– Full year Pro forma RevPAR increased 3.9%
– Acquired three hotels in key high-growth markets for $175.9 million
– Sold 23 non-core hotels for $252.5 million
– Repurchased 8.0 million shares for $225.2 million
BETHESDA, Md.–RLJ Lodging Trust (the “Company”) (NYSE: RLJ) today reported results for the quarter and year ended December 31, 2015.
Full Year Highlights
- Pro forma RevPAR increased 3.9%, Pro forma ADR increased 5.3%, and Pro forma Occupancy decreased 1.4%
- Achieved Pro forma Hotel EBITDA Margin of 36.4%
- Pro forma Consolidated Hotel EBITDA increased 6.1% to $405.1 million
- Adjusted FFO increased 4.5% to $324.7 million
- Acquired three hotels in key high-growth markets for $175.9 million
- Sold 23 non-core hotels for $252.5 million
- Completed and opened two hotel conversion properties
- Distributed an aggregate cash dividend of $1.32 per share, representing an increase of 26.9% over the prior year
- Repurchased 8.0 million shares for $225.2 million
Fourth Quarter Highlights
- Pro forma RevPAR increased 2.5%, Pro forma ADR increased 3.6%, and Pro forma Occupancy decreased 1.0%
- Achieved Pro forma Hotel EBITDA Margin of 35.5%
- Pro forma Consolidated Hotel EBITDA increased 4.1% to $95.9 million
- Sold one non-core hotel for $14.1 million
- Repurchased 1.1 million shares for $25.2 million
“In 2015, we continued to execute on our strategic initiatives, including driving RevPAR growth, improving our portfolio by recycling non-core assets, and delivering high quality conversions, as well as returning capital to our shareholders,” commented Thomas J. Baltimore, Jr., President and Chief Executive Officer. “As we look ahead, lodging fundamentals remain positive and our diversified portfolio, supported by our fortress balance sheet, is well-positioned to deliver continued growth.”
Financial and Operating Results
Performance metrics such as Occupancy, Average Daily Rate (“ADR”), Revenue Per Available Room (“RevPAR”), Hotel EBITDA, and Hotel EBITDA Margin are Pro forma. The prefix “Pro forma” as defined by the Company, denotes operating results which include results for periods prior to its ownership. Pro forma RevPAR and Pro forma Hotel EBITDA Margin are reported on a comparable basis and therefore exclude hotels sold during the period and non-comparable hotels that were not open for operation or were closed for renovation for comparable periods. Explanations of EBITDA, Adjusted EBITDA, Hotel EBITDA, FFO, and Adjusted FFO, as well as reconciliations of those measures to net income or loss, if applicable, are included at the end of this release.
Pro forma RevPAR for the three months ended December 31, 2015, increased 2.5% over the comparable period in 2014, driven by a Pro forma ADR increase of 3.6%, which was offset by a Pro forma Occupancy decrease of 1.0%. Excluding Houston and New York, which experienced softness in the quarter, Pro forma RevPAR growth was 4.8%. Six of the Company’s markets achieved double-digit RevPAR growth, including Dallas, Tampa, Northern California, Indianapolis, Boston, and Salt Lake City, which experienced RevPAR growth of 20.8%, 17.0%, 15.3%, 14.9%, 14.8%, and 10.6%, respectively. For the year ended December 31, 2015, Pro forma RevPAR increased 3.9% over the comparable period in 2014, driven by a Pro forma ADR increase of 5.3%, which was offset by a Pro forma Occupancy decrease of 1.4%.
Pro forma Hotel EBITDA Margin for the three months ended December 31, 2015, decreased 27 basis points over the comparable period in 2014 to 35.5%. Excluding Houston and New York, Pro forma Hotel EBITDA Margin increased 52 basis points. For the year ended December 31, 2015, Pro forma Hotel EBITDA Margin increased nine basis points over the comparable period in 2014 to 36.4%. Excluding Houston and New York, Pro forma Hotel EBITDA Margin increased 87 basis points.
Pro forma Consolidated Hotel EBITDA includes the results of non-comparable hotels. For the three months ended December 31, 2015, Pro forma Consolidated Hotel EBITDA increased $3.8 million to $95.9 million, representing a 4.1% increase over the comparable period in 2014. For the year ended December 31, 2015, Pro forma Consolidated Hotel EBITDA increased $23.3 million to $405.1 million, representing an increase of 6.1% over the comparable period in 2014.
Adjusted EBITDA for the three months ended December 31, 2015, decreased $0.5 million to $89.8 million, representing a 0.5% decrease over the comparable period in 2014. For the year ended December 31, 2015, Adjusted EBITDA increased $13.2 million to $380.1 million, representing an increase of 3.6% over the comparable period in 2014.
Adjusted FFO for the three months ended December 31, 2015, decreased $1.4 million to $74.8 million, representing a 1.8% decrease over the comparable period in 2014. For the year ended December 31, 2015, Adjusted FFO increased $14.0 million to $324.7 million representing an increase of 4.5% over the comparable period in 2014.
Adjusted FFO per diluted share and unit for the quarter and year ended December 31, 2015, was $0.60 and $2.50, respectively, based on the Company’s diluted weighted-average common shares and units outstanding of 125.6 million and 129.9 million for each period, respectively.
Non-recurring items and other adjustments which were noteworthy for the three months ended December 31, 2015, included a gain of $4.6 million primarily associated with the sale of one hotel, an impairment loss of $1.0 million related to one hotel, and a non-cash deferred tax benefit of $39.9 million related to the release of a valuation allowance. In addition to these items, non-recurring items during the year ended December 31, 2015, also included gains totaling $23.8 million attributed to the sale of 22 other hotels, for a total gain on sale of $28.4 million for the year.
