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Condor Hospitality Trust Reports Third Quarter 2019 Results

BETHESDA, Md.--(BUSINESS WIRE)--

Condor Hospitality Trust, Inc. (NYSE American: CDOR) (the “Company”) today announced results for the third quarter ended September 30, 2019.

THIRD QUARTER RELEASE FINANCIAL HIGHLIGHTS

  • Revenue in the third quarter 2019 of $14.7 million, comprised of $14.7 million generated entirely from New Investment Platform Hotels, a 0.2% increase from $14.6 million generated by New Investment Platform Hotels in the $15.4 million 2018 third quarter Revenue that included $0.8 million of Legacy Hotel Revenue.
  • Same-Store Revenue of $54.6 million for the first nine months of 2019 increased $0.5 million over the first nine months Same-Store Revenue of $54.1 million in 2018.
  • Same-Store ADR for the New Investment Platform Hotels increased 2.1% in the first nine months of 2019 compared to the first nine months of 2018.
  • Same-Store RevPAR for the New Investment Platform Hotels in the 2019 third quarter decreased 0.4% compared to the same quarter in 2018, affected by a continued weak convention and event schedule in San Antonio that had a direct impact on the SpringHill Suites. Excluding the SpringHill Suites, New Investment Platform RevPAR increased by 0.3%. Same-Store RevPAR of $101.71 for the New Investment Platform Hotels for the first nine months of 2019 Increased 1.0% over 2018 first nine months RevPAR of $100.74.
  • Net Earnings (Loss) Attributable to Common Shareholders of ($2.1 million), or ($0.18) per Diluted Share in the third quarter, compared to $2.5 million, or $0.21 per share, in the 2018 third quarter. Decline in Net Earnings Attributable to Common Shareholders primarily caused by no Legacy Hotels remaining in the third quarter 2019, compared to $0.3 million of operating income generated from Legacy Hotels in the third quarter 2018, $1.1 million in Equity Transaction and Strategic Alternatives costs incurred in the third quarter 2019, and $0.2 million Decline in Net Gain on Derivatives and Convertible Debt for the quarter. Additionally, the third quarter 2018 included a $3.7 million gain from Legacy Hotel sales.
  • Net Earnings (Loss) Attributable to Common Shareholders of ($3.7 million), or ($0.31) per Diluted Share, in the first nine months of 2019 compared to $5.9 million, or $0.49 per share, in the first nine months of 2018. Decline in Net Earnings Attributable to Common Shareholders primarily caused by decreased operating income generated from Legacy Hotels in the first nine months of 2019 of $1.0 million, $1.9 million in Equity Transaction and Strategic Alternatives costs incurred in the first nine months of 2019, and $1.6 million Decline in Net Gain on Derivatives and Convertible Debt for the period. Additionally, the first nine months of 2018 included a $5.6 million gain from Legacy Hotel sales.
  • Adjusted Funds from Operations was $2.6 million, or $0.22 per Diluted Share, a $0.4 million increase from $2.2 million, or $0.18, in the 2018 third quarter.
  • Same-Store Hotel EBITDA was flat for the quarter but is up $0.1 million for the first nine months of 2019 compared to the same time period in 2018.

MANAGEMENT COMMENTARY

Bill Blackham, Condor’s Chief Executive Officer, commented:

“For the first nine months of 2019 our portfolio has outperformed the upscale and upper midscale chain scales with 1.2% RevPAR growth compared to (0.5)% for upscale and 0.0% for upper midscale as reported by Smith Travel Research. Our proforma same-store RevPAR for the third quarter 2019 excluding the SpringHill Suites increased 0.3% as compared to (0.5)% for upscale and (0.1)% for upper midscale, as reported by Smith Travel Research while unadjusted same-store RevPAR declined 0.4% for the third quarter. In addition to the market conditions in San Antonio, the portfolio during the quarter experienced revenue disruption from an accidental fire protection sprinkler event in our Summerville hotel and sales, marketing and revenue management disruptions caused by management company changes at 7 of our hotels. In the first nine months of 2019 Same-Store Hotel EBITDA is approximately 0.5% higher than the same period in the prior year at $20.8 million compared to $20.7 million, and our margins while declining in the first nine months, did so moderately reducing 20 bps from 38.4% in 2018 to 38.2% in 2019 and notwithstanding industry cost pressures were flat at 34.6% for the third quarter of 2019 compared to 2018. On July 22, 2019 Condor announced the conclusion of a strategic alternatives process with the signing of a definitive agreement that contemplates the merger of the Company with the operating partnership of NexPoint Hospitality Trust, an unincorporated, open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario and listed on the TSXV, resulting in a $11.10 per share cash price to be paid to common shareholders and a $10.00 per share cash price to be paid to Series E preferred shareholders at closing. We anticipate completing and closing the merger during the fourth quarter of 2019.”

