Net Income increases to $17.7 million;
Pro Forma RevPAR increases 6.4 percent;
Adjusted FFO per share increases 22.5 percent to $0.42 per share
AUSTIN, Texas, Aug. 2, 2016– Summit Hotel Properties, Inc. (NYSE: INN) (the "Company"), today announced results for the second quarter 2016.
"We are thrilled with the strong results our diversified portfolio of premium select-service hotels delivered in the second quarter. Our second quarter pro forma RevPAR growth of 6.4 percent, paired with an exceptional 156 basis points of margin expansion, once again exceeded the Smith Travel Research Upscale RevPAR growth rate of 3.1 percent marking outperformance in sixteen of the last seventeen quarters," said Dan Hansen, the Company's President and Chief Executive Officer. "In addition to our robust operating results, we continue to demonstrate our ability to strategically dispose of non-core hotels and recycle capital," commented Mr. Hansen.
Second Quarter 2016 Highlights
- Net Income: Net income attributable to common stockholders increased 47.0 percent to $17.7 million, or $0.20 per diluted share, compared to $12.1 million, or $0.14 per diluted share, in the same period of 2015.
- Pro Forma RevPAR: Pro forma revenue per available room ("RevPAR") grew to $120.74, an increase of 6.4 percent over the same period in 2015. Pro forma average daily rate ("ADR") grew to $145.47, an increase of 4.0 percent from the same period in 2015. Pro forma occupancy increased by 2.4 percent to 83.0 percent.
- Same-Store RevPAR: Same-store RevPAR grew to $117.44, an increase of 6.5 percent over the same period in 2015. Same-store ADR grew to $142.22, an increase of 3.7 percent from the same period in 2015. Same-store occupancy increased by 2.7 percent to 82.6 percent compared to the same period in 2015.
- Pro Forma Hotel EBITDA: Pro forma hotel EBITDA grew to $50.1 million, an increase of 10.7 percent over the same period in 2015.
- Pro Forma Hotel EBITDA Margin: Pro forma hotel EBITDA margin expanded by 156 basis points to 39.9 percent compared to 38.3 percent in the same period of 2015.
- Adjusted EBITDA: Adjusted EBITDA increased to $47.4 million from $41.7 million in the same period of 2015, an increase of $5.7 million or 13.6 percent.
- Adjusted FFO: Adjusted Funds from Operations ("AFFO") increased to $36.5 million, or $0.42 per diluted share, an increase in AFFO per diluted share of 22.5 percent over the same period in 2015.
- Dispositions: The Company sold three hotels containing 383 guestrooms for a total sales price of $25.0 million. The three hotels sold had RevPAR of $67.37 for the twelve months ended March 31, 2016.
The Company's results for the three and six months ended June 30, 2016, and 2015 included the following:
Three months ended June 30,
Six months ended June 30,
2016
2015
2016
2015
(Unaudited)
($ in thousands, except per unit and RevPAR data)
Net income attributable to common stockholders
$ 17,718
$ 12,057
$ 62,056
$ 18,444
Total revenues
$ 127,195
$ 120,677
$ 245,277
$ 228,325
EBITDA (1)
$ 46,897
$ 40,002
$ 122,824
$ 73,372
Adjusted EBITDA (1)
$ 47,364
$ 41,695
$ 88,277
$ 76,205
FFO (1)
$ 32,681
$ 27,663
$ 58,545
$ 49,755
Adjusted FFO (1)
$ 36,500
$ 29,671
$ 64,779
$ 52,917
FFO per diluted share and unit (1) (2)
$ 0.37
$ 0.32
$ 0.67
$ 0.57
Adjusted FFO per diluted share and unit (1) (2)
$ 0.42
$ 0.34
$ 0.74
$ 0.61
Pro Forma (3)
RevPAR
$ 120.74
$ 113.43
$ 115.16
$ 109.58
RevPAR growth
6.4%
5.1%
Hotel EBITDA
$ 50,127
$ 45,274
$ 93,294
$ 84,505
Hotel EBITDA margin
39.9%
38.3%
38.9%
37.6%
Hotel EBITDA margin growth
156 bps
130 bps
(1)
See tables later in this press release for a discussion and reconciliation of net income to non-GAAP financial measures, including earnings before interest, taxes, depreciation and amortization ("EBITDA"), adjusted EBITDA, funds from operations ("FFO"), FFO per diluted share and unit, adjusted FFO ("AFFO"), and AFFO per diluted share and unit, as well as a discussion of hotel EBITDA. See "Non-GAAP Financial Measures" at the end of this release. Non-GAAP financial measures are unaudited.
