Xenia Hotels & Resorts, Inc. (NYSE: XHR) today announced results for the quarter ended June 30, 2019.
Second Quarter 2019 Highlights
- Net Income: Net income attributable to common stockholders was $12.8 million and net income per diluted share was $0.11.
- Same-Property RevPAR: Same-Property RevPAR increased 1.3% compared to the second quarter of 2018 to $181.09, as a result of a 63 basis point increase in occupancy and a 0.5% increase in ADR.
- Same-Property Hotel EBITDA Margin: Same-Property Hotel EBITDA Margin was 30.8%, which was down 1 basis point compared to the second quarter of 2018.
- Total Portfolio RevPAR: Total Portfolio RevPAR was $181.09, a 1.7% increase compared to the second quarter of 2018.
- Adjusted EBITDAre: Adjusted EBITDAre declined $0.4 million to $89.5 million, a decrease of 0.4% compared to the second quarter of 2018.
- Adjusted FFO per Diluted Share: Adjusted FFO per diluted share was $0.63, a $0.03 decrease compared to the second quarter of 2018, reflecting a 0.6% decrease in Adjusted FFO and a higher weighted average share and unit count.
- Dividends: The Company declared its second quarter dividend of $0.275 per share to common stockholders of record on June 28, 2019.
"We were pleased with our overall performance during the second quarter as our RevPAR growth modestly exceeded our expectations and we continued to achieve outstanding expense controls throughout the portfolio," said Marcel Verbaas, Chairman and Chief Executive Officer of Xenia. "Despite an overall challenging operating environment, our uniquely positioned portfolio and asset management platform continue to drive positive results, evidenced by the fact that our Same-Property Hotel EBITDA margin remained virtually flat on relatively muted 1.3% RevPAR growth. With well-documented pressures on labor costs and continued growth in real estate taxes and insurance costs, we believe that our ability to maintain margins in this environment is an impressive accomplishment."
"We remain bullish about the long-term outlook for our significantly upgraded portfolio, while remaining cautious in our outlook for the remainder of the year due to the uncertainty in the overall economic climate and lodging supply pressures in various markets throughout our portfolio," continued Mr. Verbaas. "Our geographic diversity continues to serve us well, with Houston, San Diego, Napa, San Francisco and Dallas being particular bright spots from a top-line perspective during the second quarter. We continue to be encouraged by the overall results in our top markets, offsetting more difficult comparisons in a number of our smaller markets. With an overall portfolio that is in excellent physical condition and a number of value enhancement projects well underway, we believe we remain well-positioned for both the near term and the years ahead."
Year to Date 2019 Highlights
- Net Income: Net income attributable to common stockholders for the six months ended June 30, 2019 was $29.5 million and net income per diluted share was $0.26.
- Same-Property RevPAR: Same-Property RevPAR was $175.72, an increase of 2.7% compared to the six months ended June 30, 2018, as ADR increased 1.6% and occupancy increased 80 basis points.
- Same-Property Hotel EBITDA Margin: Same-Property Hotel EBITDA Margin was 29.9%, an increase of 61 basis points compared to the six months ended June 30, 2018.
- Total Portfolio RevPAR: Total Portfolio RevPAR was $175.72, a 4.4% increase year over year, reflecting portfolio performance and upgrades to overall portfolio quality as a result of transactions that were completed in 2018.
- Adjusted EBITDAre: Adjusted EBITDAre was $167.5 million, an increase of 2.4% from 2018.
- Adjusted FFO per Diluted Share: The Company generated Adjusted FFO per diluted share of $1.15, a $0.03 decrease compared to 2018, reflecting a 2.7% increase in Adjusted FFO offset by a higher weighted average share and unit count.
