DiamondRock Hospitality Results

DiamondRock Hospitality Company Reports First Quarter 2.1 Percent RevPAR Decline

Hotel Adjusted EBITDA margin was 26.42%, an increase of 14 basis points from the comparable period of 2015.

DiamondRock

DiamondRock Hospitality Company, a lodging-focused real estate investment trust that owns a portfolio of 29 premium hotels in the United States, last week announced results of operations for the quarter ended March 31, 2016.

First Quarter 2016 Highlights

  • RevPAR: RevPAR was $150.61, a 2.1% decline from the comparable period of 2015. 
  • Hotel Adjusted EBITDA Margin: Hotel Adjusted EBITDA margin was 26.42%, an increase of 14 basis points from the comparable period of 2015. 
  • Adjusted EBITDA: Adjusted EBITDA was $50.3 million, an increase of 3.7% from 2015. 
  • Adjusted FFO: Adjusted FFO was $42.8 million and Adjusted FFO per diluted share was $0.21. 
  • Net Income: Net income was $16.8 million and earnings per diluted share was $0.08. 
  • Chicago Marriott Loan Prepayment: The Company prepaid the $201.7 million mortgage loan secured by the Chicago Marriott Downtown on January 11, 2016. 
  • Dividends: The Company declared a dividend of $0.125 per share during the first quarter, which was paid on April 12, 2016.

Recent Developments

  • Credit Facility: On May 3, 2016, the Company amended its senior unsecured revolving credit facility, increasing the capacity to $300 million, decreasing pricing and extending the maturity date to May 2020. 
  • Term Loan: On May 3, 2016, the Company closed on a new five-year $100 million senior unsecured term loan. 
  • Pending Dispositions: The Company is under contract to dispose of two hotels for approximately $200 million and is currently evaluating other disposition candidates.

Mark W. Brugger, President and Chief Executive Officer of DiamondRock Hospitality Company, stated, "We are successfully executing on our priorities for 2016, which include increasing liquidity and investment capacity, with $400 million in financing activity and approximately $200 million in pending dispositions. During the first quarter, we responded to expected RevPAR headwinds resulting from limited convention activity in our top group markets with outstanding asset management performance. Our team achieved a 2% reduction in operating expenses during the quarter, leading to a record 122% profit flow-through and 14 basis points of Hotel Adjusted EBITDA margin expansion. We expect positive RevPAR momentum for the balance of the year as we move to seasonally stronger quarters and more favorable convention calendars in our markets."

Operating Results       

Please see "Certain Definitions" and "Non-GAAP Financial Measures" attached to this press release for an explanation of the terms "EBITDA," "Adjusted EBITDA," "Hotel Adjusted EBITDA Margin," "FFO" and "Adjusted FFO."

For the quarter ended March 31, 2016, the Company reported the following:

 

First Quarter

2016

2015

Change

ADR(1)

$205.08

$201.36

1.8

%

Occupancy(1)

73.4

%

76.4

%

-3.0 percentage points

RevPAR(1)

$150.61

$153.90

-2.1

%

Hotel Adjusted EBITDA Margin(1)

26.42

%

26.28

%

14 basis points

Adjusted EBITDA

$50.3 million

$48.5 million

$1.8 million

Adjusted FFO

$42.8 million

$37.7 million

$5.1 million

Adjusted FFO per diluted share

$0.21

$0.19

$0.02

Net income

$16.8 million

$10.6 million

$6.2 million

Earnings per diluted share

$0.08

$0.05

$0.03

(1) The 2015 amounts include pre-acquisition operating results for the Shorebreak Hotel and Sheraton Suites Key West in order to reflect the period in 2015 comparable to our ownership period in 2016.

The Company's first quarter results were negatively impacted by the Company's two Chicago hotels, which faced a difficult citywide calendar as well as disruption from renovations to upgrade the hotels. Excluding these two hotels, RevPAR increased 0.3% and Hotel Adjusted EBITDA margins increased 60 basis points.

Financing Activity

On January 11, 2016, the Company prepaid the $201.7 million mortgage loan secured by the Chicago Marriott Downtown.  The Company funded the prepayment with proceeds from the 4.36% fixed interest rate, 10-year loan placed on the Boston Westin Waterfront Hotel in October 2015, as well as a draw on its senior unsecured credit facility. The mortgage was scheduled to mature in April 2016 and the prepayment saved the Company approximately $2.7 million in net interest expense.

On May 3, 2016, the Company amended its senior unsecured revolving credit facility to increase the capacity to $300 million, decrease pricing and extend the maturity date to May 2020. The new facility also includes an accordion feature to expand up to $600 million, subject to lender consent.  The interest rate on the new facility is based on a pricing grid ranging from 150 to 225 basis points over LIBOR, based on the Company's leverage ratio. The interest rate is currently 150 basis points over LIBOR.  The Company also lowered the unused facility fees and modified certain financial covenants.

On May 3, 2016, the Company also closed on a new five-year $100 million senior unsecured term loan. The interest rate on the term loan is based on a pricing grid ranging from 145 to 220 basis points over LIBOR, based on the Company's leverage ratio. Upon closing of the term loan, the Company received proceeds of $50 million, which were used with corporate cash to repay $55 million of borrowings outstanding on its senior unsecured credit facility.  The Company expects to receive the remaining $50 million of proceeds in connection with the repayment of the mortgage loan secured by the Courtyard Manhattan Fifth Avenue later this month.

