Third Quarter 2015 Highlights
- Same-Property RevPAR: Same-Property RevPAR, as adjusted by our operators for USALI, increased 4.6% from the third quarter of 2014 to $147.81, as occupancy remained essentially flat and ADR increased 4.6%.
- Same-Property Hotel EBITDA Margin: Same-Property Hotel EBITDA margin was 31.8%, an increase of 60 basis points from the same period in 2014.
- Adjusted EBITDA: Adjusted EBITDA grew $15.2 million to $74.9 million, an increase of 25.5% over the third quarter of 2014.
- Adjusted FFO: Adjusted FFO available to common stockholders increased to $0.57 per diluted share compared to $0.39 per diluted share for the third quarter of 2014, representing an increase of 46.2%.
- Acquisition Activity: In July, the Company acquired a three property portfolio consisting of the RiverPlace Hotel in Portland, Oregon, the Canary Hotel in Santa Barbara, California, and the Hotel Palomar in Philadelphia, Pennsylvania, for a purchase price of $245 million. In August, the Company announced it had entered into a purchase and sale agreement to acquire the Hotel Commonwealth in Boston, Massachusetts for $136 million upon completion of the hotel's current expansion project. This transaction is expected to be completed in early 2016.
- Development Completion: The Company completed the development of the Grand Bohemian Hotel Charleston in Charleston, South Carolina in August.
- Dividends: The Company declared its third quarter dividend of $0.23 per share on September 17, 2015. The dividend was paid on October 15, 2015.
"Our third quarter results were strong, both from a revenue and bottom-line perspective," said Marcel Verbaas, President and Chief Executive Officer of Xenia Hotels & Resorts. "The strength of our diversified portfolio was evidenced by our RevPAR increase of 4.6%, despite the challenges the industry faced in August and September as a result of the shift in timing of certain holidays and the weakness in the Houston market that continues to impact our hotels there. With most of the RevPAR growth in our hotels resulting from ADR increases, we were able to offset fairly significant increases in real estate taxes at a number of our hotels and improve our hotel operating margin by 60 basis points this quarter."
Mr. Verbaas continued, "We maintain a positive outlook for the industry in general and our portfolio in particular. When excluding our Houston hotels we grew portfolio RevPAR by 5.9%. Given the particular third quarter challenges, we believe this result is a testament to both our commitment to our stated strategy, as well as the success of our asset management practices. We are also excited about the continued evolution of our portfolio. The addition of the three hotels we acquired in July and the completion of the Grand Bohemian Hotel Charleston are a further reflection of the execution of our strategic plan as we added four high quality lifestyle assets in excellent on-strategy locations."
Year to Date Results
For the nine months ended September 30, 2015, Same-Property RevPAR increased to $145.91, reflecting a 4.5% growth from the same period in 2014, driven by ADR growth of 5.3% and offset by a decrease in occupancy of 0.7%. The Company's Same-Property Hotel EBITDA Margin was 32.2%, which improved 90 basis points compared to the same period in prior year. The Company's Adjusted EBITDA and Adjusted FFO per diluted share increased 16.7% and 26.2%, respectively, during the first nine months of 2015 as compared to the same period in 2014.
Acquisitions and Developments
In the third quarter, the Company added four hotels to its operating portfolio and announced one additional hotel acquisition that is expected to close in early 2016.
In July 2015 the Company completed the acquisition of three high-quality lifestyle boutique hotels for a combined purchase price of $245 million. The 84-room RiverPlace Hotel located in downtown Portland, the 97-room Canary Hotel located in downtown Santa Barbara, and the 230-room Hotel Palomar located in downtown Philadelphia, are all managed by Kimpton Hotels & Restaurants. The three hotels are well-located in high barrier to entry markets with diverse demand generators.
Additionally, the Grand Bohemian Hotel Charleston, a 50-room Autograph Collection hotel located in Charleston, South Carolina in which the Company owns a 75% interest, opened in late August 2015. The hotel is located in the heart of the historic district in Charleston, surrounded by local landmarks, shopping and dining. The total cost to develop the hotel was approximately $32 million.
Finally, in August 2015 the Company announced it had entered into a purchase agreement to acquire the Hotel Commonwealth in Boston for a purchase price of $136 million. The hotel has an irreplaceable location between Fenway Park and Boston University in the Kenmore Square section of Boston. The transaction, which is subject to customary closing conditions and the completion of the current hotel expansion, is expected to close in early 2016. The hotel will continue to be managed by Sage Hospitality.
Capital Investments
The Company invested $9.7 million in capital expenditures during the third quarter after having completed several major renovation projects during the first half of the year. For the nine months ended September 30, 2015, the Company has invested $38.2 million in capital expenditures including a guest room renovation and bathroom conversion at the Marriott San Francisco Airport Waterfront, a guest room renovation at the Hyatt Regency Santa Clara and a pool deck renovation at the Aston Waikiki Beach Resort. The Company anticipates total capital expenditures for 2015 of $45 to $50 million, excluding earthquake remediation repairs at the Andaz Napa.
