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Pebblebrook Hotel Trust Reports Second Quarter 2022 Results

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BETHESDA, Md., July 26, 2022--(BUSINESS WIRE)--Pebblebrook Hotel Trust (NYSE: PEB):

Q2 FINANCIAL HIGHLIGHTS

  • Net income: $28.8 million

  • Same-Property RevPAR(1): (5.0%) vs. 2019; ADR(1) exceeded 2019 by 18.7%

  • Same-Property Total Revenues(1): $395.7 million, 96.9% recovered vs. 2019

  • Adjusted EBITDAre(1): $128.8 million, 83.8% recovered vs. 2019

  • Adjusted FFO(1) per diluted share: $0.72 vs. $0.87 in 2019 and ($0.10) in 2021

HOTEL OPERATING TRENDS

  • Q2 Same-Property Occupancy at 69% with June Same-Property occupancy at 73%, the highest since the beginning of the COVID-19 pandemic

  • Business travel, both group and transient, continues to recover with urban occupancies and ADRs significantly improving throughout Q2

  • The Company’s portfolio has not experienced any noteworthy pullback in leisure or business demand due to recent economic concerns

PORTFOLIO UPDATES & REPOSITIONINGS

  • Acquired the 119-room Inn on Fifth for $156.0 million and the 257-room Gurney’s Newport Resort & Marina for $174.0 million

  • Sold the 208-room The Marker San Francisco for $77.0 million

  • Executed contracts to sell three additional urban properties for aggregate gross sales proceeds of $183.9 million

  • Invested $22.5 million into the portfolio in the second quarter, including successfully completing the $28.0 million redevelopment and transformation of Hotel Vitale into 1 Hotel San Francisco

Q3 2022 OUTLOOK

  • Net income: $24.7 to $34.7 million

  • Same-Property RevPAR(1) var: (5.0%) to (8.0%) vs. 2019; +32.5% to +36.8% vs. 2021

  • Adjusted EBITDAre(1): $112.6 to $122.6 million

  • Adjusted FFO(1) per diluted share: $0.57 to $0.65

(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 used in the table above and elsewhere in this press release.

"Our second quarter operating results significantly surpassed our outlook due primarily to a robust recovery in weekday group and transient business travel throughout our urban markets. As the quarter progressed, we experienced strong demand and ADR improvements in San Francisco, Chicago, Boston, Seattle, Portland, and Washington, DC. This momentum is continuing into the third quarter. At our resorts, leisure demand remained robust, with pricing achieving record levels, far above 2019 and exceeding healthy 2021 rates. We also expanded our resort portfolio to 13 properties with the recent acquisitions of the luxury Inn on Fifth in Naples, Florida, and Gurney’s Newport Resort & Marina in Newport, Rhode Island. These unique independent resort properties offer significant upside opportunities. Our recent acquisitions have been funded by our ongoing property disposition program, and $77.6 million of preferred operating partnership units issued to the seller of Inn on Fifth. In late June, we completed the $77.0 million sale of The Marker San Francisco. In addition, we also executed $183.9 million of contracts to sell three additional urban properties. These property sales are expected to be completed during the third quarter."

-Jon E. Bortz, Chairman, President, and Chief Executive Officer of Pebblebrook Hotel Trust

Second Quarter and Year-to-Date Highlights

Second Quarter

Six Months Ended June 30,

Same-Property and Corporate Highlights

2022

2021

(‘22 vs. ‘21

growth)

2019

(‘22 vs. ‘19

growth)

2022

2021

(‘22 vs. ‘21

growth)

2019

(‘22 vs. ‘19

growth)

($ in millions except per share and RevPAR data)

Net income (loss)

$28.8

$1.4

$60.5

($71.4)

($120.0)

$66.2

Same-Property Room Revenues(1)

$260.6

$129.7

$273.6

$429.3

$194.6

$493.4

Same-Property Room Revenues variance

101.0%

(4.8%)

120.6%

(13.0%)

Same-Property Total Revenues(1)

$395.7

$201.4

$408.3

$653.8

$306.0

$744.5

Same-Property Total Revenues variance

96.5%

(3.1%)

113.7%

(12.2%)

Same-Property Total Expenses(1)

$257.0

$157.2

$261.8

$458.8

$268.6

$506.0

Same-Property Total Expenses variance

63.5%

(1.8%)

70.8%

(9.3%)

Same-Property EBITDA(1)

