Xenia Hotels & Resorts Reports Fourth Quarter And Full Year 2018 Results, And Provides 2019 Guidance

ORLANDO, Fla., Feb. 26, 2019 /PRNewswire/ -- Xenia Hotels & Resorts, Inc. (NYSE: XHR) ("Xenia" or the "Company") today announced results for the quarter and full year ended December 31, 2018.

Fourth Quarter 2018 Highlights

• Net Income: Net income attributable to common stockholders was $100.0 million, including an $81.2 million gain on sale of investment properties, and net income per diluted share was $0.88.
• Same-Property RevPAR: Same-Property RevPAR increased 1.6% compared to the fourth quarter of 2017 to $158.70, driven by a 2.5% increase in ADR, offset by a 62 basis point decline in occupancy.
• Same-Property Hotel EBITDA Margin: Same-Property Hotel EBITDA Margin was 27.6%, an increase of 47 basis points compared to the fourth quarter of 2017.
• Total Portfolio RevPAR: Total Portfolio RevPAR was $158.30, a 4.0% increase compared to the fourth quarter of 2017 reflecting portfolio performance and the changes in portfolio composition.
• Adjusted EBITDAre: Adjusted EBITDAre grew $7.6 million to $75.7 million, an increase of 11.2% compared to the fourth quarter of 2017.
• Adjusted FFO per Diluted Share: Adjusted FFO per diluted share was $0.58, an increase of 11.5% compared to the fourth quarter of 2017.
• Transaction Activity: As previously announced, the Company completed the acquisitions of Park Hyatt Aviara Resort, Golf Club & Spa and the newly-branded Waldorf Astoria Atlanta Buckhead, as well as a free-standing restaurant in the same mixed-use development in Buckhead, for total consideration of $230.5 million.  Additionally, the Company completed the buyout of its joint venture partner's minority interest in two hotels for $12.2 million.  Also during the quarter, the Company completed the sale of two hotels for a combined sales price of $220 million.
• Financing Activity: The Company funded $65 million on its $150 million unsecured term loan and paid off two mortgage loans totaling $43 million.
• Dividends: The Company declared its fourth quarter dividend of $0.275 per share to common stockholders of record on December 31, 2018.

"The fourth quarter of 2018 was an exciting one for the Company as we not only experienced strong operating performance, but also continued our process of upgrading the portfolio through thoughtful acquisitions and dispositions," commented Marcel Verbaas, Chairman and Chief Executive Officer of Xenia. "We were pleased with top-line performance as our Same-Property RevPAR increased by 1.6%, building on the 4.7% RevPAR growth our current Same-Property portfolio achieved in the fourth quarter of 2017, as well as our margin improvement of 47 basis points. The increase in top-line revenue in 2018 speaks to the strength of demand at various hotels throughout our portfolio during the quarter, especially when considering the increased post-hurricane demand that aided the performance of our hotels in Orlando and Houston in 2017.  While RevPAR in these two markets remained relatively flat after significant growth in the prior year, additional bright spots in our portfolio included markets such as Napa, Phoenix, Boston, and Santa Clara with RevPAR increases of 15.8%, 8.5%, 6.7%, and 4.3%, respectively, as well as our hotels in San Francisco and Dallas, which were able to grow RevPAR after achieving 12.1% and 13.9% increases in the fourth quarter of 2017."

