Pebblebrook Hotel Trust Reports Second Quarter 2013 Results
Pebblebrook Hotel Trust Reports Second Quarter 2013 Results
Same-Property RevPAR Increased 6.0 Percent; Adjusted EBITDA Rose 30.2 Percent
|Second Quarter||Six Months Ended, June 30|
|($ in millions except per share and RevPAR data)|
Net income (loss) to common shareholders
|Net income (loss) per diluted share||$0.14||$0.10||$0.06||$(0.04)|
|Same-Property RevPAR growth rate||6.0%||7.2%|
|Same-Property EBITDA growth rate||8.8%||10.8%|
|Same-Property EBITDA Margin(1)||31.1%||30.1%||26.5%||25.3%|
|Adjusted EBITDA growth rate||30.2%||38.3%|
|Adjusted FFO per diluted share(1)||$0.43||$0.37||$0.62||$0.48|
|Adjusted FFO per diluted share growth rate||14.8%||29.1%|
(1)See tables later in this press release for a description of same-property information and reconciliations from net income (loss) to non-GAAP financial measures, including earnings before interest, taxes, depreciation and amortization ("EBITDA"), Adjusted EBITDA, Funds from Operations ("FFO"), FFO per share, Adjusted FFO and Adjusted FFO per share.
For the details as to which hotels are included in Same-Property revenue per available room ("RevPAR"), average daily rate ("ADR"), Occupancy, Revenues, Expenses, EBITDA and EBITDA Margins appearing in the table above and elsewhere in this press release, refer to the Same-Property Inclusion Reference Table later in this press release.
"We're very pleased with our portfolio's performance in the second quarter, as we benefitted from the ongoing recovery in the industry and the consistent outperformance we're able to generate on a top-line and bottom-line basis," said Jon E. Bortz, Chairman, President and Chief Executive Officer of Pebblebrook Hotel Trust. "Overall fundamentals for our portfolio and the lodging industry remain strong as we continue to experience healthy demand growth from the corporate and leisure transient segments. In addition, demand growth is also being supplemented by robust growth in international inbound travel, primarily benefitting the major gateway cities, particularly those in which our hotels are located."
Second Quarter Highlights
- Same-Property RevPAR: Same-Property revenue per available room ("Same-Property RevPAR") in the second quarter of 2013 increased 6.0 percent over the same period of 2012 to $195.42. Same-Property average daily rate ("Same-Property ADR") grew 4.4 percent from the second quarter of 2012 to $227.25. Same-Property Occupancy rose 1.5 percent to a robust 86.0 percent.
- Same-Property EBITDA: The Company's hotels generated $46.1 million of Same-Property EBITDA for the quarter ended June 30, 2013, climbing 8.8 percent compared with the same period of 2012. Same-Property Revenues increased 5.6 percent, while Same-Property Expenses rose 4.2 percent. As a result, Same-Property EBITDA Margin grew to 31.1 percent for the quarter ended June 30, 2013, representing an increase of 93 basis points as compared to the same period last year.
- Adjusted EBITDA: The Company's Adjusted EBITDA increased to $42.8 million from $32.9 million in the prior year period, an increase of $9.9 million, or 30.2 percent.
- Adjusted FFO: The Company's Adjusted FFO climbed to $26.4 million from $20.1 million in the prior year period, an increase of 31.2 percent.
- Dividends: On June 14, 2013, the Company declared a regular quarterly cash dividend of $0.16 per share on its common shares, a regular quarterly cash dividend of $0.4921875 per share on its 7.875 percent Series A Cumulative Redeemable Preferred Shares, a regular quarterly cash dividend of $0.50 per share on its 8.0 percent Series B Cumulative Redeemable Preferred Shares and a regular quarterly cash dividend of $0.40625 per share on its 6.50 percent Series C Cumulative Redeemable Preferred Shares.
"Our operators, working closely with our asset management team, were able to increase Same-Property EBITDA 8.8 percent over the prior year period and improve operating margins by 93 basis points during the quarter, despite the significant negative impact from the renovation disruptions caused by the on-going comprehensive renovations at the Affinia 50 and the public area renovations at the Affinia Manhattan," added Mr. Bortz. "We believe our portfolio has significant opportunities to generate outsized revenue and EBITDA growth as we continue to make progress implementing our array of asset management initiatives, best practices and operating efficiencies. Our strong second quarter results illustrate the benefits of our strategy of primarily investing in high-quality hotels that have historically underperformed, are located in dynamic urban markets in major gateway cities and which will benefit from our comprehensive asset management approach."
