BETHESDA, Md.–Pebblebrook Hotel Trust (NYSE: PEB) (the “Company”) today reported results for the fourth quarter and year ended December 31, 2016. The Company’s results include the following:
Fourth Quarter Full Year 2016 2015 2016 2015 ($ in millions except per share and RevPAR data) Net income $18.4 $23.0 $74.0 $95.0 Same-Property RevPAR(1) $191.99 $191.94 $211.28 $206.31 Same-Property RevPAR growth rate 0.0% 2.4% Same-Property Wholly Owned EBITDA(1) $59.6 $59.4 $280.3 $268.3 Same-Property Wholly Owned EBITDA growth rate 0.3% 4.5% Same-Property Wholly Owned EBITDA Margin(1) 32.3% 32.1% 35.3% 34.7% Adjusted EBITDA(1) $57.7 $64.4 $273.2 $259.5 Adjusted EBITDA growth rate (10.4%) 5.3% Adjusted FFO(1) $41.5 $44.7 $201.8 $181.5 Adjusted FFO per diluted share(1) $0.57 $0.62 $2.78 $2.50 Adjusted FFO per diluted share growth rate (8.1%) 11.2%
(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 Margin 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 are very pleased with our 2016 results and the continued improvements we made throughout our portfolio in 2016, both operationally and from value-enhancing renovations,” said Jon E. Bortz, Chairman, President and Chief Executive Officer of Pebblebrook Hotel Trust. “In addition, we had significant success with our strategic disposition plan, completing numerous property and asset dispositions totaling $463.8 million. The U.S. hotel industry ended yet another year at its highest occupancy ever, despite weak business travel, an uptick in new supply and continued headwinds from global economic challenges including a strong U.S. dollar. For Pebblebrook, in 2016, we grew Same-Property Wholly Owned EBITDA by 4.5 percent, Adjusted EBITDA by 5.3 percent and Adjusted FFO per share by 11.2 percent, and we increased our dividend by 22.6 percent, all representing record levels. We experienced this growth and record numbers while also completing several property dispositions, which reduced the size of the Company’s portfolio, but lowered leverage and increased liquidity.”
- Net income: The Company’s net income was $74.0 million for the year ended December 31, 2016, declining $21.0 million as compared to 2015, primarily due to the impairment losses incurred by the redemption of the Company’s now dissolved 49 percent interest in its six-hotel joint venture (the “Manhattan Collection”) and the sale of the DoubleTree by Hilton Hotel Bethesda-Washington DC, which were partly offset by gains on the sales of Viceroy Miami and The Redbury Hotel.
- Same-Property RevPAR and Room Revenue: Same-Property RevPAR for the year increased 2.4 percent over 2015 to $211.28. Same-Property ADR climbed 1.0 percent from the prior year to $247.83. Same-Property Occupancy rose 1.4 percent to 85.3 percent. Same-Property Room Revenue for Wholly Owned properties increased by 3.8 percent, higher than RevPAR, largely due to the increase in same-property room count.
- Same-Property EBITDA: The Company’s Wholly Owned hotels generated $280.3 million of Same-Property EBITDA for the year ended December 31, 2016, increasing 4.5 percent from 2015. Same-Property Wholly Owned Revenues grew 2.5 percent, while Same-Property Wholly Owned Expenses increased only 1.5 percent. Same-Property Wholly Owned EBITDA Margin grew by 65 basis points to 35.3 percent for 2016, as compared to last year.
- Adjusted EBITDA: The Company’s Adjusted EBITDA for 2016 rose to $273.2 million, a gain of 5.3 percent versus $259.5 million in 2015.
- Adjusted FFO: The Company’s Adjusted FFO climbed 11.2 percent to $201.8 million, compared with $181.5 million for the prior year.
- Dividends: During 2016, the Company declared dividends of $1.52 per share on its common shares, $1.625 per share on its 6.50% Series C Cumulative Redeemable Preferred Shares and $0.95626 per share on its 6.375% Series D Cumulative Redeemable Preferred Shares.
“Our recently renovated and repositioned hotels continued to increase market share and grow cash flow in 2016, which we expect to continue in 2017,” said Mr. Bortz. “We also applaud our hotel management teams who continue to work collaboratively with our asset managers to find efficiencies in our operations. Our teams were able to drive impressive operating results in our wholly owned portfolio, which improved margins by 65 basis points despite modest revenue growth and negative disruptions from our renovation projects during the year.”
Fourth Quarter Highlights
- Net income: The Company’s net income was $18.4 million in the fourth quarter of 2016, declining $4.6 million as compared to the same period of 2015.
- Same-Property RevPAR and Room Revenue: Same-Property RevPAR for the quarter remained flat over the same period of 2015 at $191.99. Same-Property ADR increased 0.4 percent from the prior year quarter to $236.82. Same-Property Occupancy fell 0.4 percent to 81.1 percent. Same-Property Room Revenue increased by 0.1 percent.
