Adjusted EBITDA Rose 24.3 Percent; Adjusted FFO Per Diluted Share Climbed 29.9 Percent
BETHESDA, Md.--Pebblebrook Hotel Trust (NYSE: PEB) (the "Company") today reported results for the second quarter ended June 30, 2014. 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 excited about the terrific performance of our portfolio in the second quarter, as we continued to outperform the hotel industry's strong growth," said Jon E. Bortz, Chairman, President and Chief Executive Officer of Pebblebrook Hotel Trust. "Our hotels continue to realize healthy increases in travel demand from the business and leisure transient segments, as well as ongoing strength from inbound international travel. In addition, the group demand rebound that we experienced in the year accelerated in the second quarter. These positive demand trends, coupled with strong pricing power, contributed to the robust increases in our income and our cash flow. Based on the strong performance experienced in the overall industry and our portfolio during the first half of 2014, as well as the group and transient pace for the second half of the year, we are increasing our outlook for the U.S. hotel industry and our portfolio."
Second Quarter Highlights
Same-Property RevPAR: Same-Property RevPAR in the second quarter of 2014 grew 9.2 percent over the same period of 2013 to $210.40. Same-Property ADR rose 7.6 percent from the second quarter of 2013 to $239.89. Same-Property Occupancy increased 1.4 percent to 87.7 percent.
Same-Property EBITDA: The Company's hotels generated $57.4 million of Same-Property EBITDA for the quarter ended June 30, 2014, rising 12.1 percent compared with the same period of 2013. Same-Property Revenues climbed 6.1 percent, while Same-Property Hotel Expenses increased just 3.4 percent. As a result, Same-Property EBITDA Margin grew to 33.7 percent for the quarter ended June 30, 2014, an expansion of 178 basis points as compared to the same period last year.
Adjusted EBITDA: The Company's Adjusted EBITDA increased $10.4 million, or 24.3 percent, to $53.3 million from $42.8 million in the prior year period.
Adjusted FFO: The Company's Adjusted FFO climbed 36.5 percent to $36.0 million from $26.4 million in the prior year period.
Dividends: On June 16, 2014, the Company declared a regular quarterly cash dividend of $0.23 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.
"We were able to grow same-property RevPAR by 9.2 percent in the second quarter, in excess of the industry's 8.2 percent growth," added Mr. Bortz. "As a result, same-property EBITDA increased 12.1 percent over the prior year as the implementation of our asset management and best practice initiatives continues to drive our strong results. We see further upside from our strategy of owning high-quality hotels located in high barrier to entry coastal gateway cities. Furthermore, our hotels continue to pick up market share in comparison to their competitors as they benefit from prior renovations and improvements. These benefits should continue to accrue over the next several years."
Capital Reinvestment and Asset Management
During the second quarter, the Company invested $10.1 million in capital improvements throughout its portfolio, including 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 $1.9 million at Hotel Palomar San Francisco, $1.0 million at Hotel Vintage Seattle, $0.9 million at Radisson Hotel Fisherman's Wharf, and $0.7 million at W Los Angeles - Westwood.
As of the end of the second quarter, the Company has completed the addition of four guest rooms at the Embassy Suites San Diego Bay Downtown and the comprehensive renovation and repositioning of the 125-room Hotel Vintage Park Seattle, which has been renamed Hotel Vintage Seattle. The Company has also substantially completed the restaurant and lobby renovations along with the addition of five guest rooms at the 201-room Hotel Palomar San Francisco.
During the fourth quarter of 2014, the Company plans to commence a comprehensive renovation and repositioning at the 355-room Radisson Hotel Fisherman's Wharf, a guest rooms and public areas renovation of the 258-room W Los Angeles-Westwood, including the potential addition of 39 guest rooms, and a lobby and atrium renovation at the 341-room Embassy Suites San Diego Bay Downtown.
On May 22, 2014, the Company acquired the Prescott Hotel for $49.0 million. The 160-room, urban, upper-upscale hotel is located in the heart of Union Square in San Francisco, California.
On July 17, 2014 the Company acquired The Nines Hotel for $127.0 million. The 331-room luxury hotel is located across from Pioneer Square in downtown Portland, Oregon.
"We're thrilled with the acquisition of these two terrific hotels located in our West Coast target markets of San Francisco and Portland," commented Mr. Bortz. "We believe these properties offer great opportunities for outsized RevPAR growth, margin expansion and value creation through opportunistic capital investment and the implementation of our asset management and best practice initiatives in collaboration with our operating partners."
Same-Property RevPAR, ADR and Occupancy: Same-Property RevPAR for the six months ended June 30, 2014 increased 8.8 percent over the same period of 2013 to $189.81. Year-to-date, Same-Property ADR grew 7.3 percent from the comparable period of 2013 to $225.67, while year-to-date Same-Property Occupancy climbed 1.4 percent to 84.1 percent.
Same-Property Hotel EBITDA: The Company's hotels generated $92.1 million of Same-Property Hotel EBITDA for the six months ended June 30, 2014, an improvement of 14.9 percent compared with the same period of 2013. Same-Property Hotel Revenues grew 6.8 percent, while Same-Property Hotel Expenses rose 3.7 percent. As a result, Same-Property Hotel EBITDA Margin for the six months ended June 30, 2014 increased 208 basis points to 29.4 percent as compared to the same period last year.
Adjusted EBITDA: The Company's Adjusted EBITDA increased 27.7 percent, or $18.0 million, to $82.8 million from $64.8 million in the prior year period.
Adjusted FFO: The Company's Adjusted FFO climbed 37.7 percent to $52.9 million from $38.4 million in the prior year period.
As of June 30, 2014, the Company had $579.8 million in consolidated debt and $225.4 million in unconsolidated, non-recourse, secured debt at weighted-average interest rates of 4.2 percent and 3.6 percent, respectively. The Company's total combined consolidated and unconsolidated weighted-average interest rate on its debt is 4.1 percent. The Company had $100.0 million outstanding in the form of an unsecured term loan and had a $36.0 million balance outstanding on its $200.0 million senior unsecured revolving credit facility. As of June 30, 2014, the Company had $53.8 million of consolidated cash, cash equivalents and restricted cash and $16.2 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 June 30, 2014, 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 4.1 times. The Company's total debt to total gross assets ratio was 30 percent. Excluding its interest in the off-balance sheet Manhattan Collection, the Company's fixed charge coverage ratio was 2.4 times, total net debt to trailing 12-month corporate EBITDA was 3.5 times and total debt to total assets ratio was 27 percent.
The Company has increased its outlook for 2014, incorporating the expected impact of the Company's various capital investment projects, the recent acquisitions of the Prescott Hotel and The Nines Hotel, the Company's second quarter performance, and it assumes continued improvement in economic activity, positive business travel trends and other significant assumptions. The Company's revised outlook for 2014 is as follows:
The Company's outlook for 2014 and third 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 July 24, 2014, as if they had been owned by the Company for the entire years of 2013 and 2014, except for the Prescott Hotel and The Nines Hotel, which are not included in the first and second quarters of 2013 and 2014. The Company's 2014 outlook assumes no additional acquisitions beyond the hotels the Company owned as of July 24, 2014.
To view corresponding tables for this release please visit:
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 31 hotels, including 25 wholly owned hotels with a total of 6,046 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