defined by the Company, denotes operating results which include results for periods prior to its ownership. An explanation of EBITDA, Adjusted EBITDA, Hotel EBITDA, FFO, and Adjusted FFO, as well as reconciliations of those measures to net income or loss, if applicable, is included at the end of this release.

Pro forma RevPAR for the three months ended September 30, 2012, increased 7.9% over the comparable period in 2011, driven by an ADR increase of 6.4% and an occupancy increase of 1.4%. Among the Company’s top six markets, the best performers in the quarter were Chicago and Washington D.C., which experienced RevPAR growth of 10.2% and 9.8%, respectively. During the quarter, the timing of the Jewish holidays and a lower delegate turnout at the United Nations General Assembly negatively impacted the New York lodging market. Excluding the Company’s five assets in New York, RevPAR growth would have increased 9.5%. For the nine months ended September 30, 2012, Pro forma RevPAR increased 6.4% over the comparable period in 2011, driven by an ADR increase of 5.5% and an occupancy increase of 0.8%.

Pro forma Hotel EBITDA for the three months ended September 30, 2012, increased $7.7 million to $77.6 million, representing an 11.1% increase over the comparable period in 2011. For the nine months ended September 30, 2012, Pro forma Hotel EBITDA increased $16.6 million to $216.2 million, representing an 8.3% increase over the comparable period in 2011.

Pro forma Hotel EBITDA Margin for the three months ended September 30, 2012, increased 97 basis points over the comparable period in 2011 to 34.5%. Excluding the Company’s five assets in New York, margin growth would have increased 178 basis points. For the nine months ended September 30, 2012, Pro forma Hotel EBITDA Margin increased 50 basis points over the comparable period in 2011 to 33.6%.

Pro forma Consolidated Hotel EBITDA includes the results of non-comparable hotels. For the three months ended September 30, 2012, Pro forma Consolidated Hotel EBITDA increased $7.6 million to $77.4 million, representing a 10.9% increase over the comparable period in 2011. For the nine months ended September 30, 2012, Pro forma Consolidated Hotel EBITDA increased to $217.7 million.

Adjusted EBITDA for the three months ended September 30, 2012, increased $9.9 million to $71.7 million, representing a 15.9% increase over the comparable period in 2011. For the nine months ended September 30, 2012, Adjusted EBITDA increased $19.6 million to $197.0 million, representing an 11.1% increase over the comparable period in 2011.

Adjusted FFO for the three months ended September 30, 2012, increased $11.2 million to $50.6 million, representing a 28.4% increase over the comparable period in 2011. For the nine months ended September 30, 2012, Adjusted FFO increased $30.1 million to $134.9 million, representing a 28.7% increase over the comparable period in 2011. Adjusted FFO per diluted share and unit for the three and nine months ended September 30, 2012, was $0.48 and $1.27, respectively, based on the Company’s diluted weighted-average shares and units outstanding of 106.4 million and 106.3 million for each period, respectively.

Non-recurring expenses for the three months ended September 30, 2012, consisted of $0.9 million related to an impairment charge and $0.7 million of interest and penalties incurred in connection with the Springhill Suites Southfield, Michigan mortgage loan. For the nine months ended September 30, 2012, non-recurring expenses consisted of $0.9 million related to an impairment charge, $0.7 million of interest and penalties incurred in connection with the Springhill Suites Southfield, Michigan mortgage loan, and $0.6 million related to a non-cash loss on disposal of furniture, fixtures, and equipment associated with assets under renovation. These expenses are included in net income, EBITDA and FFO, but have been excluded from Adjusted EBITDA and Adjusted FFO, as applicable.

Net income attributable to common shareholders for the three months ended September 30, 2012, was $15.2 million, compared to $31.3 million in the comparable period in 2011. For the nine months ended September 30, 2012, net income attributable to common shareholders was $27.6 million, compared to $12.6 million for the comparable period in 2011. The three and nine months ended September 30, 2011, include $23.5 million of gain associated with the deed in lieu transfer of the New York LaGuardia Airport Marriott that occurred in the third quarter of 2011.

