Xenia Hotels & Resorts Reports Second Quarter 2021 Results

ORLANDO, Fla., Aug. 3, 2021 /PRNewswire/ -- Xenia Hotels & Resorts, Inc. (NYSE: XHR) ("Xenia" or the "Company") today announced results for the quarter ended June 30, 2021.

Second Quarter 2021 Highlights

• Net Loss: Net loss attributable to common stockholders was $(42.0) million, or $(0.36) per share.
• Adjusted EBITDAre: Adjusted EBITDAre was $27.4 million.
• Adjusted FFO per Diluted Share: Adjusted FFO per diluted share was $0.08.
• Same-Property RevPAR: The Company had its entire Same-Property portfolio (34 properties) open and operating during the second quarter. These properties achieved RevPAR of $110.45, a decline of 38.7% versus the second quarter of 2019, as a result of occupancy of 51.4% and an ADR of $215.01.
• Same-Property Hotel EBITDA: Same-Property Hotel EBITDA was $36.3 million.
• Same-Property Hotel EBITDA Margin: Same-Property Hotel EBITDA Margin was 24.0%.

Year to Date  2021 Highlights

• Net Loss: Net loss attributable to common stockholders was $(98.4) million, or $(0.86) per share.
• Adjusted EBITDAre: Adjusted EBITDAre was $23.7 million.
• Adjusted FFO per Diluted Share: Adjusted FFO per diluted share was $(0.10).
• Same-Property RevPAR: The Company had its entire Same-Property portfolio (34 properties) open and operating during the first half of 2021. These properties achieved RevPAR of $88.20, a decline of 50.9% versus the six months ended June 30, 2019, as a result of occupancy of 43.1% and an ADR of $204.44.
• Same-Property Hotel EBITDA: Same-Property Hotel EBITDA was $36.4 million.
• Same-Property Hotel EBITDA Margin: Same-Property Hotel EBITDA Margin was 15.2%.

"We are pleased that continued improvement in lodging demand, the competitive positioning of our portfolio and excellent cost controls resulted in positive Adjusted EBITDAre and FFO for the second quarter," commented Marcel Verbaas, Chairman and Chief Executive Officer of Xenia. "After Adjusted FFO turned positive in March, we have seen this trend continue throughout the second quarter. While the recent resurgence of COVID-19 cases and the potential for the return of mandated or recommended social restrictions are a cause for concern, we believe that the proven desire for leisure and corporate travel as well as our diversified and well-located portfolio will allow us to continue to drive positive results in the months ahead. As a result of our portfolio's performance and the balance sheet activities we have completed over the past 18 months, including our most recent notes offering, we believe we have created significant financial strength and flexibility which will allow us to be opportunistic and drive income growth in the years ahead. We will remain disciplined in our investment approach as we evaluate these opportunities while we continue to maximize our operating results."

Operations Update

As of June 30, 2021, all 35 of the Company's hotels and resorts were open and operating.  The Company recommenced operations at Hyatt Regency Portland at the Oregon Convention Center on May 24, 2021. 

The following table provides operating information for the six months ended June 30, 2021 and preliminary operating information for July 2021:

"Our operating results have steadily improved since the beginning of the year, culminating in our Same-Property Portfolio achieving occupancy of 55.5% and RevPAR of $118.32 in June," said Mr. Verbaas. "With all of our hotels and resorts now open for business, 32 of our properties generated positive Hotel EBITDA during the second quarter. Encouragingly, our Same-Property ADR during the month of June was essentially flat when compared to June of 2019. The substantial sequential improvement in monthly occupancy when compared to 2019 gives us cause for optimism as the summer progresses and we look ahead to the second half of the year."

"Strong leisure transient demand continues to drive this early phase of the recovery, with group and business transient demand slowly returning," continued Mr. Verbaas. "Our drive-to leisure-focused hotels continue to be bright spots in the portfolio, with 9 of these hotels and resorts generating higher Hotel EBITDA in June than during the same period in 2019 and 7 of these properties doing so for the entire second quarter. The improvement in hotel performance has continued into the early part of the third quarter, with estimated RevPAR in July only approximately 18% below July 2019, as ADR substantially exceeded its 2019 level and occupancy approached 60%."