$138.8

$44.3

$146.6

$194.9

$37.4

$238.5

Same-Property EBITDA variance

213.4%

(5.3%)

421.5%

(18.3%)

Adjusted EBITDAre(1)

$128.8

$20.1

$153.8

$175.2

($2.7)

$246.1

Adjusted EBITDAre variance

539.3%

(16.2%)

NM

(28.8%)

Adjusted FFO(1)

$95.0

($12.5)

$113.7

$109.0

($66.1)

$176.3

Adjusted FFO per diluted share(1)

$0.72

($0.10)

$0.87

$0.83

($0.50)

$1.35

Adjusted FFO per diluted share variance

NM

(17.2%)

NM

(38.5%)

2022 Monthly Results

Same-Property Portfolio Highlights(2)

Jan

Feb

Mar

Apr

May

Jun

($ in millions except ADR and RevPAR data)

Occupancy

34%

50%

62%

68%

67%

73%

ADR

$269

$308

$305

$319

$314

$323

RevPAR

$91

$153

$188

$218

$210

$236

Total Revenues

$57.0

$84.9

$116.2

$128.3

$129.4

$138.1

Total Revenues growth rate (‘22 vs. ‘19)

(44%)

(21%)

(9%)

(3%)

(6%)

(1%)

Hotel EBITDA

($3.1)

$20.5

$38.8

$46.6

$42.9

$49.3

Hotel EBITDA growth rate (’22 vs. ’19)

(115%)

(29%)

(9%)

1%

(11%)

(6%)

NM = Not Meaningful

(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"), EBITDA for Real Estate ("EBITDAre"), Adjusted EBITDAre, 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 Room Revenues, Total Revenues, Expenses and EBITDA appearing in the table above and elsewhere in this press release, refer to the Same-Property Statistical Data table footnotes later in this press release.

Adjusted EBITDAre, Adjusted FFO and Adjusted FFO per share exclude the amortization of share-based compensation expense. Historical (2021 and 2019 comparable periods) results of such non-GAAP financial measures have been adjusted to reflect the exclusion.

(2)

Includes information for all of the hotels the Company owned as of June 30, 2022, except 1 Hotel San Francisco (which is excluded from January-June given the property’s closure for renovation), Inn on Fifth (which is excluded from January-March given the property’s acquisition on May 11), and Gurney’s Newport Resort & Marina (which is excluded from January-June given the property’s acquisition on June 23). Excludes The Marker San Francisco from April-June, given the property’s disposition on June 28.

"The demand pickup in our urban markets, including business transient, in-house groups, and citywide convention demand, materially strengthened in the second quarter," noted Mr. Bortz. "These trends are continuing in the third quarter as rate growth achieves new records and we see the return of the historical patterns of strong weekday demand from business travel continuing to recover. Leisure and international travel are also returning to the urban markets. Yet, business and international travel are still well below 2019 levels, so there is opportunity for a further, substantial recovery in occupancy. On the hotel operating expense side of our business, the wide array of changes we made to our hotel operating models are producing encouraging results. Same-Property Hotel operating expenses excluding fixed costs were 3.4% below Q2 2019, resulting in Hotel EBITDA margins within 83 basis points of the second quarter of 2019."

Capital Investments and Strategic Property Redevelopments

In the second quarter of 2022, the Company completed $22.5 million of capital investments throughout its portfolio, including the completion of the redevelopment and repositioning of Hotel Vitale into 1 Hotel San Francisco, which offers nature-inspired designs and environmentally focused services and aesthetics throughout guestrooms and suites, public areas, and meeting and event venues. The Company has completed $42.4 million of capital improvements and projects year to date through June 2022.

"We’re extremely excited with the tremendously positive guest reactions and reviews we have received on the 1 Hotel San Francisco," noted Mr. Bortz. "This sustainability-focused, luxury hotel with amazing views overlooking the Bay Bridge and the iconic Ferry Building opened on June 1, 2022. Initial room rates and booking volume have exceeded our expectations, and we are ramping very nicely. We are encouraged with the tremendous upside potential of this redeveloped and transformed hotel."

The Company expects to invest a total of $100.0 to $120.0 million during 2022, which includes commencing the redevelopment and repositioning projects at Solamar Hotel (to be converted to Margaritaville Hotel San Diego Gaslamp Quarter), Hilton San Diego Gaslamp Quarter, Jekyll Island Club Resort, Viceroy Santa Monica Hotel, and Estancia La Jolla Hotel & Spa, as well as the development of a new outdoor venue and additional alternative lodging units at Skamania Lodge.