- Same-Property EBITDA: The Company’s hotels generated $59.6 million of Same-Property EBITDA for the quarter ended December 31, 2016, increasing 0.3 percent from the same period of 2015. Same-Property Revenues declined 0.3 percent, while Same-Property Expenses were reduced by 0.5 percent. Same-Property EBITDA Margin grew by 19 basis points to 32.3 percent for the fourth quarter of 2016, as compared to the same period last year.
- Adjusted EBITDA: The Company’s Adjusted EBITDA declined to $57.7 million from $64.4 million in the prior year period, a decrease of $6.7 million, or 10.4 percent. The declines were primarily a result of the hotels the Company sold during 2016.
- Adjusted FFO: The Company’s Adjusted FFO decreased 7.3 percent to $41.5 million from $44.7 million in the prior year period.
- Dividends: On December 15, 2016, 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 and a regular quarterly cash dividend of $0.39844 per share on its 6.375% Series D Cumulative Redeemable Preferred Shares.
“Although there is more optimism regarding the prospects for accelerated hotel demand growth and improved industry performance following the presidential election, we have yet to see any noteworthy increases in business or leisure travel demand since the election,” advised Mr. Bortz. “Leading economic indicators and business sentiment have improved, but until we see actual travel demand increase, we will remain tempered regarding our near-term outlook.”
Strategic Disposition Plan
During 2016, the Company completed numerous strategic property dispositions that harvested significant value for shareholders. In the second quarter of 2016, Pebblebrook sold Viceroy Miami for $64.5 million and The Redbury Hotel for $40.9 million, as well as an excess land parcel adjacent to Revere Hotel Boston Common for $6.0 million. In the fourth quarter of 2016, the Company executed an asset exchange with its joint venture partner to redeem the Company’s 49 percent interest in the Manhattan Collection. The Company then sold the Manhattan NYC for $217.5 million. The Company also sold the DoubleTree by Hilton Hotel Bethesda – Washington DC for $50.1 million in the fourth quarter.
These strategic property dispositions created value for shareholders by taking advantage of the valuation differences between the private and public markets. In addition, the Company utilized the proceeds from these sales to pay down debt, strengthen the Company’s balance sheet and increase liquidity.
During 2016, the Company completed $124.0 million of capital improvements throughout its portfolio. The Company’s capital improvements included $22.6 million at Hotel Zeppelin San Francisco (part of a $32.0 million project), $15.8 million at Union Station Hotel Nashville, an Autograph Collection Hotel (which included a $15.5 million transformation), $12.0 million at Hotel Colonnade Coral Gables, a Tribute Portfolio Hotel, formerly The Westin Colonnade, Coral Gables, (part of a $17.5 million redevelopment) and $10.7 million at Hotel Monaco Washington DC (part of a $13.0 million renovation), including the reconcepting and renovation of the hotel’s restaurant and bar, Dirty Habit DC, formerly Poste.
In 2017, the Company intends to complete several major renovation and repositioning projects including:
- Hotel Palomar Los Angeles Beverly Hills (estimated at $12.0 million) which is undergoing a comprehensive renovation, including all guestrooms, the guestroom corridors, meeting rooms, lobby, restaurant, pool and entryway with an expected completion date in first quarter 2017;
- Revere Hotel Boston Common (estimated at $22.5 million), which is undergoing a comprehensive property renovation that began in fourth quarter 2016 with an expected completion date in second quarter 2017;
- The Tuscan Fisherman’s Wharf (estimated at $15.0 million), which began a comprehensive property renovation and transformation starting in January 2017 with an expected completion date at the end of second quarter 2017, which will be renamed Hotel Zoe upon completion and will operate as an independent hotel; and
- LaPlaya Beach Resort & Club (estimated at $7.5 million), which will undergo a renovation of the lobby, restaurant and bar, and all guestrooms in the resort’s Gulf Tower, starting in early summer 2017 with an expected completion date in the third quarter 2017.
Capital Markets and Balance Sheet
During 2016, the Company originated $150.0 million of new term loans, paid off $169.3 million of debt maturities and redeemed $225.2 million of its outstanding preferred shares. The Company also issued $125.0 million through an underwritten public offering of 5.0 million shares of its 6.375% Series D Cumulative Redeemable Preferred Shares.
“We made very positive strides in 2016 to lower our overall leverage, increase our coverage ratios, extend our debt maturities and increase our liquidity,” noted Raymond D. Martz, Chief Financial Officer of Pebblebrook Hotel Trust. “We appreciate the continued support and longstanding positive relationships shown by our banking partners.”
As of December 31, 2016, the Company had $1.0 billion in consolidated debt at an effective weighted-average interest rate of 3.4 percent. The Company had $675.0 million outstanding in the form of unsecured term loans and $82.0 million outstanding on its $450.0 million senior unsecured revolving credit facility. As of December 31, 2016, the Company had $40.8 million of consolidated cash, cash equivalents and restricted cash.
On December 31, 2016, as defined in the Company’s credit agreement, the Company’s fixed charge coverage ratio was 3.6 times and total net debt to trailing 12-month corporate EBITDA was 3.8 times.
To view full financial release and corresponding tables please click the PDF icon or visit: http://investor.pebblebrookhotels.com/file.aspx?IID=4243454&FID=38208648