Summit Hotel Properties Reports Fourth Quarter And Full Year 2018 Results

AUSTIN, Texas, Feb. 26, 2019 /PRNewswire/ -- Summit Hotel Properties, Inc. (NYSE: INN) (the "Company"), today announced results for the fourth quarter and full year ended December 31, 2018.

"Our results for the fourth quarter came in at the high-end of our expectations as better than expected demand, across several of our key markets, partially offset the comparison we had to the very strong fourth quarter of 2017,"  said Dan Hansen, the Company's Chairman, President and Chief Executive Officer. "Our outlook for 2019 assumes a continuation of the current operating environment.  We remain confident in our differentiated investment thesis of owning high-quality, well-located assets with efficient operating models and its ability to generate attractive long-term investment returns. We have taken advantage of a favorable transaction environment by completing approximately $120 million of asset sales over the last twelve months at very attractive capitalization rates and we continue to invest capital to add value across the portfolio," commented Mr. Hansen.

Full Year 2018 Highlights

• Net Income:  Net income attributable to common stockholders decreased to $71.0 million, or $0.68 per diluted share, compared with $79.2 million, or $0.79 per diluted share, in the same period of 2017.
• Pro Forma RevPAR: Pro forma revenue per available room ("RevPAR") increased 0.8 percent to $121.74 from the same period in 2017. Pro forma average daily rate ("ADR") increased 1.3 percent to $156.18 compared to the same period in 2017, which was partially offset by an occupancy decline of 0.5 percent to 77.9 percent.
• Same-Store RevPAR: Same-store RevPAR decreased 0.2 percent to $119.53 from the same period in 2017. Same-store ADR increased 1.6 percent to $153.87 compared to the same period in 2017, which was offset by an occupancy decline of 1.8 percent to 77.7 percent.
• Pro Forma Hotel EBITDA:  Pro forma hotel EBITDA was $205.9 million, a decrease of 0.2 percent from the same period in 2017.  Pro forma hotel EBITDA margin contracted by 81 basis points to 37.0 percent from 37.8 percent in the same period of 2017.  Excluding the effect of a 9.3 percent increase in property taxes, pro forma hotel EBITDA margin contracted by 29 basis points to 37.5 percent.
• Adjusted EBITDAre:  Adjusted EBITDAre increased 9.1 percent to $196.5 million from $180.1 million in the same period of 2017.
• Adjusted FFO:  AFFO increased 5.1 percent to $141.0 million, or $1.35 per diluted share, from $134.1 million, or $1.34 per diluted share, in the same period of 2017.
• Acquisitions:  The Company acquired the 150-guestroom Residence Inn by Marriott Boston Watertown on September 12, 2018, for a purchase price of $71.0 million at a forward twelve-month capitalization rate of 8.1 percent.
• Dispositions:  The Company sold eight hotels containing 910 guestrooms for an aggregate sales price of $106.8 million.  The eight properties were sold at a trailing capitalization rate of 7.7 percent and resulted in the realization of an aggregate net gain on sale of $42.5 million.

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

Fourth Quarter 2018 Highlights

• Net Income:  Net income attributable to common stockholders decreased to $2.0 million, or $0.02 per diluted share, compared with $2.4 million, or $0.02 per diluted share, in the same period of 2017.
• Pro Forma RevPAR: Pro forma RevPAR decreased 1.3 percent to $113.55 from the same period in 2017. Pro forma ADR increased 0.9 percent to $152.41, which was offset by an occupancy decline of 2.2 percent to 74.5 percent.
• Same-Store RevPAR: Same-store RevPAR decreased 1.5 percent to $111.03 from the same period in 2017. Same-store ADR increased 1.3 percent to $150.30 compared to the same period in 2017, which was offset by an occupancy decline of 2.8 percent to 73.9 percent.
• Pro Forma Hotel EBITDA:  Pro forma hotel EBITDA was $47.1 million, a decrease of 0.9 percent from the same period in 2017.  Pro forma hotel EBITDA margin contracted by 61 basis points to 35.5 percent from 36.1 percent in the same period of 2017.
• Adjusted EBITDAre:  Adjusted EBITDAre increased 1.2 percent to $45.0 million from $44.5 million in the same period of 2017.
• Adjusted FFO:  Adjusted Funds from Operations ("AFFO") decreased 0.7 percent to $31.3 million, or $0.30 per diluted share, from $31.5 million, or $0.30 per diluted share, in the same period of 2017.

