INVESTOR RELATIONS

Press Release

Pebblebrook Hotel Trust Reports 2019 Results and Provides 2020 Outlook

Company Release - 2/20/2020 4:06 PM ET

BETHESDA, Md.--(BUSINESS WIRE)-- Pebblebrook Hotel Trust (NYSE: PEB):

Q4 HIGHLIGHTS

 

  • Net income: $19.6 million
  • Same-Property Total RevPAR1 +2.8% YOY and RevPAR1 +2.0% YOY
  • Same-Property EBITDA1: $109.0 million, +1.4% YOY
  • Adj. EBITDAre1: $100.1 million, +87.4% YOY
  • Adj. FFO1 per diluted share: $0.54, +63.6% YOY
  • Q4 Same-Property Total RevPAR, Adj. EBITDA, Adj. FFO and Adj. FFO/diluted share beat outlook due to better than expected demand, including in San Francisco and Los Angeles

 

 

 

2019 OPERATING
& FINANCIAL
HIGHLIGHTS

 

  • 2019 Same-Property Total RevPAR +1.9% & Same-Property RevPAR +1.2% led by strong performance of hotels in San Francisco, South Florida and Boston
  • Adj. EBITDAre1: $478.7 million, +87.8% YOY
  • Adj. FFO1 per diluted share: $2.63, +7.3% YOY
  • Successfully completed 12 operator/brand transitions and $162.8 million of capital investments across the portfolio
  • Positioning for strong relative future growth through major redevelopments and repositionings throughout the portfolio in 2019 & 2020

 

 

 

STRATEGIC
DISPOSITION
PLAN

 

  • Completed a total of $1.33 billion of hotel sales from the closing of the Company’s November 2018 corporate acquisition; property transaction market remains healthy and active, pricing remains stable and attractive
  • Executed contract to sell the InterContinental Buckhead Atlanta and Sofitel Washington DC Lafayette Square in Q1 2020 for $331.0 million

 

 

 

BALANCE SHEET

 

  • Net Debt to Trailing 12-Month Corporate EBITDA1 at the end of Q4: 4.7x and expected to drop to 4.4x following the closing of the announced Q1 sales
  • Fixed Charge Coverage Ratio at 2.9x; expected to increase to 3.0x following the closing of the announced Q1 sales

 

 

2020 OUTLOOK

(excluding effects of
coronavirus)

 

  • Net income: $198.7 million to $211.7 million
  • Same-Property Total RevPAR1 Growth Rate: (0.6%) to +1.0%
  • Adj. EBITDAre1: $412.2 million to $425.2 million
  • Adj. FFO1 per diluted share: $2.23 to $2.33
  • Asset sales target: $375.0 million

"Our operating results for the fourth quarter of 2019 exceeded our outlook primarily due to unexpected increases in hotel demand during November and December throughout many of our markets, including San Francisco, Los Angeles, South Florida and Boston. We also made great progress in transforming the Company for stronger growth in future years. We completed $1.3 billion in hotel sales, with another $331.0 million of sales expected in the near term, 12 successful operator or brand transitions, including 2 in early 2020, and we completed or commenced 8 major redevelopment and repositioning projects. Up until the emergence of the coronavirus in China, we were encouraged with the improvements in near term business and leisure booking trends that we experienced from November through January. However, we are concerned about the potential negative impact of coronavirus on travel. While we expect some reduced demand outside of what we’ve already experienced and incorporated, our outlook does not reflect any impact since it is not knowable or able to be forecasted due to the unique evolving nature of the situation."

-Jon E. Bortz, Chairman, President and Chief Executive Officer of Pebblebrook Hotel Trust

(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.

Fourth Quarter and Full-Year Highlights

 

Fourth Quarter

Year Ended December 31,

2019

2018

2019

2018

($ in millions except per share and RevPAR data)

Net income (loss)

$19.6

($99.3)

$115.7

$13.4

 

Same-Property Total RevPAR(1)

$296.22

$288.16

$308.01

$302.28

Same-Property Total RevPAR growth rate

2.8%

1.9%

 

 

 

 

 

 

Same-Property RevPAR(1)

$196.34

$192.43

 

$210.65

$208.19

Same-Property RevPAR growth rate

2.0%

 

 

1.2%

 

 

 

 

 

 

 

Same-Property Expenses(1)

$267.6

$258.8

 

$1,086.2

$1,050.5

Same-Property Expense growth rate

3.4%

 

 

3.4%

 

 

 

 

 

 

 

Same-Property EBITDA(1)

$109.0

$107.5

$514.8

$520.6

Same-Property EBITDA growth rate

1.4%

(1.1%)

Same-Property EBITDA Margin(1)

28.9%

29.4%

 

32.2%

33.1%

 

Adjusted EBITDAre(1)

$100.1

$53.4

$478.7

$254.9

Adjusted EBITDAre growth rate

87.4%

 

 

87.8%

 

 

Adjusted FFO(1)

$71.3

$30.4

$344.1

$183.9

Adjusted FFO per diluted share(1)

$0.54

$0.33

$2.63

$2.45

Adjusted FFO per diluted share growth rate

63.6%

 

 

7.3%

 

 

(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"), EBITDA for Real Estate (“EBITDAre”), Adjusted EBITDAre, 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 Room Revenue Per Available Room (“RevPAR”), Same-Property Total Revenue Per Available Room (“Total 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 Statistical Data table footnotes later in this press release.