FINANCIAL SUMMARY

At September 30, 2019, the Company’s total portfolio included 15 hotels, representing 1,908 rooms. The Company’s last remaining legacy asset was sold during the first quarter of 2019.

Total Company Financial Results
($ in millions except per share amounts)

 

Three months ended September 30,

 

Nine months ended September 30,

 

2019

 

2018

 

Change

 

2019

 

2018

 

Change

Revenue

$

14.7

 

$

15.5

 

-5.1%

 

$

46.7

 

$

50.0

 

-6.5%

Net Earnings (Loss) Attributable to Common Shareholders

$

(2.1)

 

$

2.5

 

NA

 

$

(3.7)

 

$

5.9

 

NA

Diluted Earnings (Loss) per Share

$

(0.18)

 

$

0.21

 

NA

 

$

(0.31)

 

$

0.49

 

NA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Funds from Operations (FFO)*

$

0.7

 

$

1.7

 

-56.7%

 

$

4.8

 

$

8.7

 

-44.9%

FFO per Diluted Share*

$

0.05

 

$

0.13

 

-61.5%

 

$

0.37

 

$

0.69

 

-46.4%

Adjusted FFO*

$

2.6

 

$

2.2

 

18.0%

 

$

9.4

 

$

9.9

 

-4.4%

Adjusted FFO per Diluted Share*

$

0.22

 

$

0.18

 

22.2%

 

$

0.78

 

$

0.82

 

-4.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hotel EBITDA*

$

5.9

 

$

6.2

 

-4.5%

 

$

20.9

 

$

21.6

 

-3.1%

Adjusted EBITDAre*

$

4.7

 

$

4.7

 

0.0%

 

$

17.1

 

$

17.1

 

0.0%

*Please see the Reg. G reconciliation tables at the end of this release.

Same Store Operational Results**
($ in millions except per share amounts and operating metrics)

 

Three months ended September 30,

 

Nine months ended September 30,

 

2019

 

2018

 

Change

 

2019

 

2018

 

Change

Same-Store RevPAR

$

94.31

 

$

94.64

 

-0.4%

 

$

101.71

 

$

100.74

 

1.0%

Same-Store Occupancy

 

78.06%

 

 

78.73%

 

-0.9%

 

 

80.17%

 

 

81.06%

 

-1.1%

Same-Store ADR

$

120.81

 

$

120.21

 

0.5%

 

$

126.87

 

$

124.28

 

2.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same-Store Hotel EBITDA*

$

5.9

 

$

5.9

 

-0.1%

 

$

20.8

 

$

20.7

 

0.5%

Same-Store Hotel EBITDA Margin*

 

34.6%

 

 

34.6%

 

0.0%

 

 

38.2%

 

 

38.4%

 

-0.2%

*Please see the Reg. G reconciliation tables at the end of this release.

**Financial results presented above include results from prior to our ownership.

PORTFOLIO ACTIVITY

The Company’s investment strategy is to assemble a portfolio of premium-branded, select-service hotels in the top 100 Metropolitan Statistical Areas (“MSAs”) with a particular focus on MSAs ranked between 20 to 60. Since restarting its portfolio transformation in 2015, the Company has acquired 14 high-quality select-service hotels representing 1,808 rooms in its target markets for a total purchase price of approximately $277 million. Additionally, during this time, the Company has sold 55 legacy assets for a total gross sales price of approximately $170 million. Following the sale of the Quality Inn Solomons in the first quarter of 2019, there are no legacy hotels remaining in the Company’s portfolio.

BALANCE SHEET AND CAPITAL MARKETS ACTIVITY

As of September 30, 2019, the Company had cash and cash equivalents (including restricted cash) of $12.0 million and available revolver borrowing capacity of $9.0 million. As of September 30, 2019, the Company had total outstanding long-term debt of $135.7 million associated with assets held for use with a weighted average maturity of 1.8 years and a weighted average interest rate of 4.52%.

CAPITAL INVESTMENTS

The Company invested $1.2 million in capital improvements throughout the portfolio in the three months ended September 30, 2019 to upgrade its properties and maintain brand standards.