(2)
Amounts are based on 87,355,000 weighted average diluted common shares and units and 87,008,000 weighted average diluted common shares and units for the three months ended June 30, 2016, and 2015, respectively, and 87,264,000 weighted average diluted common shares and units and 86,947,000 weighted average diluted common shares and units for the six months ended June 30, 2016, and 2015, respectively. The Company includes the outstanding common units of limited partnership interests ("OP Units") in Summit Hotel OP, LP, the Company's operating partnership, held by limited partners other than the Company in the determination of weighted average diluted common shares and units because the OP Units are redeemable for cash or, at the Company's option, shares of the Company's common stock on a one-for-one basis.
(3)
Unless stated otherwise in this release, all pro forma information includes operating and financial results for 80 hotels owned as of June 30, 2016, as if each hotel had been owned by the Company since January 1, 2015. As a result, all pro forma information includes operating and financial results for hotels acquired since January 1, 2015 for periods prior to the Company's ownership. Pro forma and non-GAAP financial measures are unaudited.
Year-To-Date 2016 Highlights
- Net Income: Net income attributable to common stockholders increased to $62.1 million, or $0.71 per diluted share, compared to $18.4 million, or $0.21 per diluted share, for the same period of 2015. Net income attributable to common stockholders includes a $39.5 million pretax gain related to the sale of nine hotels during the six months ended June 30, 2016.
- Pro Forma RevPAR: Pro forma RevPAR grew to $115.16, an increase of 5.1 percent over the same period in 2015. Pro forma ADR grew to $143.95, an increase of 2.8 percent from the same period in 2015. Pro forma occupancy increased by 2.3 percent to 80.0 percent.
- Same-Store RevPAR: Same-store RevPAR grew to $112.94, an increase of 5.5 percent over the same period in 2015. Same-store ADR grew to $141.25, an increase of 2.5 percent from the same period in 2015. Same-store occupancy increased by 3.0 percent to 80.0 percent compared to the same period in 2015.
- Pro Forma Hotel EBITDA: Pro forma hotel EBITDA grew to $93.3 million, an increase of 10.4 percent over the same period in 2015.
- Pro Forma Hotel EBITDA Margin: Pro forma hotel EBITDA margin expanded by 130 basis points to 38.9 percent compared to the same period in 2015.
- Adjusted EBITDA: Adjusted EBITDA increased to $88.3 million from $76.2 million in the same period of 2015, an increase of $12.1 million or 15.8 percent.
- Adjusted FFO: AFFO increased to $64.8 million, or $0.74 per diluted share, an increase in AFFO per diluted share of 22.0 percent over the same period in 2015.
- Acquisitions: The Company acquired two hotels containing 386 guestrooms for a total purchase price of $109.0 million. The two acquired hotels had RevPAR of $128.16 for the year ended December 31, 2015.
- Dispositions: The Company sold nine hotels containing 1,090 guestrooms for a total sales price of $133.3 million. The nine hotels sold had RevPAR of $84.74 for the year ended December 31, 2015.
Summit vs. Industry Results (% change)
Three Months Ended June 30, 2016
Occupancy
ADR
RevPAR
Summit Pro Forma (80)
2.4%
4.0%
6.4%
Summit Same-Store (71)
2.7%
3.7%
6.5%
STR Overall US
0.6%
2.9%
3.5%
STR Upscale
0.2%
2.9%
3.1%
Source: Smith Travel Research Quarterly Hotel Review, Volume 16, Issue Q2
Dispositions
On May 13, 2016, the Company completed the sale of the 128-guestroom Holiday Inn Express & Suites located in Irving (Las Colinas), Texas, for a total sales price of $10.5 million. The sales price represents a capitalization rate of 7.7 percent on the hotel's net operating income, including planned capital improvements, for the trailing twelve months ended March 31, 2016. The Company estimates that the hotel would have contributed approximately $0.2 million and $0.6 million of EBITDA from the sale date through the second quarter and full year 2016, respectively. This hotel was not part of the previously announced disposition of 26 hotels to affiliates of American Realty Capital Hospitality Trust, Inc. ("ARCH").