Full Year 2018 Highlights

• Net Income: Net income attributable to common stockholders for the year ended December 31, 2018 was $193.7 million, which includes a $123.5 million gain on sale of investment properties, and net income per diluted share was $1.75.
• Same-Property RevPAR: Same-Property RevPAR was $165.27, an increase of 1.2% compared to the year ended December 31, 2017, as ADR increased 1.4% and occupancy declined 15 basis points.
• Same-Property Hotel EBITDA Margin: Same-Property Hotel EBITDA Margin was 27.9%, an increase of 5 basis points compared to the year ended December 31, 2017.
• Total Portfolio RevPAR: Total Portfolio RevPAR was $162.64, a 4.8% increase year over year, reflecting portfolio performance and the changes in portfolio composition.
• Adjusted EBITDAre: Adjusted EBITDAre was $299.8 million, an increase of 10.9% from 2017.
• Adjusted FFO per Diluted Share: The Company generated Adjusted FFO per diluted share of $2.22, a 7.8% increase from 2017.
• Transaction Activity: The Company continued to make significant improvements in its portfolio composition during 2018, which included the acquisitions of four luxury hotels comprising 841 rooms for total consideration of $354 million. The acquisitions included The Ritz-Carlton, Denver, Fairmont Pittsburgh, Park Hyatt Aviara Resort, Golf Club & Spa, and the newly branded Waldorf Astoria Atlanta Buckhead.  Additionally, the Company acquired a free-standing restaurant unit that is part of the same development as the Waldorf Astoria Atlanta Buckhead and completed the buyout of its joint venture partner's minority interest in Grand Bohemian Hotel Charleston and Grand Bohemian Hotel Mountain Brook.  The Company sold three upscale select-service hotels comprising 1,173 rooms for total consideration of $420 million.
• Financing Activity: The Company amended, restated and upsized its revolving credit facility, completed $215 million of new debt financings, modified one mortgage loan, paid off $272 million of mortgage loans, and fixed LIBOR on $65 million of variable rate debt.
• Capital Markets Activity:  The Company commenced an "At the Market" ("ATM") program authorizing the Company to issue common stock having an aggregate offering amount of up to $200 million.  During the year, the Company received gross proceeds of $137.4 million from the sale of common stock under its ATM program.

"Looking back on 2018, we are excited about the results of the Company's continued focus on portfolio optimization, both from an operational and transactional perspective," continued Mr. Verbaas. "In addition to completing almost $800 million in acquisitions and dispositions, our team completed a substantial number of large capital projects. Meanwhile, our financing and capital markets activities allowed the Company to address all near term debt maturities and further strengthen the balance sheet. Operationally, we remain thrilled about the impact our asset management initiatives continue to have on our bottom-line performance. Despite an estimated headwind of 90 basis points on our Same-Property RevPAR as a result of our significant renovation activity, our Same-Property portfolio achieved a 1.2% RevPAR increase for the full year, with our Total Portfolio RevPAR increasing by 4.8% as a result of the upgrades within our portfolio. Additionally, we continue to reap the benefits of our cost control efforts, as Same-Property hotel operating expenses increased by only 1.3%, allowing us to maintain Same-Property Hotel EBITDA margin at 27.9%, an impressive result in an environment where labor and other operating costs continue to increase.  We are pleased to have been able to deliver 7.8% Adjusted FFO per share growth during a year where we have continued to enhance the quality and future growth profile of the portfolio."

Business Interruption Insurance Proceeds

During the fourth quarter and year ended December 31, 2018, the Company received net business interruption insurance proceeds of $2.2 million and $5.0 million, respectively.  For the year, this includes $3.1 million related to Hyatt Centric Key West Resort & Spa and $0.2 million related to Marriott Woodlands Waterway Hotel & Convention Center for lost income as a result of 2017 Hurricanes Irma and Harvey, and $1.7 million related to the Company's two Napa hotels for lost income as a result of the Northern California wildfires that occurred in the fourth quarter of 2017.

Transactions

During 2018, the Company completed the following transactions:

• In March, the Company sold its leasehold interest in the 645-room Aston Waikiki Beach Hotel for $200 million.
• In August, the Company completed the acquisition of The Ritz-Carlton, Denver, a 202-room luxury hotel, for a purchase price of $100.3 million.
• In September, the Company completed the acquisition of the 185-room Fairmont Pittsburgh for $30 million.
• In October, the Company completed the acquisition of its joint venture partner's interests in both Grand Bohemian Hotel Charleston and Grand Bohemian Hotel Mountain Brook for a combined purchase price of $12.2 million.  As a result, both hotels are now wholly owned by the Company.
• In November, the Company completed the acquisition of the 327-room Park Hyatt Aviara Resort, Golf Club & Spa for $170 million.
• Also in November, the Company completed the sale of the 300-room Hilton Garden Inn Washington D.C. Downtown for $128 million.
• In December, the Company purchased the former Mandarin Oriental, Atlanta, a 127-room luxury hotel, which was rebranded as Waldorf Astoria Atlanta Buckhead immediately upon completion of the acquisition, for $53.5 million.  Simultaneously, the Company completed the $7 million acquisition of a free-standing restaurant unit that is part of the mixed-use development.
• Also in December, the Company completed the sale of the 228-room Residence Inn Denver City Center for $92 million.

