Pebblebrook Hotel Trust Reports 2020 Results

BETHESDA, Md.–(BUSINESS WIRE)–$PEB #PEB–Pebblebrook Hotel Trust (NYSE: PEB):

OPERATING STATUS OF HOTELS AND RESORTS

  • 38 hotels and resorts currently open, which is approximately three-fourths of the Company’s portfolio; these 38 properties accounted for 73% of the Company’s 2019 Hotel EBITDA
  • As expected, demand softened in November and December of 2020 compared with prior months due to the typical seasonal winter slowdown in travel and increased government restrictions in response to the dramatic rise in COVID infections nationwide.
  • The softer demand trends continued into January 2021. However, the Company is encouraged that hotel demand and booking trends for February and March have improved materially from January.
  • The Company’s remaining suspended hotels are expected to re-open in the coming months as demand recovers.

 

 

AVERAGE MONTHLY CASH BURN

  • During the fourth quarter of 2020, monthly cash burn at the Company’s hotels averaged in the range of its previous estimate of $5 to $8 million, with December running at approximately $9 million, due to typical winter seasonality and a dramatic rise in COVID-19 cases and government restrictions.
  • Total monthly corporate cash burn in the fourth quarter of 2020 averaged in the range of its previous estimate, running at $16 to $21 million.

 

 

BALANCE SHEET & LIQUIDITY

  • In December, the Company issued $500.0 million of convertible senior unsecured notes with a 1.75% coupon and reopened the securities in Q1 raising an additional $263.75 million. Proceeds from these offerings increased the Company’s liquidity and reduced near term outstanding debt.
  • On February 18, 2021, the Company and its lending partners agreed to amend its credit agreements to waive financial covenants until the first quarter of 2022 and provide substantially less restrictive covenants and increased investment flexibility through the end of the first quarter of 2023.
  • Currently, the Company has cash on hand of approximately $127 million and liquidity of approximately $770 million, which includes $643.2 million available on the Company’s $650.0 million revolving credit facility.
  • Net debt to depreciated book value at the end of Q4 2020 was 39%

 

 

Q1 2021 OUTLOOK

  • Given the uncertainties related to the pandemic, its impact on travel, and variable and unpredictable government restrictions, the Company is unable to provide an outlook for 2021 at this time.
  • Based on our January preliminary results, and February’s results and trends, the Company anticipates Q1 2021 revenues will likely be roughly in-line with Q4 2020, with Same-Property Room Revenues currently estimated to decline 80% to 81% compared with Q1 2019.

(1) See tables later in this press release for a description of Same-Property information and reconciliations from net income (loss) to non-GAAP financial measures.

“As we close what has been an unprecedented year, I am incredibly proud of our hotel team members and corporate employees in all that we accomplished throughout 2020. From the onset of COVID-19, we quickly rallied together to mitigate the pandemic’s effects by successfully reducing costs and capitalizing on our strategic initiatives. Despite the challenging environment, we completed approximately $400 million of property dispositions at very attractive values. We successfully issued $750 million of highly attractive convertible notes, which significantly enhanced our liquidity, allowed us to pay down near-term debt maturities and provided for future debt to equity conversion at very favorable equity pricing. We also completed numerous transformative property renovations and redevelopments, including San Diego Mission Bay Resort, Viceroy Santa Monica Hotel, Chaminade Resort & Spa, Hotel Zena Washington DC, Le Parc Suite Hotel West Hollywood and Viceroy Washington DC. And in November, we launched Curator Hotel & Resort Collection with six industry-leading hotel operators as founding members. We believe that Curator will generate significant future value for our shareholders as we rapidly add new member hotels and increase the cost-saving offerings and benefits provided by Curator. 2020 marked the most challenging year for the hotel industry in decades, and the most challenging ever for Pebblebrook. However, our combined strategic actions and tireless hard work have set the foundation for 2021, which we expect to be a year of gradual recovery as leisure and business travel demand returns. We are cautiously optimistic that we will return to profitability in the second half of this year, and we feel confident we are in a great position for significant growth and investment opportunities in the years ahead.”