Capital Markets

In May, the Company issued $500 million of 4.875% senior secured notes maturing in June 2029, enabling it to address all of its near-term debt maturities.   Proceeds were used to repay the $163.1 million balance on the revolving credit facility, $150 million term loan, and for general corporate purposes.  The Company also repaid the $56.8 million mortgage loan collateralized by Kimpton Hotel Palomar Philadelphia.

Also in May, the Company's Board of Directors approved increasing the availability under the "At-the-Market" ("ATM") Program to $200 million to allow for additional capital raise flexibility.  As of June 30, 2021, the Company had $200 million remaining available for sale under the ATM Program.

Corporate Credit Facility Amendments

In May, the Company entered into further amendments to its revolving credit facility and its only remaining corporate credit facility term loan, which expanded the Company's transactional and operational flexibility and extended the covenant waiver period by one quarter (through the first quarter of 2022). 

Liquidity and Balance Sheet

As of June 30, 2021, the Company had total outstanding debt of $1.5 billion with a weighted-average interest rate of 5.12%. The Company had approximately $500 million of cash and cash equivalents, and full availability on its $523 million revolving credit facility, resulting in total liquidity of approximately $1.0 billion as of June 30, 2021. In addition, the Company held approximately $35 million of restricted cash and escrows at the end of the second quarter.

Capital Expenditures

During the three and six months ended June 30, 2021, the Company invested $4.6 million and $11.9 million in portfolio improvements, respectively.

Significant projects currently in process include:

• The development of the Regency Court, a new outdoor social venue, at Hyatt Regency Scottsdale Resort & Spa with a targeted completion date early in the fourth quarter of 2021
• A restaurant and lobby renovation at The Ritz-Carlton, Pentagon City with a targeted completion date early in the fourth quarter of 2021
• A restaurant and lobby renovation at Waldorf Astoria Atlanta Buckhead with a targeted completion date early in the first quarter of 2022

Additionally, the Company has accelerated several projects to take advantage of current business conditions. These include:

• A guest room renovation at Waldorf Astoria Atlanta Buckhead with a targeted completion date in the first quarter of 2022
• A comprehensive renovation of Grand Bohemian Hotel Orlando, including guest rooms with substantial tub-to-shower conversions, restaurant and bar, lobby, rooftop pool area, and meeting space. This project will take place in phases beginning in the first quarter of 2022 with an estimated completion date in the first quarter of 2023 in order to minimize disruption
• A comprehensive renovation of Kimpton Canary Hotel Santa Barbara, including guest rooms, restaurant and bar, rooftop, lobby, and meeting space with a targeted completion date in the second quarter of 2022

Impairment Loss

During the second quarter, the Company began marketing Marriott Charleston Town Center for sale.  As a result, the Company recorded a non-cash impairment charge of $12.3 million to reflect the estimated current market value.

2021 Outlook and Guidance

The Company does not expect to issue full year earnings guidance until it has more certainty on trends within the industry. The Company is providing the following guidance for full year 2021 on certain corporate expenses and metrics:

• General and administrative expenses are projected to be approximately $19 million, excluding non-cash share-based compensation.
• Interest expense is projected to be approximately $75 million, which reflects the capital markets transactions that occurred in May and excludes non-cash loan related costs.
• Capital expenditures are projected to be approximately $40 million.
• 114.5 million weighted average diluted shares/units

