Xenia Hotels & Resorts Reports Second Quarter 2016 Results

ORLANDO, Fla., Aug. 5, 2016 /PRNewswire/ -- Xenia Hotels & Resorts, Inc. (NYSE: XHR) ("Xenia" or the "Company") today announced results for the quarter ended June 30, 2016. 

Second Quarter 2016 Highlights

• Net Income: Net income attributable to common stockholders was $25.8 million and net income per share was $0.24.
• Same-Property RevPAR: Same-Property RevPAR increased 1.8% from the second quarter of 2015 to $162.47, as occupancy remained flat and ADR increased 1.8%. Excluding hotels located in Houston, Same-Property RevPAR increased 3.8% from the second quarter of 2015, as occupancy increased 63 basis points and ADR increased 3.0%.
• Same-Property Hotel EBITDA Margin: Same-Property Hotel EBITDA Margin was 36.3%, an increase of 115 basis points from the same period in 2015.
• Total Portfolio RevPAR: Total portfolio RevPAR was 8.3% higher than in the second quarter of 2015, reflecting portfolio performance, as well as changes in portfolio composition.
• Adjusted EBITDA: Adjusted EBITDA increased $7.7 million to $88.0 million, an increase of 9.6% over the second quarter of 2015.
• Adjusted FFO per Diluted Share: Adjusted FFO available to common stockholders increased to $0.65 per diluted share compared to $0.57 per diluted share for the second quarter of 2015, an increase of 14.0%.
• Transaction Activity: During the quarter, the Company completed the sale of four hotels for a gross price of $136 million.
• Financing Activity: In June, the Company paid off one $22 million mortgage loan.
• Dividends: The Company declared its second quarter dividend of $0.275 per share to common stock and unit holders of record on June 30, 2016.

Year to Date Results

For the six months ended June 30, 2016, net income attributable to common stockholders was $17 million, a 90.0% increase over the same period prior year, due largely to one-time separation and other start-up related expenses in 2015, offset by the provision for asset impairment and loss on debt extinguishment incurred during 2016.  Same-Property RevPAR increased 1.3% from the first half of 2015 to $151.54, as occupancy declined 79 basis points and ADR increased 2.4%.  The Company's Same-Property Hotel EBITDA margin was 33.3%, which improved 26 basis points compared to the same period prior year.  The Company's Adjusted EBITDA and Adjusted FFO per diluted share increased 3.7% and 5.9%, respectively, during the first half of 2016 as compared to the same period in 2015.

"We continue to be focused on our strategy of owning and further improving a high-quality, diversified portfolio of hotels, executing our differentiated approach to portfolio management and maintaining a strong financial profile," said Marcel Verbaas, President and Chief Executive Officer of Xenia.  "While the dynamics in the Houston market continue to be unfavorable, we were able to generate 1.8% Same-Property portfolio RevPAR growth in the second quarter, as our Same-Property portfolio excluding our Houston area assets achieved a healthy 3.8% RevPAR increase.  Our continued efforts to contain costs and optimize our portfolio through unique property initiatives resulted in margin growth of 115 basis points during the quarter, in part due to refunds related to real estate tax appeals. We will maintain our focus on cost control and revenue enhancement opportunities as we look cautiously into the second half of the year and anticipate a period of relatively muted RevPAR growth."

"We are particularly pleased with our acquisition and disposition efforts to improve our portfolio over the past year, as demonstrated by the fact that total portfolio RevPAR during the second quarter exceeded prior year by 8.3%. We have been able to achieve this while further strengthening our balance sheet, resulting in a net senior capital to EBITDA ratio that is among the lowest of our peer group," Mr. Verbaas continued.  "The completion of nearly $310 million of dispositions since last fall has allowed us to maintain this conservative leverage profile, while also providing us with the ability to return capital to our investors through the execution of our share repurchase program. The fact that we were able to sell six hotels on the lower end of the portfolio at a weighted average multiple of 10.8x 2015 EBITDA speaks to the value of our portfolio, particularly when taking into account that this excludes approximately $90 million of total near-term capital investments that we were able to avoid as a result of these dispositions. Adjusted for this required near-term capital, the combined sales price represented a 13.9x 2015 EBITDA multiple."

Operating Results

The Company's results include the following:

"Same-Property" results include the results for all hotels owned as of June 30, 2016, except for the Grand Bohemian Hotel Charleston and the Grand Bohemian Hotel Mountain Brook, which commenced operations in the second half of 2015, and the Hotel Commonwealth, which underwent a significant expansion project in late 2015.  "Same-Property" results include periods prior to the Company's ownership of the Canary Santa Barbara, RiverPlace Hotel, and Hotel Palomar Philadelphia, and exclude the NOI guaranty payment at the Andaz San Diego.  Results include renovation disruption for multiple capital projects during the periods presented.

Disposition Activity

As previously disclosed, in April the Company sold the DoubleTree by Hilton in Washington DC for a sale price of $65 million, and in May, the Company sold the Embassy Suites Baltimore Hunt Valley for a sale price of $20 million.

In June, the Company completed the sale of the 287-room Marriott Atlanta Century Center / Emory Area in Atlanta, Georgia and the 226-room Hilton Phoenix Suites in Phoenix, Arizona for a combined sale price of $50.8 million, inclusive of $4.5 million of capital in the hotels' reserve accounts which was acquired by the buyer.

Proceeds from dispositions will be utilized for general corporate purposes which may include share repurchases under the Company's existing repurchase authorization, debt repayments and potential acquisitions consistent with the Company's long-term strategy of investing in high-quality assets primarily located in top 25 lodging markets and key leisure destinations.