In addition to the sale mentioned above, the Company completed the sale of two hotels containing 255 guestrooms for a combined sales price of $14.5 million. The 136-guestroom Aloft in Jacksonville, Florida, and 119-guestroom Holiday Inn Express in Vernon Hills, Illinois were sold on June 1, 2016, and June 7, 2016, respectively. The combined sales price represents a capitalization rate of 6.1 percent on the hotels' net operating income, including planned capital improvements, for the trailing twelve months ended March 31, 2016. The Company estimates that the hotels would have contributed approximately $0.2 million and $0.7 million of EBITDA from the sale dates through the second quarter and full year 2016, respectively. Both of these hotels were sold to parties that are unrelated to ARCH, but were part of the previously announced disposition of 26 hotels to affiliates of ARCH.
Capital Investment
The Company invested $8.5 million in capital improvements during the second quarter of 2016. Among the properties renovated during the quarter, the scope of work ranged from common space improvements to complete guestroom renovations, including furniture, soft goods and guest bathrooms.
6.45% Series D Preferred Stock Issuance
On June 28, 2016, the Company closed on a public offering of 3,000,000 shares of its 6.45% Series D Cumulative Redeemable Preferred Stock for gross proceeds of $75.0 million. The Company contributed the net proceeds to its operating partnership to reduce the outstanding balance of its senior unsecured revolving credit facility and for other general corporate purposes, which may include, among other things, redeeming the outstanding 9.25% Series A Preferred Stock on or after October 28, 2016, which is generally the date it becomes redeemable by the Company.
Balance Sheet
At June 30, 2016, the Company had the following:
- Total outstanding debt of $628.6 million with a weighted average interest rate of 3.84 percent.
- Maximum borrowing capacity of $450.0 million under its senior unsecured credit facility, including both the revolver and term loan portions of the facility, with $150.0 million outstanding and $300.0 million available to borrow.
- Total net debt, which the Company defines as total outstanding debt less cash and cash equivalents, to trailing twelve month adjusted EBITDA was 3.3x.
During the quarter, the Company repaid two mortgage loans totaling $18.4 million with a weighted average interest of 5.86 percent with advances on its senior unsecured revolving credit facility. The three hotels that previously collateralized the repaid loans were added to the Company's unencumbered asset pool in the second quarter 2016.
At July 29, 2016, the Company had the following:
- Total outstanding debt of $627.9 million with a weighted average interest rate of 3.77 percent.
- Maximum borrowing capacity of $450.0 million under its senior unsecured credit facility, including both the revolver and term loan portions of the facility, with $150.0 million outstanding and $300.0 million available to borrow.
- Total net debt to trailing twelve month adjusted EBITDA was 3.3x.
Dividends
On July 29, 2016, the Company declared a quarterly cash dividend of:
- $0.1325 per share on its common stock and per OP Unit in Summit Hotel OP, LP.
- $0.578125 per share on its 9.25% Series A Cumulative Redeemable Preferred Stock.
- $0.4921875 per share on its 7.875% Series B Cumulative Redeemable Preferred Stock.
- $0.4453125 per share on its 7.125% Series C Cumulative Redeemable Preferred Stock.
- $0.28219 per share on its 6.45% Series D Cumulative Redeemable Preferred Stock. The Series D preferred stock dividend reflects the time period of June 28, 2016, to August 31, 2016.
The dividends are payable on August 31, 2016, to holders of record as of August 16, 2016.
Subsequent Events
Dispositions
On July 6, 2016, the Company completed the sale of the 122-guestroom Hyatt Place located in Irving (Las Colinas), Texas, for a total sales price of $14.0 million. The sales price represents a capitalization rate of 7.0 percent on the hotel's net operating income, including planned capital improvements, for the trailing twelve months ended June 30, 2016. The Company estimates that the hotel would have contributed approximately $0.3 million and $0.6 million of EBITDA from the sale date through the third quarter and full year 2016, respectively. This hotel was not part of the previously announced disposition of 26 hotels to affiliates of ARCH.
Acquisitions
The Company is currently under contract to purchase a 157-guestroom hotel property for $61.4 million. The purchase is expected to close during August 2016.
Balance Sheet
On August 1, 2016, the Company repaid a mortgage loan that had an interest rate of 6.22 percent, a principal balance of $17.0 million and a maturity date of November 1, 2016. There was no prepayment penalty related to the early repayment of the mortgage loan and the Company expects to add the hotel to its unencumbered asset pool during the third quarter 2016. As a result of the loan repayment, the Company does not have any scheduled debt maturities for the next twelve months and only 2.4 percent of its total debt is scheduled to mature through 2018.
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