Net cash flow from operating activities for the nine months ended September 30, 2012, totaled $123.7 million compared to $90.6 million for the comparable period in 2011.

Capital Expenditures

The Company’s 2012 capital plan to upgrade and/or reposition 45 hotels for approximately $95.0 million is entering its final phase.

During the third quarter, approximately $2.3 million of additional upgrades were initiated at three hotels. Year to date, the Company has initiated approximately $65 million of upgrades across 25 hotels. Once the remaining 20 assets are initiated in the fourth quarter, the Company’s comprehensive two-year capital program will be substantially complete.

Balance Sheet and Capital Structure

As of September 30, 2012, the Company had $192.1 million of unrestricted cash on its balance sheet and $215.0 million available on its unsecured credit facility. The Company had $1.4 billion of outstanding debt, including $85.0 million outstanding on its unsecured credit facility. The Company’s ratio of net debt to Adjusted EBITDA for the trailing twelve month period was 4.6 times.

Dividends

The Company’s Board of Trustees declared a cash dividend of $0.165 per common share of beneficial interest. The dividend was paid on October 15, 2012, to shareholders of record as of September 28, 2012.

2012 Outlook

The Company is reaffirming its previously issued guidance. The Company’s outlook excludes potential future acquisitions and dispositions, which could result in a material change to the Company’s outlook. The Company’s 2012 outlook is also based on a number of other assumptions, many of which are outside the Company’s control and all of which are subject to change.

Pro forma operating statistics assume the Company owned all 144 of its hotels since January 1, 2011. Pro forma RevPAR growth and Pro forma Hotel EBITDA Margin exclude non-comparable hotels. Pro forma Consolidated Hotel EBITDA guidance includes approximately $3.5 million of prior ownership Hotel EBITDA from three acquisitions purchased in the second quarter that will not be included in the Company’s corporate Adjusted EBITDA or Adjusted FFO. For the full year 2012, the Company’s outlook is:

     
    Current Outlook
Pro forma RevPAR growth   6.0% to 8.0%
Pro forma Hotel EBITDA Margin 33.5% to 34.5%
Pro forma Consolidated Hotel EBITDA   $280.0 to $300.0 million
 

RLJ Lodging Trust is a self-advised, publicly traded real estate investment trust focused on acquiring premium-branded, focused-service and compact full-service hotels. The Company’s portfolio consists of 144 hotels in 20 states and the District of Columbia, with more than 21,300 rooms. 

 
RLJ Lodging Trust
Combined Consolidated Balance Sheets
(Amounts in thousands, except share and per share data)
   
September 30,   December 31,
    2012   2011
(unaudited)
Assets
Investment in hotel properties, net $ 3,004,618 $ 2,820,457
Investment in loans 12,480 12,633
Cash and cash equivalents 192,102 310,231
Restricted cash reserves 68,275 87,288
Hotel receivables, net of allowance of $295 and $150, respectively 29,324 20,081
Deferred financing costs, net 8,235 9,639
Deferred income tax asset 1,682 1,369
Prepaid expense and other assets   28,521       28,320  
Total assets $ 3,345,237     $ 3,290,018  
Liabilities and Equity
Borrowings under credit facility $ 85,000 $ -
Mortgage loans 1,331,967 1,341,735
Interest rate swap liability 1,032 1,796
Accounts payable and accrued expense 80,385 86,213
Deferred income tax liability 3,281 3,314
Advance deposits and deferred revenue 10,320 4,781
Accrued interest 2,397 2,115
Distributions payable   17,902       16,076  
Total liabilities 1,532,284 1,456,030
 
 
 
Equity
Shareholders' equity:

Preferred shares of beneficial interest, $0.01 par value, 50,000,000 shares authorized; zero shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively.

- -

Common shares of beneficial interest, $0.01 par value, 450,000,000 shares authorized; 106,600,365 and 106,279,049 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively.