Jon E. Bortz, Chairman, President, and Chief Executive Officer of Pebblebrook Hotel Trust

Fourth Quarter and Full-Year Highlights

Fourth Quarter

 

Year Ended December 31,

2020

 

2019

 

2020

 

2019

($ in millions except per share and RevPAR data)

Net income (loss)

($173.2)

$19.6

($392.6)

$115.7

 

 

 

 

 

 

 

Same-Property Room Revenues(1)

$48.0

$235.1

 

$279.8

$1,019.8

Same-Property Room Revenues growth rate

(79.6%)

 

 

(72.6%)

 

 

 

 

 

 

 

Same-Property Total Revenues(1)

$74.0

$353.2

 

$429.0

$1,490.5

Same-Property Total Revenues growth rate

(79.1%)

 

 

(71.2%)

 

 

 

 

 

 

 

Same-Property Total Expenses(1)

$93.9

$251.8

 

$468.4

$1,014.5

Same-Property Total Expense growth rate

(62.7%)

 

 

(53.8%)

 

 

 

 

 

 

 

Same-Property EBITDA(1)

($19.9)

$101.4

($39.4)

$476.0

Same-Property EBITDA growth rate

(119.7%)

(108.3%)

 

Adjusted EBITDAre(1)

($27.9)

$100.1

($69.7)

$478.7

Adjusted EBITDAre growth rate

(127.8%)

 

 

(114.6%)

 

 

Adjusted FFO(1)

($65.4)

$71.3

($191.4)

$344.1

Adjusted FFO per diluted share(1)

($0.50)

$0.54

($1.46)

$2.63

Adjusted FFO per diluted share growth rate

(192.6%)

 

 

(155.5%)

 

(1)

See tables later in this press release for a description of same-property information and reconciliations from net income (loss) to non-GAAP financial measures, including Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), EBITDA for Real Estate (“EBITDAre”), Adjusted EBITDAre, Funds from Operations (“FFO”), FFO per share, Adjusted FFO and Adjusted FFO per share.

 

For the details as to which hotels are included in Same-Property Room Revenues, Total Revenues, Expenses and EBITDA appearing in the table above and elsewhere in this press release, refer to the Same-Property Statistical Data table footnotes later in this press release.

“In response to the challenging operating environment caused by the COVID-19 pandemic, we shifted quickly to protect the health and safety of our guests and team members by implementing new operating standards, cleaning protocols, and social distancing measures,” noted Mr. Bortz. “As vaccine distribution progresses, we expect that travel demand will steadily recover, led first by leisure travelers, then transient business travelers in the second half of 2021, and finally group will be the last to return, particularly large group meetings, late in 2021.”

The Company’s portfolio operating trends improved through October, driven by healthy leisure travel demand and some slow recovery in business travel. However, following October’s peak performance, fundamentals weakened due primarily to a surge in COVID-19 cases and increased government restrictions. During the fourth quarter, occupancy at our open hotels declined from 37.9 percent in October to 29.0 percent in November, to 19.8 percent in December. The Company’s open hotels generated ($5.9) million of Hotel EBITDA in the quarter. The Company’s resort portfolio, of which all 8 properties were open throughout the quarter, generated $7.3 million of Hotel EBITDA, with an occupancy of 39.6 percent and an ADR of $302.16, a rate that was 14.8 percent higher than last year’s fourth quarter.

Estimated Monthly Cash Burn

The Company estimates that its monthly cash burn for the fourth quarter averaged between approximately $16.0 to $21.0 million (excluding capital investments) based on the following:

  • Average hotel-level monthly cash burn of approximately $7.0 million, which was approximately $3.0 million in October, but increased to approximately $9.0 million in December, excluding one-time expenses;
  • Corporate-level monthly G&A cash burn of $2.0 million; and
  • Corporate finance-related monthly cash burn of $12.0 million, which includes interest payments on the Company’s outstanding debt as well as both common and preferred dividend payments.

However, the first quarter’s monthly cash burn is likely to be slightly higher than the fourth quarter. Thereafter, assuming progress on reducing the impact of the virus through mitigation measures and widespread vaccinations, monthly cash burn is expected to decline, and should be eliminated sometime mid-year, as the travel recovery takes hold as the year progresses, demand gradually improves, recently reopened hotel performance ramps up, and additional hotels reopen.

Capital Investments and Strategic Property Redevelopments

In the fourth quarter, the Company completed $14.6 million of capital investments throughout its portfolio. The Company completed $125.0 million of capital investments and projects in 2020, including the completion of major renovations and property improvements at Hotel Zena Washington DC (formerly Donovan Hotel), Embassy Suites San Diego Bay – Downtown, The Westin San Diego Gaslamp Quarter, Le Parc Suite Hotel, San Diego Mission Bay Resort (formerly Hilton San Diego Resort & Spa), Viceroy Santa Monica Hotel, Chaminade Resort & Spa, Viceroy Washington DC (formerly Mason & Rook Hotel) and The Marker Key West Harbor Resort.

