Summit Hotel Properties Reports Third Quarter 2017 Results

AUSTIN, Texas, Oct. 30, 2017 /PRNewswire/ -- Summit Hotel Properties, Inc. (NYSE: INN) (the "Company"), today announced results for the third quarter of 2017.

"In the third quarter, both our top and bottom line results came in at or above the high end of our expectations going in to the quarter despite what was generally a challenging operating environment.  Pro forma RevPAR growth of 1.2 percent in the quarter further validates our diverse and well-positioned portfolio as 60 percent of our markets exceeded the STR Upscale average and our portfolio once again gained market share against our respective competitive sets," said Dan Hansen, the Company's Chairman, President and Chief Executive Officer.  "We continued to enhance the flexibility of our balance sheet during the quarter with the closing of a $225 million unsecured term loan.  As a result, we finished the quarter with over $400 million of liquidity to pursue value creation opportunities," commented Mr. Hansen.

Third Quarter 2017 Summary

• Net Income:  Net income attributable to common stockholders decreased to $18.2 million, or $0.17 per diluted share, compared with $22.1 million, or $0.25 per diluted share, in the same period of 2016.  When excluding the $7.7 million and $10.5 million pretax gain on disposal of assets during the three months ended September 30, 2017 and 2016, respectively, net income attributable to common stockholders decreased by $1.1 million as compared to the same period in 2016.
• Pro Forma RevPAR:  Pro forma revenue per available room ("RevPAR") increased 1.2 percent to $119.13 from the same period in 2016.  Pro forma occupancy increased 2.4 percent to 80.5 percent, which was partially offset by a 1.1 percent decrease in average daily rate ("ADR") to $148.05.
• Same-Store RevPAR:  Same-store RevPAR grew to $115.04, an increase of 0.6 percent from the same period in 2016.  Same-store occupancy increased by 2.0 percent to 80.6 percent, which was partially offset by a 1.4 percent decrease in ADR to $142.80 compared to the same period in 2016. 
• Pro Forma Hotel EBITDA:  Pro forma hotel EBITDA was $50.5 million, a decrease of 3.4 percent over the same period in 2016.  Pro forma hotel EBITDA margin contracted by 160 basis points to 37.0 percent from 38.6 percent in the same period of 2016.  Excluding the effect of property tax increases, pro forma hotel EBITDA margin contracted by 41 basis points to 38.2 percent.
• Adjusted EBITDA:  Adjusted EBITDA increased 13.6 percent to $47.8 million from $42.1 million in the same period of 2016.
• Adjusted FFO:  Adjusted Funds from Operations ("AFFO") increased 13.6 percent to $36.7 million, or $0.35 per diluted share, from $32.3 million in the same period of 2016.
• Acquisitions:  The Company acquired the 255-guestroom AC Hotel by Marriott Atlanta Downtown for an aggregate purchase price of $57.5 million, or $225,500 per key.
• Dispositions:  The Company sold three hotels containing a total of 273 guestrooms for an aggregate sales price of $27.8 million, or an average of $101,600 per key.  The hotels had a combined RevPAR of $85.03 for the twelve months ended June 30, 2017 which is a 26.3% discount to the pro forma portfolio's RevPAR for the same period.

The Company's results for the three and nine months ended September 30, 2017 and 2016 are as follows:

Year-To-Date 2017 Summary

• Net Income:  Net income attributable to common stockholders decreased to $76.8 million, or $0.78 per diluted share, compared with $84.1 million, or $0.96 per diluted share, in the same period of 2016.  When excluding the $43.5 million and $50.0 million pretax gain on disposal of assets during the nine months ended September 30, 2017 and 2016, respectively, net income attributable to common stockholders decreased by $0.8 million as compared to the same period in 2016.
• Pro Forma RevPAR:  Pro forma revenue per available room ("RevPAR") decreased 0.1 percent from the same period in 2016 to $119.18.  Pro forma average daily rate ("ADR") decreased 0.4 percent from the same period in 2016 to $150.70.  Pro forma occupancy increased 0.3 percent to 79.1 percent.
• Same-Store RevPAR:  Same-store RevPAR declined to $115.87, a decrease of 0.8 percent from the same period in 2016.  Same-store ADR decreased 1.0 percent from the same period in 2016 to $145.20.  Same-store occupancy increased by 0.2 percent to 79.8 percent from the same period in 2016.
• Pro Forma Hotel EBITDA:  Pro forma hotel EBITDA was $152.3 million, a decrease of 5.1 percent from the same period in 2016.  Pro forma hotel EBITDA margin contracted by 174 basis points to 37.6 percent from the same period of 2016.
• Adjusted EBITDA:  Adjusted EBITDA increased 4.1 percent to $135.7 million from $130.4 million in the same period of 2016.
• Adjusted FFO:  Adjusted Funds from Operations ("AFFO") increased to $102.6 million, or $1.04 per diluted share, an increase in AFFO of 5.7 percent from the same period in 2016.
• Acquisitions:  The Company acquired ten hotels containing 1,790 guestrooms for an aggregate purchase price of $422.0 million, or an average of $235,700 per key.
• Dispositions:  The Company sold twelve hotels containing 1,164 guestrooms for an aggregate sales price of $120.2 million, or an average of $103,200 per key.

