IRVING, Texas–Nov. 1, 2016– FelCor Lodging Trust Incorporated (NYSE: FCH) today reported results for the third quarter ended September 30, 2016.
Third Quarter Highlights
- Same-store RevPAR decreased 0.7% compared to the same period in 2015.
- Net loss was $4.9 million ($0.08 per share) versus a net loss of $8.1 million ($0.10 per share) for the same period in 2015.
- Adjusted FFO per share increased 12% to $0.28 from the same period in 2015.
- Adjusted EBITDA increased $2.0 million to $67.1 million from the same period in 2015.
- Sold two hotels (Renaissance Esmeralda Indian Wells Resort and Holiday Inn Nashville Airport) for aggregate gross proceeds of approximately $108 million.
“Our room revenue was impacted negatively this quarter by a combination of softer demand, tropical storms, and aggressive discounting programs offered by some of our brands. However, increases in non-room revenue, our various cost containment initiatives implemented earlier this year and our Wyndham guarantee enabled us to meet our Adjusted EBITDA and Adjusted FFO per share expectations,” said Troy A. Pentecost, FelCor’s President, Interim Senior Executive Officer and Chief Operating Officer.
“During the quarter, we also made progress with our planned hotel sales, selling both the Renaissance Esmeralda and the Holiday Inn Nashville and continuing the marketing process with Jones Lange LaSalle for our three New York hotels. While our primary focus remains on the asset sales, we also are moving forward with our planned redevelopment projects,” added Mr. Pentecost.
“Our Board of Directors and management team remain confident in our strategy to drive long-term stockholder value. We are dedicated to continued strengthening of our balance sheet and creating capacity for accretive investments,” concluded Mr. Pentecost.
Third Quarter Hotel Results
Third Quarter 2016 2015 Change Same-store hotels (37) RevPAR $ 159.78 $ 160.95 (0.7 )% Total hotel revenue, in millions $ 204.8 $ 203.1 0.8 % Hotel EBITDA, in millions $ 66.9 $ 67.4 (0.7 )% Hotel EBITDA margin 32.7 % 33.2 % (50) bps
RevPAR for our 37 same-store hotels decreased 0.7% (to $159.78) from the same period in 2015. The change reflects a 0.6% increase in average daily rate, or ADR, (to $195.33) and a 1.3% decline in occupancy (to 81.8%). Several of our markets, accounting for 42% of total room nights, experienced softer transient and group demand, and many of our hotels in the Southeast were negatively impacted by weather. Additionally, some brands implemented programs designed to drive more direct bookings and decrease online travel agent dependence, which resulted in more rate discounting across our portfolio than anticipated. While these programs did, and may continue to negatively impact our RevPAR, we expect the offsetting reduction in online travel agent commissions will result in greater profitability. In the meantime, we are working closely with the brands to optimize their discounting and maximize profitability at our hotels.
Wyndham Worldwide Corporation has guaranteed a minimum annual NOI on eight of our hotels over the ten-year terms of their management agreements. Hotel EBITDA for the three months ended September 30, 2016 includes $1.8 million in fee reductions related to the Wyndham guarantee compared to $0.3 million during the same period last year.
See pages 12-13 and 18-22 for more detailed operating data.
Third Quarter Operating Results
Third Quarter $ in millions, except for per share information 2016 2015 Change Net loss $ (4.9 ) $ (8.1 ) 39.8 % Net loss per share $ (0.08 ) $ (0.10 ) $ 0.02 Same-store Adjusted EBITDA $ 64.2 $ 64.0 0.3 % Adjusted EBITDA $ 67.1 $ 65.1 3.1 % Adjusted FFO per share $ 0.28 $ 0.25 $ 0.03
Net loss attributable to common stockholders was $11.4 million ($0.08 per share) in 2016, compared to a net loss of $14.5 million ($0.10 per share) for the same period in 2015. Net loss in 2016 includes a $20.1 million impairment charge for one hotel and severance costs of $6.1 million, partially offset by a $4.9 million net gain on hotel sales (including a $3.1 million loss in discontinued operations). Net loss in 2015 included a $20.9 million impairment charge for a hotel subsequently sold in 2016 and a $3.6 million charge for severance costs, partially offset by a $3.6 million net gain on hotel sales (including $491,000 in discontinued operations).