Pending Hotel Dispositions

The Company is under contract to dispose of two hotels for an aggregate price of approximately $200 million. The dispositions are consistent with the Company's long-term plan to optimize its portfolio by strategically recycling capital from slower growth assets. These transactions are expected to be accretive to the Company's average portfolio RevPAR, improve the Company's long-term RevPAR growth outlook and increase the Company's Hotel Adjusted EBITDA margin. These transactions are subject to certain conditions, including the assumption of debt on one of the hotels, and no assurance can be made regarding the timing or completion of these transactions. If completed, the net proceeds from these dispositions will further enhance the Company's liquidity and balance sheet capacity, which may be used to repurchase its shares at attractive valuations or for other corporate objectives. In addition to these pending sales, the Company is evaluating the opportunity to sell one or more of its New York Cityhotels dependent on pricing.  None of these hotels are currently under contract for sale.

Capital Expenditures

The Company spent approximately $27.4 million on capital improvements during the quarter ended March 31, 2016, primarily related to the second phase of the Chicago Marriott Downtown renovation and the first phase of the renovation of The Gwen.  The Company currently expects to spend approximately $150 million on capital improvements at its hotels in 2016.  Significant projects in 2016 include:

  • The Gwen, a Luxury Collection Hotel: The Company rebranded the Conrad Chicago to Starwood's Luxury Collection on September 1, 2015. The renovation work associated with the brand conversion, which is expected to cost approximately $25 million, will be completed in two phases. The first phase, consisting of the lobby, rooftop bar and other public spaces, commenced in January and is expected to be completed in May 2016. The second phase of the renovation, consisting of the guest rooms, is expected to be completed during the seasonally slow winter season beginning in late 2016. 
  • Chicago Marriott Downtown: The second and largest phase of the multi-year renovation was completed early in the second quarter. This phase included the upgrade of approximately 460 rooms and a new state-of-the-art fitness center. The remaining guest rooms will be renovated during the seasonally slow winter months over the next two years. 
  • The Lodge at Sonoma: The Company expects to renovate the guest rooms at the hotel during the seasonally slow period during late 2016 and early 2017. 
  • Charleston Renaissance: The Company expects to renovate the guest rooms at the hotel commencing in the fourth quarter of 2016. 
  • Worthington Renaissance: The Company expects to renovate the guest rooms at the hotel during the seasonally slow summer months of 2016. 
  • Vail Marriott Mountain Resort & Spa: The Company expects to renovate the guest rooms at the hotel in two phases during seasonally slow periods.

Balance Sheet

As of March 31, 2016, the Company had $48.9 million of unrestricted cash on hand and approximately $1.0 billion of total debt, which consisted of property-specific mortgage debt and $60.0 million of borrowings on its senior unsecured credit facility.

Share Repurchase Program

The Company's Board of Directors authorized a $150 million share repurchase program during 2015. Repurchases under this program will be made in open market or privately negotiated transactions from time to time and in such amounts as market conditions warrant, and subject to regulatory considerations. The Company has not repurchased any shares of its common stock since the program started.

Dividends

The Company's Board of Directors declared a quarterly dividend of $0.125 per share to stockholders of record as of March 31, 2016.  The dividend was paid on April 12, 2016.

Outlook and Guidance

The Company is providing annual guidance for 2016, but does not undertake to update it for any developments in its business.  Achievement of the anticipated results is subject to the risks disclosed in the Company's filings with the U.S. Securities and Exchange Commission.  Pro Forma RevPAR assumes that all of the Company's 29 hotels were owned since January 1, 2015.

The Company is maintaining its 2016 guidance, which was previously provided in connection with the reporting of its 2015 results in February 2016. The guidance below was not adjusted to reflect the two pending hotel dispositions.  The Company continues to expect the full year 2016 results to be as follows:

 

Metric

Low End

High End

Pro Forma RevPAR Growth

 

2 percent

4 percent

Adjusted EBITDA

 

$265 million

$278 million

Adjusted FFO

 

$211 million

$221 million

Adjusted FFO per share

(based on 202.1 million shares)

$1.04 per share

$1.09 per share

The full year guidance range above reflects income tax expense of $7 million to $11 million, interest expense of $46 million to $47 million and corporate expenses of $24 million to $25 million.

The Company expects approximately 30% to 31% of its full year 2016 Adjusted EBITDA to be earned during the second quarter of 2016. In addition, the Company expects second quarter RevPAR growth to be in the low single digits.

Selected Quarterly Pro Forma Operating Information

The following table is presented to provide investors with selected quarterly Pro Forma operating information for 2015.  The operating information assumes that all of the Company's 29 hotels were owned since January 1, 2015.

 

Quarter 1, 2015

Quarter 2, 2015

Quarter 3, 2015

Quarter 4, 2015

Full Year 2015

ADR

$

201.36

$

222.39

$

214.38

$

217.23

$

214.12

Occupancy

76.4

%

84.0

%

83.0

%

77.5

%

80.2

%

RevPAR

$

153.90

$

186.80

$

177.89

$

168.32

$

171.79

Revenues (in thousands)

$

215,969

$

254,256

$

238,516

$

233,842

$

942,583

Hotel Adjusted EBITDA (in thousands)

$

56,752

$

88,997

$

75,242

$

73,076

$

294,067

        % of full Year

19.3

%

30.3

%

25.6

%

24.8

%

100.0

%

Hotel Adjusted EBITDA Margin

26.28

%

35.00

%

31.55

%

31.25

%

31.20

%

Available Rooms

978,254

991,704

1,003,604

1,003,168

3,976,730

About the Company

DiamondRock Hospitality Company is a self-advised real estate investment trust (REIT) that is an owner of a leading portfolio of geographically diversified hotels concentrated in top gateway markets and destination resort locations.  The Company owns 29 premium quality hotels with over 10,900 rooms. The Company has strategically positioned its hotels to be operated both under leading global brands such as Hilton, Marriott, and Westin and boutique hotels in the lifestyle segment.

