News Details

BETHESDA, Md.--(BUSINESS WIRE)-- Pebblebrook Hotel Trust (NYSE: PEB) (the “Company”) today reported results for the fourth quarter and year ended December 31, 2017. The Company’s results include the following:

“We are pleased with our 2017 performance and the continued operating improvements we made throughout the portfolio,” said Jon E. Bortz, Chairman, President and Chief Executive Officer of Pebblebrook Hotel Trust. “We exceeded our outlook for Same-Property EBITDA, Adjusted EBITDA and Adjusted FFO per diluted share for the fourth quarter and the year. We also completed $80.8 million of capital reinvestments, including several major redevelopment projects which we expect will generate significant growth in 2018 and beyond. We were also successful in our strategic disposition plan, as we sold two additional properties for $213.0 million, which enabled us to reduce our leverage, improve our balance sheet and repurchase $93.4 million of common shares at a significant discount to our Net Asset Value. As we look ahead to 2018, we are incrementally more optimistic about the economy, which should result in increased travel and hotel demand. However, businesses remain cautious, and while we’ve seen some spotty evidence of progress, we’ve not yet experienced any material improvement in corporate travel trends. Leisure demand growth remains robust despite declines in international inbound travel, and we expect these trends to continue throughout 2018.”

2017 Highlights

• Net income: The Company’s net income was $100.3 million for the year ended December 31, 2017, rising $26.3 million as compared to 2016, primarily due to the impairment losses related to property dispositions in the prior year.
• Same-Property RevPAR and Same-Property Total RevPAR: Same-Property RevPAR for the year fell 2.2 percent versus 2016 to $207.33. Excluding San Francisco, Same-Property RevPAR declined 0.3 percent over the prior year. Same-Property ADR slipped 1.0 percent from the prior year to $245.73. Same-Property Occupancy decreased 1.3 percent to 84.4 percent. Same-Property Total RevPAR declined 0.3 percent from the same period of 2016, due to healthy improvements in Food & Beverage Revenue and Other Revenue.
• Same-Property EBITDA: The Company’s hotels generated $253.6 million of Same-Property EBITDA for the year ended December 31, 2017, declining 4.6 percent from 2016. Same-Property Revenues decreased 0.5 percent, while Same-Property Expenses increased 1.7 percent. Same-Property EBITDA Margin declined by 146 basis points to 33.7 percent for 2017, as compared to last year.
• Adjusted EBITDA: The Company’s Adjusted EBITDA for 2017 declined to $233.1 million, a loss of 14.7 percent versus $273.2 million in 2016. The declines were partially a result of the properties the Company sold during 2017 and the necessary closure of LaPlaya Beach Resort & Club (“LaPlaya”) for the majority of the fourth quarter of 2017 following Hurricane Irma.
• Adjusted FFO: The Company’s Adjusted FFO decreased 10.6 percent to $180.4 million, compared with $201.8 million for the prior year.
• Dividends: During 2017, the Company declared dividends of $1.52 per share on its common shares, $1.63 per share on its 6.50% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest and $1.59 per share on its 6.375% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest.

“Our hotels generated solid results despite the challenging operating environment, which included the disruption related to the expansion of the Moscone Convention Center in San Francisco, as well as several natural disasters and redevelopment projects,” said Mr. Bortz. “These headwinds that we endured in 2017 should serve as tailwinds for our portfolio in 2018 and 2019 as the San Francisco market is recovering as anticipated and our recently renovated hotels are recapturing market share and increasing their cash flows. In addition, our properties continue to generate healthy growth in non-room revenues, such as food and beverage, which we expect to continue throughout the year.”

