Q1 RevPAR increased 27.0% from 2022

RLJ Lodging Trust (NYSE: RLJ) yesterday reported results for the three months ended March 31, 2023.

First Quarter And Year To Date Highlights

  • Portfolio Comparable RevPAR of $136.45, an increase of 27.0% from Q1 2022 and achieved 95% of the comparable period in 2019
  • Total revenue of $314.5 million
  • Net income of $10.5 million
  • Net income per diluted share attributable to common shareholders of $0.03
  • Comparable Hotel EBITDA of $90.9 million
  • Adjusted EBITDA of $82.7 million
  • Adjusted FFO per diluted common share and unit of $0.35
  • Repurchased approximately 3.9 million common shares for approximately $40 million at an average price per share of $10.22
  • Increased quarterly dividend by 60% to $0.08 per common share
  • Exercised option to extend maturity of $225 million of term loans and a $200 million secured loan to 2024

“We are pleased to see the positive momentum in lodging fundamentals continue, especially in urban markets which benefited from further improvement in business travel, strong group demand, healthy leisure and rising international travel,” commented Leslie D. Hale, President and Chief Executive Officer. “These positive trends allowed our portfolio to achieve strong year-over-year RevPAR growth with continuing pricing power, which led to our first quarter results coming in ahead of our expectations. A number of our key urban markets including San Diego, New York and Washington DC, exceeded 2019 ADR by 10% or more during the quarter. Additionally, we continued to demonstrate the optionality that our strong balance sheet provides by executing on our incremental growth initiatives, opportunistically repurchasing our shares on a leverage neutral basis and meaningfully increasing our quarterly dividend by 60%, which underscore the benefits of our strong free cash flow profile.”

Financial and Operating Highlights

($ in thousands, except ADR, RevPAR, and per share amounts)

(unaudited)

 

 

For the three months ended March 31,

 

2023

2022

Operational Overview: (1)

 

 

Comparable ADR

$199.07

$175.82

Comparable Occupancy

68.5%

61.1%

Comparable RevPAR

$136.45

$107.42

 

 

 

Financial Overview:

 

 

Total Revenues

$314,503

$242,899

Comparable Hotel Revenue

$314,488

$242,510

 

 

 

Net Income (Loss)

$10,514

($15,469)

 

 

 

Comparable Hotel EBITDA (2)

$90,926

$63,251

Comparable Hotel EBITDA Margin

28.9%

26.1%

Adjusted EBITDA

$82,685

$54,594

 

 

 

Adjusted FFO

$56,080

$23,894

Adjusted FFO Per Basic and Diluted Common Share and Unit

$0.35

$0.14

Note:

(1) Comparable statistics reflect the Company's 96 hotel portfolio owned as of March 31, 2023.

(2) Comparable Hotel EBITDA for the three months ended March 31 2022 excludes $0.2 million net income from sold hotels. Comparable Hotel EBITDA for the three months ended March 31, 2022 includes $0.1 million net income from acquired hotels.

Operational Update

During the first quarter, the Company’s portfolio generated Comparable RevPAR of $136.45, an increase of 27.0% from the comparable period in 2022 and achieved 95% of the comparable period in 2019. Occupancy during the first quarter of 2023 increased by 12.2% while ADR increased by 13.2% compared to the comparable period in 2022, achieving 90% and 105% of occupancy and ADR for the comparable period in 2019, respectively. The Company’s strong performance during the first quarter was positively impacted by broad based improvement in all segments of demand, most notably in urban markets where the Company generates over two-thirds of its earnings.

Share Repurchases

Year-to-date through May 4, 2023, the Company has repurchased approximately 3.9 million common shares for approximately $40 million, at an average price per share of $10.22, including 1.2 million shares repurchased so far during the second quarter for $12.5 million at an average price per share of $10.21.

The Company's Board of Trustees recently approved a new one-year share repurchase program to acquire up to an aggregate $250.0 million of common and preferred shares under the same terms as the expiring program.

Balance Sheet

As of March 31, 2023, the Company had approximately $1.1 billion of total liquidity, comprising approximately $474.3 million of unrestricted cash and $600.0 million available under its revolving credit facility ("Revolver"), and $2.2 billion of debt outstanding, 93% of which is currently either fixed or hedged.