  • Net Income: The Company’s net income was $19.6 million in the fourth quarter of 2019, an increase of $118.9 million as compared to the same period of 2018. The Company’s net income was $115.7 million for the year ended December 31, 2019, an increase of $102.3 million as compared to 2018. The increase is primarily due to the Company’s corporate acquisition completed in November 2018.
  • Same-Property Operating Statistics: Same-Property Total RevPAR increased 2.8 percent from the fourth quarter of 2018. Same-Property RevPAR for the fourth quarter increased 2.0 percent from the prior year to $196.34, with Same-Property ADR declining 0.5 percent to $247.18 and Same-Property Occupancy rising 2.5 percent to 79.4 percent. In addition, Same-Property Total RevPAR for full-year 2019 grew 1.9 percent over 2018, and Same-Property RevPAR for the year increased 1.2 percent over the prior year to $210.65. Same-Property ADR rose 1.3 percent for the year to $256.17, and Same-Property Occupancy for the year declined by 0.2 percent to 82.2 percent.
  • Same-Property EBITDA, Expenses and Margins: The Company’s hotels generated $109.0 million of Same-Property EBITDA for the quarter ended December 31, 2019, up 1.4 percent versus the same period of 2018. Same-Property Revenues increased 2.8 percent, while Same-Property Expenses rose 3.4 percent, resulting in Same-Property EBITDA Margin for the quarter decreasing 41 basis points to 28.9 percent. The Company’s hotels generated $514.8 million of Same-Property EBITDA for the full-year 2019, down 1.1 percent compared to the prior year. Same-Property Revenues climbed 1.9 percent, while Same-Property Expenses increased 3.4 percent. As a result, Same-Property EBITDA Margin for 2019 decreased 98 basis points to 32.2 percent as compared to the prior year.
  • Operating Performance: Excluding the mandatory California Proposition 13 increases in real estate taxes for the California properties acquired as part of the Company’s corporate acquisition in November 2018, Same-Property Expenses increased 3.1 percent during the fourth quarter, resulting in Same-Property EBITDA Margin for the quarter decreasing just 19 basis points. For 2019, also excluding the Proposition 13 impact, Same-Property Expenses increased 2.6 percent, and Same-Property EBITDA margins declined 46 basis points.

“Our hotels performed well in 2019 despite the challenging operating environment, which included disruption from the U.S. government shutdown in early 2019, international trade tensions, a strong U.S. dollar resulting in softer international demand and new hotel supply,” commented Mr. Bortz. “Our recently renovated and repositioned properties continue to gain market share, driving overall market share growth for the entire portfolio for the year. This outperformance is expected to continue over the next several years.”

Update on Strategic Disposition Plan

During the fourth quarter of 2019, the Company completed the sale of Topaz Hotel in Washington, D.C. for $33.1 million. Including the $449.0 million of hotel property sales completed earlier in the year, the Company completed a total of $482.1 million of sales throughout the year.

On January 27, 2020, the Company announced that it executed a contract to sell the InterContinental Buckhead Atlanta and Sofitel Washington DC Lafayette Square for a combined $331.0 million price. This sale is subject to normal closing conditions, and the Company offers no assurances that this sale will be completed on these terms, or at all. The Company is targeting to complete the sale later in the first quarter. For 2020, the Company is targeting to achieve $375.0 million of hotel and asset sales, which includes the previously announced InterContinental Buckhead Atlanta and Sofitel Washington DC Lafayette Square hotels.

Since the Company commenced its strategic disposition plan on November 30, 2018, and through December 31, 2019, 13 hotels have been successfully sold, generating approximately $1.33 billion of gross sales proceeds. The sales to date reflect a very favorable 15.6x EBITDA multiple and a 5.5 percent net operating income capitalization rate (after an assumed annual capital reserve of 4.0 percent of total hotel revenues) based on the operating performance for 2018 of the properties sold.

Update on Strategic Property Redevelopment Plan

The Company made significant progress on its Strategic Property Redevelopment Plan in 2019. Throughout the year, the Company completed 10 third-party operator or brand changes at the following 9 hotels:

  • Hotel Colonnade Coral Gables, Autograph Collection
  • The Hotel Zags, “The Unofficial Z Collection”
  • Skamania Lodge
  • L’Auberge Del Mar
  • Paradise Point Resort & Spa
  • Villa Florence San Francisco on Union Square
  • The Marker San Francisco
  • Mason & Rook Hotel, soon to be Viceroy Washington DC
  • Donovan Hotel, soon to be Hotel Zena Washington DC

In addition, on January 2, 2020, Hilton San Diego Resort & Spa became San Diego Mission Bay Resort, an independent lifestyle-oriented resort. Also in January, Davidson Hotels & Resorts became the manager of Solamar Hotel in San Diego. Furthermore, as announced on February 13, 2020, Solamar Hotel will become Margaritaville Hotel San Diego Gaslamp Quarter by the end of the second quarter of 2021 following an extensive renovation and transformation.

On February 19, 2020, the Company announced that Hotel Vitale in San Francisco will be renovated and transformed into the eco-lux 1 Hotel San Francisco managed by SH Hotels & Resorts. The hotel will remain Hotel Vitale until the renovation is completed, which is expected to occur by the end of the second quarter of 2021.

In addition to these transformations, the Company is also reinventing and relaunching the Villa Florence San Francisco on Union Square as The Baybury Hotel following a comprehensive renovation and repositioning, which is expected to be completed by the end of this year.

Capital Investments

In the fourth quarter, the Company completed $51.6 million of capital investments throughout its portfolio. The Company completed $162.8 million of capital investments and projects in 2019, including the completion of major renovations and property improvements at W Boston, Mondrian Los Angeles, Sofitel Philadelphia at Rittenhouse Square and Skamania Lodge, all in the second quarter, the completion of the first phase of a substantial renovation at San Diego Mission Bay Resort in the third quarter and the completion of significant upgrades at The Marker Resort Key West in the fourth quarter.

