BETHESDA, Md., Aug. 5, 2016 — DiamondRock Hospitality Company (the "Company") (NYSE: DRH), a lodging-focused real estate investment trust that owns a portfolio of 26 premium hotels in the United States, today announced results of operations for the quarter ended June 30, 2016.
Second Quarter 2016 Highlights
- Net Income: Net income was $44.2 million and earnings per diluted share was $0.22.
- Comparable RevPAR: RevPAR was $197.52, a 0.8% increase from the comparable period of 2015.
- Comparable Hotel Adjusted EBITDA Margin: Hotel Adjusted EBITDA margin was 35.85%, an increase of 11 basis points from the comparable period of 2015.
- Adjusted EBITDA: Adjusted EBITDA was $84.1 million, an increase of 3.7% from 2015.
- Adjusted FFO: Adjusted FFO was $63.1 million and Adjusted FFO per diluted share was $0.31.
- Credit Facility: The Company amended its senior unsecured revolving credit facility, increasing the capacity to $300 million, decreasing pricing and extending the maturity date to May 2020.
- Term Loan: The Company closed on a new five-year $100 million senior unsecured term loan.
- Courtyard Fifth Avenue Loan Repayment: The Company repaid the $48.1 million mortgage loan secured by the Courtyard Fifth Avenue.
- Hotel Dispositions: The Company sold the Orlando Airport Marriott for proceeds of approximately $67 million and the Hilton Minneapolis for proceeds of approximately $143 million.
- Dividends: The Company declared a dividend of $0.125 per share during the second quarter, which was paid on July 12, 2016.
Recent Developments
- Hotel Disposition: The Company sold the Hilton Garden Inn Chelsea/New York City for proceeds of approximately $65 million on July 7, 2016.
Mark W. Brugger, President and Chief Executive Officer of DiamondRock Hospitality Company, stated, "The Company has successfully executed on our strategic priority of increasing liquidity and financial flexibility, with $400 million in financing activity and approximately $275 million in hotel dispositions in recent months. We expect to end the year with over $200 million in corporate cash, no outstanding borrowings on our credit facility and a net debt to Adjusted EBITDA ratio of 2.7 times. We are well positioned to deploy capital opportunistically in response to future market dislocations, including through share repurchases. During the second quarter, our team and operators were highly effective in identifying cost efficiencies that resulted in an impressive Hotel Adjusted EBITDA margin of 36 percent. The continued benefit of these same initiatives enables the Company to maintain Adjusted EBITDA and Adjusted FFO guidance despite our more cautious outlook for revenue growth on weaker business travel trends."
Operating Results
Please see "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"and a reconciliation of these measures to net income. Comparable operating results include our 2015 acquisitions for all periods presented and exclude our 2016 dispositions for all periods presented. See "Reconciliation of Comparable Operating Results" attached to this press release for a reconciliation to historical amounts.
For the quarter ended June 30, 2016, the Company reported the following:
Second Quarter
2016
2015
Change
Comparable Operating Results (1) (2)
ADR
$231.31
$232.75
-0.6
%
Occupancy
85.4
%
84.2
%
1.2 percentage points
RevPAR
$197.52
$195.98
0.8
%
Revenues
$232.5 million
$229.6 million
1.2
%
Hotel Adjusted EBITDA Margin
35.85
%
35.74
%
11 basis points
Actual Operating Results
Revenues
$256.7 million
$249.8 million
2.8
%
Net income
$44.2 million
$24.8 million
$19.4 million
Earnings per diluted share
$0.22
$0.12
$0.10
Adjusted EBITDA
$84.1 million
$81.1 million
$3.0 million
Adjusted FFO
$63.1 million
$61.5 million
$1.6 million
Adjusted FFO per diluted share
$0.31
$0.31
$0.00
(1)
The amounts for all periods presented exclude the three hotels sold during 2016: Orlando Airport Marriott, Hilton Minneapolis and Hilton Garden Inn Chelsea.
(2)
The 2015 amounts include pre-acquisition operating results for the Sheraton Suites Key West from April 1, 2015 to June 29, 2015 in order to reflect the period in 2015 comparable to our ownership period in 2016. The pre-acquisition operating results were obtained from the respective sellers of the hotels during the acquisition due diligence process. We have made no adjustments to the amounts provided to us by the respective sellers. The pre-acquisition operating results were not audited or reviewed by the Company's independent auditors.
