Summit Hotel Properties Reports Second Quarter 2019 Results And Announces Newly-Formed Joint Venture With GIC

31/07/2019 14:45

Source: PR News

Summit Hotel Properties Reports Second Quarter 2019 Results And Announces Newly-Formed Joint Venture With GIC

AUSTIN, Texas, July 31, 2019 /PRNewswire/ -- Summit Hotel Properties, Inc. (NYSE: INN) (the "Company"), today announced results for the quarter ended June 30, 2019.

"We continue to be pleased with the financial performance of our portfolio as stable top line growth and a focus on cost controls held operating margins generally unchanged during the quarter.  Additionally, RevPAR growth for our well-located and diverse portfolio of high-quality hotels exceeded the STR Upscale average by 160 basis points in the second quarter and also surpassed RevPAR growth for the overall industry," said Dan Hansen, the Company's Chairman, President and Chief Executive Officer.  "We are also thrilled to announce our partnership with GIC, a well-respected and highly regarded investor that shares our disciplined, long-term approach to creating value.  The pending acquisition of the Hampton Inn & Suites Silverthorne will serve as our first investment in the joint venture and we look forward to growing the scale of the partnership," commented Mr. Hansen.

Second Quarter 2019 Highlights

  • Net Income:  Net income attributable to common stockholders increased 33.6 percent to $45.2 million, or $0.43 per diluted share, compared with $33.9 million, or $0.32 per diluted share, in the same period of 2018.
  • Pro Forma RevPAR:  Pro forma revenue per available room ("RevPAR") increased 1.2 percent to $133.51 from the same period in 2018.  Pro forma average daily rate ("ADR") increased 1.2 percent to $163.15 compared to the same period in 2018 and pro forma occupancy increased 0.1 percent to 81.8 percent.
  • Same-Store RevPAR:  Same-store RevPAR increased 1.1 percent to $131.91 from the same period in 2018.  Same-store ADR increased 1.3 percent to $161.64 compared to the same period in 2018 and occupancy decreased 0.2 percent to 81.6 percent.
  • Pro Forma Hotel EBITDA:  Pro forma hotel EBITDA was $55.2 million, an increase of 2.7 percent from the same period in 2018.  Pro forma hotel EBITDA margin contracted by 3 basis points to 39.0 percent from 39.1 percent in the same period of 2018. 
  • Adjusted EBITDAreAdjusted EBITDAre decreased 5.0 percent to $52.4 million from $55.2 million in the same period of 2018.
  • Adjusted FFO:  AFFO decreased 6.7 percent to $38.6 million, or $0.37 per diluted share, from $41.4 million, or $0.40 per diluted share, in the same period of 2018.
  • Dispositions:  The Company sold six hotels, containing 815 guestrooms, for an aggregate gross sales price of $135.0 million.  The sale price, plus estimated near-term capital improvements, represented a 12.8x EBITDA multiple and 6.9 percent capitalization rate for the trailing twelve months ended March 31, 2019 and resulted in a net gain of $36.6 million.

The Company's results for the three and six months ended June 30, 2019 and 2018 are as follows:


For the Three Months Ended

June 30,


For the Six Months Ended

June 30,


2019


2018


2019


2018


unaudited


(Dollars in thousands, except per share amounts)

Net income attributable to

common stockholders

$        45,248


$        33,867


$        54,416


$        34,735

Net income per diluted share

$            0.43


$            0.32


$            0.52


$            0.33

Total revenues

$      142,930


$      152,222


$      281,882


$      292,421

EBITDAre (1)

$        49,409


$        55,812


$        94,812


$      100,354

Adjusted EBITDAre (1)

$        52,420


$        55,155


$        99,145


$      101,902

FFO (1)

$        35,202


$        41,472


$        65,652


$        67,509

Adjusted FFO (1)

$        38,648


$        41,438


$        70,912


$        73,574

FFO per diluted share and unit (1,2)

$            0.34


$            0.40


$            0.63


$            0.65

Adjusted FFO per diluted share and unit (1,2)

$            0.37


$            0.40


$            0.68


$            0.71









Pro Forma (3)








RevPAR

$        133.51


$        131.90


$        129.36


$        126.43

RevPAR Growth

1.2%




2.3%



Hotel EBITDA

$        55,191


$        53,715


$      103,365


$        98,646

Hotel EBITDA margin

39.0%


39.1%


37.9%


37.6%

Hotel EBITDA margin growth

-3 bps




27 bps





(1)

See tables later in this press release for a discussion and reconciliation of net income to non-GAAP financial measures, including earnings before interest, taxes, depreciation and amortization ("EBITDA"), EBITDAre, adjusted EBITDAre, funds from operations ("FFO"), FFO per diluted share and unit, adjusted FFO ("AFFO"), and AFFO per diluted share and unit, as well as a reconciliation of operating income to hotel EBITDA.  See "Non-GAAP Financial Measures" at the end of this release.



