DiamondRock Hospitality Results

DiamondRock Hospitality Company Reports Third Quarter 2017 Results

DiamondRock

DiamondRock Hospitality Company (NYSE: DRH), a lodging-focused real estate investment trust that owns a portfolio of 28 premium hotels in the United States, today announced results of operations for the quarter ended September 30, 2017.

Third Quarter 2017 Highlights

  • Net Income: Net income was $21.6 million and earnings per diluted share was $0.11. 
  • Comparable RevPARRevPAR was $195.13, a 2.1% increase from the comparable period of 2016. 
  • Comparable Hotel Adjusted EBITDA Margin: Hotel Adjusted EBITDA margin was 31.70%, a decrease of 115 basis points from the comparable period of 2016. Comparable hotel operating expenses increased approximately 1.6% from 2016. 
  • Adjusted EBITDA: Adjusted EBITDA was $63.1 million, a decrease of $2.5 million from 2016. 
  • Adjusted FFO: Adjusted FFO was $50.1 million and Adjusted FFO per diluted share was $0.25. 
  • Dividends: The Company declared a dividend of $0.125 per share during the third quarter, which was paid on October 12, 2017.

Mark W. Brugger, President and Chief Executive Officer of DiamondRock Hospitality Company stated, "We are pleased with our third quarter results and positive momentum entering the fourth quarter that allowed us to raise full year RevPAR guidance.  Our third quarter results benefited from outperformance in Chicago, Fort Worth and Salt Lake City, as well as our asset management team's strong execution limiting comparable hotel expense growth to 1.6%.  As we look forward, with approximately $167 million of cash on hand, no borrowings on our $300 million credit facility and most of our hotels unencumbered by debt, DiamondRock is well-positioned for capital deployment."

Operating Results       

For the quarter ended September 30, 2017, the Company reported the following:

Third Quarter

2017

2016

Change

Comparable Operating Results (1)

ADR

$228.85

$227.01

0.8%

Occupancy

85.3%

84.2%

1.1 percentage points

RevPAR

$195.13

$191.06

2.1%

Revenues

$210.9 million

$211.2 million

-0.1%

Hotel Adjusted EBITDA Margin

31.70%

32.85%

-115 basis points

Actual Operating Results (2)

Revenues

$223.5 million

$220.2 million

1.5%

Net income

$21.6 million

$29.9 million

-$8.3 million

Earnings per diluted share

$0.11

$0.15

-$0.04

Adjusted EBITDA

$63.1 million

$65.6 million

-$2.5 million

Adjusted FFO

$50.1 million

$52.1 million

-$2.0 million

Adjusted FFO per diluted share

$0.25

$0.26

-$0.01

 

(1)

Comparable operating results exclude Frenchman's Reef and the Inn at Key West for all periods presented and include pre-acquisition operating results for L'Auberge de Sedona and Orchards Inn Sedona from July 1, 2016 to September 30, 2016. The pre-acquisition operating results were obtained from the seller of the hotels during the acquisition due diligence process. We have made no adjustments to the amounts provided to us by the seller. The pre-acquisition operating results were not audited or reviewed by the Company's independent auditors.  Additionally, 2016 amounts exclude the operating results of hotels sold during 2016.

(2)

Actual operating results include Frenchman's Reef and the Inn at Key West for the period the hotels were open in 2017 (July 1, 2017 to September 5, 2017) and the full third quarter of 2016.  Actual operating results for 2016 include the operating results of hotels sold during 2016 for the Company's respective ownership periods.

For the nine months ended September 30, 2017, the Company reported the following:

 

Year to Date

2017

2016

Change

Comparable Operating Results (1)

ADR

$226.51

$224.03

1.1%

Occupancy

81.2%

80.5%

0.7 percentage points

RevPAR

$183.91

$180.26

2.0%

Revenues

$610.8 million

$605.4 million

0.9%

Hotel Adjusted EBITDA Margin

31.21%

31.94%

-73 basis points

Actual Operating Results (2)

Revenues

$663.0 million

$689.9 million

-3.9%

Net income

$67.1 million

$90.9 million

-$23.8 million

Earnings per diluted share

$0.33

$0.45

-$0.12

Adjusted EBITDA

$188.1 million

$200.1 million

-$12.0 million

Adjusted FFO

$150.2 million

$158.0 million

-$7.8 million

Adjusted FFO per diluted share

$0.75

$0.78

-$0.03

 

(1)

Comparable operating results exclude Frenchman's Reef and the Inn at Key West for all periods presented and include pre-acquisition operating results for L'Auberge de Sedona and Orchards Inn Sedona from January 1, 2017 to February 27, 2017 and January 1, 2016 to September 30, 2016. The pre-acquisition operating results were obtained from the seller of the hotels during the acquisition due diligence process. We have made no adjustments to the amounts provided to us by the seller. The pre-acquisition operating results were not audited or reviewed by the Company's independent auditors.  Additionally, 2016 amounts exclude hotels sold during 2016.

(2)

Actual operating results include Frenchman's Reef and the Inn at Key West for the period the hotels were open in 2017 (January 1, 2017 to September 5, 2017) and the full year to date period of 2016.  Actual operating results for 2016 include the operating results of hotels sold during 2016 for the Company's respective ownership periods.

Update on Impact from Natural Disasters

The Company was impacted by recent natural disasters.  As previously disclosed, the Company is pursuing insurance claims for the remediation of property damage and business interruption income at each of the impacted hotels. The Company is insured for up to $361 million for each covered event, subject to certain deductibles and sub limits.

  • Frenchman's Reef: The hotel sustained significant damage from Hurricanes Irma and Maria. The hotel closed on September 6th and is currently expected to remain closed through the end of 2018. 
  • The Inn at Key West: The hotel sustained substantial wind and water-related damage from Hurricane Irma. The hotel closed on September 6th to comply with a mandatory evacuation order and is currently expected to remain closed into the second quarter of 2018. 
  • Sheraton Suites Key West: The hotel sustained minimal wind and water-related damage from Hurricane Irma. The hotel closed on September 6th to comply with a mandatory evacuation order and re-opened on September 16th. 
  • Westin Fort Lauderdale Beach Resort: The hotel experienced minimal water intrusion from Hurricane Irma. The hotel closed on September 7th to comply with a mandatory evacuation order and re-opened on September 12th. 
  • The Lodge at Sonoma Renaissance Resort & SpaThe hotel was impacted by smoke infiltration during the recent wildfires and was closed from October 10th through October 19th. The smoke infiltration has been remediated and the hotel re-opened on October 20th.

Hotel Manager Changes

In August 2017, the Company terminated its management agreement with Marriott International for the Courtyard Manhattan/Midtown East and entered into a new 10-year management agreement with HEI Hotels & Resorts.  The Company also entered into a franchise agreement with Marriott International to continue the hotel's Courtyard brand affiliation.  In connection with the termination of the Marriott International management agreement, the Company recognized $1.9 million of accelerated amortization of key money and incurred approximately $0.5 million of severance and other costs, which are excluded from Adjusted EBITDA and Adjusted FFO.