During the second quarter, the Company invested $11.7 million in capital improvements throughout its portfolio. The Company's capital investments included $2.6 million at the Affinia 50, $1.5 million at Hotel Zetta, $1.3 million at Vintage Park Seattle, and $1.2 million at Sofitel Philadelphia.
In January 2013, the Company commenced a $4.5 million refurbishment of the Sofitel Philadelphia guest rooms and corridors, which it completed in April 2013.
Also in January, the Company, along with its joint venture partner, commenced an $18.0 to $20.0 million comprehensive renovation, reconfiguration and expansion of the Affinia 50, which includes renovating the guest rooms, corridors, lobby, public areas and exterior. The reconfiguration of the hotel will increase the number of guest rooms by almost 20 percent, from 210 to 251. The project is on schedule and on budget and is expected to be substantially complete by the fourth quarter of 2013. The Company expects to fund its 49 percent pro rata interest of the remaining total project costs with available cash.
In June 2013, the Company, along with its joint venture partner, completed a $7.3 million renovation of the Affinia Manhattan lobby, entry, back-of-house and meeting space, which included the reconfiguration and creation of 2,167 square feet of additional meeting space. The completion of these improvements concludes the third and final phase of the multi-year $35.0 million comprehensive renovation of the property.
In addition to its capital reinvestment programs, Pebblebrook remains committed to implementing a comprehensive array of asset management best practices, initiatives and operating efficiencies throughout its portfolio to boost hotel revenues and improve operating efficiencies in a continuous effort to drive strong margin growth. Since its first hotel acquisition in 2010, the Company has identified approximately $16.7 million of annualized best practices and asset management opportunities throughout its portfolio that it has either implemented or is in the process of implementing.
On April 4, 2013, the joint venture that owns the Manhattan Collection successfully completed a new $50.0 million interest-only, non-recourse, secured loan at a fixed annual interest rate of 3.14 percent and a term of five years. The loan is collateralized by a first mortgage on the 242-room Affinia Dumont hotel in New York, New York.
On April 11, 2013, the underwriters exercised in full their over-allotment option to purchase an additional 400,000 shares of the Company's 6.50% Series C Cumulative Redeemable Preferred Shares, resulting in additional net proceeds of approximately $9.6 million.
During the second quarter of 2013, the Company issued and sold 171,293 common shares under its ATM offering program at an average price of $28.09 per share, for total net proceeds of $4.7 million.
- Same-Property RevPAR, ADR and Occupancy: Same-Property RevPAR for the six months ended June 30, 2013 increased 7.2 percent over the same period of 2012 to $177.97. Year-to-date, Same-Property ADR grew 3.9 percent from the comparable period of 2012 to $215.20, while year-to-date Same-Property Occupancy climbed 3.2 percent to 82.7 percent.
- Same-Property Hotel EBITDA: The Company's hotels generated $71.8 million of Same-Property Hotel EBITDA for the six months ended June 30, 2013, an improvement of 10.8 percent compared with the same period of 2012. Same-Property Hotel Revenues grew 5.7 percent, while Same-Property Hotel Expenses rose 4.0 percent. As a result, Same-Property Hotel EBITDA Margin for the six months ended June 30, 2013 increased 121 basis points to 26.5 percent as compared to the same period last year.
- Adjusted EBITDA: The Company's Adjusted EBITDA increased 38.3 percent, or $18.0 million, to $64.8 million from $46.9 million in the prior year period.
- Adjusted FFO: The Company's Adjusted FFO climbed 50.1 percent to $38.4 million from $25.6 million in the prior year period.
As of June 30, 2013, the Company had $528.9 million in consolidated debt and $225.4 million in unconsolidated, non-recourse, secured debt at weighted-average interest rates of 4.4 percent and 3.6 percent, respectively. The Company's total combined pro rata weighted-average interest rate is 4.1 percent. The Company had $100.0 million outstanding in the form of an unsecured term loan and no outstanding balance on its $200.0 million senior unsecured revolving credit facility. As of June 30, 2013, the Company had $165.4 million of consolidated cash, cash equivalents and restricted cash and $12.6 million of unconsolidated cash, cash equivalents and restricted cash. The unconsolidated debt, cash, cash equivalents and restricted cash amounts represent the Company's 49 percent pro rata interest in the Manhattan Collection.
