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RLJ Lodging Trust Reports Second Quarter 2019 Results

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

- Disposition of two non-core hotel portfolios for approximately $490 million

- Early termination of Wyndham management agreements

RLJ Lodging Trust (the “Company”) (RLJ) today reported results for the three and six months ended June 30, 2019.

Highlights of Strategic Initiatives

  • Sold a 21-hotel portfolio (“Portfolio 21”) in June and under firm contract to sell an 18-hotel portfolio (“Portfolio 18”) in August
  • Entered into agreement to terminate Wyndham management and NOI guarantee agreements
  • Sold Kingston Plantation in Myrtle Beach, SC for approximately $156 million in June
  • Refinanced approximately $0.4 billion of debt
  • Pro forma RevPAR increased 0.7%, driven by an increase of 0.4% in ADR and 0.3% in Occupancy
  • Repurchased approximately 3.1 million common shares for approximately $54.3 million

“We had a very successful quarter, in addition to delivering solid operational results, we made significant progress on our strategic initiatives, including entering into agreements to sell two non-core portfolios of slow-growth, low-RevPAR hotels and unlocking significant embedded real estate value by terminating our management and NOI guarantee agreements with Wyndham,” commented Leslie D. Hale, President and Chief Executive Officer. “These transformational transactions improved our portfolio quality, elevated our growth profile, and positioned our portfolio for long-term growth and NAV appreciation. With a fortress balance sheet and over $1 billion of investment capacity, RLJ has multiple levers to create shareholder value.”

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 growth for the second quarter was 0.7%. Pro forma RevPAR excluding Portfolio 18, increased 1.1% for the second quarter. The Company's top performing markets were Louisville and Northern California with Pro forma RevPAR growth of 12.1% and 6.9%, respectively.

Net Income for the second quarter was $33.7 million, a decrease of $30.7 million from the comparable period in 2018. For the three months ended June 30, 2019 and June 30, 2018, net income included $32.4 million and $12.0 million, respectively, from sold hotels.

Adjusted EBITDA for the second quarter was $148.4 million, a decrease of $11.5 million from the comparable period in 2018. For the three months ended June 30, 2019 and June 30, 2018, Adjusted EBITDA included $14.3 million and $25.0 million, respectively, from sold hotels.

Financial and Operating Highlights

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

(unaudited)

 

For the three months ended June 30,

 

For the six months ended June 30,

 

2019

 

2018

 

Change

 

2019

 

2018

 

Change

Operational Overview: (1)

 

 

 

 

 

 

 

 

 

Pro forma ADR

$182.44

 

$181.77

 

0.4%

 

$181.05

 

$178.79

 

1.3%

Pro forma Occupancy

82.4%

 

82.1%

 

0.3%

 

78.8%

 

78.9%

 

(0.1)%

Pro forma RevPAR

$150.25

 

$149.19

 

0.7%

 

$142.68

 

$140.98

 

1.2%

 

 

 

 

 

 

 

 

 

 

 

 

Financial Overview:

 

 

 

 

 

 

 

 

 

 

 

Total Revenues

$448,727

 

$484,691

 

(7.4)%

 

$847,994

 

$914,285

 

(7.3)%

Pro forma Hotel Revenue

$408,405

 

$403,987

 

1.1%

 

$772,634

 

$759,323

 

1.8%

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (2)

$33,681

 

$64,393

 

(47.7)%

 

$62,013

 

$88,286

 

(29.8)%

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma Hotel EBITDA

$143,192

 

$144,035

 

(0.6)%

 

$252,822

 

$251,926

 

0.4%

Pro forma Hotel EBITDA Margin

35.1%

 

35.7%

 

(59) bps

 

32.7%

 

33.2%

 

(46) bps

Adjusted EBITDA (3)

$148,381

 

$159,837

 

(7.2)%

 

$259,927

 

$275,629

 

(5.7)%

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted FFO

$119,190

 

$127,915

 

(6.8)%

 

$201,830

 

$209,386

 

(3.6)%

Adjusted FFO Per Diluted Common Share and Unit

$0.69

 

$0.73

 

(5.5)%

 

$1.16

 

$1.20

 

(3.3)%

Note:

(1) Pro forma statistics reflect the Company's 127 hotel portfolio as of August 7, 2019, which excludes Portfolio 21 and Kingston Plantation hotels sold in June 2019 but includes Portfolio 18.

(2) For the three months ended June 30, 2019 and 2018, sold hotels contributed $32.4 million and $12.0 million, respectively, to Net Income. For the six months ended June 30, 2019 and 2018, sold hotels contributed $37.0 million and $17.5 million, respectively, to Net Income.

(3) For the three months ended June 30, 2019, and 2018, sold hotels contributed $14.3 million and $25.0 million, respectively, to Adjusted EBITDA. For the six months ended June 30, 2019 and 2018, sold hotels contributed $25.2 million and $41.7 million, respectively, to Adjusted EBITDA.

Prior Quarterly Outlook Bridge

The following table reconciles the Company's results for the second quarter with the outlook issued as of May 8, 2019.

 

 

Outlook as of
May 8, 2019

Impact of
Dispositions

Adjusted Outlook

Actual

Variance at
Midpoint

Pro forma Consolidated Hotel EBITDA

 

$155.1M to $160.5M

 

($16.7M)

 

$138.4M to $143.8M

 

$143.2M

 

$2.1M

Adjusted EBITDA

 

$145.0M to $150.1M

 

($1.1M)

 

$143.9M to $149.0M

 

$148.4M

 

$2.0M

   

Dispositions Update

The Company is providing the following update on recent disposition activity.