In October 2017, the Company terminated its management agreement with Joie de Vivre Hotels for the Hotel Rex and entered into a new 10-year management agreement with Viceroy Hotels & Resorts to operate the hotel.

Capital Expenditures

The Company spent approximately $77.5 million on capital improvements during the nine months ended September 30, 2017, primarily related to the third phase of the Chicago Marriott Downtown renovation and guest room renovations at the Gwen, Worthington Renaissance, Charleston Renaissance, and The Lodge at Sonoma. The Company expects to spend between $110 million and $120 million on capital improvements at its hotels in 2017.  Significant projects include the following:

  • Chicago Marriott Downtown: The Company has completed the third phase of the multi-year renovation, which included the upgrade renovation of approximately 340 guest rooms. The Company expects to renovate the final 258 of 1,200 guest rooms during late 2017 with completion in early 2018. 
  • The Gwen: The Company completed the renovation of the hotel's 311 guest rooms in April 2017. 
  • Worthington Renaissance: The Company completed the renovation of the hotel's 504 guest rooms in January 2017. 
  • Charleston Renaissance: The Company completed the renovation of the hotel's 166 guest rooms in February 2017. 
  • The Lodge at Sonoma: The Company completed the renovation of the hotel's 182 guest rooms in April 2017.

During the third quarter, the Company recognized impairment losses of approximately $2.4 million, which consisted of $1.8 million related to construction in progress that it determined is not recoverable and $0.6 million related to property damage at the Sheraton Suites Key West.  The impairment losses are excluded from Adjusted EBITDA and Adjusted FFO.

Balance Sheet

As of September 30, 2017, the Company had $166.6 million of unrestricted cash on hand and approximately $940.8 million of total debt, which consisted of property-specific mortgage debt and $300.0 million of unsecured term loans. The Company has no outstanding borrowings on its $300 million senior unsecured credit facility and 20 of its 28 hotels are unencumbered by debt.

Dividends

The Company's Board of Directors declared a quarterly dividend of $0.125 per share to stockholders of record as of September 30, 2017.  The dividend was paid on October 12, 2017.

Guidance

The Company is providing updated annual guidance for 2017, 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 excludes Frenchman's Reef and the Inn at Key West for all periods and assumes that L'Auberge de Sedona and Orchards Inn Sedona were owned since January 1, 2016.

The Company is revising its 2017 guidance for the following: (1) impact of natural disasters, (2) an improved RevPAR growth outlook following 7.9% RevPAR growth in October 2017 and (3) an improved group outlook for the fourth quarter.  The Company's revised full year 2017 guidance is as follows:

 

Previous Guidance

Change from Midpoint

Revised Guidance

Metric

Low End

High End

Natural 

Disaster 

Impact

Portfolio 

Outlook

Low End

High End

Comparable 

RevPAR Growth

1.0 percent

2.0 percent

N/A

0.75 percent

2.0 percent

2.5 percent

Adjusted EBITDA

$245 million

$253 million

($6.0 million)

N/A

$239 million

$247 million

Adjusted FFO

$196 million

$203 million

($4.7 million)

N/A

$192.3 million

$197.3 million

Adjusted FFO 

per share 

  (based on 201.5

   million shares)

$0.97 per 

share

$1.01 per 

share

($0.025 per 

share)

N/A

$0.95 per 

share

$0.98 per 

share

Although the Company is actively pursuing advance payments under its property and business interruption insurance claims, the above guidance does not reflect any proceeds from business interruption insurance.  The full year guidance range above reflects expected income tax expense of $8.1 to $11.2 million, expected interest expense of $38.5 to $38.6 million and expected corporate expenses of $25 million.

Selected Quarterly Comparable Operating Information

The following table is presented to provide investors with selected quarterly comparable operating information.  The operating information includes our 2017 acquisitions and excludes our 2016 dispositions, Frenchman's Reef and the Inn at Key West for all periods presented.

 

Quarter 3, 2016

Quarter 4, 2016

Quarter 1, 2017

Quarter 2, 2017

Quarter 3, 2017

ADR

$

227.01

$

233.04

$

209.73

$

238.43

$

228.85

Occupancy

84.2

%

76.1

%

73.1

%

85.1

%

85.3

%

RevPAR

$

191.06

$

177.45

$

153.32

$

202.88

$

195.13

Revenues (in thousands)

$

211,179

$

198,968

$

175,563

$

224,299

$

210,889

Hotel Adjusted EBITDA (in thousands)

$

69,367

$

63,646

$

44,418

$

79,351

$

66,852

        % of full Year

27.0

%

24.8

%

17.6

%

31.4

%

26.4

%

Hotel Adjusted EBITDA Margin

32.85

%

31.99

%

25.30

%

35.38

%

31.70

%

Available Rooms

829,012

830,024

811,980

821,002

825,472

Reconciliation to Previously Reported 

Available Rooms:

Frenchman's Reef Available Rooms

43,240

43,240

42,300

42,770

43,240

Inn at Key West Available Rooms

9,752

9,752

9,540

9,646

9,752

Temporary Closure of Other Hotels Due 

to Natural Disasters

4,552

Previously Reported Available Rooms

882,004

883,016

863,820

873,418

883,016

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 28 premium quality hotels with over 9,600 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.  On November 6, 2017, the Company relocated its corporate headquarters to 2 Bethesda Metro Center, Suite 1400, Bethesda, Maryland 20814. 

DIAMONDROCK HOSPITALITY COMPANY 

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

September 30, 2017

December 31, 2016

ASSETS

(unaudited)

Property and equipment, net

$

2,688,214

$

2,646,676

Restricted cash

42,317

46,069

Due from hotel managers

98,292

77,928

Favorable lease assets, net

26,795

18,013

Prepaid and other assets (1)

77,694

37,682

Cash and cash equivalents

166,619

243,095

Total assets

$

3,099,931

$

3,069,463

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:

Mortgage debt, net of unamortized debt issuance costs

$

642,768

$

821,167

Term loan, net of unamortized debt issuance costs

298,037

99,372

Total debt

940,805

920,539

Deferred income related to key money, net

17,028

20,067

Unfavorable contract liabilities, net

71,212

72,646

Deferred ground rent

85,047

80,509

Due to hotel managers

70,972

58,294

Dividends declared and unpaid

25,627

25,567

Accounts payable and accrued expenses (2)

56,618

55,054

Total other liabilities

326,504

312,137

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; 

  200,305,232 and 200,200,902 shares issued and outstanding at 

  September 30, 2017 and December 31, 2016, respectively

2,003

2,002

Additional paid-in capital

2,059,919

2,055,365

Accumulated deficit

(229,300)

(220,580)

Total stockholders' equity

1,832,622

1,836,787

Total liabilities and stockholders' equity

$

3,099,931

$

3,069,463

 

(1)

Includes $41.8 million of insurance receivables as of September 30, 2017, $23.1 million of deferred tax assets, $5.4 million and $6.0 million of prepaid expenses and $7.4 million and $8.6 million of other assets as of September 30, 2017 and December 31, 2016, respectively.

