News Details

BETHESDA, Md.--(BUSINESS WIRE)-- Pebblebrook Hotel Trust (NYSE: PEB) (the “Company”) today reported results for the fourth quarter ended December 31, 2018. The Company’s results include the following:

⁽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 Inclusion Reference Table later in this press release.

“Our fourth quarter results conclude a transformational year for Pebblebrook, with our acquisition of LaSalle making us the largest owner of lifestyle-oriented hotels and resorts in the country,” said Jon E. Bortz, Chairman, President and Chief Executive Officer of Pebblebrook Hotel Trust. “Since the closing of the LaSalle acquisition on November 30, 2018, we have made tremendous progress integrating the legacy LaSalle hotels into our portfolio, as well as all of the former LaSalle employees who have joined our team. As we look ahead to 2019, despite softening global economic growth trends, group and transient business travel along with leisure travel demand remain solid. We are excited about the many substantive opportunities within the new, larger Pebblebrook portfolio and believe our portfolio-wide initiatives and our comprehensive best practices program, which have been enhanced and augmented with the addition of the LaSalle team, will generate significant benefits for the combined portfolio. We remain confident that the previously announced $18.0 to $20.0 million of annualized corporate synergies and expense savings will be realized, although they will be partially offset, as previously discussed, by an estimated $10.0 million of additional real estate tax expenses due to California’s Proposition 13. Finally, we continue to make great progress executing on our strategic disposition program, most recently with our sales of the Liaison Capitol Hill and Hotel Palomar Washington, DC.”

Update on Strategic Disposition Program

On February 14, 2019, the Company announced the sale of the 343-room Liaison Capitol Hill for $111.0 million. The sales price reflects a 16.9x EBITDA multiple and a 4.9 percent net operating capitalization rate (after an assumed annual capital reserve of 4.0 percent of total hotel revenues) based on the hotel’s operating performance for 2018.

On February 25, 2019, the Company announced the sale of the 335-room Hotel Palomar Washington, DC for $141.5 million. The sales price reflects a 14.9x EBITDA multiple and a 5.9 percent net operating capitalization rate (after an assumed annual capital reserve of 4.0 percent of total hotel revenues) based on the hotel’s operating performance for 2018.

To date, these two hotels, as well as the previous fourth quarter 2018 sales of Gild Hall, New York, Embassy Suites Philadelphia Center City and The Grand Hotel Minneapolis, comprise $388.3 millionof total sales proceeds. These sales proceeds have been used to reduce the Company’s total outstanding debt, and the Company estimates its total net debt to trailing 12-month corporate EBITDA will be approximately 4.7 times by the end of the first quarter of 2019.

“We are extremely pleased with the success we’ve had in executing our strategic disposition plan and expect to make significant additional progress on our plan in 2019, particularly in the next four to six months, by taking advantage of the attractive private market values of our real estate, which are at a significant premium to our current public market valuation,” said Thomas C. Fisher, Chief Investment Officer of Pebblebrook Hotel Trust.

2018 Highlights

• Net income: The Company’s net income was $13.4 million for the year ended December 31, 2018, a decrease of $86.9 million as compared to 2017. The decline is primarily due to the one-time transaction costs associated with the acquisition of LaSalle Hotel Properties (“LaSalle”).
• Same-Property Total RevPAR and Same-Property RevPAR: Same-Property Total RevPAR for the year grew 1.5 percent over 2017. Same-Property RevPAR for the year increased 1.0 percent over the prior year to $202.10. Same-Property ADR rose 1.5 percent for the year to $246.15, and Same-Property Occupancy for the year declined by 0.5 percent to 82.1 percent. These operating results include the legacy LaSalle hotels only for the month of December in both 2018 and 2017, since the acquisition was not completed until November 30, 2018.
• Same-Property EBITDA: The Company’s hotels generated $262.2 million of Same-Property EBITDA in 2018, up 0.5 percent compared to the prior year. Same-Property Revenues climbed 1.6 percent, while Same-Property Expenses increased 2.1 percent. As a result, Same-Property EBITDA Margin for 2018 decreased just 35 basis points to 32.3 percent as compared to the prior year. These operating results include the legacy LaSalle hotels only for the month of December in both 2018 and 2017, since the acquisition was not completed until November 30, 2018.
• Adjusted EBITDAre: The Company’s Adjusted EBITDAre increased 9.4 percent, or $21.8 million, to $254.9 million from $233.1 million in 2017.
• Adjusted FFO: The Company’s Adjusted FFO grew 1.9 percent to $183.9 million from $180.4 million in the prior year. The Company’s Adjusted FFO per diluted share declined 4.7 percent to $2.45 compared to 2017.

