Xenia Hotels & Resorts Reports Second Quarter 2018 Results

ORLANDO, Fla., Aug. 2, 2018 /PRNewswire/ -- Xenia Hotels & Resorts, Inc. (NYSE: XHR) ("Xenia" or the "Company") today announced results for the quarter ended June 30, 2018.

Second Quarter 2018 Highlights

• Net Income: Net income attributable to common stockholders was $28.8 million and net income per diluted share was $0.26, a 58.5% and 60.0% decline, respectively, year over year due to a $49.2 million gain on sale of investment properties during the second quarter 2017.
• Same-Property RevPAR: Same-Property RevPAR increased 3.4% compared to the second quarter of 2017 to $177.99, as occupancy increased 190 basis points and ADR increased 1.0%.
• Same-Property Hotel EBITDA Margin: Same-Property Hotel EBITDA Margin was 33.5%, an increase of 32 basis points compared to the second quarter of 2017.
• Total Portfolio RevPAR: Total Portfolio RevPAR was $178.04, 8.5% higher than in the second quarter of 2017, reflecting portfolio performance and the change in portfolio composition.
• Adjusted EBITDAre: Adjusted EBITDAre increased $10.3 million to $89.8 million, an increase of 12.9% compared to the second quarter of 2017.
• Adjusted FFO per Diluted Share: Adjusted FFO per diluted share was $0.66, an increase of 11.9% compared to the second quarter of 2017.
• Financing Activity: The Company paid off four mortgage loans totaling $210 million and executed two swap transactions totaling $65 million.
• Capital Markets Activity: The Company issued $122.2 million of common stock under its At-The-Market program.
• Dividends: The Company declared its second quarter dividend of $0.275 per share to common stockholders of record on June 29, 2018.

"Our second quarter operating results met our expectations as strong April performance drove a 3.4% RevPAR increase for the quarter," commented Marcel Verbaas, Chairman and Chief Executive Officer of Xenia. "Top-line performance was particularly strong in Dallas, as healthy group business contributed to RevPAR growth of 14.1%, and San Francisco, where robust transient demand lead to a 10.6% RevPAR increase for the quarter. Additionally, we began to see the early benefit of our recent renovations at the Westin Galleria and Westin Oaks which, coupled with easier year-over-year comparisons, resulted in a 12.2% RevPAR increase at our Houston hotels. We were pleased with our margin growth of 32 basis points during the quarter, as total expenses increased by a modest 2.1%.  As we look ahead, we remain cautiously optimistic about operating fundamentals and we look forward to reaping the full benefit of the seven guestroom renovations we completed in the first half of 2018.  Although our on-going capital projects, which include guestroom renovations at Marriott Dallas City Center and Hyatt Regency Grand Cypress as well as meeting space renovations at our Houston hotels, are creating varying levels of disruption to operations in the third quarter, we believe the significant improvements we are making to our portfolio in 2018 will further enhance our competitive positioning as we look toward 2019 and beyond."

Year to Date Highlights

• Net Income: Net income attributable to common stockholders was $84.5 million and net income per diluted share was $0.78, an 8.9% and 8.3%, respectively, increase year over year.
• Same-Property RevPAR: Same-Property RevPAR increased 0.4% to $168.77 compared to the six months ended June 30, 2017, as occupancy increased 60 basis points and ADR declined 0.4%.
• Same-Property Hotel EBITDA Margin: Same-Property Hotel EBITDA Margin was 31.8%, a decrease of 16 basis points compared to the six months ended June 30, 2017.
• Total Portfolio RevPAR: Total Portfolio RevPAR was $168.25, an 8.0% increase year over year, reflecting portfolio performance and the change in portfolio composition.
• Adjusted EBITDAre: Adjusted EBITDAre was $163.6 million, an increase of 18.0% from 2017, primarily as a result of acquisitions that took place in 2017 and the corresponding changes to seasonality of earnings.
• Adjusted FFO per Diluted Share: The Company generated Adjusted FFO per diluted share of $1.18, a 13.5% increase from 2017.

Operating Results

The Company's results include the following:

Business Interruption Insurance Proceeds

During the quarter, the Company received $2.6 million of business interruption insurance proceeds related to business lost at Hyatt Centric Key West Resort & Spa in 2017 and 2018 as a result of Hurricane Irma.  Approximately $1.4 million of the proceeds related to lost income in the third and fourth quarters of 2017, with the remaining $1.2 million attributable to lost income from the first quarter of 2018.  The Company anticipates receiving additional business interruption insurance proceeds related to the impact of Hurricanes Harvey and Irma at Marriott Woodlands Waterway Hotel & Convention Center and Hyatt Centric Key West Resort & Spa, respectively, and continues to work with its insurers on claims related to the 2017 California wildfires that impacted Andaz Napa and Marriott Napa Valley Hotel & Spa.  The Company cannot provide assurances as to the amount or timing of additional insurance settlements.