In 2020, the Company intends to start or complete additional major renovation and repositioning projects including:

  • Donovan Hotel (estimated at $25.0 million, or $130 thousand per key), which encompasses an exhaustive redevelopment and repositioning, expected to be completed in the second quarter of 2020, at which time the hotel will be relaunched as Hotel Zena Washington DC, the seventh member of “The Unofficial Z Collection,” the Company’s proprietary brand of individually curated, unique urban lifestyle hotels;
  • Embassy Suites San Diego Bay Downtown (estimated at $18.0 million), which is receiving a comprehensive guest suite renovation, expected to be completed in the second quarter of 2020;
  • Westin San Diego Gaslamp Quarter(estimated at $17.0 million), which consists of a guestroom, lobby, restaurant, and bar renovation, expected to be completed by the end of the first quarter of 2020;
  • Le Parc Suite Hotel (estimated at $12.5 million), which consists of a comprehensive hotel renovation, including the guestrooms, lobby, public areas and exterior, which commenced in the first quarter of 2020, expected to be completed by the end of the second quarter of 2020;
  • Villa Florence San Francisco on Union Square(estimated at $12.0 million), which will undergo a complete transformation including the guestrooms, corridors, entry and lobby, planned to begin in the third quarter of 2020, expected to be completed by the end of the year, at which time it will be repositioned as The Baybury Hotel;
  • San Diego Mission Bay Resort, Phase 2 (estimated at $11.0 million), which is undergoing a reconfiguration and complete renovation of the public areas including the porte-cochere, lobby, entry, pool, restaurants, and bars, retail shop, creation of additional event venues and upgrading of guestrooms and suites, expected to be completed by the end of the second quarter of 2020;
  • Viceroy Santa Monica Hotel, Phase 1 (estimated at $10.5 million), which is undergoing a porte-cochere, lobby, public area, pool, restaurant, bar and meeting space renovation, featuring both interior and exterior enhancements, expected to be completed by the end of the second quarter of 2020;
  • Chaminade Resort & Spa (estimated at $9.0 million), which is repositioning the property through a redevelopment of the property’s public space, restaurant, lobby, porte-cochere/entry, exterior patio, and all meeting space and venues, expected to be completed in the second quarter of 2020; and
  • Mason & Rook Hotel (estimated at $8.0 million), which is undergoing a complete renovation and upgrading of the entry, lobby, guestrooms, restaurant and bar areas, rooftop pool, and its meeting spaces, expected to be completed by the end of the second quarter of 2020, at which time it will be rebranded as the Viceroy Washington DC.

Balance Sheet and Shareholder Distributions

As of December 31, 2019, the Company had $2.2 billion in consolidated debt at an effective weighted-average interest rate of 3.5 percent. Approximately $1.7 billion, or 77 percent of the Company’s total outstanding debt, was at a weighted-average fixed interest rate of 3.5 percent, and approximately $0.5 billion, or 23 percent, was at a weighted-average floating interest rate of 3.3 percent. Of the Company’s outstanding debt, $2.0 billion was in the form of unsecured term loans, and $165.0 million was outstanding on its $650.0 million senior unsecured revolving credit facility. As of December 31, 2019, the Company had $56.9 million of consolidated cash, cash equivalents, and restricted cash.

As of December 31, 2019, the Company’s fixed charge coverage ratio was 2.9 times, total net debt to trailing 12-month corporate EBITDA was 4.7 times, and the Company’s debt to net assets after GAAP depreciation was at 30 percent.

On December 16, 2019, the Company declared a regular quarterly cash dividend of $0.38 per share on its common shares as well as a regular quarterly cash dividend for the following preferred shares of beneficial interest:

  • $0.40625 per 6.50% Series C Cumulative Redeemable Preferred Share;
  • $0.39844 per 6.375% Series D Cumulative Redeemable Preferred Share;
  • $0.39844 per 6.375% Series E Cumulative Redeemable Preferred Share; and
  • $0.39375 per 6.30% Series F Cumulative Redeemable Preferred Share.

2020 Outlook

The Company is providing a 2020 outlook, which assumes $375.0 million of asset sales throughout the year, with $331.0 million of assets sold by the end of the first quarter, and $44.0 million of assets sold by mid-year.

The 2020 asset sales are projected to negatively impact the Company’s Adjusted EBITDAre by $21.6 million, as a result of the lost Hotel EBITDA from the sold assets. Assuming all asset sales proceeds are used to reduce the Company’s outstanding debt, we estimate interest savings of approximately $10.8 million will be generated. The net impact of the 2020 asset sales to Adjusted FFO and Adjusted FFO per diluted share is estimated to be $10.8 million and $0.08, respectively.

The assets that were sold in 2019 contributed $7.5 million in Adjusted EBITDAre,$1.2 million to Adjusted FFO and $0.01 to Adjusted FFO per diluted share, which will be a net loss to 2020’s expected performance.

The 2020 outlook assumes a negative impact of $9.0 million in Same-Property EBITDA from the planned 2020 redevelopments and $1.2 million in Same-Property EBITDA from the operator and brand transitions at the Company’s properties. These estimates assume a total of 90 basis points of negative impact to Same-Property RevPAR Growth as a result of the 2020 renovations and transitions.

Outside of the impact that we’ve already seen and incorporated, the Company’s outlook for 2020 and the first quarter of 2020 does not assume any additional impact from the coronavirus since it is unknowable and unable to be forecasted due to the evolving situation.