"We are proud of the portfolio improvements we have been able to make since our listing, and 2018 was another successful year on the transaction side of our business," said Mr. Verbaas. "Through almost $800 million of transactions, relatively balanced between acquisitions and dispositions, we believe we have not only improved our portfolio quality but also the growth prospects as it relates to both revenues and profitability. We added four outstanding luxury hotels at a substantial discount to replacement cost and we believe these assets provide us with intriguing opportunities to enhance value. Meanwhile, we sold three lower-tier hotels, including one on a relatively short term ground lease with significant near-term capital requirements, at attractive valuations.  These dispositions enabled us to further strengthen our balance sheet and increase our focus on luxury and upper upscale hotels which now represent 98% of our room count."

Financings and Balance Sheet

In October, the Company paid off the $18.6 million mortgage loan collateralized by Grand Bohemian Hotel Charleston and the $24.8 million mortgage loan collateralized by Grand Bohemian Hotel Mountain Brook.  Additionally in October, the Company funded $65 million of the $150 million unsecured term loan maturing in August 2023.

During 2018, the Company successfully amended, restated, and upsized its senior unsecured revolving credit facility resulting in a decrease in the leverage-based pricing grid and a three-year extension.  The Company originated two new loans during the year, including the $65 million mortgage loan collateralized by The Ritz-Carlton, Pentagon City and a $150 million unsecured term loan maturing in August 2023.  Additionally, the Company modified the mortgage loan collateralized by Andaz Napa resulting in $18 million of incremental proceeds, paid off seven mortgage loans totaling $272 million, and fixed LIBOR on $65 million of variable rate debt.

As of December 31, 2018, the Company had total outstanding debt of $1.2 billion with a weighted average interest rate of 3.82%.  Nearly 85% of the Company's debt has interest rates which are fixed or have been hedged to fixed.  In addition, the Company had $91.4 million of cash and cash equivalents, and full availability on its $500 million unsecured credit facility.  Total net debt to trailing twelve month Corporate EBITDA (as defined in Section 1.01 of the Company's unsecured credit facility) was 3.6x as of December 31, 2018.

Subsequent to quarter end, the Company funded the remaining $85 million of the unsecured term loan maturing August 2023, bringing the outstanding balance on the loan to the full $150 million capacity.

Capital Markets

During the quarter, the Company did not issue any shares of its common stock through its At-The-Market ("ATM") program. For the year ended December 31, 2018, the Company issued 5.7 million shares of its common stock through its ATM program at a weighted average share price of $24.02 for total gross proceeds of $137.4 million.  As of December 31, 2018, the Company had $62.6 million remaining available for sale under the ATM program.

The Company did not repurchase any shares under its existing share repurchase authorization during the year. As of December 31, 2018, the Company had approximately $96.9 million remaining under its share repurchase authorization.

Capital Expenditures

During the fourth quarter and year ended December 31, 2018, the Company invested $24 million and $108 million in its portfolio, respectively.  For the full year 2018, significant projects in the Company's current Same-Property portfolio included:

• Andaz Savannah - Renovation of all guestrooms.
• Hotel Monaco Chicago - Renovation of the restaurant and bar and reconcepting to Fisk & Co.
• Hotel Monaco Denver - Renovation of all guestrooms, guest corridors, and bathrooms, resulting in walk-in showers in 75% of the guestrooms.
• Hyatt Regency Grand Cypress - Renovation of all guestrooms and guest corridors.
• Lorien Hotel & Spa - Renovation of all guestrooms and guest corridors.
• Marriott Chicago at Medical District/UIC - Renovation of all guestrooms, guest corridors, and bathrooms, resulting in walk-in showers in 78% of the guestrooms.
• Marriott Dallas City Center - Renovation of all guestrooms, guest corridors, and bathrooms, resulting in walk-in showers in 75% of the guestrooms.
• Marriott San Francisco Airport Waterfront - Renovation of lobby and great room including a substantial bar upgrade.
• Marriott Woodlands Waterway Hotel & Convention Center - Renovation of the meeting space including the 66,000 square feet of event and pre-function space.
• RiverPlace Hotel - Renovation of the restaurant and bar and reconcepting to King Tide Fish & Shell.
• Westin Galleria Houston - Transformation of the 24th floor, including the creation of a concierge lounge and fitness center, as well as a complete renovation of the meeting space.  Renovation of the lobby including the addition of a lobby bar.
• Westin Oaks Houston - Renovation of all guestrooms, guest corridors, and bathrooms, resulting in walk-in showers in 75% of the guestrooms, the conversion of all double queen-bedded rooms to double kings, and the transformation of 16 large guestrooms into one-bedroom suites.