  • Sold two Kingston Plantation hotels with 640 rooms for $156 million in June. The sale equates to a 12.9x trailing multiple, inclusive of planned capital expenditures.
  • Entered into two transactions to sell 39 non-core legacy hotels for approximately $490 million at a blended 10.6x trailing multiple, inclusive of planned capital requirements:
    • Portfolio 21 closed in June 2019.
    • Portfolio 18 is scheduled to close in August 2019. The Company currently holds a $17.5 million non-refundable deposit from the purchaser.

Please refer to the Schedule of Hotel Dispositions within this release for a list of hotels included in the two transactions.

The sale of Portfolio 18 is subject to customary closing conditions. However, there can be no assurance the Company will be able to successfully consummate the transaction.

Wyndham Termination

The Company entered into a non-binding letter of intent and is finalizing a definitive agreement with Wyndham to terminate the management and NOI guarantee agreements on the Wyndham hotels. The significant terms of termination agreement will include the following:

  • Management agreement and guarantee will terminate effective December 31, 2019
  • Wyndham remains obligated to fund the 2019 guarantee payment estimated to be $10 million
  • RLJ will receive a termination payment of $35.0 million
  • At RLJ's option, these hotels may operate under transitional franchise and/or management agreements through December 31, 2020, with an extension option through December 31, 2021

The Company is also currently evaluating branding alternatives for the Wyndham hotels and expects rebrandings to occur in stages starting in 2020.

Debt Financing

In April 2019, the Company refinanced approximately $381 million of secured debt, which reduced borrowing costs, extended maturities (including extensions), and improved non-financial terms. In connection with these transactions, the Company entered into a new $200.0 million mortgage loan maturing in April 2024, a new $96.0 million mortgage loan maturing in April 2026, and an amended and restated $85.0 million seven-year floating rate mortgage loan maturing in April 2026.

The cash proceeds received from the two new mortgage loans were used to repay the Company's $150.0 million secured loan maturing in October 2021 and an approximately $140 million secured loan maturing in March 2022.

Share Repurchases

During the second quarter, the Company repurchased 0.4 million shares of its common stock for $7.8 million at an average price per share of $17.56. Year-to-date, as of August 7, 2019, the Company has repurchased approximately 3.1 million shares of its common stock for approximately $54.3 million at an average price per share of $17.29. As of August 7, 2019, the Company's share buyback program had a remaining capacity of approximately $206.0 million.

Balance Sheet

As of June 30, 2019, the Company had $697.6 million of unrestricted cash on its balance sheet, $600.0 million available on its revolving credit facility, and $2.2 billion of debt outstanding.

The Company’s ratio of net debt to Adjusted EBITDA for the trailing twelve-month period ended June 30, 2019, was 3.3x.

Dividends

The Company’s Board of Trustees declared a cash dividend of $0.33 per common share of beneficial interest in the second quarter. The dividend was paid on July 15, 2019, to shareholders of record as of June 28, 2019.

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 July 31, 2019, to shareholders of record as of June 28, 2019.

Outlook

The Company is adjusting its outlook for the impact of the dispositions. The Company's full-year outlook includes 109 hotels. Pro forma RevPAR growth, Pro forma Hotel EBITDA Margin and Pro forma Consolidated Hotel EBITDA excludes Portfolio 21, Portfolio 18, and Kingston Plantation for all periods presented. The Company's outlook for Adjusted EBITDA and Adjusted FFO per Diluted Share and Unit includes Portfolio 21, Portfolio 18, and Kingston Plantation for the Company's ownership period. Other than Portfolio 18, future acquisitions, dispositions, financings, or share repurchases are not incorporated into the Company's outlook below and could result in a material change to the Company's outlook.

 

 

Prior Outlook as of
May 8, 2019

 

Impact of Dispositions

 

Adjusted Outlook

Pro forma RevPAR growth

 

0.0% to +2.0%

 

-

 

0.0% to +2.0%

Pro forma Hotel EBITDA Margin

 

31.8% to 32.6%

 

-20 bps to -40 bps

 

31.6% to 32.2%

Pro forma Consolidated Hotel EBITDA

 

$527.0M to $552.0M

 

($78.0M)

 

$449.0M to $474.0M

Corporate Cash General & Administrative

 

$35.0M to $36.0M

 

-

 

$35.0M to $36.0M

Adjusted EBITDA

 

$492.0M to $517.0M

 

($37.0M)

 

$455.0M to $480.0M

Adjusted FFO per Diluted Share and Unit

 

$2.18 to $2.30

 

($0.20)

 

$1.98 to $2.10

 

Additionally, key assumptions underlying the Company's full year 2019 outlook include:

  • Closing of the Portfolio 18 sale in August
  • Net interest expense of $88 million to $90 million, which excludes the impact of unrealized gains or losses related to interest rate hedges
  • Capital expenditures related to renovations in the range of $90 million to $110 million and approximately 40 bps to 50 bps of renovation related RevPAR disruption
  • Cash income tax expense of $3 million to $4 million
  • Diluted weighted-average common shares and units of 172.9 million, assuming no additional share repurchases

For the third quarter 2019, the Company anticipates Pro forma Consolidated Hotel EBITDA to be between 23.8% and 24.8% of the Company's full year 2019 outlook, calculated at the midpoint of the respective outlook range.

Investor Presentation and Supplemental Information

Please refer to the investor presentation and the schedule of supplemental information posted to the Company's website for additional details on the disposition transactions and pro forma operating statistics.

Earnings Call

The Company will conduct its quarterly analyst and investor conference call on August 8, 2019, at 10:00 a.m. (Eastern Time). The conference call can be accessed by dialing (877) 407-3982 or (201) 493-6780 for international participants and requesting RLJ Lodging Trust’s second quarter earnings conference call. Additionally, a live webcast of the conference call will be available through the Company’s website at http://www.rljlodgingtrust.com. A replay of the conference call webcast will be archived and available online through the Investor Relations page of the Company’s website.