The Company’s outlook, which assumes no acquisitions, reflects the Company’s various planned capital investment projects, and includes other significant assumptions, is as follows:

 

2020 Outlook

Low

High

 

($ and shares/units in millions,
except per share and RevPAR data)

 

Net income

$198.7

 

$211.7

 

 

 

Adjusted EBITDAre

$412.2

 

$425.2

Adjusted EBITDAre growth rate

(13.9%)

 

(11.2%)

 

 

 

 

Adjusted FFO

$293.6

 

$306.6

Adjusted FFO per diluted share

$2.23

 

$2.33

Adjusted FFO per diluted share growth rate

(15.2%)

 

(11.4%)

 

This 2020 Outlook is based, in part, on the following estimates and assumptions:

 

Asset Sales during 2020

$375.0

$375.0

Q1 Asset Sales

$331.0

$331.0

Midyear Asset Sales

$44.0

$44.0

 

 

 

U.S. GDP growth rate

1.5%

2.0%

U.S. Hotel Industry RevPAR growth rate

(1.0%)

1.0%

 

 

Same-Property RevPAR

$211

$215

Same-Property RevPAR growth rate

(1.0%)

1.0%

Same-Property Room Revenue growth rate

(0.7%)

1.3%

 

 

 

Same-Property EBITDA

$451.0

$464.0

Same-Property EBITDA growth rate

(5.6%)

(2.8%)

Same-Property Expense growth rate

2.2%

3.2%

Same-Property EBITDA Margin

30.3%

30.7%

Same-Property EBITDA Margin growth rate

(170 bps)

(130 bps)

 

 

 

Corporate cash general and administrative expenses

($30.1)

($30.1)

Corporate non-cash general and administrative expenses

($9.3)

($9.3)

Preopening and other corporate expenses

($4.1)

($4.1)

 

 

 

Total capital investments related to renovations, capital maintenance and return on investment projects

$165.0

$185.0

 

 

 

Weighted-average fully diluted shares and units

131.8

131.8

 

The Company’s Outlook for the first quarter of 2020 is as follows:

 

 

First Quarter
2020 Outlook

Low

High

 

($ and shares/units in millions,
except per share and RevPAR data)

Net income (loss)

$79.3

$86.8

 

 

 

Q1 Asset Sales

$331.0

$331.0

 

 

 

Same-Property RevPAR

$183

$188

Same-Property RevPAR growth rate

(4.0%)

(1.0%)

Same-Property Room Revenue growth rate

(2.9%)

0.1%

 

 

Same-Property EBITDA

$76.8

$84.3

Same-Property EBITDA growth rate

(15.3%)

(7.0%)

Same-Property Expense growth rate

1.9%

3.1%

Same-Property EBITDA Margin

23.8%

25.3%

Same-Property EBITDA Margin growth rate

(350 bps)

(200 bps)

 

 

 

Adjusted EBITDAre

$68.4

$75.9

Adjusted EBITDAre growth rate

(24.4%)

(16.1%)

 

 

 

Adjusted FFO

$42.5

$50.0

Adjusted FFO per diluted share

$0.32

$0.38

Adjusted FFO per diluted share growth rate

(30.4%)

(17.4%)

 

 

 

Weighted-average fully diluted shares and units

131.7

131.7

 

The First Quarter 2020 Outlook assumes an estimated negative impact of 235 basis points on Same-Property RevPAR growth and $5.8 million of negative impact on Same-Property EBITDA, based on the planned repositionings and renovations across the portfolio. Additionally, the First Quarter 2020 Outlook assumes an estimated negative impact of 30 basis points on Same-Property RevPAR growth and $0.7 million of negative impact on Same-Property EBITDA, based on operator transitions across the portfolio.

The 2020 Outlook excludes the following hotels from Same-Property RevPAR, Same-Property RevPAR growth rate, Same-Property EBITDA, Same-Property EBITDA growth rate, Same-Property Expense growth rate, Same-Property EBITDA Margin, and Same-Property EBITDA Margin growth rate:

  • Donovan Hotel for the first, second and fourth quarters of both 2020 and 2019 due to its closure in the fourth quarter of 2019 and the first and second quarters of 2020 for redevelopment, renovation, and rebranding; and
  • InterContinental Buckhead Atlanta and Sofitel Washington DC Lafayette Square for the first, second, third and fourth quarters of both 2020 and 2019 due to their expected sale sometime in the first quarter of 2020.

If any of the foregoing estimates and assumptions prove to be inaccurate, actual results, including the outlook, may vary and could vary significantly from the amounts shown above.

Fourth Quarter 2019 Earnings Call

The Company will conduct its quarterly analyst and investor conference call on Friday, February 21, 2020, at 9:00 AM ET. To participate in the conference call, please dial (877) 705-6003 approximately ten minutes before the call begins. Additionally, a live webcast of the conference call will be available through the Company’s website. To access the webcast, log on to www.pebblebrookhotels.com ten minutes before the conference call. A replay of the conference call webcast will be archived and available online through the Investor Relations section of www.pebblebrookhotels.com.

About Pebblebrook Hotel Trust

Pebblebrook Hotel Trust (NYSE: PEB) is a publicly traded real estate investment trust (“REIT”) and the largest owner of urban and resort lifestyle hotels in the United States. The Company owns 56 hotels, totaling approximately 14,000 guestrooms across 16 urban and resort markets, with a focus on the west coast gateway cities. For more information, visit www.pebblebrookhotels.com and follow us at @PebblebrookPEB.

For further information about the Company’s business and financial results, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of the Company’s SEC filings, including, but not limited to, its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, copies of which may be obtained at the Investor Relations section of the Company’s website at www.pebblebrookhotels.com.

This press release contains certain “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Reform Act of 1995. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “seek,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” “forecast,” “continue,” “assume,” “plan,” references to “outlook” or other similar words or expressions. Forward-looking statements are based on certain assumptions and can include future expectations, future plans and strategies, financial and operating projections and forecasts and other forward-looking information and estimates. Examples of forward-looking statements include the following: projections and forecasts of U.S. GDP growth, U.S. hotel industry RevPAR growth, the Company’s net income, FFO, EBITDA, Adjusted FFO, Adjusted EBITDAre, RevPAR, Total RevPAR, EBITDA Margin and EBITDA Margin growth, and the Company’s expenses, share count or other financial items; descriptions of the Company’s plans or objectives for future operations, acquisitions, dispositions or services; forecasts of the Company’s future economic performance and its share of future markets; forecasts of hotel industry performance; and descriptions of assumptions underlying or relating to any of the foregoing expectations including assumptions regarding the timing of their occurrence. These forward-looking statements are subject to various risks and uncertainties, many of which are beyond the Company’s control, which could cause actual results to differ materially from such statements. These risks and uncertainties include, but are not limited to, the state of the U.S. economy and the supply of hotel properties, and other factors as are described in greater detail in the Company’s filings with the Securities and Exchange Commission, including, without limitation, the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. Unless legally required, the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

All information in this press release is as of February 20, 2020. The Company undertakes no duty to update the statements in this press release to conform the statements to actual results or changes in the Company’s expectations.

