BETHESDA, Md.– Pebblebrook Hotel Trust (NYSE: PEB) (the “Company”) today reported results for the fourth quarter and year ended December 31, 2015 and announced it expects to increase its quarterly dividend on its common shares by 22.6 percent over the Company’s current quarterly common dividend. The Company’s results include the following:
Fourth Quarter Full Year 2015 2014 2015 2014 ($ in millions except per share and RevPAR data) Net income (loss) to common shareholders $16.4 $9.5 $68.7 $47.8 Net income (loss) per diluted share $0.23 $0.13 $0.94 $0.71 Same-Property RevPAR(1) $197.13 $193.81 $205.42 $198.81 Same-Property RevPAR growth rate 1.7% 3.3% Same-Property EBITDA(1) $69.2 $66.6 $281.9 $260.3 Same-Property EBITDA growth rate 3.9% 8.3% Same-Property EBITDA Margin(1) 31.8% 31.5% 33.1% 31.6% Adjusted EBITDA(1) $64.4 $50.9 $259.5 $197.3 Adjusted EBITDA growth rate 26.4% 31.5% Adjusted FFO(1) $44.7 $32.6 $181.5 $130.1 Adjusted FFO per diluted share(1) $0.62 $0.46 $2.50 $1.96 Adjusted FFO per diluted share growth rate 34.8% 27.6%
(1) See tables later in this press release for a description of Same-Property information and reconciliations from net income (loss) to non-GAAP financial measures, including Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), Adjusted EBITDA, Funds from Operations ("FFO"), FFO per share, Adjusted FFO and Adjusted FFO per share.
For the details as to which hotels are included in Same-Property Revenue Per Available Room (“RevPAR”), Average Daily Rate (“ADR”), Occupancy, Revenues, Expenses, EBITDA and EBITDA Margins appearing in the table above and elsewhere in this press release, refer to the Same-Property Inclusion Reference Table later in this press release.
“We are pleased with the progress we made during 2015 improving the operating performance of our portfolio, particularly at our recently renovated and repositioned hotels as these properties gain momentum,” said Jon E. Bortz, Chairman, President and Chief Executive Officer of Pebblebrook Hotel Trust. “Despite a softer environment in the fourth quarter due to global economic challenges, the U.S. hotel industry finished the year at its highest occupancy ever, as demand continued to outpace supply. For Pebblebrook, despite also experiencing a weaker fourth quarter, we still managed to grow Same-Property EBITDA in 2015 by 8.3 percent, Adjusted EBITDA by 31.5 percent, and Adjusted FFO per share by 27.6 percent; and we increased our common dividend by 34.8 percent.”
2015 Highlights
- Same-Property RevPAR and Room Revenue: Same-Property RevPAR for the year increased 3.3 percent to $205.42 over the same period of 2014. Same-Property Room Revenue increased by 3.9 percent, greater than RevPAR, due to the increase in the Same-Property room count. Same-Property ADR grew 4.5 percent from the comparable period of 2014 to $244.60. Same-Property Occupancy decreased 1.1 percent to 84.0 percent, as the Company focused more on growing ADR and EBITDA. Same-Property RevPAR for our wholly-owned properties, which excludes the Manhattan Collection, increased 4.6 percent for 2015.
- Same-Property EBITDA: The Company’s hotels generated $281.9 million of Same-Property EBITDA for the year ended December 31, 2015, climbing 8.3 percent from the same period of 2014. Same-Property Revenues increased 3.5 percent, while Same-Property Expenses increased just 1.2 percent. As a result, Same-Property EBITDA Margin grew to 33.1 percent for the year ended December 31, 2015, representing an improvement of 148 basis points as compared to the same period last year. Flow-through of Same-Property Revenues to Same-Property EBITDA was 75.7 percent for 2015. Same-Property EBITDA for our wholly-owned properties grew 11.2 percent for 2015.
- Same-Property EBITDA per room: The Company’s Same-Property EBITDA per room for the year ended December 31, 2015 increased 7.6 percent to $35,197 from 2014.
- Adjusted EBITDA: The Company’s Adjusted EBITDA for 2015 rose to $259.5 million, a gain of 31.5 percent versus $197.3 million in 2014.
- Adjusted FFO: The Company’s Adjusted FFO for 2015 climbed 39.5 percent to $181.5 million, compared with $130.1 million for the prior year.