About Us

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. As of June 30, 2019, the Company's portfolio consisted of 127 hotels with approximately 25,400 rooms located in 23 states and the District of Columbia and an ownership interest in one unconsolidated hotel with 171 rooms.

Forward Looking Statements

The following information contains certain statements, other than purely historical information, including estimates, projections, statements relating to the Company’s business plans, objectives and expected operating results, and the assumptions upon which those statements are based, that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements generally are identified by the use of the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “plan,” “may,” “will,” “will continue,” “intend,” “should,” or similar expressions. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, beliefs, and expectations, such forward-looking statements are not predictions of future events or guarantees of future performance and the Company’s actual results could differ materially from those set forth in the forward-looking statements. Some factors that might cause such a difference include the following: the current global economic uncertainty, increased direct competition, changes in government regulations or accounting rules, changes in local, national, and global real estate conditions, declines in the lodging industry, seasonality of the lodging industry, risks related to natural disasters, such as earthquakes and hurricanes, hostilities, including future terrorist attacks or fear of hostilities that affect travel, the Company’s ability to obtain lines of credit or permanent financing on satisfactory terms, changes in interest rates, access to capital through offerings of the Company’s common and preferred shares of beneficial interest, or debt, the Company’s ability to identify suitable acquisitions, the Company’s ability to close on identified acquisitions and integrate those businesses, and inaccuracies of the Company’s accounting estimates. Given these uncertainties, undue reliance should not be placed on such statements. Except as required by law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. The Company cautions investors not to place undue reliance on these forward-looking statements and urges investors to carefully review the disclosures the Company makes concerning risks and uncertainties in the sections entitled “Risk Factors,” “Forward-Looking Statements,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report, as well as risks, uncertainties, and other factors discussed in other documents filed by the Company with the Securities and Exchange Commission.

RLJ Lodging Trust
Non-GAAP and Accounting Commentary

Non-Generally Accepted Accounting Principles (“Non-GAAP”) Financial Measures

The Company considers the following non-GAAP financial measures useful to investors as key supplemental measures of its performance: (1) FFO, (2) Adjusted FFO, (3) EBITDA, (4) EBITDAre, (5) Adjusted EBITDA, (6) Hotel EBITDA, and (7) Hotel EBITDA Margin. These Non-GAAP financial measures should be considered along with, but not as alternatives to, net income or loss as a measure of its operating performance. FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA, Hotel EBITDA, and Hotel EBITDA Margin as calculated by the Company, may not be comparable to other companies that do not define such terms exactly as the Company.

Funds From Operations (“FFO”)

The Company calculates Funds from Operations (“FFO”) in accordance with standards established by the National Association of Real Estate Investment Trusts, or NAREIT, which defines FFO as net income or loss (calculated in accordance with GAAP), excluding gains or losses from sales of real estate, impairment, the cumulative effect of changes in accounting principles, plus depreciation and amortization, and adjustments for unconsolidated partnerships and joint ventures. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most real estate industry investors consider FFO to be helpful in evaluating a real estate company’s operations. The Company believes that the presentation of FFO provides useful information to investors regarding the Company’s operating performance and can facilitate comparisons of operating performance between periods and between real estate investment trusts (“REITs”), even though FFO does not represent an amount that accrues directly to common shareholders.

The Company’s calculation of FFO may not be comparable to measures calculated by other companies who do not use the NAREIT definition of FFO or do not calculate FFO per diluted share in accordance with NAREIT guidance. Additionally, FFO may not be helpful when comparing the Company to non-REITs. The Company presents FFO attributable to common shareholders, which includes unitholders of limited partnership interest (“OP units”) in RLJ Lodging Trust, L.P., the Company’s operating partnership, because the OP units are redeemable for common shares of the Company. The Company believes it is meaningful for the investor to understand FFO attributable to all common shares and OP units.

EBITDA and EBITDAre

Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”) is defined as net income or loss excluding: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sales of assets; and (3) depreciation and amortization. The Company considers EBITDA useful to an investor in evaluating and facilitating comparisons of its operating performance between periods and between REITs by removing the impact of its capital structure (primarily interest expense) and asset base (primarily depreciation and amortization) from its operating results. In addition, EBITDA is used as one measure in determining the value of hotel acquisitions and dispositions.

In addition to EBITDA, the Company presents EBITDAre in accordance with NAREIT guidelines, which defines EBITDAre as net income or loss (calculated in accordance with GAAP) excluding interest expense, income tax expense, depreciation and amortization expense, gains or losses from sales of real estate, impairment, and adjustments for unconsolidated partnerships and joint ventures. The Company believes that the presentation of EBITDAre provides useful information to investors regarding the Company’s operating performance and can facilitate comparisons of operating performance between periods and between REITs.

Adjustments to FFO and EBITDAre

The Company adjusts FFO, EBITDA, and EBITDAre for certain items that the Company considers either outside the normal course of operations or extraordinary. The Company believes that Adjusted FFO, Adjusted EBITDA, and Adjusted EBITDAre provide useful supplemental information to investors regarding its ongoing operating performance that, when considered with net income or loss, FFO, EBITDA, and EBITDAre, are beneficial to an investor’s understanding of its operating performance. The Company adjusts FFO, EBITDA, and EBITDAre for the following items:

  • Transaction Costs: The Company excludes transaction costs expensed during the period.
  • Non-Cash Expenses: The Company excludes the effect of certain non-cash items such as the amortization of share-based compensation and non-cash income taxes.
  • Other Non-Operational Expenses: The Company excludes the effect of certain non-operational expenses representing income and expenses outside of the normal course of operations

The Company previously presented Adjusted EBITDA with adjustments for noncontrolling interests in consolidated joint ventures. The rationale for including 100% of Adjusted EBITDA for consolidated joint ventures with noncontrolling interests is that the full amount of any debt of these consolidated joint ventures is reported in our consolidated balance sheet and metrics using debt to EBITDA provide a better understanding of the Company’s leverage. This is also consistent with NAREIT’s definition of EBITDAre.