Acquisitions

On July 13, 2017, the Company completed the acquisition of the 255-guestroom AC Hotel by Marriott Atlanta Downtown (the "Hotel") for a total purchase price of $57.5 million, or $225,500 per key, and entered into a management agreement with Interstate Hotels & Resorts.  Opened as an AC Hotel by Marriott in May 2017, the Hotel recently underwent a complete renovation and repositioning of approximately $20 million, or $78,400 per key.  The AC Hotel by Marriott is one of Marriott's newest distinctive brands offering a stylish, yet very efficient and purposeful feel. 

The Hotel's prime location in the heart of Downtown Atlanta will benefit from various business and leisure demand generators. Atlanta is home to 27 of the Fortune 1000 companies and benefits from Hartsfield-Jackson Atlanta International Airport, the busiest airport in the world servicing more than 100 million passengers per year. Major corporations and organizations such as the American Cancer Society, Ernst & Young, Georgia Power, Georgia-Pacific, Coca-Cola and Turner Broadcasting System are all located within one mile of the Hotel.  Significant leisure demand generators such as the Georgia Aquarium, World of Coca-Cola, College Football Hall of Fame, CNN Studios, and SkyView Atlanta are also within walking distance.  The recently opened 75,000-seat Mercedes-Benz Stadium, the new home of the NFL's Atlanta Falcons and MLS' Atlanta United, is located only steps from the hotel.

Dispositions

On July 21, 2017, the Company completed the sale of a 273-guestroom, three-hotel portfolio located in suburban Fort Worth, Texas for a total sales price of $27.8 million, or approximately $102,000 per key.  The portfolio included the 105-guestroom Hampton Inn & Suites Fort Worth West I-30, the 98-guestroom Hilton Garden Inn Fort Worth/Fossil Creek, and the 70-guestroom Fairfield Inn & Suites Fort Worth West I-30.  The sale resulted in a net gain of $8.1 million and represented a capitalization rate of 7.9 percent on the hotels' net operating income, including planned capital improvements, for the trailing twelve months ended June 30, 2017.

Capital Investment

The Company invested $11.3 million and $25.3 million in capital improvements during the three and nine months ended September 30, 2017, respectively.  The scope of work ranged from common space improvements to complete guestroom renovations, including furniture, soft goods and guest bathrooms.  Through the remainder of 2017, the Company expects to invest another $15.0 million to $20.0 million in capital improvements.

Capital Markets & Balance Sheet

During the third quarter and subsequent to quarter end, the Company executed on the following capital markets transactions:

• On September 26, 2017, the Company entered into a new $225 million unsecured term loan.  The 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 $400 million.  The unsecured term loan matures on November 25, 2022, carries an interest rate based on a pricing grid ranging from 145 basis points to 220 basis points plus LIBOR depending upon the Company's leverage ratio, includes a delayed draw feature, and is prepayable without penalty at any time.  At closing, the Company received an initial loan advance of $125 million and may draw the remaining $100 million at any time prior to September 20, 2018.  Net proceeds from the initial loan advance were utilized to pay down outstanding advances under the Company's unsecured revolving credit facility.
• On October 2, 2017, the Company entered into two separate $100 million interest rate swap agreements with an effective date of January 29, 2018, to partially fix the interest rate on a portion of its variable interest rate unsecured indebtedness.  The swaps convert LIBOR from a floating rate to an average fixed rate of 1.98% through January 31, 2023.

At September 30, 2017, the Company had the following:

• Total outstanding debt of $777.5 million with a weighted average interest rate of 3.78 percent.
• Undrawn capacity on its unsecured credit facilities and other debt instruments totaling $382.6 million.
• Total net debt, which the Company defines as total outstanding debt less cash and cash equivalents, to trailing twelve month pro forma adjusted EBITDA of 3.9x.

At October 20, 2017, the Company had the following:

• Total outstanding debt of $781.8 million with a weighted average interest rate of 3.78 percent.
• Undrawn capacity on its unsecured credit facilities and other debt instruments totaling $377.6 million.

Dividends

On October 30, 2017, the Company declared a quarterly cash dividend of $0.17 per share on its common stock and per common unit of limited partnership interest in Summit Hotel OP, LP.  The annualized dividend of $0.68 per common share and per common unit represents an annual yield of 4.3 percent based on the October 27, 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 November 30, 2017 to holders of record as of November 16, 2017.

2017 Outlook

The Company is providing its outlook for the fourth quarter and full year 2017 based on its 79 hotels owned as of October 30, 2017.  There are no future acquisitions, dispositions, or capital markets activities assumed in the Company's outlook for the fourth quarter and full year 2017.

Third Quarter 2017 Earnings Conference Call

The Company will conduct its quarterly conference call on Tuesday, October 31, 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 95308312.  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 11:59 PM ET Tuesday, November 7, 2017, by dialing 855-859-2056, conference identification code 95308312.  A replay will also be available in the Investor Relations section of the Company's website until February 28, 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 October 30, 2017, the Company's portfolio consisted of 79 hotels with a total of 11,590 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 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.