Fourth Quarter Highlights

• Net income: The Company’s net income was $11.9 million in the fourth quarter of 2017, declining $6.5 million as compared to the same period of 2016.
• Same-Property RevPAR and Same-Property Total RevPAR: Same-Property RevPAR for the quarter fell slightly by 0.1 percent over 2016 to $188.54. Excluding San Francisco, Same-Property RevPAR rose 0.7 percent over the prior year. Same-Property ADR increased 0.7 percent from the prior year to $234.40. Same-Property Occupancy decreased 0.9 percent to 80.4 percent. Same-Property Total RevPAR grew 2.9 percent over the same period of 2016 to $281.14.
• Same-Property EBITDA: The Company’s hotels generated $53.8 million of Same-Property EBITDA for the quarter ended December 31, 2017, increasing 0.4 percent over the same period of 2016. Same-Property Revenues grew 2.9 percent, while Same-Property Expenses rose by 4.1 percent. Same-Property EBITDA Margin declined by 78 basis points to 30.7 percent for the fourth quarter of 2017, as compared to the same period last year.
• Adjusted EBITDA: The Company’s Adjusted EBITDA decreased to $46.8 million from $57.7 million in the prior year period, a decrease of $10.9 million, or 18.8 percent. The declines were primarily a result of the properties the Company sold during 2017 and the necessary closure of LaPlaya for the majority of the fourth quarter of 2017 following Hurricane Irma. LaPlaya has now fully reopened following its period of restoration and renovation.
• Adjusted FFO: The Company’s Adjusted FFO decreased 18.4 percent to $33.8 million from $41.5 million in the prior year period.
• Dividends: On December 15, 2017, the Company declared a regular quarterly cash dividend of $0.38 per share on its common shares, a regular quarterly cash dividend of $0.40625 per share on its 6.50% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest and a regular quarterly cash dividend of $0.39844 per share on its 6.375% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest.

“Many leading economic indicators remain positive or have been improving, the global economy is healthy and is gaining momentum, and business sentiment remains positive, all of which are encouraging trends for the hotel industry and our portfolio,” noted Mr. Bortz. “Still, we will maintain our modest outlook for industry demand growth until we see a substantive pickup in corporate demand. On the operating side, we continue to experience cost pressures, including labor and employee benefits. Our asset managers work constantly in partnership with our hotel teams to implement best practices in order to limit expense growth, increase efficiencies and improve profitability.”

Update on Impact from Hurricane Irma on LaPlaya Beach Resort & Club

The Company completed the major repair and remediation work at LaPlaya in late January 2018, and all guestrooms have been reopened. The Company expects to complete additional repair work later in 2018, which will negatively impact the resort’s performance and is included in our outlook. However, the Company anticipates this disruption will be covered under the Company’s current business interruption and property insurance programs, although to be conservative, and prior to any settlement, business interruption proceeds for 2018 are not included in our outlook.

Strategic Disposition Plan

During 2017, the Company continued the execution of its previously announced strategic disposition plan with the completion of two transactions, which brought the total amount of sales within the original targeted range of $500.0 million to $1.0 billion. In the second quarter of 2017, the Company completed the sales of the 252-room Dumont NYC for a price of $118.0 million and the 826-space parking garage at Revere Hotel Boston Common for a price of $95.0 million. The two sales, totaling $213.0 million, bring the Company’s total disposition proceeds to $676.8 million over the past two years.

In addition, in the fourth quarter of 2017, the Company received $2.0 million in cash for a forfeited hard-money security deposit in connection with a potential property sale with a third-party buyer. The Company will continue to evaluate opportunistic and selective sales within its portfolio.

Share Repurchase Program

In 2017, the Company completed a total of 3.2 million common share repurchases at an average price of $28.77 per share totaling $93.4 million. Under the $250.0 million common share repurchase program, the Company is authorized to repurchase an additional $156.6 million of common shares. The repurchase program may be suspended or discontinued at any time, and the Company is not obligated to acquire any particular amount of shares. There were no repurchases in the fourth quarter.

Capital Reinvestments

During 2017, the Company completed $80.8 million of capital investments throughout its portfolio. The Company’s capital improvements included $21.7 million at Revere Hotel Boston Common (part of a $22.5 million project), $12.5 million at Hotel Zoe San Francisco (which was included in a $17.0 million transformation of the former Tuscan Fisherman’s Wharf), $4.7 million at Hotel Palomar Los Angeles Beverly Hills (part of a $12.0 million redevelopment) and $11.1 million at LaPlaya Beach Resort & Club ($8.0 million of which is primarily attributed to the Gulf Tower renovation project).

In 2018, the Company intends to start or complete several renovation and repositioning projects including:

• Mondrian Los Angeles (estimated at $11.0 million) which will undergo a renovation of the guestrooms and lobby as well as a renovation of the Skybar restaurant beginning in the fourth quarter of this year with an expected completion date in the first quarter of 2019;
• Hotel Zelos San Francisco (estimated at $6.0 million), which is planning a guestroom renovation to complement recent improvements to the guestrooms as well as the transformative lobby, guestroom corridor and restaurant renovation completed in 2014;
• Hotel Zephyr Fisherman’s Wharf, Zephyr Walk (estimated at $5.5 million), which is undergoing a redevelopment and re-leasing of most of the approximately 46,000 square feet of street level retail space that began in the fourth quarter of 2017 with an expected completion date in the second quarter of 2018; and
• Revere Hotel Boston Common (estimated at $3.5 million), which involves the conversion of the property’s nightlife club into a newly completed restaurant called Rebel’s Guild that will fully transform the food and beverage offerings at the hotel.

