Pebblebrook Hotel Trust Reports First Quarter 2016 Results

BETHESDA, Md.--(BUSINESS WIRE)--Pebblebrook Hotel Trust (NYSE: PEB) (the “Company”) today reported results for the first quarter ended March 31, 2016. The Company’s results include the following:

⁽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"), Adjusted EBITDA, 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 Revenue Per Available Room (“RevPAR”), Average Daily Rate (“ADR”), Occupancy, Revenues, Expenses, EBITDA and EBITDA Margins appearing in the table above and elsewhere in this press release, refer to the Same-Property Inclusion Reference Table later in this press release.

“We are very pleased with our portfolio’s strong operating results in the first quarter,” said Jon E. Bortz, Chairman, President and Chief Executive Officer of Pebblebrook Hotel Trust. “Our results exceeded our outlook and the industry. Our outperformance was primarily due to strong demand in several of our west coast markets, particularly in San Francisco and Los Angeles, some of which was one-time in nature. We also benefitted from less renovation impact this year versus last year. We remain cautious about 2016 due to weakening business transient demand growth, a lack of visibility and continued global economic headwinds and uncertainties. Consequently, despite our first quarter beat, we are keeping our full year 2016 outlook unchanged.”

First Quarter Highlights

• Same-Property RevPAR and Room Revenue: Same-Property RevPAR in the first quarter of 2016 increased 8.0 percent over the same period of 2015 to $195.01. Same-Property Room Revenue increased by 9.9 percent, greater than RevPAR largely due to the extra day in February and the increase in the Same-Property room count. Same-Property ADR grew 3.1 percent from the prior year quarter to $236.23. Same-Property Occupancy rose 4.8 percent to 82.6 percent. Same-Property RevPAR for our wholly owned properties, which excludes the Company’s 49 percent interest in its six-hotel joint venture (the “Manhattan Collection”), increased 8.9 percent from the prior year period.
• Same-Property EBITDA: The Company’s hotels generated $62.0 million of Same-Property EBITDA for the quarter ended March 31, 2016, climbing 15.2 percent from the same period of 2015. Same-Property Revenues increased 6.8 percent, while Same-Property Expenses rose just 3.6 percent. As a result, Same-Property EBITDA Margin grew 217 basis points to 29.8 percent for the first quarter of 2016, as compared to the same period last year. For the quarter, flow-through of Same-Property Revenues to Same-Property EBITDA was 61.9 percent. Same-Property EBITDA for our wholly owned properties grew 15.9 percent compared with the prior year period.
• Adjusted EBITDA: The Company’s Adjusted EBITDA rose to $56.2 million from $38.8 million in the prior year period, an increase of $17.4 million, or 44.8 percent.
• Adjusted FFO: The Company’s Adjusted FFO climbed 66.6 percent to $40.6 million from $24.4 million in the prior year period.
• Dividends: On March 15, 2016, the Company declared a regular quarterly cash dividend of $0.38 per share on its common shares, an increase of 23 percent from the prior quarterly dividend of $0.31 per share, a regular quarterly cash dividend of $0.50 per share on its 8.00% Series B Cumulative Redeemable Preferred Shares and a regular quarterly cash dividend of $0.40625 per share on its 6.50% Series C Cumulative Redeemable Preferred Shares.

“During the quarter, our RevPAR growth was led by our properties in San Francisco, which benefitted from an overall strong quarter as well as the Super Bowl in February, along with our properties in West Los Angeles and San Diego. Both the West Los Angeles market and our properties experienced better than expected results due partly to the unfortunate displacement of families living in the Porter Ranch neighborhood caused by the natural gas leak in Aliso Canyon,” said Mr. Bortz. “Same-Property RevPAR for our portfolio increased 8.0 percent, above the industry’s 2.7 percent growth and in excess of our 3.0 percent to 6.0 percent outlook. Our hotels that were renovated and repositioned in 2015 also made significant strides in the quarter, increasing occupancy levels, rates and market share penetration. Overall, our performance continues to be depressed by our New York hotels. Same-Property RevPAR excluding the Manhattan Collection grew 8.9 percent for the year, with ADR climbing 4.1 percent.”