Year-to-Date Operating Results
Net loss attributable to common stockholders was $15.5 million ($0.11 per share) in 2016, compared to a net loss of $34.7 million ($0.26 per share) for the same period in 2015. Net loss in 2016 includes impairment charges of $26.5 million attributable to two hotels (one of which was sold in 2016) and a $6.1 million charge for severance costs. These charges are partially offset by a $3.5 million net gain on hotel sales (including a $3.1 million loss in discontinued operations). Net loss in 2015 included $30.9 million in debt extinguishment charges, a $20.9 million impairment charge for a property subsequently sold in 2016 and a $3.6 million charge for severance costs, partially offset by a $19.9 million net gain on the sale of consolidated hotels (including $407,000 in discontinued operations) and a $7.1 million gain on the sale of an unconsolidated joint venture.
RevPAR for our 37 same-store hotels increased 1.7% (to $155.17) from the same period in 2015. The change reflects a 2.0% increase in ADR (to $193.19) and a 0.2% decline in occupancy (to 80.3%). Hotel EBITDA for our 37 same-store hotels increased by 1.7% to $186.6 million, and Hotel EBITDA margin was 31.2%, a 16 basis point decrease.
EBITDA, Adjusted EBITDA, Same-store Adjusted EBITDA, Hotel EBITDA, Hotel EBITDA margin, FFO, Adjusted FFO and Adjusted FFO per share are all non-GAAP financial measures. See our discussion of “Non-GAAP Financial Measures” beginning on page 14 for a reconciliation of each of these measures to the most comparable GAAP financial measure and for information regarding the use, limitations and importance of these non-GAAP financial measures.
Balance Sheet
As of September 30, 2016, we had $1.3 billion of gross consolidated debt with a 5.4% weighted-average interest rate and a seven-year weighted-average maturity. We had $50.4 million of cash and cash equivalents on hand and $22.1 million of restricted cash.
Capital Allocation
We continually strive to increase long-term stockholder value through prudent capital allocation. As part of this ongoing effort, we regularly evaluate opportunities to redeploy capital to achieve higher returns and strengthen our balance sheet.
Asset Sales
We sold two hotels during the third quarter. The 560-room Renaissance Esmeralda Indian Wells Resort sold for $76 million, and the 383-room Holiday Inn Nashville Airport sold for $32 million. We used the net proceeds to repay funds drawn under our line of credit. We continue to market our three New York hotels.
Stock Repurchase Program
In 2015, our Board approved a $100 million stock repurchase program, which we began implementing in December 2015. To date, we have purchased 6.6 million shares for $44.8 million (at an average price of $6.78 per share), including 477,000 shares during the third quarter.
Common Dividend
During the third quarter, we declared a $0.06 per share common stock dividend, which was paid at the end of October. Our Board of Directors will determine future quarterly common stock dividends based on funds available for distribution, reinvestment opportunities within our portfolio and taxable income, among other things.
Capital Expenditures
During the first nine months of 2016, we invested $51.6 million in renovations and redevelopment projects at our hotels. During 2016, we plan to invest approximately $60 million in renovations as part of our long-term capital plan. In addition, we expect to invest approximately $15 million in redevelopment projects this year, primarily at the Embassy Suites Myrtle Beach Oceanfront Resort and The Vinoy Renaissance St. Petersburg Resort and Golf Club. These projects are underway and remain on schedule and within budget. We are also progressing with obtaining entitlements and planning for several other high-ROI redevelopment projects. These projects will contribute to future EBITDA growth. We target unlevered internal rates of return of at least 15% for these projects.
Outlook
We are updating our 2016 guidance to reflect third quarter results and ongoing softness in transient and group demand for the remainder of the year. Our outlook assumes Hotel EBITDA for the Wyndham hotels equals the amount guaranteed by Wyndham for 2016 (corresponding to approximately $59 million of Hotel EBITDA).
For full year 2016, we now expect:
- Net income attributable to FelCor will be $0.6 – $4.6 million;
- RevPAR for same-store hotels will increase 1.25 – 1.5%;
- Adjusted EBITDA will be $236.0 – $240.0 million;
- Adjusted FFO per share will be $0.88 – $0.90; and
- Interest expense, including our pro rata share from joint ventures, will be $80.1 million.
To view full financial release and corresponding tables please click the PDF icon or visit: http://ir.felcor.com/phoenix.zhtml?c=118512&p=irol-newsArticle_print&ID=2217915