1,067 1,063
Additional paid-in-capital 1,839,195 1,835,011
Accumulated other comprehensive loss (1,018 ) (1,782 )
Distributions in excess of net earnings   (44,336 )     (18,960 )

Total shareholders' equity

1,794,908 1,815,332
 
Noncontrolling interest
Noncontrolling interest in joint venture 6,718 7,170
Noncontrolling interest in Operating Partnership   11,327       11,486  
Total noncontrolling interest   18,045       18,656  
Total equity   1,812,953       1,833,988  
Total liabilities and equity $ 3,345,237     $ 3,290,018  
 
 
RLJ Lodging Trust
Combined Consolidated Statements of Operations and Comprehensive Income
(Amounts in thousands, except share and per share data)
(unaudited)
       
 
For the three months ended For the nine months ended
September 30, September 30,
2012   2011 2012   2011
Revenue

Hotel operating revenue

Room revenue $ 197,584 $ 172,589 $ 551,005 $ 495,217
Food and beverage revenue 21,359 19,497 63,267 59,664
Other operating department revenue   6,274       5,165     17,395       14,810  
Total revenue   225,217       197,251     631,667       569,691  
Expense
Hotel operating expense
Room 43,545 39,012 121,442 110,753
Food and beverage 15,159 13,479 45,107 41,767
Management fees 7,913 6,755 21,855 19,519
Other hotel expenses   67,506       59,559     191,220       172,744  
Total hotel operating expense 134,123 118,805 379,624 344,783
Depreciation and amortization 30,811 29,026 95,962 91,479
Impairment loss 896 - 896 -
Property tax, insurance and other 14,234 12,463 39,342 35,951
General and administrative 8,073 6,329 22,814 17,504
Transaction and pursuit costs 326 282 3,140 3,614
IPO costs   -       89     -       10,333  
Total operating expense   188,463       166,994     541,778       503,664  
Operating income 36,754 30,257 89,889 66,027
Other income 68 518 258 742
Interest income 438 424 1,275 1,264
Interest expense (21,620 ) (21,664 ) (62,175 ) (75,415 )
Loss on disposal - - (634 ) -
 
Income (loss) from continuing operations before income taxes 15,640 9,535 28,613 (7,382 )
 
Income tax expense   (339 )     (858 )   (1,214 )     (1,546 )
Income (loss) from continuing operations 15,301 8,677 27,399 (8,928 )
 
Income from discontinued operations   -       22,970     -       21,838  
 
Net income 15,301 31,647 27,399 12,910
 
Net (income) loss attributable to non-controlling interests
Noncontrolling interest in joint venture 44 (22 ) 452 55

Noncontrolling interest in common units of Operating Partnership

  (149 )     (306 )   (283 )     (285 )
Net income attributable to the Company 15,196 31,319 27,568 12,680
 
Distributions to preferred unitholders - - - (61 )
           
Net income attributable to common shareholders $ 15,196     $ 31,319   $ 27,568     $ 12,619  
 
Basic per common share data:

Net income (loss) per share attributable to common shareholders before discontinued operations

$ 0.14 $ 0.08 $ 0.26 $ (0.10 )
Discontinued operations   -       0.22     -       0.24  
Net income per share attributable to common shareholders $ 0.14     $ 0.30   $ 0.26     $ 0.14  
Weighted-average number of common shares   105,453,978       105,228,305     105,392,071       89,316,830  
 
Diluted per common share data:

Net income (loss) per share attributable to common shareholders before discontinued operations

$ 0.14 $ 0.08 $ 0.26 $ (0.10 )
Discontinued operations   -       0.22     -       0.24  
Net income per share attributable to common shareholders $ 0.14     $ 0.30   $ 0.26     $ 0.14  
Weighted-average number of common shares   105,509,104       105,228,305     105,446,211       89,316,830  
 
Comprehensive income
Net income attributable to the Company $ 15,196 $ 31,319 $ 27,568 $ 12,680
Unrealized gain on interest rate derivatives   389       682     764       1,494  
Comprehensive income attributable to the Company $ 15,585     $ 32,001   $ 28,332     $ 14,174  
 