Capital Reinvestment and Asset Management

During the first quarter, the Company made $36.3 million of capital improvements throughout its portfolio, which includes the Company’s 49 percent interest in the Manhattan Collection. The Company completed renovations at Hotel Zeppelin San Francisco (formerly the Prescott Hotel San Francisco), The Nines, a Luxury Collection Hotel, Portland and Hotel Monaco Washington DC. We also commenced the renovation of Union Station Hotel Nashville, Autograph Collection in the first quarter.

In March, the Company completed a $35.0 million transformative renovation, repositioning and addition of 32 guest rooms at Hotel Zeppelin San Francisco. “We’re very excited about the launch of Hotel Zeppelin,” noted Mr. Bortz. “The initial guest response to our uniquely designed Hotel Zeppelin has been fantastic. This hotel is well situated in the Union Square market and should benefit from continued healthy business and leisure demand in the vibrant and growing San Francisco market as the hotel ramps to stabilization over the next few years.”

During the remainder of 2016 and early 2017, the Company has various major renovations and repositionings it plans to undertake at a number of its properties that will improve performance in future years, including:

• Union Station Hotel Nashville, Autograph Collection (estimated at $15.5 million), which has already begun its phased comprehensive guest rooms, public space and meeting space renovation expected to be completed in the third quarter of 2016;
• The Westin Colonnade, Coral Gables (estimated at $18.0 million), which already began its phased comprehensive guest rooms, public area and meeting space renovation, expected to be completed and re-launched as a Tribute Portfolio property late in the third quarter of 2016;
• Hotel Palomar Los Angeles Beverly Hills (estimated at $9.0 million), which will undergo a guest rooms and public space renovation to begin in the fourth quarter of 2016 with expected completion in the first quarter of 2017;
• Mondrian Los Angeles (estimated at $8.0 million), which will undergo a guest rooms renovation to begin in the fourth quarter of 2016 with expected completion in the first quarter of 2017;
• Revere Hotel Boston Common (estimated at $20.0 million), which will undergo a comprehensive property renovation to start in the fourth quarter of 2016 with expected completion in the first quarter of 2017; and
• The Tuscan Fisherman’s Wharf, a Best Western Plus Hotel (estimated at $15.0 million), which will undergo a comprehensive property renovation beginning early in 2017.

Balance Sheet

As of March 31, 2016, the Company had $1.3 billion in consolidated debt and $225.4 million in unconsolidated, non-recourse, secured debt, at weighted-average interest rates of 3.5 percent and 3.6 percent, respectively. The Company had $675.0 million outstanding in the form of unsecured term loans and $180.0 million outstanding on its $450.0 million senior unsecured revolving credit facility. As of March 31, 2016, the Company had $38.3 million of consolidated cash, cash equivalents and restricted cash and $12.9 million of unconsolidated cash, cash equivalents and restricted cash. The unconsolidated debt, cash, cash equivalents and restricted cash amounts represent the Company’s 49 percent interest in the Manhattan Collection.

On March 31, 2016, as defined in the Company’s credit agreement, the Company’s fixed charge coverage ratio was 3.0 times and total net debt to trailing 12-month corporate EBITDA was 5.1 times. Excluding its interest in the off-balance sheet Manhattan Collection, the Company’s fixed charge coverage ratio was 3.1 times, and net debt to trailing 12-month corporate EBITDA was 4.8 times.

Capital Markets

Year-to-date, Pebblebrook completed several capital markets transactions to help maintain its strong balance sheet and prudent capital structure including increasing two of its unsecured term loans, redeeming preferred shares and retiring mortgage debt:

• On January 6, 2016, the Company announced that it exercised the accordion options on two of its existing unsecured term loans to borrow an additional $150.0 million;
• On March 11, 2016, the Company redeemed all 5,600,000 of its issued and outstanding 7.875% Series A Cumulative Preferred Shares; and
• On April 5, 2016, the Company repaid the $62.8 million mortgage secured by the Embassy Suites San Diego Bay - Downtown, which was subject to a 6.28 percent interest rate.

“As evidenced by our recent debt originations and the redemption of our Series A Cumulative Preferred Shares, we’ve been able to significantly reduce our annualized fixed charges,” noted Raymond D. Martz, Chief Financial Officer of Pebblebrook Hotel Trust. “In 2016, we expect to make additional strides toward increasing our cash flow and reducing our leverage ratio through the refinancing of our higher-rated mortgage debt and through the potential disposition of a select number of properties.”