For additional information or to receive press releases via email, please visit our website at www.pebblebrookhotels.com

 
Pebblebrook Hotel Trust
Consolidated Balance Sheets
($ in thousands, except for per share data)
December 31, 2019December 31, 2018
 
ASSETS
Assets:
Investment in hotel properties, net

$

6,332,587

 

$

6,534,193

 

Ground lease asset, net

 

-

 

 

199,745

 

Cash and cash equivalents

 

30,098

 

 

83,366

 

Restricted cash

 

26,777

 

 

24,445

 

Hotel receivables (net of allowance for doubtful accounts of $738 and $526, respectively)

 

49,619

 

 

59,897

 

Prepaid expenses and other assets

 

59,474

 

 

76,702

 

Total assets

$

6,498,555

 

$

6,978,348

 

 
 
 
LIABILITIES AND EQUITY
 
Liabilities:
Unsecured revolving credit facilities

$

165,000

 

$

170,000

 

Term loans, net of unamortized deferred financing costs

 

1,964,657

 

 

2,409,284

 

Senior unsecured notes, net of unamortized deferred financing costs

 

99,563

 

 

99,469

 

Mortgage loans, net of unamortized deferred financing costs

 

-

 

 

68,145

 

Accounts payable and accrued expenses

 

516,437

 

 

360,279

 

Deferred revenues

 

57,704

 

 

54,741

 

Accrued interest

 

4,694

 

 

2,741

 

Distribution payable

 

58,564

 

 

43,759

 

Total liabilities

 

2,866,619

 

 

3,208,418

 

Commitments and contingencies
 
Equity:
Preferred shares of beneficial interest, $0.01 par value (liquidation preference $510,000 at December 31, 2019 and December 31, 2018), 100,000,000 shares authorized; 20,400,000 shares issued and outstanding at December 31, 2019 and December 31, 2018

 

204

 

 

 

204

 

Common shares of beneficial interest, $0.01 par value, 500,000,000 shares authorized; 130,484,956 issued and outstanding at December 31, 2019 and 130,311,289 issued and outstanding at December 31, 2018

 

1,305

 

 

 

1,303

 

Additional paid-in capital

 

4,069,410

 

 

4,065,804

 

Accumulated other comprehensive income (loss)

 

(24,715

)

 

1,330

 

Distributions in excess of retained earnings

 

(424,996

)

 

(308,806

)

Total shareholders' equity

 

3,621,208

 

 

3,759,835

 

Non-controlling interests

 

10,728

 

 

10,095

 

Total equity

 

3,631,936

 

 

3,769,930

 

Total liabilities and equity

$

6,498,555

 

$

6,978,348

 

 
Pebblebrook Hotel Trust
Consolidated Statements of Operations
($ in thousands, except for per share data)
 
 

Three months ended
December 31,

 

Year ended
December 31,

2019

 

2018

 

2019

 

2018

(Unaudited)

 

 

Revenues:
Room

$

252,048

 

$

153,711

 

$

1,103,947

 

$

565,107

 

Food and beverage

 

95,781

 

 

62,170

 

 

370,584

 

 

199,089

 

Other operating

 

31,580

 

 

19,761

 

 

137,682

 

 

64,482

 

Total revenues

$

379,409

 

$

235,642

 

$

1,612,213

 

$

828,678

 

 
Expenses:
Hotel operating expenses:
Room

$

66,148

 

$

43,631

 

$

275,855

 

$

143,171

 

Food and beverage

 

65,297

 

 

43,234

 

 

260,278

 

 

136,845

 

Other direct and indirect

 

107,418

 

 

71,155

 

 

438,035

 

 

231,818

 

Total hotel operating expenses

 

238,863

 

 

158,020

 

 

974,168

 

 

511,834

 

Depreciation and amortization

 

57,504

 

 

34,246

 

 

234,880

 

 

108,475

 

Real estate taxes, personal property taxes, property insurance, and ground rent

 

31,004

 

 

18,382

 

 

125,013

 

 

54,191

 

General and administrative

 

8,294

 

 

6,152

 

 

34,047

 

 

20,945

 

Transaction costs

 

1,103

 

 

69,503

 

 

8,679

 

 

75,049

 

(Gain) loss on sale of hotel properties

 

(2,819

)

 

2,147

 

 

(2,819

)

 

2,147

 

(Gain) loss and other operating expenses

 

2,684

 

 

441

 

 

8,903

 

 

(10,935

)

Total operating expenses

 

336,633

 

 

288,891

 

 

1,382,871

 

 

761,706

 

Operating income (loss)

 

42,776

 

 

(53,249

)

 

229,342

 

 

66,972

 

Interest expense

 

(23,962

)

 

(20,649

)

 

(108,474

)

 

(53,923

)

Other

 

6

 

 

(27,331

)

 

29

 

 

2,078

 

Income (loss) before income taxes

 

18,820

 

 

(101,229

)

 

120,897

 

 

15,127

 

Income tax (expense) benefit

 

752

 

 

1,886

 

 

(5,172

)

 

(1,742

)

Net income (loss)

 

19,572

 

 

(99,343

)

 