Balance Sheet
As of September 30, 2015, the Company had total outstanding debt of $1.2 billion, including $117 million outstanding on its $400 million senior unsecured credit facility, and a weighted average interest rate of 3.73%. Total net debt to trailing 12 month pro forma Corporate EBITDA (as defined in the Company's senior unsecured credit facility) was 4.0x as of September 30, 2015. As of the end of the third quarter, the Company had $99 million of cash and cash equivalents.
Subsequent Events
Portfolio Updates
In October 2015, the Company announced the sale of the 656-room Hyatt Regency Orange County in Garden Grove, California, for a price of $137 million. The sale price represented an 11.8x multiple on the hotel's 2015 forecasted EBITDA and a 7.1% capitalization rate on 2015 forecasted NOI. In addition to the purchase price, the Company retained the approximate $5.9 million balance in the hotel's capital expenditure reserve account.
The Grand Bohemian Hotel Mountain Brook, a 100-room Autograph Collection hotel located in an upscale suburb of Birmingham, Alabama, in which the Company owns a 75% interest, opened in late October 2015. The total cost to develop the hotel is expected to be approximately $45 million.
Also in October 2015, the Company transitioned the management of the Courtyard Pittsburgh Downtown, Hilton Garden Inn Evanston, Courtyard Kansas City Country Club Plaza and Homewood Suites Houston Galleria to Sage Hospitality, which now manages six hotels for the Company.
"The portfolio initiatives we were able to complete in the early part of the fourth quarter were particularly meaningful." said Mr. Verbaas. "We are excited about the completion of the Grand Bohemian Hotel Mountain Brook, our fifth hotel in Marriott's Autograph Collection, and also our fifth hotel managed by The Kessler Collection. Furthermore, as a result of the management transition at four of our urban upscale hotels that we initiated, Sage will be operating seven of our hotels upon completion of the Hotel Commonwealth transaction. We are looking forward to reaping the benefits from the continued strengthening of our relationship with Sage."
Mr. Verbaas added, "The sale of our Hyatt Regency in Garden Grove was the result of a well-executed strategic decision. Based on the characteristics of the hotel and the market, we felt the time was right to explore a sale for this legacy hotel. Given the experience of our management team with these type of transactions, both as a seller and a buyer over many years, we were able to complete this disposition smoothly and expeditiously at an attractive sale price. The sale of this asset allowed us to reduce debt and create further balance sheet flexibility to continue to execute on our strategy of owning a portfolio of high-quality hotels primarily in top 25 markets and key leisure destinations."
Capital Markets
On October 22, the Company closed on two new senior unsecured term loans, a $175 million unsecured term loan maturing in February 2021 and a $125 million unsecured term loan maturing in October 2022. The $175 million term loan bears an interest rate based on a pricing grid with a range of 145 to 225 basis points plus LIBOR, determined by the Company's leverage ratio. Based on the Company's pro forma leverage ratio, the current effective interest rate is LIBOR plus 160 basis points. In conjunction with the term loan, the Company executed interest rate swaps to fix LIBOR over the period of the loan at 1.29%. As a result the current annual interest rate on the term loan is 2.89%.
The $125 million term loan bears an interest rate based on a pricing grid with a range of 170 to 255 basis points plus LIBOR, determined by the Company's leverage ratio. Based on the Company's pro forma leverage ratio, the current effective interest rate is LIBOR plus 190 basis points. Funding of the term loan is expected to occur in early 2016 in connection with the anticipated closing of the Company's previously announced Hotel Commonwealth acquisition.
Additionally the Company completed a refinancing of the $30 million, 5.50% fixed rate mortgage on the Residence Inn Cambridge subsequent to quarter end with the existing lender. The new $63 million mortgage has a ten year term at a fixed annual interest rate of 4.48%.
With the proceeds from the $175 million term loan, excess proceeds from the refinancing of the Residence Inn Cambridge and net sale proceeds from the Hyatt Regency Orange County, the Company was able to pay down the outstanding balance on its revolving line of credit, as well as unencumber four hotels including the Marriott San Francisco Airport Waterfront, the Marriott Woodlands Waterway Hotel & Convention Center, the Hilton Garden Inn Evanston, and the Hampton Inn & Suites Denver Downtown.
Pro forma for the refinancings subsequent to quarter end, the Company has total debt outstanding of $1.1 billion with no outstanding balance on its revolving line of credit and a weighted average interest rate of 3.57%.
"We are pleased with the progress we have made to proactively address our 2016 and 2017 maturities and extend our maturity profile, while maintaining full capacity on our $400 million unsecured credit facility," commented Andy Welch, Executive Vice President and Chief Financial Officer of Xenia Hotels & Resorts. "The completion of these financings allows us to further stagger and increase the weighted average tenor of our debt maturities, unencumber four additional hotels, and lower our weighted average interest rate."
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http://investors.xeniareit.com/CorporateProfile.aspx?iid=4552942