(2)

Includes $20.5 million of deferred tax liabilities, $14.9 million and $12.1 million of accrued property taxes, $4.4 million and $10.8 million of accrued capital expenditures, and $16.8 million and $11.7 million of other accrued liabilities as of September 30, 2017 and December 31, 2016, 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,

2017

2016

2017

2016

Revenues:

Rooms

$

167,990

$

163,158

$

483,305

$

498,714

Food and beverage

42,651

44,069

140,191

151,850

Other

12,845

13,012

39,472

39,373

Total revenues

223,486

220,239

662,968

689,937

Operating Expenses:

Rooms

41,945

39,766

120,411

121,737

Food and beverage

30,794

29,103

93,324

97,718

Management fees

5,356

7,655

18,317

23,036

Other hotel expenses

77,769

74,123

228,036

232,576

Depreciation and amortization

25,083

23,605

75,031

73,731

Hotel acquisition costs

(245)

2,028

Corporate expenses

6,109

4,684

19,199

17,420

Impairment losses

2,357

2,357

Total operating expenses, net

189,168

178,936

558,703

566,218

Operating profit

34,318

41,303

104,265

123,719

Interest and other income, net

(372)

(333)

(923)

(451)

Interest expense

9,692

9,504

28,790

32,242

Loss on early extinguishment of debt

274

Gain on sales of hotel properties

(2,198)

(10,319)

Total other expenses, net

9,320

6,973

28,141

21,472

Income before income taxes

24,998

34,330

76,124

102,247

Income tax expense

(3,375)

(4,393)

(9,019)

(11,357)

Net income

$

21,623

$

29,937

$

67,105

$

90,890

Earnings per share:

Basic earnings per share

$

0.11

$

0.15

$

0.33

$

0.45

Diluted earnings per share

$

0.11

$

0.15

$

0.33

$

0.45

Weighted-average number of common 

  shares outstanding:

Basic

200,834,910

201,297,846

200,767,104

201,188,563

Diluted

201,424,400

201,739,604

201,353,649

201,572,206

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 EBITDA 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 or structured severance programs 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. 
  • 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; costs incurred related to natural disasters; 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,

2017

2016

2017

2016

Net income

$

21,623

$

29,937

$

67,105

$

90,890

Interest expense

9,692

9,504

28,790

32,242

Income tax expense

3,375

4,393

9,019

11,357

Real estate related depreciation and amortization

25,083

23,605

75,031

73,731

EBITDA

59,773

67,439

179,945

208,220

Non-cash ground rent

1,591

1,568

4,756

4,230

Non-cash amortization of favorable and unfavorable 

contract liabilities, net

(478)

(478)

(1,434)

(1,434)

Hotel acquisition costs (1)

(245)

2,028

Natural disaster costs

1,493

1,493

Impairment losses

2,357

2,357

Hotel manager transition costs (2)

(1,362)

(1,362)

Loss on early extinguishment of debt

274

Gain on sale of hotel properties

(2,198)

(10,319)

Severance costs (3)

(682)

(563)

Adjusted EBITDA

$

63,129

$

65,649

$

188,057

$

200,134

 

(1)

During the three months ended September 30, 2017, we recorded a refund of $0.2 million of transfer taxes originally paid to the City and County of San Francisco in connection with our acquisition of the Hotel Rex.

(2)

Includes items related to the hotel manager change at the Courtyard Manhattan Midtown East during the third quarter, as follows: (a) employee severance costs of approximately $0.4 million, (b) transition costs of approximately $0.1 million offset by (c) $1.9 million of accelerated amortization of key money received from Marriott.

(3)

Amounts are 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.

 

Full Year 2017 Guidance

Low End

High End

Net income

$

81,603

$

87,603

Interest expense

38,600

38,500

Income tax expense

8,100

11,200

Real estate related depreciation and amortization

100,000

99,000

EBITDA

228,303

236,303

Non-cash ground rent

6,300

6,300

Non-cash amortization of favorable and unfavorable contracts, net

(1,900)

(1,900)

Hotel acquisition costs

2,028

2,028

Natural disaster costs

3,000

3,000

Impairment losses

2,357

2,357

Hotel manager transition costs (1)

(1,362)

(1,362)

Loss on early extinguishment of debt

274

274

Adjusted EBITDA

$

239,000

$

247,000

 

(1)

Includes items related to the hotel manager change at the Courtyard Manhattan Midtown East during the third quarter, as follows: (a) employee severance costs of approximately $0.4 million, (b) transition costs of approximately $0.1 million offset by (c) $1.9 million of accelerated amortization of key money received from Marriott.

 

 

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,

2017

2016

2017

2016

Net income

$

21,623

$

29,937

$

67,105

$

90,890

Interest expense

9,692

9,504

28,790

32,242

Income tax expense

3,375

4,393

9,019

11,357

Real estate related depreciation and amortization

25,083

23,605

75,031

73,731

EBITDA

59,773

67,439

179,945

208,220

Corporate expenses

6,109

4,684

19,199

17,420

Interest and other income, net

(372)

(333)

(923)

(451)

Hotel acquisition costs (1)

(245)

2,028

Loss on early extinguishment of debt

274

Natural disaster costs

1,493

1,493

Impairment losses

2,357

2,357

Gain on sale of hotel properties

(2,198)

(10,319)

Hotel EBITDA

69,115

69,592

204,373

214,870

Non-cash ground rent

1,591

1,568

4,756

4,230

Non-cash amortization of favorable and 

unfavorable contract liabilities, net

(478)

(478)

(1,434)

(1,434)

Hotel manager transition costs (2)

(1,362)

(1,362)

Hotel Adjusted EBITDA

$

68,866

$

70,682

$

206,333

$

217,666

 

(1)

During the three months ended September 30, 2017, we recorded a refund of $0.2 million of transfer taxes originally paid to the City and County of San Francisco in connection with our acquisition of the Hotel Rex.

(2)

Includes items related to the hotel manager change at the Courtyard Manhattan Midtown East during the third quarter, as follows: (a) employee severance costs of approximately $0.4 million, (b) transition costs of approximately $0.1 million offset by (c) $1.9 million of accelerated amortization of key money received from Marriott.

 

 

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,

2017

2016

2017

2016

Net income

$

21,623

$

29,937

$

67,105

$

90,890

Real estate related depreciation and amortization

25,083

23,605

75,031

73,731

Impairment losses

2,357

2,357

Gain on sales of hotel properties, net of income tax

(1,877)

(8,887)

FFO

49,063

51,665

144,493

155,734

Non-cash ground rent

1,591

1,568

4,756

4,230

Non-cash amortization of favorable and unfavorable 

contract liabilities, net

(478)

(478)

(1,434)

(1,434)

Hotel acquisition costs (1)

(245)

2,028

Natural disaster costs

1,493

1,493

Hotel manager transition costs (2)

(1,362)

(1,362)

Loss on early extinguishment of debt

274

Severance costs (3)

(682)

(563)

Fair value adjustments to debt instruments

19

Adjusted FFO

$

50,062

$

52,073

$

150,248

$

157,986

Adjusted FFO per diluted share

$

0.25

$

0.26

$

0.75

$

0.78

 

(1)

During the three months ended September 30, 2017, we recorded a refund of $0.2 million of transfer taxes originally paid to the City and County of San Francisco in connection with our acquisition of the Hotel Rex.