 
RLJ Lodging Trust
Reconciliation of Net Income to Non-GAAP Measures
(Amounts in thousands, except per share data)
(unaudited)
       
 
 
 
FFO and Adjusted FFO
For the three months ended For the nine months ended
September 30, September 30,
2012   2011 2012   2011
Net income (1) $ 15,301 $ 31,647 $ 27,399 $ 12,910
Depreciation and amortization 30,811 29,026 95,962 91,479
Depreciation and amortization, discontinued operations - 669 - 2,602
Distributions to preferred unitholders - - - (61 )
Loss on disposal - - 634 -
Gain on extinguishment of indebtedness - (23,515 ) - (23,515 )
Impairment loss 896 - 896 -
Noncontrolling interest in joint venture 44 (22 ) 452 55
Adjustments related to joint venture (2)   (119 )     (77 )   (330 )     (222 )
FFO attributable to common shareholders 46,933 37,728 125,013 83,248
 
Transaction and pursuit costs 326 282 3,140 3,614
IPO Costs (3) - 89 - 10,333
Amortization of share based compensation 2,550 1,322 5,763 1,962
Loan related costs (4)(5) 669 - 669 4,303
Other expenses (6)(7)   125       -     302       1,362  
Adjusted FFO $ 50,603     $ 39,421   $ 134,887     $ 104,822  
 
 
Adjusted FFO per common share and unit-basic (8) $ 0.48 $ 0.37 $ 1.27 N/A
Adjusted FFO per common share and unit-diluted (8) $ 0.48 $ 0.37 $ 1.27 N/A
 
Basic weighted-average common shares and units outstanding (9) 106,348 106,122 106,286 90,211
Diluted weighted-average common shares and units outstanding (9) 106,403 106,122 106,340 90,211
 
   

(1)

 

Includes net income from discontinued operations.

(2)

Includes depreciation and amortization expense allocated to the noncontrolling interest in joint venture.

(3)

Includes expenses related to the transfer and assumption of indebtedness and other contractual obligations of our predecessor in connection with the IPO and our formation transactions.

(4)

Includes $0.7 million for both the three and nine months ended September 30, 2012, respectively, of default interest and penalties incurred in connection with Springhill Suites Southfield, Michigan mortgage loan.

(5)

Includes zero and $4.3 million for the three and nine months ended September 30, 2011, respectively, of incremental interest expense related to the accelerated payoff of mortgage indebtedness.

(6)

Includes $0.1 million and $0.3 million for the three and nine months ended September 30, 2012, respectively, of legal expenses outside the normal course of operations.

(7)

Includes zero and $1.4 million for the three and nine months ended September 30, 2011, respectively, of certain compensation obligations of our predecessor not continued.

(8)

The Company does not reflect Adjusted FFO per common share and unit (basic/diluted) for the nine months ended September 30, 2011. The Company does not consider the calculation to be meaningful based on the timing of its initial public offering.

(9)

Includes 0.9 million operating partnership units.

 
 
RLJ Lodging Trust
Reconciliation of Net Income to Non-GAAP Measures
(Amounts in thousands)
(unaudited)
       
 
 
 
EBITDA, Adjusted EBITDA, Pro forma Consolidated Hotel EBITDA, and Pro forma Hotel EBITDA
 
For the three months ended For the nine months ended
September 30, September 30,
2012   2011 2012   2011
Net income (1) $ 15,301 $ 31,647 $ 27,399 $ 12,910
Depreciation and amortization 30,811 29,026 95,962 91,479
Depreciation and amortization, discontinued operations - 669 - 2,602
Distributions to preferred unitholders - - - (61 )
Interest expense, net (2) 21,590 21,651 62,123 75,371
Interest expense, net, discontinued operations - 77 - 488
Income tax expense 339 858 1,214 1,546
Noncontrolling interest in joint venture 44 (22 ) 452 55
Adjustments related to joint venture (3)   (295 )     (253 )   (854 )     (746 )
EBITDA 67,790 83,653 186,296 183,644
 