For the six months ended June 30, 2016, the Company reported the following:
Year to Date
2016
2015
Change
Comparable Operating Results (1)(2)
ADR
$224.26
$222.90
0.6
%
Occupancy
79.3
%
80.3
%
-1.0 percentage points
RevPAR
$177.81
$179.05
-0.7
%
Revenues
$424.5 million
$424.9 million
-0.1
%
Hotel Adjusted EBITDA Margin
31.88
%
31.64
%
24 basis points
Actual Operating Results
Revenues
$469.7 million
$458.7 million
2.4
%
Net income
$61.0 million
$35.5 million
$25.5 million
Earnings per diluted share
$0.30
$0.18
$0.12
Adjusted EBITDA
$134.5 million
$129.6 million
$4.9 million
Adjusted FFO
$105.9 million
$99.2 million
$6.7 million
Adjusted FFO per diluted share
$0.52
$0.49
$0.03
(1)
The amounts for all periods presented exclude the three hotels sold during 2016: Orlando Airport Marriott, Hilton Minneapolis and Hilton Garden Inn Chelsea.
(2)
The 2015 amounts include pre-acquisition operating results for the Shorebreak Hotel from January 1, 2015 to February 5, 2015 and Sheraton Suites Key West from January 1, 2015 to June 29, 2015 in order to reflect the period in 2015 comparable to our ownership period in 2016. The pre-acquisition operating results were obtained from the respective sellers of the hotels during the acquisition due diligence process. We have made no adjustments to the amounts provided to us by the respective sellers. The pre-acquisition operating results were not audited or reviewed by the Company's independent auditors.
Hotel Dispositions
As previously announced, the Company has sold three hotels in 2016 for total consideration of approximately $275 million.
- Orlando Airport Marriott: On June 8, 2016, the Company sold the 485-room Orlando Airport Marriott for total consideration of approximately $67 million, which included payment for the hotel's replacement reserve, and recognized a pre-tax gain of $3.4 million.
- Hilton Minneapolis: On June 30, 2016, the Company sold the 821-room Hilton Minneapolis for total consideration of approximately $143 million and recognized a gain of pre-tax $4.7 million.
- Hilton Garden Inn Chelsea / New York City: On July 7, 2016, the Company sold the 169-room Hilton Garden Inn Chelsea July 7, 2016 for $65 million. The Company expects to record a gain on the sale of the hotel.
Financing Activity
On May 3, 2016, the Company amended its senior unsecured revolving credit facility to increase the capacity to $300 million, decrease pricing and extend the maturity date to May 2020. The new facility also includes an accordion feature to expand up to $600 million, subject to lender consent. The interest rate on the new facility is based on a pricing grid ranging from 150 to 225 basis points over LIBOR, based on the Company's leverage ratio. The interest rate is currently 150 basis points over LIBOR. The Company also lowered the unused facility fees and modified certain financial covenants.
On May 3, 2016, the Company also entered into a new five-year $100 million senior unsecured term loan. The interest rate on the term loan is based on a pricing grid ranging from 145 to 220 basis points over LIBOR, based on the Company's leverage ratio. The interest rate is currently 145 basis points over LIBOR. The proceeds were used to repay $55 million of borrowings outstanding on its senior unsecured credit facility as well as the repayment of the $48.1 mortgage loan secured by the Courtyard Manhattan Fifth Avenue.
Capital Expenditures
The Company spent approximately $54.1 million on capital improvements during the six months ended June 30, 2016, primarily related to the second phase of the Chicago Marriott Downtown renovation, the first phase of the renovation of The Gwen and the Worthington Renaissance guest room renovation. As a result of the three dispositions and fewer planned renovations by the end of 2016, the Company is lowering its anticipated capital expenditures to $135 million. Previously, the Company expected to spend approximately $150 million on capital improvements at its hotels in 2016. Significant projects in 2016 include:
- The Gwen, a Luxury Collection Hotel: The Company rebranded the Conrad Chicago to Starwood's Luxury Collection on September 1, 2015. The renovation work associated with the brand conversion will be completed in two phases. The first phase, consisting of the lobby, rooftop bar and other public spaces, was completed in May 2016. The second phase of the renovation, consisting of the guest rooms, is expected to be completed during the seasonally slow winter season beginning in late 2016.
- Chicago Marriott Downtown: The second and largest phase of the multi-year renovation was completed early in the second quarter. This phase included the upgrade of approximately 460 rooms and a new state-of-the-art fitness center. The remaining guest rooms will be renovated during the seasonally slow winter months over the next two years.
- 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 commencing in the fourth quarter of 2016.
- Worthington Renaissance: The Company has commenced the guest room renovation at the hotel and expects to complete the project by the end of 2016.
Balance Sheet
As of June 30, 2016, the Company had $166.5 million of unrestricted cash on hand and approximately $0.9 billion of total debt, which consisted of property-specific mortgage debt and $100.0 million of borrowings on its term loan. The Company expects to end the year with over $200 million in unrestricted cash, approximately $0.9 billion of total debt and no outstanding borrowings on its senior unsecured credit facility.
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