DiamondRock Hospitality Results

DiamondRock Hospitality Company Reports Third Quarter 2016 Results

Adjusted EBITDA was $65.6 million, a decrease of $3.7 million or 5.3% from 2015. Adjusted EBITDA for the comparable period of 2015 included $6.8 million of Adjusted EBITDA from the three non-core hotels that were sold in 2016.

DiamondRock

DiamondRock Hospitality Company (NYSE:  DRH), a lodging-focused real estate investment trust that owns a portfolio of 26 premium hotels in the United States, today announced results of operations for the quarter ended September 30, 2016.

Third Quarter 2016 Highlights

  • Net Income: Net income was $29.9 million and earnings per diluted share was $0.15. 
  • Comparable RevPARRevPAR was $187.91, a 0.8% increase from the comparable period of 2015. 
  • Comparable Hotel Adjusted EBITDA Margin: Hotel Adjusted EBITDA margin was 32.12%, an increase of 23 basis points from the comparable period of 2015. 
  • Adjusted EBITDA: Adjusted EBITDA was $65.6 million, a decrease of $3.7 million or 5.3% from 2015.  Adjusted EBITDA for the comparable period of 2015 included $6.8 million of Adjusted EBITDA from the three non-core hotels that were sold in 2016. 
  • Adjusted FFO: Adjusted FFO was $52.1 million and Adjusted FFO per diluted share was $0.26. 
  • Hotel Disposition: As previously announced, the Company sold the 169-room Hilton Garden Inn Chelsea on July 7, 2016 for $65.0 million. 
  • Share Repurchases: The Company repurchased 92,600 shares at an average price of $8.90 per share during the third quarter. Subsequent to September 30, 2016, the Company repurchased an additional 634,537 shares at an average price of $8.92 per share. 
  • Dividends: The Company declared a dividend of $0.125 per share during the third quarter, which was paid on October 12, 2016.

Mark W. Brugger, President and Chief Executive Officer of DiamondRock Hospitality Company, stated, "Our portfolio gained 2.1 points of market share in the quarter despite moderating transient demand. Our tight cost controls resulted in impressive third quarter profit margins. Year-to-date, the Company has kept total expenses flat. Additionally, the Company has successfully executed on its strategic priority of increasing liquidity and expects to end the year with over $200 million in corporate cash, no outstanding borrowings on our corporate credit facility, and more than half the portfolio unencumbered by debt. DiamondRock continues to pay a competitive, well-covered dividend and remains well positioned to deploy capital opportunistically, including through share repurchases, which began at the end of the quarter."

Operating Results       

Please see "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"and a reconciliation of these measures to net income. Comparable operating results include our 2015 acquisitions for all periods presented and exclude our 2016 dispositions for all periods presented. See "Reconciliation of Comparable Operating Results" attached to this press release for a reconciliation to historical amounts.

For the quarter ended September 30, 2016, the Company reported the following:

 

Third Quarter

2016

2015

Change

Comparable Operating Results (1)

ADR

$223.44

$223.34

0.0

%

Occupancy

84.1

%

83.5

%

0.6 percentage points

RevPAR

$187.91

$186.47

0.8

%

Revenues

$220.1 million

$214.1 million

2.8

%

Hotel Adjusted EBITDA Margin

32.12

%

31.89

%

23 basis points

Actual Operating Results

Revenues

$220.2 million

$238.5 million

-7.7

%

Net income

$29.9 million

$24.5 million

$5.4 million

Earnings per diluted share

$0.15

$0.12

$0.03

Adjusted EBITDA

$65.6 million

$69.3 million

-$3.7 million

Adjusted FFO

$52.1 million

$52.3 million

-$0.2 million

Adjusted FFO per diluted share

$0.26

$0.26

$0.00

 

(1)

The amounts for all periods presented exclude the three hotels sold during 2016: Orlando Airport Marriott, Hilton Minneapolis and Hilton Garden Inn Chelsea.

For the nine months ended September 30, 2016, the Company reported the following:

 

Year to Date

2016

2015

Change

Comparable Operating Results (1)(2)

ADR

$223.98

$223.05

0.4

%

Occupancy

80.9

%

81.4

%

-0.5 percentage points

RevPAR

$181.30

$181.66

-0.2

%

Revenues

$644.6 million

$639.1 million

0.9

%

Hotel Adjusted EBITDA Margin

31.96

%

31.72

%

24 basis points

Actual Operating Results

Revenues

$689.9 million

$697.2 million

-1.1

%

Net income

$90.9 million

$59.9 million

$31.0 million

Earnings per diluted share

$0.45

$0.30

$0.15

Adjusted EBITDA

$200.1 million

$198.9 million

$1.2 million

Adjusted FFO

$158.0 million

$151.5 million

$6.5 million

Adjusted FFO per diluted share

$0.78

$0.75

$0.03

 

(1)

The amounts for all periods presented exclude the three hotels sold during 2016: Orlando Airport Marriott, Hilton Minneapolis and Hilton Garden Inn Chelsea.

(2) 

The 2015 amounts include pre-acquisition operating results for the Shorebreak Hotel from January 1, 2015 to February 5, 2015 and Sheraton Suites Key West from January 1, 2015 to June 29, 2015 in order to reflect the period in 2015 comparable to our ownership period in 2016. 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.

Share Repurchase Program

In September 2016, the Company began repurchasing shares of its common stock pursuant to its previously announced $150 millionshare repurchase program, and it has continued such repurchases since the end of the third quarter. Year-to-date, the Company has repurchased 727,137 shares of its common stock at an average price of $8.92 per share for a total purchase price of $6.5 million.  The Company has $143.5 million of remaining authorized capacity under its share repurchase program. The shares are purchased in the open market or through private transactions from time-to-time, depending upon market conditions, pursuant to a trading plan under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.

Capital Expenditures

The Company spent approximately $78.7 million on capital improvements during the nine months ended September 30, 2016.  The investments relate primarily to three major projects: the second phase of the Chicago Marriott Downtown renovation; the first phase of the renovation at The Gwen; and the Worthington Renaissance guest room renovation.  The Company currently expects to spend approximately $130 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 Marriott's Luxury Collection brand on September 1, 2015. The renovation work associated with the brand conversion will be completed in two phases. The first phase, consisting of the lobby, rooftop bar and other public spaces, was 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 2016. This phase included the upgrade renovation of approximately 460 guest rooms as well as construction of 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 through early 2017. 
  • Charleston Renaissance: The Company expects to renovate the guest rooms at the hotel during the seasonally slow period from the end of the year through early 2017. 
  • Worthington Renaissance: The Company has commenced the guest room renovation at the hotel and expects to complete the project at the end of 2016.

Balance Sheet

As of September 30, 2016, the Company had $236.0 million of unrestricted cash on hand and approximately $0.9 billion of total debt, which consisted of property-specific mortgage debt and $100.0 million of borrowings on its term loan. The Company expects to end the year with over $200 million in unrestricted cash, approximately $0.9 billion of total debt and no outstanding borrowings on its senior unsecured credit facility.

Dividends

The Company's Board of Directors declared a quarterly dividend of $0.125 per share to stockholders of record as of September 30, 2016.  The dividend was paid on October 12, 2016.

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.  Comparable RevPAR assumes that all of the Company's 26 hotels were owned since January 1, 2015.

Given recent moderating trends in business transient demand, the Company is reducing its RevPAR outlook.  However, because of better than expected cost controls from asset management initiatives, the Company is maintaining prior full year 2016 Adjusted EBITDA and Adjusted FFO guidance. In addition, the Company now expects full year 2016 corporate expenses to range from $23 million to $24 million.

