Xenia Hotels & Resorts Reports Fourth Quarter and Full Year 2016 Results, and Provides 2017 Guidance

ORLANDO, Fla., Feb. 28, 2017 /PRNewswire/ -- Xenia Hotels & Resorts, Inc. (NYSE: XHR) ("Xenia" or the "Company") today announced results for the fourth quarter and full year ended December 31, 2016. 

Fourth Quarter 2016 Highlights

• Net Income: Net income attributable to common stockholders was $48.8 million and net income per diluted share was $0.44, decreases of 21.1% and 20.0%, respectively, compared to the fourth quarter of 2015, partially due to a difference in the gain on sale of investment properties of $13.6 million.
• Same-Property RevPAR: Same-Property RevPAR decreased 4.2% compared to the fourth quarter of 2015 to $138.37, as occupancy declined 194 basis points and ADR decreased 1.5%. Excluding the Company's Houston-area hotels, Same-Property RevPAR decreased 1.9%, as occupancy declined 105 basis points and ADR decreased 0.5%.
• Same-Property Hotel EBITDA Margin: Same-Property Hotel EBITDA Margin was 30.9%, a decrease of 116 basis points compared to the fourth quarter of 2015. Excluding the Company's Houston-area hotels, Same-Property Hotel EBITDA Margin decreased 71 basis points.
• Total Portfolio RevPAR: Total Portfolio RevPAR was 0.9% higher than in the fourth quarter of 2015, reflecting improvements in portfolio composition.
• Adjusted EBITDA: Adjusted EBITDA declined $9.1 million to $64.1 million, a decrease of 12.4% partially due to net asset dispositions since the fourth quarter of 2015.
• Adjusted FFO per Diluted Share: Adjusted FFO per diluted share decreased 1.8% to $0.55 per diluted share compared to the fourth quarter of 2015.
• Financing Activity: The Company paid off three mortgage loans totaling $130 million and modified two loans resulting in $41 million of incremental proceeds.
• Disposition Activity: The Company sold four hotels for total consideration of approximately $119 million.
• Dividends: The Company declared its fourth quarter dividend of $0.275 per share to common stockholders of record on December 30, 2016.

Full Year 2016 Highlights

• Net Income: Net income attributable to common stockholders was $85.9 million, a 3.3% decrease compared to the prior year.
• Same-Property RevPAR: Same-Property RevPAR decreased 0.3% to $150.12, as occupancy declined 103 basis points while ADR increased 1.1%. Excluding the Company's Houston-area hotels, Same-Property RevPAR increased 1.9%, as occupancy remained flat and ADR increased 2.0%.
• Same-Property Hotel EBITDA Margin: Same-Property Hotel EBITDA Margin was 32.6%, an increase of 6 basis points compared to the full year 2015. Excluding the Company's Houston-area hotels, Same-Property Hotel EBITDA Margin grew 40 basis points during the year ended December 31, 2016.
• Total Portfolio RevPAR: Total Portfolio RevPAR increased 4.7%, reflecting improvements in portfolio composition.
• Adjusted EBITDA: Adjusted EBITDA was $287.3 million, a decrease of 1.9% over 2015.
• Adjusted FFO per Diluted Share: The Company generated Adjusted FFO per diluted share of $2.20, a 2.3% increase over 2015.
• Investment Activity: The Company made several improvements in portfolio composition. In January, the Company completed the acquisition of the 245-room Hotel Commonwealth in Boston, Massachusetts for a purchase price of $136 million. The Company sold nine hotels comprising 1,887 rooms for total consideration of $290 million.
• Financing Activity: The Company paid off $277 million of mortgage loans, refinanced or modified three loans resulting in $52 million of incremental proceeds, and fixed LIBOR on $139 million of variable rate debt. In addition, the $125 million term loan that was entered into in late 2015 was funded and the Company obtained a new $60 million mortgage loan collateralized by the Hotel Palomar Philadelphia.
• Share Repurchase Activity: The Company repurchased approximately 5.0 million shares of its common stock at a weighted average purchase price of $14.89 per share, or $74 million in total.
• Dividends: The Company declared $1.10 of dividends per share to common stockholders during 2016, which represented a 7.2% yield relative to the Company's stock price on December 31, 2015.

