Pebblebrook Hotel Trust Provides Operating Update, Preliminary Q4 2022 and Full Year 2022 Results, and Transaction Update

Preliminary Q4 2022 Results⁽¹⁾

(As of 1/20/2023)

Prior Q4 2022 Outlook

(As of 12/20/2022)

Variance⁽²⁾

Low

High

Low

High

Low

High

($ and shares/units in millions, except per share and RevPAR data)

Net loss

($41)

($39)

($40)

($36)

($1)

($3)

Adjusted EBITDAre⁽³⁾

$56

$58

$52

$56

$4

$2

Adjusted FFO⁽³⁾

$24

$26

$17

$21

$7

$5

Adjusted FFO per diluted share⁽³⁾

$0.19

$0.20

$0.13

$0.16

$0.06

$0.04

Same Property RevPAR⁽³⁾

$174

$174

$173

$175

$1

($1)

Same Property RevPAR variance vs. 2019⁽³⁾

(7.8%)

(7.8%)

(8.0%)

(7.0%)

0.2%

(0.8%)

Same Property RevPAR variance vs. 2021⁽³⁾

25.6%

25.6%

25.2%

26.6%

0.4%

(1.0%)

Same Property EBITDA⁽³⁾

$63.2

$65.2

$61.0

$65.0

$2.2

$0.2

Same Property EBITDA variance vs. 2019⁽³⁾

(29.1%)

(26.9%)

(31.6%)

(27.1%)

2.5%

0.2%

Preliminary Full Year 2022 Results⁽¹⁾

(As of 1/20/2023)

Prior Full Year 2022 Outlook

(As of 12/20/2022)

Variance⁽²⁾

Low

High

Low

High

Low

High

($ and shares/units in millions, except per share and RevPAR data)

Net loss

($87)

($85)

($85)

($81)

($2)

($4)

Adjusted EBITDAre⁽³⁾

$355

$357

$351

$355

$4

$2

Adjusted FFO⁽³⁾

$220

$222

$212

$216

$8

$6

Adjusted FFO per diluted share⁽³⁾

$1.68

$1.69

$1.61

$1.64

$0.07

$0.05

Same Property RevPAR⁽³⁾

$193

$193

$193

$193

-

-

Same Property RevPAR variance vs. 2019⁽³⁾

(8.0%)

(8.0%)

(8.0%)

(7.75%)

-

(0.3%)

Same Property RevPAR variance vs. 2021⁽³⁾

67.0%

67.0%

67.2%

67.2%

(0.2%)

(0.2%)

Same Property EBITDA⁽³⁾

$389.0

$391.0

$386.8

$390.8

$2.2

$0.2

Same Property EBITDA variance vs. 2019⁽³⁾

(16.0%)

(15.5%)

(16.4%)

(15.6%)

0.4%

0.1%

December 31, 2022

December 31, 2022

$

(41

)

$

(39

)

$

(87

)

$

(85

)

60

60

239

239

-

-

(6

)

(6

)

4

4

90

90

$

23

$

25

$

236

$

238

(12

)

(12

)

(48

)

(48

)

8

8

8

8

$

19

$

21

$

196

$

198

2

2

8

8

3

3

11

11

8

8

8

8

(8

)

(8

)

(8

)

(8

)

-

-

5

5

$

24

$

26

$

220

$

222

$

0.15

$

0.16

$

1.49

$

1.51

$

0.19

$

0.20

$

1.68

$

1.69

130.0

130.0

131.3

131.3

These measures are not in accordance with, or an alternative to, measures prepared in accordance with GAAP and may be different from similarly titled non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.

Funds from Operations (“FFO”) - FFO represents net income (computed in accordance with GAAP), excluding gains or losses from sales of properties, plus real estate-related depreciation and amortization and after adjustments for unconsolidated partnerships. The Company considers FFO a useful measure of performance for an equity REIT because it facilitates an understanding of the Company's operating performance without giving effect to real estate depreciation and amortization, which assume that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, the Company believes that FFO provides a meaningful indication of its performance. The Company also considers FFO an appropriate performance measure given its wide use by investors and analysts. The Company computes FFO in accordance with standards established by the Board of Governors of Nareit in its March 1995 White Paper (as amended in November 1999 and April 2002), which may differ from the methodology for calculating FFO utilized by other equity REITs and, accordingly, may not be comparable to that of other REITs. Further, FFO does not represent amounts available for management’s discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments and uncertainties, nor is it indicative of funds available to fund the Company’s cash needs, including its ability to make distributions. The Company presents FFO per diluted share calculations that are based on the outstanding dilutive common shares plus the outstanding Operating Partnership units for the periods presented.