The Company now expects the full year 2016 results to be as follows:

 

Previous Guidance

Current Guidance

Metric

Low End

High End

Low End

High End

Comparable RevPAR Growth

 

0 percent

1 percent

-0.75 percent

0 percent

Adjusted EBITDA

 

$250 million

$263 million

$250 million

$263 million

Adjusted FFO

 

$199 million

$209 million

$199 million

$209 million

Adjusted FFO per share

(based on 201.5 million shares)

$0.99 per share

$1.04 per share

$0.99 per share

$1.04 per share

Selected Quarterly Comparable Operating Information

The following table is presented to provide investors with selected quarterly comparable operating information for 2015 and 2016 year-to-date.  The operating information includes our 2015 acquisitions for all periods presented and excludes our 2016 dispositions for all periods presented.

 

Quarter 1, 2015

Quarter 2, 2015

Quarter 3, 2015

Quarter 4, 2015

Full Year 2015

ADR

$

211.89

$

232.75

$

223.34

$

227.67

$

224.17

Occupancy

76.5

%

84.3

%

83.5

%

77.1

%

80.3

%

RevPAR

$

162.02

$

196.15

$

186.47

$

175.45

$

180.09

Revenues (in thousands)

$

195,263

$

229,647

$

214,144

$

208,741

$

847,795

Hotel Adjusted EBITDA (in thousands)

$

52,351

$

82,072

$

68,300

$

65,624

$

268,347

        % of full Year

19.5

%

30.6

%

25.5

%

24.4

%

100.0

%

Hotel Adjusted EBITDA Margin

26.81

%

35.74

%

31.89

%

31.44

%

31.65

%

Available Rooms

844,784

856,751

867,168

866,732

3,435,435

 

Quarter 1, 2016

Quarter 2, 2016

Quarter 3, 2016

YTD 2016

ADR

$

216.03

$

231.31

$

223.44

$

223.98

Occupancy

73.2

%

85.5

%

84.1

%

80.9

%

RevPAR

$

158.22

$

197.69

$

187.91

$

181.30

Revenues (in thousands)

$

192,034

$

232,500

$

220,087

$

644,621

Hotel Adjusted EBITDA (in thousands)

$

51,968

$

83,362

$

70,686

$

206,016

Hotel Adjusted EBITDA Margin

27.06

%

35.85

%

32.12

%

31.96

%

Available Rooms

857,311

858,039

867,468

2,582,818

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 26 premium quality hotels with over 9,400 rooms. The Company has strategically positioned its hotels to be operated both under leading global brand families such as Hilton and Marriott as well as unique boutique hotels in the lifestyle segment. 

 

 

DIAMONDROCK HOSPITALITY COMPANY  

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)

September 30, 2016

December 31, 2015

ASSETS

Property and equipment, net

$

2,642,034

$

2,882,176

Restricted cash

47,661

59,339

Due from hotel managers

87,019

86,698

Favorable lease assets, net

18,076

23,955

Prepaid and other assets (1)

47,693

46,758

Cash and cash equivalents

235,965

213,584

Total assets

$

3,078,448

$

3,312,510

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:

Mortgage debt, net of unamortized debt issuance costs

$

823,626

$

1,169,749

Term loan, net of unamortized debt issuance costs

99,336

Senior unsecured credit facility

Total debt

922,962

1,169,749

Deferred income related to key money, net

20,776

23,568

Unfavorable contract liabilities, net

73,123

74,657

Deferred ground rent

79,027

70,153

Due to hotel managers

55,350

65,350

Dividends declared and unpaid

23,586

25,599

Accounts payable and accrued expenses (2)

59,247

58,829

Total other liabilities

311,109

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; 200,796,110 and 200,741,777 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively

2,008

2,007

Additional paid-in capital

2,059,638

2,056,878

Accumulated deficit

(217,269)

(234,280)

Total stockholders' equity

1,844,377

1,824,605

Total liabilities and stockholders' equity

$

3,078,448

$

3,312,510

 

(1) 

Includes $34.0 million of deferred tax assets, $5.0 million and $7.6 million of prepaid expenses, and $8.7 million and $5.2 million of other assets as of September 30, 2016 and December 31, 2015, respectively.

(2) 

Includes $21.2 million of deferred tax liabilities, $12.4 million and $13.3 million of accrued property taxes, $6.7 million and $11.6 million of accrued capital expenditures, and $18.9 million and $12.7 million of other accrued liabilities as of September 30, 2016 and December 31, 2015, respectively.

 

 

DIAMONDROCK HOSPITALITY COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2016

2015

2016

2015

Revenues:

Rooms

$

163,158

$

178,529

$

498,714

$

504,729

Food and beverage

44,069

47,256

151,850

155,662

Other

13,012

12,717

39,373

36,801

Total revenues

220,239

238,502

689,937

697,192

Operating Expenses:

Rooms

39,766

42,415

121,737

122,872

Food and beverage

29,103

32,143

97,718

103,044

Management fees

7,655

7,562

23,036

22,665

Other hotel expenses

74,123

83,358

232,576

237,410

Depreciation and amortization

23,605

25,107

73,731

75,018

Hotel acquisition costs

453

945

Corporate expenses

4,684

6,048

17,420

17,790

Impairment losses

10,461

Total operating expenses, net

178,936

197,086

566,218

590,205

Operating profit

41,303

41,416

123,719

106,987

Interest and other income, net

(333)

(126)

(451)

(480)

Interest expense

9,504

12,907

32,242

38,963

Gain on sales of hotel properties

(2,198)

(10,319)

Total other expenses, net

6,973

12,781

21,472

38,483

Income before income taxes

34,330

28,635

102,247

68,504

Income tax expense

(4,393)

(4,171)

(11,357)

(8,576)

Net income

$

29,937

$

24,464

$

90,890

$

59,928

Earnings per share:

Basic earnings per share

$

0.15

$

0.12

$

0.45

$

0.30

Diluted earnings per share

$

0.15

$

0.12

$

0.45

$

0.30

Weighted-average number of common shares outstanding:

Basic

201,297,846

200,852,072

201,188,563

200,776,641

Diluted

201,739,604

201,167,659

201,572,206

201,124,091

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, Hotel EBITDA, Hotel 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, Hotel EBITDA, Hotel 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.

Use and Limitations of Non-GAAP Financial Measures

Our management and Board of Directors use EBITDA, Adjusted EBITDA, Hotel EBITDA, Hotel 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.

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.

Hotel EBITDA

Hotel EBITDA represents net income excluding:  (1) interest expense, (2)  income taxes, (3) depreciation and amortization, (4) corporate general and administrative expenses (shown as corporate expenses on the consolidated statements of operations), and (5) hotel acquisition costs. We believe that Hotel EBITDA provides our investors a useful financial measure to evaluate our hotel operating performance, excluding the impact of our capital structure (primarily interest), our asset base (primarily depreciation and amortization), and our corporate-level expenses (corporate expenses and hotel acquisition costs).  With respect to Hotel EBITDA, we believe that excluding the effect of corporate-level expenses provides a more complete understanding of the operating results over which individual hotels and third-party management companies have direct control.  We believe property-level results provide investors with supplemental information on the ongoing operational performance of our hotels and effectiveness of the third-party management companies operating our business on a property-level basis.