(2)

Includes items related to the hotel manager change at the Courtyard Manhattan Midtown East during the third quarter, as follows: (a) employee severance costs of approximately $0.4 million, (b) transition costs of approximately $0.1 million offset by (c) $1.9 million of accelerated amortization of key money received from Marriott.

(3)

Amounts are 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.

 

Full Year 2017 Guidance

Low End

High End

Net income

$

81,603

$

87,603

Real estate related depreciation and amortization

100,000

99,000

Impairment losses

2,357

2,357

FFO

183,960

188,960

Non-cash ground rent

6,300

6,300

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

(1,900)

(1,900)

Acquisition costs

2,028

2,028

Natural disaster costs

3,000

3,000

Hotel manager transition costs (1)

(1,362)

(1,362)

Loss on early extinguishment of debt

274

274

Adjusted FFO

$

192,300

$

197,300

Adjusted FFO per diluted share

$

0.95

$

0.98

 

(1)

Includes items related to the hotel manager change at the Courtyard Manhattan Midtown East during the third quarter, as follows: (a) employee severance costs of approximately $0.4 million, (b) transition costs of approximately $0.1 million offset by (c) $1.9 million of accelerated amortization of key money received from Marriott.

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 includes the pre-acquisition results for our 2017 acquisitions and excludes the results for our 2016 dispositions (in thousands):

 

Three Months Ended 

September 30,

Nine Months Ended 

September 30,

2017

2016

2017

2016

Revenues

$

223,486

$

220,239

$

662,968

$

689,937

Hotel revenues from prior ownership (1)

6,870

3,422

20,101

Hotel revenues from closed hotels (2)

(12,596)

(15,779)

(55,639)

(59,344)

Hotel revenues from sold hotels (3)

(152)

(45,316)

Comparable Revenues

$

210,890

$

211,178

$

610,751

$

605,378

Hotel Adjusted EBITDA

$

68,866

$

70,682

$

206,333

$

217,666

Hotel Adjusted EBITDA from prior ownership (1)

1,312

229

4,281

Hotel Adjusted EBITDA from closed hotels (2)

(2,013)

(2,629)

(15,938)

(16,963)

Hotel Adjusted EBITDA from sold hotels (3)

4

(11,650)

Comparable Hotel Adjusted EBITDA

$

66,853

$

69,369

$

190,624

$

193,334

Hotel Adjusted EBITDA Margin

30.81

%

32.09

%

31.12

%

31.55

%

Comparable Hotel Adjusted EBITDA Margin

31.70

%

32.85

%

31.21

%

31.94

%

 

(1)

Amounts represent the pre-acquisition operating results of the L'Auberge de Sedona and Orchards Inn Sedona for the period from January 1, 2017 to February 27, 2017 and January 1, 2016 to September 30, 2016, respectively.  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 seller. The pre-acquisition operating results were not audited or reviewed by the Company's independent auditors.

(2)

Amounts represent the operating results of Frenchman's Reef and Morning Star Marriott Beach Resort and Inn at Key West as they are closed due to hurricane damage.

(3)

Amounts represent the historical operating results of the Orlando Airport Marriott, Minneapolis Hilton and Hilton Garden Inn Chelsea for their respective ownership periods.

Comparable Hotel Operating Expenses

The following table sets forth hotel operating expenses for the three and nine months ended September 30, 2017 and 2016 for each of the hotels that we owned during these periods.  Our GAAP hotel operating expenses for the three and nine months ended September 30, 2017 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 2017 comparable to our ownership period in 2016, the amounts in the column titled "Adjustments for Acquisitions and Dispositions" represent the pre-acquisition operating costs of the L'Auberge de Sedona and Orchards Inn Sedona for the period from January 1, 2017 to February 27, 2017 and January 1, 2016 to September 30, 2016 and excludes the operating costs of the Orlando Airport Marriott, Minneapolis Hilton and Hilton Garden Inn Chelsea for the time periods presented.  The amounts in the column titled "Adjustments for Closed Hotels" represent the operating costs for all periods presented of Frenchman's Reef and Morning Star Marriott Beach Resort and Inn at Key West as they are closed due to hurricane damage. 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.

 

As Reported

Adjustments for 

Acquisitions/ 

Dispositions

Adjustments for 

Closed Hotels

Comparable

Three Months Ended September 30,

Three Months Ended September 30,

2017

2016

Change

2017

2016

2017

2016

2017

2016

Change

Rooms departmental expenses

$

41,945

$

39,766

5.5

%

$

$

1,266

$

(1,764)

$

(2,495)

$

40,181

$

38,537

4.3

%

Food and beverage departmental expenses

30,794

29,103

5.8

%

1,980

(4,161)

(3,849)

26,633

27,234

(2.2)

%

Other direct departmental

3,082

3,022

2.0

%

350

(664)

(636)

2,418

2,736

(11.6)

%

General and administrative

19,181

17,742

8.1

%

586

(1,394)

(1,761)

17,787

16,567

7.4

%

Utilities

6,487

6,740

(3.8)

%

156

(1,229)

(1,349)

5,258

5,547

(5.2)

%

Repairs and maintenance

8,776

8,578

2.3

%

308

(724)

(907)

8,052

7,979

0.9

%

Sales and marketing

15,155

14,765

2.6

%

432

(1,167)

(1,131)

13,988

14,066

(0.6)

%

Franchise fees

6,231

5,484

13.6

%

(13)

6,231

5,471

13.9

%

Base management fees

3,373

5,393

(37.5)

%

196

(351)

(437)

3,022

5,152

(41.3)

%

Incentive management fees

1,983

2,262

(12.3)

%

1,983

2,262

(12.3)

%

Property taxes

13,078

12,302

6.3

%

44

(54)

(62)

13,024

12,284

6.0

%

Ground rent

2,573

2,596

(0.9)

%

2,573

2,596

(0.9)

%

Insurance

1,526

1,693

(9.9)

%

68

(331)

(443)

1,195

1,318

(9.3)

%

Other fixed expenses

1,680

1,201

39.9

%

62

(95)

(79)

1,585

1,184

33.9

%

Total hotel operating expenses

$

155,864

$

150,647

3.5

%

$

$

5,435

$

(11,934)

$

(13,149)

$

143,930

$

142,933

0.7

%

Hotel manager transition costs

1,362

100.0

%

1,362

100.0

%

Natural disaster costs

(1,493)

(100.0)

%

1,351

(142)

(100.0)

%

Total adjusted hotel operating expenses

$

155,733

$

150,647

3.4

%

$

$

5,435

$

(10,583)

$

(13,149)

$

145,150

$

142,933

1.6

%

 

As Reported

Adjustments for 

Acquisitions/ 

Dispositions

Adjustments for 

Closed Hotels

Comparable

Nine Months Ended September 30,

Nine Months Ended September 30,

2017

2016

Change

2017

2016

2017

2016

2017

2016

Change

Rooms departmental expenses

$

120,411

$

121,737

(1.1)

%

$

773

$

(3,800)

$

(7,018)

$

(7,663)

