Xenia Hotels & Resorts Reports First Quarter 2020 Results - WIRE.RealEstate

Xenia Hotels & Resorts Reports First Quarter 2020 Results

May 21, 2020 11:05 PM ET


Xenia Hotels & Resorts, Inc. today announced results for the quarter ended March 31, 2020.

First Quarter 2020 Highlights

  • Net Loss: Net loss attributable to common stockholders was $(36.1) million and net loss per diluted share was $(0.32).
  • Same-Property RevPAR: Same-Property RevPAR was $126.52, a decrease of 27.6% compared to the first quarter of 2019, as a result of a nearly 20 point decline in occupancy percentage and a 3.3% decrease in ADR.
  • Same-Property Hotel EBITDA Margin:  Same-Property Hotel EBITDA Margin was 15.0%, which was a decline of 1,441 basis points compared to the first quarter of 2019.
  • Total Portfolio RevPAR: Total Portfolio RevPAR was $121.68, a decrease of 28.5% compared to the first quarter of 2019.
  • Adjusted EBITDAre: Adjusted EBITDAre declined $53.6 million to $24.5 million, a decrease of 68.7% compared to the first quarter of 2019.
  • Adjusted FFO per Diluted Share: Adjusted FFO per diluted share was $0.17, a decrease of $0.36 compared to the first quarter of 2019.
  • Financing Activity: The Company drew the remaining $340 million on its $500 million Senior Unsecured Revolving Credit Facility.
  • Dividends: The Company declared its first quarter dividend of $0.275 per share to common stockholders of record on March 31, 2020.  Xenia expects to suspend its dividend through the balance of the year unless it determines an additional dividend is required to maintain its REIT status.

“Our first quarter results are reflective of the rapidly deteriorating operating fundamentals that affected our industry and our portfolio as the quarter progressed.  After starting the year with encouraging results compared to our expectations, the unprecedented impact of the COVID-19 pandemic significantly reduced our occupancy throughout the portfolio in the month of March,” commented Marcel Verbaas, Chairman and Chief Executive Officer of Xenia. “This impact has further increased in the second quarter as both group and transient demand have been curtailed significantly.  In response to the operating conditions throughout our portfolio, we have worked with our operators to adjust operating expenses to reflect demand levels at our hotels and resorts, including temporarily suspending operations at 31 out of our 39 properties. Our primary focus as we manage through this crisis remains on the safety and well-being of our associates, our guests and our operators’ associates at our hotels and resorts. These will continue to be guiding principles as we review our strategy regarding temporary closures and potential reopenings of our properties. While we expect the recovery to take time, we anticipate starting to recommence operations at a select number of properties in the weeks ahead.”

“As outlined in our communications over the past two months, we have taken significant steps to reduce operating expenses both at our properties and at the corporate level. This has allowed us to minimize our monthly cash outflows while the majority of our hotels and resorts have temporarily suspended operations. We have also substantially reduced our anticipated capital expenditures for the year, while maintaining a focus on most efficiently completing a few large ongoing projects that we believe are prudent to complete from a cost perspective and will provide appropriate returns when business returns to normalized levels,” continued Mr. Verbaas. “Preserving liquidity and maintaining operational flexibility are our primary goals as we navigate through this historically difficult time for our company and the lodging industry as a whole.  We believe that our diverse portfolio that appeals to various types of demand, our best in class brands and operators, and our experienced management team that has managed through challenges in the past, will allow us to emerge from this period with a bright future ahead. I would like to hereby recognize the extraordinary efforts put forth by our operators and our corporate employees as they continue to focus on value preservation for our shareholders during this unprecedented time in their personal lives.”

 

Operating Results

     

The Company’s results include the following:

     
       
 

Three Months Ended March 31,

   
 

2020

 

2019

 

Change

 

($ amounts in thousands, except hotel statistics and per share amounts)

Net loss attributable to common stockholders(1)

$

(36,138)

   

$

16,703

   

(316.4)

%

Net loss per share available to common stockholders – basic and diluted

$

(0.32)

   

$

0.15

   

(313.3)

%

           

Same-Property Number of Hotels

38

   

38

   

 

Same-Property Number of Rooms

10,645

   

10,645

   

 

Same-Property Occupancy(2)

56.9

%

 

76.0

%

 

(1,912)

 bps

Same-Property Average Daily Rate(2)

$

222.35

   

$

230.02

   

(3.3)

%

Same-Property RevPAR(2)

$

126.52

   

$

174.87

   

(27.6)

%

Same-Property Hotel EBITDA(2)(3)

$

31,893

   

$

84,721

   

(62.4)

%

Same-Property Hotel EBITDA Margin(2)(3)

15.0

%

 

29.5

%

 

(1,441)

 bps

           

Total Portfolio Number of Hotels(4)

39

   

40

   

(1)

 

Total Portfolio Number of Rooms(4)

11,245

   

11,167

   

78

 

Total Portfolio RevPAR(5)

$

121.68

   

$

170.28

   

(28.5)

%

           

Adjusted EBITDAre(3)

$

24,460

   

$

78,086

   

(68.7)

%

Adjusted FFO(3)

$

19,370

   

$

60,031

   

(67.7)

%

Adjusted FFO per diluted share

$

0.17

   

$

0.53

   

(67.9)

%

 

(1)

Net loss for the three months ended March 31, 2020 reflects the impact of a $16.4 million of non-cash goodwill impairment charge.