DIAMONDROCK HOSPITALITY COMPANY

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)

March 31, 2016

December 31, 2015

ASSETS

Property and equipment, net

$

2,885,341

$

2,882,176

Restricted cash

56,997

59,339

Due from hotel managers

94,643

86,698

Favorable lease assets, net

23,866

23,955

Prepaid and other assets (1)

45,779

46,758

Cash and cash equivalents

48,903

213,584

Total assets

$

3,155,529

$

3,312,510

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:

Mortgage debt, net of unamortized debt issuance costs

$

965,526

$

1,169,749

Senior unsecured credit facility

60,000

Total debt

1,025,526

1,169,749

Deferred income related to key money, net

22,851

23,568

Unfavorable contract liabilities, net

74,079

74,657

Deferred ground rent

71,322

70,153

Due to hotel managers

67,973

65,350

Dividends declared and unpaid

25,489

25,599

Accounts payable and accrued expenses (2)

51,454

58,829

Total other liabilities

313,168

318,156

Stockholders' Equity:

Preferred stock, $0.01 par value; 10,000,000 shares authorized; no shares 

  issued and outstanding

Common stock, $0.01 par value; 400,000,000 shares authorized;

  200,844,065 and 200,741,777 shares issued and outstanding at March 

  31, 2016 and December 31, 2015, respectively

2,008

2,007

Additional paid-in capital

2,057,664

2,056,878

Accumulated deficit

(242,837)

(234,280)

Total stockholders' equity

1,816,835

1,824,605

Total liabilities and stockholders' equity

$

3,155,529

$

3,312,510

(1) Includes $34.0 million of deferred tax assets, $6.2 million of prepaid expenses and $5.6 million of other assets as of March 31, 2016.

(2)  Includes $21.2 million of deferred tax liabilities, $12.8 million of accrued property taxes, $12.5 million of accrued capital expenditures and $5.0 million of other accrued liabilities as of March 31, 2016.

 

 

 

 

DIAMONDROCK HOSPITALITY COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

Three Months Ended March 31,

2016

2015

Revenues:

Rooms

$

149,443

$

144,637

Food and beverage

50,374

52,333

Other

13,217

11,918

Total revenues

213,034

208,888

Operating Expenses:

Rooms

38,714

38,464

Food and beverage

33,350

35,547

Management fees

6,609

6,201

Other hotel expenses

78,929

76,505

Depreciation and amortization

25,121

24,337

Hotel acquisition costs

232

Corporate expenses

6,000

5,410

Impairment losses

786

Total operating expenses, net

188,723

187,482

Operating profit

24,311

21,406

Interest income

(50)

(90)

Interest expense

11,664

13,219

Other income, net

(38)

Total other expenses, net

11,614

13,091

Income before income taxes

12,697

8,315

Income tax benefit

4,081

2,326

Net income

$

16,778

$

10,641

Earnings per share:

Basic earnings per share

$

0.08

$

0.05

Diluted earnings per share

$

0.08

$

0.05

Weighted-average number of common shares outstanding:

Basic

200,992,875

200,645,518

Diluted

201,595,461

201,122,233

 

Non-GAAP Financial Measures

We use the following non-GAAP financial measures that we believe are useful to investors as key measures of our operating performance: EBITDA, Adjusted EBITDA, FFO and Adjusted FFO. These measures should not be considered in isolation or as a substitute for measures of performance in accordance with GAAP.  EBITDA, Adjusted EBITDA, FFO and Adjusted FFO, as calculated by us, may not be comparable to other companies that do not define such terms exactly as the Company.

EBITDA and FFO

EBITDA represents net income excluding: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sale of assets; and (3) depreciation and amortization. We believe EBITDA is useful to an investor in evaluating our operating performance because it helps investors evaluate and compare the results of our operations from period to period by removing the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortization) from our operating results. In addition, covenants included in our debt agreements use EBITDA as a measure of financial compliance. We also use EBITDA as one measure in determining the value of hotel acquisitions and dispositions.

The Company computes FFO in accordance with standards established by NAREIT, which defines FFO as net income determined in accordance with GAAP, excluding gains or losses from sales of properties and impairment losses, plus depreciation and amortization. The Company believes that the presentation of FFO provides useful information to investors regarding its operating performance because it is a measure of the Company's operations without regard to specified non-cash items, such as real estate depreciation and amortization and gain or loss on sale of assets.  The Company also uses FFO as one measure in assessing its operating results.