$

114,166

$

110,274

3.5

%

Food and beverage departmental expenses

93,324

97,718

(4.5)

%

920

(2,698)

(12,622)

(12,887)

81,622

82,133

(0.6)

%

Other direct departmental

9,169

9,177

(0.1)

%

257

935

(2,128)

(2,044)

7,298

8,068

(9.5)

%

General and administrative

56,687

58,036

(2.3)

%

416

(2,306)

(5,236)

(5,577)

51,867

50,153

3.4

%

Utilities

18,627

20,035

(7.0)

%

106

(818)

(3,890)

(3,893)

14,843

15,324

(3.1)

%

Repairs and maintenance

26,336

27,069

(2.7)

%

209

(840)

(2,830)

(2,932)

23,715

23,297

1.8

%

Sales and marketing

44,584

47,381

(5.9)

%

263

(2,563)

(3,913)

(3,750)

40,934

41,068

(0.3)

%

Franchise fees

17,277

16,520

4.6

%

(585)

17,277

15,935

8.4

%

Base management fees

13,733

17,005

(19.2)

%

110

(719)

(1,573)

(1,674)

12,270

14,612

(16.0)

%

Incentive management fees

4,584

6,031

(24.0)

%

4,584

6,031

(24.0)

%

Property taxes

39,178

35,212

11.3

%

83

(959)

(175)

(183)

39,086

34,070

14.7

%

Ground rent

7,703

10,121

(23.9)

%

(2,901)

7,703

7,220

6.7

%

Insurance

4,858

5,541

(12.3)

%

45

(97)

(1,232)

(1,396)

3,671

4,048

(9.3)

%

Other fixed expenses

3,617

3,484

3.8

%

41

51

(435)

(382)

3,223

3,153

2.2

%

Total hotel operating expenses

$

460,088

$

475,067

(3.2)

%

$

3,223

$

(17,300)

$

(41,052)

$

(42,381)

$

422,259

$

415,386

1.7

%

Hotel manager transition costs

1,362

100.0

%

1,362

100.0

%

Natural disaster costs

(1,493)

(100.0)

%

1,351

(142)

(100.0)

%

Total adjusted hotel operating expenses

$

459,957

$

475,067

(3.2)

%

$

3,223

$

(17,300)

$

(39,701)

$

(42,381)

$

423,479

$

415,386

1.9

%

 

 

Market Capitalization as of September 30, 2017

(in thousands)

Enterprise Value

Common equity capitalization (at September 30, 2017 closing price of $10.95/share)

$

2,206,053

Consolidated debt (face amount)

947,757

Cash and cash equivalents

(166,619)

Total enterprise value

$

2,987,191

Share Reconciliation

Common shares outstanding

200,305

Unvested restricted stock held by management and employees

631

Share grants under deferred compensation plan

530

Combined shares outstanding

201,466

Debt Summary as of September 30, 2017

(dollars in thousands)

Property

Interest Rate

Term

Outstanding 

Principal

Maturity

Marriott Salt Lake City Downtown

4.25%

Fixed

$

57,122

November 2020

Westin Washington D.C. City Center

3.99%

Fixed

65,346

January 2023

The Lodge at Sonoma, a Renaissance Resort & Spa

3.96%

Fixed

28,432

April 2023

Westin San Diego

3.94%

Fixed

65,220

April 2023

Courtyard Manhattan / Midtown East

4.40%

Fixed

84,421

August 2024

Renaissance Worthington

3.66%

Fixed

84,504

May 2025

JW Marriott Denver at Cherry Creek

4.33%

Fixed

63,790

July 2025

Westin Boston Waterfront Hotel

4.36%

Fixed

198,922

November 2025

     Debt issuance costs, net

(4,989)

Total mortgage debt, net of unamortized debt issuance costs

$

642,768

Unsecured term loan

LIBOR + 1.45(1)

Variable

100,000

May 2021

Unsecured term loan

LIBOR + 1.45(2)

Variable

200,000

April 2022

     Debt issuance costs, net

(1,963)

Unsecured term loans, net of unamortized debt issuance costs

$

298,037

Senior unsecured credit facility

LIBOR + 1.50

Variable

$

May 2020 (3)

Total debt, net of unamortized debt issuance costs

$

940,805

Weighted-average interest rate of fixed rate debt

4.22%

Total weighted-average interest rate

3.75%

 

(1)

The interest rate as of September 30, 2017 was 2.68%.

(2)

The interest rate as of September 30, 2017 was 2.69%.

(3)

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

 

 

 

Operating Statistics – Third Quarter

ADR

Occupancy

RevPAR

Hotel Adjusted EBITDA Margin

3Q 2017

3Q 2016

B/(W)

3Q 2017

3Q 2016

B/(W)

3Q 2017

3Q 2016

B/(W)

3Q 2017

3Q 2016

B/(W)

Atlanta Alpharetta Marriott

$

162.05

$

168.83

(4.0)

%

76.1

%

74.6

%

1.5

%

$

123.25

$

125.87

(2.1)

%

30.57

%

36.03

%

-546 bps

Bethesda Marriott Suites

$

152.68

$

164.31

(7.1)

%

73.2

%

69.1

%

4.1

%

$

111.79

$

113.56

(1.6)

%

20.10

%

23.62

%

-352 bps

Boston Westin

$

262.82

$

252.89

3.9

%

81.5

%

87.5

%

(6.0)

%

$

214.21

$

221.19

(3.2)

%

31.31

%

32.06

%

-75 bps

Hilton Boston Downtown

$

321.72

$

319.55

0.7

%

92.3

%

92.6

%

(0.3)

%

$

297.04

$

295.76

0.4

%

45.12

%

45.15

%

-3 bps

Hilton Burlington

$

224.97

$

221.77

1.4

%

92.6

%

91.0

%

1.6

%

$

208.43

$

201.88

3.2

%

50.60

%

49.40

%

120 bps

Renaissance Charleston

$

227.46

$

209.97

8.3

%

87.4

%

92.3

%

(4.9)

%

$

198.80

$

193.72

2.6

%

37.61

%

37.14

%

47 bps

Chicago Marriott

$

225.10

$

223.48

0.7

%

87.2

%

84.5

%

2.7

%

$

196.29

$

188.75

4.0

%

31.71

%

31.58

%

13 bps

Chicago Gwen

$

223.15

$

222.73

0.2

%

89.4

%

88.9

%

0.5

%

$

199.57

$

197.93

0.8

%

25.48

%

38.04

%

-1256 bps

Courtyard Denver Downtown

$

217.19

$

211.53

2.7

%

88.1

%

88.4

%

(0.3)

%

$

191.37

$

187.03

2.3

%

52.49

%

52.69

%

-20 bps

Courtyard Fifth Avenue

$

266.17

$

266.76

(0.2)

%

92.9

%

93.7

%

(0.8)

%

$

247.18

$

250.09

(1.2)

%

21.15

%

24.22

%

-307 bps

Courtyard Midtown East

$

257.35

$

270.70

(4.9)

%

94.7

%

95.1

%

(0.4)

%

$

243.77

$

257.53

(5.3)

