BETHESDA, Md., Feb. 23, 2016 — DiamondRock Hospitality Company (the "Company") (NYSE: DRH), a lodging-focused real estate investment trust that owns a portfolio of 29 premium hotels in the United States, today announced results of operations for the quarter and year ended December 31, 2015.
2015 Operating Highlights
- Pro Forma RevPAR: Pro Forma RevPAR was $170.87, an increase of 4.7% from the comparable period of 2014.
- Pro Forma Hotel Adjusted EBITDA Margin: Pro Forma Hotel Adjusted EBITDA margin was 31.02%, an increase of 113 basis points from 2014.
- Pro Forma Hotel Adjusted EBITDA: Pro Forma Hotel Adjusted EBITDA was $287.5 million, an increase of 9.1% from 2014.
- Adjusted EBITDA: Adjusted EBITDA was $265.9 million, an increase of 12.8% from 2014.
- Adjusted FFO: Adjusted FFO was $203.4 million and Adjusted FFO per diluted share was $1.01.
- Dividends: The Company declared four quarterly dividends totaling $0.50 per share during 2015, returning approximately $96 million to shareholders.
Fourth Quarter 2015 Highlights
- Pro Forma RevPAR: Pro Forma RevPAR was $168.32, an increase of 3.1% from the comparable period of 2014.
- Pro Forma Hotel Adjusted EBITDA Margin: Pro Forma Hotel Adjusted EBITDA margin was 31.26%, an increase of 114 basis points from 2014.
- Pro Forma Hotel Adjusted EBITDA: Pro Forma Hotel Adjusted EBITDA was $73.1 million, an increase of 8.3% from 2014.
- Adjusted EBITDA: Adjusted EBITDA was $67.0 million, an increase of 10.2% from 2014.
- Adjusted FFO: Adjusted FFO was $51.9 million and Adjusted FFO per diluted share was $0.26.
- Westin Boston Financing: The Company entered into a new $205 million mortgage secured by the Westin Boston Waterfront Hotel in October 2015. The mortgage loan has a term of 10 years and bears interest at a fixed rate of 4.36%.
- Orlando Loan Prepayment: On October 9, 2015, the Company prepaid the $55.3 million mortgage loan secured by the Orlando Airport Marriott.
- Repayment of Seller Financing: On November 9, 2015, the Company received full repayment of the $4.0 million loan it provided to the buyer of the Oak Brook Hills Resort in 2014.
- Share Repurchase Program: On November 4, 2015, the Company's Board of Directors authorized a $150 million share repurchase program.
- Dividends: The Company declared a dividend of $0.125 per share during the fourth quarter, which was paid on January 12, 2016.
Recent Developments
- Chicago Marriott Loan Prepayment: On January 11, 2016, the Company prepaid the $201.7 million mortgage loan secured by the Chicago Marriott Downtown.
Mark W. Brugger, President and Chief Executive Officer of DiamondRock Hospitality Company, stated, "Our portfolio performed well in 2015 and met our expectations from last quarter. The Company had strong execution in the core functions of asset management and finance. Our asset management best practices resulted in 73% profit flow-through from our portfolio and 114 basis points of Hotel Adjusted EBITDA margin growth during the fourth quarter. Our fourth quarter financing activities capped off $355 million of new loans during the year, which enhanced our already strong balance sheet, addressed near-term debt maturities and will save the Company several million dollars in annual interest costs."
Operating Results
Discussions of "Pro Forma" assumes the Company owned each of its 29 hotels since January 1, 2014 but excludes the Hilton Garden Inn Times Square Central from January 1, 2015 to August 31, 2015, since the hotel opened for business on September 1, 2014. Please see "Certain Definitions" and "Non-GAAP Financial Measures" attached to this press release for an explanation of the terms "EBITDA," "Adjusted EBITDA," "Hotel Adjusted EBITDA Margin," "FFO" and "Adjusted FFO."
For the quarter ended December 31, 2015, the Company reported the following:
Fourth Quarter
2015
2014
Change
Pro Forma ADR
$217.23
$215.07
1.0
%
Pro Forma Occupancy
77.5
%
75.9
%
1.6 percentage points
Pro Forma RevPAR
$168.32
$163.19
3.1
%
Pro Forma Revenues
$233.8 million
$224.1 million
4.3
%
Pro Forma Hotel Adjusted EBITDA Margin
31.26
%
30.12
%
114 basis points
Adjusted EBITDA
$67.0 million
$60.8 million
$6.2 million
Adjusted FFO
$51.9 million
$41.8 million
$10.1 million
Adjusted FFO per diluted share
$0.26
$0.21
$0.05
The Company's fourth quarter results were held back by its New York City hotels and rebranding disruption at The Gwen Chicago. Excluding these hotels, Pro Forma RevPAR growth was 6.0% and Pro Forma Hotel Adjusted EBITDA margins increased 376 basis points.