115,725

 

 

13,385

 

Net income (loss) attributable to non-controlling interests

 

29

 

 

(432

)

 

283

 

 

(8

)

Net income (loss) attributable to the Company

 

19,543

 

 

(98,911

)

 

115,442

 

 

13,393

 

Distributions to preferred shareholders

 

(8,139

)

 

(5,396

)

 

(32,556

)

 

(17,466

)

Net income (loss) attributable to common shareholders

$

11,404

 

$

(104,307

)

$

82,886

 

$

(4,073

)

 
 
Net income (loss) per share available to common shareholders, basic

$

0.08

 

$

(1.16

)

$

0.63

 

$

(0.06

)

Net income (loss) per share available to common shareholders, diluted

$

0.08

 

$

(1.16

)

$

0.63

 

$

(0.06

)

 
Weighted-average number of common shares, basic

 

130,484,956

 

 

90,268,395

 

 

130,471,670

 

 

74,286,307

 

Weighted-average number of common shares, diluted

 

130,669,494

 

 

90,268,395

 

 

130,718,306

 

 

74,286,307

 

 
Pebblebrook Hotel Trust
Reconciliation of Net Income (Loss) to FFO and Adjusted FFO
($ in thousands, except per share data)
(Unaudited)
 

Three months ended
December 31,

 

Year ended
December 31,

2019

 

2018

 

2019

 

2018

 
Net income (loss)

$

19,572

 

$

(99,343

)

$

115,725

 

$

13,385

 

Adjustments:
Depreciation and amortization

 

57,396

 

 

34,193

 

 

234,591

 

 

108,265

 

(Gain) loss on sale of hotel properties

 

(2,819

)

 

2,147

 

 

(2,819

)

 

2,147

 

FFO

$

74,149

 

$

(63,003

)

$

347,497

 

$

123,797

 

Distribution to preferred shareholders

 

(8,139

)

 

(5,396

)

 

(32,556

)

 

(17,466

)

FFO available to common share and unit holders

$

66,010

 

$

(68,399

)

$

314,941

 

$

106,331

 

Transaction costs

 

1,103

 

 

69,503

 

 

8,679

 

 

75,049

 

Non-cash ground rent

 

701

 

 

646

 

 

3,975

 

 

2,453

 

Management/franchise contract transition costs

 

1,143

 

 

1

 

 

5,927

 

 

56

 

Interest expense adjustment for acquired liabilities

 

213

 

 

267

 

 

902

 

 

969

 

Capital lease adjustment

 

1,000

 

 

326

 

 

3,193

 

 

753

 

Non-cash amortization of acquired intangibles

 

(290

)

 

124

 

 

(1,340

)

 

733

 

Estimated hurricane related repairs and cleanup costs

 

-

 

 

-

 

 

-

 

 

1,452

 

Gain on insurance settlement

 

-

 

 

-

 

 

(672

)

 

(13,954

)

Business interruption proceeds

 

-

 

 

-

 

 

672

 

 

6,135

 

Unrealized gain on investment

 

-

 

 

27,347

 

 

-

 

 

3,277

 

Non-cash interest expense

 

1,379

 

 

606

 

 

6,140

 

 

606

 

Early extinguishment of debt

 

-

 

 

-

 

 

1,698

 

 

-

 

Adjusted FFO available to common share and unit holders

$

71,259

 

$

30,421

 

$

344,115

 

$

183,860

 

 
FFO per common share - basic

$

0.50

 

$

(0.75

)

$

2.41

 

$

1.42

 

FFO per common share - diluted

$

0.50

 

$

(0.75

)

$

2.40

 

$

1.42

 

Adjusted FFO per common share - basic

$

0.54

 

$

0.34

 

$

2.63

 

$

2.46

 

Adjusted FFO per common share - diluted

$

0.54

 

$

0.33

 

$

2.63

 

$

2.45

 

 
Weighted-average number of basic common shares and units

 

130,854,912

 

 

90,638,351

 

 

130,841,626

 

 

74,656,263

 

Weighted-average number of fully diluted common shares and units

 

131,039,450

 

 

90,954,715

 

 

131,088,262

 

 

75,000,204

 

 
To supplement the Company’s consolidated financial statements presented in accordance with U.S. GAAP, this press release includes certain non-GAAP financial measures as defined under SEC rules.

These measures are not in accordance with, or an alternative to, measures prepared in accordance with GAAP and may be different from similarly titled non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.

Funds from Operations (“FFO”) - FFO represents net income (computed in accordance with GAAP), excluding gains or losses from sales of properties, plus real estate-related depreciation and amortization and after adjustments for unconsolidated partnerships. The Company considers FFO a useful measure of performance for an equity REIT because it facilitates an understanding of the Company's operating performance without giving effect to real estate depreciation and amortization, which assume that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, the Company believes that FFO provides a meaningful indication of its performance. The Company also considers FFO an appropriate performance measure given its wide use by investors and analysts. The Company computes FFO in accordance with standards established by the Board of Governors of Nareit in its March 1995 White Paper (as amended in November 1999 and April 2002), which may differ from the methodology for calculating FFO utilized by other equity REITs and, accordingly, may not be comparable to that of other REITs. Further, FFO does not represent amounts available for management’s discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments and uncertainties, nor is it indicative of funds available to fund the Company’s cash needs, including its ability to make distributions. The Company presents FFO per diluted share calculations that are based on the outstanding dilutive common shares plus the outstanding Operating Partnership units for the periods presented.