Adjustments to EBITDA and FFO

We adjust EBITDA and FFO when evaluating our performance because we believe that the exclusion of certain additional items described below provides useful supplemental information to investors regarding our ongoing operating performance and that the presentation of Adjusted EBITDA and Adjusted FFO, when combined with GAAP net income, EBITDA and FFO, is beneficial to an investor's complete understanding of our operating performance.  We adjust EBITDA and FFO for the following items:

  • Non-Cash Ground Rent: We exclude the non-cash expense incurred from the straight line recognition of rent from our ground lease obligations and the non-cash amortization of our favorable lease assets. We exclude these non-cash items because they do not reflect the underlying operating performance of our hotels. 
  • Non-Cash Amortization of Favorable and Unfavorable Contracts: We exclude the non-cash amortization of favorable and unfavorable contract assets recorded in conjunction with certain acquisitions because the non-cash amortization does not reflect the underlying operating performance of our hotels. 
  • Cumulative Effect of a Change in Accounting Principle: Infrequently, the Financial Accounting Standards Board (FASB) promulgates new accounting standards that require the consolidated statement of operations to reflect the cumulative effect of a change in accounting principle. We exclude the effect of these adjustments because they do not reflect the underlying performance of the Company for that period. 
  • Gains or Losses from Early Extinguishment of Debt: We exclude the effect of gains or losses recorded on the early extinguishment of debt because we believe theses gains or losses do not accurately reflect the underlying performance of the Company. 
  • Acquisition Costs: We exclude acquisition transaction costs expensed during the period because we believe these costs do not reflect the underlying performance of the Company or our hotels. 
  • Severance Costs: We exclude corporate severance costs and severance costs at out hotels related to lease terminations because we believe these costs do not reflect the underlying performance of the Company or our hotels. 
  • Hotel Manager Transition Costs: We exclude the transition costs associated with a change in hotel manager because we believe these costs do not reflect the underlying performance of our hotels. During the three months ended March 31, 2015, we excluded the transition costs associated with the change of hotel managers in connection with the acquisitions of the Westin Fort Lauderdale and the Shorebreak Hotel. 
  • Other Items: From time to time we incur costs or realize gains that we do not believe reflect the underlying performance of the Company or our hotels. Such items may include, but are not limited to, hotel pre-opening costs, lease preparation costs, contract termination fees, gains or losses from legal settlements, bargain purchase gains and gains from insurance proceeds.

In addition, to derive Adjusted EBITDA we exclude gains or losses on dispositions and impairment losses because we believe that including them in EBITDA does not reflect the ongoing performance of our hotels. Additionally, the gains or losses on dispositions and impairment losses represent either accelerated depreciation or excess depreciation in previous periods, and depreciation is excluded from EBITDA.

In addition, to derive Adjusted FFO we exclude any fair value adjustments to debt instruments.

The following tables are reconciliations of our GAAP net income to EBITDA and Adjusted EBITDA (in thousands):     

 

Three Months Ended March 31,

2016

2015

Net income

$

16,778

$

10,641

Interest expense

11,664

13,219

Income tax benefit

(4,081)

(2,326)

Real estate related depreciation and amortization

25,121

24,337

EBITDA

49,482

45,871

Non-cash ground rent

1,334

1,507

Non-cash amortization of favorable and unfavorable contract liabilities, net

(478)

(353)

Impairment losses

786

Hotel acquisition costs

232

Hotel manager transition costs (1)

467

Adjusted EBITDA

$

50,338

$

48,510

(1)    Classified as other hotel expenses on the consolidated statements of operations.

 

 

 

Full Year 2016 Guidance

Low End

High End

Net income

$

107,500

$

118,500

Interest expense

47,000

46,000

Income tax expense

7,000

11,000

Real estate related depreciation and amortization

100,500

99,500

EBITDA

262,000

275,000

Non-cash ground rent

4,800

4,800

Non-cash amortization of favorable and unfavorable contracts, net

(1,800)

(1,800)

Adjusted EBITDA

$

265,000

$

278,000

 

The following tables are reconciliations of our GAAP net income to FFO and Adjusted FFO (in thousands):

 

Three Months Ended March 31,

2016

2015

Net income

$

16,778

$

10,641

Real estate related depreciation and amortization

25,121

24,337

Impairment losses

786

FFO

41,899

35,764

Non-cash ground rent

1,334

1,507

Non-cash amortization of favorable and unfavorable contract liabilities, net

(478)

(353)

Hotel acquisition costs

232

Hotel manager transition and pre-opening costs (1)

467

Fair value adjustments to debt instruments

14

80

Adjusted FFO

$

42,769

$

37,697

Adjusted FFO per diluted share

$

0.21

$

0.19

(1)       Classified as other hotel expenses on the consolidated statements of operations.

 

 

 

Full Year 2016 Guidance

Low End

High End

Net income

$

107,500

$

118,500

Real estate related depreciation and amortization

100,500

99,500

FFO

208,000

218,000

Non-cash ground rent

4,800

4,800

Non-cash amortization of favorable and unfavorable contract liabilities, net

(1,800)

(1,800)

Adjusted FFO

$

211,000

$

221,000

Adjusted FFO per diluted share

$

1.04

$

1.09

 

Use and Limitations of Non-GAAP Financial Measures

Our management and Board of Directors use EBITDA, Adjusted EBITDA, FFO and Adjusted FFO to evaluate the performance of our hotels and to facilitate comparisons between us and other lodging REITs, hotel owners who are not REITs and other capital intensive companies. The use of these non-GAAP financial measures has certain limitations. These non-GAAP financial measures as presented by us, may not be comparable to non-GAAP financial measures as calculated by other real estate companies. These measures do not reflect certain expenses or expenditures that we incurred and will incur, such as depreciation, interest and capital expenditures. We compensate for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our reconciliations to the most comparable GAAP financial measures, and our consolidated statements of operations and cash flows, include interest expense, capital expenditures, and other excluded items, all of which should be considered when evaluating our performance, as well as the usefulness of our non-GAAP financial measures.