%

25.67

%

33.38

%

-771 bps

Fort Lauderdale Westin

$

141.95

$

140.24

1.2

%

79.9

%

85.1

%

(5.2)

%

$

113.38

$

119.30

(5.0)

%

19.25

%

27.77

%

-852 bps

Frenchman's Reef

$

215.66

$

196.57

9.7

%

86.6

%

81.6

%

5.0

%

$

186.74

$

160.31

16.5

%

13.47

%

14.09

%

-62 bps

JW Marriott Denver Cherry Creek

$

270.39

$

275.52

(1.9)

%

85.6

%

87.1

%

(1.5)

%

$

231.54

$

240.03

(3.5)

%

38.98

%

38.30

%

68 bps

Inn at Key West

$

159.50

$

165.14

(3.4)

%

90.9

%

79.1

%

11.8

%

$

145.06

$

130.56

11.1

%

36.37

%

37.84

%

-147 bps

Sheraton Suites Key West

$

221.87

$

218.30

1.6

%

81.5

%

78.4

%

3.1

%

$

180.89

$

171.24

5.6

%

34.94

%

33.54

%

140 bps

Lexington Hotel New York

$

256.48

$

251.31

2.1

%

94.0

%

94.8

%

(0.8)

%

$

241.14

$

238.14

1.3

%

22.74

%

20.53

%

221 bps

Hotel Rex

$

225.35

$

237.76

(5.2)

%

92.7

%

84.9

%

7.8

%

$

208.91

$

201.96

3.4

%

39.93

%

38.26

%

167 bps

Salt Lake City Marriott

$

170.44

$

165.71

2.9

%

80.3

%

73.4

%

6.9

%

$

136.79

$

121.65

12.4

%

38.64

%

39.47

%

-83 bps

L'Auberge de Sedona

$

478.26

$

436.92

9.5

%

72.5

%

73.0

%

(0.5)

%

$

346.94

$

318.84

8.8

%

16.84

%

16.49

%

35 bps

Orchards Inn Sedona

$

205.50

$

190.59

7.8

%

79.3

%

81.8

%

(2.5)

%

$

162.99

$

155.85

4.6

%

24.11

%

25.89

%

-178 bps

Shorebreak

$

281.74

$

256.64

9.8

%

83.8

%

85.7

%

(1.9)

%

$

236.22

$

220.01

7.4

%

41.28

%

41.33

%

-5 bps

The Lodge at Sonoma

$

368.44

$

336.17

9.6

%

80.2

%

88.2

%

(8.0)

%

$

295.50

$

296.45

(0.3)

%

39.17

%

38.04

%

113 bps

Hilton Garden Inn Times Square Central

$

247.91

$

260.05

(4.7)

%

97.7

%

98.1

%

(0.4)

%

$

242.20

$

255.16

(5.1)

%

30.58

%

34.25

%

-367 bps

Vail Marriott

$

200.36

$

187.56

6.8

%

78.4

%

76.9

%

1.5

%

$

157.09

$

144.31

8.9

%

24.45

%

26.12

%

-167 bps

Westin San Diego

$

200.25

$

193.87

3.3

%

90.5

%

90.9

%

(0.4)

%

$

181.27

$

176.27

2.8

%

37.99

%

37.99

%

0 bps

Westin Washington D.C. City Center

$

188.07

$

198.32

(5.2)

%

86.7

%

86.4

%

0.3

%

$

163.01

$

171.30

(4.8)

%

31.80

%

34.44

%

-264 bps

Renaissance Worthington

$

177.76

$

170.16

4.5

%

70.2

%

50.2

%

20.0

%

$

124.84

$

85.34

46.3

%

25.89

%

19.70

%

619 bps

Total (1)

$

227.75

$

224.91

1.3

%

85.4

%

84.0

%

1.4

%

$

194.42

$

188.88

2.9

%

30.81

%

31.72

%

-91 bps

Comparable Total (1) (2)

$

228.85

$

227.01

0.8

%

85.3

%

84.2

%

1.1

%

$

195.13

$

191.06

2.1

%

31.70

%

32.85

%

-115 bps

 

(1)

Amounts include the pre-acquisition operating results of the L'Auberge de Sedona and Orchards Inn Sedona for the period from July 1, 2016 to September 30, 2016 and exclude the three hotels sold in 2016.

(2)

Amounts exclude the operating results of Frenchman's Reef and Morning Star Marriott Beach Resort and Inn at Key West as they are closed due to hurricane damage.

 

Operating Statistics – Year to Date

ADR

Occupancy

RevPAR

Hotel Adjusted EBITDA Margin

YTD 2017

YTD 2016

B/(W)

YTD 2017

YTD 2016

B/(W)

YTD 2017

YTD 2016

B/(W)

YTD 2017

YTD 2016

B/(W)

Atlanta Alpharetta Marriott

$

168.15

$

174.58

(3.7)

%

76.3

%

73.7

%

2.6

%

$

128.27

$

128.67

(0.3)

%

32.74

%

35.86

%

-312 bps

Bethesda Marriott Suites

$

170.12

$

170.48

(0.2)

%

75.6

%

71.4

%

4.2

%

$

128.53

$

121.78

5.5

%

28.23

%

28.24

%

-1 bps

Boston Westin

$

254.66

$

242.15

5.2

%

79.1

%

82.0

%

(2.9)

%

$

201.37

$

198.46

1.5

%

31.47

%

31.11

%

36 bps

Hilton Boston Downtown

$

290.62

$

282.76

2.8

%

86.3

%

87.8

%

(1.5)

%

$

250.76

$

248.16

1.0

%

40.20

%

40.72

%

-52 bps

Hilton Burlington

$

180.10

$

180.39

(0.2)

%

81.5

%

81.4

%

0.1

%

$

146.86

$

146.82

%

40.39

%

41.53

%

-114 bps

Renaissance Charleston

$

245.39

$

223.06

10.0

%

79.1

%

90.9

%

(11.8)

%

$

194.10

$

202.75

(4.3)

%

36.72

%

39.64

%

-292 bps

Chicago Marriott

$

218.14

$

219.65

(0.7)

%

73.1

%

69.4

%

3.7

%

$

159.44

$

152.52

4.5

%

25.41

%

25.77

%

-36 bps

Chicago Gwen

$

219.29

$

208.80

5.0

%

73.0

%

76.8

%

(3.8)

%

$

160.17

$

160.33

(0.1)

%

22.46

%

29.77

%

-731 bps

Courtyard Denver Downtown

$

207.87

$

203.60

2.1

%

81.0

%

82.9

%

(1.9)

%

$

168.46

$

168.86

(0.2)

%

48.97

%

49.43

%

-46 bps

Courtyard Fifth Avenue

$

249.08

$

250.14

(0.4)

%

89.1

%

88.2

%

0.9

%

$

221.86

$

220.50

0.6

%

15.55

%

17.72

%

-217 bps

Courtyard Midtown East

$

243.41

$

251.17

(3.1)

%

90.1

%

91.9

%

(1.8)

%

$

219.26

$

230.80

(5.0)

%

24.18

%

28.31

%

-413 bps

Fort Lauderdale Westin

$

192.20

$

196.63

(2.3)

