RLJ Lodging Trust Results

RLJ Lodging Trust Reports Fourth Quarter and Full Year 2019 Results

Reports 2019 RevPAR growth of 0.7%

RLJ Lodging Trust

RLJ Lodging Trust (NYSE: RLJ) yesterday reported results for the three months and year ended December 31, 2019.

Fourth Quarter Highlights

  • Pro forma RevPAR decrease of 0.5%
  • Pro forma Hotel EBITDA Margin of 30.0%
  • Net income of $34.9 million
  • Adjusted EBITDA of $96.3 million
  • Adjusted FFO per diluted common share and unit of $0.41
  • Repurchased 0.7 million common shares for approximately $12.2 million

Full Year Highlights

  • Pro forma RevPAR increase of 0.7%
  • Pro forma Hotel EBITDA Margin of 31.8%
  • Net income of $129.4 million
  • Adjusted EBITDA of $462.5 million
  • Adjusted FFO per diluted common share and unit of $2.03
  • Strategically reshaped portfolio with sale of 47 non-core hotels for approximately $724 million
  • Executed Wyndham termination agreement and received $35.0 million payment
  • Refinanced $1.4 billion of debt, reducing borrowing costs and extending maturities
  • Repurchased 4.6 million common shares for approximately $77.8 million

“2019 was a transformational year for RLJ as we successfully executed on our strategic plan to reshape our portfolio, enhance operating metrics, and improve our growth profile,” commented Leslie D. Hale, President and Chief Executive Officer. “As we enter 2020, our portfolio is uniquely positioned with tangible catalysts despite choppy fundamentals. We have a fortress balance sheet, which enables us to be nimble, and significant investment capacity, which allows us to pursue multiple value creation opportunities in both the near and long-term. RLJ is well positioned to create value in all phases of the lodging cycle.”

The prefix “Pro forma” as defined by the Company, denotes operating results which include results for periods prior to its ownership and excludes sold hotels. Pro forma RevPAR and Pro forma Hotel EBITDA Margin are reported on a comparable basis and therefore exclude any hotels sold during the period and non-comparable hotels that were not open for operation or were closed for renovation for comparable periods. Explanations of EBITDA, EBITDAre, Adjusted EBITDA, Hotel EBITDA, Hotel EBITDA Margin, FFO, and Adjusted FFO, as well as reconciliations of those measures to net income or loss, if applicable, are included within this release.

Pro forma RevPAR for the fourth quarter declined 0.5% from the comparable period in 2018. The Company's top performing markets were Louisville, Tampa, and Orlando with Pro forma RevPAR growth of 21.8%, 20.4%, and 9.0%, respectively. For the full year, the Company's top performing markets were Louisville, Austin, and Charleston with Pro forma RevPAR growth of 26.2%, 6.3%, and 5.4%, respectively.

Net Income for the fourth quarter was $34.9 million, an increase of $7.0 million from the comparable period in 2018.

Adjusted EBITDA for the fourth quarter was $96.3 million, a decrease of $17.6 million from the comparable period in 2018. For the three months ended December 31, 2018, adjusted EBITDA included $17.2 million from sold hotels.

Non-recurring items for the fourth quarter included an impairment loss of $13.5 million related to two hotel properties. The impairment loss is included in net income attributable to common shareholders but is excluded for the purpose of calculating Adjusted EBITDA and Adjusted FFO.

Financial and Operating Highlights

 

($ in millions, except ADR, RevPAR, and per share amounts)

(unaudited)
 

 

For the three months ended

December 31,

 

For the year ended

December 31,

 

2019

 

2018

 

Change

 

2019

 

2018

 

Change

Operational Overview: (1)

 

 

 

 

 

 

 

Pro forma ADR

$179.56

 

$181.72

 

(1.2)%

 

$182.96

 

$182.53

 

0.2%

Pro forma Occupancy

75.7%

75.2%

0.7%

 

79.0%

78.6%

0.4%

Pro forma RevPAR

$135.87

 

$136.62

 

(0.5)%

 

$144.51

 

$143.55

 

0.7%

 

 

 

 

 

 

 

 

Financial Overview:

 

 

 

 

 

 

 

Total Revenues

$347.1

 

$399.9

 

(13.2)%

 

$1,566.2

 

$1,761.2

 

(11.1)%

Pro forma Hotel Revenue

$342.1

 

$339.8

 

0.7%

 

$1,419.2

 

$1,398.8

 

1.5%

 

 

 

 

 

 

 

 

Net Income (2)

$34.9

 

$27.9

 

25.1%

 

$129.4

 

$190.9

 

(32.2)%

 

 

 

 

 

 

 

 

Pro forma Hotel EBITDA

$102.6

 

$106.0

 

(3.2)%

 

$450.7

 

$451.5

 

(0.2)%

Pro forma Hotel EBITDA Margin

30.0%

31.2%

(119) bps

 

31.8%

32.3%

(52) bps

Adjusted EBITDA (3)

$96.3

 

$113.8

 

(15.4)%

 

$462.5

 

$522.1

 

(11.4)%

 

 

 

 

 

 

 

 

Adjusted FFO

$69.3

 

$84.9

 

(18.5)%

 

$350.3

 

$395.7

 

(11.5)%

Adjusted FFO Per Diluted Common Share and Unit

$0.41

 

$0.49

 

(16.3)%

 

$2.03

 

$2.26

 

(10.2)%

Note:

(1) Pro forma statistics reflect the Company's 103 hotel portfolio as of February 25, 2020.

