Xenia Hotels & Resorts Reports First Quarter 2020 Results

ORLANDO, Fla., May 11, 2020 /PRNewswire/ -- Xenia Hotels & Resorts, Inc. (NYSE: XHR) ("Xenia" or the "Company") today announced results for the quarter ended March 31, 2020.

First Quarter 2020 Highlights

• Net Loss: Net loss attributable to common stockholders was $(36.1) million and net loss per diluted share was $(0.32).
• Same-Property RevPAR: Same-Property RevPAR was $126.52, a decrease of 27.6% compared to the first quarter of 2019, as a result of a nearly 20 point decline in occupancy percentage and a 3.3% decrease in ADR.
• Same-Property Hotel EBITDA Margin:  Same-Property Hotel EBITDA Margin was 15.0%, which was a decline of 1,441 basis points compared to the first quarter of 2019.
• Total Portfolio RevPAR: Total Portfolio RevPAR was $121.68, a decrease of 28.5% compared to the first quarter of 2019.
• Adjusted EBITDAre: Adjusted EBITDAre declined $53.6 million to $24.5 million, a decrease of 68.7% compared to the first quarter of 2019.
• Adjusted FFO per Diluted Share: Adjusted FFO per diluted share was $0.17, a decrease of $0.36 compared to the first quarter of 2019.
• Financing Activity: The Company drew the remaining $340 million on its $500 million Senior Unsecured Revolving Credit Facility.
• Dividends: The Company declared its first quarter dividend of $0.275 per share to common stockholders of record on March 31, 2020.  Xenia expects to suspend its dividend through the balance of the year unless it determines an additional dividend is required to maintain its REIT status.

"Our first quarter results are reflective of the rapidly deteriorating operating fundamentals that affected our industry and our portfolio as the quarter progressed.  After starting the year with encouraging results compared to our expectations, the unprecedented impact of the COVID-19 pandemic significantly reduced our occupancy throughout the portfolio in the month of March," commented Marcel Verbaas, Chairman and Chief Executive Officer of Xenia. "This impact has further increased in the second quarter as both group and transient demand have been curtailed significantly.  In response to the operating conditions throughout our portfolio, we have worked with our operators to adjust operating expenses to reflect demand levels at our hotels and resorts, including temporarily suspending operations at 31 out of our 39 properties. Our primary focus as we manage through this crisis remains on the safety and well-being of our associates, our guests and our operators' associates at our hotels and resorts. These will continue to be guiding principles as we review our strategy regarding temporary closures and potential reopenings of our properties. While we expect the recovery to take time, we anticipate starting to recommence operations at a select number of properties in the weeks ahead."

"As outlined in our communications over the past two months, we have taken significant steps to reduce operating expenses both at our properties and at the corporate level. This has allowed us to minimize our monthly cash outflows while the majority of our hotels and resorts have temporarily suspended operations. We have also substantially reduced our anticipated capital expenditures for the year, while maintaining a focus on most efficiently completing a few large ongoing projects that we believe are prudent to complete from a cost perspective and will provide appropriate returns when business returns to normalized levels," continued Mr. Verbaas. "Preserving liquidity and maintaining operational flexibility are our primary goals as we navigate through this historically difficult time for our company and the lodging industry as a whole.  We believe that our diverse portfolio that appeals to various types of demand, our best in class brands and operators, and our experienced management team that has managed through challenges in the past, will allow us to emerge from this period with a bright future ahead. I would like to hereby recognize the extraordinary efforts put forth by our operators and our corporate employees as they continue to focus on value preservation for our shareholders during this unprecedented time in their personal lives."

Business Update

The impact of the COVID-19 pandemic on the global economy, lodging industry, and the Company's operations was significant during the first quarter and has further increased during the second quarter.

The vast majority of group business for the second quarter canceled and the Company is uncertain if, or when, this business will rebook in the future.  Additionally, due to the uncertainty surrounding general sentiment towards travel as restrictions are lifted, as well as the likelihood of strict corporate travel policies, both business transient and leisure demand continue to be extremely difficult to forecast throughout the portfolio.

The Company's operating partners have lowered hotel operating expenses, primarily by adjusting staffing and service levels in response to the significant reduction in demand. As a result, a substantial number of the properties' employees have been furloughed for which we have accrued approximately $6 million in future expenses in the first quarter. As of March 31, 2020, the Company had temporarily suspended operations or had decided to temporarily suspend operations at 24 of its 39 properties. At present, operations at 31 of the Company's hotels and resorts remain temporarily suspended. The remainder of the Company's properties have adjusted operating expenses to reflect significantly lower levels of demand. 

