February 20, 2014 04:01 PM Eastern Standard Time - BETHESDA, Md.--Pebblebrook Hotel Trust (NYSE: PEB) (the "Company") today reported results for the fourth quarter and year ended December 31, 2013. 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"), Adjusted EBITDA, 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 revenue per available room ("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.
"We're very pleased with our portfolio's strong overall performance in 2013," said Jon E. Bortz, Chairman, President and Chief Executive Officer of Pebblebrook Hotel Trust. "This was another very good year for the hotel industry, and another great year for Pebblebrook, as industry demand well outpaced supply due to consistent growth in business transient, leisure and international inbound travel. Our strategy of owning high quality hotels in high barrier to entry major gateway cities has enabled us to take advantage of these positive fundamentals and continue to outperform the overall industry. Furthermore, we're very excited about the four west coast hotels we acquired during 2013, as well as the recently completed repositioning and capital investment projects that should benefit our portfolio in 2014 and beyond. Overall, our performance during the year exceeded our expectations as Adjusted FFO per share grew 24.9 percent, which provided us the opportunity to increase our common dividend by 33 percent in 2013."
Same-Property RevPAR: Same-Property revenue per available room ("Same-Property RevPAR") for the year ended December 31, 2013 increased 6.4 percent over the same period of 2012 to $185.50. Same-Property average daily rate ("Same-Property ADR") grew 4.6 percent from the comparable period of 2012 to $223.27. Same-Property Occupancy increased 1.8 percent to a robust 83.1 percent.
Same-Property EBITDA: The Company's hotels generated $162.5 million of Same-Property EBITDA for the year ended December 31, 2013, climbing 8.9 percent from the same period of 2012. Same-Property Revenues increased 5.5 percent, while Same-Property Expenses rose 4.2 percent. As a result, Same-Property EBITDA Margin grew to 28.3 percent for the year ended December 31, 2013, representing an improvement of 88 basis points as compared to the same period last year.
Same-Property EBITDA Per Room: The Company's Same-Property EBITDA Per Room for the year ended December 31, 2013 increased 8.4 percent from the comparable period of 2012 to $27,677.
Adjusted EBITDA: The Company's Adjusted EBITDA for 2013 rose to $150.1 million from $114.2 million in 2012, a gain of 31.5 percent.
Adjusted FFO: The Company's Adjusted FFO for 2013 climbed 38.0 percent to $91.3 million, compared with $66.1 million for the prior year period.
Dividends: During 2013, the Company declared dividends of $0.64 per share on its common shares, $1.96875 per share on its 7.875% Series A Cumulative Redeemable Preferred Shares, $2.00 per share on its 8.0% Series B Cumulative Redeemable Preferred Shares and $1.340625 per share on its 6.50% Series C Cumulative Redeemable Preferred Shares.
Based on the Company's 2014 outlook and the continued improvement in the operating performance of the Company's hotels, the Company expects to increase its quarterly dividend on its common shares to $0.23 per share, commencing with the dividend for the first quarter of 2014. This proposed increase represents a 43.8 percent increase over the Company's current quarterly dividend of $0.16.
"The hotel industry's fundamentals strengthened further in 2013, as demand for hotel rooms in the U.S. climbed a healthy 2.2 percent, while supply grew only 0.7 percent, pushing industry occupancy up again, allowing for significant rate improvement and resulting in hotel industry RevPAR growth of 5.4 percent," added Mr. Bortz. "Pebblebrook's Same-Property RevPAR growth of 6.4 percent exceeded the industry's, as we benefited from our strategy of investing primarily in stronger urban markets in major gateway cities, aided further by positive results from our west coast emphasis and our capital reinvestment programs. We're looking forward to continuing the progress we've made in improving the operating performance of our hotels through our asset management initiatives and the implementation of our best practices. As we look forward to 2014, the U.S. hotel industry should continue to strengthen as the economy recovers, group and transient business travel increases, and new supply remains below demand growth, and well below historical averages."
Fourth Quarter Highlights
Same-Property RevPAR: Same-Property RevPAR in the fourth quarter of 2013 increased 5.2 percent over the same period of 2012 to $183.49. Same-Property ADR grew 4.3 percent from the fourth quarter of 2012 to $229.16. Same-Property Occupancy rose 0.9 percent to a very strong 80.1 percent.
Same-Property EBITDA: The Company's hotels generated $43.5 million of Same-Property EBITDA for the quarter ended December 31, 2013, climbing 9.8 percent compared with the same period of 2012. Same-Property Revenues increased 5.6 percent, while Same-Property Hotel Expenses rose 4.0 percent. As a result, Same-Property EBITDA Margin grew to 28.9 percent for the quarter ended December 31, 2013, representing an increase of 110 basis points as compared to the same period last year.
Adjusted EBITDA: The Company's Adjusted EBITDA rose to $40.9 million from $31.9 million in the prior year period, an increase of $9.0 million, or 28.0 percent.