%

86.9

%

92.1

%

(5.2)

%

$

167.03

$

181.03

(7.7)

%

36.53

%

39.84

%

-331 bps

Frenchman's Reef

$

282.62

$

257.46

9.8

%

87.8

%

86.5

%

1.3

%

$

248.11

$

222.74

11.4

%

26.63

%

26.32

%

31 bps

JW Marriott Denver Cherry Creek

$

262.32

$

270.10

(2.9)

%

81.1

%

81.9

%

(0.8)

%

$

212.70

$

221.10

(3.8)

%

34.60

%

36.19

%

-159 bps

Inn at Key West

$

197.20

$

208.16

(5.3)

%

82.1

%

87.1

%

(5.0)

%

$

161.91

$

181.22

(10.7)

%

47.44

%

46.85

%

59 bps

Sheraton Suites Key West

$

256.78

$

260.24

(1.3)

%

89.5

%

88.2

%

1.3

%

$

229.77

$

229.56

0.1

%

45.38

%

44.35

%

103 bps

Lexington Hotel New York

$

231.36

$

230.77

0.3

%

92.1

%

90.3

%

1.8

%

$

213.14

$

208.44

2.3

%

13.69

%

14.76

%

-107 bps

Hotel Rex

$

224.87

$

238.58

(5.7)

%

83.9

%

83.9

%

%

$

188.64

$

200.28

(5.8)

%

35.14

%

36.77

%

-163 bps

Salt Lake City Marriott

$

167.03

$

161.18

3.6

%

79.3

%

71.0

%

8.3

%

$

132.49

$

114.44

15.8

%

40.12

%

36.45

%

367 bps

L'Auberge de Sedona (1)

$

551.56

$

474.28

16.3

%

76.8

%

74.9

%

1.9

%

$

423.72

$

355.25

19.3

%

25.77

%

22.28

%

349 bps

Orchards Inn Sedona (1)

$

231.35

$

207.76

11.4

%

84.1

%

83.5

%

0.6

%

$

194.50

$

173.55

12.1

%

34.34

%

32.50

%

184 bps

Shorebreak

$

244.28

$

232.01

5.3

%

76.3

%

81.3

%

(5.0)

%

$

186.38

$

188.73

(1.2)

%

29.54

%

34.10

%

-456 bps

The Lodge at Sonoma

$

326.04

$

294.85

10.6

%

65.1

%

81.4

%

(16.3)

%

$

212.12

$

240.07

(11.6)

%

27.81

%

30.92

%

-311 bps

Hilton Garden Inn Times Square Central

$

227.06

$

234.74

(3.3)

%

97.0

%

96.4

%

0.6

%

$

220.20

$

226.36

(2.7)

%

27.25

%

29.71

%

-246 bps

Vail Marriott

$

282.34

$

271.71

3.9

%

75.0

%

73.4

%

1.6

%

$

211.68

$

199.34

6.2

%

35.08

%

37.13

%

-205 bps

Westin San Diego

$

198.46

$

189.79

4.6

%

86.9

%

86.4

%

0.5

%

$

172.39

$

163.95

5.1

%

39.36

%

37.74

%

162 bps

Westin Washington D.C. City Center

$

223.17

$

222.66

0.2

%

86.6

%

85.9

%

0.7

%

$

193.29

$

191.30

1.0

%

40.03

%

38.65

%

138 bps

Renaissance Worthington

$

182.09

$

180.21

1.0

%

75.4

%

64.1

%

11.3

%

$

137.36

$

115.59

18.8

%

36.10

%

32.89

%

321 bps

Total

$

228.67

$

225.55

1.4

%

81.5

%

80.9

%

0.6

%

$

186.46

$

182.51

2.2

%

31.12

%

31.55

%

-43 bps

Comparable Total (2)

$

226.51

$

224.03

1.1

%

81.2

%

80.5

%

0.7

%

$

183.91

$

180.26

2.0

%

31.21

%

31.94

%

-73 bps

 

(1)

Hotels were acquired on February 28, 2017. Amounts reflect the operating results these hotels for the period from February 28, 2017 to September 30, 2017 and February 28, 2016 to September 30, 2016, respectively.

(2)

Amounts include the pre-acquisition operating results of the L'Auberge de Sedona and Orchards Inn Sedona for the period from January 1, 2017 to February 27, 2017 and January 1, 2016 to September 30, 2016, respectively, and exclude the three hotels sold in 2016.  Amounts exclude the operating results of Frenchman's Reef and Morning Star Marriott Beach Resort and Inn at Key West as they are closed due to hurricane damage.

 

Hotel Adjusted EBITDA Reconciliation

Third Quarter 2017

Plus:

Plus:

Plus:

Equals:

Total Revenues

Net Income / (Loss)

Depreciation

Interest Expense

Adjustments (1)

Hotel Adjusted 

EBITDA

Atlanta Alpharetta Marriott

$

4,540

$

994

$

394

$

$

$

1,388

Bethesda Marriott Suites

$

3,707

$

(1,115)

$

347

$

$

1,513

$

745

Boston Westin

$

23,444

$

2,945

$

2,194

$

2,261

$

(60)

$

7,340

Hilton Boston Downtown

$

11,645

$

4,016

$

1,238

$

$

$

5,254

Hilton Burlington

$

6,034

$

2,541

$

512

$

$

$

3,053

Renaissance Charleston

$

3,470

$

949

$

388

$

$

(32)

$

1,305

Chicago Marriott

$

30,712

$

6,367

$

3,751

$

18

$

(397)

$

9,739

Chicago Gwen

$

7,719

$

878

$

1,089

$

$

$

1,967

Courtyard Denver Downtown

$

3,328

$

1,438

$

309

$

$

$

1,747

Courtyard Fifth Avenue

$

4,383

$

429

$

446

$

$

52

$

927

Courtyard Midtown East

$

7,487

$

(265)

$

676

$

1,002

$

509

$

1,922

Fort Lauderdale Westin

$

7,673

$

191

$

1,286

$

$

$

1,477

Frenchman's Reef

$

11,213

$

(945)

$

1,104

$

$

1,351

$

1,510

JW Marriott Denver Cherry Creek

$

6,193

$

1,192

$

507

$

715

$

$

2,414

Inn at Key West

$

1,383

$

374

$

129

$

$

$

503

Sheraton Suites Key West

$

3,334

$

729

$

294

$

$

142

$

1,165

Lexington Hotel New York

$

17,156

$

411

$

3,478

$

5

$

8

$

3,902

Hotel Rex

$

2,061

$

684

$

139

$

$

$

823

Salt Lake City Marriott

$

8,755

$

2,208

$

531

$

644

$

$

3,383

L'Auberge de Sedona

$

5,213

$

393

$

485

$

$

$

878

Orchards Inn Sedona

$

1,962

$

198

$

234

$

$

41

$

473

Shorebreak

$

4,726

$

1,512

$

454

$

$

(15)

$

1,951

The Lodge at Sonoma

$

7,294

$

2,068

$

495

$

294

$

$

2,857

Hilton Garden Inn Times Square Central

$

6,394

$

1,161

$

794

$

$

$

1,955

Vail Marriott

$

8,461

$

1,572

$

497

$

$

$

2,069

Westin San Diego

$

9,414

$

1,816

$

1,094

$

666

$

$

3,576

Westin Washington D.C. City Center

$

7,631

$

422

$

1,299

$

706

$

$

2,427

Renaissance Worthington

$

8,154

$

377

$

919

$

813

$

2

$

2,111

Total

$

223,486

$

33,540

$

25,083

$

7,124

$

3,114

$

68,866

Less: Closed Hotels (2)

$

(12,596)

$

571

$

(1,233)

$

$

(1,351)

$

(2,013)

Comparable Total

$

210,890

$

34,111

$

23,850

$

7,124

$

1,763

$

66,853

 

(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 manager transition costs.