"Our portfolio performed in-line with our expectations during the fourth quarter, as Same-Property RevPAR came in toward the higher end of our implied guidance range and Adjusted FFO exceeded the top end of the range," commented Marcel Verbaas, President and Chief Executive Officer of Xenia.  "Our quarterly results were negatively impacted by the continued weakness in the Houston market, disruption due to renovations, and weak food and beverage revenues at several of our larger, group-oriented hotels.  Several non-recurring events in the fourth quarter of 2015 also impacted the year-over-year comparison. Despite a slight decline in Same-Property RevPAR for 2016, our dedicated asset management team remained focused on cost containment allowing us to maintain margins for the year.  Throughout the past year we have continued to solidify the foundation of our company as exemplified by the enhancements to portfolio quality and the fortitude of our balance sheet.  We have ample liquidity with over $215 million of cash on our balance sheet, full availability on our line of credit, and more than 55% of our hotels unencumbered by debt, all of which provide us flexibility to take advantage of opportunities as they arise."

Operating Results

The Company's results include the following:

Disposition Activity

As previously disclosed, in December the Company sold the 162-room Homewood Suites by Hilton Houston near the Galleria, the 148-room Hampton Inn & Suites Denver Downtown, the 178-room Hilton Garden Inn Chicago North Shore/Evanston and the 195-room Hilton St. Louis Downtown for an aggregate sale price of approximately $119 million.

During 2016, the Company sold nine hotels for approximately $290 million.  The dispositions allowed the Company to exit several non-core, low-growth markets including Gainesville, Florida and St. Louis, Missouri, as well as reduce exposure in Houston, Denver, and Chicago.  On average, the disposition hotels generated EBITDA per key 40% below the remaining portfolio.  The disposition hotels had an average RevPAR of approximately $110 for the trailing twelve months prior to sale, which is significantly below the $152.46 RevPAR for full year 2016 for hotels in the portfolio at year-end.

Financings and Balance Sheet

In the fourth quarter, the Company paid off three mortgage loans totaling $130 million, including the $13 million loan collateralized by the Courtyard Birmingham Downtown at UAB, the $83 million loan collateralized by the Renaissance Austin Hotel, and the $34 million loan collateralized by the Marriott Griffin Gate Resort & Spa.   Additionally in the fourth quarter, the Company modified the loans collateralized by the Marriott Dallas City Center and the Hyatt Regency Santa Clara.  The amendments resulted in $11 million and $30 million of incremental proceeds, respectively, and extended the maturity dates to January 2022.

During 2016, the Company originated a new $60 million loan collateralized by Hotel Palomar Philadelphia, paid off six mortgage loans totaling $277 million, drew down its $125 million seven-year term loan in connection with the Hotel Commonwealth acquisition, refinanced or modified three loans resulting in $52 million in incremental proceeds, and fixed LIBOR on $139 million of variable rate debt.

Subsequent to year-end, the Company executed swaps to fix the interest rates on the loans collateralized by the Marriott Dallas City Center and the Hyatt Regency Santa Clara at 4.05% and 3.81%, respectively, effective on March 1, 2017 through the maturity date of the loans in January 2022.  As a result, the Company's ratio of variable rate to total debt is expected to be reduced from 52% at year-end 2015 to 34% on March 1, 2017.

As of December 31, 2016, the Company had total outstanding debt of $1.1 billion with a weighted average interest rate of 3.24%.  In addition, the Company had $216 million of cash and cash equivalents and full availability on its $400 million senior unsecured credit facility.  Total net debt to trailing twelve month Corporate EBITDA (as defined in Section 1.01 of the Company's senior unsecured credit facility) was 3.3x.

"We are pleased with our financing activities in 2016.  We strengthened our balance sheet by addressing all debt maturities through early 2018, reducing exposure to interest rate risk, lowering our weighted average interest rate, and extending the average duration of our debt.   Our debt profile continues to be strong, highlighted by a conservative leverage ratio and low cost of debt.  As we look forward, we expect our balance sheet strength to enable us to create long-term value," commented Atish Shah, Chief Financial Officer for Xenia.