Financings and Balance Sheet

In April, the Company paid off the $21.5 million mortgage loan collateralized by Andaz Savannah.  In May, the Company paid off the $41.0 million mortgage loan collateralized by Hotel Monaco Denver and the $37.5 million mortgage loan collateralized by Loews New Orleans Hotel.  Additionally, in June the Company paid off the $110 million mortgage loan collateralized by Westin Galleria Houston & Westin Oaks Houston at The Galleria.

Also during the quarter, the Company executed swaps to fix the interest rate on the loan collateralized by The Ritz-Carlton, Pentagon City effective June 1, 2018 through January 2023.

As of June 30, 2018, the Company had total outstanding debt of $1.1 billion with a weighted average interest rate of 3.78%.  Over 85% of the Company's debt has interest rates which are fixed or have been hedged to fixed.  In addition, the Company had $184.8 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 3.3x.

Capital Markets

During the quarter, the Company issued 5,090,656 shares of its common stock through its At-The-Market ("ATM") program at a weighted average share price of $24.01 for total gross proceeds of $122.2 million.  As of June 30, 2018, the Company had $77.8 million available for sale under the ATM program.

The Company did not repurchase any shares under its existing share repurchase authorization during the quarter.

"During the first half of 2018, we made several moves that further position the company for future investment opportunities.  We sold the Aston Waikiki Beach Hotel for $200 million and raised over $120 million of equity capital, each at attractive levels, thereby reducing our leverage level from 4.2x at year end 2017 to 3.3x net debt to EBITDA at the end of the second quarter.  Since the beginning of the year, we have further fixed and paid down debt, which reduced our interest expense, addressed most 2019 maturities, and improved our fixed-to-floating ratio.  Our balance sheet is amongst the healthiest relative to our peers, which we expect to be an advantage as we look to grow the company over the near term.  As to internal growth opportunities, we completed a significant level of renovation activity in the first half of the year and expect these improvements to generate strong returns in the quarters ahead," said Atish Shah, Chief Financial Officer of Xenia.

Capital Expenditures

During the three and six months ended June 30, 2018, the Company invested $32 million and $56 million in its portfolio, respectively.  During the quarter, the Company completed the guestroom renovation at Westin Oaks Houston, which included the renovation of all traditional guestrooms, guest corridors, and bathrooms, bathtub to shower conversions in 75% of the guestrooms, new mattresses, TVs, amenity cabinets with under counter refrigerators, the conversion of all double queen-bedded rooms to double kings, and the transformation of 16 large guestrooms into one-bedroom suites.  The hotel's five premium suites are the final stage of the guestroom renovation project and are expected to be completed early in the fourth quarter 2018.

The Company commenced guestroom renovations at Marriott Dallas City Center, which will include bathtub to shower conversions in 75% of the guestrooms, and Hyatt Regency Grand Cypress, both of which are expected to be completed during the third quarter.  The Company also continued the planning and design of the new ballroom at Hyatt Regency Grand Cypress.  Additionally, the Company began the renovation of the meeting space at Westin Galleria Houston, which is anticipated to conclude during the third quarter, and the renovation of the Marriott Woodlands Waterway Hotel & Convention Center meeting space, which includes the 66,000 square feet of event and pre-function space at the property.

Capital spent during the quarter also included payments for renovations completed or substantially completed during the first quarter 2018, including:

• Guestroom renovations at Lorien Hotel & Spa, Hotel Monaco Denver, Residence Inn Denver City Center, Hilton Garden Inn Washington DC, Marriott Chicago at Medical District/UIC, and Andaz Savannah;
• Lobby and great room renovation at Marriott San Francisco Airport Waterfront;
• Restaurant reconcepting and renovations at King Tide Fish & Shell at RiverPlace Hotel and Fisk & Co. at Hotel Monaco Chicago; and,
• Transformation of 24th floor at Westin Galleria Houston, including the creation of a concierge lounge and fitness center.

2018 Outlook and Guidance

The Company's outlook for 2018 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 38 hotels owned as of August 2, 2018.

Additional guidance details:

• Disruption due to renovations is expected to negatively impact Same-Property RevPAR Change by 75 to 100 basis points.
• General and administrative expense of $21 million to $23 million, excluding non-cash share-based compensation.
• Interest expense of approximately $48 million, excluding non-cash loan related costs.
• Income tax expense of approximately $7 million.
• The issuance of shares through the ATM program through August 2, 2018 negatively impacted full year 2018 Adjusted FFO per Diluted Share by approximately $0.08.

Second Quarter 2018 Earnings Call

The Company will conduct its quarterly conference call on Thursday, August 2, 2018 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 premium full service and lifestyle 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 38 hotels, including 36 wholly owned hotels, comprising 10,852 rooms, across 17 states and the District of Columbia. 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®, Hilton®, and Loews®, as well as leading independent management companies including Sage Hospitality, The Kessler Collection, Urgo Hotels & Resorts, 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.