During the first quarter of 2023, the Company drew down the final $95 million in proceeds on its amended $200 million term loan and utilized these proceeds to pay off $94 million in term loans maturing in January 2023. Additionally, the Company extended the maturity to January 2024 of approximately $225 million of its term loans maturing in January 2023, and $200 million of a secured loan maturing in 2023 to April 2024.

Dividends

The Company’s Board of Trustees declared a quarterly cash dividend of $0.08 per common share of beneficial interest of the Company. The dividend was paid on April 17, 2023 to shareholders of record as of March 31, 2023.

The Company's Board of Trustees declared a quarterly cash dividend of $0.4875 on the Company’s Series A Preferred Shares. The dividend was paid on April 28, 2023 to shareholders of record as of March 31, 2023.

Q2 2023 Outlook

Based on current trends and assuming no materials disruptions to travel caused by pandemics or worsening macro-economic conditions, the Company's second quarter 2023 is as follows:

 

  

Q2 2023

Comparable RevPAR

  

$155.00 to $159.00

Comparable Hotel EBITDA

  

$121.0M to $130.0.M

Adjusted EBITDA

  

$112.0M to $121.0M

Adjusted FFO per diluted share

  

$0.51 to $0.57

No future acquisitions, dispositions, financings, or share repurchases are incorporated into the Company's outlook and could result in a material change to the Company's outlook.

RLJ Lodging Trust is a self-advised, publicly traded real estate investment trust that owns primarily premium-branded, high-margin, focused-service and compact full-service hotels. The Company's portfolio currently consists of 96 hotels with approximately 21,200 rooms, located in 23 states and the District of Columbia and an ownership interest in one unconsolidated hotel with 171 rooms.

Hotel EBITDA and Hotel EBITDA Margin

With respect to Consolidated Hotel EBITDA, the Company believes that excluding the effect of corporate-level expenses and certain non-cash items provides a more complete understanding of the operating results over which individual hotels and operators have direct control. The Company believes property-level results provide investors with supplemental information about the ongoing operational performance of the Company’s hotels and the effectiveness of third-party management companies.

Comparable Hotel EBITDA and Comparable Hotel EBITDA margin include prior ownership information provided by the sellers of the hotels for periods prior to our acquisition of the hotels and excludes results from sold hotels as applicable. The following is a summary of Comparable hotel adjustments:

Comparable adjustments: Acquired hotels

For the three months ended March 31, 2023 and 2022, Comparable adjustments included the following acquired hotel:

  • 21c Hotel Nashville acquired in July 2022

Comparable adjustments: Sold hotels

For the three months ended March 31, 2022, comparable adjustments included the following sold hotels:

  • Marriott Denver Airport at Gateway Park sold in March 2022
  • SpringHill Suites Denver North Westminster sold in April 2022

RLJ Lodging Trust

Consolidated Balance Sheets

(Amounts in thousands, except share and per share data)

(unaudited)

 

 

 

  

March 31,

2023

 

December 31,

2022

Assets

  

 

 

 

Investment in hotel properties, net

  

$

4,165,843

 

 

$

4,180,328

 

Investment in unconsolidated joint ventures

  

 

7,260

 

 

 

6,979

 

Cash and cash equivalents

  

 

474,332

 

 

 

481,316

 

Restricted cash reserves

  

 

31,244

 

 

 

55,070

 

Hotel and other receivables, net of allowance of $323 and $319, respectively

  

 

41,178

 

 

 

38,528

 

Lease right-of-use assets

  

 

135,480

 

 

 

136,915

 

Prepaid expense and other assets

  

 

76,615

 

 

 

79,089

 

Total assets

  

$

4,931,952

 

 

$

4,978,225

 

Liabilities and Equity

  

 

 

 

Debt, net

  

$

2,219,284

 

 

$

2,217,555

 

Accounts payable and other liabilities

  

 

144,775

 

 

 

155,916

 

Advance deposits and deferred revenue

  

 

27,904

 

 

 

23,769

 

Lease liabilities

  

 

116,193

 

 

 

117,010

 

Accrued interest

  

 

11,144

 

 

 

20,707

 

Distributions payable

  

 

19,412

 

 

 

14,622

 

Total liabilities

  

 

2,538,712

 

 

 

2,549,579

 

Equity

  

 

 

 

Shareholders’ equity:

  

 

 

 

Preferred shares of beneficial interest, $0.01 par value, 50,000,000 shares authorized

  

 

 