OUTLOOK AND GUIDANCE

The Company has suspended guidance until further notice.

DIVIDENDS

On July 19, 2019, the Company entered into an Agreement and Plan of Merger (as amended from time to time, the “Merger Agreement”) with NHT Operating Partnership LLC, a Delaware limited liability company (the “Parent”) and other parties thereto pursuant to which the Parent will acquire all of the issued and outstanding equity interests of the Company and its operating partnership through two mergers (the “proposed transaction”). During the term of the Merger Agreement, the Company may not pay cash dividends to holders of the Company common stock or the Series E Preferred Stock, except the Company is permitted to declare and pay a dividend to shareholders during the month in which an extension option for the closing of the transactions contemplated by the Merger Agreement is exercised by the Parent, subject to limitations as set forth in the Merger Agreement and the disclosure schedule delivered therewith that sets forth a limitation on the amount of any such dividends, and is based on available prior month adjusted funds from operations as calculated pursuant to the Merger Agreement. The holders of the Series E preferred stock have agreed to waive accrual of any unpaid dividends between signing and closing.

EARNINGS CALL

The Company will not be conducting a third quarter earnings conference call.

About Condor Hospitality Trust, Inc.

Condor Hospitality Trust, Inc. (NYSE American: CDOR) is a self-administered real estate investment trust that specializes in the investment and ownership of upper midscale and upscale, premium-branded, select-service, extended-stay, and limited-service hotels in the top 100 Metropolitan Statistical Areas (“MSAs”) with a particular focus on the top 20 to 60 MSAs. The Company currently owns 15 hotels in 8 states. Condor’s hotels are franchised by a number of the industry’s most well-regarded brand families including Hilton, Marriott, and InterContinental Hotels.

Forward-Looking Statement

This news release (including statements about the expected timing, completion and effects of the mergers and the other transactions contemplated by the Merger Agreement) may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that are not historical facts, and in some cases, can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” “project”, “plan”, the negative version of these words or other similar expressions. Readers are cautioned not to place undue reliance on any such forward-looking statements.

All forward-looking statements speak only as of the date hereof and are based on current expectations and involve a number of assumptions, risks and uncertainties that could cause the actual results to differ materially from such forward-looking statements. They are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. Condor may not be able to complete the proposed transaction on the terms described herein or other acceptable terms or at all because of a number of factors, including without limitation, the following: (i) the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement; (ii) unknown, underestimated or undisclosed commitments or liabilities; (iii) the inability to complete the proposed transaction due to the failure to satisfy the closing conditions to the proposed transaction; (iv) risks related to disruption of management’s attention from Condor’s ongoing business operations due to the proposed transaction; (v) the effect of the announcement of the proposed transaction on the ability of the parties to retain and hire key personnel, maintain relationships with their franchisors, management companies and suppliers, and maintain their operating results and business generally; (vi) the risk that certain approvals or consents will not be received in a timely manner or that the proposed transaction will not be consummated in a timely manner; (vii) adverse changes in U.S. and non-U.S. governmental laws and regulations; and (viii) the risk of litigation, including shareholder litigation in connection with the proposed transaction, and the impact of any adverse legal judgments, fines, penalties, injunctions or settlements.

Actual results may differ materially from those indicated by such forward-looking statements. In addition, the forward-looking statements represent Condor’s views as of the date on which such statements were made. Condor anticipates that subsequent events and developments may cause those views to change. These forward-looking statements should not be relied upon as representing Condor’s views as of any date subsequent to the date hereof. Condor expressly disclaims a duty to provide updates to forward-looking statements, whether as a result of new information, future events or other occurrences.

Additional factors that may affect Condor’s business or financial results are described in the risk factors included in Condor’s filings with the Securities and Exchange Commission (“SEC”), including its Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

SELECTED FINANCIAL DATA:

Condor Hospitality Trust, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited - In thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

As of

 

 

September 30, 2019

 

December 31, 2018

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

Investment in hotel properties, net

 

$

224,376

 

$

230,178

Investment in unconsolidated joint venture

 

 

4,649

 

 

5,866

Cash and cash equivalents

 

 

5,046

 

 

4,151

Restricted cash, property escrows

 

 

6,906

 

 

5,005

Accounts receivable, net

 

 

1,500

 

 

1,290

Prepaid expenses and other assets

 

 

1,131

 

 

2,227

Derivative assets, at fair value

 

 

428

 

 

639

Investment in hotel properties held for sale, net

 

 

-

 

 

4,092

Total Assets

 

$

244,036

 