As governmental authorities begin to ease "stay at home" orders, the Company will work with its operating partners to evaluate the best strategy and approach for reopening each of its properties based on the hotel or resort's ability to implement necessary safety precautions and cleanliness standards, anticipated demand, and other considerations. Upon recommencement of operations at the Company's hotels and resorts that have temporarily suspended operations, Xenia anticipates there will be startup expenses, as well as an increase in expenses related to enhanced safety and cleanliness measures. At this time, the Company anticipates five of its smaller properties with a leisure demand focus will recommence operations during the month of May.

At the corporate level, the Company remains focused on expense controls across the platform.  As a result, Xenia expects to reduce its corporate full-year cash general and administrative expense by over 20%, or approximately $5.5 million, excluding the impact of non-recurring restructuring costs.

Transactions

During the first quarter, the Company announced it had entered into an agreement to sell the 522-room Renaissance Atlanta Waverly Hotel & Convention Center for $155 million with an anticipated closing date of July 31, 2020. The buyer has a $7.75 million non-refundable deposit at risk should the transaction not proceed. Based on the current status of the financial markets, and overall economic uncertainty, the Company can make no assurances that this transaction will close as agreed upon, or at all. If the transaction is not completed as a result of the buyer's default, the Company expects to receive the non-refundable deposit which is currently being held in escrow.

As previously announced, subsequent to quarter end, the pending sale of the 492-room Renaissance Austin Hotel did not close, as contemplated in the amended agreement and, as a result, the agreement was terminated. The Company retained the $2 million deposit that was previously released from escrow.

Additionally, subsequent to quarter end, the pending sale of the 7-hotel Kimpton-managed portfolio did not close.  On April 30, 2020, the buyer parties provided a notice alleging sellers breached the agreement to sell the portfolio and purporting to terminate the agreement prior to the closing date.  The Company denied the buyers' allegations and rejected the buyers' purported termination.  On the May 4, 2020 closing date, the buyer parties failed to close on the transaction.  As a result of the buyer parties' failure to close, the Company terminated the agreement and is vigorously pursuing, over the buyer parties' objection, the $20 million deposit currently held in escrow.

Liquidity and Balance Sheet

In order to enhance cash liquidity, the Company drew the remaining $340 million on its $500 million Senior Unsecured Revolving Credit Facility during the first quarter.

As of March 31, 2020, the Company had total outstanding debt of $1.6 billion with a weighted average interest rate of 3.32%.  Total net debt to trailing twelve month Corporate EBITDA (as defined in Section 1.01 of the Company's Senior Unsecured Revolving Credit Facility) was 5.2x.

The Company is engaged in active discussions with its unsecured lenders to amend each of its unsecured borrowing agreements, as it breached a financial covenant on each of its unsecured debt borrowings at the end of the first quarter and expects to breach additional financial covenants at the end of the second quarter.  In addition, the Company is in discussions with several of its secured lenders to obtain loan modifications that may include covenant waivers, debt service forbearance or deferral, as well as other relief. 

As of March 31, 2020, Xenia had approximately $397 million of cash and cash e quivalents, which included approximately $35 million of cash held in property-level working capital accounts. 

In addition, the Company held approximately $80 million of restricted cash and escrows at the end of the first quarter. Approximately, $67 million of restricted cash was held in property FF&E replacement reserves. The Company has agreed with certain of its operating partners that a portion of a respective property's FF&E replacement reserves may be utilized for hotel operating expenses, subject to restrictions and conditions, including replenishment.

The Company estimates that if all of its properties were to temporarily suspend operations, its monthly recurring cash expenses would be approximately $17 million to $20 million, inclusive of hotel operating expenses, such as wages and benefits, real estate and personal property taxes, insurance, as well as corporate general and administrative expenses.  The Company's debt service, should it be paid in accordance with current debt agreements, totals an additional $5 million of monthly cash expense.

Following the payment of its first quarter dividend in April, the Company expects to suspend its dividend through the balance of the year unless it determines an additional dividend is required to maintain its REIT status.

Capital Markets

During the first quarter, the Company repurchased a total of 165,516 shares of common stock for total consideration of $2.3 million. As of March 31, 2020, the Company had approximately $94.7 million remaining under its share repurchase authorization. The Company does not anticipate utilizing the share repurchase program during the remainder of 2020.