Park Hyatt Aviara Resort, Golf Club & Spa Renovation Update

The Company has made significant progress on its comprehensive capital plan for Park Hyatt Aviara Resort, Golf Club & Spa.  The transformational renovation will include the complete renovation of guestrooms and corridors including casegoods and softgoods, renovation of the meeting spaces and pre-function areas, and the renovation and reconcepting of food and beverage outlets.  In addition, substantial upgrades will be made to the spa and golf facilities, as well as exterior landscaping, outdoor meeting space, and pool features and amenities.  In total, the Company estimates it will spend approximately $50 million to $60 million on the renovation. The renovation is scheduled to commence in the fourth quarter 2019 and is expected to be completed in the first quarter 2021. The Company has included approximately $15 million for the project in the capital expenditure guidance provided below.

Hyatt Regency Grand Cypress Renovation Update

The renovation of all guestrooms and guest corridors was completed on time and significantly below budget.  The renovation concluded in October 2018 and cost approximately $8 million.  Construction of the new 25,000 square foot ballroom and 32,000 square feet of pre-function and support space began in September 2018. This new facility, which is expected to cost approximately $32 million, is scheduled to open in the fourth quarter 2019.  As of December 31, 2018, below-grade infrastructure and ground floor slab had been completed and $6.5 million had been expended.

Hemingway's, the resort's signature steak and seafood restaurant, will undergo a complete renovation in the summer of 2019.   The existing meeting space will undergo a comprehensive $7 million renovation in 2020, following completion of the new ballroom.

2019 Outlook and Guidance

The Company's outlook for 2019 is based on the current economic environment, incorporates all expected renovation disruption, and assumes no additional acquisitions, dispositions, equity offerings, or share repurchases.  Same-Property RevPAR change includes all 40 hotels owned as of February 26, 2019.

Additional guidance assumptions:

• Disruption due to renovations is expected to negatively impact Same-Property RevPAR Change by approximately 20 basis points.
• In 2018, the three hotels that were sold during the year contributed approximately $19 million to Adjusted EBITDAre.
• General and administrative expense of $21 million to $23 million, excluding non-cash share-based compensation. 
• Interest expense of $50 million to $52 million, excluding non-cash loan related costs.
• Income tax expense of approximately $6 million.
• 114.4 million weighted average diluted shares and units outstanding.

"We expect moderate RevPAR growth to result in a slight decline in Adjusted EBITDAre in 2019 relative to 2018.  Our expectations for improved performance at recently-renovated hotels and newly-acquired properties are being offset by expense growth resulting from higher wage and benefit costs and greater real estate tax and insurance expenses.  We continue to be excited about the long-term growth opportunities embedded in our portfolio, stemming from recent acquisitions and capital expenditure projects.  Due to the recent moves we have made, as well as our strong balance sheet, we believe the company is well-positioned for earnings growth and continued portfolio enhancement in the years ahead," commented Atish Shah, Chief Financial Officer of Xenia.

Fourth Quarter 2018 Earnings Call

The Company will conduct its quarterly conference call on Tuesday, February 26, 2019 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 40 hotels comprising 11,167 rooms across 17 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, Sage Hospitality, and Davidson Hotels & Resorts. 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 for RevPAR growth, Net Income, Adjusted EBITDAre, Adjusted FFO, Adjusted FFO per share, capital expenditures 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 Company's dependence on third-party managers of its hotels, including its inability to implement strategic business decisions directly, (ii) 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, (iii) the availability and terms of financing and capital and the general volatility of securities markets, (iv) risks associated with the real estate industry, including environmental contamination and costs of complying with the Americans with Disabilities Act and similar laws, (v) interest rate increases, (vi) the possible failure of the Company to qualify as a REIT and the risk of changes in laws affecting REITs, (vii) the possibility of uninsured or underinsured losses, including those relating to natural disasters, terrorism, or cyber incidents; (viii) risks associated with redevelopment and repositioning projects, including delays and cost overruns, (ix) levels of spending in business and leisure segments as well as consumer confidence (x) declines in occupancy and average daily rate, (xi) the seasonal and cyclical nature of the real estate and hospitality businesses, (xii) changes in distribution arrangements, such as through Internet travel intermediaries, (xiii) relationships with labor unions and changes in labor laws, (xiv) the impact of changes in the tax code as a result of recent U.S. federal income tax reform and uncertainty as to how some of those changes may be applied, and (xv) 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.