(2)

Amounts represent the operating results of Frenchman's Reef and Morning Star Marriott Beach Resort and Inn at Key West as they are closed due to hurricane damage.

 

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

$

3,449

$

(34)

$

(397)

$

9,669

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

$

23,605

$

8,560

$

1,090

$

70,682

Add: Prior Ownership Results(2)

$

6,870

$

346

$

934

$

$

32

$

1,312

Less: Sold Hotels (3)

$

(152)

$

4

$

$

$

$

4

Less: Closed Hotels (4)

$

(15,779)

$

(827)

$

(1,802)

$

$

$

(2,629)

Comparable Total

$

211,178

$

37,059

$

22,737

$

8,560

$

1,122

$

69,369

 

(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 manager transition costs.

(2)

Amounts represent the pre-acquisition operating results of the L'Auberge de Sedona and Orchards Inn Sedona for the period from July 1, 2016 to September 30, 2016.

(3)

Amounts represent the operating results of the three hotels sold in 2016: Orlando Airport Marriott, Minneapolis Hilton and Hilton Garden Inn Chelsea.

(4)

Amounts represent the operating results of Frenchman's Reef and Morning Star Marriott Beach Resort and Inn at Key West as they are closed due to hurricane damage.

 

Hotel Adjusted EBITDA Reconciliation

Year to Date 2017

Plus:

Plus:

Plus:

Equals:

Total Revenues

Net Income / (Loss)

Depreciation

Interest Expense

Adjustments (1)

Hotel Adjusted 

EBITDA

Atlanta Alpharetta Marriott

$

14,845

$

3,696

$

1,164

$

$

$

4,860

Bethesda Marriott Suites

$

12,629

$

(2,024)

$

1,039

$

$

4,550

$

3,565

Boston Westin

$

70,371

$

9,024

$

6,567

$

6,738

$

(181)

$

22,148

Hilton Boston Downtown

$

29,651

$

8,210

$

3,710

$

$

$

11,920

Hilton Burlington

$

13,083

$

3,740

$

1,544

$

$

$

5,284

Renaissance Charleston

$

9,948

$

2,635

$

1,113

$

$

(95)

$

3,653

Chicago Marriott

$

77,887

$

9,895

$

10,965

$

121

$

(1,192)

$

19,789

Chicago Gwen

$

18,220

$

1,074

$

3,018

$

$

$

4,092

Courtyard Denver Downtown

$

8,723

$

3,382

$

890

$

$

$

4,272

Courtyard Fifth Avenue

$

11,689

$

321

$

1,342

$

$

155

$

1,818

Courtyard Midtown East

$

20,009

$

(656)

$

1,998

$

2,987

$

509

$

4,838

Fort Lauderdale Westin

$

33,858

$

8,517

$

3,852

$

$

$

12,369

Frenchman's Reef

$

50,247

$

7,634

$

4,395

$

$

1,351

$

13,380

JW Marriott Denver Cherry Creek

$

17,771

$

2,496

$

1,522

$

2,131

$

$

6,149

Inn at Key West

$

5,392

$

2,041

$

517

$

$

$

2,558

Sheraton Suites Key West

$

13,559

$

5,138

$

873

$

$

142

$

6,153

Lexington Hotel New York

$

44,658

$

(6,266)

$

10,422

$

1,932

$

24

$

6,112

Hotel Rex

$

5,529

$

1,520

$

423

$

$

$

1,943

Salt Lake City Marriott

$

26,042

$

6,942

$

1,580

$

1,926

$

$

10,448

L'Auberge de Sedona

$

14,573

$

2,579

$

1,177

$

$

$

3,756

Orchards Inn Sedona

$

5,408

$

1,215

$

545

$

$

97

$

1,857

Shorebreak

$

10,955

$

1,981

$

1,299

$

$

(44)

$

3,236

The Lodge at Sonoma

$

16,682

$

2,409

$

1,352

$

878

$

$

4,639

Hilton Garden Inn Times Square Central

$

17,275

$

2,331

$

2,376

$

$

$

4,707

Vail Marriott

$

29,663

$

8,911

$

1,496

$

$

$

10,407

Westin San Diego

$

27,948

$

5,724

$

3,290

$

1,986

$

$

11,000

Westin Washington D.C. City Center

$

26,452

$

4,591

$

3,887

$

2,112

$

$

10,590

Renaissance Worthington

$

29,901

$

5,694

$

2,675

$

2,419

$

6

$

10,794

Total

$

662,968

$

102,754

$

75,031

$

23,230

$

5,322

$

206,333

Add: Prior Ownership Results (2)

$

3,422

$

(293)

$

522

$

$

$

229

Less: Closed Hotels (3)

$

(55,639)

$

(9,675)

$

(4,912)

$

$

(1,351)

$

(15,938)

Comparable Total

$

610,751

$

92,786

$

70,641

$

23,230

$

3,971

$

190,624

 

(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 manager transition costs.

(2)

Amounts represent the pre-acquisition operating results of the L'Auberge de Sedona and Orchards Inn Sedona for the period from January 1, 2017 to February 27, 2017.

(3)

Amounts represent the operating results of Frenchman's Reef and Morning Star Marriott Beach Resort and Inn at Key West as they are closed due to hurricane damage.

 

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

$

9,867

$

410

$

(1,192)

$

19,159

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

$

73,731

$

29,771

$

2,795

$

217,666

Add: Prior Ownership Results(2)

$

20,101

$

1,416

$

2,802

$

$

63

$

4,281

Less: Sold Hotels (3)

$

(45,316)

$

(5,527)

$

(4,091)

$

(2,514)

$

482

$

(11,650)

Less: Closed Hotels (4)

$

(59,344)

$

(11,581)

$

(5,382)

$

$

$

(16,963)

Comparable Total

$

605,378

$

95,918

$

67,060

$

27,257

$

3,340

$

193,334

 

(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 manager transition costs.

(2)

Amounts represent the pre-acquisition operating results of the L'Auberge de Sedona and Orchards Inn Sedona for the period from January 1, 2016 to September 30, 2016.

(3)

Amounts represent the operating results of the three hotels sold in 2016: Orlando Airport Marriott, Minneapolis Hilton and Hilton Garden Inn Chelsea.

(4)

Amounts represent the operating results of Frenchman's Reef and Morning Star Marriott Beach Resort and Inn at Key West as they are closed due to hurricane damage.



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