The Company also evaluates its performance by reviewing Adjusted FFO because it believes that adjusting FFO to exclude certain recurring and non-recurring items described below provides useful supplemental information regarding the Company's ongoing operating performance and that the presentation of Adjusted FFO, when combined with the primary GAAP presentation of net income (loss), more completely describes the Company's operating performance. The Company adjusts FFO for the following items, which may occur in any period, and refers to this measure as Adjusted FFO:

- Non-cash ground rent: The Company excludes the non-cash ground rent expense, which is primarily made up of the straight-line rent impact from a ground lease.

- Non-cash interest expense: The Company excludes non-cash interest expense because the Company believes that including this adjustment in FFO does not reflect the underlying financial performance of the Company and its hotels.

- Amortization of share-based compensation expense: The Company excludes the amortization of share-based compensation expense because the Company believes that including this adjustment in FFO does not reflect the underlying financial performance of the Company and its hotels.

- Early extinguishment of debt: The Company excludes early extinguishment of debt because the Company believes that including this adjustment in FFO does not reflect the underlying financial performance of the Company and its hotels.

- Issuance costs of redeemed preferred shares: The Company excludes issuance costs of redeemed preferred shares because the Company believes that including this adjustment in FFO does not reflect the underlying financial performance of the Company and its hotels.

- Other: The Company excludes other expenses, which include transaction costs, management/franchise contract transition costs, interest expense adjustment for acquired liabilities, finance lease adjustment and non-cash amortization of acquired intangibles because the Company believes that including these non-cash adjustments in FFO does not reflect the underlying financial performance of the Company and its hotels.

The Company’s presentation of FFO in accordance with the Nareit White Paper, and as adjusted by the Company, should not be considered as an alternative to net income (computed in accordance with GAAP) as an indicator of the Company’s financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of its liquidity.

Any differences are a result of rounding.

December 31, 2022

December 31, 2022

$

(41

)

$

(39

)

$

(87

)

$

(85

)

28

28

100

100

60

60

239

239

$

47

$

49

$

252

$

254

-

-

(6

)

(6

)

4

4

90

90

$

51

$

53

$

336

$

338

2

2

8

8

3

3

11

11

-

-

-

-

$

56

$

58

$

355

$

357

These measures are not in accordance with, or an alternative to, measures prepared in accordance with GAAP and may be different from similarly titled non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.

Earnings before Interest, Taxes, and Depreciation and Amortization ("EBITDA") - The Company believes that EBITDA provides investors a useful financial measure to evaluate its operating performance, excluding the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortization).

Earnings before Interest, Taxes, and Depreciation and Amortization for Real Estate ("EBITDAre") - The Company believes that EBITDAre provides investors a useful financial measure to evaluate its operating performance, and the Company presents EBITDAre in accordance with the National Association of Real Estate Investment Trusts ("Nareit") guidelines, as defined in its September 2017 white paper "Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate." EBITDAre adjusts EBITDA for the following items, which may occur in any period, and refers to these measures as Adjusted EBITDAre: (1) gains or losses of on the disposition of depreciated property, including gains or losses on change of control; (2) impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate; and (3) adjustments to reflect the entity's share of EBITDAre of unconsolidated affiliates.

The Company also evaluates its performance by reviewing Adjusted EBITDAre because it believes that adjusting EBITDAre to exclude certain recurring and non-recurring items described below provides useful supplemental information regarding the Company's ongoing operating performance and that the presentation of Adjusted EBITDAre, when combined with the primary GAAP presentation of net income (loss), more completely describes the Company's operating performance. The Company adjusts EBITDAre for the following items, which may occur in any period, and refers to these measures as Adjusted EBITDAre:

- Non-cash ground rent: The Company excludes the non-cash ground rent expense, which is primarily made up of the straight-line rent impact from a ground lease.

- Amortization of share-based compensation expense: The Company excludes amortization of share-based compensation expense because the Company believes that including this non-cash adjustment in EBITDAre does not reflect the underlying financial performance of the Company and its hotels.

- Other: The Company excludes other expenses, which include transaction costs, management/franchise contract transition costs and non-cash amortization of acquired intangibles because the Company believes that including these non-cash adjustments in EBITDAre does not reflect the underlying financial performance of the Company and its hotels.

The Company’s presentation of EBITDAre, and as adjusted by the Company, should not be considered as an alternative to net income (computed in accordance with GAAP) as an indicator of the Company’s financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of its liquidity.

Any differences are a result of rounding.

The Company's estimates and assumptions for Same Property RevPAR, RevPAR Growth, Total RevPAR, Total RevPAR Growth, ADR, Occupancy, Revenues, Expenses, EBITDA and EBITDA Margin for the fourth quarter of 2022 include all of the hotels the Company owned as of December 31, 2022, except for 1 Hotel San Francisco for Q4 2022, 2021 and 2019 due to its closure for renovation during Q4 2021, and LaPlaya Beach Resort & Club for Q4 2022, 2021 and 2019 due to its closure following Hurricane Ian during Q4 2022.

Operating statistics and financial results may include periods prior to the Company's ownership of the hotels.