Capital Expenditures

During the fourth quarter, the Company invested $21 million in its portfolio.   For the full year 2016, the Company invested $57 million in its portfolio, including the following projects:

• The extensive renovation of the Marriott Napa Valley Hotel & Spa, which transformed the guestrooms, meeting and pre-function space, and pool and outdoor function space.
• The renovation of its Hyatt in Key West, including upgrades to the property's guestrooms, Blue Mojito Pool Bar & Grill, and Jala Spa. These renovations resulted in the addition of two guestrooms at the hotel and upon completion of the renovation the hotel was rebranded as the Hyatt Centric Key West Resort & Spa.
• The completion of the meeting room and ballroom renovation at the Renaissance Atlanta Waverly Hotel.
• The renovation of the concierge-level guestrooms at the Fairmont Dallas.
• The commencement of the guestroom renovation at the Westin Galleria Houston, which will continue through the first half of 2017.
• The commencement of the guestroom renovation at the Andaz San Diego, which is expected to be complete in the second quarter of 2017.
• The commencement of guestroom renovations at the Bohemian Hotel Celebration and Bohemian Hotel Savannah Riverfront, and a meeting room renovation at the Marriott San Francisco Airport Waterfront.

Share Repurchases

During the fourth quarter, the Company purchased 500,715 shares under its share repurchase authorization for an aggregate purchase price of $7.7 million.  During the year ended December 31, 2016, the Company repurchased 4,966,763 shares of its common stock at a weighted average purchase price of $14.89 per share, or $74 million in total.

In November 2016, the Company's Board of Directors authorized the repurchase of up to an additional $75 million of the Company's outstanding common shares.  Repurchases may be made in open market and privately-negotiated transactions, or by other means, including Rule 10b5-1 trading plans.  The repurchase program may be suspended or discontinued at any time, and does not obligate the Company to acquire any particular amount of shares.  Inclusive of this additional authorization, the Company had approximately $101 million of capacity under its repurchase authorization as of February 24, 2017.

2017 Outlook and Guidance

The Company's outlook for 2017 is based on the current economic environment, incorporates all expected renovation disruption, and assumes no acquisitions, dispositions, equity offerings, or share repurchases.  RevPAR change includes all 42 hotels owned as of February 28, 2017.

Additional guidance details:

• Average RevPAR declines of 8% to 12% at the Company's Houston-area hotels, due to the impact of continued weakness in corporate demand, the addition of new supply, and disruption due to renovations at the Westin Galleria and Westin Oaks. The Company's Houston-area hotels are expected to negatively impact portfolio RevPAR change by approximately 100 basis points.
• Disruption due to renovations is expected to negatively impact portfolio RevPAR change by approximately 50 basis points.
• In 2016, the nine hotels that were sold during the year contributed approximately $17 million to Adjusted EBITDA.
• General and administrative expense of $22 million to $24 million, excluding non-cash share-based compensation.
• Interest expense of $41 million to $43 million, excluding non-cash loan related costs. The expected reduction in interest expense relative to 2016 is a result of changes in debt outstanding, offset by changes in the mix of fixed and variable rate debt, and an expected change in the LIBOR curve.
• Income tax expense of $5 million to $6 million.

"We anticipate operating fundamentals to remain challenging in 2017, as citywide convention pace remains weak in several of our markets and new supply continues to weigh on the industry.  As such, cost controls and margin retention remain a focus as we look to find additional efficiencies throughout the portfolio," continued Mr. Verbaas.  "We are accelerating several value-add renovation projects throughout the portfolio, as we believe these projects will generate strong returns and better position our assets for the years ahead. We continue to believe in the strength and quality of our portfolio over the long-term, which when combined with our capital allocation strategy and balance sheet flexibility, will lead us to perform well in the coming years."

Fourth Quarter 2016 Earnings Call

The Company will conduct its quarterly conference call on Tuesday, February 28, 2017 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 42 hotels, including 40 wholly owned hotels, comprising 10,911 rooms, across 20 states and the District of Columbia. Xenia's hotels are operated and/or licensed by industry leaders such as Marriott®, Kimpton®, Hyatt®, 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 "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 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.

Non-GAAP Financial Measures

The Company considers the following useful non-GAAP financial measures to investors as key supplemental measures of operating performance: EBITDA, Adjusted EBITDA, Same Property Hotel EBITDA, Same-Property Hotel EBITDA Margin, FFO, Adjusted FFO, and Adjusted FFO per diluted share.  These non-GAAP financial measures should be considered along with, but not as alternatives to, net income or loss, operating profit, cash from operations, or any other operating performance measure as prescribed per GAAP.

