News Details

Pro Forma RevPAR Increased 10.7 Percent; Pro Forma Hotel EBITDA Rose 20.7 Percent

BETHESDA, Md.--(BUSINESS WIRE)-- Pebblebrook Hotel Trust (NYSE: PEB) (the “Company”) today reported results for the quarter ended September 30, 2011. The Company’s results include the following:

For the details as to which hotels are included in Pro forma RevPAR, ADR, Occupancy, Hotel Revenues, Hotel Expenses, Hotel EBITDA and Hotel EBITDA Margins for the third quarter and nine months ended September 30, 2011, refer to the Pro Forma 2011 Property Inclusion Reference Table later in this press release.

Third Quarter Highlights

• Pro forma RevPAR: Pro forma room revenue per available room (“Pro forma RevPAR”) in the third quarter of 2011 increased 10.7 percent over the same period of 2010 to $177.32. Pro forma average daily rate (“Pro forma ADR”) grew 7.6 percent from the third quarter of 2010 to $211.19. Pro forma Occupancy rose 2.8 percent to a robust 84.0 percent.
• Pro forma Hotel EBITDA: The hotels generated $29.6 million of Pro forma Hotel EBITDA for the quarter ended September 30, 2011, an improvement of 20.7 percent compared with the same period of 2010. Pro forma Hotel Revenues increased 9.3 percent, while Pro forma Hotel Expenses rose 5.4 percent. As a result, Pro forma Hotel EBITDA Margin was 27.9 percent for the quarter ended September 30, 2011 and represents an increase of 264 basis points as compared to the same period last year.
• EBITDA and Adjusted EBITDA: The Company’s EBITDA increased $19.9 million to $22.1 million for the third quarter of 2011 compared to the prior year period. The Company’s Adjusted EBITDA rose by $22.2 million to $26.5 million from $4.3 million in the prior year period.
• FFO and Adjusted FFO: The Company generated FFO of $13.1 million in the third quarter of 2011. The Company’s Adjusted FFO climbed to $17.5 million from $3.8 million in the prior year period.
• Capital Investments: During the third quarter of 2011, the Company invested $9.3 million of capital throughout its portfolio, including $2.5 million at the InterContinental Buckhead, $1.7 million at the Westin Gaslamp Quarter and $1.3 million at the Sir Francis Drake, all related to renovations at those three properties.
• Dividends: On September 15, 2011, the Company declared a $0.12 per share quarterly dividend on its common shares and a $0.4921875 per share quarterly dividend on its 7.875% Series A Cumulative Redeemable Preferred Shares. On September 22, 2011, the Company declared a $0.13333 per share partial quarterly dividend on its 8.0% Series B Cumulative Redeemable Preferred Shares.

“Third quarter operating results for our portfolio continued to exhibit very strong growth patterns despite geopolitical and economic headwinds,” said Jon E. Bortz, Chairman, President and Chief Executive Officer of Pebblebrook Hotel Trust. “Business travel demand, which has increased consistently throughout the year, showed ongoing strength, both in the U.S. industry and across our portfolio. This has allowed us to continue to increase pricing and generate robust room rate growth in most of our markets, including San Francisco, West Hollywood, Miami, Philadelphia, New York and Boston. As a result, our 10.7% RevPAR growth in the quarter was significantly higher than the U.S. industry’s 7.9% increase, clearly demonstrating the strength of our markets and properties.”

The renovation and refurbishment of Sir Francis Drake’s lobby and Starlight Room were completed in the third quarter of 2011. The second phase of the comprehensive renovation of the Westin Gaslamp Quarter, which includes the hotel’s second and third floor meeting space, was also completed in the third quarter. The third and final phase, involving the renovation and reconfiguration of the hotel’s ground floor, including the exterior, porte cochère, lobby, lounge and restaurant, commenced in October 2011, with the expectation that the entire renovation will be completed in April 2012. The renovation of the Affinia Manhattan’s 526 guest rooms was completed in the third quarter, resulting in the addition of 92 guest rooms to the now 618 guest room property. The Descent Theme Bar and Lounge at the W Boston is under development and is expected to open during the fourth quarter of 2011. In addition, renovations at the Sheraton Delfina, Argonaut Hotel and Hotel Monaco Seattle are expected to commence late this year or early 2012, with completions targeted during the first four months of 2012.

“The capital investment programs at the Sir Francis Drake, Westin Gaslamp Quarter and Affinia Manhattan present a significant opportunity to increase room rates and recover lost occupancy, which should generate significantly increased profitability and cash flow at these hotels. Early customer reviews and results have been very positive,” continued Mr. Bortz.

In addition to its capital reinvestment programs, Pebblebrook continues to focus on implementing asset management initiatives and enhancing performance to support solid margin growth.