Capital Markets and Balance Sheet

In 2017, Pebblebrook refinanced and extended the maturities of the Company’s $450.0 million senior unsecured revolving credit facility and four unsecured term loans comprising $675.0 million. The Company now has no debt maturities until 2020. Additionally, the Company paid off $44.1 million of maturing debt on the Sofitel Philadelphia and the $25.5 million mortgage secured by the Hotel Zelos San Francisco.

“We were pleased with the terrific results of our credit facility and term loan refinancing and debt maturity payoffs in 2017, which has allowed us to lower our overall leverage, increase our coverage ratios and extend our debt maturities,” noted Raymond D. Martz, Chief Financial Officer of Pebblebrook Hotel Trust. “The Company’s balance sheet continues to be in a strong position to provide any needed liquidity in order to take advantage of any opportunities that may arise over the next several years. We appreciate the continued support and longstanding positive relationships shown by our banking partners.”

As of December 31, 2017, the Company had $890.6 million in consolidated debt at an effective weighted-average interest rate of 3.3 percent. The Company had $675.0 million outstanding in the form of unsecured term loans and $45.0 million outstanding on its $450.0 million senior unsecured revolving credit facility. As of December 31, 2017, the Company had $32.5 million of consolidated cash, cash equivalents and restricted cash.

On December 31, 2017, as defined in the Company’s credit agreement, the Company’s fixed charge coverage ratio was 3.7 times and total net debt to trailing 12-month corporate EBITDA was 3.7 times.

2018 Outlook

The Company's outlook for 2018, which assumes no additional acquisitions or dispositions, reflects the Company’s various planned capital investment projects and includes other significant assumptions, including an estimated $3.5 million of business interruption proceeds related to the LaPlaya hurricane impact in 2017, is as follows:

“The hotel industry is entering 2018 with an improved economic outlook and more optimism than in 2017,” commented Mr. Bortz. “We expect the urban markets to continue to underperform the overall industry, primarily due to increased supply. Our portfolio, however, should outperform the urban markets by approximately 50 bps, as we benefit from the ramp up of several hotels following disruptive renovations in 2017 as well as an improving environment in San Francisco. We remain encouraged with the fundamentals in our markets as supply growth appears to be peaking later this year and demand growth remains solid despite only modest growth in the corporate segment. The improved sentiment in the business community may serve as a positive catalyst for hotel demand later in 2018.”

The Company’s outlook for the first quarter of 2018 is as follows:

The Company’s estimates and assumptions, including the Company’s outlook for 2018 and the first quarter 2018 for Same-Property RevPAR, Same-Property RevPAR growth rate, Same-Property EBITDA, Same-Property EBITDA growth rate, Same-Property EBITDA Margin and Same-Property EBITDA Margin growth rate include the hotels owned as of December 31, 2017, as if they had been owned by the Company for all of 2017 and 2018, except for LaPlaya, which is not included in the third or fourth quarters. The Company’s 2018 outlook assumes no additional acquisitions or dispositions beyond the hotels the Company owned as of December 31, 2017.

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 2017 Earnings Call

The Company will conduct its quarterly analyst and investor conference call on Friday, February 23, 2018 at 10:00 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 prior to 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 is a publicly traded real estate investment trust (“REIT”) organized to opportunistically acquire and invest primarily in upper upscale, full-service hotels located in urban markets in major gateway cities. The Company owns 28 hotels, with a total of 6,972 guest rooms. The Company owns hotels located in 9 states and the District of Columbia, including: Los Angeles, California (Beverly Hills, Santa Monica and West Hollywood); San Diego, California; San Francisco, California; Washington, DC; Coral Gables, Florida; Naples, Florida; Buckhead, Georgia; Boston, Massachusetts; Minneapolis, Minnesota; Portland, Oregon; Philadelphia, Pennsylvania; Nashville, Tennessee; Columbia River Gorge, Washington; and Seattle, Washington. For more information, please visit us at www.pebblebrookhotels.com and follow us on Twitter at @PebblebrookPEB.

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 EBITDA, 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 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, 2017.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 press release is as of February 22, 2018.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

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Pebblebrook Hotel Trust
Raymond D. Martz, Chief Financial Officer
240-507-1330

Source: Pebblebrook Hotel Trust