Adjusted FFO: The Company's Adjusted FFO climbed 32.5 percent to $24.6 million from $18.5 million in the prior year period.
Dividends: On December 13, 2013, the Company declared a regular quarterly cash dividend of $0.16 per share on its common shares, a regular quarterly cash dividend of $0.4921875 per share on its 7.875% Series A Cumulative Redeemable Preferred Shares, a regular quarterly cash dividend of $0.50 per share on its 8.00% Series B Cumulative Redeemable Preferred Shares and a regular quarterly cash dividend of $0.40625 per share on its 6.50% Series C Cumulative Redeemable Preferred Shares.
Capital Reinvestment and Asset Management
During 2013, the Company made $53.1 million of capital improvements throughout its portfolio, which includes the Company's 49 percent interest in its six hotel joint venture with Denihan Hospitality Group (the "Manhattan Collection"). The Company's capital improvements included $8.5 million at Hotel Zetta, $3.7 million at Sofitel Philadelphia, $3.6 million at Hotel Vintage Park Seattle and $2.8 million at Le Méridien Delfina Santa Monica, as well as $7.5 million at the Affinia 50, which represents the Company's 49 percent share of the joint venture's investment.
In the first quarter of 2013, the Company completed the $13.4 million comprehensive renovation and redevelopment of Hotel Zetta in San Francisco, CA. This multi-phase, transformational repositioning included every facet of the property, including the guest rooms, corridors, public areas, meeting space, lobby, entry, exterior and leased restaurant, as well as a renaming of the hotel.
In the second quarter of 2013, the Company completed a guest rooms and corridors renovation totaling $4.5 million at the Sofitel Philadelphia and, along with its joint venture partner, a $7.3 million (the Company's 49 percent share equaled $3.6 million) renovation and reconfiguration of Affinia Manhattan's lobby and meeting space, including the entry, lobby, meeting space, back of house and the reconfiguration and creation of 2,167 square feet of additional meeting space.
In the third quarter of 2013, the Company completed a refurbishment of the guest rooms and fitness center at The Benjamin totaling $3.0 million.
In the fourth quarter of 2013, the Company, along with its joint venture partner, completed a comprehensive property renovation at the Affinia 50 totaling $18.4 million (the Company's 49 percent share equaled $9.0 million). This renovation touched all areas of the hotel, including the lobby, entry, guest rooms, corridors, exterior and public areas, as well as the creation of 41 additional guest rooms, expanding the number of guest rooms from 210 to 251.
"The completed capital investment programs at Affinia 50, Hotel Zetta, The Benjamin, Affinia Manhattan and Sofitel Philadelphia should provide us with additional opportunities to maintain and grow market share at each hotel by generating higher room rates and increased RevPAR penetration," continued Mr. Bortz. "We expect these projects will substantially increase the profitability and value of these hotels, while also benefitting our portfolio as a whole when combined with the benefit of the continuing performance ramp-up resulting from prior renovations and capital investments at the Le Méridien Delfina Santa Monica, Hotel Monaco Seattle, Westin San Diego Gaslamp Quarter, Argonaut Hotel, InterContinental Buckhead, Sir Francis Drake, Grand Hotel Minneapolis and DoubleTree by Hilton Bethesda."
During 2014 the Company has a comprehensive renovation and repositioning planned at the 355-room Radisson Hotel Fisherman's Wharf, which is expected to commence in the fourth quarter of 2014; a comprehensive renovation and repositioning of the 125-room Hotel Vintage Park Seattle, which began in the fourth quarter of 2013; the restaurant, lobby renovation and addition of five guest rooms at the 196-room Hotel Palomar San Francisco, which commenced in the first quarter of 2014; a guest rooms and public areas renovation of the 258-room W Los Angeles-Westwood, which is expected to begin in the fourth quarter of 2014; and the renovation of the lobby and atrium at the 337-room Embassy Suites San Diego Bay Downtown, which is planned to commence in the fourth quarter of 2014.
In addition to its capital reinvestment programs, the Company continues to implement a comprehensive array of asset management best practices and initiatives throughout its portfolio to enhance hotel revenues and improve operating efficiencies to promote expense controls and strong margin growth. To date, the Company has identified approximately $20.4 million of annualized best practices and asset management opportunities throughout its portfolio.
"We're thrilled with the progress we've made in implementing our asset management initiatives and best practices across our hotel portfolio. These programs are instrumental to the strong EBITDA margin growth we've achieved over the last several years and for us to drive margin growth higher over the next few years," continued Mr. Bortz. "We greatly appreciate the hard work and support of our hotel management teams, who continue to work collaboratively with our asset managers to find new opportunities to grow revenues, reduce expenses, improve operating efficiencies and increase our cash flow. We expect additional improvement in our performance in 2014 and 2015 as these efficiencies and operating enhancements are implemented and savings are actualized and annualized."