 

Series A Cumulative Convertible Preferred Shares, $0.01 par value, 12,950,000 shares authorized; 12,879,475 shares issued and outstanding, liquidation value of $328,266, at March 31, 2023 and December 31, 2022

  

 

366,936

 

 

 

366,936

 

Common shares of beneficial interest, $0.01 par value, 450,000,000 shares authorized; 160,077,784 and 162,003,533 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

  

 

1,601

 

 

 

1,620

 

Additional paid-in capital

  

 

3,034,682

 

 

 

3,054,958

 

Distributions in excess of net earnings

  

 

(1,057,939

)

 

 

(1,049,441

)

Accumulated other comprehensive income

  

 

34,175

 

 

 

40,591

 

Total shareholders’ equity

  

 

2,379,455

 

 

 

2,414,664

 

Noncontrolling interests:

  

 

 

 

Noncontrolling interest in the Operating Partnership

  

 

6,264

 

 

 

6,313

 

Noncontrolling interest in consolidated joint ventures

  

 

7,521

 

 

 

7,669

 

Total noncontrolling interest

  

 

13,785

 

 

 

13,982

 

Total equity

  

 

2,393,240

 

 

 

2,428,646

 

Total liabilities and equity

  

$

4,931,952

 

 

$

4,978,225

 

Note: The corresponding notes to the consolidated financial statements can be found in the Company’s Quarterly Report on Form 10-Q.

RLJ Lodging Trust

Consolidated Statements of Operations

(Amounts in thousands, except share and per share data)

(unaudited)

   

   

 

  

For the three months ended March 31,

 

  

2023

 

2022

Revenues

  

 

 

 

Operating revenues

  

 

 

 

Room revenue

  

$

260,832

 

 

$

205,779

 

Food and beverage revenue

  

 

33,288

 

 

 

20,901

 

Other revenue

  

 

20,383

 

 

 

16,219

 

Total revenues

  

 

314,503

 

 

 

242,899

 

Expenses

  

 

 

 

Operating expenses

  

 

 

 

Room expense

  

 

66,051

 

 

 

53,828

 

Food and beverage expense

  

 

26,137

 

 

 

16,169

 

Management and franchise fee expense

  

 

26,182

 

 

 

20,388

 

Other operating expenses

  

 

82,624

 

 

 

68,654

 

Total property operating expenses

  

 

200,994

 

 

 

159,039

 

Depreciation and amortization

  

 

44,996

 

 

 

46,865

 

Property tax, insurance and other

  

 

24,648

 

 

 

22,513

 

General and administrative

  

 

13,656

 

 

 

14,134

 

Transaction costs

  

 

20

 

 

 

62

 

Total operating expenses

  

 

284,314

 

 

 

242,613

 

Other income, net

  

 

849

 

 

 

7,285

 

Interest income

  

 

3,664

 

 

 

172

 

Interest expense

  

 

(24,130

)

 

 

(24,561

)

Gain on sale of hotel properties, net

  

 

—

 

 

 

1,417

 

Income (loss) before equity in income from unconsolidated joint ventures

  

 

10,572

 

 

 

(15,401

)

Equity in income from unconsolidated joint ventures

  

 

281

 

 

 

122

 

Income (loss) before income tax expense

  

 

10,853

 

 

 

(15,279

)

Income tax expense

  

 

(339

)

 

 

(190

)

Net income (loss)

  

 

10,514

 

 

 

(15,469

)

Net (income) loss attributable to noncontrolling interests:

  

 

 

 

Noncontrolling interest in the Operating Partnership

  

 

(17

)

 

 

104

 

Noncontrolling interest in consolidated joint ventures

  

 

148

 

 

 

118

 

Net income (loss) attributable to RLJ

  

 

10,645

 

 

 

(15,247

)

Preferred dividends

  

 

(6,279

)

 

 

(6,279

)

Net income (loss) attributable to common shareholders

  

$

4,366

 

 

$

(21,526

)

Basic per common share data:

  

 

 

 

 

 

Net income (loss) per share attributable to common shareholders - basic

  

$

0.03

 

 

$

(0.13

)

Weighted-average number of common shares

  

 

159,483,268

 

 

 

164,179,661

 

Diluted per common share data:

  

 

 

 

 

 

Net income (loss) per share attributable to common shareholders - diluted

  

$

0.03

 

 

$

(0.13

)

Weighted-average number of common shares

  

 

160,143,748

 

 

 

164,179,661

 

Note: The Statements of Comprehensive Income and corresponding notes to the consolidated financial statements can be found in the Company’s Quarterly Report on Form 10-Q.