Hotel EBITDA and Hotel EBITDA Margin

With respect to Consolidated Hotel EBITDA, the Company believes that excluding the effect of corporate-level expenses and certain non-cash items provides a more complete understanding of the operating results over which individual hotels and operators have direct control. The Company believes property-level results provide investors with supplemental information about the ongoing operational performance of the Company’s hotels and the effectiveness of its third-party management companies.

Pro forma Consolidated Hotel EBITDA includes prior ownership information provided by the sellers of the hotels for periods prior to our acquisition of the hotels, which has not been audited and excludes results from sold hotels as applicable. Pro forma Hotel EBITDA and Pro forma Hotel EBITDA Margin exclude the results of any non-comparable hotels that were under renovation or not open for the entirety of the comparable periods. The following is a summary of pro forma hotel adjustments:

Pro forma adjustments: Acquired hotels

For the three and six months ended June 30, 2019 and 2018, respectively, no hotels were acquired.

Pro forma adjustments: Sold hotels

For the three and six months ended June 30, 2019 and 2018, pro forma adjustments included the hotels shown on the Schedule of Hotel Dispositions within this release, with the exception of Portfolio 18, and the following sold hotels:

  • Embassy Suites Boston - Marlborough
  • Sheraton Philadelphia Society Hill Hotel
  • Embassy Suites Napa Valley
  • DoubleTree Columbia
  • The Vinoy Renaissance St. Petersburg Resort & Golf Club
  • DoubleTree by Hilton Burlington Vermont
  • Holiday Inn San Francisco - Fisherman's Wharf
 

RLJ Lodging Trust

Consolidated Balance Sheets

(Amounts in thousands, except share and per share data)

(unaudited)

 

 

 

 

June 30,
2019

 

December 31,
2018

Assets

 

 

 

 

Investment in hotel properties, net

 

$

4,706,110

 

 

$

5,378,651

 

Investment in unconsolidated joint ventures

 

16,612

 

 

22,279

 

Cash and cash equivalents

 

697,600

 

 

320,147

 

Restricted cash reserves

 

48,330

 

 

64,695

 

Hotel and other receivables, net of allowance of $352 and $598, respectively

 

65,019

 

 

52,115

 

Lease right-of-use assets

 

147,023

 

 

 

Deferred income tax asset, net

 

43,343

 

 

47,395

 

Intangible assets, net

 

173

 

 

52,448

 

Prepaid expense and other assets

 

48,018

 

 

67,367

 

Hotel properties held for sale, net

 

169,439

 

 

Total assets

 

$

5,941,667

 

 

$

6,005,097

 

Liabilities and Equity

 

 

 

 

Debt, net

 

$

2,200,722

 

 

$

2,202,676

 

Accounts payable and other liabilities

 

183,791

 

 

203,833

 

Deferred income tax liability

 

2,766

 

 

2,766

 

Advance deposits and deferred revenue

 

23,125

 

 

25,411

 

Lease liabilities

 

122,399

 

 

 

Accrued interest

 

6,922

 

 

7,913

 

Distributions payable

 

64,941

 

 

65,557

 

Total liabilities

 

2,604,666

 

 

2,508,156

 

Equity

 

 

 

 

Shareholders’ equity:

 

 

 

 

Preferred shares of beneficial interest, $0.01 par value, 50,000,000 shares authorized

 

 

 

 

Series A Cumulative Convertible Preferred Shares, $0.01 par value, 12,950,000 shares authorized; 12,879,475 shares issued and outstanding, liquidation value of $328,266, at June 30, 2019 and December 31, 2018

 

366,936

 

 

366,936

 

Common shares of beneficial interest, $0.01 par value, 450,000,000 shares authorized; 173,459,015 and 174,019,616 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively

 

1,735

 

 

1,740

 

Additional paid-in capital

 

3,182,351

 

 

3,195,381

 

Accumulated other comprehensive (loss) income

 

(21,836

)

 

16,195

 

Distributions in excess of net earnings

 

(216,583

)

 

(150,476

)

Total shareholders’ equity

 

3,312,603

 

 

3,429,776

 

Noncontrolling interest:

 

 

 

 

Noncontrolling interest in consolidated joint ventures

 

13,957

 

 

11,908

 

Noncontrolling interest in the Operating Partnership

 

10,441

 

 

10,827

 

Total noncontrolling interest

 

24,398

 

 

22,735

 

Preferred equity in a consolidated joint venture, liquidation value of $45,544 at December 31, 2018

 

 

 

44,430

 

Total equity

 

3,337,001

 

 

3,496,941

 

Total liabilities and equity

 

$

5,941,667

 

 

$

6,005,097

 

Note:

The corresponding notes to the consolidated financial statements can be found in the Company’s Quarterly Report on Form 10-Q.

