BETHESDA, MD—RLJ Lodging Trust is satisfied with its performance in Q1 2019. In order to achieve its top strategic priorities in 2019, the company implemented several cost containment initiatives during the quarter. Additionally, RLJ saw an increase in pro forma RevPAR, consolidated hotel EBITDA and adjusted FFO.
Highlights
- Pro forma RevPAR increased 1.3%, driven by a pro forma ADR increase of 2.0%.
- Net income of $28.3 million.
- Pro forma consolidated hotel EBITDA of $120.5 million, an increase of 0.6% over the prior year.
- Pro forma hotel EBITDA margin of 30.2%.
- Adjusted FFO of $82.6 million, an increase of 1.4% over the prior year.
- Repurchased 0.6 million common shares since the beginning of the year for $10.8 million at an
average price of $17.53. - Refinanced approximately $381 million of debt subsequent to quarter-end, reducing interest rates,
extending maturities, and adding flexibility.
“We are pleased with our solid performance this quarter, which underscores the targeted capital investments we made last year in markets and assets that are positioned for outsized growth in 2019 and beyond,” said Leslie D. Hale, president/CEO at RLJ Lodging Trust. “Our asset management team successfully implemented cost containment initiatives to mitigate the significant cost pressures that we are seeing, which aided in our ability to outperform our bottom line expectations. In addition to achieving solid results, we prudently allocated capital through highly accretive share repurchases, further strengthened our balance sheet, and made progress on our strategic initiative to sell our non-core hotels. All of these initiatives have positioned RLJ to achieve our key 2019 strategic priorities.”
Pro forma RevPAR growth for the first quarter was 1.3%. The REIT’s top performing markets were Atlanta, Northern California, and Louisville with pro forma RevPAR growth of 20.9%, 15.5%, and 13.5%, respectively. The company’s RevPAR growth was impacted by approximately 25 basis points from the government shutdown and 60 basis points from current year renovation disruption. Additionally, excluding Denver, which experienced softness in the quarter, pro forma RevPAR growth was 1.8%.
Adjusted EBITDA for the first quarter was $111.5 million, a decrease of $4.2 million from the comparable period in 2018. Adjusted EBITDA for the comparable period in the prior year included $4.8 million from seven sold hotels. Normalizing for the impact of asset sales, Adjusted EBITDA would have increased by $0.6 million from the comparable period in 2018.
Interest expense for the first quarter was $20.1 million, a decrease of $8.6 million from the comparable period in 2018, primarily due to the prior year redemption of the senior secured notes and the repayment of the Knickerbocker mortgage. First quarter interest expense includes an unrealized gain of $2.3 million related to interest rate hedges that were specifically assigned to debt that was repaid in 2019.
Share Repurchases
Year-to-date, the company has repurchased 0.6 million shares of its common stock for $10.8 million at an average price per share of $17.53. The company’s share buyback program has remaining capacity of 249.6 million.
Balance Sheet
As of March 31, 2019, the company had $241.5 million of unrestricted cash on its balance sheet, $460.0 million available on its revolving credit facility, and $2.2 billion of debt outstanding. The company’s ratio of net debt to Adjusted EBITDA for the trailing 12-month period ended March 31, 2019, was 3.8x.
Dividends
The company’s board of trustees declared a cash dividend of $0.33 per common share of beneficial interest in the first quarter. The dividend was paid on April 15, 2019, to shareholders of record as of March 29, 2019.
The company’s board of trustees declared a preferred dividend of $0.4875 on its Series A cumulative convertible preferred shares. The dividend was paid on April 30, 2019, to shareholders of record as of March 29, 2019.
Subsequent Events
In April 2019, the company refinanced approximately $381 million of secured debt, which reduced borrowing costs, extended maturities (including extensions), and improved non-financial terms. These included the following:
• New $200 million five-year floating rate mortgage loan maturing April 2024
• New $96 million seven-year floating rate mortgage loan maturing April 2026
• Amended and restated $85 million seven-year floating rate mortgage loan maturing April 2026
The company utilized proceeds from the two new loans to repay its $150 million secured loan maturing in October 2021 and approximately $140 million secured loan maturing in March 2022.
Outlook
The company’s full-year outlook includes all hotels owned as of May 8, 2019. Potential future acquisitions, dispositions, financing, or share repurchases are not incorporated into the company’s outlook below and could result in a material change to the company’s outlook.