“There is significant topline and bottom line growth embedded within our current portfolio. In addition to our focus on revenue growth, we have already implemented or identified many initiatives that should result in significantly reduced operating costs. The results are just starting to show, as demonstrated by our healthy operating cash flow and EBITDA margin growth this quarter. We’re thrilled that our asset managers and our hotel managers, working closely together, have made excellent progress in implementing our asset management initiatives and best practices across many of our hotels during the year. We’re excited about the increasing positive impact this array of programs will generate in 2012 and beyond,” Mr. Bortz explained.

Acquisitions

• On July 29, 2011, the Company acquired a 49 percent interest in a joint venture valued at $908.0 million with affiliates of Denihan Hospitality Group that own six upper upscale hotels in Manhattan. This six hotel portfolio (the “Manhattan Collection”) includes Affinia Manhattan, Affinia Shelburne, Affinia Dumont, Affinia 50, Affinia Gardens and The Benjamin – which originally comprised 1,640 guest rooms, but has since increased the number of guest rooms to 1,732 guest rooms following the completion of a comprehensive renovation and reconfiguration of the Affinia Manhattan. The Manhattan Collection hotels are ideally located in the Midtown market of Manhattan, have been well maintained and boast some of the largest guest rooms and suites in New York City, providing a unique competitive advantage in the marketplace. Denihan Hospitality Group manages each hotel in the Manhattan Collection.
  
  As of September 30, 2011, the Manhattan Collection was encumbered with $595.3 million of first mortgage and mezzanine debt. The debt is non-recourse, interest-only, and subject to a floating interest rate based on the 30-day LIBOR rate plus a weighted average total spread of approximately 300 basis points. The loan matures in February 2013.

“We’re thrilled with the acquisitions we’ve made this year, investing in numerous high barrier to entry markets, including San Francisco, Seattle, San Diego, West Hollywood, Miami, Boston and New York. Each of these properties is well located and was acquired at substantial a discount to replacement cost. In addition, these properties present excellent upside opportunities through increased RevPAR penetration and more disciplined operating controls and efficiencies,” commented Mr. Bortz.

Since its initial public offering in December 2009, the Company has invested in 20 properties (including six through a joint venture) totaling $1.6 billion of invested capital.

Year-to-Date Highlights

• Pro forma RevPAR: Pro forma RevPAR for the nine months ended September 30, 2011 increased by 9.0 percent over the same period of 2010 to $154.17. Year-to-date, Pro forma ADR grew 8.5 percent from the comparable period of 2010 to $197.05. Pro forma Occupancy improved 0.5 percent to 78.2 percent.
• Pro forma Hotel EBITDA: The Company’s hotels generated $57.3 million of Pro forma Hotel EBITDA for the nine months ended September 30, 2011, an increase of 17.6 percent compared with the same period of 2010. Pro forma Hotel Revenues climbed 8.1 percent, while Pro forma Hotel Expenses rose 5.1 percent. As a result, Pro forma Hotel EBITDA Margin for the nine months ended September 30, 2011 increased 210 basis points to 25.9 percent as compared to the same period last year.
• EBITDA and Adjusted EBITDA: The Company’s EBITDA grew to $42.5 million for the nine months ended September 30, 2011, compared with $(2.0) million for the prior year period. The Company’s Adjusted EBITDA rose to $51.2 million from $4.0 million for the prior year period.
• FFO and Adjusted FFO: For the nine months ended September 30, 2011, the Company’s FFO was $23.7 million. The Company’s Adjusted FFO increased to $32.4 million, compared with $3.5 million for the prior year period.

Balance Sheet

As of September 30, 2011, the Company had $251.8 million in consolidated debt and $291.7 million in unconsolidated, non-recourse debt at weighted average interest rates of 4.4 percent and 3.2 percent, respectively. The Company had no outstanding balance on its $200.0 million senior unsecured credit facility. As of September 30, 2011, the Company had $84.0 million of consolidated cash, cash equivalents and restricted cash and $21.7 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 pro rata interest in the Manhattan Collection, a joint venture with affiliates of Denihan Hospitality Group that owns six upper upscale hotels in Manhattan, New York. The diluted weighted average number of common shares and units outstanding for the quarter ended September 30, 2011 was 50.8 million.

On September 30, 2011, as defined by the Company’s credit agreement, the Company’s fixed charge coverage ratio was 2.6 times, total net debt to trailing 12 month Corporate EBITDA was 5.4 times and total debt to total assets ratio was 31%. Excluding the Manhattan Collection, the Company’s fixed charge coverage ratio was 3.0 times, net debt to trailing 12 month Corporate EBITDA was 2.8 times and total debt to total assets ratio was 18%.

Capital Markets

In the third quarter, the Company completed several capital transactions to help fund strategic growth and maintain its strong balance sheet.