RLJ Lodging Trust

Consolidated Statements of Operations

(Amounts in thousands, except share and per share data)

(unaudited)

 

 

 

For the three months ended
June 30,

 

For the six months ended
June 30,

 

 

2019

 

2018

 

2019

 

2018

Revenues

 

 

 

 

 

 

 

 

Operating revenues

 

 

 

 

 

 

 

 

Room revenue

 

$

378,857

 

 

$

403,232

 

 

$

716,527

 

 

$

760,877

 

Food and beverage revenue

 

49,458

 

 

58,444

 

 

93,704

 

 

110,639

 

Other revenue

 

20,412

 

 

23,015

 

 

37,763

 

 

42,769

 

Total revenues

 

$

448,727

 

 

$

484,691

 

 

$

847,994

 

 

$

914,285

 

Expenses

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

Room expense

 

$

88,898

 

 

$

94,459

 

 

$

173,086

 

 

$

184,428

 

Food and beverage expense

 

35,910

 

 

42,406

 

 

70,119

 

 

83,669

 

Management and franchise fee expense

 

35,825

 

 

37,252

 

 

69,944

 

 

72,928

 

Other operating expense

 

101,596

 

 

108,556

 

 

198,713

 

 

214,679

 

Total property operating expenses

 

262,229

 

 

282,673

 

 

511,862

 

 

555,704

 

Depreciation and amortization

 

54,956

 

 

61,648

 

 

113,359

 

 

123,056

 

Property tax, insurance and other

 

31,201

 

 

35,537

 

 

61,797

 

 

70,036

 

General and administrative

 

11,765

 

 

15,523

 

 

22,925

 

 

26,436

 

Transaction costs

 

425

 

 

247

 

 

984

 

 

1,920

 

Total operating expenses

 

360,576

 

 

395,628

 

 

710,927

 

 

777,152

 

Other income

 

349

 

 

565

 

 

622

 

 

1,657

 

Interest income

 

1,073

 

 

960

 

 

2,245

 

 

2,190

 

Interest expense

 

(25,237

)

 

(25,443

)

 

(45,299

)

 

(54,144

)

(Loss) gain on sale of hotel properties and hotel properties held for sale, net

 

(24,835

)

 

796

 

 

(24,835

)

 

(2,938

)

Gain on extinguishment of indebtedness, net

 

 

 

7

 

 

 

 

7,666

 

Income before equity in (loss) income from unconsolidated joint ventures

 

39,501

 

 

65,948

 

 

69,800

 

 

91,564

 

Equity in (loss) income from unconsolidated joint ventures

 

(2,403

)

 

799

 

 

(2,784

)

 

418

 

Income before income tax expense

 

37,098

 

 

66,747

 

 

67,016

 

 

91,982

 

Income tax expense

 

(3,417

)

 

(2,354

)

 

(5,003

)

 

(3,696

)

Net income

 

33,681

 

 

64,393

 

 

62,013

 

 

88,286

 

Net (income) loss attributable to noncontrolling interests:

 

 

 

 

 

 

 

 

Noncontrolling interest in consolidated joint ventures

 

(96

)

 

(55

)

 

256

 

 

179

 

Noncontrolling interest in the Operating Partnership

 

(141

)

 

(254

)

 

(233

)

 

(327

)

Preferred distributions - consolidated joint venture

 

 

 

(370

)

 

(186

)

 

(735

)

Redemption of preferred equity - consolidated joint venture

 

 

 

 

 

(1,153

)

 

 

Net income attributable to RLJ

 

33,444

 

 

63,714

 

 

60,697

 

 

87,403

 

Preferred dividends

 

(6,279

)

 

(6,279

)

 

(12,557

)

 

(12,557

)

Net income attributable to common shareholders

 

$

27,165

 

 

$

57,435

 

 

$

48,140

 

 

$

74,846

 

Basic per common share data:

 

 

 

 

 

 

 

 

Net income per share attributable to common shareholders

 

$

0.16

 

 

$

0.33

 

 

$

0.27

 

 

$

0.43

 

Weighted-average number of common shares

 

172,661,878

 

 

174,238,854

 

 

172,729,064

 

 

174,216,387

 

Diluted per common share data:

 

 

 

 

 

 

 

 

Net income per share attributable to common shareholders

 

$

0.16

 

 

$

0.33

 

 

$

0.27

 

 

$

0.43

 

Weighted-average number of common shares

 

172,766,091

 

 

174,364,547

 

 

172,808,513

 

 

174,316,348

 

Note:

The Statements of Comprehensive Income and corresponding notes to the consolidated financial statements can be found in the Company’s Quarterly Report on Form 10-Q.

RLJ Lodging Trust

Reconciliation of Non-GAAP Measures

(Amounts in thousands, except per share data)

(unaudited)

 

Funds from Operations (FFO) Attributable to Common Shareholders and Unitholders

 

 

 

For the three months ended
June 30,

 

For the six months ended
June 30,

 

 

2019

 

2018

 

2019

 

2018

Net income

 

$

33,681

 

 

$

64,393

 

 

$

62,013

 

 

$

88,286

 

Preferred dividends

 

(6,279

)

 

(6,279

)

 

(12,557

)

 

(12,557

)

Preferred distributions - consolidated joint venture

 

 

 

(370

)

 

(186

)

 

(735

)

Redemption of preferred equity - consolidated joint venture

 

 

 

 

 

(1,153

)

 

 

Depreciation and amortization

 

54,956

 

 

61,648

 

 

113,359

 

 

123,056

 

Loss (gain) on sale of hotel properties and hotel properties held for sale, net

 

24,835

 

 

(796

)

 

24,835

 

 

2,938

 

Noncontrolling interest in consolidated joint ventures

 

(96

)

 

(55

)

 

256

 

 

179

 

Adjustments related to consolidated joint ventures (1)

 

(75

)

 

(80

)

 

(149

)

 

(155

)

Adjustments related to unconsolidated joint ventures (2)

 

3,534

 

 

669

 

 