Adjustments to EBITDA, FFO and Hotel EBITDA

We adjust EBITDA, FFO and Hotel EBITDA 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, Adjusted FFO and Hotel Adjusted EBIDTA when combined with GAAP net income, EBITDA, FFO and Hotel EBITDA, is beneficial to an investor's complete understanding of our consolidated and property-level operating performance.  Hotel Adjusted EBITDA margins are calculated as Hotel Adjusted EBITDA divided by total hotel revenues.

We adjust EBITDA, FFO and Hotel EBITDA 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 actual rent amounts due to the respective lessors in the current period and they are of lesser significance in evaluating our actual performance for that period.

      

  • Non-Cash Amortization of Favorable and Unfavorable Contracts: We exclude the non-cash amortization of favorable and unfavorable contracts recorded in conjunction with certain acquisitions because the non-cash amortization is based on historical cost accounting and is of lesser significance in evaluating our actual performance for that period.

      

  • 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, which include the accounting impact from prior periods, because they do not reflect the Company's actual underlying performance for the current 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 these gains or losses result from transaction activity related to the Company's capital structure that we believe are not indicative of the ongoing operating performance of the Company or our hotels.

      

  • Hotel Acquisition Costs:  We exclude hotel acquisition costs expensed during the period because we believe these transaction costs are not reflective of the ongoing performance of the Company or our hotels.

      

  • Severance Costs:  We exclude corporate severance costs incurred with the termination of corporate-level employees and severance costs incurred at our hotels related to lease terminations because we believe these costs do not reflect the ongoing 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 ongoing performance of the Company or our hotels. During the nine months ended September 30, 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 consider outside the ordinary course of business and that we do not believe reflect the ongoing performance of the Company or our hotels.  Such items may include, but are not limited to the following: pre-opening costs incurred with newly developed hotels; lease preparation costs incurred to prepare vacant space for marketing; management or franchise contract termination fees; gains or losses from legal settlements; bargain purchase gains incurred upon acquisition of a hotel; 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 are based on historical cost accounting and 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.  We exclude these non-cash amounts because they do not reflect the underlying performance of the Company.

Reconciliations of Non-GAAP Measures

EBITDA and Adjusted EBITDA

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

 

Three Months Ended 

September 30,

Nine Months Ended 

September 30,

2016

2015

2016

2015

Net income

$

29,937

$

24,464

$

90,890

$

59,928

Interest expense

9,504

12,907

32,242

38,963

Income tax expense

4,393

4,171

11,357

8,576

Real estate related depreciation and amortization

23,605

25,107

73,731

75,018

EBITDA

67,439

66,649

208,220

182,485

Non-cash ground rent

1,568

1,467

4,230

4,454

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

(478)

(407)

(1,434)

(1,134)

Impairment losses

10,461

Gain on sale of hotel properties

(2,198)

(10,319)

Severance costs (1)

(682)

428

(563)

428

Hotel acquisition costs

453

945

Hotel manager transition costs (2)

754

1,287

Adjusted EBITDA

$

65,649

$

69,344

$

200,134

$

198,926

 

(1)       

Classified as corporate expenses on the consolidated statements of operations.  During the three months ended September 30, 2016, we reversed $0.7 million of previously recognized compensation expense for forfeited equity awards related to the resignation of our former Executive Vice President and Chief Operating Officer.

(2)       

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

 

Full Year 2016 Guidance

Low End

High End

Net income

$

107,450

$

118,450

Interest expense

43,000

42,500

Income tax expense

9,432

12,932

Real estate related depreciation and amortization

98,000

97,000

EBITDA

257,882

270,882

Non-cash ground rent

4,800

4,800

Non-cash amortization of favorable and unfavorable contracts, net

(1,800)

(1,800)

Gain on sale of hotel properties

(10,319)

(10,319)

Severance costs

(563)

(563)

Adjusted EBITDA

$

250,000

$

263,000

Hotel EBITDA and Hotel Adjusted EBITDA

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

 

Three Months Ended 

September 30,

Nine Months Ended 

September 30,

2016

2015

2016

2015

Net income

$

29,937

$

24,464

$

90,890

$

59,928

Interest expense

9,504

12,907

32,242

38,963

Income tax expense

4,393

4,171

11,357

8,576

Real estate related depreciation and amortization

23,605

25,107

73,731

75,018

EBITDA

67,439

66,649

208,220

182,485

Corporate expenses

4,684

6,048

17,420

17,790

Interest and other income, net

(333)

(126)

(451)

(480)

Hotel acquisition costs

453

945

Gain on sale of hotel properties

(2,198)

(10,319)

Impairment losses

10,461

Hotel EBITDA

69,592

73,024

214,870

211,201

Non-cash ground rent

1,568

1,467

4,230

4,454

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

(478)

(407)

(1,434)

(1,134)

Hotel manager transition costs

754

1,287

Hotel level severance costs

428

428

Hotel Adjusted EBITDA

$

70,682

$

75,266

$

217,666

$

216,236

FFO and Adjusted FFO

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

 

Three Months Ended 

September 30,

Nine Months Ended 

September 30,

2016

2015

2016

2015

Net income

$

29,937

$

24,464

$

90,890

$

59,928

Real estate related depreciation and amortization

23,605

25,107

73,731

75,018

Gain on sales of hotel properties, net of income tax

(1,877)

(8,887)

Impairment losses

10,461

FFO

51,665

49,571

155,734

145,407

Non-cash ground rent

1,568

1,467

4,230

4,454

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

(478)

(407)

(1,434)

(1,134)

Hotel acquisition costs

453

945

Hotel manager transition costs (1)

754

1,287

Severance costs (2)

(682)

428

(563)

428

Fair value adjustments to debt instruments

49

19

115

Adjusted FFO

$

52,073

$

52,315

$

157,986

$

151,502

Adjusted FFO per diluted share

$

0.26

$

0.26

$

0.78

$

0.75

 

(1)       

Classified as corporate expenses on the consolidated statements of operations.

(2)       

Classified as other hotel expenses on the consolidated statements of operations.  During the three months ended September 30, 2016, we reversed $0.7 million of previously recognized compensation expense for forfeited equity award related to the resignation of our former Executive Vice President and Chief Operating Officer.

 

Full Year 2016 Guidance

Low End

High End

Net income

$

107,450

$

118,450

Real estate related depreciation and amortization

98,000

97,000

Gain on sales of hotel properties, net of income tax

(8,887)

(8,887)

FFO

196,563

206,563

Non-cash ground rent

4,800

4,800

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

(1,800)

(1,800)

Severance costs

(563)

(563)

Adjusted FFO

$

199,000

$

209,000

Adjusted FFO per diluted share

$

0.99

$

1.04

Reconciliation of Comparable Operating Results

The following presents the revenues, Hotel Adjusted EBITDA and Hotel Adjusted EBITDA Margin together with comparable prior year results, which excludes the results for our 2016 dispositions and includes the pre-acquisition results for our 2015 acquisitions (in thousands):

 

Three Months Ended 

September 30,

Nine Months Ended 

September 30,

2016

2015

2016

2015

Revenues

$

220,239

$

238,502

$

689,937

$

697,192

Hotel revenues from prior ownership (1)

11,537

Hotel revenues from sold hotels (2)

(152)

(24,358)

(45,316)

(69,675)

Comparable Revenues

$

220,087

$

214,144

$

644,621

$

639,054

Hotel Adjusted EBITDA

$

70,682

$

75,266

$

217,666

$

216,236

Hotel Adjusted EBITDA from prior ownership (1)

4,779

Hotel Adjusted EBITDA from sold hotels (2)

4

(6,966)

(11,650)

(18,292)

Comparable Hotel Adjusted EBITDA

$

70,686

$

68,300

$

206,016

$

202,723

Hotel Adjusted EBITDA Margin

32.09

%

31.56

%

31.55

%

31.02

%

Comparable Hotel Adjusted EBITDA Margin

32.12

%

31.89

%

31.96

%

31.72

%

 

(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 June 29, 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.