These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP. They should not be considered as alternatives to operating profit, cash flow from operations, or any other operating performance measure prescribed by GAAP. These non-GAAP financial measures reflect additional ways of viewing our operations that we believe, when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. We strongly encourage investors to review our financial information in its entirety and not to rely on a single financial measure.

 

 

 

 

DIAMONDROCK HOSPITALITY COMPANY

HOTEL OPERATING DATA

Schedule of Property Level Results

(unaudited and in thousands) 

Three Months Ended March 31,

2016

2015 (1)

%

Change

ADR

$

205.08

$

201.36

1.8

%

Occupancy

73.4

%

76.4

%

(3.0)

%

RevPAR

$

150.61

$

153.90

(2.1)

%

Revenues:

Rooms

$

149,443

$

150,549

(0.7)

%

Food and beverage

50,374

53,160

(5.2)

%

Other

13,217

12,260

7.8

%

Total revenues

$

213,034

$

215,969

(1.4)

%

Operating Expenses:

Rooms departmental expenses

$

38,714

$

39,579

(2.2)

%

Food and beverage departmental expenses

33,350

36,193

(7.9)

%

Other direct departmental

3,100

4,508

(31.2)

%

General and administrative

19,697

17,992

9.5

%

Utilities

6,812

7,401

(8.0)

%

Repairs and maintenance

9,316

9,327

(0.1)

%

Sales and marketing

15,685

15,310

2.4

%

Franchise fees

5,288

5,242

0.9

%

Base management fees

5,315

5,336

(0.4)

%

Incentive management fees

1,294

1,100

17.6

%

Property taxes

12,301

11,337

8.5

%

Ground rent

3,799

3,782

0.4

%

Other fixed expenses

2,931

3,249

(9.8)

%

Hotel manager transition and pre-opening costs

467

(100.0)

%

Total hotel operating expenses

157,602

160,823

(2.0)

%

Hotel EBITDA

$

55,432

$

55,146

0.5

%

Non-cash ground rent

1,334

1,506

(11.4)

%

Non-cash amortization of unfavorable contract liabilities

(478)

(367)

30.2

%

Hotel manager transition costs (2)

467

(100.0)

%

Hotel Adjusted EBITDA

$

56,288

$

56,752

(0.8)

%

(1)       The 2015 amounts include pre-acquisition operating results for the Shorebreak Hotel and Sheraton Suites Key West in order to reflect the period in 2015 comparable to our ownership period in 2016.  See reconciliation to reported amounts on following page.

(2)       Classified as other hotel expenses on the consolidated statements of operations.

 

Hotel EBITDA and Hotel Adjusted EBITDA

In this release, when we discuss "Hotel Adjusted EBITDA," we exclude from Hotel EBITDA the non-cash expense incurred by the hotels due to the straight lining of the rent from our ground lease obligations, the non-cash amortization of our favorable and unfavorable contracts, and certain other items as described above.  Hotel EBITDA represents hotel net income excluding: (1) interest expense; (2) income taxes; and (3) depreciation and amortization. Hotel Adjusted EBITDA margins are calculated as Hotel Adjusted EBITDA divided by total hotel revenues.

The following table is a reconciliation of our GAAP net income to Hotel EBITDA and Hotel Adjusted EBITDA (in thousands):

 

Three Months Ended March 31,

2016

2015

Net income

$

16,778

$

10,641

Interest expense

11,664

13,219

Income tax benefit

(4,081)

(2,326)

Real estate related depreciation and amortization

25,121

24,337

EBITDA

49,482

45,871

Corporate expenses

6,000

5,410

Interest and other income

(50)

(128)

Hotel acquisition costs

232

Impairment losses

786

Hotel EBITDA from prior ownership (1)

2,975

Hotel EBITDA

55,432

55,146

Non-cash ground rent

1,334

1,507

Non-cash ground rent from prior ownership (1)

(15)

Non-cash amortization of favorable and unfavorable contract liabilities, net

(478)

(353)

Hotel manager transition costs

467

Hotel Adjusted EBITDA

$

56,288

$

56,752

 

The following presents the current year revenues, Hotel Adjusted EBITDA and Hotel Adjusted EBITDA Margin together with comparable prior year results, which includes the pre-acquisition results for our 2015 acquisitions (in thousands):

 

Three Months Ended March 31,

2016

2015

Revenues

$

213,034

$

208,888

Hotel revenues from prior ownership (1)

7,081

Comparable Revenues

$

213,034

$

215,969

Hotel Adjusted EBITDA

$

56,288

$

53,792

Hotel Adjusted EBITDA from prior ownership (1)

2,960

Comparable Hotel Adjusted EBITDA

$

56,288

$

56,752

Hotel Adjusted EBITDA Margin

26.42

%

25.75

%

Comparable Hotel Adjusted EBITDA Margin

26.42

%

26.28

%

(1)       Amounts represent the pre-acquisition operating results of the Shorebreak Hotel for the period from January 1, 2015 to February 5, 2015 and the Sheraton Suites Key West for the period from January 1, 2015 to March 31, 2015.  The pre-acquisition operating results were obtained from the respective sellers of the hotels during the acquisition due diligence process. We have made no adjustments to the amounts provided to us by the respective sellers. The pre-acquisition operating results were not audited or reviewed by the Company's independent auditors.