Update on Strategic Acquisitions and Dispositions

Year to date, the Company has acquired $330.0 million and sold $77.0 million of properties. On May 11, 2022, the Company acquired the 119-room Inn on Fifth in Naples, Florida for $156.0 million. On June 23, 2022, the Company acquired the 257-room Gurney’s Newport Resort & Marina in Newport, Rhode Island for $174.0 million.

The Company continues to make progress on its disposition program. On June 28, 2022, the Company sold the 208-room The Marker San Francisco for $77.0 million. In addition, the Company has executed contracts for gross proceeds of $183.9 million related to the sales of three properties to separate unaffiliated buyers who have each completed due diligence and waived typical contingencies. Each sale is expected to be completed during the third quarter and is subject to normal closing conditions. The Company offers no assurances that these sales will be completed on these terms or at all.

Balance Sheet and Liquidity

As of June 30, 2022, the Company had $62.8 million of consolidated cash, cash equivalents and restricted cash, in addition to $498.4 million of undrawn availability on its senior unsecured revolving credit facility, for total liquidity of $561.2 million. The Company had $2.5 billion in consolidated debt and convertible notes at an effective weighted-average interest rate of 3.4 percent. $1.9 billion, or 75 percent of the Company's total outstanding debt and convertible notes, was at an effective weighted-average fixed interest rate of 3.2 percent, and $0.6 billion, or 25 percent, was at a weighted-average floating interest rate of 4.2 percent. The Company had $1.4 billion of unsecured term loans, and $100.0 million was outstanding on its $611.0 million senior unsecured revolving credit facility. The Company has exited its debt covenant waiver period as of the quarter ended June 30, 2022.

Common and Preferred Dividends

On June 15, 2022, the Company declared a quarterly cash dividend of $0.01 per share on its common shares as well as a regular quarterly cash dividend for the following preferred shares of beneficial interest:

  • $0.39844 per 6.375% Series E Cumulative Redeemable Preferred Share;

  • $0.39375 per 6.3% Series F Cumulative Redeemable Preferred Share;

  • $0.39844 per 6.375% Series G Cumulative Redeemable Preferred Share; and

  • $0.35625 per 5.7% Series H Cumulative Redeemable Preferred Share.

Update on Curator Hotel & Resort Collection

Curator Hotel & Resort Collection ("Curator") is a distinct collection of experientially focused small brands and independent lifestyle hotels and resorts worldwide founded by Pebblebrook and several industry-leading independent lifestyle hotel operators. As of June 30, 2022, Curator had grown to 90 member hotels. In the second quarter of 2022, Curator announced strategic partnerships with numerous leading travel and technology companies, including Infor, Oracle, StayNTouch, and Tayst Coffee Roaster. As of June 30, 2022, Curator had 85 programs with preferred vendor partners, providing Curator member hotels with preferred pricing, enhanced operating terms and early access to curated new technologies.

Q3 2022 Outlook

Based on current trends, assuming no acquisitions and the three contracted dispositions are completed, and assuming no material disruptions to travel caused by the COVID-19 pandemic, the Company’s outlook for Q3 2022 is as follows:

Q3 2022 Outlook

Low

High

($ and shares/units in millions, except per share and RevPAR data)

Net income

$24.7

$34.7

Adjusted EBITDAre

$112.6

$122.6

Adjusted FFO

$75.3

$85.3

Adjusted FFO per diluted share

$0.57

$0.65

This Q3 2022 Outlook is based, in part, on the following estimates and assumptions:

Same-Property RevPAR

$212

$218

Same-Property RevPAR variance vs. 2019

(8.0%)

(5.0%)

Same-Property RevPAR variance vs. 2021

32.5%

36.8%

Same-Property EBITDA

$123.5

$133.5

Same-Property EBITDA variance vs. 2019

(8.7%)

(1.3%)

The Company continues to be unable to provide a full-year outlook for 2022 due to the uncertainties caused by the COVID-19 pandemic. The Company intends to issue new full-year guidance when it has more clarity on the economy, travel demand, and more predictable overall operating fundamentals and trends.

Second Quarter 2022 Earnings Call

The Company will conduct its quarterly analyst and investor conference call on Wednesday, July 27, 2022, at 9:30 AM ET. Please dial (877) 407-3982 approximately ten minutes before the call begins to participate. Additionally, a live webcast of the conference call will be available through the Investor Relations section of www.pebblebrookhotels.com. To access the webcast, click on https://investor.pebblebrookhotels.com/news-and-events/webcasts/default.aspx ten minutes before the conference call. A replay of the conference call webcast will be archived and available online.