The Company also evaluates its performance by reviewing Adjusted FFO because it believes that adjusting FFO to exclude certain recurring and non-recurring items described below provides useful supplemental information regarding the Company's ongoing operating performance and that the presentation of Adjusted FFO, when combined with the primary GAAP presentation of net income (loss), more completely describes the Company's operating performance. The Company adjusts FFO for the following items, which may occur in any period, and refers to this measure as Adjusted FFO:

- Transaction costs: The Company excludes transaction costs expensed during the period because it believes that including these costs in FFO does not reflect the underlying financial performance of the Company and its hotels.
- Non-cash ground rent: The Company excludes the non-cash ground rent expense, which is primarily made up of the straight-line rent impact from a ground lease.
- Management/franchise contract transition costs: The Company excludes one-time management and/or franchise contract transition costs expensed during the period because it believes that including these costs in FFO does not reflect the underlying financial performance of the Company and its hotels.
- Interest expense adjustment for acquired liabilities: The Company excludes interest expense adjustment for acquired liabilities assumed in connection with acquisitions, because it believes that including these non-cash adjustments in FFO does not reflect the underlying financial performance of the Company.
- Capital lease adjustment: The Company excludes the effect of non-cash interest expense from capital leases because it believes that including these non-cash adjustments in FFO does not reflect the underlying financial performance of the Company.
- Non-cash amortization of acquired intangibles: The Company excludes the non-cash amortization of acquired intangibles, which includes but is not limited to the amortization of favorable and unfavorable leases or management agreements and above/below market real estate tax reduction agreements because it believes that including these non-cash adjustments in FFO does not reflect the underlying financial performance of the Company.
- Estimated hurricane related repairs and cleanup costs: The Company excludes estimated hurricane related repairs and cleanup costs during the period because it believes that including these adjustments in FFO does not reflect the underlying financial performance of the Company and its hotels.
- Gain on insurance settlement: The Company excludes the gain on insurance settlement because the Company believes that including this adjustment in FFO does not reflect the underlying financial performance of the Company and its hotels.
- Business interruption proceeds: The Company includes business interruption proceeds because the Company believes that including these proceeds reflects the underlying financial performance of the Company and its hotels.
- Unrealized gain on investment: The Company excludes the unrealized gain on investment because the Company believes that including this adjustment in FFO does not reflect the underlying financial performance of the Company and its hotels.
- Non-cash interest expense and early extinguishment of debt: The Company excludes non-cash interest expense and early extinguishment of debt because the Company believes that including this adjustment in FFO does not reflect the underlying financial performance of the Company and its hotels.
 
The Company’s presentation of FFO in accordance with the Nareit White Paper, and as adjusted by the Company, should not be considered as an alternative to net income (computed in accordance with GAAP) as an indicator of the Company’s financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of its liquidity.
Pebblebrook Hotel Trust
Reconciliation of Net Income (Loss) to EBITDA, EBITDAre and Adjusted EBITDAre
($ in thousands)
(Unaudited)
 

Three months ended
December 31,

 

Year ended
December 31,

2019

 

2018

 

2019

 

2018

 
Net income (loss)

$

19,572

 

$

(99,343

)

$

115,725

 

$

13,385

 

Adjustments:
Interest expense

 

23,962

 

 

20,649

 

 

108,474

 

 

53,923

 

Income tax expense (benefit)

 

(752

)

 

(1,886

)

 

5,172

 

 

1,742

 

Depreciation and amortization

 

57,504

 

 

34,246

 

 

234,880

 

 

108,475

 

EBITDA

$

100,286

 

$

(46,334

)

$

464,251

 

$

177,525

 

(Gain) loss on sale of hotel properties

 

(2,819

)

 

2,147

 

 

(2,819

)

 

2,147

 

EBITDAre

$

97,467

 

$

(44,187

)

$

461,432

 

$

179,672

 

Transaction costs

 

1,103

 

 

69,503

 

 

8,679

 

 

75,049

 

Non-cash ground rent

 

701

 

 

646

 

 

3,975

 

 

2,453

 

Management/franchise contract transition costs

 

1,143

 

 

1

 

 

5,927

 

 

56

 

Non-cash amortization of acquired intangibles

 

(290

)

 

124

 

 

(1,340

)

 

733

 

Estimated hurricane related repairs and cleanup costs

 

-

 

 

-

 

 

-

 

 

1,452

 

Gain on insurance settlement

 

-

 

 

-

 

 

(672

)

 

(13,954

)

Business interruption proceeds

 

-

 

 

-

 

 

672

 

 

6,135

 

Unrealized gain on investment

 

-

 

 

27,347

 

 

-

 

 

3,277

 

Adjusted EBITDAre

$

100,124

 

$

53,434

 

$

478,673

 

$

254,873

 

 
To supplement the Company’s consolidated financial statements presented in accordance with U.S. GAAP, this press release includes certain non-GAAP financial measures as defined under SEC rules.

These measures are not in accordance with, or an alternative to, measures prepared in accordance with GAAP and may be different from similarly titled non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.

Earnings before Interest, Taxes, and Depreciation and Amortization ("EBITDA") - The Company believes that EBITDA provides investors a useful financial measure to evaluate its operating performance, excluding the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortization).

Earnings before Interest, Taxes, and Depreciation and Amortization for Real Estate ("EBITDAre") - The Company believes that EBITDAre provides investors a useful financial measure to evaluate its operating performance, and the Company presents EBITDAre in accordance with the National Association of Real Estate Investment Trusts ("Nareit") guidelines, as defined in its September 2017 white paper "Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate." EBITDAre adjusts EBITDA for the following items, which may occur in any period, and refers to these measures as Adjusted EBITDAre: (1) gains or losses on the disposition of depreciated property, including gains or losses on change of control; (2) impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate; and (3) adjustments to reflect the entity's share of EBITDAre of unconsolidated affiliates.