(2)       

Amounts represent the operating results of the Orlando Airport Marriott, Minneapolis Hilton and Hilton Garden Inn Chelsea.

Comparable Hotel Operating Expenses

The following tables set forth hotel operating expenses for the three and nine months ended September 30, 2016 and 2015 for each of the hotels that we owned as of September 30, 2016.  Our GAAP hotel operating expenses for the three and nine months ended September 30, 2016 consisted of the line items set forth below (dollars in thousands) under the column titled "As Reported."  The amounts reported in this column include amounts that are not comparable period-over-period. In order to reflect the period in 2015 comparable to our ownership period in 2016, the amounts in the column titled "Adjustments for Acquisitions and Dispositions" 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 June 29, 2015 and exclude the operating results of the Orlando Airport Marriott, Minneapolis Hilton and Hilton Garden Inn Chelsea for the time periods presented.  We provide this important supplemental information to our investors because this information provides a useful means for investors to measure our operating performance on a comparative basis.  See the column titled "Comparable."

 These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP in this release.  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 at our hotels 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. In particular, we note the pre-acquisition operating results set forth in the column titled "Adjustments for Acquisitions" 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 our independent auditors.

 

View Table Fullscreen

As Reported

Adjustments for 

Acquisitions/Dispositions

Comparable

Three Months Ended September 30,

Three Months Ended September 30,

2016

2015

Change

2016

2015

2016

2015

Change

Rooms departmental expenses

$

39,766

$

42,415

(6.2)

%

$

(54)

$

(3,950)

$

39,712

$

38,465

3.2

%

Food and beverage departmental expenses

29,103

32,143

(9.5)

%

(12)

(4,101)

29,091

28,042

3.7

%

Other direct departmental

3,022

4,374

(30.9)

%

(221)

3,022

4,153

(27.2)

%

General and administrative

17,742

18,799

(5.6)

%

(28)

(2,016)

17,714

16,783

5.5

%

Utilities

6,740

7,178

(6.1)

%

(6)

(695)

6,734

6,483

3.9

%

Repairs and maintenance

8,578

9,406

(8.8)

%

(5)

(899)

8,573

8,507

0.8

%

Sales and marketing

14,765

16,340

(9.6)

%

(7)

(2,092)

14,758

14,248

3.6

%

Franchise fees

5,483

5,939

(7.7)

%

(14)

(344)

5,469

5,595

(2.3)

%

Base management fees

5,393

5,909

(8.7)

%

(4)

(665)

5,389

5,244

2.8

%

Incentive management fees

2,262

1,653

36.8

%

2,262

1,653

36.8

%

Property taxes

12,302

13,463

(8.6)

%

(26)

(557)

12,276

12,906

(4.9)

%

Ground rent

2,596

3,797

(31.6)

%

(1,475)

2,596

2,322

11.8

%

Hotel manager transition costs

754

(100.0)

%

754

(100.0)

%

Other fixed expenses

2,895

3,308

(12.5)

%

(176)

2,895

3,132

(7.6)

%

Total hotel operating expenses

$

150,647

$

165,478

(9.0)

%

$

(156)

$

(17,191)

$

150,491

$

148,287

1.5

%

 

View Table Fullscreen

As Reported

Adjustments for 

Acquisitions/Dispositions

Comparable

Nine Months Ended September 30,

Nine Months Ended September 30,

2016

2015

Change

2016

2015

2016

2015

Change

Rooms departmental expenses

$

121,737

$

122,872

(0.9)

%

$

(7,455)

$

(9,636)

$

114,282

$

113,236

0.9

%

Food and beverage departmental expenses

97,718

103,044

(5.2)

%

(8,251)

(11,330)

89,467

91,714

(2.5)

%

Other direct departmental

9,177

12,946

(29.1)

%

(116)

(449)

9,061

12,497

(27.5)

%

General and administrative

58,036

54,886

5.7

%

(4,199)

(5,133)

53,837

49,753

8.2

%

Utilities

20,035

20,889

(4.1)

%

(1,276)

(1,606)

18,759

19,283

(2.7)

%

Repairs and maintenance

27,069

27,397

(1.2)

%

(1,724)

(2,196)

25,345

25,201

0.6

%

Sales and marketing

47,381

48,323

(1.9)

%

(3,790)

(5,760)

43,591

42,563

2.4

%

Franchise fees

16,520

15,916

3.8

%

(587)

(27)

15,933

15,889

0.3

%

Base management fees

17,005

17,308

(1.8)

%

(1,274)

(1,578)

15,731

15,730

%

Incentive management fees

6,031

5,357

12.6

%

6,031

5,357

12.6

%

Property taxes

35,212

35,286

(0.2)

%

(1,169)

(1,362)

34,043

33,924

0.4

%

Ground rent

10,121

11,363

(10.9)

%

(2,901)

(4,413)

7,220

6,950

3.9

%

Hotel manager transition costs

1,287

(100.0)

%

1,287

(100.0)

%

Other fixed expenses

9,025

9,117

(1.0)

%

(443)

(536)

8,582

8,581

%

Total hotel operating expenses

$

475,067

$

485,991

(2.2)

%

$

(33,185)

$

(44,026)

$

441,882

$

441,965

%

 

Market Capitalization as of September 30, 2016

(in thousands)

 

Enterprise Value

Common equity capitalization (at September 30, 2016 closing price of $9.10/share)

$

1,836,097

Consolidated debt

922,962

Cash and cash equivalents

(235,965)

Total enterprise value

$

2,523,094

Share Reconciliation

Common shares outstanding

200,796

Unvested restricted stock held by management and employees

563

Share grants under deferred compensation plan

410

Combined shares outstanding

201,769

 

Debt Summary as of September 30, 2016

(dollars in thousands)

 

Property

Interest Rate

Term

Outstanding 

Principal

Maturity

Marriott Salt Lake City Downtown

4.25%

Fixed

$

58,719

November 2020

Westin Washington D.C. City Center

3.99%

Fixed

66,623

January 2023

The Lodge at Sonoma, a Renaissance Resort & Spa

3.96%

Fixed

29,044

April 2023

Westin San Diego

3.94%

Fixed

67,341

April 2023

Courtyard Manhattan / Midtown East

4.40%

Fixed

85,790

August 2024

Renaissance Worthington

3.66%

Fixed

85,000

May 2025

JW Marriott Denver at Cherry Creek

4.33%

Fixed

64,839

July 2025

Westin Boston Waterfront Hotel

4.36%

Fixed

202,309

November 2025

Lexington Hotel New York

LIBOR + 2.25(1)

Variable

170,368

October 2017 (2)

     Debt issuance costs, net

(6,407)

Total mortgage debt, net of unamortized debt issuance costs

$

823,626

Senior unsecured term loan

LIBOR + 1.45(3)

Variable

100,000

May 2021

     Debt issuance costs, net

(664)

Senior unsecured term loan, net of unamortized debt issuance costs

$

99,336

Senior unsecured credit facility

LIBOR + 1.50

Variable

May 2020 (4)

Total debt, net of unamortized debt issuance costs

$

922,962

Weighted-average interest rate of fixed rate debt

4.22%

Total weighted-average interest rate

3.72%

 

(1)       

The interest rate as of September 30, 2016 was 2.77%.