(2)

“Same-Property” includes all hotels owned as of March 31, 2020, except for Hyatt Regency Portland at the Oregon Convention Center, which commenced operations in late December 2019. Includes hotels that had temporarily suspended operations for a portion of the three months ended March 31, 2020. “Same-Property” also includes renovation disruption for multiple capital projects during the periods presented and disruption from the COVID-19 pandemic in 2020 results, and excludes the NOI guaranty payment at Andaz San Diego.

(3)

See tables later in this press release for reconciliations from net income to Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), EBITDA 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.

 

Business Update

The impact of the COVID-19 pandemic on the global economy, lodging industry, and the Company’s operations was significant during the first quarter and has further increased during the second quarter.

The vast majority of group business for the second quarter canceled and the Company is uncertain if, or when, this business will rebook in the future.  Additionally, due to the uncertainty surrounding general sentiment towards travel as restrictions are lifted, as well as the likelihood of strict corporate travel policies, both business transient and leisure demand continue to be extremely difficult to forecast throughout the portfolio.

The Company’s operating partners have lowered hotel operating expenses, primarily by adjusting staffing and service levels in response to the significant reduction in demand. As a result, a substantial number of the properties’ employees have been furloughed for which we have accrued approximately $6 million in future expenses in the first quarter. As of March 31, 2020, the Company had temporarily suspended operations or had decided to temporarily suspend operations at 24 of its 39 properties. At present, operations at 31 of the Company’s hotels and resorts remain temporarily suspended. The remainder of the Company’s properties have adjusted operating expenses to reflect significantly lower levels of demand. 

As governmental authorities begin to ease “stay at home” orders, the Company will work with its operating partners to evaluate the best strategy and approach for reopening each of its properties based on the hotel or resort’s ability to implement necessary safety precautions and cleanliness standards, anticipated demand, and other considerations. Upon recommencement of operations at the Company’s hotels and resorts that have temporarily suspended operations, Xenia anticipates there will be startup expenses, as well as an increase in expenses related to enhanced safety and cleanliness measures. At this time, the Company anticipates five of its smaller properties with a leisure demand focus will recommence operations during the month of May.

At the corporate level, the Company remains focused on expense controls across the platform.  As a result, Xenia expects to reduce its corporate full-year cash general and administrative expense by over 20%, or approximately $5.5 million, excluding the impact of non-recurring restructuring costs.

Transactions

During the first quarter, the Company announced it had entered into an agreement to sell the 522-room Renaissance Atlanta Waverly Hotel & Convention Center for $155 million with an anticipated closing date of July 31, 2020. The buyer has a $7.75 million non-refundable deposit at risk should the transaction not proceed. Based on the current status of the financial markets, and overall economic uncertainty, the Company can make no assurances that this transaction will close as agreed upon, or at all. If the transaction is not completed as a result of the buyer’s default, the Company expects to receive the non-refundable deposit which is currently being held in escrow.

As previously announced, subsequent to quarter end, the pending sale of the 492-room Renaissance Austin Hotel did not close, as contemplated in the amended agreement and, as a result, the agreement was terminated. The Company retained the $2 million deposit that was previously released from escrow.

Additionally, subsequent to quarter end, the pending sale of the 7-hotel Kimpton-managed portfolio did not close.  On April 30, 2020, the buyer parties provided a notice alleging sellers breached the agreement to sell the portfolio and purporting to terminate the agreement prior to the closing date.  The Company denied the buyers’ allegations and rejected the buyers’ purported termination.  On the May 4, 2020 closing date, the buyer parties failed to close on the transaction.  As a result of the buyer parties’ failure to close, the Company terminated the agreement and is vigorously pursuing, over the buyer parties’ objection, the $20 million deposit currently held in escrow.

Liquidity and Balance Sheet

In order to enhance cash liquidity, the Company drew the remaining $340 million on its $500 million Senior Unsecured Revolving Credit Facility during the first quarter.

As of March 31, 2020, the Company had total outstanding debt of $1.6 billion with a weighted average interest rate of 3.32%.  Total net debt to trailing twelve month Corporate EBITDA (as defined in Section 1.01 of the Company’s Senior Unsecured Revolving Credit Facility) was 5.2x.