Transaction and pursuit costs 326 282 3,140 3,614
IPO costs (4) - 89 - 10,333
Gain on extinguishment of indebtedness - (23,515 ) - (23,515 )
Impairment loss 896 - 896 -
Loss on disposal - - 634 -
Amortization of share based compensation 2,550 1,322 5,763 1,962
Other expenses (5)(6)   125       -     302       1,362  
Adjusted EBITDA $ 71,687     $ 61,831   $ 197,031     $ 177,400  
General and administrative (7) 5,523 5,007 17,051 14,180
Other income/interest income (476 ) (928 ) (1,481 ) (1,959 )
Operating results from discontinued operations - (198 ) - (1,415 )
Corporate overhead allocated to properties 220 243 495 543
Distributions to preferred unitholders - - - 61
Operating results from noncontrolling interest in joint venture 251 275 402 691
Pro forma adjustments (8) - 3,334 3,504 8,345
Non-cash amortization (9)   217       250     706       750  
Pro forma Consolidated Hotel EBITDA $ 77,422 $ 69,814 $ 217,708 $ 198,596
Non-comparable hotels (10)   176       36     (1,494 )     993  
Pro forma Hotel EBITDA $ 77,598     $ 69,850   $ 216,214     $ 199,589  
 
   

(1)

 

Includes net income from discontinued operations.

(2)

Excludes amounts attributable to investment in loans of $0.4 million and $1.2 million for the three and nine months ended September 30, 2012 and 2011, respectively.

(3)

Includes depreciation, amortization and interest expense allocated to the noncontrolling interest in joint venture.

(4)

Includes expenses related to the transfer and assumption of indebtedness and other contractual obligations of our predecessor in connection with the IPO and our formation transactions.

(5)

Includes $0.1 million and $0.3 million for the three and nine months ended September 30, 2012, respectively, of legal expenses outside the normal course of operations.

(6)

Includes zero and $1.4 million for the three and nine months ended September 30, 2011, respectively, of certain compensation obligations of our predecessor not continued.

(7)

General and administrative expenses exclude certain compensation obligations of our predecessor not continued and amortization of share based compensation, which are reflected in Adjusted EBITDA.

(8)

Reflects adjustments made to incorporate prior ownership periods for new acquisitions.

(9)

Non-cash amortization includes the amortization of management and franchise fees.

(10)

Adjustments reflect operating results from properties closed for renovations and properties not open for operations.

 
 
RLJ Lodging Trust
Pro forma Operating Statistics
(unaudited)
 
 
For the three months ended September 30,
                                           
% of Pro forma
  ADR Occupancy Pro forma RevPAR Hotel EBITDA
  # of Hotels 2012     2011     Var 2012     2011     Var 2012     2011     Var Q3 12
NYC 5 $ 231.75 $ 232.85 -0.5 % 96.0 % 95.2 % 0.8 % $ 222.39 $ 221.73 0.3 % 16 %
Chicago 21 129.26 117.89 9.6 % 79.5 % 79.2 % 0.5 % 102.82 93.34 10.2 % 14 %
Austin 17 117.61 113.65 3.5 % 68.0 % 70.4 % -3.4 % 80.00 80.00 0.0 % 8 %
Denver 15 123.04 114.37 7.6 % 78.9 % 80.8 % -2.4 % 97.04 92.40 5.0 % 12 %
Louisville 5 126.20 117.76 7.2 % 70.1 % 73.3 % -4.5 % 88.41 86.37 2.4 % 5 %
Washington DC 7 161.43 151.71 6.4 % 84.4 % 81.8 % 3.2 % 136.23 124.02 9.8 % 8 %
Other 73   113.99       104.52     9.1 % 74.1 %     71.1 %     4.2 %   84.45       74.36     13.6 % 37 %
Total 143 $ 132.43     $ 124.46     6.4 % 76.7 %     75.6 %     1.4 % $ 101.55     $ 94.12     7.9 % 100 %



Logos, product and company names mentioned are the property of their respective owners.