 

 

 

Market Capitalization as of March 31, 2016

(in thousands)

 

Enterprise Value

Common equity capitalization (at March 31, 2016 closing price of $10.12/share)

$

2,043,516

Consolidated debt

1,025,526

Cash and cash equivalents

(48,903)

Total enterprise value

$

3,020,139

Share Reconciliation

Common shares outstanding

200,844

Unvested restricted stock held by management and employees

685

Share grants under deferred compensation plan held by directors

400

Combined shares outstanding

201,929

 

 

 

Debt Summary as of May 6, 2016

(dollars in thousands)

 

Property

Interest Rate

Term

Outstanding 

Principal

Maturity

Courtyard Manhattan / Fifth Avenue

6.48%

Fixed

$

48,080

June 2016

Marriott Salt Lake City Downtown

4.25%

Fixed

59,358

November 2020

Hilton Minneapolis

5.46%

Fixed

89,676

May 2021

Westin Washington D.C. City Center

3.99%

Fixed

68,142

January 2023

The Lodge at Sonoma, a Renaissance Resort & Spa

3.96%

Fixed

29,289

April 2023

Westin San Diego

3.94%

Fixed

67,184

April 2023

Courtyard Manhattan / Midtown East

4.40%

Fixed

86,000

August 2024

Renaissance Worthington

3.66%

Fixed

85,000

May 2025

JW Marriott Denver at Cherry Creek

4.33%

Fixed

65,000

July 2025

Westin Boston Waterfront Hotel

4.36%

Fixed

203,655

November 2025

Lexington Hotel New York

LIBOR + 2.25

Variable

170,368

October 2017 (1)

Total mortgage debt

$

971,752

Senior unsecured term loan

LIBOR + 1.45

Variable

50,000

(3)

May 2021

Senior unsecured credit facility

LIBOR + 1.50

Variable

20,000

May 2020 (2)

Total debt

$

1,041,752

Unamortized debt issuance costs

(8,291)

Total debt, net

$

1,033,461

Weighted-average interest rate of fixed rate debt

4.51%

Total weighted-average interest rate

4.05%

(1) May be extended for two additional one-year terms subject to the satisfaction of certain conditions and the payment of an extension fee.

(2) May be extended for an additional year upon the payment of applicable fees and the satisfaction of certain customary conditions.

(3) The Company expects to receive an $50 million of additional proceeds under the term loan upon the repayment of the Courtyard Manhattan / Fifth Avenue 

mortgage loan later in May 2016. 

 

 

 

 

 

Operating Statistics – First Quarter

ADR

Occupancy

RevPAR

Hotel Adjusted EBITDA Margin

1Q 2016

1Q 2015

B/(W)

1Q 2016

1Q 2015

B/(W)

1Q 2016

1Q 2015

B/(W)

1Q 2016

1Q 2015

B/(W)

Atlanta Alpharetta Marriott

$

184.82

$

174.77

5.8

%

68.9

%

68.3

%

0.6

%

$

127.39

$

119.30

6.8

%

35.63

%

36.14

%

-51 bps

Bethesda Marriott Suites

$

160.42

$

169.81

(5.5)

%

60.6

%

56.7

%

3.9

%

$

97.25

$

96.20

1.1

%

18.45

%

20.12

%

-167 bps

Boston Westin

$

201.23

$

204.26

(1.5)

%

71.2

%

72.8

%

(1.6)

%

$

143.34

$

148.73

(3.6)

%

18.58

%

20.37

%

-179 bps

Hilton Boston Downtown

$

206.30

$

207.20

(0.4)

%

76.8

%

68.8

%

8.0

%

$

158.36

$

142.59

11.1

%

23.44

%

14.49

%

895 bps

Hilton Burlington

$

126.35

$

130.09

(2.9)

%

68.0

%

63.0

%

5.0

%

$

85.90

$

81.99

4.8

%

22.09

%

21.19

%

90 bps

Renaissance Charleston

$

203.73

$

201.03

1.3

%

86.4

%

87.4

%

(1.0)

%

$

175.98

$

175.71

0.2

%

33.52

%

30.25

%

327 bps

Hilton Garden Inn Chelsea

$

163.98

$

161.82

1.3

%

97.0

%

87.7

%

9.3

%

$

159.10

$

141.96

12.1

%

13.17

%

9.84

%

333 bps

Chicago Marriott

$

162.21

$

166.30

(2.5)

%

40.4

%

57.1

%

(16.7)

%

$

65.52

$

95.03

(31.1)

%

(21.31)

%

(3.57)

%

-1774 bps

Chicago Gwen

$

160.13

$

172.24

(7.0)

%

55.2

%

63.4

%

(8.2)

%

$

88.37

$

109.14

(19.0)

%

(8.08)

%

(3.99)

%

-409 bps

Courtyard Denver Downtown

$

185.29

$

188.54

(1.7)

%

75.8

%

75.1

%

0.7

%

$

140.37

$

141.56

(0.8)

%

41.44

%

42.73

%

-129 bps

Courtyard Fifth Avenue

$

204.97

$

212.12

(3.4)

%

78.1

%

83.8

%

(5.7)

%

$

160.08

$

177.79

(10.0)

%

(4.38)

%

0.37

%

-475 bps

Courtyard Midtown East

$

204.49

$

209.10

(2.2)

%

85.4

%

85.1

%

0.3

%

$

174.67

$

178.01

(1.9)

%

10.04

%

11.64

%

-160 bps

Fort Lauderdale Westin

$

252.29

$

228.38

10.5

%

97.6

%

96.8

%

0.8

%

$

246.24

$

221.18

11.3

%

47.66

%

41.45

%

621 bps

Frenchman's Reef

$

337.11

$

332.10

1.5

%

87.8

%

89.6

%

(1.8)