Capital Improvements

During the three and twelve months ended December 31, 2018, the Company invested $17.1 million and $66.6 million in capital improvements, respectively.  Among the notable projects completed during the year were comprehensive renovations of the 252-guestroom Holiday Inn Express & Suites San Francisco Fisherman's Wharf and the 165-guestroom Marriott Boulder.  In addition, the Company invested $32.4 million into its hotels acquired during 2016 and 2017, which primarily relates to change-of-ownership property improvement plans and represents nearly 50 percent of total spend during the year.  The Company anticipates investing $40.0 to $60.0 million in capital improvements across its portfolio in 2019.

Capital Markets & Balance Sheet

During the fourth quarter, the Company completed the following capital markets transactions:

• On December 6, 2018, the Company closed on a new $600 million unsecured credit facility which increased the size of the facility by $150 million, extended the maturity dates, reduced borrowing costs, enhanced flexibility, and expanded the Company's bank group. The upsized credit facility is comprised of a $400 million unsecured revolving line of credit and a $200 million unsecured term loan and replaced the Company's previous $450 million unsecured credit facility. The $400 million revolving line of credit matures in March 2023 and can be extended to March 2024, subject to certain conditions, and the $200 million term loan matures in April 2024. The new credit facility includes an accordion feature that will allow the Company to request additional lender commitments up to a total of $900 million. The interest rate on the credit facility is based on a pricing grid ranging from 135 basis points to 210 basis points plus LIBOR for the $200 million term loan and 140 basis points to 215 basis points plus LIBOR for the $400 million revolving line of credit, depending upon the Company's leverage ratio.
• On December 31, 2018, the Company repaid, without any prepayment penalty, four mortgage loans totaling $107.1 million that were scheduled to mature in March 2019 and had an average interest rate of 5.18 percent. The repayment of these loans increased the Company's average time to maturity to nearly five years and there are no significant debt maturities until November 2022.

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

• Total outstanding debt of $965.0 million with a weighted average interest rate of 4.27 percent.
• After giving effect to interest rate derivative agreements, $569.1 million, or 59 percent, of our debt had fixed interest rates, and $395.9 million, or 41 percent had variable interest rates.
• Undrawn availability on its senior unsecured revolving credit facility of $285.0 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 February 18, 2019, the Company had the following:

• Total outstanding debt of $949.4 million with a weighted average interest rate of 4.27 percent.
• After giving effect to interest rate derivative agreements, $568.7 million, or 60 percent, of our debt had fixed interest rates, and $380.8 million, or 40 percent had variable interest rates.
• Undrawn availability on its senior unsecured revolving credit facility of $300.0 million.
• Total net debt to trailing twelve-month pro forma adjusted EBITDAre of 4.7x.

Subsequent Events

On January 31, 2019, the Company acquired a fee simple interest in the real estate at its Residence Inn by Marriott Baltimore Hunt Valley for a purchase price of $4.1 million.  The hotel is no longer subject to a ground lease and the Company will no longer be required to make annual ground lease payments equal to $0.4 million, resulting in an effective capitalization rate of 10.0 percent.

On February 12, 2019, the Company completed the sale of the 66-guestroom Holiday Inn Express and 64-guestroom Country Inn & Suites located in Charleston, WV for an aggregate sales price of $11.6 million which resulted in an estimated combined gain on sale of $4.1 million.  The aggregate sales price, plus estimated future capital improvements, represents a capitalization rate of 7.4 percent for the trailing twelve months ended December 31, 2018.  The two hotels had an average RevPAR of $79.82, which was 34 percent lower than the Company's pro forma portfolio average RevPAR, and hotel EBITDA margin of 33.3 percent, which was 370 basis points lower than the portfolio average for the same period.  Net proceeds from the sale were applied to reduce the outstanding balance on the Company's unsecured revolving credit facility.

Dividends

On February 1, 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 February 25, 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 February 28, 2019 to holders of record as of February 14, 2019.

2019 Outlook

The Company is providing its outlook for the full year 2019 based on 75 hotels owned as of February 26, 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.

Fourth Quarter and Full Year 2018 Earnings Conference Call

The Company will conduct its quarterly conference call on Wednesday, February 27, 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 2086997.  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 Wednesday, March 6, 2019, by dialing 855-859-2056, conference identification code 2086997.  A replay will also be available in the Investor Relations section of the Company's website until April 30, 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 February 26, 2019, the Company's portfolio consisted of 75 hotels with a total of 11,529 guestrooms located in 25 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.