“The strongest markets of the year for us included Naples, Florida and Key West, Florida, both of which continue to recover from the negative impact of Hurricane Irma in 2017,” continued Mr. Bortz. “We also experienced gains in the Philadelphia market due to strength in conventions and overall business and leisure demand and also in AtlantaBuckhead, where our new leadership team drove strong performance. While the overall San Francisco market had a great year, we chose to undertake and complete renovations at Sir Francis Drake and Hotel Zelos San Francisco in order to take advantage of 2019, which is expected to be an even stronger year in San Francisco as we see an incredibly favorable convention calendar following the Moscone Convention Center renovation, combined with strong business and leisure hotel demand and limited supply growth. We expect RevPAR at our twelve hotels in San Francisco to grow between 9.0 and 11.0 percent on average in 2019.”

Fourth Quarter Highlights

• Net loss: The Company’s net loss was ($99.3) million in the fourth quarter of 2018, decreasing $111.3 million as compared to the same period of 2017. The decline is primarily due to the one-time transaction costs associated with the acquisition of LaSalle.
• Same-Property Total RevPAR and Same-Property RevPAR: Same-Property Total RevPAR for the quarter remained flat to 2017 at $255.98. Same-Property RevPAR grew 0.7 percent over the same period of 2017 to $169.94. Same-Property ADR improved 2.6 percent over the prior year to $228.73. Same-Property Occupancy fell 1.8 percent to 74.3 percent. Same-Property occupancy was negatively impacted by numerous renovations and brand integrations in the fourth quarter. These operating results include the legacy LaSalle hotels only for the month of December in both 2018 and 2017, since the acquisition was not completed until November 30, 2018.
• Same-Property EBITDA: The Company’s hotels generated $55.9 million of Same-Property EBITDA for the quarter ended December 31, 2018, decreasing 7.1 percent compared to the same period of 2017. Same-Property Revenues remained flat, while Same-Property Expenses grew 2.6 percent. Same-Property EBITDA Margin decreased 192 basis points to 25.0 percent for the fourth quarter of 2018, as compared to the same period last year. Same-Property EBITDA was negatively impacted by numerous renovations, strikes and brand integrations in the fourth quarter. These operating results include the legacy LaSalle hotels only for the month of December in both 2018 and 2017, since the acquisition was not completed until November 30, 2018.
• Adjusted EBITDAre: The Company’s Adjusted EBITDAre increased to $53.4 million from $46.8 million in the prior-year period, an increase of 14.2 percent. For periods prior to the second quarter of 2018, the Adjusted EBITDAre metric was previously reported as Adjusted EBITDA.
• Adjusted FFO: The Company’s Adjusted FFO decreased 10.0 percent to $30.4 million from $33.8 million in the prior-year period. These results only reflect the impact of the LaSalle acquisition from the closing on November 30, 2018 through December 31, 2018, and were negatively impacted by the seasonality of the LaSalle acquisition and its properties.
• Dividends: On November 19, 2018, the Company declared a prorated quarterly cash dividend of $0.2478261 per share on its common shares. On December 14, 2018, the Company declared a second prorated quarterly cash dividend of $0.1321739 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.

Capital Reinvestments

During 2018, the Company completed $87.0 million of capital reinvestments throughout its portfolio. The Company’s capital improvements included $7.8 million at Sir Francis Drake (which was part of the $9.0 million lobby and guestroom renovation completed at the end of 2018), $8.5 million at Mondrian Los Angeles (part of its $18.0 million renovation, scheduled to be completed by the end of the second quarter of 2019) and $4.4 million at W Hotel Boston (part of the hotel’s $10.0 million guestroom renovation, which is being completed this quarter). In addition, guestroom and public area renovations were completed during 2018 at a number of the legacy LaSalle hotels, including 2018 capital investments of $21.7 million at The Westin Copley Place, Boston, $7.2 million at Paradise Point Resort & Spa, $6.2 million at The Heathman Hotel, $5.3 million at Chamberlain West Hollywood Hotel, $4.9 million at Montrose West Hollywood, $3.0 million at Harbor Court Hotel San Francisco and $2.2 million at The Marker San Francisco.

