IRVING, Texas–FelCor Lodging Trust Incorporated (NYSE: FCH) today reported results for the second quarter ended June 30, 2016.
Second Quarter Highlights
- Same-store RevPAR increased 2.6% over the same period in 2015.
- Net income was $13.8 million, and net income per share was $0.05.
- Adjusted FFO per share increased 14% to $0.32 over the same period in 2015.
- Adjusted EBITDA increased $2.7 million to $72.4 million over the same period in 2015.
- Selling two hotels (Renaissance Esmeralda Indian Wells Resort and Holiday Inn Nashville Airport) for aggregate gross proceeds of approximately $108 million.
“During the second quarter, RevPAR growth was 2.6%. Softer corporate transient demand led to adjustments in customer mix that impacted overall ADR, primarily in New York, San Francisco, Philadelphia and Boston. The remainder of our portfolio performed well relative to expectations, and our overall portfolio continued to gain market share. We actively worked with our management companies to maximize revenue and profitability, as evidenced by our continued market share growth and Hotel EBITDA margin improvement,” said Richard A. Smith, FelCor’s President and Chief Executive Officer.
Mr. Smith added, “We continue to execute our strategy as planned to drive stockholder value. We are making progress with our planned asset sales. We have agreed to sell two hotels and have received non-refundable deposits. In addition, we purchased 1.2 million shares of common stock at prices significantly below our net asset value, and we are progressing with our high-ROI redevelopment projects.”
Second Quarter Hotel Results
Second Quarter 2016 2015 Change Same-store hotels (39) RevPAR $ 158.48 $ 154.48 2.6 % Total hotel revenue, in millions $ 225.0 $ 219.6 2.5 % Hotel EBITDA, in millions $ 74.0 $ 71.8 3.1 % Hotel EBITDA margin 32.9 % 32.7 %
19 bps
RevPAR for our 39 same-store hotels increased 2.6% (to $158.48) from the same period in 2015. The change reflects a 2.0% increase in ADR (to $194.28) and a 0.6% increase in occupancy (to 81.6%). Corporate transient room nights decreased 3% from the same period in 2015 as a result of weaker demand, which ultimately led to less compression in some of our urban markets. This decrease was partially offset by a 7% increase in corporate group room nights.
See pages 12-13 and 18-22 for more detailed operating data.
Second Quarter Operating Results
Second Quarter $ in millions, except for per share information 2016 2015 Change Net income (loss) $ 13.8 $ (3.2 ) 524.1 % Net income (loss) per share $ 0.05 $ (0.12 ) $ 0.17 Same-store Adjusted EBITDA $ 69.7 $ 67.7 3.0 % Adjusted EBITDA $ 72.4 $ 69.7 3.9 % Adjusted FFO per share $ 0.32 $ 0.28 $ 0.04
Net income attributable to common stockholders was $7.1 million ($0.05 per share) in 2016, compared to a net loss of $17.3 million ($0.12 per share) for the same period in 2015. Net income in 2016 includes an impairment charge of $6.3 million attributable to a property to be sold in the third quarter. Net loss in 2015 included $30.8 million in debt extinguishment charges, offset by a $7.1 million gain on sale of an unconsolidated joint venture.
Same-store Adjusted EBITDA increased 3.0% to $69.7 million from the same period in 2015. Adjusted EBITDA was $72.4 million.
Adjusted FFO was $44.1 million ($0.32 per share), compared to $39.3 million ($0.28 per share) for the same period in 2015.
Year-to-Date Operating Results
Net loss attributable to common stockholders was $4.1 million ($0.03 per share) in 2016, compared to a net loss of $20.2 million ($0.15 per share) for the same period in 2015. Net loss in 2016 includes an impairment charge of $6.3 million attributable to a property to be sold in the third quarter. Net loss in 2015 included $30.9 million in debt extinguishment charges, offset by a $16.3 million net gain on the sale of consolidated hotels and a $7.1 million gain on sale of an unconsolidated joint venture.
RevPAR for our 39 same-store hotels increased 3.5% (to $150.29) from the same period in 2015. The change reflects a 2.6% increase in ADR (to $191.15) and a 0.9% increase in occupancy (to 78.6%). Hotel EBITDA for our 39 same-store hotels increased by 4% to $129.4 million, and Hotel EBITDA margin was 30.2%, a 23 basis point increase.
Same-store Adjusted EBITDA increased 4.9% to $120.0 million from the same period in 2015. Adjusted EBITDA was $121.4 million.
Adjusted FFO was $64.3 million ($0.46 per share), compared to $57.6 million ($0.43 per share) for the same period in 2015.
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.
Capital Allocation
We continually strive to increase long-term stockholder value through prudent capital allocation. As part of this ongoing effort, we look for opportunities to redeploy capital to achieve higher returns and strengthen our balance sheet.
Asset Sales
We have agreed to sell two hotels, the 560-room Renaissance Esmeralda Indian Wells Resort and the 383-room Holiday Inn Nashville Airport for $76 million and $32 million, respectively. We have received non-refundable deposits of $4.8 million, with scheduled closing dates of August 1 and September 1, respectively. Proceeds will be used to repay 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. To date, we have purchased 6.1 million shares for $41.9 million (at an average price of $6.81 per share), including 1.2 million shares during the second quarter. We intend to continue repurchasing our common stock while it trades at a significant discount to NAV.
Common Dividend
During the second quarter, we declared a $0.06 per share common stock dividend, which will be paid at the end of July. 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 six months, we invested $32.1 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 making progress with entitlements and planning for several other high-ROI redevelopment projects. The returns from these projects will augment future EBITDA growth, and we expect the projects to generate unlevered internal rates of return of at least 15%.
Balance Sheet
As of June 30, 2016, we had $1.5 billion of gross consolidated debt with a 5.2% weighted-average interest rate and a seven-year weighted-average maturity. We had $58.2 million of cash and cash equivalents on hand and $23.7 million of restricted cash.
“Over the past several years, we have made significant improvements to our balance sheet by staggering and extending our debt maturities, locking in low fixed interest rates, lowering our aggregate preferred dividends and increasing our revolver capacity. In addition, approximately 20% of our EBITDA is protected through the guaranty with Wyndham. We are well-positioned to execute our strategic plan through any stage of the lodging cycle and achieve our goal of increasing stockholder value,” said Michael C. Hughes, FelCor’s Executive Vice President and Chief Financial Officer.
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