(2)

Amounts are based on 104,255,000 weighted average diluted common shares and units and 104,273,000 weighted average diluted common shares and units for the three months ended June 30, 2019, and 2018, respectively, and 104,261,000 weighted average diluted common shares and units and 104,360,000 weighted average diluted common shares and units for the six months ended June 30, 2019, and 2018, respectively.  The Company includes the outstanding common units of limited partnership interests ("OP Units") in Summit Hotel OP, LP, the Company's operating partnership, held by limited partners other than the Company in the determination of weighted average diluted common shares and units because the OP Units are redeemable for cash or, at the Company's option, shares of the Company's common stock on a one-for-one basis.



(3)

Unless stated otherwise in this release, all pro forma information includes operating and financial results for 69 hotels owned as of June 30, 2019, as if each hotel had been owned by the Company since January 1, 2018.  As a result, all pro forma information includes operating and financial results for hotels acquired since January 1, 2018, which includes periods prior to the Company's ownership.  Pro forma and non-GAAP financial measures are unaudited.

Year-To-Date 2019 Highlights

  • Net Income:  Net income attributable to common stockholders increased 56.7 percent to $54.4 million, or $0.52 per diluted share, compared with $34.7 million, or $0.33 per diluted share, in the same period of 2018.
  • Pro Forma RevPAR:  Pro forma RevPAR increased 2.3 percent to $129.36 from the same period in 2018.  Pro forma ADR grew to $163.34, an increase of 1.9 percent from the same period in 2018 and pro forma occupancy increased 0.4 percent to 79.2 percent
  • Same-Store RevPAR:  Same-store RevPAR increased 2.1 percent to $128.21 from the same period in 2018.  Same-store ADR increased 2.0 percent to $162.45 compared to the same period in 2018 and same-store occupancy increased 0.1 percent to 78.9 percent.
  • Pro Forma Hotel EBITDA:  Pro forma hotel EBITDA was $103.4 million, an increase of 4.8 percent from the same period in 2018.  Pro forma hotel EBITDA margin expanded by 27 basis points to 37.9 percent from 37.6 percent in the same period of 2018.
  • Adjusted EBITDAreAdjusted EBITDAre decreased 2.7 percent to $99.1 million from $101.9 million in the same period of 2018.
  • Adjusted FFO:  AFFO decreased 3.6 percent to $70.9 million, or $0.68 per diluted share, from $73.6 million, or $0.71 per diluted share, in the same period of 2018.
  • Dispositions:  The Company sold eight hotels containing 945 guestrooms for an aggregate gross sales price of $146.6 million, or $155,100 per key.  The eight properties were sold at an average trailing capitalization rate of 7.0 percent and resulted in the realization of an aggregate net gain on sale of $40.8 million.

GIC Joint Venture (the "Joint Venture")

The Company has entered into the Joint Venture with GIC, Singapore's sovereign wealth fund, to acquire assets that align with the Company's current investment strategy and criteria.  The Company will serve as general partner and asset manager of the Joint Venture and intends to invest 51% of the equity capitalization of the limited partnership, with GIC investing the remaining 49%.  The Joint Venture intends to finance assets with an anticipated 50% overall leverage target.  The Company will earn fees for providing services to the Joint Venture and will have the potential to earn incentive fees based on the Joint Venture achieving certain return thresholds.  The pending acquisition of the Hampton Inn & Suites in Silverthorne, CO is expected to be acquired by the Joint Venture.  Financial results of the Joint Venture will be consolidated into the Company's consolidated financial statements.

Pending Acquisition

An affiliate of the Joint Venture is currently under contract to acquire the 88-guestroom Hampton Inn & Suites located in Silverthorne, Colorado for a purchase price of $25.5 million.  Ideally situated near popular ski destinations including Keystone, Breckenridge, Copper Mountain, and Arapahoe Basin, the hotel benefits from strong, year-round leisure demand and a local corporate base.  Opened in December 2015, the hotel will require minimal initial capital investment, had trailing twelve-month RevPAR of $153, and hotel EBITDA margin of 45.1 percent for the period ended June 30, 2019, which are premiums to the Company's pro forma portfolio average.  The Company estimates a capitalization rate of 8.3 percent based on management's current estimate of the hotel's forward twelve-month net operating income and expects the hotel to generate $0.8 million of EBITDAre from the scheduled acquisition date through the remainder of 2019. 

An affiliate of the Joint Venture is also under contract to acquire two adjacent, contiguous land parcels to the Hampton Inn & Suites Silverthorne, totaling 1.3 acres, for an aggregate purchase price of $2.4 million, which offers an attractive opportunity for a potential future development.

The Joint Venture expects to close the transactions concurrently during the third quarter.  The transactions remain subject to customary closing conditions, and no assurances can be made that the transactions will close on the intended timeline, or at all.

Capital Improvements

The Company invested $15.3 million and $32.6 million in capital improvements during the three and six months ended June 30, 2019 and anticipates investing a total of $50.0 million to $60.0 million in capital improvements across its portfolio during 2019.