- Dividends: During 2015, the Company declared dividends of $1.24 per share on its common shares, $1.96875 per share on its 7.875% Series A Cumulative Redeemable Preferred Shares, $2.00 per share on its 8.0% Series B Cumulative Redeemable Preferred Shares and $1.625 per share on its 6.50% Series C Cumulative Redeemable Preferred Shares.
“The hotel industry’s fundamentals remained favorable in 2015, as demand growth of 2.9 percent outpaced supply growth of 1.1 percent,” said Mr. Bortz. “While demand growth in our markets was not as robust as we originally expected for the year, we benefited from our implementation of best practices and our creative and comprehensive capital reinvestment programs. We continue to see results from our long-term focus on growing Same-Property EBITDA through our capital investment programs, as well as improving the overall quality and condition of our portfolio. Same-Property RevPAR excluding the Manhattan Collection grew 4.6 percent for the year, with ADR climbing 6.0 percent, even with the negative impact of numerous disruptive renovations throughout the portfolio.”
Fourth Quarter Highlights
- Same-Property RevPAR and Room Revenue: Same-Property RevPAR in the fourth quarter of 2015 increased 1.7 percent over the same period of 2014 to $197.13. Same-Property Room Revenue increased by 2.4 percent, greater than RevPAR due to the increase in the Same-Property room count. Same-Property ADR grew 1.6 percent from the fourth quarter of 2014 to $241.52. Same-Property Occupancy rose 0.1 percent to 81.6 percent. Same-Property RevPAR for our wholly-owned properties increased 3.2 percent from the year-ago period.
- Same-Property EBITDA: The Company’s hotels generated $69.2 million of Same-Property EBITDA for the quarter ended December 31, 2015, climbing 3.9 percent compared with the same period of 2014. Same-Property Revenues increased 2.8 percent, while Same-Property Hotel Expenses rose 2.4 percent. As a result, Same-Property EBITDA Margin grew to 31.8 percent from the fourth quarter of 2014, representing an increase of 32 basis points. Same-Property EBITDA for our wholly-owned properties grew 7.0 percent from the prior-year period.
- Adjusted EBITDA: The Company’s Adjusted EBITDA rose to $64.4 million from $50.9 million in the prior-year period, an increase of $13.4 million, or 26.4 percent.
- Adjusted FFO: The Company’s Adjusted FFO climbed 37.3 percent to $44.7 million from $32.6 million in the prior-year period.
- Dividends: On December 15, 2015, the Company declared a regular quarterly cash dividend of $0.31 per share on its common shares, a regular quarterly cash dividend of $0.4921875 per share on its 7.875% Series A Cumulative Redeemable Preferred Shares, a regular quarterly cash dividend of $0.50 per share on its 8.00% Series B Cumulative Redeemable Preferred Shares and a regular quarterly cash dividend of $0.40625 per share on its 6.50% Series C Cumulative Redeemable Preferred Shares.
“Corporate transient demand during the fourth quarter was weaker than expected, particularly during December,” noted Mr. Bortz. “However, working collaboratively with our hotel teams, we continue to make strides implementing our best practices and other operating initiatives, as well as adjusting revenue management strategies and tactics to mitigate the softer demand trends.”
Capital Reinvestment and Asset Management
During 2015, the Company made $104.3 million of capital improvements throughout its portfolio, which includes the Company’s 49 percent interest in its six-hotel joint venture with Denihan Hospitality Group (the “Manhattan Collection”). The Company’s capital improvements included $21.8 million at Hotel Zephyr Fisherman’s Wharf, $13.5 million at Prescott Hotel San Francisco, $10.1 million at W Los Angeles – West Beverly Hills, $8.3 million at Hotel Vintage Portland, $6.5 million at Embassy Suites San Diego Bay – Downtown and $6.0 million at The Westin Colonnade, Coral Gables.
“The completed capital investment programs at Hotel Vintage Portland, W Los Angeles – West Beverly Hills, Hotel Zephyr Fisherman’s Wharf and Embassy Suites San Diego Bay – Downtown should provide us with additional opportunities in 2016 and beyond to substantially grow market share at each hotel by generating higher room rates and increased RevPAR penetration,” continued Mr. Bortz. “Our teams have made positive progress throughout the year, which we expect will accelerate throughout 2016.”