• On July 12, 2011, the Company directly sold 600,000 shares of its existing 7.875% Series A Cumulative Redeemable Preferred Shares to an institutional investor at a price of $25.25 per share, resulting in net proceeds of approximately $15.1 million.
• On September 21, 2011, the Company closed an underwritten public offering of 3.4 million shares of its 8.00% Series B Cumulative Redeemable Preferred Shares, resulting in net proceeds of approximately $82.3 million.

“We’re very pleased with our continued ability to access the debt and capital markets,” commented Raymond D. Martz, Chief Financial Officer of Pebblebrook Hotel Trust. “Our recently completed preferred equity offering allowed us to further strengthen our balance sheet and maintain our targeted conservative leverage levels.”

2011 Outlook

As a result of the Company’s recently completed acquisitions and capital market activities, the Company is amending its 2011 outlook to the following:

The Company’s revised 2011 outlook now includes the effects of its 8.0% Series B Preferred shares offering, which closed on September 21, 2011, and is based on the following estimates and assumptions:

• Additional acquisitions are not included beyond the 20 properties that have been acquired as of September 30, 2011;
• Hotel industry RevPAR to increase 7.5 to 8.0 percent over 2010;
• Pro forma RevPAR growth of 8.0 to 9.0 percent over 2010 to $155 to $157;
• Pro forma Hotel EBITDA of $84.3 to $87.3 million;
• Pro forma Hotel EBITDA Margin to increase between 240 and 300 basis points over the 2010 Pro forma Hotel EBITDA Margin to 25.9 to 26.5 percent;
• Corporate cash general and administrative expenses of $8.1 to $8.6 million;
• Corporate non-cash general and administrative expenses of $2.7 million;
• Acquisition and related expenses of $7.3 million;
• Total capital investments related to renovations, capital maintenance and return on investment projects of approximately $63.0 to $68.0 million;
• Interest expense, including the non-cash amortization of deferred financing fees and unused credit facility fees and the Company’s 49 percent pro rata interest in the Manhattan Collection, of $19.5 million;
• Interest income of $0.9 million; and
• Weighted average fully diluted shares and operating partnership units of 49.0 million.

The Company’s 2011 outlook for corporate cash and non-cash general and administrative expenses does not include the $7.3 million of costs related to acquisitions, such as due diligence, transfer taxes and legal and accounting fees, which are required to be expensed when incurred and which are detailed separately above. In addition, the 2011 outlook includes the effects of the Company’s 49 percent pro rata interest in the Manhattan Collection.

For the details as to which hotels are included in Pro forma RevPAR, ADR, Occupancy, Hotel Revenues, Hotel Expenses, Hotel EBITDA and Hotel EBITDA Margins for the Company’s 2011 Outlook, refer to the Pro Forma 2011 Property Inclusion Reference Table later in this press release.

Earnings Call

The Company will conduct its quarterly analyst and investor conference call on Friday, October 28, 2011 at 9:00 AM EDT. To participate in the conference call, please dial (877) 857-6161 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 http://www.pebblebrookhotels.com ten minutes prior to the conference call. A replay of the conference call webcast will be archived and available online through the Investor Relations section of http://www.pebblebrookhotels.com.

About Pebblebrook Hotel Trust

Pebblebrook Hotel Trust is a publicly traded real estate investment trust (“REIT”) organized to opportunistically acquire and invest primarily in upper upscale, full service hotels located in large urban and resort markets with an emphasis on the major coastal cities. The Company owns 20 hotels, comprised of 14 wholly owned hotels, with a total of 3,812 guest rooms and a 49% joint venture interest in six hotels with 1,732 guest rooms. The Company owns, or has an ownership interest in, hotels located in nine states and the District of Columbia, including 14 markets: Bethesda, Maryland; San Francisco, California; Buckhead, Georgia; Washington, DC; Minneapolis, Minnesota; Stevenson, Washington; Santa Monica, California; Philadelphia, Pennsylvania; San Diego, California; Seattle, Washington; West Hollywood, California; Miami, Florida; Boston, Massachusetts; and New York, New York. For more information, please visit www.pebblebrookhotels.com.

This press release contains certain “forward-looking” statements relating to, among other things, potential property acquisitions and projected financial and operating results.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 net income, FFO, EBITDA, Adjusted FFO, Adjusted EBITDA, RevPAR, EBITDA Margin and the Company’s expenses, share count or other financial items; descriptions of the Company’s plans or objectives for future operations, acquisitions 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, 2010.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.

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.

All information in this release is as of October 27, 2011.The Company undertakes no duty to update the statements in this 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
Raymond D. Martz, Chief Financial Officer, 240-507-1330

Source: Pebblebrook Hotel Trust