For the year ended December 31, 2015, the Company reported the following:
Full Year
2015
2014
Change
Pro Forma ADR
$213.74
$206.58
3.5
%
Pro Forma Occupancy
79.9
%
79.0
%
0.9 percentage points
Pro Forma RevPAR
$170.87
$163.26
4.7
%
Pro Forma Revenues
$926.9 million
$881.9 million
5.1
%
Pro Forma Hotel Adjusted EBITDA Margin
31.02
%
29.89
%
113 basis points
Adjusted EBITDA
$265.9 million
$235.8 million
$30.1 million
Adjusted FFO
$203.4 million
$171.5 million
$31.9 million
Adjusted FFO per diluted share
$1.01
$0.87
$0.14
Excluding the Company's New York City hotels and The Gwen Chicago, Pro Forma RevPAR growth was 6.7% and Pro Forma Hotel Adjusted EBITDA margins increased 258 basis points.
Hotel Financing Activity
On October 9, 2015, the Company prepaid the $55.3 million mortgage loan secured by the Orlando Airport Marriott. The prepayment saved approximately $0.7 million of interest expense during the fourth quarter, which was factored into the Company's prior guidance.
On October 27, 2015, the Company entered into a new $205 million mortgage loan secured by the Westin Boston Waterfront Hotel. The new loan has a term of 10 years, a fixed interest rate of 4.36% and will amortize on a 30-year schedule. The proceeds from the loan, as well as a portion of a $60 million draw on its senior unsecured credit facility, were utilized to prepay the $201.7 million mortgage loan secured by the Chicago Marriott Downtown Magnificent Mile on January 11, 2016. The lower interest rate on the new loan is expected to save the Company approximately $2.7 million in net interest expense.
During 2015, the Company completed $355 million of new financings at interest rates approximately 150 basis points below the rates on maturing loans. Since 2011, the Company has lowered its weighted average interest rate from 5.6% to 4.1%, resulting in cumulative annual interest savings of approximately $14 million.
Capital Expenditures
The Company spent approximately $63.0 million on capital improvements at its hotels in 2015, which included the following significant projects:
- Hilton Boston Downtown: The Company completed a return on investment project at the hotel to create an incremental 41 guest rooms and upgrade additional guest rooms, which created over 90 premium rooms.
- Chicago Marriott Downtown: The Company commenced a multi-year guest room renovation at the hotel. The first phase of the guest room renovation, which consisted of 140 rooms, including all 25 suites, was successfully completed during the first quarter of 2015. The Company also added Marriott's new prototype F&B grab-and-go outlet in the hotel's lobby, which allowed the hotel to transform room service delivery.
The Company expects to spend approximately $150 million on capital improvements at its hotels in 2016, which includes carryover from certain projects that commenced in 2015. Significant projects in 2016 include:
- The Gwen, a Luxury Collection: The Company rebranded the Conrad Chicago to Starwood's Luxury Collection on September 1, 2015. The renovation work associated with the brand conversion, which is expected to cost approximately $25 million, will be completed in two phases. The first phase, consisting of the lobby and other public spaces, commenced in January and is expected to completed by May. The second phase of the renovation, consisting of the guest rooms, will be completed during the seasonally slow winter season beginning in late 2016.
- Chicago Marriott Downtown: The second phase of the renovation, which consists of upgrading approximately 460 rooms and creating a new state-of-the-art fitness center, commenced in late 2015 and is expected to be completed early in the second quarter of 2016. The remaining guest rooms will be renovated during the seasonally slow winter months over the next two years and is not expected to result in material disruption.
- The Lodge at Sonoma: The Company expects to renovate the guest rooms at the hotel during the seasonally slow period during late 2016 and early 2017.
- Charleston Renaissance: The Company expects to renovate the guest rooms at the hotel during the fourth quarter of 2016.
- Worthington Renaissance: The Company expects to renovate the guest rooms at the hotel during the seasonally slow summer months of 2016.
Repayment of Seller Financing
In connection with the sale of the Oak Brook Hills Resort in April 2014, the Company provided a $4.0 million unsecured loan to the buyer of the hotel. The loan was subordinate to the buyer's senior mortgage loan, and the Company believed the repayment of the loan was remote and fully reserved the loan. On November 9, 2015, upon the hotel meeting certain operating profit thresholds, the buyer repaid the Company's loan in full. The Company recorded a gain of $3.9 million during the fourth quarter, which is excluded from its reported Adjusted EBITDA and Adjusted FFO.
Balance Sheet
As of December 31, 2015, the Company had $213.6 million of unrestricted cash on hand and approximately $1.2 billion of total debt, which consisted of property-specific mortgage debt and no outstanding borrowings on the Company's $200.0 million senior unsecured credit facility. The Company currently has $60.0 million outstanding on its senior unsecured credit facility.
Share Repurchase Program
On November 4, 2015, the Company's Board of Directors authorized a $150 million share repurchase program. Repurchases under this program will be made in open market or privately negotiated transactions from time to time and in such amounts as market conditions warrant, and subject to regulatory considerations. The Company has not repurchased any shares of its common stock since the program started.
Dividends
The Company's Board of Directors declared a quarterly dividend of $0.125 per share to stockholders of record as of December 31, 2015. The dividend was paid on January 12, 2016.
To view full financial release and corresponding tables please click the PDF icon or visit:
