Summit Hotel Properties Reports Fourth Quarter And Full Year 2016 Results

AUSTIN, Texas, Feb. 23, 2017 /PRNewswire/ -- 

• Net Income of $87.4 million for 2016;
• Adjusted FFO climbs 14.0 percent to $1.41 per share for 2016;
• Annual Pro Forma RevPAR Increases 3.8 percent

Summit Hotel Properties, Inc. (NYSE: INN) (the "Company"), today announced results for the fourth quarter and full year ended December 31, 2016.

"Our diverse portfolio of premium select-service hotels performed exceptionally well during 2016 while achieving an all-time high pro forma hotel EBITDA margin of 38.0 percent," said Dan Hansen, the Company's Chairman, President and Chief Executive Officer.  "For five years in a row, our portfolio has outperformed the Smith Travel Research Upscale RevPAR growth rate by an average of nearly 200 basis points.  This track record of outperformance demonstrates our ability to actively manage our portfolio and drive shareholder value," commented Mr. Hansen.

Full Year 2016 Highlights

• Net Income:  Net income attributable to common stockholders decreased to $87.4 million, or $1.00 per diluted share, compared with $107.8 million, or $1.24 per diluted share, in the same period of 2015.  When excluding the $49.9 million and $65.1 million pretax gain on disposal of assets in 2016 and 2015, respectively, and the $9.1 million non-recurring transaction fee income in 2015, net income attributable to common stockholders in 2016 increased by $3.9 million as compared to 2015.
• Pro Forma RevPAR: Pro forma revenue per available room ("RevPAR") grew to $112.89, an increase of 3.8 percent over the same period in 2015. Pro forma average daily rate ("ADR") grew to $144.26, an increase of 3.1 percent from the same period in 2015. Pro forma occupancy increased by 0.7 percent to 78.3 percent in 2016.
• Same-Store RevPAR: Same-store RevPAR grew to $107.83, an increase of 3.3 percent over the same period in 2015. Same-store ADR grew to $138.75, an increase of 2.6 percent from the same period in 2015. Same-store occupancy increased by 0.7 percent to 77.7 percent compared to the same period in 2015.
• Pro Forma Hotel EBITDA:  Pro forma hotel EBITDA grew to $184.4 million, an increase of 8.0 percent over the same period in 2015.  Pro forma hotel EBITDA margin expanded by 93 basis points to 38.0 percent compared to 37.1 percent in the same period of 2015.
• Adjusted EBITDA:  Adjusted EBITDA increased to $166.5 million from $153.6 million in the same period of 2015, an increase of $12.9 million or 8.4 percent.
• Adjusted FFO:  Adjusted Funds from Operations ("AFFO") increased to $123.8 million, or $1.41 per diluted share, an increase in AFFO per diluted share of 13.1 percent over the same period in 2015.
• Acquisitions:  The Company acquired four hotels containing 749 guestrooms for a total purchase price of $244.2 million, or $326,000 per key.
• Dispositions:  The Company sold ten hotels containing 1,212 guestrooms for an aggregate sales price of $147.3 million, or $121,500 per key.

The Company's results for the three and twelve months ended December 31, 2016 and 2015 are as follows:

Fourth Quarter 2016 Highlights

• Net Income: Net income attributable to common stockholders decreased to $3.3 million, or $0.04 per diluted share, compared with $80.0 million, or $0.92 per diluted share, for the same period of 2015. When excluding the $2.1 million non-recurring premium on redemption of preferred shares in 2016, the $65.8 million pretax gain on disposal of assets primarily related to the sale of hotels and $9.1 million of non-recurring transaction fee income in 2015, net income attributable to common stockholders increased by $0.3 million.
• Pro Forma RevPAR: Pro forma RevPAR grew to $103.05, an increase of 1.0 percent over the same period in 2015. Pro forma ADR grew to $139.90, an increase of 2.2 percent from the same period in 2015. Pro forma occupancy decreased by 1.1 percent to 73.7 percent in 2016.
• Same-Store RevPAR: Same-store RevPAR grew to $97.74, an increase of 0.3 percent over the same period in 2015. Same-store ADR grew to $133.67, an increase of 2.0 percent from the same period in 2015. Same-store occupancy decreased by 1.6 percent to 73.1 percent compared to the same period in 2015.
• Pro Forma Hotel EBITDA:  Pro forma hotel EBITDA grew to $39.8 million, an increase of 2.9 percent over the same period in 2015.  Pro forma hotel EBITDA margin expanded by 79 basis points to 35.7 percent compared to 34.9 percent in the same period of 2015.
• Adjusted EBITDA:  Adjusted EBITDA increased to $36.1 million from $33.6 million in the same period of 2015, an increase of $2.5 million or 7.4 percent.
• Adjusted FFO:  AFFO increased to $26.7 million, or $0.30 per diluted share, an increase in AFFO per diluted share of 10.5 percent over the same period in 2015.
• Acquisitions:  The Company acquired the 206-guestroom Hyatt Place Chicago Downtown – The Loop for a total purchase price of $73.8 million, or $358,000 per key.  The hotel had RevPAR of $170.62 for the year ended December 31, 2016.

Acquisitions

During 2016, the Company acquired four hotels containing 749 guestrooms for an aggregate purchase price of $244.2 million.  Pro forma RevPAR for the full year 2016 for the four hotels was $156.13, as compared to $107.83 for the 70 hotels classified as same-store in 2016, representing a 44.8 percent RevPAR premium.

On January 19, 2016, the Company acquired the 226-guestroom Courtyard by Marriott located in Nashville, Tennessee, for a total purchase price of $71.0 million.

On January 20, 2016, the Company acquired the 160-guestroom Residence Inn by Marriott located in Atlanta, Georgia, for a total purchase price of $38.0 million.

On August 9, 2016, the Company acquired the 157-guestroom Marriott in Boulder, Colorado, for a total purchase price of $61.4 million.

On October 28, 2016, the Company acquired the 206-guestroom Hyatt Place Chicago Downtown for a total purchase price of $73.8 million.

Dispositions

During 2016, the Company disposed of ten hotels for an aggregate sales price of $147.3 million.

On February 11, 2016, the Company sold a portfolio of six hotels totaling 707 guestrooms for an aggregate sales price of $108.3 million.

On May 13, 2016, the Company sold the 128-guestroom Holiday Inn Express & Suites located in Irving (Las Colinas), Texas, for a total sales price of $10.5 million.

On June 1, 2016, the Company sold the 136-guestroom Aloft in Jacksonville, Florida, for a total sales price of $8.6 million.

On June 7, 2016, the Company sold the 119-guestroom Holiday Inn Express located in Vernon Hills, Illinois, for a total sales price of $5.9 million.

On July 6, 2016, the Company sold the 122-guestroom Hyatt Place located in Irving (Las Colinas), Texas, for a total sales price of $14.0 million.

Capital Markets

On October 28, 2016, the Company paid $50.7 million to redeem all 2,000,000 shares of its issued and outstanding 9.25% Series A Cumulative Redeemable Preferred Stock at a redemption price of $25.00 per share plus accrued and unpaid dividends.  The redemption was funded using a portion of the net proceeds from its 6.45% Series D Cumulative Redeemable Preferred Stock issuance in June 2016.

During the fourth quarter, the Company sold and issued 6,151,514 shares under its at-the-market ("ATM") offering program at an average price of $14.63 per share, for total net proceeds of $89.1 million.  The net proceeds were used to reduce the outstanding balance of its senior unsecured revolving credit facility, which had been used for acquisitions and other general corporate purposes.

Capital Investment & Asset Management

The Company invested $11.3 million and $42.4 million in capital improvements during the three and twelve months ended December 31, 2016, respectively.  For 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.

During the fourth quarter, the Company substantially completed a full renovation of the Hyatt House located in Miami, Florida.  The Company added seven additional guestrooms to the hotel during the renovation to better utilize existing space, bringing the total number of guestrooms to 163.  The new guestrooms were placed into service on January 1, 2017, at a cost of approximately $99,600 per key.  Management expects the additional guestrooms to yield a 21.3 percent cash-on-cash return in 2017.

Balance Sheet

At December 31, 2016, the Company had the following:

• Total outstanding debt of $657.6 million with a weighted average interest rate of 3.69 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 $200.0 million outstanding and $250.0 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 of 3.7x.

Looking ahead, the balance sheet continues to be well-positioned with only 2.2 percent of total debt maturing over the next two years and an average time to maturity of 4.3 years.

At February 15, 2017, the Company had the following:

• Total outstanding debt of $641.2 million with a weighted average interest rate of 3.72 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 $185.0 million outstanding and $265.0 million available to borrow.
• Total net debt to trailing twelve month adjusted EBITDA of 3.6x.

Common Dividend

During 2016, the Company announced common dividend increases in April 2016 and October 2016 of 12.8 percent and 22.6 percent, respectively, resulting in an annualized dividend rate of $0.65 per share.  The common dividend increases validate the continued strong cash flows generated by our diversified portfolio of high-quality hotels.

On January 24, 2017, the Company declared a quarterly cash dividend of $0.1625 per share on its common stock and per common unit of limited partnership interest in Summit Hotel OP, LP.  The quarterly common dividend of $0.1625 per share represents an annualized dividend yield of 4.0 percent based on the February 22, 2017 closing stock price.

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

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

The dividends are payable on February 28, 2017 to holders of record as of February 14, 2017.

Subsequent Events

Disposition Update

On January 12, 2017, the Company and an affiliate of American Realty Capital Hospitality Trust, Inc. ("ARCH") entered into an agreement to extend the scheduled closing date on the remaining hotels under contract for sale to ARCH from December 30, 2016 to April 27, 2017 to allow ARCH the necessary time to close on their $400 million convertible preferred investment commitment from an affiliate of Brookfield Asset Management.

As consideration for the closing date extension, ARCH, as borrower, entered into a loan agreement with an affiliate of the Company, as lender, in the amount of $3.0 million.  If ARCH defaults under the terms of the purchase and sale agreement, the loan shall be in force, with the principal balance and any accrued and unpaid interest due and payable on July 31, 2017.  If ARCH acquires the remaining hotels on or before April 27, 2017, the loan shall be rescinded. 

The original $27.5 million loan to ARCH, of which $22.5 million is currently outstanding, along with any accrued and unpaid interest, will be due and payable on the earlier of the closing date of the remaining hotels or February 11, 2018.  If the remaining hotels do not close on or before April 27, 2017, all accrued and unpaid payment-in-kind interest due shall immediately become payable and ARCH shall be required to make $1.0 million principal amortization payments in August and September 2017.  For additional details, please see the Company's Form 8-K filed with the SEC on January 13, 2017.

2017 Outlook

The Company is providing its outlook for the first quarter and full year 2017 based on its 81 hotels owned as of February 23, 2017.  The Company's Adjusted FFO outlook for the first quarter and full year 2017 reflects the sale of the 90-guestroom Courtyard by Marriott located in El Paso, Texas, for a total sales price of $11.0 million in the first quarter 2017, the sale of the remaining seven ARCH hotels containing 651 guestrooms for a total sales price of $66.8 million in the second quarter 2017, and the acquisition of a 129-guestroom hotel for $38.0 million in the second quarter of 2017.  All of the transactions are subject to customary closing conditions and no assurances can be given that the transactions will close within the expected timeframe or at all.

Fourth Quarter and Full Year 2016 Earnings Conference Call

The Company will conduct its quarterly conference call on Friday, February 24, 2017, 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 60552697.  Additionally, a live webcast of the call will be available through the Company's website, www.shpreit.com.  A replay of the conference call will be available until 11:59 p.m. (ET) on Friday, March 3, 2017, by dialing 855-859-2056; conference identification code 60552697.  A replay of the conference call will also be available on the Company's website until April 30, 2017.

About Summit Hotel Properties

Summit Hotel Properties, Inc., is a publicly-traded real estate investment trust focused on owning primarily premium-branded, select-service hotels in the Upscale segment of the lodging industry.  As of February 23, 2017, the Company's portfolio consisted of 81 hotels with a total of 10,964 guestrooms located in 23 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 embedded 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, 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, 2016, 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.