Operating Results
The Company's results include the following:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
| 2019 | 2018 | Change | 2019 | 2018 | Change | ||||||||||||||||
| ($ amounts in thousands, except hotel statistics and per share amounts) | |||||||||||||||||||||
| Net income attributable to common stockholders(1) | $ | 12,777 | $ | 28,794 | (55.6) | % | $ | 29,479 | $ | 84,451 | (65.1) | % | |||||||||
| Net income per share available to common stockholders - diluted | $ | 0.11 | $ | 0.26 | (57.7) | % | $ | 0.26 | $ | 0.78 | (66.7) | % | |||||||||
| Same-Property Number of Hotels | 40 | 40 | — | 40 | 40 | — | |||||||||||||||
| Same-Property Number of Rooms | 11,167 | 11,165 | 2 | 11,167 | 11,165 | 2 | |||||||||||||||
| Same-Property Occupancy(2) | 79.9 | % | 79.2 | % | 63 | bps | 77.5 | % | 76.7 | % | 80 | bps | |||||||||
| Same-Property Average Daily Rate(2) | $ | 226.74 | $ | 225.65 | 0.5 | % | $ | 226.73 | $ | 223.13 | 1.6 | % | |||||||||
| Same-Property RevPAR(2) | $ | 181.09 | $ | 178.79 | 1.3 | % | $ | 175.72 | $ | 171.14 | 2.7 | % | |||||||||
| Same-Property Hotel EBITDA(2)(3) | $ | 93,840 | $ | 92,639 | 1.3 | % | $ | 178,628 | $ | 170,037 | 5.1 | % | |||||||||
| Same-Property Hotel EBITDA Margin(2)(3) | 30.8 | % | 30.9 | % | (1) | bps | 29.9 | % | 29.3 | % | 61 | bps | |||||||||
| Total Portfolio Number of Hotels(4) | 40 | 38 | 2 | 40 | 38 | 2 | |||||||||||||||
| Total Portfolio Number of Rooms(4) | 11,167 | 10,852 | 315 | 11,167 | 10,852 | 315 | |||||||||||||||
| Total Portfolio RevPAR(5) | $ | 181.09 | $ | 178.04 | 1.7 | % | $ | 175.72 | $ | 168.25 | 4.4 | % | |||||||||
| Adjusted EBITDAre(3) | $ | 89,459 | $ | 89,847 | (0.4) | % | $ | 167,546 | $ | 163,581 | 2.4 | % | |||||||||
| Adjusted FFO(3) | $ | 71,488 | $ | 71,917 | (0.6) | % | $ | 131,520 | $ | 128,104 | 2.7 | % | |||||||||
| Adjusted FFO per diluted share | $ | 0.63 | $ | 0.66 | (4.5) | % | $ | 1.15 | $ | 1.18 | (2.5) | % | |||||||||
| (1) | Net income for the three and six months ended June 30, 2019 reflects the impact of a $15 million impairment on one property. Net income for the six months ended June 30, 2018 includes a gain on sale of investment properties of $42 million. |
| (2) | "Same-Property" includes all hotels owned as of June 30, 2019. "Same-Property" includes periods prior to the Company's ownership of The Ritz-Carlton, Denver, Fairmont Pittsburgh, Park Hyatt Aviara Resort, Golf Club & Spa, and Waldorf Astoria Atlanta Buckhead. "Same-Property" also includes renovation disruption for multiple capital projects during the periods presented and natural disaster disruption at multiple properties in 2018. The pre-acquisition operating results were obtained from the seller and/or the manager of the hotels during the acquisition due diligence process. We have made no adjustments to the historical operating amounts provided to us by the seller and/or the manager, other than to reflect the removal of historical intercompany lease revenue/expense or any other items that are not applicable to us under our ownership. The pre-acquisition operating results are not audited or reviewed by our independent auditors. Pre-acquisition operating results for periods prior to the Company's ownership have not been included in the Company's actual consolidated financial statements and are included only in "Same-Property" for comparison purposes. |
| (3) | See tables later in this press release for reconciliations from net income to Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate ("EBITDAre"), Adjusted EBITDAre, Funds From Operations ("FFO"), Adjusted FFO, and Same-Property Hotel EBITDA. EBITDA, EBITDAre, Adjusted EBITDAre, FFO, Adjusted FFO, Same-Property Hotel EBITDA, and Same-Property Hotel EBITDA Margin are non-GAAP financial measures. |
| (4) | As of end of periods presented. |
| (5) | Results of all hotels as owned during the periods presented, including the results of hotels sold or acquired for the actual period of ownership by the Company. |
Financings and Balance Sheet
As of June 30, 2019, the Company had total outstanding debt of $1.1 billion with a weighted average interest rate of 3.88%. Over 80% of the Company's debt has interest rates which are fixed or have been hedged to fixed. In addition, the Company had $110.4 million of cash and cash equivalents, and full availability on its $500 million unsecured credit facility. Total net debt to trailing twelve month Corporate EBITDA (as defined in Section 1.01 of the Company's unsecured credit facility) was 3.5x as of June 30, 2019.