(2) Net Income for the three months ended December 31, 2019 and 2018, included $19.5 million and $5.1 million respectively, from sold hotels. Net Income for the year ended December 31, 2019 and 2018, included $18.1 million and $81.9 million respectively, from sold hotels.

(3) Adjusted EBITDA for the three months ended December 31, 2018 included $17.2 million from sold hotels. Adjusted EBITDA for the year ended December 31, 2019 and 2018, included $47.0 million and $106.2 million respectively, from sold hotels.

Fourth Quarter Disposition

On November 22, 2019, the Company sold five hotels in Austin, TX for a total sales price of $67.6 million. The sold portfolio included the following hotels:

  • 211-room Marriott Austin South
  • 152-room SpringHill Suites Austin South
  • 110-room Courtyard Austin South
  • 66-room Residence Inn Austin South
  • 63-room Fairfield Inn & Suites Austin South

Full Year Dispositions

For the year ended December 31, 2019, the Company sold 47 properties in five separate transactions consisting of:

  • 21 hotel portfolio with 2,555 rooms in June 2019
  • 255-room Embassy Suites Myrtle Beach Oceanfront Resort and the 385-room Hilton Myrtle Beach Resort in Myrtle Beach, SC in June 2019
  • 18 hotel portfolio with 2,119 rooms in August 2019
  • 108-room Residence Inn Columbia in September 2019
  • 5 hotel portfolio with 602 rooms in Austin, TX in November 2019

Share Repurchases

For the three months ended December 31, 2019, the Company repurchased 0.7 million shares of its common stock at an average price per share of $16.52 for approximately $12.2 million.

For the year ended December 31, 2019, the Company repurchased 4.6 million shares of its common stock at an average price per share of $17.01 for approximately $77.8 million.

Subsequent to year-end, the Company repurchased approximately 1.5 million shares of its common stock for approximately $24.5 million.

The Company's existing repurchase program will expire on February 29, 2020. On February 14, 2020, the Company's Board of Trustees authorized a new one year $250.0 million share repurchase program that will expire on February 28, 2021.

Balance Sheet

As of December 31, 2019, the Company had $882.5 million of unrestricted cash on its balance sheet, $600.0 million in capacity on its revolving credit facility, and $2.2 billion of debt outstanding.

The Company’s ratio of net debt to Adjusted EBITDA for the year ended December 31, 2019, was 3.1x.

Dividends

The Company’s Board of Trustees declared a cash dividend of $0.33 per common share of beneficial interest in the fourth quarter. The dividend was paid on January 15, 2020, to shareholders of record as of December 31, 2019. For the year ended December 31, 2019, the Company declared total dividends of $1.32 per common share of beneficial interest.

The Company's Board of Trustees declared a preferred dividend of $0.4875 on its Series A cumulative convertible preferred shares. The dividend was paid on January 31, 2020, to shareholders of record as of December 31, 2019. For the year ended December 31, 2019, the Company declared total dividends of $1.95 per Series A cumulative convertible preferred share.

Full Year Impact from Dispositions

The following table shows the impact of the sale of 47 non-core hotels in 2019 on Adjusted FFO and Adjusted EBITDA.

 

 

As Reported

for the Year Ended

December 31, 2019

 

Impact of

Dispositions

 

As Adjusted

for the Year Ended

December 31, 2019

Adjusted FFO

$350.3M

($46.2M)

$304.1M

Adjusted EBITDA

$462.5M

($47.0M)

$415.5M
 

2020 Outlook

The Company’s outlook includes only hotels owned as of February 25, 2020. The outlook does not incorporate the refinancing of the $475 million senior unsecured notes or any incremental share repurchases, as both are future transactions that will be influenced by market dynamics at the time of execution. Future acquisitions or dispositions are also not assumed in the Company's outlook.

For the full year 2020, the Company anticipates:

 

Current Outlook

Pro forma RevPAR growth

-1.5% to +0.5%

Pro forma Hotel EBITDA Margin

29.4% to 31.0%

Pro forma Consolidated Hotel EBITDA

$413.0M to $443.0M

Corporate Cash General & Administrative Expense

$35.0M to $36.0M

Adjusted EBITDA

$378.0M to $408.0M

Adjusted FFO per Diluted Share and Unit

$1.62 to $1.77

Additionally, the Company's full year 2020 outlook includes:

  • Interest expense of $88.0 million to $90.0 million
  • Capital expenditures related to renovations in the range of $90.0 million to $110.0 million
  • Cash income tax expense of $3.0 million to $4.0 million
  • Diluted weighted average common shares and units of 169.5 million

The Company's outlook for Pro forma Hotel EBITDA margin at the midpoint includes an impact of 65 basis points from increases in insurance premiums and property taxes.

For the first quarter 2020, the Company expects Pro forma Consolidated Hotel EBITDA to be between $89.0 million to $94.0 million and Adjusted EBITDA to be between $83.0 million to $88.0 million.

RLJ Lodging Trust is a self-advised, publicly traded real estate investment trust that owns primarily premium-branded, high-margin, focused-service and compact full-service hotels. The Company's portfolio consists of 103 hotels with approximately 22,570 rooms, located in 23 states and the District of Columbia and an ownership interest in one unconsolidated hotel with 171 rooms.



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