RLJ Lodging Trust

Reconciliation of Non-GAAP Measures

(Amounts in thousands, except per share data)

(unaudited)

Funds from Operations (FFO) Attributable to Common Shareholders and Unitholders

   

   

 

  

For the three months ended March 31,

 

  

2023

 

2022

Net income (loss)

  

$

10,514

 

 

$

(15,469

)

Preferred dividends

  

 

(6,279

)

 

 

(6,279

)

Depreciation and amortization

  

 

44,996

 

 

 

46,865

 

Gain on sale of hotel properties, net

  

 

—

 

 

 

(1,417

)

Noncontrolling interest in consolidated joint ventures

  

 

148

 

 

 

118

 

Adjustments related to consolidated joint venture (1)

  

 

(43

)

 

 

(49

)

Adjustments related to unconsolidated joint venture (2)

  

 

237

 

 

 

295

 

FFO

  

 

49,573

 

 

 

24,064

 

Transaction costs

  

 

20

 

 

 

62

 

Pre-opening costs (3)

  

 

222

 

 

 

234

 

Amortization of share-based compensation

  

 

5,692

 

 

 

5,185

 

Non-cash income tax expense

  

 

—

 

 

 

(135

)

Non-cash interest expense related to discontinued interest rate hedges

  

 

482

 

 

 

336

 

Derivative gains in accumulated other comprehensive income reclassified to earnings (4)

  

 

—

 

 

 

(5,866

)

Other expenses (5)

  

 

91

 

 

 

14

 

Adjusted FFO

  

$

56,080

 

 

$

23,894

 

 

  

 

 

 

Adjusted FFO per common share and unit-basic

  

$

0.35

 

 

$

0.14

 

Adjusted FFO per common share and unit-diluted

  

$

0.35

 

 

$

0.14

 

 

  

 

 

 

Basic weighted-average common shares and units outstanding (6)

  

 

160,255

 

 

 

164,951

 

Diluted weighted-average common shares and units outstanding (6)

  

 

160,916

 

 

 

165,516

 
Notes:

(1)

 

Includes depreciation and amortization expense allocated to the noncontrolling interest in the consolidated joint venture.

(2)

 

Includes our ownership interest in the depreciation and amortization expense of the unconsolidated joint venture.

(3)

 

Represents expenses related to the brand conversions of certain hotel properties prior to opening.

(4)

 

Reclassification of interest rate swap gains from accumulated other comprehensive income to earnings for discontinued interest rate hedges.

(5)

 

Represents expenses outside of the normal course of operations.

(6)

 

Includes 0.8 million weighted-average operating partnership units for the three month periods ended March 31, 2023 and 2022.

RLJ Lodging Trust

Reconciliation of Non-GAAP Measures

(Amounts in thousands)

(unaudited)

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)

   

   

 

  

For the three months ended March 31,

 

  

2023

 

2022

Net income (loss)

  

$

10,514

 

 

$

(15,469

)

Depreciation and amortization

  

 

44,996

 

 

 

46,865

 

Interest expense, net of interest income

  

 

20,466

 

 

 

24,389

 

Income tax expense

  

 

339

 

 

 

190

 

Adjustments related to unconsolidated joint venture (1)

  

 

345

 

 

 

407

 

EBITDA

  

 

76,660

 

 

 

56,382

 

Gain on sale of hotel properties, net

  

 

—

 

 

 

(1,417

)

EBITDAre

  

 

76,660

 

 

 

54,965

 

Transaction costs

  

 

20

 

 

 

62

 

Pre-opening costs (2)

  

 

222

 

 

 

234

 

Amortization of share-based compensation

  

 

5,692

 

 

 

5,185

 

Derivative gains in accumulated other comprehensive income reclassified to earnings (3)

  

 

—

 

 

 

(5,866

)

Other expenses (4)

  

 

91

 

 

 

14

 

Adjusted EBITDA

  

 

82,685

 

 

 

54,594

 

General and administrative

  

 

7,964

 

 

 

8,949

 

Other corporate adjustments

  

 

470

 

 

 

(166

)

Consolidated Hotel EBITDA

  

 

91,119

 

 

 

63,377

 

Comparable adjustments - income from sold hotels

  

 

(193

)

 

 

(191

)

Comparable adjustments - income from acquired hotels

  

 

—

 

 

 

65

 

Comparable Hotel EBITDA

  

$

90,926

 

 

$

63,251

 

Notes: Comparable statistics reflect the Company's 96 hotel portfolio owned as of March 31, 2023.