About Pebblebrook Hotel Trust

Pebblebrook Hotel Trust (NYSE: PEB) is a publicly traded real estate investment trust ("REIT") and the largest owner of urban and resort lifestyle hotels and resorts in the United States. The Company owns 54 hotels and resorts, totaling approximately 13,400 guest rooms across 16 urban and resort markets. For more information, visit www.pebblebrookhotels.com and follow us 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 the 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: descriptions of the Company’s plans or objectives for future capital investment projects, operations or services; forecasts of the Company’s future economic performance; forecasts of hotel industry performance; descriptions of potential dispositions; 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 SEC, including, without limitation, the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. 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 filings with the U.S. Securities and Exchange Commission, 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 at www.pebblebrookhotels.com.

All information in this press release is as of July 26, 2022. 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 at www.pebblebrookhotels.com

Pebblebrook Hotel Trust

Consolidated Balance Sheets

($ in thousands, except share and per-share data)

June 30, 2022

December 31, 2021

(Unaudited)

ASSETS

Assets:

Investment in hotel properties, net

$

6,039,477

$

6,079,333

Hotels held for sale

146,805

-

Cash and cash equivalents

32,046

58,518

Restricted cash

30,744

33,729

Hotel receivables (net of allowance for doubtful accounts of $281 and $1,142, respectively)

54,899

37,045

Prepaid expenses and other assets

84,954

52,565

Total assets

$

6,388,925

$

6,261,190

LIABILITIES AND EQUITY

Liabilities:

Unsecured revolving credit facilities

$

100,000

$

-

Unsecured term loans, net of unamortized deferred financing costs

1,402,760

1,427,256

Convertible senior notes, net of unamortized debt premium and discount and deferred financing costs

745,868

745,401

Senior unsecured notes, net of unamortized deferred financing costs

49,879

49,838

Mortgage loans, net of unamortized debt discount and deferred financing costs

219,244

219,393

Accounts payable, accrued expenses and other liabilities

261,169

250,584

Lease liabilities - operating leases

320,315

319,426

Deferred revenues

75,340

69,064

Accrued interest

4,821

4,567

Liabilities related to hotels held for sale

4,636

-

Distribution payable

12,217

11,756

Total liabilities

3,196,249

3,097,285

Commitments and contingencies

Shareholders' Equity:

Preferred shares of beneficial interest, $0.01 par value (liquidation preference $740,000 at June 30, 2022 and December 31, 2021), 100,000,000 shares authorized; 29,600,000 shares issued and outstanding at June 30, 2022 and December 31, 2021

296

296

Common shares of beneficial interest, $0.01 par value, 500,000,000 shares authorized; 130,905,132 shares issued and outstanding at June 30, 2022 and 130,813,750 shares issued and outstanding at December 31, 2021

1,309

1,308

Additional paid-in capital

4,271,169

4,268,042

Accumulated other comprehensive income (loss)

23,748

(19,442

)

Distributions in excess of retained earnings

(1,190,693

)

(1,094,023

)

Total shareholders' equity

3,105,829

3,156,181

Non-controlling interests

86,847

7,724

Total equity

3,192,676

3,163,905

Total liabilities and equity

$

6,388,925

$

6,261,190

Pebblebrook Hotel Trust

Consolidated Statements of Operations

($ in thousands, except share and per-share data)

(Unaudited)

Three months ended

June 30,

Six months ended

June 30,

2022

2021

2022

2021

Revenues:

Room

$

261,394

$

108,603

$

430,026

$

162,066

Food and beverage

100,724

31,514

163,148

46,323

Other operating

35,406

23,197

62,418

38,568

Total revenues

$

397,524

$

163,314

$

655,592

$

246,957

Expenses:

Hotel operating expenses:

Room

$

58,002

$

28,563

$

100,465

$

45,273

Food and beverage

64,513

22,453

110,563

33,196

Other direct and indirect

105,881

56,219

191,728

101,447

Total hotel operating expenses

228,396

107,235

402,756

179,916

Depreciation and amortization

60,274

54,701

119,374

110,144

Real estate taxes, personal property taxes, property insurance, and ground rent

33,020

29,436

63,477

58,026

General and administrative

9,686

9,724

19,394

17,370

...