%

$

296.06

$

297.45

(0.5)

%

36.66

%

33.68

%

298 bps

JW Marriott Denver Cherry Creek

$

256.27

$

260.79

(1.7)

%

77.0

%

73.7

%

3.3

%

$

197.26

$

192.29

2.6

%

31.13

%

27.34

%

379 bps

Inn at Key West

$

260.36

$

283.02

(8.0)

%

96.5

%

94.3

%

2.2

%

$

251.27

$

266.88

(5.8)

%

53.46

%

62.73

%

-927 bps

Sheraton Suites Key West (1)

$

314.54

$

309.72

1.6

%

95.5

%

98.8

%

(3.3)

%

$

300.32

$

305.85

(1.8)

%

51.95

%

50.47

%

148 bps

Lexington Hotel New York

$

184.59

$

179.33

2.9

%

81.0

%

89.0

%

(8.0)

%

$

149.48

$

159.68

(6.4)

%

(8.24)

%

4.76

%

-1300 bps

Hilton Minneapolis

$

123.49

$

122.27

1.0

%

61.3

%

66.5

%

(5.2)

%

$

75.67

$

81.33

(7.0)

%

2.04

%

6.93

%

-489 bps

Orlando Airport Marriott

$

142.09

$

140.54

1.1

%

90.9

%

89.8

%

1.1

%

$

129.22

$

126.23

2.4

%

41.96

%

40.34

%

162 bps

Hotel Rex

$

250.81

$

227.49

10.3

%

79.2

%

78.1

%

1.1

%

$

198.59

$

177.74

11.7

%

35.15

%

29.64

%

551 bps

Salt Lake City Marriott

$

165.41

$

159.39

3.8

%

65.6

%

73.3

%

(7.7)

%

$

108.49

$

116.76

(7.1)

%

34.23

%

34.62

%

-39 bps

Shorebreak (1)

$

215.30

$

205.58

4.7

%

75.6

%

79.2

%

(3.6)

%

$

162.76

$

162.72

%

25.34

%

21.27

%

407 bps

The Lodge at Sonoma

$

225.28

$

214.81

4.9

%

73.5

%

74.7

%

(1.2)

%

$

165.66

$

160.45

3.2

%

19.34

%

14.63

%

471 bps

Hilton Garden Inn Times Square Central

$

182.29

$

180.70

0.9

%

94.0

%

94.1

%

(0.1)

%

$

171.27

$

170.12

0.7

%

13.84

%

34.84

%

-2100 bps

Vail Marriott

$

412.52

$

391.28

5.4

%

89.2

%

91.5

%

(2.3)

%

$

368.09

$

357.99

2.8

%

53.96

%

51.19

%

277 bps

Westin San Diego

$

187.19

$

187.69

(0.3)

%

83.7

%

81.2

%

2.5

%

$

156.71

$

152.44

2.8

%

39.61

%

35.42

%

419 bps

Westin Washington D.C. City Center

$

207.40

$

206.96

0.2

%

80.3

%

72.7

%

7.6

%

$

166.50

$

150.50

10.6

%

33.20

%

26.49

%

671 bps

Renaissance Worthington

$

182.58

$

183.43

(0.5)

%

67.1

%

74.7

%

(7.6)

%

$

122.45

$

136.96

(10.6)

%

34.25

%

38.46

%

-421 bps

Total (1)

$

205.08

$

201.36

1.8

%

73.4

%

76.4

%

(3.0)

%

$

150.61

$

153.90

(2.1)

%

26.42

%

26.28

%

14 bps

(1)  The 2015 amounts include pre-acquisition operating results for the Shorebreak Hotel and Sheraton Suites Key West in order to reflect the period in 2015 comparable to our ownership period in 2016.

 

 

 

 

Hotel Adjusted EBITDA Reconciliation

First Quarter 2016

Plus:

Plus:

Plus:

Equals:

Total Revenues

Net Income / (Loss)

Depreciation

Interest Expense

Adjustments (1)

Hotel Adjusted

EBITDA

Atlanta Alpharetta Marriott

$

5,217

$

1,501

$

358

$

$

$

1,859

Bethesda Marriott Suites

$

3,311

$

(1,279)

$

357

$

$

1,533

$

611

Boston Westin

$

18,324

$

(1,030)

$

2,203

$

2,292

$

(60)

$

3,405

Hilton Boston Downtown

$

6,588

$

308

$

1,228

$

$

8

$

1,544

Hilton Burlington

$

2,798

$

151

$

467

$

$

$

618

Renaissance Charleston

$

3,100

$

820

$

251

$

$

(32)

$

1,039

Hilton Garden Inn Chelsea

$

2,513

$

(30)

$

361

$

$

$

331

Chicago Marriott

$

12,376

$

(5,598)

$

2,941

$

417

$

(397)

$

(2,637)

Chicago Gwen

$

3,157

$

(913)

$

658

$

$

$

(255)

Courtyard Denver Downtown

$

2,454

$

731

$

286

$

$

$

1,017

Courtyard Fifth Avenue

$

2,833

$

(1,436)

$

440

$

820

$

52

$

(124)

Courtyard Midtown East

$

5,249

$

(1,154)