(2)       

May be extended for two additional one-year terms subject to the satisfaction of certain conditions, including a debt yield based on trailing 12-month hotel cash flows equal to or greater than 13% at the time the first extension option is exercised, and the payment of an extension fee.  The debt yield as of September 30, 2016 was approximately 5.7%.

(3)       

The interest rate as of September 30, 2016 was 1.97%.

(4)       

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

 

 

View Table Fullscreen

Operating Statistics – Third Quarter

ADR

Occupancy

RevPAR

Hotel Adjusted EBITDA Margin

3Q 2016

3Q 2015

B/(W)

3Q 2016

3Q 2015

B/(W)

3Q 2016

3Q 2015

B/(W)

3Q 2016

3Q 2015

B/(W)

Atlanta Alpharetta Marriott

$

168.83

$

162.26

4.0

%

74.6

%

78.4

%

(3.8)

%

$

125.87

$

127.24

(1.1)

%

36.03

%

38.98

%

-295 bps

Bethesda Marriott Suites

$

164.31

$

153.53

7.0

%

69.1

%

67.2

%

1.9

%

$

113.56

$

103.14

10.1

%

23.62

%

19.89

%

373 bps

Boston Westin

$

252.89

$

248.93

1.6

%

87.5

%

87.7

%

(0.2)

%

$

221.19

$

218.41

1.3

%

32.06

%

34.24

%

-218 bps

Hilton Boston Downtown

$

319.55

$

312.36

2.3

%

92.6

%

95.4

%

(2.8)

%

$

295.76

$

298.02

(0.8)

%

45.15

%

45.54

%

-39 bps

Hilton Burlington

$

221.77

$

212.95

4.1

%

91.0

%

88.1

%

2.9

%

$

201.88

$

187.53

7.7

%

49.40

%

49.30

%

10 bps

Renaissance Charleston

$

209.97

$

203.53

3.2

%

92.3

%

89.2

%

3.1

%

$

193.72

$

181.55

6.7

%

37.14

%

33.89

%

325 bps

Hilton Garden Inn Chelsea (1)

$

149.01

$

227.32

(34.4)

%

99.8

%

97.9

%

1.9

%

$

148.72

$

222.46

(33.1)

%

(2.63)

%

40.50

%

-4313 bps

Chicago Marriott

$

223.48

$

227.50

(1.8)

%

84.5

%

84.2

%

0.3

%

$

188.75

$

191.66

(1.5)

%

31.58

%

28.68

%

290 bps

Chicago Gwen

$

222.73

$

233.92

(4.8)

%

88.9

%

76.9

%

12.0

%

$

197.93

$

179.79

10.1

%

38.04

%

30.92

%

712 bps

Courtyard Denver Downtown

$

211.53

$

215.61

(1.9)

%

88.4

%

84.6

%

3.8

%

$

187.03

$

182.34

2.6

%

52.69

%

50.08

%

261 bps

Courtyard Fifth Avenue

$

266.76

$

278.40

(4.2)

%

93.7

%

90.7

%

3.0

%

$

250.09

$

252.47

(0.9)

%

24.22

%

25.57

%

-135 bps

Courtyard Midtown East

$

270.70

$

282.99

(4.3)

%

95.1

%

89.5

%

5.6

%

$

257.53

$

253.32

1.7

%

33.38

%

33.48

%

-10 bps

Fort Lauderdale Westin

$

140.24

$

136.22

3.0

%

85.1

%

77.8

%

7.3

%

$

119.30

$

106.00

12.5

%

27.77

%

20.11

%

766 bps

Frenchman's Reef

$

196.57

$

181.61

8.2

%

81.6

%

77.0

%

4.6

%

$

160.31

$

139.90

14.6

%

14.09

%

7.97

%

612 bps

JW Marriott Denver Cherry Creek

$

275.52

$

272.60

1.1

%

87.1

%

87.4

%

(0.3)

%

$

240.03

$

238.21

0.8

%

38.30

%

36.53

%

177 bps

Inn at Key West

$

165.14

$

179.25

(7.9)

%

79.1

%

81.0

%

(1.9)

%

$

130.56

$

145.25

(10.1)

%

37.84

%

37.21

%

63 bps

Sheraton Suites Key West

$

218.30

$

221.65

(1.5)

%

78.4

%

80.2

%

(1.8)

%

$

171.24

$

177.68

(3.6)

%

33.54

%

34.20

%

-66 bps

Lexington Hotel New York

$

251.31

$

266.34

(5.6)

%

94.8

%

94.4

%

0.4

%

$

238.14

$

251.30

(5.2)

%

20.53

%

29.07

%

-854 bps

Hotel Rex

$

237.76

$

260.95

(8.9)

%

84.9

%

87.2

%

(2.3)

%

$

201.96

$

227.64

(11.3)

%

38.26

%

42.26

%

-400 bps

Salt Lake City Marriott

$

165.71

$

164.54

0.7

%

73.4

%

73.0

%

0.4

%

$

121.65

$

120.13

1.3

%

39.47

%

35.13

%

434 bps

Shorebreak

$

256.64

$

263.32

(2.5)

%

85.7

%

83.4

%

2.3

%

$

220.01

$

219.65

0.2

%

41.33

%

40.68

%

65 bps

The Lodge at Sonoma

$

336.17

$

315.38

6.6

%

88.2

%

92.7

%

(4.5)

%

$

296.45

$

292.23

1.4

%

38.04

%

35.05

%

299 bps

Hilton Garden Inn Times Square Central

$

260.05

$

265.28

(2.0)

%

98.1

%

98.3

%

(0.2)

%

$

255.16

$

260.68

(2.1)

%

34.25

%

39.75

%

-550 bps

Vail Marriott

$

187.56

$

172.12

9.0

%

76.9

%

71.6

%

5.3

%

$

144.31

$

123.22

17.1

%

26.12

%

23.96

%

216 bps

Westin San Diego

$

193.87

$

190.12

2.0

%

90.9

%

90.4

%

0.5

%

$

176.27

$

171.92

2.5

%

37.99

%

33.81

%

418 bps

Westin Washington D.C. City Center

$

198.32

$

188.96

5.0

%

86.4

%

85.1

%

1.3

%

$

171.30

$

160.78

6.5

%

34.44

%

34.43

%

1 bps

Renaissance Worthington

$

170.16

$

175.17

(2.9)

%

50.2

%

65.2

%

(15.0)

%

$

85.34

$

114.14

(25.2)

%

19.70

%

29.14

%

-944 bps

Total

$

223.34

$

223.35

%

84.1

%

83.5

%

0.6

%

$

187.87

$

186.51

0.7

%

32.09

%

31.56

%

53 bps

Comparable Total (2)

$

223.44

$

223.34

%

84.1

%

83.5

%

0.6

%

$

187.91

$

186.47

0.8

%

32.12

%

31.89

%

23 bps

 

(1)       

The hotel was sold on July 7, 2016.  The 2015 operating results reflect the period in 2015 comparable to our ownership period in 2016.

(2)       

Excludes the three hotels sold in 2016: Orlando Airport Marriott, Hilton Minneapolis and Hilton Garden Inn Chelsea.