During the three months ended March 31, 2020, the Company did not issue any shares of its common stock through its At-The-Market ("ATM") program. As of March 31, 2020, the Company had approximately $62.6 million remaining available for sale under the ATM program.

Capital Expenditures

During the three months ended March 31, 2020, the Company invested $22 million in its portfolio.  During the quarter, the Company substantially completed the guestrooms, corridors, and meeting space renovation at Park Hyatt Aviara Resort, Golf Club & Spa.  Additionally, the Company completed the meeting space renovations at The Ritz-Carlton, Pentagon City and Westin Oaks Houston at the Galleria.

The Company has canceled or deferred approximately $50 million of its 2020 capital expenditure budget, eliminating non-essential budgeted expenditures and continuing primarily with projects currently in-progress or for which materials have been ordered.  The Company's current estimate for full-year capital expenditures is approximately $70 million, a reduction of over 40% from the midpoint of the Company's prior guidance range of $110 million to $130 million.

Each of the Company's major 2020 projects, including the transformational renovation at Park Hyatt Aviara Resort, Golf Club & Spa, the guestroom renovation at Marriott Woodlands Waterway Hotel & Convention Center, and the renovation of the existing meeting space at Hyatt Regency Grand Cypress, is progressing with adjustments to scope and timing to reduce 2020 capital outlays.

The remaining components of the Park Hyatt Aviara renovation that will be completed by the first quarter of 2021 include the major renovation of the lobby, lobby bar, and outdoor terrace, conversion of the existing restaurant into a new three-meal dining concept, the major renovation of the exterior, including pool area, exterior function space, and upgrades to all landscaping, and renovation of the spa and fitness area, as well as the golf clubhouse and its specialty restaurant.  The Company has deferred the golf course renovation to a later date.

The comprehensive guest room renovation at Marriott Woodlands is expected to be completed in the third quarter, while the guest bathroom and M Club components have been deferred to a later date.  The Company has also deferred certain scope items as part of the renovation of the existing ballroom and meeting space at Hyatt Regency Grand Cypress.

Impairment Loss

During the first quarter of 2020, the Company recorded a non-cash goodwill impairment charge of $16.4 million related to Andaz Savannah and Bohemian Hotel Savannah Riverfront, Autograph Collection. The goodwill impairments were directly attributed to the continuing material adverse impact caused by the COVID-19 pandemic.

2020 Outlook and Guidance

On March 11, 2020, the Company withdrew its previously issued full-year 2020 guidance due to increased uncertainty related to the financial impact of COVID-19 to the Company.  Since that time, the impact of the pandemic on its operations has increased significantly and the uncertainty surrounding the balance of 2020 continues.  As a result, apart from the cash G&A and capital expenditure guidance referenced above, the Company does not expect to issue guidance until it has more clarity on operating fundamentals.

First Quarter 2020 Earnings Call

The Company will conduct its quarterly conference call on Monday, May 11, 2020 at 1:00 PM Eastern Time. To participate in the conference call, please dial (855) 656-0921.  Additionally, a live webcast of the conference call will be available through the Company's website, www.xeniareit.com.  A replay of the conference call will be archived and available online through the Investor Relations section of the Company's website for 90 days.

About Xenia Hotels & Resorts, Inc.

Xenia Hotels & Resorts, Inc. is a self-advised and self-administered REIT that invests primarily in uniquely positioned luxury and upper upscale hotels and resorts, with a focus on the top 25 U.S. lodging markets as well as key leisure destinations in the United States. The Company owns 39 hotels comprising 11,245 rooms across 16 states. Xenia's hotels are primarily in the luxury and upper upscale segments, and operated and/or licensed by industry leaders such as Marriott, Hyatt, Kimpton, Fairmont, Loews, and Hilton, as well as leading independent management companies including The Kessler Collection and Sage Hospitality. For more information on Xenia's business, refer to the Company website at www.xeniareit.com.