The Company is engaged in active discussions with its unsecured lenders to amend each of its unsecured borrowing agreements, as it breached a financial covenant on each of its unsecured debt borrowings at the end of the first quarter and expects to breach additional financial covenants at the end of the second quarter.  In addition, the Company is in discussions with several of its secured lenders to obtain loan modifications that may include covenant waivers, debt service forbearance or deferral, as well as other relief. 

As of March 31, 2020, Xenia had approximately $397 million of cash and cash e quivalents, which included approximately $35 million of cash held in property-level working capital accounts. 

In addition, the Company held approximately $80 million of restricted cash and escrows at the end of the first quarter. Approximately, $67 million of restricted cash was held in property FF&E replacement reserves. The Company has agreed with certain of its operating partners that a portion of a respective property’s FF&E replacement reserves may be utilized for hotel operating expenses, subject to restrictions and conditions, including replenishment.

The Company estimates that if all of its properties were to temporarily suspend operations, its monthly recurring cash expenses would be approximately $17 million to $20 million, inclusive of hotel operating expenses, such as wages and benefits, real estate and personal property taxes, insurance, as well as corporate general and administrative expenses.  The Company’s debt service, should it be paid in accordance with current debt agreements, totals an additional $5 million of monthly cash expense.

Following the payment of its first quarter dividend in April, the Company expects to suspend its dividend through the balance of the year unless it determines an additional dividend is required to maintain its REIT status.

Capital Markets

During the first quarter, the Company repurchased a total of 165,516 shares of common stock for total consideration of $2.3 million. As of March 31, 2020, the Company had approximately $94.7 million remaining under its share repurchase authorization. The Company does not anticipate utilizing the share repurchase program during the remainder of 2020.

During the three months ended March 31, 2020, the Company did not issue any shares of its common stock through its At-The-Market (“ATM”) program. As of March 31, 2020, the Company had approximately $62.6 million remaining available for sale under the ATM program.

Capital Expenditures

During the three months ended March 31, 2020, the Company invested $22 million in its portfolio.  During the quarter, the Company substantially completed the guestrooms, corridors, and meeting space renovation at Park Hyatt Aviara Resort, Golf Club & Spa.  Additionally, the Company completed the meeting space renovations at The Ritz-Carlton, Pentagon City and Westin Oaks Houston at the Galleria.

The Company has canceled or deferred approximately $50 million of its 2020 capital expenditure budget, eliminating non-essential budgeted expenditures and continuing primarily with projects currently in-progress or for which materials have been ordered.  The Company’s current estimate for full-year capital expenditures is approximately $70 million, a reduction of over 40% from the midpoint of the Company’s prior guidance range of $110 million to $130 million.

Each of the Company’s major 2020 projects, including the transformational renovation at Park Hyatt Aviara Resort, Golf Club & Spa, the guestroom renovation at Marriott Woodlands Waterway Hotel & Convention Center, and the renovation of the existing meeting space at Hyatt Regency Grand Cypress, is progressing with adjustments to scope and timing to reduce 2020 capital outlays.

The remaining components of the Park Hyatt Aviara renovation that will be completed by the first quarter of 2021 include the major renovation of the lobby, lobby bar, and outdoor terrace, conversion of the existing restaurant into a new three-meal dining concept, the major renovation of the exterior, including pool area, exterior function space, and upgrades to all landscaping, and renovation of the spa and fitness area, as well as the golf clubhouse and its specialty restaurant.  The Company has deferred the golf course renovation to a later date.

The comprehensive guest room renovation at Marriott Woodlands is expected to be completed in the third quarter, while the guest bathroom and M Club components have been deferred to a later date.  The Company has also deferred certain scope items as part of the renovation of the existing ballroom and meeting space at Hyatt Regency Grand Cypress.

Impairment Loss

During the first quarter of 2020, the Company recorded a non-cash goodwill impairment charge of $16.4 million related to Andaz Savannah and Bohemian Hotel Savannah Riverfront, Autograph Collection. The goodwill impairments were directly attributed to the continuing material adverse impact caused by the COVID-19 pandemic.

2020 Outlook and Guidance

On March 11, 2020, the Company withdrew its previously issued full-year 2020 guidance due to increased uncertainty related to the financial impact of COVID-19 to the Company.  Since that time, the impact of the pandemic on its operations has increased significantly and the uncertainty surrounding the balance of 2020 continues.  As a result, apart from the cash G&A and capital expenditure guidance referenced above, the Company does not expect to issue guidance until it has more clarity on operating fundamentals.

First Quarter 2020 Earnings Call

The Company will conduct its quarterly conference call on Monday, May 11, 2020 at 1:00 PM Eastern Time. To participate in the conference call, please dial (855) 656-0921.  Additionally, a live webcast of the conference call will be available through the Company’s website, www.xeniareit.com.  A replay of the conference call will be archived and available online through the Investor Relations section of the Company’s website for 90 days.

See Campaign: http://http://www.xeniareit.com
Contact Information:
http://www.xeniareit.com

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