In 2021, the Company intends to complete the following redevelopments:

  • L’Auberge Del Mar (estimated at $10.5 million), a major redevelopment, including guestrooms and a dramatic transformation and expansion of the luxury property’s public spaces, including indoor and outdoor event and meeting spaces, bars, the pool, and the creation of an outdoor restaurant with ocean views, and the addition of a coffee café, all of which are expected to be completed in the second quarter of 2021; and
  • Southernmost Beach Resort (estimated at $15.0 million), a comprehensive guestroom renovation including all case goods, soft goods, and bathrooms, including tub to shower conversions, targeted to be completed in the third quarter of 2021.

If fundamentals strengthen, the Company will evaluate commencing additional previously planned major renovation and repositioning projects later in 2021.

Balance Sheet and Liquidity

As of December 31, 2020, the Company had $136.3 million of consolidated cash, cash equivalents, and restricted cash in addition to $603.2 million of additional undrawn availability on its senior unsecured revolving credit facility, for a total of $739.5 million of liquidity. The Company had $2.4 billion in consolidated unsecured debt at an effective weighted-average interest rate of 3.4 percent. Two billion dollars, or 84 percent of the Company’s total outstanding debt, was at a weighted-average fixed interest rate of 3.6 percent, and $0.4 billion, or 16 percent, was at a weighted-average floating interest rate of 2.4 percent. Of the Company’s outstanding debt, $1.8 billion was in the form of unsecured term loans, and $40.0 million was outstanding on its $650.0 million senior unsecured revolving credit facility. The Company has no loans maturing until 2022.

On December 15, 2020, the Company successfully executed a public offering of $500.0 million aggregate principal amount of convertible unsecured senior notes with a 6-year term, a 1.75% coupon and an equity conversion price up 35% (equivalent to $25.47/share). The Company also purchased a call spread option up 75% (equivalent to $33.02/share). Proceeds from this initial offering were used to reduce the Company’s outstanding debt and increase liquidity.

On February 9, 2021, the Company completed a public offering for $250.0 million aggregate principal amount of its previously issued 1.75% convertible unsecured senior notes. The notes were sold at a 5.5% premium to par (gross proceeds of $263.75 million). Proceeds from this offering were used primarily to reduce the outstanding balance on the Company’s senior unsecured revolving credit facility and $177.0 million of its 2021 and 2022 debt maturities. The Company also purchased a call spread option equivalent to that of the initial offering.

On February 18, 2021, the Company amended the agreements governing its outstanding debt, including its $650.0 million senior unsecured revolving credit facility, $1.6 billion of unsecured term loans and working capital facilities, and $100.0 million unsecured private placement senior notes. The Company’s amended credit agreements and related documents waive all financial covenants through the end of 2021 and most financial covenants through the first quarter of 2022, and provide substantially less restrictive covenants through the end of the first quarter of 2023. The amendment also provides the Company with enhanced flexibility to complete property renovations, acquisitions, and other investments during the waiver period. Approximately $21.0 million of November 2021 debt maturities were also extended to November 2022.

Common and Preferred Dividends

On December 15, 2020, the Company declared a quarterly cash dividend of $0.01 per share on its common shares as well as a regular quarterly cash dividend for the following preferred shares of beneficial interest:

  • $0.40625 per 6.50% Series C Cumulative Redeemable Preferred Share;
  • $0.39844 per 6.375% Series D Cumulative Redeemable Preferred Share;
  • $0.39844 per 6.375% Series E Cumulative Redeemable Preferred Share; and
  • $0.39375 per 6.30% Series F Cumulative Redeemable Preferred Share.

Update on Strategic Dispositions

The Company completed a total of $387.0 million of sales in 2020 and an additional $12.0 million in January 2021. On March 6, 2020, the Company sold the InterContinental Buckhead Atlanta and Sofitel Washington DC Lafayette Square for $331.0 million. On July 29, 2020, the Company sold Union Station Hotel Nashville, Autograph Collection for $56.0 million. Finally, on January 25, 2021, the Company announced the monetization of rooftop wireless leases at 11 of its hotels for $12.0 million of net proceeds.

On February 3, 2021, the Company announced that it had executed a contract to sell the Sir Francis Drake, which the Company expects will generate approximately $157.6 million of proceeds. The sale is expected to be completed during the second quarter of 2021.