Second Quarter 2021 Earnings Call

The Company will conduct its quarterly conference call on Tuesday, August 3, 2021 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 in uniquely positioned luxury and upper upscale hotels and resorts with a focus on the top 25 U.S. lodging markets as well as key leisure destinations in the United States. The Company owns 35 hotels and resorts comprising 10,011 rooms across 15 states. Xenia's hotels are in the luxury and upper upscale segments, and are operated and/or licensed by industry leaders such as Marriott, Hyatt, Kimpton, Fairmont, Loews, Hilton, and The Kessler Collection. 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 related to the effects of the COVID-19 pandemic, including on the demand for travel, transient and group business, capital expenditures, timing of renovations, 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 impact of the COVID-19 pandemic, including on the demand for travel, transient and group business, and levels of consumer confidence; (ii) actions that governments, businesses, and individuals take in response to the COVID-19 pandemic or any resurgence of COVID-19 including variants of the virus, including limiting or banning travel; (iii) the impact of the COVID-19 pandemic and actions taken in response to the pandemic or any resurgence on global, national, or regional economies, travel and economic activity, including the duration and magnitude of its impact on unemployment rates and consumer discretionary spending; (iv) the ability of hotel managers to successfully navigate the impacts of the COVID-19 pandemic; (v) the pace of recovery following the COVID-19 pandemic or any resurgence; (vi) factors such as public health (including a significant increase in new and variant strains of COVID-19 cases), availability and effectiveness of COVID-19 vaccines and therapeutics, the level of acceptance of the vaccine by the general population and the economic and geopolitical environments may impact the timing, extent and pace of such recovery; (vii) the Company's dependence on third-party managers of its hotels, including its inability to implement strategic business decisions directly; (viii) 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, prolonged periods of civil unrest in our markets, and cancellation of or delays in the completion of anticipated demand generators; (ix) the availability and terms of financing and capital and the general volatility of securities markets; (x) risks associated with the real estate industry, including environmental contamination and costs of complying with the Americans with Disabilities Act and similar laws; (xi) interest rate increases; (xii) ability to successfully negotiate amendments and covenant waivers with its unsecured and secured indebtedness; (xiii) ability to comply with covenants, restrictions, and limitations in any existing or revised loan agreements with our unsecured and secured lenders; (xiv) the possible failure of the Company to qualify as a REIT and the risk of changes in laws affecting REITs; (xv) the possibility of uninsured or underinsured losses, including those relating to natural disasters, terrorism, government shutdowns and closures, civil unrest, or cyber incidents; (xvi) risks associated with redevelopment and repositioning projects, including delays and cost overruns; (xvii) levels of spending in business and leisure segments as well as consumer confidence; (xviii) declines in occupancy and average daily rate, (xix) the seasonal and cyclical nature of the real estate and hospitality businesses, (xx) changes in distribution arrangements, such as through Internet travel intermediaries; (xxi) relationships with labor unions and changes in labor laws, including increases to minimum wages; (xxii) the impact of changes in the tax code and uncertainty as to how some of those changes may be applied; (xxiii) monthly cash expenditures and the uncertainty around predictions; (xxiv) vaccination hesitancy and/or effectiveness;  (xxv) inflationary caution; (xxvi) labor shortages; and (xxvii) 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 Investor Relations section of Xenia's website. While not all the information that the Company posts to the Xenia 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.

Non-GAAP Financial Measures

The Company considers the following non-GAAP financial measures to be useful to investors as key supplemental measures of our operating performance: EBITDA, EBITDAre, Adjusted EBITDAre, 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, EBITDAre and Adjusted EBITDAre

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 investors, in evaluating and facilitating comparisons of our operating performance between periods and between REITs by removing the impact of our capital structure (primarily interest expense) and asset base (primarily depreciation and amortization) from our 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, is used by management in the annual budget process for compensation programs.

We calculate EBITDAre in accordance with standards established by the National Association of Real Estate Investment Trusts ("Nareit"). Nareit defines EBITDAre as EBITDA plus or minus losses and gains on the disposition of depreciated property, including gains or losses on change of control, plus impairments of depreciated property and of investments in unconsolidated affiliates caused by a decrease in the value of depreciated property in the affiliate, and adjustments to reflect the entity's share of EBITDAre of unconsolidated affiliates.

We further adjust EBITDAre to exclude the impact of non-controlling interests in consolidated entities other than our Operating Partnership Units because our Operating Partnership Units may be redeemed for common stock. We also adjust EBITDAre for certain additional items such as depreciation and amortization related to corporate assets, hotel property acquisition, terminated transaction and pre-opening expenses, amortization of share-based compensation, non-cash ground rent and straight-line rent expense, the cumulative effect of changes in accounting principles, and other costs we believe do not represent recurring operations and are not indicative of the performance of our underlying hotel property entities. We believe it is meaningful for investors to understand Adjusted EBITDAre attributable to all common stock and unit holders. We believe Adjusted EBITDAre attributable to common stock and unit holders provides investors with another useful financial measure in evaluating and facilitating comparison of operating performance between periods and between REITs that report similar measures.