Acquisitions
In 2015, the Company successfully acquired two high-quality, full-service hotels: the 189-room LaPlaya Beach Resort & Club in Naples, Florida for $185.5 million and the 221-room upper-upscale The Tuscan Fisherman’s Wharf, a Best Western Plus Hotel, for $122.0 million located in the heart of Fisherman’s Wharf in San Francisco, California. Both of the Company’s 2015 acquisitions are located in exceptionally desirable, high growth, high barrier-to-entry markets.
Dispositions
The Company has retained an advisor to market for sale its 49 percent joint venture interest in the Manhattan Collection. In addition, Pebblebrook has also retained advisors to market for disposition several select hotels in its portfolio, and the Company is evaluating offering additional properties, including parking facilities and retail space that can be apportioned from individual hotels. The properties that are being offered individually were selected to best take advantage of the current disconnect between public and private market values, minimally impact the overall quality of the portfolio, and maintain the benefits of healthy diversification. The Company will provide updates to any disposition activity only after such transactions are complete, and there is no assurance that any transactions will be consummated.
$150 Million Common Share Repurchase Program
The Company announced that its Board of Trustees authorized a new share repurchase program of up to $150.0 million of the Company’s outstanding common shares, $0.01 par value per share. The repurchase program may be suspended or discontinued at any time and does not obligate the Company to acquire any particular amount of shares.
The Company intends to repurchase shares only if the Company deems repurchases to be attractive and only after any property sales proceeds are utilized to reduce corporate leverage and provide for taxes through the separate distribution of taxable gains from any property sales. Generally, the Company intends to repurchase shares primarily with proceeds from any dispositions of its hotel properties.
Under the program, the Company may repurchase shares from time to time in transactions on the open market, in accordance with applicable securities laws and other restrictions. The timing and volume of repurchases will be determined by management based on its ongoing assessments of the capital needs of the business, prevailing market prices, general economic and market conditions and other considerations.
Capital Markets
During 2015, the Company completed numerous attractive capital market transactions to help fund strategic growth and maintain its strong balance sheet. The Company successfully executed $375.0 million in 5-year and 7-year term loans and also originated $100.0 million in average 8.8-year private placement senior unsecured notes. Additionally, the Company increased the size of its unsecured credit facility to $750.0 million, which includes $300.0 million of outstanding term loans.
“We’re extremely pleased with our continued ability to access the capital markets and the strong support from our banking relationships,” commented Raymond D. Martz, Chief Financial Officer of Pebblebrook Hotel Trust. “We will continue to evaluate our options for attractive long-term debt capital, and we remain encouraged by the continued strong interest from the lending community to provide capital for high quality assets in major urban markets with strong sponsorship.”
Balance Sheet
As of December 31, 2015, the Company had $1.1 billion in consolidated debt and $225.4 million in unconsolidated, non-recourse, secured debt, both at weighted-average interest rates of 3.6 percent. The Company had $525.0 million outstanding in the form of unsecured term loans and $165.0 million outstanding on its $450.0 million senior unsecured revolving credit facility. As of December 31, 2015, the Company had $35.8 million of consolidated cash, cash equivalents and restricted cash and $12.2 million of unconsolidated cash, cash equivalents and restricted cash. The unconsolidated debt, cash, cash equivalents and restricted cash amounts represent the Company’s 49 percent interest in the Manhattan Collection.
On December 31, 2015, as defined in the Company’s credit agreement, the Company’s fixed charge coverage ratio was 2.9 times and total net debt to trailing 12-month corporate EBITDA was 4.7 times. Excluding its interest in the off-balance sheet Manhattan Collection, the Company’s fixed charge coverage ratio was 3.0 times, and net debt to trailing 12-month corporate EBITDA was 4.3 times.
On January 6, 2016, the Company announced that it drew down $150.0 million on previously arranged 5-year and 7-year term loans, and used the proceeds to reduce the balance on its $450.0 million senior unsecured revolving credit facility.
On February 8, 2016, the Company provided notice to the holders of its 7.875% Series A Cumulative Preferred Shares (the “Series A Preferred Shares”) of the redemption of all 5,600,000 of its issued and outstanding Series A Preferred Shares. The redemption date will be March 11, 2016. The Company intends to use proceeds from its senior unsecured revolving credit facility to redeem the Series A Preferred Shares.
To view full financial release and corresponding tables please click the PDF icon or visit:
http://investor.pebblebrookhotels.com/file.aspx?IID=4243454&FID=33045929