4,228

 

 

1,337

 

FFO

 

110,556

 

 

119,130

 

 

190,646

 

 

202,349

 

Transaction costs

 

425

 

 

247

 

 

984

 

 

1,920

 

Gain on extinguishment of indebtedness, net

 

 

 

(7

)

 

 

 

(7,666

)

Amortization of share-based compensation

 

3,035

 

 

3,172

 

 

5,760

 

 

5,686

 

Non-cash income tax expense

 

2,770

 

 

1,826

 

 

4,052

 

 

2,929

 

Other expenses (3)

 

2,404

 

 

3,547

 

 

388

 

 

4,168

 

Adjusted FFO

 

$

119,190

 

 

$

127,915

 

 

$

201,830

 

 

$

209,386

 

 

 

 

 

 

 

 

 

 

Adjusted FFO per common share and unit-basic

 

$

0.69

 

 

$

0.73

 

 

$

1.16

 

 

$

1.20

 

Adjusted FFO per common share and unit-diluted

 

$

0.69

 

 

$

0.73

 

 

$

1.16

 

 

$

1.20

 

 

 

 

 

 

 

 

 

 

Basic weighted-average common shares and units outstanding (4)

 

173,435

 

 

175,013

 

 

173,502

 

 

174,990

 

Diluted weighted-average common shares and units outstanding (4)

 

173,539

 

 

175,138

 

 

173,581

 

 

175,090

 

Note:

(1)

Includes depreciation and amortization expense allocated to the noncontrolling interest in the consolidated joint ventures.

(2)

Includes our ownership interest in the depreciation and amortization expense and loss on sale of the unconsolidated joint ventures.

(3)

Represents income and expenses outside of the normal course of operations, including debt modification costs, hurricane-related costs that were not reimbursed by insurance, executive transition costs, activist shareholder costs, and unrealized gains and losses on certain discontinued cash flow hedges.

(4)

Includes 0.8 million weighted-average operating partnership units for the three and six month periods ended June 30, 2019 and 2018, respectively.

RLJ Lodging Trust

Reconciliation of Non-GAAP Measures

(Amounts in thousands)

(unaudited)

 

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)

 

 

 

For the three months ended
June 30,

 

For the six months ended
June 30,

 

 

2019

 

2018

 

2019

 

2018

Net income

 

$

33,681

 

 

$

64,393

 

 

$

62,013

 

 

$

88,286

 

Depreciation and amortization

 

54,956

 

 

61,648

 

 

113,359

 

 

123,056

 

Interest expense, net of interest income

 

24,164

 

 

24,483

 

 

43,055

 

 

51,954

 

Income tax expense

 

3,417

 

 

2,354

 

 

5,003

 

 

3,696

 

Adjustments related to unconsolidated joint ventures (1)

 

736

 

 

796

 

 

1,552

 

 

1,591

 

EBITDA

 

116,954

 

 

153,674

 

 

224,982

 

 

268,583

 

Loss (gain) on sale of hotel properties and hotel properties held for sale, net

 

24,835

 

 

(796

)

 

24,835

 

 

2,938

 

Loss on sale of unconsolidated joint ventures (2)

 

2,923

 

 

 

 

2,923

 

 

 

EBITDAre

 

144,712

 

 

152,878

 

 

252,740

 

 

271,521

 

Transaction costs

 

425

 

 

247

 

 

984

 

 

1,920

 

Gain on extinguishment of indebtedness, net

 

 

 

(7

)

 

 

 

(7,666

)

Amortization of share-based compensation

 

3,035

 

 

3,172

 

 

5,760

 

 

5,686

 

Other expenses (3)

 

209

 

 

3,547

 

 

443

 

 

4,168

 

Adjusted EBITDA

 

148,381

 

 

159,837

 

 

259,927

 

 

275,629

 

General and administrative (4)

 

8,730

 

 

9,152

 

 

17,156

 

 

17,446

 

Other corporate adjustments (5)

 

422

 

 

55

 

 

977

 

 

542

 

Consolidated Hotel EBITDA

 

157,533

 

 

169,044

 

 

278,060

 

 

293,617

 

Pro forma adjustments - income from sold hotels

 

(14,341

)

 

(25,009

)

 

(25,238

)

 

(41,691

)

Pro forma Consolidated Hotel EBITDA

 

143,192

 

 

144,035

 

 

252,822

 

 

251,926

 

Pro forma adjustments - income from non-comparable hotels

 

 

 

 

 

 

 

 

Pro forma Hotel EBITDA

 

$

143,192

 

 

$

144,035

 

 

$

252,822

 

 

$

251,926

 

Note:

(1)

Includes our ownership interest in the interest, depreciation, and amortization expense of the unconsolidated joint ventures.

(2)

Includes our ownership interest in the loss on sale of the unconsolidated joint ventures associated with two resort hotel properties owned by the Company in Myrtle Beach, SC.

(3)

Represents income and expenses outside of the normal course of operations, including debt modification costs, hurricane-related costs that were not reimbursed by insurance, executive transition costs, and activist shareholder costs.

(4)

Excludes amortization of share-based compensation and activist shareholder costs reflected in Adjusted EBITDA.

(5)

Other corporate adjustments include property-level adjustments and certain revenues and expenses at corporate entities. These items include interest income, amortization of deferred management fees, key money amortization, ground rent amortization, legal fees, revenues and expenses associated with non-hotel properties, income (loss) from unconsolidated entities, internal lease rent expense, and other items.

