Summit Hotel Properties Reports First Quarter 2019 Results

AUSTIN, Texas, May 1, 2019 /PRNewswire/ -- Summit Hotel Properties, Inc. INN (the "Company"), today announced results for the first quarter ended March 31, 2019.

"We are pleased with our financial results in the first quarter as strong top line growth, along with a continued focus on cost control initiatives, resulted in operating margin improvement year-over-year.  RevPAR growth of 2.9% for our well-located and diverse portfolio of high-quality hotels exceeded the STR Upscale average by 340 basis points in the first quarter, which highlights the positive trends we saw throughout the portfolio during the quarter,"  said Dan Hansen, the Company's Chairman, President and Chief Executive Officer. "We continued to be proactive in a favorable transaction environment by completing nearly $150 million of asset sales year-to-date, including the six hotels sold in April, at very attractive capitalization rates, which further deleverages our balance sheet and creates capacity for future growth," commented Mr. Hansen.

First Quarter 2019 Highlights

• Net Income:  Net income attributable to common stockholders increased to $9.2 million, or $0.09 per diluted share, compared with $0.9 million, or $0.01 per diluted share, in the same period of 2018.
• Pro Forma RevPAR:  Pro forma revenue per available room ("RevPAR") increased 2.9 percent to $123.20 from the same period in 2018.  Pro forma average daily rate ("ADR") increased 2.3 percent to $161.02 compared to the same period in 2018 and pro forma occupancy increased 0.6 percent to 76.5 percent.
• Same-Store RevPAR:  Same-store RevPAR increased 2.6 percent to $122.50 from the same period in 2018.  Same-store ADR increased 2.3 percent to $160.73 compared to the same period in 2018 and occupancy increased 0.3 percent to 76.2 percent.
• Pro Forma Hotel EBITDA:  Pro forma hotel EBITDA was $50.2 million, an increase of 5.5 percent from the same period in 2018.  Pro forma hotel EBITDA margin expanded by 30 basis points to 36.2 percent from 35.9 percent in the same period of 2018. 
• Adjusted EBITDAre:  Adjusted EBITDAre of $46.7 million was unchanged from $46.7 million in the same period of 2018.
• Adjusted FFO:  AFFO increased 0.4 percent to $32.3 million, or $0.31 per diluted share, from $32.1 million, or $0.31 per diluted share, in the same period of 2018.
• Dispositions:  The Company sold two hotels, containing 130 guestrooms, located in Charleston, WV, for an aggregate sales price of $11.6 million.  The two properties were sold at a trailing twelve month capitalization rate of 7.4 percent, including estimated future capital improvements, and resulted in the realization of an aggregate gain on sale of $4.2 million.

The Company's results for the three months ended March 31, 2019 and 2018 are as follows:

Capital Improvements

During the three months ended March 31, 2019, the Company invested $17.2 million in capital improvements and anticipates investing an additional $22.8 million to $42.8 million in capital improvements across its portfolio during the remainder of 2019.

Capital Markets & Balance Sheet

At March 31, 2019, the Company had the following:

• Total outstanding debt of $967.7 million with a weighted average interest rate of 4.26 percent.
• After giving effect to interest rate derivative agreements, $562.0 million, or 58 percent, of the Company's debt had fixed interest rates, and $405.7 million, or 42 percent had variable interest rates.
• Undrawn availability on its senior unsecured revolving credit facility of $275.0 million.
• Total net debt, which the Company defines as total outstanding debt less cash and cash equivalents, to trailing twelve-month pro forma adjusted EBITDAre of 4.7x.

At April 24, 2019, the Company had the following:

• Total outstanding debt of $834.9 million with a weighted average interest rate of 4.23 percent.
• After giving effect to interest rate derivative agreements, $551.2 million, or 66 percent, of our debt had fixed interest rates, and $283.7 million, or 34 percent had variable interest rates.
• Undrawn availability on its senior unsecured revolving credit facility of $375.0 million.
• Total net debt to trailing twelve-month pro forma adjusted EBITDAre of 4.3x.

Subsequent Events

On April 17, 2019, the Company completed the disposition of six hotels totaling 815 guestrooms for an aggregate gross sales price of $135.0 million, which resulted in an estimated net gain of $36.6 million.  The portfolio of six hotels sold included:

• 139-guestroom Hampton Inn Boston-Norwood
• 101-guestroom Hampton Inn Santa Barbara/Goleta
• 146-guestroom Hampton Inn & Suites Minneapolis St. Paul Airport – Mall of America
• 127-guestroom Hyatt Place Dallas/Arlington
• 189-guestroom Residence Inn Salt Lake City Downtown
• 113-guestroom SpringHill Suites by Marriott Minneapolis St. Paul Airport – Mall of America

The aggregate gross sales price of $135.0 million, plus estimated future capital improvements, represented a 12.8x EBITDA multiple and 6.9 percent capitalization rate for the trailing twelve months ended March 31, 2019.  The six hotels had an average RevPAR of $110.98, which was 9.8 percent lower than the Company's pro forma portfolio average RevPAR, and hotel EBITDA margin of 34.3 percent, which was 280 basis points lower than the pro forma portfolio average for the same period.  The Company estimates that the hotels would have contributed approximately $9.5 million of EBITDAre through the remainder of 2019.  Net proceeds from the sale were used to reduce the outstanding balance of the Company's unsecured revolving credit facility.