 

View Table Fullscreen

Operating Statistics – Year to Date

ADR

Occupancy

RevPAR

Hotel Adjusted EBITDA Margin

YTD 2016

YTD 2015

B/(W)

YTD 2016

YTD 2015

B/(W)

YTD 2016

YTD 2015

B/(W)

YTD 2016

YTD 2015

B/(W)

Atlanta Alpharetta Marriott

$

174.58

$

164.07

6.4

%

73.7

%

74.9

%

(1.2)

%

$

128.67

$

122.89

4.7

%

35.86

%

36.47

%

-61 bps

Bethesda Marriott Suites

$

170.48

$

169.30

0.7

%

71.4

%

67.1

%

4.3

%

$

121.78

$

113.62

7.2

%

28.24

%

26.67

%

157 bps

Boston Westin

$

242.15

$

240.01

0.9

%

82.0

%

80.8

%

1.2

%

$

198.46

$

193.90

2.4

%

31.11

%

31.24

%

-13 bps

Hilton Boston Downtown

$

282.76

$

286.90

(1.4)

%

87.8

%

84.9

%

2.9

%

$

248.16

$

243.46

1.9

%

40.72

%

39.74

%

98 bps

Hilton Burlington

$

180.39

$

173.28

4.1

%

81.4

%

78.7

%

2.7

%

$

146.82

$

136.36

7.7

%

41.53

%

40.75

%

78 bps

Renaissance Charleston

$

223.06

$

218.44

2.1

%

90.9

%

90.6

%

0.3

%

$

202.75

$

197.92

2.4

%

39.64

%

36.30

%

334 bps

Hilton Garden Inn Chelsea (1)

$

201.66

$

206.70

(2.4)

%

98.1

%

92.4

%

5.7

%

$

197.74

$

191.04

3.5

%

25.85

%

31.22

%

-537 bps

Chicago Marriott

$

219.65

$

219.01

0.3

%

69.4

%

75.6

%

(6.2)

%

$

152.52

$

165.49

(7.8)

%

25.77

%

23.74

%

203 bps

Chicago Gwen

$

208.80

$

220.74

(5.4)

%

76.8

%

74.6

%

2.2

%

$

160.33

$

164.56

(2.6)

%

29.77

%

26.41

%

336 bps

Courtyard Denver Downtown

$

203.60

$

204.66

(0.5)

%

82.9

%

80.8

%

2.1

%

$

168.86

$

165.31

2.1

%

49.43

%

47.78

%

165 bps

Courtyard Fifth Avenue

$

250.14

$

261.65

(4.4)

%

88.2

%

88.8

%

(0.6)

%

$

220.50

$

232.22

(5.0)

%

17.72

%

21.17

%

-345 bps

Courtyard Midtown East

$

251.17

$

260.63

(3.6)

%

91.9

%

89.7

%

2.2

%

$

230.80

$

233.68

(1.2)

%

28.31

%

29.73

%

-142 bps

Fort Lauderdale Westin

$

196.63

$

182.12

8.0

%

92.1

%

86.4

%

5.7

%

$

181.03

$

157.31

15.1

%

39.84

%

32.88

%

696 bps

Frenchman's Reef

$

257.46

$

255.49

0.8

%

86.5

%

85.6

%

0.9

%

$

222.74

$

218.74

1.8

%

26.32

%

24.83

%

149 bps

JW Marriott Denver Cherry Creek

$

270.10

$

271.88

(0.7)

%

81.9

%

80.9

%

1.0

%

$

221.10

$

219.84

0.6

%

36.19

%

33.72

%

247 bps

Inn at Key West

$

208.16

$

226.21

(8.0)

%

87.1

%

88.6

%

(1.5)

%

$

181.22

$

200.40

(9.6)

%

46.85

%

51.91

%

-506 bps

Sheraton Suites Key West (2)

$

260.24

$

258.07

0.8

%

88.2

%

91.1

%

(2.9)

%

$

229.56

$

235.11

(2.4)

%

44.35

%

34.96

%

939 bps

Lexington Hotel New York

$

230.77

$

238.68

(3.3)

%

90.3

%

92.9

%

(2.6)

%

$

208.44

$

221.81

(6.0)

%

14.76

%

26.43

%

-1167 bps

Hilton Minneapolis (3)

$

149.38

$

141.74

5.4

%

69.8

%

75.2

%

(5.4)

%

$

104.32

$

106.58

(2.1)

%

19.92

%

23.45

%

-353 bps

Orlando Airport Marriott (4)

$

129.43

$

128.65

0.6

%

86.8

%

84.6

%

2.2

%

$

112.29

$

108.79

3.2

%

35.80

%

29.29

%

651 bps

Hotel Rex

$

238.58

$

238.66

%

83.9

%

85.2

%

(1.3)

%

$

200.28

$

203.23

(1.5)

%

36.77

%

36.83

%

-6 bps

Salt Lake City Marriott

$

161.18

$

158.13

1.9

%

71.0

%

73.8

%

(2.8)

%

$

114.44

$

116.67

(1.9)

%

36.45

%

34.44

%

201 bps

Shorebreak (5)

$

232.01

$

232.71

(0.3)

%

81.3

%

81.4

%

(0.1)

%

$

188.73

$

189.35

(0.3)

%

34.10

%

36.16

%

-206 bps

The Lodge at Sonoma

$

294.85

$

276.28

6.7

%

81.4

%

83.9

%

(2.5)

%

$

240.07

$

231.66

3.6

%

30.92

%

29.18

%

174 bps

Hilton Garden Inn Times Square Central

$

234.74

$

242.32

(3.1)

%

96.4

%

97.0

%

(0.6)

%

$

226.36

$

235.05

(3.7)

%

29.71

%

42.28

%

-1257 bps

Vail Marriott

$

271.71

$

261.69

3.8

%

73.4

%

71.8

%

1.6

%

$

199.34

$

187.77

6.2

%

37.13

%

36.39

%

74 bps

Westin San Diego

$

189.79

$

187.95

1.0

%

86.4

%

86.0

%

0.4

%

$

163.95

$

161.73

1.4

%

37.74

%

34.10

%

364 bps

Westin Washington D.C. City Center

$

222.66

$

215.77

3.2

%

85.9

%

82.8

%

3.1

%

$

191.30

$

178.60

7.1

%

38.65

%

35.81

%

284 bps

Renaissance Worthington

$

180.21

$

181.28

(0.6)

%

64.1

%

70.3

%

(6.2)

%

$

115.59

$

127.47

(9.3)

%

32.89

%

35.48

%

-259 bps

Total

$

217.54

$

216.25

0.6

%

80.7

%

81.3

%

(0.6)

%

$

175.58

$

175.86

(0.2)

%

31.55

%

31.02

%

53 bps

Comparable Total (6)

$

223.98

$

223.05

0.4

%

80.9

%

81.4

%

(0.5)

%

$

181.30

$

181.66

(0.2)

%

31.96

%

31.72

%

24 bps

_______________________________________________________________

 

(1)       

The hotel was sold on July 7, 2016.  The 2015 operating results reflect the period in 2015 comparable to our ownership period in 2016.

(2)       

The hotel was acquired on June 30, 2015.  The 2015 amounts include pre-acquisition operating results in order to reflect the period in 2015 comparable to our ownership period in 2016.

(3)       

The hotel was sold on June 30, 2016.  The 2015 operating results reflect the period in 2015 comparable to our ownership period in 2016.

(4)       

The hotel was sold on June 8, 2016.  The 2015 operating results reflect the period in 2015 comparable to our ownership period in 2016.

(5)       

The hotel was acquired on February 6, 2015.  The 2015 amounts include pre-acquisition operating results in order to reflect the period in 2015 comparable to our ownership period in 2016.

(6)       

Excludes the three hotels sold in 2016: Orlando Airport Marriott, Hilton Minneapolis and Hilton Garden Inn Chelsea.