Capital Markets & Balance Sheet

At June 30, 2019, the Company had the following:

  • Total outstanding debt of $834.4 million with a weighted average interest rate of 4.21 percent.
  • After giving effect to interest rate derivative agreements, $550.8 million, or 66 percent, of the Company's debt had fixed interest rates, and $283.6 million, or 34 percent had variable interest rates.
  • Undrawn availability on its senior unsecured revolving credit facility of $375.0 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 4.2x.

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

  • Total outstanding debt of $834.2 million with a weighted average interest rate of 4.16 percent.
  • After giving effect to interest rate derivative agreements, $550.6 million, or 66 percent, of our debt had fixed interest rates, and $283.6 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 4.2x.

Dividends

On July 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 share and per unit represents an annual dividend yield of 6.2 percent based on the July 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 August 30, 2019 to holders of record as of August 16, 2019.

2019 Outlook

The Company is providing its updated outlook for the full year 2019 which includes 69 hotels owned as of July 31, 2019 and the pending acquisition of the Hampton Inn & Suites Silverthorne in partnership with GIC, which is expected to close during the third quarter.  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.

FULL YEAR 2019

(Dollars in thousands, except RevPAR and per unit data)


Low


High

Pro forma RevPAR (70) 1

$123.75


$126.25

Pro forma RevPAR growth (70) 1

0.50%


2.50%

RevPAR (same-store 67) 2

$122.00


$124.50

RevPAR growth (same-store 67) 2

0.00%


2.00%

Adjusted EBITDAre

$179,600


$187,900

Adjusted FFO

$125,400


$133,800

Adjusted FFO per diluted unit 3

$1.20


$1.28

Capital improvements

$50,000


$60,000



(1)

As of July 31, 2019, the Company owned 69 hotels and is also under contract to purchase the Hampton Inn & Suites Silverthorne which has been included in the Company's updated outlook.  Pro forma outlook information for the full year 2019 includes operating estimates for 70 hotels as if each hotel had been owned since January 1, 2018.



(2)

As of July 31, 2019, the Company owned 67 same-store hotels.  The same-store outlook information includes operating estimates for 67 hotels owned by the Company since January 1, 2018.



(3)

Assumes weighted average diluted common shares and units outstanding of 104,300,000 for the full year 2019.

Second Quarter 2019 Earnings Conference Call

The Company will conduct its quarterly conference call on Thursday, August 1, 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 3438916.  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, August 8, 2019, by dialing 855-859-2056, conference identification code 3438916.  A replay will also be available in the Investor Relations section of the Company's website until October 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 July 31, 2019, the Company's portfolio consisted of 69 hotels with a total of 10,715 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.

 

Summit Hotel Properties, Inc.

Condensed Consolidated Balance Sheets

(Dollars in thousands)



June 30,


December 31,


2019


2018


(unaudited)



ASSETS




Investment in hotel properties, net

$      1,941,674


$      2,065,554

Undeveloped land

2,267


2,267

Assets held for sale, net

493


7,633

Investment in real estate loans, net

31,856


30,700

Right-of-use assets

29,313


-

Cash and cash equivalents

48,796


44,088

Restricted cash

27,066


28,468

Trade receivables, net

21,253


13,978

Prepaid expenses and other

7,634


10,111

Deferred charges, net

4,118


4,691

Other assets

8,751


14,807

Total assets

$      2,123,221


$      2,222,297

LIABILITIES AND EQUITY




Liabilities:




Debt, net of debt issuance costs

$         829,001


$         958,712

Lease liabilities

18,887


-

Accounts payable

5,288


5,391

Accrued expenses and other

72,988


66,050

Total liabilities

926,164


1,030,153





Total stockholders' equity

1,194,803


1,189,849

Non-controlling interests in operating partnership

2,254


2,295

Total equity

1,197,057


1,192,144

Total liabilities and equity

$      2,123,221


$      2,222,297

 


Summit Hotel Properties, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(Dollars in thousands, except per share amounts)










For the Three Months Ended


For the Six Months Ended


June 30,


June 30,


2019


2018


2019


2018

Revenues:








Room

$      131,656


$      140,650


$      259,756


$      270,222

Food and beverage

6,280


6,517


12,442


12,846

Other

4,994


5,055


9,684


9,353

Total revenues

142,930


152,222


281,882


292,421

Expenses:








Room

28,413


31,113


56,253


60,118

Food and beverage

4,688


5,107


9,288


10,106

Other hotel operating expenses

39,422


41,578


79,219


81,036

Property taxes, insurance and other

10,695


11,032


22,103


22,030

Management fees

4,458


5,388


9,604


10,740

Depreciation and amortization

23,779


24,954


49,315


50,200

Corporate general and administrative

5,920


5,620


11,910


12,227

Loss on impairment of assets

1,685


-


1,685


-

Total expenses

119,060


124,792


239,377


246,457

Gain on disposal of assets, net

35,520


17,331


39,686


17,288

Operating income

59,390


44,761


82,191


63,252

Other income (expense):








Interest expense

(9,766)


(10,402)


(20,618)


(19,731)

Other income, net

146


3,470




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