Same-Property Hotel EBITDA and Same-Property Hotel EBITDA Margin

Same-Property hotel data includes the actual operating results for all hotels owned as of the end of the reporting period. We then adjust the Same-Property hotel data for comparability purposes by including pre-acquisition operating results of asset(s) acquired during the period, which provides investors a basis for understanding the acquisition(s) historical operating trends and seasonality. The pre-acquisition operating results for the comparable period are obtained from the seller and/or manager of the hotels during the acquisition due diligence process and have not been audited or reviewed by our independent auditors. We further adjust the Same-Property hotel data to remove dispositions during the respective reporting periods, and, in certain cases, hotels that are not fully open due to significant renovation, re-positioning, or disruption or whose room counts have materially changed during either the current or prior year as these historical operating results are not indicative of or expected to be comparable to the operating performance of our hotel portfolio on a prospective basis.

Same-Property Hotel EBITDA represents net income or loss excluding: (1) interest expense, (2) income taxes, (3) depreciation and amortization, (4) corporate-level costs and expenses, (5) hotel acquisition and terminated transaction costs, and (6) certain state and local excise taxes resulting from our ownership structure. We believe that Same-Property Hotel EBITDA provides our investors a useful financial measure to evaluate our hotel operating performance excluding the impact of our capital structure (primarily interest expense), our asset base (primarily depreciation and amortization), income taxes, and our corporate-level expenses (corporate expenses and hotel acquisition and terminated transaction costs). We believe property-level results provide investors with supplemental information on the ongoing operational performance of our hotels and the effectiveness of our third-party management companies that operate our business on a property-level basis. Same-Property Hotel EBITDA Margin is calculated by dividing Same-Property Hotel EBITDA by Same-Property Total Revenues.

As a result of these adjustments the Same-Property hotel data we present does not represent our total revenues, expenses, operating profit or net income and should not be used to evaluate our performance as a whole. Management compensates for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our condensed consolidated statements of operations and comprehensive loss  include such amounts, all of which should be considered by investors when evaluating our performance.

We include Same-Property hotel data as supplemental information for investors. Management believes that providing Same-Property hotel data is useful to investors because it represents comparable operations for our portfolio as it exists at the end of the respective reporting periods presented, which allows investors and management to evaluate the period-to-period performance of our hotels and facilitates comparisons with other hotel REITs and hotel owners. In particular, these measures assist management and investors in distinguishing whether increases or decreases in revenues and/or expenses are due to growth or decline of operations at Same-Property hotels or from other factors, such as the effect of acquisitions or dispositions.

FFO and Adjusted FFO

The Company calculates FFO in accordance with standards established by Nareit, as amended in the December 2018 restatement white paper, which defines FFO as net income or loss (calculated in accordance with GAAP), excluding real estate-related depreciation, amortization and impairments, gains or losses from sales of real estate, the cumulative effect of changes in accounting principles, similar adjustments for unconsolidated partnerships and consolidated variable interest entities, 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 or 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 common stock and unit holders.

We further adjust FFO for certain additional items that are not in Nareit's definition of FFO such as hotel property acquisition, terminated transaction and pre-opening expenses, amortization of debt origination costs and share-based compensation, non-cash ground rent and straight-line rent expense, and other items we believe do not represent recurring operations. We believe 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 our operating performance.

Adjusted FFO per diluted share

The diluted weighted-average common share count used for the calculation of Adjusted FFO per diluted share differs from diluted weighted-average common share count used to derive net income or loss per share available to common stockholders. The Company calculates Adjusted FFO per diluted share by dividing the Adjusted FFO by the diluted weighted-average number of shares of common stock outstanding plus the weighted-average vested Operating Partnership units. Any anti-dilutive securities are excluded from the diluted earnings per-share calculation.