$

673

$

1,008

$

$

527

Fort Lauderdale Westin

$

15,743

$

6,335

$

1,168

$

$

$

7,503

Frenchman's Reef

$

21,759

$

6,364

$

1,613

$

$

$

7,977

JW Marriott Denver Cherry Creek

$

5,908

$

595

$

525

$

719

$

$

1,839

Inn at Key West

$

2,817

$

1,327

$

179

$

$

$

1,506

Sheraton Suites Key West

$

5,965

$

2,585

$

514

$

$

$

3,099

Lexington Hotel New York

$

10,413

$

(5,571)

$

3,367

$

1,339

$

7

$

(858)

Minneapolis Hilton

$

9,418

$

(2,296)

$

1,462

$

1,268

$

(242)

$

192

Orlando Airport Marriott

$

9,073

$

3,234

$

573

$

$

$

3,807

Hotel Rex

$

1,960

$

547

$

142

$

$

$

689

Salt Lake City Marriott

$

7,213

$

1,262

$

544

$

663

$

$

2,469

Shorebreak

$

3,315

$

480

$

375

$

$

(15)

$

840

The Lodge at Sonoma

$

5,475

$

392

$

367

$

300

$

$

1,059

Hilton Garden Inn Times Square Central

$

4,501

$

(154)

$

777

$

$

$

623

Vail Marriott

$

15,415

$

7,839

$

479

$

$

$

8,318

Westin San Diego

$

9,120

$

1,907

$

1,026

$

679

$

$

3,612

Westin Washington D.C. City Center

$

7,687

$

604

$

1,219

$

729

$

$

2,552

Renaissance Worthington

$

9,332

$

1,818

$

568

$

808

$

2

$

3,196

Total

$

213,034

$

19,339

$

25,121

$

11,042

$

856

$

56,288

 (1)   The adjustments include non-cash expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations, the non-cash amortization of our favorable lease assets, the non-cash amortization of our unfavorable contract liabilities.

 

 

 

 

Hotel Adjusted EBITDA Reconciliation

First Quarter 2015

Plus:

Plus:

Plus:

Equals:

Total Revenues

Net Income / (Loss)

Depreciation

Interest Expense

Adjustments (1)

Hotel Adjusted 

EBITDA

Atlanta Alpharetta Marriott

$

4,864

$

1,365

$

393

$

$

$

1,758

Bethesda Marriott Suites

$

3,325

$

(1,261)

$

389

$

$

1,541

$

669

Boston Westin

$

20,093

$

1,846

$

2,245

$

$

2

$

4,093

Hilton Boston Downtown

$

5,260

$

(365)

$

1,085

$

$

42

$

762

Hilton Burlington

$

2,629

$

82

$

452

$

$

23

$

557

Renaissance Charleston

$

3,150

$

593

$

392

$

$

(32)

$

953

Hilton Garden Inn Chelsea

$

2,256

$

(140)

$

362

$

$

$

222

Chicago Marriott

$

16,099

$

(4,877)

$

1,563

$

3,136

$

(397)

$

(575)

Chicago Gwen

$

4,058

$

(1,031)

$

869

$

$

$

(162)

Courtyard Denver Downtown

$

2,427

$

754

$

283

$

$

$

1,037

Courtyard Fifth Avenue

$

2,994

$

(1,311)

$

448

$

822

$

52

$

11

Courtyard Midtown East

$

5,302

$

(1,066)

$

685

$

998

$

$

617

Fort Lauderdale Westin

$

15,154

$

5,004

$

1,127

$

$

151

$

6,282

Frenchman's Reef

$

21,070

$

4,736

$

1,570

$

790

$

$

7,096

JW Marriott Denver Cherry Creek

$

5,637

$

454

$

529

$

558

$

$

1,541

Inn at Key West

$

2,860

$

1,621

$

173

$

$

$

1,794

Sheraton Suites Key West (2)

$

5,823

$

2,426

$

513

$

$

$

2,939

Lexington Hotel New York

$

11,323

$

(4,190)

$

3,329

$

1,370

$

30

$

539

Minneapolis Hilton

$

9,769

$

(2,753)

$

2,347

$

1,285

$

(202)

$

677

Orlando Airport Marriott

$

8,683

$

2,146

$

561

$

796

$

$

3,503

Hotel Rex

$

1,714

$

366

$

142

$

$

$

508

Salt Lake City Marriott

$

7,435

$

1,165

$

737

$

672

$

$

2,574

Shorebreak (2)

$

3,254

$

158

$

233

$

$

301

$

692

The Lodge at Sonoma

$

5,453

$

119

$

376

$

303

$

$

798

Hilton Garden Inn Times Square Central

$

4,432

$

767

$

777

$

$

$

1,544

Vail Marriott

$

14,581

$

6,979

$

485

$

$

$

7,464

Westin San Diego

$

9,049

$

1,460

$

1,015

$

684

$

46

$

3,205

Westin Washington D.C. City Center

$

6,851

$

(162)

$

1,190

$

740

$

47

$

1,815

Renaissance Worthington

$

10,424

$

2,706

$

580

$

721

$

2

$

4,009

Total (2)

$

215,969

$

17,591

$

24,850

$

12,875

$

1,606

$

56,752

(1)     The adjustments include non-cash expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations, the non-cash amortization of our favorable lease assets, the non-cash amortization of our unfavorable contract liabilities and hotel manager transition costs.

(2)       Amounts include pre-acquisition operating results for the Shorebreak Hotel and Sheraton Suites Key West in order to reflect the period in 2015 comparable to our ownership period in 2016.

 

 



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