The Company also evaluates its performance by reviewing Adjusted EBITDAre because it believes that adjusting EBITDAre to exclude certain recurring and non-recurring items described below provides useful supplemental information regarding the Company's ongoing operating performance and that the presentation of Adjusted EBITDAre, when combined with the primary GAAP presentation of net income (loss), more completely describes the Company's operating performance. The Company adjusts EBITDAre for the following items, which may occur in any period, and refers to these measures as Adjusted EBITDAre:

- Transaction costs: The Company excludes transaction costs expensed during the period because it believes that including these costs in EBITDAre does not reflect the underlying financial performance of the Company and its hotels.
- Non-cash ground rent: The Company excludes the non-cash ground rent expense, which is primarily made up of the straight-line rent impact from a ground lease.
- Management/franchise contract transition costs: The Company excludes one-time management and/or franchise contract transition costs expensed during the period because it believes that including these costs in EBITDAre does not reflect the underlying financial performance of the Company and its hotels.
- Non-cash amortization of acquired intangibles: The Company excludes the non-cash amortization of acquired intangibles, which includes but is not limited to the amortization of favorable and unfavorable leases or management agreements and above/below market real estate tax reduction agreements because it believes that including these non-cash adjustments in EBITDAre does not reflect the underlying financial performance of the Company and its hotels.
- Estimated hurricane related repairs and cleanup costs: The Company excludes estimated hurricane related repairs and cleanup costs during the period because it believes that including these adjustments in EBITDAre does not reflect the underlying financial performance of the Company and its hotels.
- Gain on insurance settlement: The Company excludes the gain on insurance settlement because the Company believes that including this adjustment in EBITDAre does not reflect the underlying financial performance of the Company and its hotels.
- Business interruption proceeds: The Company includes business interruption proceeds because the Company believes that including these proceeds reflects the underlying financial performance of the Company and its hotels.
- Unrealized gain on investment: The Company excludes the unrealized gain on investment because the Company believes that including this adjustment in EBITDAre does not reflect the underlying financial performance of the Company and its hotels.

The Company’s presentation of EBITDAre, and as adjusted by the Company, should not be considered as an alternative to net income (computed in accordance with GAAP) as an indicator of the Company’s financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of its liquidity.
 
Pebblebrook Hotel Trust
Strategic Disposition Program Summary
(Unaudited)
 
Date of
disposition
Sales price
($ in millions)
EBITDA
multiple
Net operating
capitalization rate
Sales price
per key
($ in thousands)
 
 
Hotel dispositions:
Park Central San Francisco and Park Central New York / WestHouse New York11/30/2018

$

715.0

16.5x

5.1%

$

443

Gild Hall, New York11/30/2018

 

38.8

15.8x

5.3%

 

298

Embassy Suites Philadelphia Center City11/30/2018

 

67.0

11.0x

8.1%

 

233

The Grand Hotel Minneapolis12/4/2018

 

30.0

8.5x

10.4%

 

214

The Liaison Capitol Hill2/14/2019

 

111.0

16.9x

4.9%

 

324

Hotel Palomar Washington, DC2/22/2019

 

141.5

14.9x

5.9%

 

422

Onyx Hotel5/29/2019

 

58.3

15.3x

5.9%

 

521

Hotel Amarano Burbank7/16/2019

 

72.9

15.8x

5.7%

 

552

Rouge Hotel9/12/2019

 

42.0

17.4x

5.0%

 

307

Hotel Madera9/26/2019

 

23.3

14.3x

5.7%

 

284

Topaz Hotel11/22/2019

 

33.1

19.5x

4.4%

 

334

InterContinental Buckhead Atlanta / Sofitel Washington DC Lafayette Square*TBD

 

331.0

14.2x

6.1%

 

502

 
Total / Average

$

1,664

15.3x

5.64%

$

409

 
The EBITDA multiple and net operating capitalization rate are based on the applicable hotel's estimated trailing twelve-month operating performance for 2018. The net operating income capitalization rate is based on an assumed annual capital reserve of 4.0% of total hotel revenues. The EBITDA Multiple and net operating capitalization rate for Hotel Amarano Burbank reflect an estimated adjustment for the annualized impact of real estate taxes for California's Proposition 13 because the Company believes the adjusted hotel results for this period provide investors and analysts with an understanding of the hotel-level operating performance.

These hotel results for the respective periods may include information reflecting operational performance prior to the Company's ownership of the hotels. Any differences are a result of rounding.

The information above has not been audited and is presented only for comparison purposes.

*The contracted sale of InterContinental Buckhead Atlanta and Sofitel Washington DC Lafayette Square is subject to normal closing conditions, and the Company offers no assurances that this sale will be completed.
 
Pebblebrook Hotel Trust
Reconciliation of 2020 Outlook Net Income (Loss) to FFO and Adjusted FFO
($ in millions, except per share data)
(Unaudited)
 
Three months ending
March 31, 2020
Year ending
December 31, 2020
LowHighLowHigh
 
Net income (loss)

$

79

 

$

87

 

$

199

 

$

212

 

Adjustments:
Depreciation and amortization

 

47

 

 

47

 

 

192

 

 

192

 

(Gain) loss on sale of hotel properties

 

(81

)

 

(81

)

 

(82

)

 

(82

)

FFO

$

45

 

$

53

 

$

309

 

$

322

 

Distribution to preferred shareholders

 

(8

)

 

(8

)

 

(33

)

 

(33

)

FFO available to common share and unit holders

$

37

 

$

45

 

$

276

 

$

289

 

Non-cash ground rent

 

1

 

 

1

 

 

4

 

 

4

 

Non-cash interest expense

 

1

 

 

1

 

 

6

 

 

6

 

Other

 

4

 

 

3

 

 

8

 

 

8

 

Adjusted FFO available to common share and unit holders

$

43

 

$

50

 

$

294

 

$

307

 

 
FFO per common share - diluted

$

0.28

 

$

0.34

 

$

2.09

 

$

2.19

 

Adjusted FFO per common share - diluted

$

0.32

 

$

0.38

 

$

2.23

 

$

2.33