This press release, together with other statements and information publicly disseminated by the Company, contains certain 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. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with these safe harbor provisions. Forward-looking statements are not historical facts but are based on certain assumptions of management and describe the Company's future plans, strategies and expectations. Forward-looking statements are generally identifiable by use of words such as "may," "could," "expect," "intend," "plan," "seek," "anticipate," "believe," "estimate," "guidance," "predict," "potential," "continue," "likely," "will," "would," "illustrative," references to "outlook" and "guidance," and variations of these terms and similar expressions, or the negative of these terms or similar expressions. Forward-looking statements in this press release include, among others, statements about our plans, strategies, the outlook related to the effects of the COVID-19 pandemic, including on the demand for travel, transient and group business, the timing of hotel re-openings, the level of expenses incurred in connection with hotel re-openings, capital expenditures, timing of renovations, status of transactions and escrow deposits, and derivations thereof, financial performance, prospects or future events. Such forward-looking statements are necessarily based upon estimates and assumptions that, while considered reasonable by us and our management, are inherently uncertain. As a result, our actual results, performance or achievements may differ materially from those expressed or implied by these forward-looking statements, which are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond the Company's control and which could materially affect actual results, performances or achievements. Factors that may cause actual results to differ materially from current expectations include, but are not limited to, (i) the impact of the COVID-19 pandemic, including on the demand for travel, transient and group business, and levels of consumer confidence; (ii) actions that governments, businesses, and individuals take in response to the COVID-19 pandemic or any future resurgence, including limiting or banning travel; (iii) the impact of the COVID-19 pandemic and actions taken in response to the pandemic or any future resurgence on global, national, or regional economies, travel and economic activity, including the duration  and magnitude of its impact on unemployment rates and consumer discretionary spending; (iv) the ability of hotel managers to successfully navigate the impacts of the COVID-19 pandemic; (v) the pace of recovery following the COVID-19 pandemic or any future resurgence; (vi) the Company's dependence on third-party managers of its hotels, including its inability to implement strategic business decisions directly, (vii) risks associated with the hotel industry, including competition, increases in wages and benefits, energy costs and other operating costs, actual or threatened terrorist attacks, information technology failures, downturns in general and local economic conditions and cancellation of or delays in the completion of anticipated demand generators, (viii) the availability and terms of financing and capital and the general volatility of securities markets, (ix) risks associated with the real estate industry, including environmental contamination and costs of complying with the Americans with Disabilities Act and similar laws, (x) interest rate increases, (xi) ability to successfully negotiate amendments and covenant waivers with its unsecured and secured indebtedness; (xii) ability to comply with covenants, restrictions, and limitations in any existing or revised loan agreements with our unsecured and secured lenders; (xiii) the possible failure of the Company to qualify as a REIT and the risk of changes in laws affecting REITs, (xiv) the possibility of uninsured or underinsured losses, including those relating to natural disasters, terrorism, government shutdowns and closures, or cyber incidents; (xv) risks associated with redevelopment and repositioning projects, including delays and cost overruns, (xvi) levels of spending in business and leisure segments as well as consumer confidence (xvii) declines in occupancy and average daily rate, (xviii) the seasonal and cyclical nature of the real estate and hospitality businesses, (xix) changes in distribution arrangements, such as through Internet travel intermediaries, (xx) relationships with labor unions and changes in labor laws, (xxi) the impact of changes in the tax code and uncertainty as to how some of those changes may be applied, and (xxii) the risk factors discussed in the Company's Annual Report on Form 10-K, as updated in its Quarterly Reports.  Accordingly, there is no assurance that the Company's expectations will be realized. We caution you not to place undue reliance on any forward-looking statements, which are made only as of the date of this press release. We do not undertake or assume any obligation to update publicly any of these forward-looking statements to reflect actual results, new information or future events, changes in assumptions or changes in other factors affecting forward-looking statements, except to the extent required by applicable law. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

For further 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 SEC filings, including, but not limited to, its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, copies of which may be obtained at the Investor Relations section of the Company's website at www.xeniareit.com.

All information in this press release is as of the date of its release. The Company undertakes no duty to update the statements in this press release to conform the statements to actual results or changes in the Company's expectations.

Availability of Information on Xenia's Website

Investors and others should note that Xenia routinely announces material information to investors and the marketplace using U.S. Securities and Exchange Commission (SEC) filings, press releases, public conference calls, webcasts and the Xenia Investor Relations website. While not all the information that the Company posts to the Xenia Investor Relations website is of a material nature, some information could be deemed to be material. Accordingly, the Company encourages investors, the media, and others interested in Xenia to review the information that it shares at the Investor Relations link located on www.xeniareit.com. Users may automatically receive email alerts and other information about the Company when enrolling an email address by visiting "Email Alerts / Investor Information" in the "Corporate Overview" section of Xenia's Investor Relations website at www.xeniareit.com.

For additional information or to receive press releases via email, please visit our website at www.xeniareit.com.