(1)

 

Includes our ownership interest in the interest, depreciation, and amortization expense of the unconsolidated joint venture.

(2)

 

Represents expenses related to the brand conversions of certain hotel properties prior to opening.

(3)

 

Reclassification of interest rate swap gains from accumulated other comprehensive income to earnings for discontinued interest rate hedges.

(4)

 

Represents expenses outside of the normal course of operations.

RLJ Lodging Trust

Reconciliation of Non-GAAP Measures

(Amounts in thousands except %)

(unaudited)

   

Comparable Hotel EBITDA Margin

   

   

 

  

For the three months ended March 31,

 

  

2023

 

2022

Total revenue

  

$

314,503

 

 

$

242,899

 

Comparable adjustments - revenue from sold hotels

  

 

—

 

 

 

(2,220

)

Comparable adjustments - revenue from prior ownership of acquired hotels

  

 

—

 

 

 

1,846

 

Other corporate adjustments / non-hotel revenue

  

 

(15

)

 

 

(15

)

Comparable Hotel Revenue

  

$

314,488

 

 

$

242,510

 

 

  

 

 

 

Comparable Hotel EBITDA

  

$

90,926

 

 

$

63,251

 

 

  

 

 

 

Comparable Hotel EBITDA Margin

  

 

28.9

%

 

 

26.1

%

RLJ Lodging Trust

Consolidated Debt Summary

(Amounts in thousands except %)

(unaudited)

 

 

 

 

 

Loan

  

Base Term (Years)

  

Maturity

(incl. extensions)

  

Floating / Fixed (1)

  

Interest Rate (2)

 

Balance as of

March 31, 2023 (3)

Mortgage Debt

  

 

  

 

  

 

  

 

 

 

Mortgage loan - 1 hotel

  

10

  

Jan 2029

  

Fixed

  

5.06%

 

$ 25,000

Mortgage loan - 7 hotels (4)

  

3

  

Apr 2024

  

Floating

  

4.35%

 

200,000

Mortgage loan - 3 hotels

  

5

  

Apr 2026

  

Floating

  

2.53%

 

96,000

Mortgage loan - 4 hotels

  

5

  

Apr 2026

  

Floating

  

4.89%

 

85,000

Weighted Average / Mortgage Total

  

 

  

 

  

 

  

4.08%

 

$ 406,000

 

  

 

  

 

  

 

  

 

 

 

Corporate Debt

  

 

  

 

  

 

  

 

 

 

Revolver (5)

  

4

  

May 2025

  

Floating

  

-

 

$ —

$200 Million Term Loan Maturing 2026

  

3

  

January 2028

  

Floating

  

3.43%

 

200,000

$400 Million Term Loan Maturing 2024

  

5

  

January 2024

  

Floating

  

6.71%

 

151,683

$225 Million Term Loan Maturing 2024

  

5

  

January 2024

  

Floating

  

4.57%

 

72,973

$400 Million Term Loan Maturing 2025

  

5

  

May 2025

  

Floating

  

3.27%

 

400,000

$500 Million Senior Notes due 2026

  

5

  

July 2026

  

Fixed

  

3.75%

 

500,000

$500 Million Senior Notes due 2029

  

8

  

September 2029

  

Fixed

  

4.00%

 

500,000

Weighted Average / Corporate Total

  

 

  

 

  

 

  

3.96%

 

$ 1,824,656

 

  

 

  

 

  

 

  

 

 

 

Weighted Average / Total

  

 

  

 

  

 

  

3.98%

 

$ 2,230,656

Notes:

(1) The floating interest rate is hedged with an interest rate swap.

(2) Interest rates as of March 31, 2023.

(3) Excludes the impact of fair value adjustments and deferred financing costs.

(4) In April 2023 the Company exercised the right to a one-year extension on this loan.

(5) As of March 31, 2023, there was $600.0 million of borrowing capacity on the Revolver, which is charged an unused commitment fee of 0.25% annually.