EBITDA and Adjusted EBITDA

EBITDA is a commonly used measure of performance in many industries and is defined as net income or loss (calculated in accordance with GAAP) excluding interest expense, provision for income taxes (including income taxes applicable to sale of assets) and depreciation and amortization.  The Company considers EBITDA useful to an investor regarding results of operations, in evaluating and facilitating comparisons of operating performance between periods and between REITs by removing the impact of capital structure (primarily interest expense) and asset base (primarily depreciation and amortization) from operating results, even though EBITDA does not represent an amount that accrues directly to common stockholders.  In addition, EBITDA is used as one measure in determining the value of hotel acquisitions and dispositions and along with FFO and Adjusted FFO, it is used by management in the annual budget process for compensation programs. The Company presents EBITDA attributable to common stock and unit holders, which includes its Operating Partnership units because its Operating Partnership units may be redeemed for common stock.  The Company believes it is meaningful for the investor to understand EBITDA attributable to all common stock and Operating Partnership units.

The Company further adjusts EBITDA for certain additional items such as hotel property acquisitions and pursuit costs, amortization of share-based compensation, equity investment adjustments, the cumulative effect of changes in accounting principles, impairment of real estate assets, operating results from properties sold and other costs it believes do not represent recurring operations and are not indicative of the performance of its underlying hotel property entities.  The Company believes Adjusted EBITDA provides investors with another financial measure in evaluating and facilitating comparison of operating performance between periods and between REITs that report similar measures.

Hotel EBITDA and Hotel EBITDA Margin

The Company calculates Hotel EBITDA in accordance with the current edition of USALI, which is defined as net income or loss (calculated in accordance with GAAP) after adding back replacement reserves.  Hotel EBITDA Margin is calculated by dividing Hotel EBITDA by Total Revenues.

FFO and Adjusted FFO

The Company calculates FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (NAREIT), which defines FFO as net income or loss (calculated in accordance with GAAP), excluding real estate-related depreciation, amortization and impairments, gains (losses) from sales of real estate, the cumulative effect of changes in accounting principles, similar adjustments for unconsolidated partnerships and joint ventures, and items classified by GAAP as extraordinary. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most industry investors consider presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. The Company believes that the presentation of FFO provides useful supplemental information to investors regarding operating performance by excluding the effect of real estate depreciation and amortization, gains (losses) from sales for real estate, impairments of real estate assets, extraordinary items and the portion of these items related to unconsolidated entities, all of which are based on historical cost accounting and which may be of lesser significance in evaluating current performance.  The Company believes that the presentation of FFO can facilitate comparisons of operating performance between periods and between REITs, even though FFO does not represent an amount that accrues directly to common stockholders.  The calculation of FFO may not be comparable to measures calculated by other companies who do not use the NAREIT definition of FFO or do not calculate FFO per diluted share in accordance with NAREIT guidance.  Additionally, FFO may not be helpful when comparing Xenia to non-REITs.  The Company presents FFO attributable to common stock and unit holders, which includes its Operating Partnership units because its Operating Partnership units may be redeemed for common stock.  The Company believes it is meaningful for the investor to understand FFO attributable to all common stock and Operating Partnership units.

The Company further adjusts FFO for certain additional items that are not in NAREIT's definition of FFO such as hotel property acquisition and pursuit costs, amortization of debt origination costs and share-based compensation, operating results from properties that are sold and other expenses it believes do not represent recurring operations.  The Company believes that Adjusted FFO provides investors with useful supplemental information that may facilitate comparisons of ongoing operating performance between periods and between REITs that make similar adjustments to FFO and is beneficial to investors' complete understanding of operating performance.

Adjusted FFO per diluted share

The Company calculates Adjusted FFO per diluted share by dividing the Adjusted FFO for the respective period by the diluted weighted average number of common stock shares for the corresponding period.  The Company's diluted weighted average number of common shares outstanding is calculated by taking the weighted average of the common stock outstanding for the respective period plus the effect of any dilutive securities.  Any anti-dilutive securities are excluded from the diluted earnings per-share calculation.