RLJ Lodging Trust

Reconciliation of Non-GAAP Measures

(Amounts in thousands)

(unaudited)

 

Pro forma Hotel EBITDA Margin

 

 

 

For the three months ended
June 30,

 

For the six months ended
June 30,

 

 

2019

 

2018

 

2019

 

2018

Total revenue

 

$

448,727

 

 

$

484,691

 

 

$

847,994

 

 

$

914,285

 

Pro forma adjustments - revenue from sold hotels

 

(39,327

)

 

(79,491

)

 

(73,992

)

 

(153,336

)

Other corporate adjustments / non-hotel revenue

 

(995

)

 

(1,213

)

 

(1,368

)

 

(1,626

)

Pro forma Hotel Revenue

 

$

408,405

 

 

$

403,987

 

 

$

772,634

 

 

$

759,323

 

 

 

 

 

 

 

 

 

 

Pro forma Hotel EBITDA

 

$

143,192

 

 

$

144,035

 

 

$

252,822

 

 

$

251,926

 

 

 

 

 

 

 

 

 

 

Pro forma Hotel EBITDA Margin

 

35.1

%

 

35.7

%

 

32.7

%

 

33.2

%

RLJ Lodging Trust

Consolidated Debt Summary

(Amounts in thousands)

(unaudited)

 

Loan

 

Base Term
(Years)

 

Maturity
(incl.
extensions)

 

Floating / Fixed

 

Interest
Rate (1)

 

 

Balance as of
June 30, 2019 (2)

Secured Debt

 

 

 

 

 

 

 

 

 

 

 

Mortgage loan - 1 hotel

 

10

 

Jun 2022

 

Fixed

 

5.25

%

 

 

$

31,089

 

Mortgage loan - 2 hotels

 

10

 

Oct 2022

 

Fixed

 

4.95

%

 

 

56,448

 

Mortgage loan - 1 hotel

 

10

 

Oct 2022

 

Fixed

 

4.95

%

 

 

32,446

 

Mortgage loan - 1 hotel

 

10

 

Oct 2022

 

Fixed

 

4.94

%

 

 

28,662

 

Mortgage loan - 7 hotels

 

3

 

Apr 2024

 

Floating (3)

 

3.33

%

 

 

200,000

 

Mortgage loan - 3 hotels

 

5

 

Apr 2026

 

Floating

 

4.00

%

 

 

96,000

 

Mortgage loan - 4 hotels

 

5

 

Apr 2026

 

Floating (3)(5)

 

3.42

%

 

 

85,000

 

Weighted-Average / Secured Total

 

 

 

 

 

 

 

3.94

%

 

 

$

529,645

 

 

 

 

 

 

 

 

 

 

 

 

 

Unsecured Debt

 

 

 

 

 

 

 

 

 

 

 

Revolver (4)

 

4

 

Apr 2021

 

Floating

 

3.90

%

 

 

$

 

$400 Million Term Loan Maturing 2021

 

5

 

Apr 2021

 

Floating (3)(5)

 

3.10

%

 

 

400,000

 

$150 Million Term Loan Maturing 2022

 

7

 

Jan 2022

 

Floating (3)

 

3.08

%

 

 

150,000

 

$400 Million Term Loan Maturing 2023

 

5

 

Jan 2023

 

Floating (3)

 

3.78

%

 

 

400,000

 

$225 Million Term Loan Maturing 2023

 

5

 

Jan 2023

 

Floating (3)

 

3.78

%

 

 

225,000

 

Senior Unsecured Notes

 

10

 

Jun 2025

 

Fixed

 

6.00

%

 

 

475,000

 

Weighted-Average / Unsecured Total

 

 

 

 

 

 

 

4.19

%

 

 

$

1,650,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-Average / Gross Debt

 

 

 

 

 

 

 

4.13

%

 

 

$

2,179,645

 

Note:

(1)

Interest rates as of June 30, 2019.

(2)

Excludes the impact of fair value adjustments and deferred financing costs.

(3)

The floating interest rate is hedged with an interest rate swap.

(4)

As of June 30, 2019, there was $600.0 million of borrowing capacity on the revolver, which is charged an unused commitment fee of 0.30% annually.

(5)

Reflects an interest rate swap of $81.8 million on the $85.0 million mortgage loan and $350.0 million on the $400.0 million term loan.

RLJ Lodging Trust

Pro forma Operating Statistics - Top 60 Assets

(unaudited)

 

Property

 

City/State

 

# of Rooms

 

Pro forma Consolidated
Hotel EBITDA

The Knickerbocker New York

 

New York, NY

 

330

 

$13,503

Marriott Louisville Downtown

 

Louisville, KY

 

620

 

12,943

Wyndham San Diego Bayside

 

San Diego, CA

 

600

 

10,653

San Francisco Marriott Union Square

 

San Francisco, CA

 

401

 

10,603

Wyndham Boston Beacon Hill

 

Boston, MA

 

304

 

9,744

The Mills House Wyndham Grand Hotel

 

Charleston, SC

 

216

 

9,047

Embassy Suites San Francisco Airport - Waterfront

 

Burlingame, CA

 

340

 

9,009

Courtyard Austin Downtown Convention Center

 

Austin, TX

 

270

 

8,760

Embassy Suites San Francisco Airport - South San Francisco

 

South San Francisco, CA

 

312

 

8,272

Embassy Suites Los Angeles - International Airport South

 

El Segundo, CA

 

349

 

8,016

DoubleTree Grand Key Resort

 

Key West, FL

 

216

 

7,918

Wyndham New Orleans - French Quarter

 

New Orleans, LA

 

374

 

7,917

Embassy Suites Fort Lauderdale 17th Street

 

Fort Lauderdale, FL

 

361

 

7,895

Embassy Suites Mandalay Beach - Hotel & Resort

 

Oxnard, CA

 

250

 

7,432

Courtyard San Francisco

 