On June 30, 2013, as defined in the Company's credit agreement, the Company's fixed charge coverage ratio was 2.2 times and total net debt to trailing 12-month corporate EBITDA was 4.2 times. The Company's total debt to total assets ratio was 32 percent. Excluding its interest in the off-balance sheet Manhattan Collection, the Company's fixed charge coverage ratio was 2.1 times, net debt to trailing 12-month corporate EBITDA was 3.3 times and total debt to total assets ratio was 28 percent.
On July 24, the Company announced that it will up-brand and reposition its 310-room Sheraton Delfina Santa Monica to the upper upscale Le Méridien brand. This conversion is expected to be complete in the fourth quarter of 2013. In conjunction with the re-branding and repositioning, the Company expects to incur approximately $0.5 million of transition costs and invest an additional $2.0 million for capital improvements in the hotel. Viceroy Hotels and Resorts will continue to manage the property.
The Company's outlook for 2013, which assumes no additional acquisitions, incorporates the Company's recently completed capital markets activities and assumes continued improvement in economic activity, positive business travel trends and other significant assumptions, is as follows:
($ and shares/units in millions,
except per share and RevPAR data)
|Net income per diluted share||$0.65||$0.68|
|Adjusted FFO per diluted share||$1.40||$1.44|
This 2013 outlook is based, in part, on the following estimates and assumptions:
|U.S. GDP growth rate||1.75%||2.25%|
|U.S. Hotel Industry RevPAR growth rate||5.0%||6.5%|
|Same-Property RevPAR growth rate||5.5%||7.0%|
|Same-Property EBITDA Margin||28.0%||28.5%|
|Same-Property EBITDA Margin growth rate||75 bps||125 bps|
|Corporate cash general and administrative expenses||$11.5||$12.0|
|Corporate non-cash general and administrative expenses||$3.0||$3.5|
|Total capital investments related to renovations, capital maintenance and return on investment projects||$55.0||$65.0|
|Weighted-average fully diluted shares and units||61.6||61.6|
The Company's outlook for the third quarter of 2013 is as follows:
|Third Quarter 2013 Outlook|
($ and shares/units in millions,
except per share and RevPAR data)
|Same-Property RevPAR growth rate||5.0%||6.0%|
|Same-Property EBITDA Margin||31.2%||31.7%|
|Same-Property EBITDA Margin growth rate||25 bps||75 bps|
|Adjusted FFO per diluted share||$0.41||$0.43|
|Weighted-average fully diluted shares and units||61.6||61.6|
The Company's 2013 and Third Quarter Outlooks reflect the Company's 49 percent pro rata interest in the Manhattan Collection.
The Company's estimates and assumptions for Same-Property RevPAR, Same-Property RevPAR growth rate, Same-Property EBITDA, Same-Property EBITDA Margin and Same-Property EBITDA Margin growth rate for 2013 include the hotels owned as of June 30, 2013 as if they had been owned by the Company for the entire year of 2013, except for Hotel Zetta, which is not included in the first quarters of 2012 and 2013. The Company's 2013 outlook assumes no additional acquisitions beyond the hotels the Company owned as of June 30, 2013.
The Company will conduct its quarterly analyst and investor conference call on Friday, July 26, 2013 at 9:00 AM EDT. To participate in the conference call, please dial (888) 684-1278 approximately ten minutes before the call begins. Additionally, a live webcast of the conference call will be available through the Company's website. To access the webcast, log on to http://www.pebblebrookhotels.com ten minutes prior to the conference call. A replay of the conference call webcast will be archived and available online through the Investor Relations section of http://www.pebblebrookhotels.com.
