Summit Hotel Properties Reports First Quarter 2018 Results

AUSTIN, Texas, May 2, 2018 /PRNewswire/ -- Summit Hotel Properties, Inc. (NYSE: INN) (the "Company"), today announced results for the first quarter ended March 31, 2018.

"We continue to be encouraged by the improved demand trends experienced in the first quarter, which drove our key operating and financial metrics above our expectations going in to the quarter," said Dan Hansen, the Company's Chairman, President and Chief Executive Officer.  "RevPAR for our pro forma portfolio grew 2.1% in the quarter, which was driven primarily by an increase in average rate, in part as the result of better corporate travel demand.  We also continue to make great progress on our strategic capital recycling program as we entered into contracts to sell four hotels for $43.3 million.  The pending transactions further demonstrate our ability to recycle capital out of lower RevPAR hotels with lower return profiles and deploy capital at similar initial yields into hotels with higher RevPAR and margins with superior growth profiles," commented Mr. Hansen.

First Quarter 2018 Highlights

• Net Income:  Net income attributable to common stockholders decreased to $0.9 million, or $0.01 per diluted share, compared with $28.9 million, or $0.31 per diluted share, in the same period of 2017.  When excluding the $3.3 million non-cash preferred stock redemption premium during the three months ended March 31, 2018 and the $19.5 million pretax net gain on disposal of assets during the three months ended March 31, 2017, net income attributable to common stockholders decreased by $5.3 million as compared to the same period in 2017.
• Pro Forma RevPAR:  Pro forma revenue per available room ("RevPAR") increased 2.1 percent to $117.60 from the same period in 2017.  Pro forma average daily rate ("ADR") grew to $154.22, an increase of 1.2 percent from the same period in 2017.  Pro forma occupancy increased 0.9 percent to 76.3 percent.
• Same-Store RevPAR:  Same-store RevPAR remained unchanged at $114.78.  Same-store ADR increased 1.0 percent to $150.73 compared to the same period in 2017, which was offset by an occupancy decline of 1.0 percent to 76.2 percent. 
• Pro Forma Hotel EBITDA:  Pro forma hotel EBITDA was $50.4 million, a decrease of 0.5 percent from the same period in 2017.  Pro forma hotel EBITDA margin contracted by 106 basis points to 35.9 percent from 37.0 percent in the same period of 2017.  Excluding the effect of a 12.0 percent increase in property taxes, pro forma hotel EBITDA margin contracted by 40 basis points to 36.6 percent.
• Adjusted EBITDAre:  Adjusted EBITDAre increased 13.9 percent to $46.7 million from $41.1 million in the same period of 2017.
• Adjusted FFO:  Adjusted Funds from Operations ("AFFO") increased 6.5 percent to $32.1 million, or $0.31 per diluted share, from $30.2 million in the same period of 2017.

The Company's results for the three months ended March 31, 2018 and 2017 are as follows:

Pending Disposition Activity

During the first quarter, the Company entered into agreements to sell the 88-guestroom Holiday Inn Express & Suites in Sandy, Utah and the 87-guestroom Hampton Inn in Provo, Utah for an aggregate sales price of $19.0 million.  The Company also entered into agreements to sell the 143-guestroom Holiday Inn and 122-guestroom Hilton Garden Inn in Duluth, Georgia for an aggregate sales price of $24.3 million.  For the twelve months ended March 31, 2018, the four hotels had an average RevPAR of $87.49, which was 26% lower than the Company's pro forma portfolio RevPAR of $118.29, and hotel EBITDA margin of 32.4 percent, which was 470 basis points lower than the portfolio average for the same period.

The transactions are expected to close during the second quarter and the Company anticipates applying the net proceeds to the outstanding balance on its senior unsecured revolving credit facility.  The Company estimates that the hotels would have contributed approximately $3.5 million of EBITDA through the remainder of 2018.  The aggregate sales price of $43.3 million, plus estimated future capital improvements, represents a capitalization rate of 8.0 percent for the trailing twelve months ended March 31, 2018.