San Francisco, CA

 

166

 

7,431

Courtyard Portland City Center

 

Portland, OR

 

256

 

7,421

Residence Inn Palo Alto Los Altos

 

Los Altos, CA

 

156

 

7,173

Renaissance Pittsburgh Hotel

 

Pittsburgh, PA

 

300

 

6,804

Hilton Garden Inn San Francisco Oakland Bay Brg

 

Emeryville, CA

 

278

 

6,795

DoubleTree Metropolitan Hotel New York City

 

New York, NY

 

764

 

6,510

Embassy Suites Deerfield Beach - Resort & Spa

 

Deerfield Beach, FL

 

244

 

6,432

Hyatt House Emeryville San Francisco Bay Area

 

Emeryville, CA

 

234

 

6,408

Wyndham Philadelphia Historic District

 

Philadelphia, PA

 

364

 

6,404

Courtyard Waikiki Beach

 

Honolulu, HI

 

403

 

6,338

Fairfield Inn & Suites Washington DC Downtown

 

Washington, DC

 

198

 

6,055

Wyndham Santa Monica At the Pier

 

Santa Monica, CA

 

132

 

5,979

Hyatt House San Jose Silicon Valley

 

San Jose, CA

 

164

 

5,937

Embassy Suites Atlanta - Buckhead

 

Atlanta, GA

 

316

 

5,887

Courtyard Chicago Downtown Magnificent Mile

 

Chicago, IL

 

306

 

5,860

Hyatt House Santa Clara

 

Santa Clara, CA

 

150

 

5,818

Embassy Suites Milpitas Silicon Valley

 

Milpitas, CA

 

266

 

5,505

Courtyard Charleston Historic District

 

Charleston, SC

 

176

 

5,443

DoubleTree Suites by Hilton Austin

 

Austin, TX

 

188

 

5,437

Embassy Suites Tampa Downtown Convention Center

 

Tampa, FL

 

360

 

5,391

Wyndham Houston - Medical Center Hotel & Suites

 

Houston, TX

 

287

 

5,338

Marriott Denver South @ Park Meadows

 

Lone Tree, CO

 

279

 

5,200

Embassy Suites Boston Waltham

 

Waltham, MA

 

275

 

5,040

Residence Inn Bethesda Downtown

 

Bethesda, MD

 

188

 

5,026

Residence Inn Austin Downtown Convention Center

 

Austin, TX

 

179

 

4,881

Hyatt House San Diego Sorrento Mesa

 

San Diego, CA

 

193

 

4,858

Hilton Cabana Miami Beach

 

Miami Beach, FL

 

231

 

4,765

Hyatt Centric Midtown Atlanta

 

Atlanta, GA

 

194

 

4,765

Renaissance Fort Lauderdale Plantation Hotel

 

Plantation, FL

 

250

 

4,626

Embassy Suites Orlando - International Drive South/Convention Center

 

Orlando, FL

 

244

 

4,565

Homewood Suites Washington DC Downtown

 

Washington, DC

 

175

 

4,455

Embassy Suites Irvine Orange County

 

Irvine, CA

 

293

 

4,418

Hilton Garden Inn Los Angeles Hollywood

 

Los Angeles, CA

 

160

 

4,343

Embassy Suites Dallas - Love Field

 

Dallas, TX

 

248

 

4,203

Hyatt Place Washington DC Downtown K Street

 

Washington, DC

 

164

 

4,130

Embassy Suites Los Angeles Downey

 

Downey, CA

 

220

 

3,973

Embassy Suites Miami - International Airport

 

Miami, FL

 

318

 

3,896

Renaissance Boulder Flatiron Hotel

 

Broomfield, CO

 

232

 

3,864

Hyatt House San Ramon

 

San Ramon, CA

 

142

 

3,823

Embassy Suites Phoenix - Biltmore

 

Phoenix, AZ

 

232

 

3,711

Marriott Denver Airport @ Gateway Park

 

Aurora, CO

 

238

 

3,664

Residence Inn National Harbor Washington DC

 

Oxon Hill, MD

 

162

 

3,597

Hyatt Place Fremont Silicon Valley

 

Fremont, CA

 

151

 

3,589

Wyndham Pittsburgh University Center

 

Pittsburgh, PA

 

251

 

3,538

Hilton Garden Inn New Orleans Convention Center

 

New Orleans, LA

 

286

 

3,509

Embassy Suites Minneapolis - Airport

 

Bloomington, MN

 

310

 

3,472

Top 60 Assets

 

 

 

16,266

 

367,989

Other (67 Assets)

 

 

 

9,140

 

118,944

Total Portfolio

 

 

 

25,406

 

$486,933

 

Note: For the trailing twelve months ended June 30, 2019. Results reflect the Company's 127 hotel portfolio as of June 30, 2019, that excludes Portfolio 21 and Kingston Plantation sold in June 2019, but includes Portfolio 18 under contract to be sold. Results reflect 100% of the financial results of three consolidated joint ventures and exclude the Chateau LeMoyne-French Quarter New Orleans, which is an unconsolidated hotel. Amounts in thousands, except rooms. Unaudited information presented only for comparison purposes.

 

RLJ Lodging Trust

Pro forma Operating Statistics

(unaudited)

 

For the three months ended June 30, 2019 and 2018

 

Top Markets

 

# of
Hotels

 

Occupancy

 

ADR

 

RevPAR

2019

2018

Var

2019

2018

Var

2019

2018

Var

Northern California

 

12

 

88.6

%

85.0

%

4.2

%

 

$

234.78

 

$

228.92

 

2.6

%

 

$

207.92

 

$

194.50

 

6.9

%

Southern California

 

9

 

...