In 2013, the Company successfully acquired four urban high-quality, upper upscale, full-service hotels with a total of 923 guest rooms for a total investment of $326.0 million. All of the Company's 2013 acquisitions are located in highly desirable major gateway cities on the west coast.
"We're very excited about increasing our investment in our west coast target markets of San Diego, Los Angeles, Portland and San Francisco," said Mr. Bortz. "We believe these properties offer excellent opportunities for strong RevPAR growth, margin expansion and value creation through renovations, the further implementation of our asset management initiatives and from the underlying strength of these markets."
During 2013, the Company completed numerous attractive capital market transactions to help fund strategic growth and maintain its strong balance sheet. The Company raised $79.3 million in net proceeds through common share offerings and its ATM program, $96.9 million in net proceeds through a preferred share offering and, along with our joint venture partner, originated $50.0 million of new debt.
On April 4, 2013, the joint venture that owns the Manhattan Collection successfully completed a new $50.0 million interest-only, non-recourse, secured loan at a fixed annual interest rate of 3.14 percent and a term of five years. The loan is collateralized by a first mortgage on the 242-room Affinia Dumont hotel in New York, New York.
On April 11, 2013, the Company completed an underwritten public offering of 4.0 million shares of its 6.50% Series C Cumulative Redeemable Preferred Shares, resulting in net proceeds of $96.9 million.
On November 6, 2013, the Company completed an underwritten public offering of 2.5 million common shares at a price per share of $29.70, resulting in net proceeds of $74.5 million.
During 2013, the Company issued and sold 171,893 common shares under its ATM offering program at an average price of $28.09 per share, for total net proceeds of $4.8 million.
"We're delighted with our continued ability to access the capital markets," commented Raymond D. Martz, Chief Financial Officer of Pebblebrook Hotel Trust. "The support from our investors and our banks has allowed us to maintain a strong balance sheet and lower our overall cost of capital, while providing us with additional capacity for acquisitions."
As of December 31, 2013, the Company had $548.4 million in consolidated debt and $225.4 million in unconsolidated, non-recourse, secured debt at weighted-average interest rates of 4.4 percent and 3.6 percent, respectively. The Company's total combined consolidated and unconsolidated weighted-average interest rate on its debt is 4.2 percent. The Company had $100.0 million outstanding in the form of an unsecured term loan and no outstanding balance on its $200.0 million senior unsecured revolving credit facility. As of December 31, 2013, the Company had $71.6 million of consolidated cash, cash equivalents and restricted cash and $14.5 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.
On December 31, 2013, as defined in the Company's credit agreement, the Company's fixed charge coverage ratio was 2.4 times and total net debt to trailing 12-month corporate EBITDA was 4.2 times. The Company's total debt to total assets ratio was 30 percent. Excluding its interest in the off-balance sheet Manhattan Collection, the Company's fixed charge coverage ratio was 2.3 times, net debt to trailing 12-month corporate EBITDA was 3.5 times and total debt to total assets ratio was 29 percent.
The Company's outlook for 2014, which remains unchanged from its outlook announced in January 2014, incorporates the expected impact of the Company's various capital investment projects and assumes continued improvement in economic activity, positive business travel trends and other significant assumptions. The Company's outlook for 2014 is as follows:
The Company's outlook for the first quarter of 2014 is as follows:
The Company's outlook for 2014 and First Quarter 2014 reflects the Company's 49 percent pro rata interest in the Manhattan Collection.
The Company's estimates and assumptions for Same-Property RevPAR, Same-Property RevPAR growth rate, Same-Property EBITDA, Same-Property EBITDA Margin and Same-Property EBITDA Margin growth rate for 2014 include the hotels owned as of December 31, 2013, as if they had been owned by the Company for the entire year of 2013. The Company's 2014 outlook assumes no additional acquisitions beyond the hotels the Company owned as of December 31, 2013.
Pebblebrook Hotel Trust (NYSE: PEB) 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 29 hotels, including 23 wholly owned hotels with a total of 5,546 guest rooms and a 49% joint venture interest in six hotels with a total of 1,775 guest rooms. The Company owns, or has an ownership interest in, hotels located in ten states and the District of Columbia, including: Los Angeles, California (Hollywood, Santa Monica, West Hollywood and Westwood); San Diego, California; San Francisco, California; Miami, Florida; Buckhead, Georgia; Bethesda, Maryland; Boston, Massachusetts; Minneapolis, Minnesota; New York, New York; Portland, Oregon; Philadelphia, Pennsylvania; Columbia River Gorge, Washington; Seattle, Washington; and Washington, DC. For more information, please visit us at www.pebblebrookhotels.com and follow us on Twitter at @PebblebrookPEB.
Contact: Raymond D. Martz, Chief Financial Officer