$

253,448

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Accounts payable, accrued expenses, and other liabilities

 

$

7,993

 

$

5,336

Dividends and distributions payable

 

 

145

 

 

2,330

Derivative liabilities, at fair value

 

 

498

 

 

-

Convertible debt, at fair value

 

 

1,199

 

 

1,000

Long-term debt, net of deferred financing costs

 

 

134,017

 

 

135,810

Long-term debt related to hotel properties held for sale, net of deferred financing costs

 

 

-

 

 

1,120

Total Liabilities

 

 

143,852

 

 

145,596

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

 

Preferred stock, 40,000,000 shares authorized:

 

 

 

 

 

 

6.25% Series E, 925,000 shares authorized, $.01 par value, 925,000 shares outstanding, liquidation preference of $9,394 and $9,250

 

 

10,050

 

 

10,050

Common stock, $.01 par value, 200,000,000 shares authorized; 11,916,309 and 11,886,003 shares outstanding

 

 

119

 

 

119

Additional paid-in capital

 

 

232,627

 

 

231,805

Accumulated deficit

 

 

(143,277)

 

 

(134,970)

Total Shareholders' Equity

 

 

99,519

 

 

107,004

Noncontrolling interest in consolidated partnership (Condor Hospitality Limited Partnership), redemption value of $623 and $435

 

 

665

 

 

848

Total Equity

 

 

100,184

 

 

107,852

 

 

 

 

 

 

 

Total Liabilities and Equity

 

$

244,036

 

$

253,448

Condor Hospitality Trust, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited - In thousands, except per share data)

 

 

 

 

 

 

 

 

 

Three months ended September 30,

 

Nine months ended September 30,

 

 

2019

 

2018

 

2019

 

2018

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Room rentals and other hotel services

 

$

14,666

 

$

15,462

 

$

46,746

 

$

49,975

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

Hotel and property operations

 

 

9,718

 

 

10,148

 

 

29,266

 

 

31,318

Depreciation and amortization

 

 

2,405

 

 

2,423

 

 

7,161

 

 

7,126

General and administrative

 

 

1,210

 

 

1,599

 

 

4,445

 

 

5,073

Acquisition and terminated transactions

 

 

1

 

 

96

 

 

15

 

 

186

Equity transaction and strategic alternatives

 

 

1,052

 

 

-

 

 

1,886

 

 

-

Total operating expenses

 

 

14,386

 

 

14,266

 

 

42,773

 

 

43,703

Operating income

 

 

280

 

 

1,196

 

 

3,973

 

 

6,272

Net gain (loss) on disposition of assets

 

 

(14)

 

 

3,716

 

 

9

 

 

5,587

Equity (loss) in earnings of joint venture

 

 

(84)

 

 

(41)

 

 

595

 

 

251

Net gain (loss) on derivatives and convertible debt

 

 

(223)

 

 

116

 

 

(916)

 

 

719

Other expense, net

 

 

(27)

 

 

(23)

 

 

(80)

 

 

(57)

Interest expense

 

 

(1,912)

 

 

(2,154)

 

 

(6,169)

 

 

(6,173)

Impairment recovery, net

 

 

-

 

 

-

 

 

-

 

 

93

Earnings (loss) before income taxes

 

 

(1,980)

 

 

2,810

 

 

(2,588)

 

 

6,692

Income tax expense

 

 

(8)

 

 

(132)

 

 

(655)

 

 

(315)

Net earnings (loss)

 

 

(1,988)

 

 

2,678

 

 

(3,243)

 

 

6,377

Loss (earnings) attributable to noncontrolling interest

 

 

10

 

 

(20)

 

 

17

 

 

(47)

Net earnings (loss) attributable to controlling interests

 

 

(1,978)

 

 

2,658

 

 

(3,226)

 

 

6,330

Dividends declared and undeclared on preferred stock

 

 

(145)

 

 

(145)

 

 

(434)

 

 

(434)

Net earnings (loss) attributable to common shareholders

 

$

(2,123)

 

$

2,513

 

$

(3,660)

 

$

5,896

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (Loss) per Share

 

 

 

 

 

 

 

 

 

 

 

 

Total - Basic Earnings (Loss) per Share

 

$

(0.18)

 

$

0.21

 

$

(0.31)

 

$

0.50

Total - Diluted Earnings (Loss) per Share

 

$

(0.18)

 

$

0.21

 

$

(0.31)

 

$

0.49

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Non-GAAP Financial Measures (Unaudited)