Curator Hotel & Resort Collection

On November 17, 2020, the Company and six industry-leading hotel operators jointly announced the launch of Curator Hotel & Resort Collection. Curator’s distinct owner-centric platform offers an alternative for independent lifestyle hotels looking to strengthen their performance, providing them with best-in-class agreements, services and technology, while allowing them to retain their unique identities.

2021 Outlook

The Company continues to be unable to provide a full-year outlook for 2021 due to the uncertainties caused by the COVID-19 pandemic. It intends to issue new guidance when it has more clarity on government restrictions, advances in health solutions, the economy, travel demand, and more predictable overall operating fundamentals and trends.

Fourth Quarter 2020 Earnings Call

The Company will conduct its quarterly analyst and investor conference call on Wednesday, February 24, 2021, at 9:00 AM ET. Please dial (877) 705-6003 approximately ten minutes before the call begins to participate in the conference call. Additionally, a live webcast of the conference call will be available through the Company’s website. To access the webcast, log on to www.pebblebrookhotels.com ten minutes before the conference call. A replay of the conference call webcast will be archived and available online through the Investor Relations section of www.pebblebrookhotels.com.

About Pebblebrook Hotel Trust

Pebblebrook Hotel Trust (NYSE: PEB) is a publicly traded real estate investment trust (“REIT”) and the largest owner of urban and resort lifestyle hotels in the United States. The Company owns 53 hotels, totaling approximately 13,200 guestrooms across 14 urban and resort markets, with a focus on the west coast gateway cities. For more information, visit www.pebblebrookhotels.com and follow us at @PebblebrookPEB.

This press release contains certain “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Reform Act of 1995. Forward-looking statements are generally identifiable by the use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “seek,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” “forecast,” “continue,” “assume,” “plan,” references to “outlook” 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 and forecasts and other forward-looking information and estimates. Examples of forward-looking statements include the following: projections and forecasts of the Company’s cash burn rate; descriptions of the Company’s plans or objectives for future capital investment projects, operations or services; forecasts of the Company’s future economic performance; forecasts of hotel industry performance; forecasts of future value of Curator to shareholders; and descriptions of assumptions underlying or relating to any of the foregoing expectations including assumptions regarding the timing of their occurrence. These forward-looking statements are subject to various risks and uncertainties, 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 and the supply of hotel properties, and other factors as are described in greater detail in the Company’s filings with the SEC, including, without limitation, the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. 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 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 filings with the U.S. Securities and Exchange Commission, 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.pebblebrookhotels.com.

All information in this press release is as of February 23, 2021. 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.pebblebrookhotels.com

 
Pebblebrook Hotel Trust
Consolidated Balance Sheets
($ in thousands, except share and per-share data)
 
December 31, 2020 December 31, 2019
 
ASSETS
Assets:
Investment in hotel properties, net

$

5,882,022

 

$

6,332,587

 

Cash and cash equivalents

 

124,274

 

 

30,098

 

Restricted cash

 

12,026

 

 

26,777

 

Hotel receivables (net of allowance for doubtful accounts of $183 and $738, respectively)

 

10,225

 

 

49,619

 

Prepaid expenses and other assets

 

47,819

 

 

59,474

 

Total assets

$

6,076,366

 

$

6,498,555

 

 
 
 
LIABILITIES AND EQUITY
 
Liabilities:
Unsecured revolving credit facilities

$

40,000

 

$

165,000

 

Unsecured term loans, net of unamortized deferred financing costs

 

1,766,545

 

 

1,964,657

 

Senior convertible notes, net of unamortized debt discount and deferred financing costs

 

374,333

 

 

 

Senior unsecured notes, net of unamortized deferred financing costs

 

99,593

 

 

99,563

 

Accounts payable, accrued expenses and other liabilities

 

226,446

 

 

260,166

 

Lease liabilities – operating leases

 

255,106

 

 

256,271

 

Deferred revenues

 

36,057

 

 

57,704

 

Accrued interest

 

4,653

 

 

4,694

 

Distribution payable

 

9,307

 

 

58,564

 

Total liabilities

 

2,812,040

 

 

2,866,619

 

Commitments and contingencies
 
Shareholders’ Equity:
Preferred shares of beneficial interest, $0.01 par value (liquidation preference $510,000 at December 31, 2020 and December 31, 2019), 100,000,000 shares authorized; 20,400,000 shares issued and outstanding at December 31, 2020 and December 31, 2019

 

204

 

 

204

 