In 2019, the Company intends to start or complete additional renovation and repositioning projects including:

• Hilton San Diego Resort (estimated at $21.0 million), which is undergoing a guestroom and conference center renovation, expected to be completed by the end of the second quarter of 2019;
• Westin San Diego Gaslamp Quarter (estimated at $13.0 million), which consists of a guestroom, lobby and restaurant renovation to commence in the fourth quarter of 2019, expected to be completed by the second quarter of 2020;
• Embassy Suites San Diego (estimated at $13.0 million), which will receive a guestroom renovation to commence in the fourth quarter of 2019, expected to be completed by the second quarter of 2020;
• Viceroy Santa Monica (estimated at $12.0 million), which will undergo a lobby and public area renovation, both interior and exterior, to commence in the fourth quarter of 2019, expected to be completed by the end of the first quarter of 2020;
• Le Parc Suite Hotel (estimated at $12.0 million), which will consist of a complete hotel renovation, including the guestrooms and the public and entry areas, to commence in the fourth quarter of 2019, expected to be completed by the second quarter of 2020; and
• Chaminade Resort and Spa (estimated at $10.0 million), which will begin a public space, restaurant, lobby, porte cochere/entry, exterior patio and venues renovation in the fourth quarter of 2019, expected to be completed in the second quarter of 2020.

Capital Markets and Balance Sheet

On October 31, 2018, the Company closed ona $1.75 billion term loan agreement with a consortium of banks in connection with the acquisition of LaSalle. The maturities on the term loan are allocated across five tranches maturing from 2020 through 2024. On December 21, 2018, the Company entered into $410.0 million of floating to fixed interest rate swap agreements.

As of December 31, 2018, the Company had $2.8 billion in consolidated debt at an effective weighted-average interest rate of 3.7 percent. Approximately $1.6 billion, or 55 percent of the Company’s total outstanding debt, was at a weighted-average fixed interest rate of 3.4 percent, and approximately $1.2 billion, or 45 percent was at a weighted-average floating interest rate of 4.1 percent. The Company had $2.4 billion outstanding in the form of unsecured term loans and $170.0 million outstanding on its $650.0 million senior unsecured revolving credit facility. As of December 31, 2018, the Company had $107.8 million of consolidated cash, cash equivalents and restricted cash.

As of December 31, 2018, the Company’s fixed charge coverage ratio was 3.6 times and total net debt to trailing 12-month corporate EBITDA was 4.9 times. The Company has no debt maturities until 2020.

2019 Outlook with Asset Sales

The Company is providing a 2019 Outlook with Asset Sales, which assumes $600.0 million of asset sales throughout the year, including those completed year-to-date. The Company is also providing a 2019 Proforma to illustrate the impact of the sales on the full year’s performance and to help explain the financial outlook for the combined entity following the acquisition of LaSalle late last year. Both the 2019 Outlook with Asset Sales and the 2019 Proforma reflect similar operating assumptions, except for the asset sales, and neither assume any acquisitions.

The 2019 Outlook with Asset Sales, which assumes $600.0 million of assets are sold over the course of 2019, with $250.0 million of assets being sold in February, 2019 (Liaison Capitol Hill and Hotel Palomar, Washington DC), $250.0 million of assets being sold in the middle of the second quarter of 2019, and $100.0 million of assets being sold at the end of the third quarter of 2019, is as follows:

The 2019 Outlook with Asset Sales excludes Liaison Capitol Hill and Hotel Palomar Washington, DC from 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 for all quarters of both 2019 and 2018. If any of the foregoing estimates and assumptions proves to be inaccurate, actual results, including the outlook, may vary, and could vary significantly, from the amounts shown above.

The Company is also providing a 2019 Proforma, which reflects the same assumptions used in the 2019 Outlook with Asset Sales, except it does not include any asset sales, is as follows:

This 2019 Proforma is based, in part, on the following estimates and assumptions:

The Company’s 2019 Proforma for the first quarter is as follows:

The Company’s estimates and assumptions, including the Company’s 2019 Proforma and the First Quarter 2019 Proforma, 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, 2018, which includes the Liaison Capitol Hill and Hotel Palomar Washington, DC, as if they had been owned by the Company for all of 2019 and 2018. The Company’s 2019 Proforma assumes no acquisitions or dispositions. If any of the foregoing estimates and assumptions proves to be inaccurate, actual results, including the proforma, may vary, and could vary significantly, from the amounts shown above.

Fourth Quarter 2018 Earnings Call

The Company will conduct its quarterly analyst and investor conference call on Tuesday, February 26, 2019 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 61 hotels, totaling approximately 14,600guest rooms, located in 10 states and the District of Columbia, including: Del Mar, California; Los Angeles, California (Beverly Hills, Santa Monica and West Hollywood); San Diego, California; San Francisco, California; Santa Cruz, California; Washington, DC; Coral Gables, Florida; Key West, Florida; Naples, Florida; Buckhead, Georgia; Chicago, Illinois; Boston, Massachusetts; New York, New York; 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.

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, 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, 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 25, 2019.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