About Pebblebrook Hotel Trust
Pebblebrook Hotel Trust is a publicly traded real estate investment trust ("REIT") organized to opportunistically acquire and invest primarily in upper upscale, full-service hotels located in urban markets in major gateway cities. The Company owns 26 hotels, including 20 wholly owned hotels with a total of 4,960 guest rooms and a 49% joint venture interest in six hotels with a total of 1,733 guest rooms. The Company owns, or has an ownership interest in, hotels located in ten states and the District of Columbia, across 16 markets: Los Angeles, California; San Diego, California; San Francisco, California; Santa Monica, California; West Hollywood, California; Miami, Florida; Buckhead, Georgia; Bethesda, Maryland; Boston, Massachusetts; Minneapolis, Minnesota; New York, New York; Portland, Oregon; Philadelphia, Pennsylvania; Columbia River Gorge, Washington; Seattle, Washington; and Washington, DC. For more information, please visit us at www.pebblebrookhotels.com and on Twitter at @PebblebrookPEB.
This press release contains certain "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Reform Act of 1995.Forward-looking statements are generally identifiable by use of forward-looking terminology such as "may," "will," "should," "potential," "intend," "expect," "seek," "anticipate," "estimate," "approximately," "believe," "could," "project," "predict," "forecast," "continue," "assume," "plan," references to "outlook" or other similar words or expressions.Forward-looking statements are based on certain assumptions and can include future expectations, future plans and strategies, financial and operating projections and forecasts and other forward-looking information and estimates.Examples of forward-looking statements include the following: projections and forecasts of U.S. GDP growth, U.S. hotel industry RevPAR growth, the Company's net income, FFO, EBITDA, Adjusted FFO, Adjusted EBITDA, RevPAR, EBITDA Margin and EBITDA Margin growth, and the Company's expenses, share count or other financial items; descriptions of the Company's plans or objectives for future operations, acquisitions or services; forecasts of the Company's future economic performance and its share of future markets; forecasts of hotel industry performance; and descriptions of assumptions underlying or relating to any of the foregoing expectations including assumptions regarding the timing of their occurrence.These forward-looking statements are subject to various risks and uncertainties, many of which are beyond the Company's control, which could cause actual results to differ materially from such statements.These risks and uncertainties include, but are not limited to, the state of the U.S. economy and the supply of hotel properties, and other factors as are described in greater detail in the Company's filings with the Securities and Exchange Commission, including, without limitation, the Company's Annual Report on Form 10-K for the year ended December 31, 2012.Unless legally required, the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
For further information about the Company's business and financial results, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections of the Company's SEC filings, including, but not limited to, its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, copies of which may be obtained at the Investor Relations section of the Company's website atwww.pebblebrookhotels.com.
All information in this press release is as of July 25, 2013.The Company undertakes no duty to update the statements in this press release to conform the statements to actual results or changes in the Company's expectations.
For additional information or to receive press releases via email, please visit our website atwww.pebblebrookhotels.com
|Pebblebrook Hotel Trust|
|Consolidated Balance Sheets|
|($ in thousands)|
|June 30, 2013||December 31, 2012|
|Investment in hotel properties, net||$||1,530,629||$||1,417,229|
|Investment in joint venture||255,711||283,011|
|Ground lease asset, net||10,173||10,283|
|Cash and cash equivalents||151,592||85,900|
|Hotel receivables (net of allowance for doubtful accounts of $218 and $28, respectively)||25,538||13,463|
|Deferred financing costs, net||5,262||5,753|
|Prepaid expenses and other assets||24,263||18,489|
|LIABILITIES AND EQUITY|
|Senior unsecured revolving credit facility||$||-||$||-|
|Mortgage debt (including mortgage loan premium of $6,377 and $2,498, respectively)||435,319||368,508|
|Accounts payable and accrued expenses||54,190||47,364|
|Commitments and contingencies|
Preferred shares of beneficial interest, $.01 par value (liquidation preference of $325,000 and $225,000 at June 30, 2013 and December 31, 2012), 100,000,000 shares authorized; 13,000,000 shares issued and outstanding at June 30, 2013 and 9,000,000 issued and outstanding at December 31, 2012
Common shares of beneficial interest, $.01 par value, 500,000,000 shares authorized; 61,179,028 issued and outstanding at June 30, 2013 and 60,955,090 issued and outstanding at December 31, 2012
|Additional paid-in capital||1,464,904||1,362,349|
|Accumulated other comprehensive income (loss)||1,500||(300||)|
|Distributions in excess of retained earnings||(65,648||)||(49,798||)|
|Total shareholders' equity||1,401,498||1,312,951|
|Total liabilities and equity||$||2,016,970||$||1,846,162|