Capital Investment

The Company invested $13.0 million in capital improvements during the three months ended March 31, 2018.  The scope of work ranged from common space improvements to complete guestroom renovations, as well as revamped bar areas and fitness centers to enhance the guest experience.  Notably, the 252-guestroom Holiday Inn Express & Suites San Francisco Fisherman's Wharf is currently undergoing a $6.3 million comprehensive renovation that will feature complete guestroom and lobby upgrades.  The project is expected to be completed late in the second quarter of 2018, and the hotel will be well-positioned for the Moscone Center's expansion project completion scheduled for December 2018.

Capital Markets & Balance Sheet

During the first quarter and subsequent to quarter end, the Company completed the following capital markets transactions:

• On February 15, 2018, the Company closed on a new seven-year $225 million unsecured term loan.  The term loan includes an accordion feature that, subject to certain conditions, allows the Company to request an increase in lender commitments up to an aggregate of $375 million.  The unsecured term loan matures on February 14, 2025, carries an interest rate based on an improved pricing grid ranging from 180 basis points to 255 basis points plus LIBOR depending upon the Company's leverage ratio, and includes a delayed draw feature.  At closing, the Company received an initial loan advance of $140 million and used the proceeds to replace its existing seven-year $140 million unsecured term loan.  On or before May 16, 2018, the Company expects to advance the remaining $85.0 million and apply the proceeds to outstandings under its senior unsecured revolving credit facility.
• On March 20, 2018, the Company paid $85.3 million to redeem all 3,400,000 of its outstanding 7.125% Series C preferred shares at a redemption price of $25 per share plus accrued and unpaid dividends.
• On April 2, 2018, the Company repaid four mortgage loans totaling $23.9 million that had an average interest rate of 5.39%.  The loans were repaid without penalty and all four hotels that secured the loans are now unencumbered.  As a result, 54 hotels and over 70 percent of the Company's EBITDA is now unencumbered.

At March 31, 2018, the Company had the following:

• Total outstanding debt of $981.1 million with a weighted average interest rate of 4.13 percent.
• Undrawn capacity on its senior unsecured credit facilities of $260.0 million, of which $175.0 million was available on its senior unsecured revolving credit facility and $85.0 million was available on its new 7-year $225 million unsecured term loan.
• 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 20, 2018, the Company had the following:

• Total outstanding debt of $971.5 million with a weighted average interest rate of 4.10 percent.
• Undrawn capacity on its senior unsecured credit facilities of $245.0 million, of which $160.0 million was available on its senior unsecured revolving credit facility and $85.0 million was available on its new 7-year $225 million unsecured term loan.

Dividends

On April 30, 2018, 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 4.9 percent based on the May 1, 2018 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, 2018 to holders of record as of May 16, 2018.

2018 Outlook

The Company is providing its outlook for the second quarter and full year 2018 based on its 83 hotels owned as of May 2, 2018 and investment activity it expects to complete in the second quarter, including the opening of the 168-guestroom Hyatt House Orlando Universal development and the sale of four hotels containing 440 guestrooms for an aggregate sales price of $43.3 million.  There are no future acquisitions, dispositions, or additional capital markets activities assumed in the Company's outlook for the second quarter and full year 2018 beyond those previously mentioned.

First Quarter 2018 Earnings Conference Call

The Company will conduct its quarterly conference call on Thursday, May 3, 2018, at 9:00 a.m. (ET).  To participate in the conference call, please dial 877-930-8101.  The conference identification code for the call is 3597417.  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 10, 2018, by dialing 855-859-2056, conference identification code 3597417.  A replay will also be available in the Investor Relations section of the Company's website until July 31, 2018.

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 2, 2018, the Company's portfolio consisted of 83 hotels with a total of 12,250 guestrooms located in 26 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, 2017, 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.