On April 24, 2019, the Company repaid, without any prepayment penalty, a $21.9 million mortgage loan secured by three hotels that had a variable interest rate of 4.89 percent and maturity date of May 6, 2020.  As a result, the Company has no remaining debt maturities until November 2022 and 86% of its total portfolio pro forma hotel EBITDA is now unencumbered.  The Company funded the loan repayment with an advance from its unsecured revolving credit facility.

Dividends

On April 29, 2019, the Company declared a quarterly cash dividend of $0.18 per share on its common stock and per common unit of limited partnership interest in Summit Hotel OP, LP.  The annualized dividend of $0.72 per common share and per common unit represents an annual dividend yield of 6.2 percent based on the April 30, 2019 closing stock price.

In addition, the Company declared a quarterly cash dividend of:

• $0.403125 per share on its 6.45% Series D Cumulative Redeemable Preferred Stock.
• $0.390625 per share on its 6.25% Series E Cumulative Redeemable Preferred Stock.

The common and preferred dividends are payable on May 31, 2019 to holders of record as of May 17, 2019.

2019 Outlook

The Company is providing its updated outlook for the full year 2019 based on 69 hotels owned as of May 1, 2019.  The updated outlook includes the sale of six hotels on April 17, 2019, which resulted in a $9.5 million reduction in Adjusted EBITDAre for the remainder of 2019.  There are no future acquisitions, dispositions, or additional capital markets activities assumed in the Company's outlook for full year 2019 beyond those previously mentioned.

First Quarter 2019 Earnings Conference Call

The Company will conduct its quarterly conference call on Thursday, May 2, 2019, at 9:00 AM ET.  To participate in the conference call, please dial 877-930-8101.  The conference identification code for the call is 7789768.  Additionally, a live webcast of the quarterly conference call will be available through the Company's website, www.shpreit.com.  A replay of the quarterly conference call webcast will be available until 12:00 PM ET Thursday, May 9, 2019, by dialing 855-859-2056, conference identification code 7789768.  A replay will also be available in the Investor Relations section of the Company's website until July 31, 2019.

About Summit Hotel Properties

Summit Hotel Properties, Inc. is a publicly-traded real estate investment trust focused on owning premium-branded hotels with efficient operating models primarily in the Upscale segment of the lodging industry.  As of May 1, 2019, the Company's portfolio consisted of 69 hotels with a total of 10,714 guestrooms located in 24 states. 

For additional information, please visit the Company's website, www.shpreit.com, and follow the Company on Twitter at @SummitHotel_INN.

Forward-Looking Statements

This press release contains statements that are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally identifiable by use of forward-looking terminology such as "may," "will," "should," "potential," "intend," "expect," "seek," "anticipate," "estimate," "approximately," "believe," "could," "project," "predict," "forecast," "continue," "plan," "likely," "would" or other similar words or expressions. Forward-looking statements are based on certain assumptions and can include future expectations, future plans and strategies, financial and operating projections or other forward-looking information. Examples of forward-looking statements include the following: the Company's ability to realize growth from the deployment of renovation capital; projections of the Company's revenues and expenses, capital expenditures or other financial items; descriptions of the Company's plans or objectives for future operations, acquisitions, dispositions, financings, redemptions or services; forecasts of the Company's future financial performance and potential increases in average daily rate, occupancy, RevPAR, room supply and demand, EBITDAre, Adjusted EBITDAre, FFO and AFFO; the Company's outlook with respect to pro forma RevPAR, pro forma RevPAR growth, RevPAR, RevPAR growth,  AFFO,  AFFO per diluted share and unit and renovation capital deployed; and descriptions of assumptions underlying or relating to any of the foregoing expectations regarding the timing of their occurrence. These forward-looking statements are subject to various risks and uncertainties, not all of which are known to the Company and many of which are beyond the Company's control, which could cause actual results to differ materially from such statements. These risks and uncertainties include, but are not limited to, the state of the U.S. economy, supply and demand in the hotel industry, and other factors as are described in greater detail in the Company's filings with the Securities and Exchange Commission ("SEC"). Unless legally required, the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.

For information about the Company's business and financial results, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections of the Company's Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC, and its quarterly and other periodic filings with the SEC. The Company undertakes no duty to update the statements in this release to conform the statements to actual results or changes in the Company's expectations.