Non-recurring items are included in net income attributable to common shareholders but are excluded from Adjusted EBITDA and Adjusted FFO, as applicable. A complete listing of non-recurring items is provided in the Non-GAAP reconciliation tables in this press release for the quarter and year ended December 31, 2015 and 2014.
Net income attributable to common shareholders for the three months ended December 31, 2015, was $73.8 million, compared to $33.8 million for the comparable period in 2014. For the year ended December 31, 2015, net income attributable to common shareholders was $218.2 million, compared to $135.4 million for the comparable period in 2014.
Net cash flow from operating activities for the year ended December 31, 2015, totaled $328.9 million, compared to $298.8 million for the comparable period in 2014.
Acquisitions
During the year ended December 31, 2015, the Company acquired three hotels for a gross purchase price of approximately $175.9 million.
On July 15, 2015, the Company acquired the 164-room Hyatt Place DC/Downtown/K Street in Washington, DC for $68.0 million, or approximately $415,000 per key. The Company expects that the purchase price will represent a forward capitalization rate of approximately 7.1% based on the hotel's projected 2016 net operating income.
On July 20, 2015, the Company acquired the 170-room Homewood Suites Seattle/Lynnwood in Lynnwood, WA for $37.9 million, or approximately $223,000 per key. The Company expects that the purchase price will represent a forward capitalization rate of approximately 8.0% based on the hotel's projected 2016 net operating income.
On September 25, 2015, the Company acquired the 156-room Residence Inn Palo Alto Los Altos in Los Altos, CA for $70.0 million, or approximately $449,000 per key. The Company expects that the purchase price will represent a forward capitalization rate of approximately 8.1% based on the hotel's projected 2016 net operating income.
Conversions
On August 24, 2015, the Company completed the conversion of the 167-room SpringHill Suites Houston Downtown/Convention Center in Houston, TX for an all-in investment of $32.6 million, or approximately $195,000 per key. The Company expects a forward capitalization rate of approximately 8.0% based on the hotel's projected 2016 net operating income.
On September 19, 2015, the Company completed the conversion of the 166-room Courtyard San Francisco Union Square in San Francisco, CA for an all-in investment of $56.5 million, or approximately $340,000 per key. The Company expects a forward capitalization rate of approximately 8.6% based on the hotel's projected 2016 net operating income.
Dispositions
During the year ended December 31, 2015, the Company sold 23 hotels for total proceeds of approximately $252.5 million.
On February 23, 2015, the Company sold a portfolio of 20 hotels totaling 2,461 rooms for approximately $230.3 million.
On May 22, 2015, the Company sold the 63-room Fairfield Inn & Suites Valparaiso in Valparaiso, IN for $2.4 million.
On July 7, 2015, the Company sold the 80-room Residence Inn South Bend in South Bend, IN for $5.8 million.
On October 14, 2015, the Company sold the 221-room Embassy Suites Columbus in Columbus, OH for $14.1 million.
Balance Sheet
During the year ended December 31, 2015, the Company repaid approximately $165.0 million of property level debt associated with 20 assets.
Loan Hotels Maturity Floating / Fixed
Balance as of Debt Payoff
Capmark Financial Group 1 May 2015 Fixed $ 10,513 Capmark Financial Group 1 Jun 2015 Fixed 4,561 Barclays Bank 12 Jun 2015 Fixed 107,130 Barclays Bank 4 Jun 2015 Fixed 26,689 Capmark Financial Group 1 Jul 2015 Fixed 6,172 Barclays Bank 1 Sep 2015 Fixed 9,939 Total Debt Payoff 20 $ 165,004
Note: Excludes $1.6 million of amortization paid down during the year.
On July 1, 2015, the Company drew down the entire $150.0 million of funds available under the 2014 Seven-Year Term Loan. Additionally, the Company drew the remaining $7.0 million available under its first mortgage loan on the Marriott Louisville Downtown.
On September 25, 2015, the Company assumed approximately $33.4 million of property-level CMBS debt associated with the Residence Inn Palo Alto Los Altos.
As of December 31, 2015, the Company had $134.2 million of unrestricted cash on its balance sheet, $300.0 million available on its revolving credit facility, and $1.6 billion of debt outstanding. The Company’s ratio of net debt to Adjusted EBITDA, pro forma for acquisitions and dispositions, for the year ended December 31, 2015, was 3.8 times.
Dividends
The Company’s Board of Trustees declared a cash dividend of $0.33 per common share of beneficial interest in the fourth quarter. The dividend was paid on January 15, 2016, to shareholders of record as of December 31, 2015.
For the year ended December 31, 2015, the Company distributed a total dividend of $1.32 per common share of beneficial interest, representing an increase of 26.9% over the prior year's annual distribution.
Share Buyback
During the year ended December 31, 2015, the Company's Board of Trustees authorized an initial share repurchase of $200.0 million of the Company's common shares on May 1, 2015 and upsized the program to $400.0 million on October 30, 2015.
In the fourth quarter of 2015, the Company repurchased 1.1 million shares for $25.2 million at an average price per share of $24.00. In aggregate, the Company repurchased 8.0 million shares for $225.2 million at an average price per share of $27.99. The Company’s authorized share buyback program has a remaining capacity of $174.8 million.
Subsequent Events
On February 22, 2016, the Company sold the 62-room Holiday Inn Express Merrillville in Merrillville, IN for $2.9 million.
To view full financial release and corresponding tables please click the PDF icon or visit:
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