Non-GAAP financial measures are measures of our historical financial performance that are different from measures calculated and presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We report Funds from Operations (“FFO”), Adjusted FFO (“AFFO”), Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”), EBITDA for real estate (“EBITDAre”), Adjusted EBITDAre, and Hotel EBITDA as non-GAAP measures that we believe are useful to investors as key measures of our operating results and which management uses to facilitate a periodic evaluation of our operating results relative to those of our peers. Our non-GAAP measures should not be considered as an alternative to U.S. GAAP net earnings as an indication of financial performance or to U.S. GAAP cash flows from operating activities as a measure of liquidity. Additionally, these measures are not indicative of funds available to fund cash needs or our ability to make cash distributions as they have not been adjusted to consider cash requirements for capital expenditures, property acquisitions, debt service obligations, or other commitments.

FFO and AFFO

The following table reconciles net earnings (loss) to FFO and AFFO for the three and nine months ended September 30, 2019 and 2018 (in thousands). All amounts presented include our portion of the results of our unconsolidated Atlanta JV.

 

Three months ended September 30,

 

Nine months ended September 30,

Reconciliation of Net earnings (loss) to FFO and AFFO

2019

 

2018

 

2019

 

2018

Net earnings (loss)

$

(1,988)

 

$

2,678

 

$

(3,243)

 

$

6,377

Depreciation and amortization expense

 

2,405

 

 

2,423

 

 

7,161

 

 

7,126

Depreciation and amortization expense from JV

 

299

 

 

289

 

 

895

 

 

866

Net (gain) loss on disposition of assets

 

14

 

 

(3,716)

 

 

(9)

 

 

(5,587)

Net loss on disposition of assets from JV

 

2

 

 

15

 

 

2

 

 

29

Impairment recovery, net

 

-

 

 

-

 

 

-

 

 

(93)

FFO

 

732

 

 

1,689

 

 

4,806

 

 

8,718

Dividends declared and undeclared on preferred stock

 

(145)

 

 

(145)

 

 

(434)

 

 

(434)

FFO attributable to common shares and common units

 

587

 

 

1,544

 

 

4,372

 

 

8,284

Net loss (gain) on derivatives and convertible debt

 

223

 

 

(116)

 

 

916

 

 

(719)

Net loss on derivatives from JV

 

-

 

 

-

 

 

1

 

 

-

Acquisition and terminated transactions expense

 

1

 

 

96

 

 

15

 

 

186

Equity transaction and strategic alternatives

 

1,052

 

 

-

 

 

1,886

 

 

-

Stock-based compensation expense

 

141

 

 

247

 

 

901

 

 

912

Amortization of deferred financing fees

 

286

 

 

363

 

 

981

 

 

1,080

Amortization of deferred financing fees from JV

 

143

 

 

45

 

 

234

 

 

136

Loss on extinguishment of debt from JV

 

138

 

 

-

 

 

138

 

 

-

AFFO attributable to common shares and common units

$

2,571

 

$

2,179

 

$

9,444

 

$

9,879

 

 

 

 

 

 

 

 

 

 

 

 

FFO attributable to common shares and common units - Basic Shares

$

587

 

$

1,544

 

$

4,372

 

$

8,284

Convertible note interest and fair value adjustments

 

-

 

 

-

 

 

-

 

 

27

Preferred dividends and fair value adjustments

 

-

 

 

-

 

 

-

 

 

-

FFO attributable to common shares and common units - Diluted Shares

$

587

 

$

1,544

 

$

4,372

 

$

8,311

 

 

 

 

 

 

 

 

 

 

 

 

FFO per common share and common unit - Basic

$

0.05

 

$

0.13

 

$

0.37

 

$

0.70

FFO per common share and common unit - Diluted

$

0.05

 

$

0.13

 

$

0.37

 

$

0.69

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares and common units - Basic FFO

 

11,919,944

 

 

11,892,404

 

 

11,901,936

 

 

11,867,801

Weighted average common shares and common units - Diluted FFO

 

11,925,323

 

 

11,899,760

 

 

11,921,438

 

 

11,980,377

 

 

 

 

 

 

 

 

 

 

 

 

AFFO attributable to common shares and common units - Basic Shares

$

2,571

 

$

2,179

 

$

9,444

 

$

9,879

Convertible note interest

 

16

 

 

16

 

 

48

 

 

48

Preferred dividends at stated rates

 

-

 

 

-

 

 

434

 

 

434

AFFO attributable to common shares and common units - Diluted Shares

$

2,587

 