Common shares of beneficial interest, $0.01 par value, 500,000,000 shares authorized; 130,673,300 shares issued and outstanding at December 31, 2020 and 130,484,956 shares issued and outstanding at December 31, 2019

 

1,307

 

 

1,305

 

Additional paid-in capital

 

4,169,870

 

 

4,069,410

 

Accumulated other comprehensive income (loss)

 

(60,071

)

 

(24,715

)

Distributions in excess of retained earnings

 

(853,973

)

 

(424,996

)

Total shareholders’ equity

 

3,257,337

 

 

3,621,208

 

Non-controlling interests

 

6,989

 

 

10,728

 

Total equity

 

3,264,326

 

 

3,631,936

 

Total liabilities and equity

$

6,076,366

 

$

6,498,555

 

 
 
Pebblebrook Hotel Trust
Consolidated Statements of Operations
($ in thousands, except share and per-share data)
 
 

Three months ended

December 31,

Year ended

December 31,

2020

2019

2020

2019

(Unaudited)
Revenues:
Room

$

48,160

 

$

252,048

 

$

287,439

 

$

1,103,947

 

Food and beverage

 

13,257

 

 

95,781

 

 

95,892

 

 

370,584

 

Other operating

 

12,792

 

 

31,580

 

 

59,557

 

 

137,682

 

Total revenues

$

74,209

 

$

379,409

 

$

442,888

 

$

1,612,213

 

 
Expenses:
Hotel operating expenses:
Room

$

16,381

 

$

66,148

 

$

91,771

 

$

275,855

 

Food and beverage

 

11,554

 

 

65,297

 

 

77,698

 

 

260,278

 

Other direct and indirect

 

38,501

 

 

107,418

 

 

209,957

 

 

438,035

 

Total hotel operating expenses

 

66,436

 

 

238,863

 

 

379,426

 

 

974,168

 

Depreciation and amortization

 

56,516

 

 

57,504

 

 

224,560

 

 

234,880

 

Real estate taxes, personal property taxes, property insurance, and ground rent

 

29,160

 

 

31,004

 

 

114,333

 

 

125,013

 

General and administrative

 

6,899

 

 

8,294

 

 

45,158

 

 

34,047

 

Transaction costs

 

70

 

 

1,103

 

 

10,544

 

 

8,679

 

Impairment loss

 

53,986

 

 

 

 

74,556

 

 

 

(Gain) loss on sale of hotel properties

 

 

 

(2,819

)

 

(117,401

)

 

(2,819

)

(Gain) loss and other operating expenses

 

668

 

 

2,684

 

 

4,421

 

 

8,903

 

Total operating expenses

 

213,735

 

 

336,633

 

 

735,597

 

 

1,382,871

 

Operating income (loss)

 

(139,526

)

 

42,776

 

 

(292,709

)

 

229,342

 

Interest expense

 

(28,902

)

 

(23,962

)

 

(104,098

)

 

(108,474

)

Other

 

75

 

 

6

 

 

517

 

 

29

 

Income (loss) before income taxes

 

(168,353

)

 

18,820

 

 

(396,290

)

 

120,897

 

Income tax (expense) benefit

 

(4,834

)

 

752

 

 

3,697

 

 

(5,172

)

Net income (loss)

 

(173,187

)

 

19,572

 

 

(392,593

)

 

115,725

 

Net income (loss) attributable to non-controlling interests

 

(329

)

 

29

 

 

(864

)

 

283

 

Net income (loss) attributable to the Company

 

(172,858

)

 

19,543

 

 

(391,729

)

 

115,442

 

Distributions to preferred shareholders

 

(8,139

)

 

(8,139

)

 

(32,556

)

 

(32,556

)

Net income (loss) attributable to common shareholders

$

(180,997

)

$

11,404

 

$

(424,285

)

$

82,886

 

 
 
Net income (loss) per share available to common shareholders, basic

$

(1.39

)

$

0.08

 

$

(3.25

)

$

0.63

 

Net income (loss) per share available to common shareholders, diluted

$

(1.39

)

$

0.08

 

$

(3.25

)

$

0.63

 

 
Weighted-average number of common shares, basic

 

130,673,300

 

 

130,484,956

 

 

130,610,015

 

 

130,471,670

 

Weighted-average number of common shares, diluted

 

130,673,300

 

 

130,669,494

 

 

130,610,015

 

 

130,718,306

 

 

Contacts

Raymond D. Martz, Chief Financial Officer, Pebblebrook Hotel Trust – (240) 507-1330

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