Capital Markets
During the three and six months ended June 30, 2019, the Company did not issue any shares of its common stock through its At-The-Market ("ATM") program. As of June 30, 2019, the Company had approximately $62.6 million remaining available for sale under the ATM program.
Additionally, the Company did not repurchase any shares under its existing share repurchase authorization during the three and six months ended June 30, 2019. As of June 30, 2019, the Company had approximately $96.9 million remaining under its share repurchase authorization.
Capital Expenditures
During the three and six months ended June 30, 2019, the Company invested $24 million and $37 million in its portfolio, respectively. The Company substantially completed lobby renovations at Kimpton Hotel Monaco Chicago and Marriott Dallas Downtown and made final payments for several projects that were substantially completed in the first quarter.
Also during the quarter, the Company continued the construction of the new ballroom at Hyatt Regency Grand Cypress, which is expected to be completed in the fourth quarter. The Company continues to plan the comprehensive renovation and repositioning of Park Hyatt Aviara Resort, Golf Club & Spa, which is expected to commence in the fourth quarter.
Additional Second Quarter Updates
Business Interruption Insurance Proceeds
During the second quarter, the Company recognized the final $0.8 million of business interruption insurance proceeds related to business lost at Hyatt Centric Key West Resort & Spa as a result of Hurricane Irma, compared to $2.6 million recognized during the second quarter of 2018. This insurance claim is now closed.
Impairment Loss
During the second quarter of 2019, the Company recorded a non-cash impairment charge of $14.8 million on its Marriott Chicago at Medical District/UIC. The impairment was a result of a projected future decline in operating profits attributed to demand trends and changes in the hotel's expense profile.
2019 Outlook and Guidance
The Company has updated its outlook for 2019 based on second quarter performance and the current economic environment. This outlook incorporates the impairment expense recognized in the second quarter, current anticipated disruption to revenues from renovations, and does not assume any acquisitions, dispositions, equity or debt offerings, or share repurchases. Same-Property RevPAR change includes all 40 hotels owned as of August 1, 2019.
| 2019 Guidance | Variance to Prior Guidance | |||||||||||||||
| Low End | High End | Low End | High End | |||||||||||||
| ($ amounts in millions, except per share data) | ||||||||||||||||
| Net Income | $53 | $63 | $(12) | $(14) | ||||||||||||
| Same-Property RevPAR Change | 1.0% | 2.5% | —% | —% | ||||||||||||
| Adjusted EBITDAre | $293 | $303 | $1 | $(1) | ||||||||||||
| Adjusted FFO | $241 | $251 | $3 | $1 | ||||||||||||
| Adjusted FFO per Diluted Share | $2.11 | $2.19 | $0.03 | $0.01 | ||||||||||||
| Capital Expenditures | $88 | $102 | $3 | $(3) | ||||||||||||
Additional guidance assumptions:
- Disruption due to renovations is expected to negatively impact Same-Property RevPAR Change by approximately 20 basis points.
- General and administrative expense of approximately $22 million, excluding non-cash share-based compensation.
- Interest expense of approximately $47 million, excluding non-cash loan related costs.
- Income tax expense of approximately $5 million.
- 114.4 million weighted average diluted shares/units.
About Xenia Hotels & Resorts, Inc.
Xenia Hotels & Resorts, Inc. is a self-advised and self-administered REIT that invests primarily in uniquely positioned luxury and upper upscale hotels and resorts, with a focus on the top 25 U.S. lodging markets as well as key leisure destinations in the United States. The Company owns 40 hotels comprising 11,167 rooms across 17 states. Xenia's hotels are primarily in the luxury and upper upscale segments, and operated and/or licensed by industry leaders such as Marriott, Hyatt, Kimpton, Fairmont, Loews, and Hilton, as well as leading independent management companies including The Kessler Collection, Sage Hospitality, and Davidson Hotels & Resorts