Non-GAAP Financial Measures

We disclose certain "non-GAAP financial measures," which are measures of our historical financial performance. Non-GAAP financial measures are financial measures not prescribed by Generally Accepted Accounting Principles ("GAAP"). These measures are as follows: (i) Funds From Operations ("FFO") and Adjusted Funds from Operations ("AFFO"), (ii) Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA"), Earnings before Interest, Taxes, Depreciation and Amortization for Real Estate ("EBITDAre"), Adjusted EBITDAre, and hotel EBITDA (as described below). We caution investors that amounts presented in accordance with our definitions of non-GAAP financial measures may not be comparable to similar measures disclosed by other companies, since not all companies calculate these non-GAAP financial measures in the same manner. Our non-GAAP financial measures should be considered along with, but not as alternatives to, net income (loss) as a measure of our operating performance. Our non-GAAP financial measures may include funds that may not be available for our discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, debt service obligations and other commitments and uncertainties. Although we believe that our non-GAAP financial measures can enhance the understanding of our financial condition and results of operations, these non-GAAP financial measures are not necessarily better indicators of any trend as compared to a comparable measure prescribed by GAAP such as net income (loss).

Funds From Operations ("FFO") and Adjusted FFO ("AFFO")

As defined by Nareit, FFO represents net income or loss (computed in accordance with GAAP), excluding preferred dividends, gains (or losses) from sales of real property, impairment losses on real estate assets, items classified by GAAP as extraordinary, the cumulative effect of changes in accounting principles, plus depreciation and amortization related to real estate assets, and adjustments for unconsolidated partnerships and joint ventures. AFFO represents FFO excluding amortization of deferred financing costs, franchise fees, equity-based compensation expense, debt transaction costs, premiums on redemption of preferred shares, losses from net casualties, non-cash lease expense, non-cash interest income and non-cash income tax related adjustments to our deferred tax assets. Unless otherwise indicated, we present FFO and AFFO applicable to our common shares and common units. We present FFO and AFFO because we consider FFO and AFFO an important supplemental measure of our operational performance and believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO and AFFO when reporting their results. FFO and AFFO are intended to exclude GAAP historical cost depreciation and amortization, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO and AFFO exclude depreciation and amortization related to real estate assets, gains and losses from real property dispositions and impairment losses on real estate assets, FFO and AFFO provide performance measures that, when compared year over year, reflect the effect to operations from trends in occupancy, guestroom rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income. Our computation of FFO differs slightly from the computation of Nareit-defined FFO related to the reporting of corporate depreciation and amortization expense. Our computation of FFO may also differ from the methodology for calculating FFO used by other equity REITs and, accordingly, may not be comparable to such other REITs. FFO and AFFO should not be considered as an alternative to net income (loss) (computed in accordance with GAAP) as an indicator of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions.  Where indicated in this release, FFO is based on our computation of FFO and not the computation of Nareit-defined FFO unless otherwise noted.

EBITDA, EBITDAre, Adjusted EBITDAre, and Hotel EBITDA

EBITDA

EBITDA represents net income or loss, excluding: (i) interest, (ii) income tax expense and (iii) depreciation and amortization. We believe EBITDA is useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results. Our management team also uses EBITDA as one measure in determining the value of acquisitions and dispositions.

EBITDAre and Adjusted EBITDAre

EBITDAre is based on EBITDA and is expected to provide additional relevant information about REITs as real estate companies in support of growing interest among generalist investors. EBITDAre is intended to be a supplemental non-GAAP performance measure that is independent of a company's capital structure and will provide a uniform basis to measure the enterprise value of a company compared to other REITs.

EBITDAre, as defined by Nareit, is calculated as EBITDA, excluding: (i) loss and gains on disposition of property and (ii) asset impairments, if any. We believe EBITDAre is useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results.

We make additional adjustments to EBITDAre when evaluating our performance because we believe that the exclusion of certain additional non-recurring or certain non-cash items described below provides useful supplemental information to investors regarding our ongoing operating performance. We believe that the presentation of Adjusted EBITDAre, when combined with the primary GAAP presentation of net income, is useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results.

Hotel EBITDA

With respect to hotel EBITDA, we believe that excluding the effect of corporate-level expenses and non-cash items provides a more complete understanding of the operating results over which individual hotels and operators have direct control.  We believe the property-level results provide investors with supplemental information on the ongoing operational performance of our hotels and effectiveness of the third-party management companies operating our business on a property-level basis.

We caution investors that amounts presented in accordance with our definitions of EBITDA, EBITDAre, adjusted EBITDAre, and hotel EBITDA may not be comparable to similar measures disclosed by other companies, since not all companies calculate these non-GAAP measures in the same manner. EBITDA, EBITDAre, adjusted EBITDAre, and hotel EBITDA should not be considered as an alternative measure of our net income (loss) or operating performance. EBITDA, EBITDAre adjusted EBITDAre, and hotel EBITDA may include funds that may not be available for our discretionary use due to functional requirements to conserve funds for capital expenditures and property acquisitions and other commitments and uncertainties. Although we believe that EBITDA, EBITDAre, adjusted EBITDAre, and hotel EBITDA can enhance your understanding of our financial condition and results of operations, these non-GAAP financial measures are not necessarily a better indicator of any trend as compared to a comparable GAAP measure such as net income (loss). Above, we include a quantitative reconciliation of EBITDA, EBITDAre, adjusted EBITDAre and hotel EBITDA to the most directly comparable GAAP financial performance measure, which is net income (loss) and operating income (loss).

SOURCE Summit Hotel Properties, Inc.