 

Hotel Adjusted EBITDA Reconciliation

Third Quarter 2016

Plus:

Plus:

Plus:

Equals:

Total Revenues

Net Income / (Loss)

Depreciation

Interest Expense

Adjustments (1)

Hotel Adjusted EBITDA

Atlanta Alpharetta Marriott

$

5,015

$

1,441

$

366

$

$

$

1,807

Bethesda Marriott Suites

$

3,789

$

(993)

$

355

$

$

1,533

$

895

Boston Westin

$

25,683

$

3,804

$

2,193

$

2,298

$

(60)

$

8,235

Hilton Boston Downtown

$

11,681

$

4,067

$

1,207

$

$

$

5,274

Hilton Burlington

$

5,834

$

2,365

$

517

$

$

$

2,882

Renaissance Charleston

$

3,398

$

1,034

$

260

$

$

(32)

$

1,262

Hilton Garden Inn Chelsea

$

152

$

(4)

$

$

$

$

(4)

Chicago Marriott

$

30,621

$

6,651

$

3,450

$

(34)

$

(397)

$

9,670

Chicago Gwen

$

7,615

$

2,169

$

728

$

$

$

2,897

Courtyard Denver Downtown

$

3,234

$

1,413

$

291

$

$

$

1,704

Courtyard Fifth Avenue

$

4,438

$

554

$

469

$

$

52

$

1,075

Courtyard Midtown East

$

7,889

$

946

$

669

$

1,018

$

$

2,633

Fort Lauderdale Westin

$

8,824

$

1,267

$

1,183

$

$

$

2,450

Frenchman's Reef

$

14,072

$

366

$

1,617

$

$

$

1,983

JW Marriott Denver Cherry Creek

$

6,504

$

1,258

$

506

$

727

$

$

2,491

Inn at Key West

$

1,707

$

461

$

185

$

$

$

646

Sheraton Suites Key West

$

3,679

$

718

$

516

$

$

$

1,234

Lexington Hotel New York

$

16,641

$

(1,369)

$

3,413

$

1,366

$

7

$

3,417

Hotel Rex

$

1,968

$

610

$

143

$

$

$

753

Salt Lake City Marriott

$

7,963

$

1,960

$

521

$

662

$

$

3,143

Shorebreak

$

4,152

$

1,348

$

383

$

$

(15)

$

1,716

The Lodge at Sonoma

$

7,324

$

2,108

$

378

$

300

$

$

2,786

Hilton Garden Inn Times Square Central

$

6,727

$

1,476

$

828

$

$

$

2,304

Vail Marriott

$

7,772

$

1,553

$

477

$

$

$

2,030

Westin San Diego

$

9,268

$

1,817

$

1,024

$

680

$

$

3,521

Westin Washington D.C. City Center

$

7,959

$

763

$

1,251

$

727

$

$

2,741

Renaissance Worthington

$

6,330

$

(247)

$

676

$

816

$

2

$

1,247

Total

$

220,239

$

37,536

$

23,606

$

8,560

$

1,090

$

70,682

Less: Sold Hotel(2)

$

(152)

$

4

$

$

$

$

4

Comparable Total

$

220,087

$

37,540

$

23,606

$

8,560

$

1,090

$

70,686

__________________________________________________

 

(1)       

Includes non-cash expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations and the non-cash amortization favorable and unfavorable contract liabilities.

(2)       

Amounts represent the operating results of the Hilton Garden Inn Chelsea.

 

Hotel Adjusted EBITDA Reconciliation

Third Quarter 2015

Plus:

Plus:

Plus:

Equals:

Total Revenues

Net Income / (Loss)

Depreciation

Interest Expense

Adjustments (1)

Hotel Adjusted EBITDA

Atlanta Alpharetta Marriott

$

5,282

$

1,674

$

385

$

$

$

2,059

Bethesda Marriott Suites

$

3,479

$

(1,211)

$

362

$

$

1,541

$

692

Boston Westin

$

24,679

$

6,231

$

2,218

$

$

2

$

8,451

Hilton Boston Downtown

$

11,757

$

4,110

$

1,215

$

$

29

$

5,354

Hilton Burlington

$

5,456

$

2,203

$

464

$

$

23

$

2,690

Renaissance Charleston

$

3,101

$

736

$

347

$

$

(32)

$

1,051

Hilton Garden Inn Chelsea

$

3,936

$

1,232

$

362

$

$

$

1,594

Chicago Marriott

$

29,530

$

2,952

$

2,744

$

3,171

$

(397)

$

8,470

Chicago Gwen

$

7,331

$

851

$

731

$

$

685

$

2,267

Courtyard Denver Downtown

$

3,177

$

1,308

$

283

$

$

$

1,591

Courtyard Fifth Avenue

$

4,334

$

(228)

$

450

$

834

$

52

$

1,108

Courtyard Midtown East

$

7,653

$

860

$

683

$

1,019

$

$

2,562

Fort Lauderdale Westin

$

7,604

$

397

$

1,132

$

$

$

1,529

Frenchman's Reef

$

11,625

$

(662)

$

1,589

$

$

$

927

JW Marriott Denver Cherry Creek

$

6,639

$

1,172

$

525

$

728

$

$

2,425

Inn at Key West

$

1,685

$

451

$

176

$

$

$

627

Sheraton Suites Key West

$

3,687

$

749

$

512

$

$

$

1,261

Lexington Hotel New York

$

17,483

$

448

$

3,342

$

1,282

$

10

$

5,082

Minneapolis Hilton

$

14,907

$

1,869

$

1,474

$

1,297

$

(202)

$

4,438

Orlando Airport Marriott

$

5,515

$

(448)

$

575

$

807

$

$

934

Hotel Rex

$

2,158

$

770

$

142

$

$

$

912

Salt Lake City Marriott

$

7,688

$

1,256

$

767

$

678

$

$

2,701

Shorebreak

$

4,233

$

1,503

$

217

$

$

2

$

1,722

The Lodge at Sonoma

$

7,495

$

1,950

$

371

$

306

$

$

2,627

Hilton Garden Inn Times Square Central

$

6,873

$

1,955

$

777

$

$

$

2,732

Vail Marriott

$

6,802

$

1,150

$

480

$

$

$

1,630

Westin San Diego

$

8,601

$

1,149

$

1,020

$

693

$

46

$

2,908

Westin Washington D.C. City Center

$

7,471

$

585

$

1,189

$

746

$

52

$

2,572

Renaissance Worthington

$

8,321

$

1,034

$

575

$

814

$

2

$

2,425

Total

$

238,502

$

36,046

$

25,107

$

12,375

$

1,813

$

75,266

Less: Sold Hotels (2)

$

(24,358)

$

(2,653)

$

(2,411)

$

(2,104)

$

202

$

(6,966)

Comparable Total

$

214,144

$

33,393

$

22,696

$

10,271

$

2,015

$

68,300

 

(1)       

Includes non-cash expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations, the non-cash amortization favorable and unfavorable contract liabilities and hotel manger transition costs.

(2)       

Amounts represent the operating results of the Orlando Airport Marriott, Minneapolis Hilton and Hilton Garden Inn Chelsea.