$

2,195

 

$

9,926

 

$

10,361

 

 

 

 

 

 

 

 

 

 

 

 

AFFO per common share and common unit - Basic

$

0.22

 

$

0.18

 

$

0.79

 

$

0.83

AFFO per common share and common unit - Diluted

$

0.22

 

$

0.18

 

$

0.78

 

$

0.82

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares and common units - Basic AFFO

 

11,919,944

 

 

11,892,404

 

 

11,901,936

 

 

11,867,801

Weighted average common shares and common units - Diluted AFFO

 

12,690,703

 

 

11,997,029

 

 

12,686,818

 

 

12,648,488

We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts (“NAREIT”), which defines FFO as net earnings or loss computed in accordance with GAAP, excluding gains or losses from sales of real estate assets, impairment, and the depreciation and amortization of real estate assets. FFO is calculated both for the Company in total and as FFO attributable to common shares and common units, which is FFO reduced by preferred stock dividends. AFFO is FFO attributable to common shares and common units adjusted to exclude items we do not believe are representative of the results from our core operations, including non-cash gains or losses on derivatives and convertible debt, stock-based compensation expense, amortization of certain fees, losses on debt extinguishment, and in-kind dividends above stated rates, and cash charges for acquisition and equity transaction and strategic alternatives costs. All REITs do not calculate FFO and AFFO in the same manner; therefore, our calculation may not be the same as the calculation of FFO and AFFO for similar REITs.

We consider FFO to be a useful additional measure of performance for an equity REIT because it facilitates an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, we believe that FFO provides a meaningful indication of our performance. We believe that AFFO provides useful supplemental information to investors regarding our ongoing operating performance that, when considered with net income and FFO, is beneficial to an investor’s understanding of our operating performance. We present FFO and AFFO per common share and common unit because our common units are redeemable for common shares. We believe it is meaningful for the investor to understand FFO and AFFO applicable to common shares and common units.

EBITDA, EBITDAre, Adjusted EBITDAre, and Hotel EBITDA

The following table reconciles net earnings (loss) to EBITDA, EBITDAre, Adjusted EBITDAre, and Hotel EBITDA for the three and nine months ended September 30, 2019 and 2018 (in thousands). All amounts presented our portion of the results of our unconsolidated Atlanta JV.

...

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30,

 

Nine months ended September 30,

Reconciliation of Net earnings (loss) to EBITDA, EBITDAre, Adjusted EBITDAre, and Hotel EBITDA

2019

 

2018

 

2019

 

2018

Net earnings (loss)

$

(1,988)

 

$

2,678

 

$

(3,243)

 

$

6,377

Interest expense

 

1,912

 

 

2,154

 

 

6,169

 

 

6,173

Interest expense from JV

 

536

 

 

543

 

 

1,645

 

 

1,553

Loss on extinguishment of debt from JV

 

138

 

 

-

 

 

138

 

 

-

Income tax expense

 

8

 

 

132

 

 

655

 

 

315

Depreciation and amortization expense

 

2,405

 

 

2,423

 

 

7,161

 

 

7,126

Depreciation and amortization expense from JV

 

299

 

 

289

 

 

895

 

 

866

EBITDA

 

3,310

 

 

8,219

 

 

13,420

 

 

22,410

Net (gain) loss on disposition of assets

 

14

 

 

(3,716)

 

 

(9)

 

 

(5,587)

Net loss on disposition of assets from JV

 

2

 

 

15

 

 

2

 

 

29

Impairment recovery, net

 

-

 

 

-

 

 

-

 

 

(93)

EBITDAre

 

3,326

 

 

4,518

 

 

13,413

 

 

16,759

Net loss (gain) on derivatives and convertible debt

 

223

 

 

(116)

 

 

916

 

 

(719)

Net loss on derivative from JV

 

-

 

 

-

 

 

1

 

 

-

Stock-based compensation expense

 

141

 

 

247

 

 

901

 

 

912

Acquisition and terminated transactions expense

 

1

 

 

96

 

 

15

 

 

186

Equity transaction and strategic alternatives

 

1,052

 

 

-

 

 

1,886

 

 

-

Adjusted EBITDAre

 

4,743

 

 

4,745

 

 

17,132

 

 

17,138

General and administrative expense, excluding stock compensation expense

 

1,069

 

 

1,352

 

 

3,544

 

 

4,161

Other expense, net

 

27

 

 

23

 

 

80

 

 

57

Unallocated hotel and property operations expense

 

86

 

 

81