"We are pleased with the continued successful execution of our previously announced plan to selectively dispose of, and harvest value from, lower-quality assets in the portfolio that no longer fit our target criteria.  During the quarter, we completed four dispositions for over $136 million at a weighted average EBITDA multiple of 10.4x, based on TTM EBITDA as of the end of the first quarter, excluding near-term capital requirements.  Each of the hotels required significant near-term capital investments, collectively totaling nearly $60 million, none of which we felt to be a prudent use of our capital.  Adjusting for this capital, the sale price represents a 14.9x weighted average TTM EBITDA multiple as of the end of the first quarter. On average, these hotels generated RevPAR that was more than 25% below the remainder of the portfolio, demonstrating our continued focus on quality and the improvement of our overall portfolio," commented Mr. Verbaas.

Balance Sheet

In June 2016, the Company paid off the $22 million mortgage loan collateralized by the Courtyard Pittsburgh Downtown.

As of June 30, 2016, the Company had total outstanding debt of $1.3 billion with a weighted average interest rate of 3.49%.  In addition, the Company had $278 million of cash and cash equivalents and full availability on its $400 million senior unsecured credit facility.  Total net debt to trailing 12 month Corporate EBITDA (as defined in Section 1.01 of the Company's senior unsecured credit facility) was 3.6x. 

Capital Expenditures

During the second quarter, the Company invested $13 million in its portfolio.  The Company completed the guestroom renovation, the new resort-style pool, and the outdoor function space at the 275-room Marriott Napa Valley Hotel & Spa, and made significant progress on the meeting room and ballroom renovation at the Renaissance Atlanta Waverly Hotel & Convention Center.  The Company also added two keys to the inventory at the Hyatt Key West Resort & Spa as a result of the relocation of the spa at the hotel.

For the six months ended June 30, 2016, the Company invested over $20 million in its portfolio.  Several significant capital projects are scheduled to commence during the second half of the year, including guestroom renovations at the Andaz San Diego, the Hyatt Key West Resort & Spa, and the Westin Galleria Houston. 

Share Repurchase

During the second quarter, the Company purchased 738,435 shares under its share repurchase authorization for an aggregate purchase price of $11.4 million.  During the six months ended June 30, 2016, the Company purchased 4,128,935 shares under its share repurchase authorization for an aggregate purchase price of $60.7 million.

Subsequent to quarter end as of July 29, 2016, the Company repurchased an additional 16,613 shares for an aggregate purchase price of  $0.3 million.  The total shares repurchased was 4,145,548, at a weighted average price of $14.71 per share, for total consideration of approximately $61.0 million as of July 29, 2016.  Additionally, the Company had approximately $39.0 million remaining under its share repurchase authorization.

2016 Outlook and Guidance

The Company's outlook for 2016 is based on the current economic environment, incorporates all expected renovation disruption, and assumes no further acquisitions, dispositions, or share repurchases.  Same-Property RevPAR growth excludes the Grand Bohemian Hotel Charleston and the Grand Bohemian Hotel Mountain Brook, as both properties commenced operations in the second half of 2015, and the Hotel Commonwealth, as the property underwent a significant expansion project in late 2015, as well as the five hotels sold in 2016.  The change to the Company's anticipated Adjusted EBITDA from previously provided guidance is partially attributable to the disposition of the Marriott Atlanta Century Center/Emory Area and Hilton Phoenix Suites, which accounted for approximately $2.5 million of the decrease, offset by a reduction in expected general and administrative expense of $1.0 million, with the balance resulting from changes in the Company's forecast for the remainder of the year.  The change in Adjusted FFO is due to similar factors, as well as a $1.5 million reduction in expected income tax expense.

Guidance assumptions include:

• Average RevPAR declines of 13% to 16% at the Company's Houston area hotels, primarily due to the impact of continued weakness in the energy market and new supply. Excluding Houston, the Company projects Same-Property RevPAR growth of 2.0% to 3.0%.
• General and administrative expense of $21.0 million to $22.0 million, excluding management transition and severance costs and non-cash share-based compensation.
• Interest expense of $45.5 million to $46.5 million, excluding non-cash loan related costs.
• Income tax expense of $5.5 million to $6.5 million

"Xenia continues to be well-positioned to advantageously allocate capital throughout the lodging cycle.  We believe the Company's high quality asset base and strong leverage profile are two key tools to opportunistically grow value.  We continue to be focused on improving the quality of the portfolio and preserving the strength of the balance sheet, as evidenced by our actions in the second quarter.  Looking ahead, we will continue to focus on those drivers of long-term value creation," stated Atish Shah, Executive Vice President and Chief Financial Officer of Xenia.

"As to the current operating environment, the industry outlook for the remainder of 2016 continues to moderate.  Our reduced full-year guidance reflects that moderation. While revenue growth is challenged by a lack of pricing power, we continue to be focused on margin expansion, solid G&A expense control, and preserving our favorable cost of capital."

Second Quarter 2016 Earnings Call

The Company will conduct its quarterly conference call on Friday, August 5, 2016 at 11:00 AM 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 premium full service, lifestyle and urban upscale hotels, with a focus on the top 25 U.S. lodging markets as well as key leisure destinations in the United States. The Company owns 46 hotels, including 44 wholly owned hotels, comprising 11,594 rooms, across 20 states and the District of Columbia. Xenia's hotels are primarily operated by industry leaders such as Marriott®, Kimpton®, Hyatt®, Starwood®, Aston®, Fairmont®, Hilton® and Loews®, as well as leading independent management companies including Sage Hospitality, The Kessler Collection, Urgo Hotels & Resorts, Davidson Hotels & Resorts and Concord 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 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 EBITDA, 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, energy costs and other operating costs, actual or threatened terrorist attacks, 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 losses, (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, and (xiv) 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.

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