 

Hotel Adjusted EBITDA Reconciliation

Year to Date 2016

Plus:

Plus:

Plus:

Equals:

Total Revenues

Net Income / (Loss)

Depreciation

Interest Expense

Adjustments (1)

Hotel Adjusted EBITDA

Atlanta Alpharetta Marriott

$

15,506

$

4,475

$

1,085

$

$

$

5,560

Bethesda Marriott Suites

$

12,130

$

(2,240)

$

1,067

$

$

4,598

$

3,425

Boston Westin

$

73,021

$

9,430

$

6,595

$

6,873

$

(181)

$

22,717

Hilton Boston Downtown

$

29,583

$

8,406

$

3,631

$

$

8

$

12,045

Hilton Burlington

$

13,387

$

4,100

$

1,460

$

$

$

5,560

Renaissance Charleston

$

10,468

$

3,485

$

759

$

$

(95)

$

4,149

Hilton Garden Inn Chelsea

$

6,413

$

1,057

$

601

$

$

$

1,658

Chicago Marriott

$

74,356

$

10,074

$

9,866

$

410

$

(1,192)

$

19,158

Chicago Gwen

$

17,816

$

3,216

$

2,087

$

$

$

5,303

Courtyard Denver Downtown

$

8,738

$

3,456

$

863

$

$

$

4,319

Courtyard Fifth Avenue

$

11,645

$

(660)

$

1,357

$

1,212

$

155

$

2,064

Courtyard Midtown East

$

21,010

$

904

$

2,010

$

3,034

$

$

5,948

Fort Lauderdale Westin

$

36,822

$

11,149

$

3,520

$

$

$

14,669

Frenchman's Reef

$

52,794

$

9,060

$

4,834

$

$

$

13,894

JW Marriott Denver Cherry Creek

$

18,935

$

3,141

$

1,545

$

2,166

$

$

6,852

Inn at Key West

$

6,550

$

2,521

$

548

$

$

$

3,069

Sheraton Suites Key West

$

14,298

$

4,797

$

1,544

$

$

$

6,341

Lexington Hotel New York

$

43,433

$

(7,833)

$

10,185

$

4,036

$

22

$

6,410

Minneapolis Hilton

$

24,786

$

(11)

$

2,917

$

2,514

$

(482)

$

4,938

Orlando Airport Marriott

$

14,117

$

4,481

$

573

$

$

$

5,054

Hotel Rex

$

5,858

$

1,725

$

429

$

$

$

2,154

Salt Lake City Marriott

$

22,366

$

4,586

$

1,583

$

1,983

$

$

8,152

Shorebreak

$

11,078

$

2,692

$

1,130

$

$

(44)

$

3,778

The Lodge at Sonoma

$

19,662

$

4,069

$

1,111

$

899

$

$

6,079

Hilton Garden Inn Times Square Central

$

17,810

$

2,910

$

2,382

$

$

$

5,292

Vail Marriott

$

28,034

$

8,976

$

1,433

$

$

$

10,409

Westin San Diego

$

26,945

$

5,053

$

3,083

$

2,034

$

$

10,170

Westin Washington D.C. City Center

$

26,264

$

4,270

$

3,703

$

2,179

$

$

10,152

Renaissance Worthington

$

26,112

$

4,321

$

1,829

$

2,431

$

6

$

8,587

Total

$

689,937

$

111,610

$

73,730

$

29,771

$

2,795

$

217,666

Less: Sold Hotels(2)

$

(45,316)

$

(5,527)

$

(4,091)

$

(2,514)

$

482

$

(11,650)

Comparable Total

$

644,621

$

106,083

$

69,639

$

27,257

$

3,277

$

206,016

 

(1)       

Includes non-cash expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations and the non-cash amortization favorable and unfavorable contract liabilities.

(2)       

Amounts represent the operating results of the Orlando Airport Marriott, Minneapolis Hilton and Hilton Garden Inn Chelsea.

 

Hotel Adjusted EBITDA Reconciliation

Year to Date 2015

Plus:

Plus:

Plus:

Equals:

Total Revenues

Net Income / (Loss)

Depreciation

Interest Expense

Adjustments (1)

Hotel Adjusted EBITDA

Atlanta Alpharetta Marriott

$

14,945

$

4,292

$

1,159

$

$

$

5,451

Bethesda Marriott Suites

$

11,460

$

(2,685)

$

1,117

$

$

4,624

$

3,056

Boston Westin

$

71,004

$

15,499

$

6,674

$

$

7

$

22,180

Hilton Boston Downtown

$

27,510

$

7,368

$

3,452

$

$

113

$

10,933

Hilton Burlington

$

12,394

$

3,613

$

1,370

$

$

68

$

5,051

Renaissance Charleston

$

10,277

$

2,695

$

1,131

$

$

(95)

$

3,731

Hilton Garden Inn Chelsea

$

9,932

$

2,015

$

1,086

$

$

$

3,101

Chicago Marriott

$

77,669

$

3,353

$

6,852

$

9,425

$

(1,192)

$

18,438

Chicago Gwen

$

19,428

$

2,091

$

2,338

$

$

702

$

5,131

Courtyard Denver Downtown

$

8,554

$

3,236

$

851

$

$

$

4,087

Courtyard Fifth Avenue

$

11,835

$

(1,480)

$

1,347

$

2,483

$

155

$

2,505

Courtyard Midtown East

$

20,995

$

1,167

$

2,051

$

3,024

$

$

6,242

Fort Lauderdale Westin

$

33,319

$

7,416

$

3,388

$

$

151

$

10,955

Frenchman's Reef

$

49,929

$

6,464

$

4,767

$

1,164

$

$

12,395

JW Marriott Denver Cherry Creek

$

18,907

$

2,958

$

1,577

$

1,840

$

$

6,375

Inn at Key West

$

6,770

$

2,992

$

522

$

$

$

3,514

Sheraton Suites Key West (2)

$

3,750

$

799

$

512

$

$

$

1,311

Lexington Hotel New York

$

46,742

$

(1,663)

$

10,027

$

3,945

$

47

$

12,356

Minneapolis Hilton

$

39,514

$

(180)

$

6,177

$

3,874

$

(606)

$

9,265

Orlando Airport Marriott

$

20,229

$

1,808

$

1,714

$

2,404

$

$

5,926

Hotel Rex

$

5,824

$

1,720

$

425

$

$

$

2,145

Salt Lake City Marriott

$

22,331

$

3,404

$

2,262

$

2,025

$

$

7,691

Shorebreak (2)

$

9,925

$

2,243

$

973

$

$

373

$

3,589

The Lodge at Sonoma

$

19,849

$

3,754

$

1,124

$

913

$

$

5,791

Hilton Garden Inn Times Square Central

$

18,429

$

5,550

$

2,332

$

$

(90)

$

7,792

Vail Marriott

$

26,062

$

8,021

$

1,462

$

$

$

9,483

Westin San Diego

$

26,170

$

3,667

$

3,053

$

2,066

$

137

$

8,923

Westin Washington D.C. City Center

$

24,247

$

2,711

$

3,536

$

2,229

$

207

$

8,683

Renaissance Worthington

$

29,192

$

6,300

$

1,740

$

2,310

$

6

$

10,356

Total

$

697,192

$

99,128

$

75,019

$

37,702

$

4,607

$

216,236

Add: Prior Ownership Results(2)

$

11,537

$

3,760

$

1,026

$

$

(7)

$

4,779

Less: Sold Hotels(3)

$

(69,675)

$

(3,643)

$

(8,977)

$

(6,278)

$

606

$

(18,292)

Comparable Total

$

639,054

$

99,245

$

67,068

$

31,424

$

5,206

$

202,723

__________________________________________________

 

(1)       

Includes non-cash expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations, the non-cash amortization favorable and unfavorable contract liabilities and manager transition costs.

(2)       

Amounts represent the pre-acquisition operating results of Shorebreak 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 June 29, 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.

(3)       

Amounts represent the operating results of the Orlando Airport Marriott, Minneapolis Hilton and Hilton Garden Inn Chelsea.



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