2016 Outlook

The Company's outlook for 2016, which remains unchanged from its prior outlook, assumes no additional acquisitions or dispositions, includes its various planned capital investment projects and includes other significant assumptions, is as follows:

The Company’s outlook for the second quarter of 2016 is as follows:

“We continue to believe that 2016 will be a solid year for Pebblebrook and the overall U.S. hotel industry,” noted Mr. Bortz. “Yet we remain cautious given the uncertain economic environment and softening business travel trends. We expect these weak corporate transient demand trends to persist in the near term as companies look to trim expenses in light of a slower macro-economic growth outlook, combined with ongoing geopolitical risks and global economic headwinds and uncertainties.

“As we move forward throughout the year, we continue to market for disposition several select hotels and non-hotel real estate portions of our properties where we believe there is an opportunity to benefit from significantly higher values in the private market. Our efforts are focused on increasing shareholder value by utilizing disposition proceeds to reduce our debt, to make distributions of capital gains and to potentially repurchase up to $150 million of our common stock. We will provide updates to any disposition activity after any such transactions are complete, and continue to believe that private market valuations and activity levels remain favorable.”

The Company’s outlook for 2016 and the second quarter of 2016 assumes no additional acquisitions or dispositions beyond the hotels the Company owned as of March 31, 2016 and reflects the Company’s 49 percent interest in the Manhattan Collection. The Company’s outlook also incorporates all of the expected disruption associated with the various renovations and repositionings at our properties, including The Westin Colonnade, Coral Gables, Union Station Hotel Nashville, Autograph Collection, Revere Hotel Boston Common, the Tuscan Fisherman’s Wharf, a Best Western Plus Hotel, Hotel Palomar Los Angeles Beverly Hills and Mondrian Los Angeles, all of which already have or are expected to commence renovations in 2016 or early 2017.

The Company’s estimates and assumptions, including the Company’s outlook for second quarter 2016, for Same-Property RevPAR, Same-Property RevPAR growth rate, Same-Property Room Revenue growth rate, Same-Property EBITDA, Same-Property EBITDA growth rate, Same-Property EBITDA Margin and Same-Property EBITDA Margin growth rate include the hotels owned as of March 31, 2016, as if they had been owned by the Company for all of 2015 and 2016, except for Hotel Vintage Portland, which is not included in the first quarter, and Hotel Zeppelin San Francisco, which is not included in the first and fourth quarters.

If any of the foregoing estimates and assumptions prove to be inaccurate, actual results, including the outlook, may vary, and could vary significantly, from the amounts shown above.

First Quarter 2016 Earnings Call

The Company will conduct its quarterly analyst and investor conference call on Thursday, April 28, 2016 at 9:00 AM ET. To participate in the conference call, please dial (888) 572-7033 approximately ten minutes before the call begins. 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 prior to 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 is a publicly traded real estate investment trust (“REIT”) organized to opportunistically acquire and invest primarily in upper upscale, full-service hotels located in urban markets in major gateway cities. The Company owns 37 hotels, including 31 wholly owned hotels with a total of 7,440 guest rooms and a 49% joint venture interest in six hotels with a total of 1,787 guest rooms. The Company owns, or has an ownership interest in, hotels located in 11 states and the District of Columbia, including: San Francisco, California; Los Angeles, California (Beverly Hills, Hollywood, Santa Monica and West Hollywood); Boston, Massachusetts; New York, New York; San Diego, California; Portland, Oregon; Buckhead, Georgia; Naples, Florida; Seattle, Washington; Miami, Florida; Washington, DC; Philadelphia, Pennsylvania; Columbia River Gorge, Washington; Nashville, Tennessee; Bethesda, Maryland and Minneapolis, Minnesota. For more information, please visit us at www.pebblebrookhotels.com and follow us on Twitter 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 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 U.S. GDP growth, U.S. hotel industry RevPAR growth, the Company’s net income, FFO, EBITDA, Adjusted FFO, Adjusted EBITDA, RevPAR, EBITDA Margin and EBITDA Margin growth, and the Company’s expenses, share count or other financial items; descriptions of the Company’s plans or objectives for future operations, acquisitions or services; forecasts of the Company’s future economic performance and its share of future markets; forecasts of hotel industry performance; 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 Securities and Exchange Commission, including, without limitation, the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. 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 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.pebblebrookhotels.com.

All information in this press release is as of April 27, 2016. 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