Xenia Hotels & Resorts Reports Third Quarter 2015 Results

ORLANDO, Fla., Nov. 12, 2015 /PRNewswire/ -- Xenia Hotels & Resorts, Inc. (NYSE: XHR) ("Xenia" or the "Company") today announced results for the third quarter ended September 30, 2015.  The Company's results include the following:

"Same-Property" results include the results for all hotels owned as of September 30, 2015, except for the Grand Bohemian Hotel Charleston and one hotel under development, include periods prior to the Company's ownership of the Aston Waikiki Beach Resort, RiverPlace Hotel, Canary Hotel and Hotel Palomar Philadelphia, and exclude the results of operations of the Crowne Plaza Charleston Airport - Convention Center, DoubleTree Suites Atlanta Galleria, and Holiday Inn Secaucus Meadowlands, all of which were sold in 2014. "Same-Property" results also exclude the NOI guaranty payment at the Andaz San Diego.  Results include renovation and remediation disruption.

The Company's financial statements prior to February 3, 2015 have been "carved out" of InvenTrust Properties Corp.'s ("InvenTrust") financial statements and reflect significant assumptions and allocations from those financial statements, such as allocations of corporate debt, shared services functions, employee-related costs and other corporate overhead.  Based on these presentation matters, these financial statements may not be comparable to prior periods.

Third Quarter 2015 Highlights

• Same-Property RevPAR: Same-Property RevPAR, as adjusted by our operators for USALI, increased 4.6% from the third quarter of 2014 to $147.81, as occupancy remained essentially flat and ADR increased 4.6%.
• Same-Property Hotel EBITDA Margin: Same-Property Hotel EBITDA margin was 31.8%, an increase of 60 basis points from the same period in 2014.
• Adjusted EBITDA: Adjusted EBITDA grew $15.2 million to $74.9 million, an increase of 25.5% over the third quarter of 2014.
• Adjusted FFO: Adjusted FFO available to common stockholders increased to $0.57 per diluted share compared to $0.39 per diluted share for the third quarter of 2014, representing an increase of 46.2%.
• Acquisition Activity: In July, the Company acquired a three property portfolio consisting of the RiverPlace Hotel in Portland, Oregon, the Canary Hotel in Santa Barbara, California, and the Hotel Palomar in Philadelphia, Pennsylvania, for a purchase price of $245 million. In August, the Company announced it had entered into a purchase and sale agreement to acquire the Hotel Commonwealth in Boston, Massachusetts for $136 million upon completion of the hotel's current expansion project. This transaction is expected to be completed in early 2016.
• Development Completion: The Company completed the development of the Grand Bohemian Hotel Charleston in Charleston, South Carolina in August.
• Dividends: The Company declared its third quarter dividend of $0.23 per share on September 17, 2015. The dividend was paid on October 15, 2015.

"Our third quarter results were strong, both from a revenue and bottom-line perspective," said Marcel Verbaas, President and Chief Executive Officer of Xenia Hotels & Resorts. "The strength of our diversified portfolio was evidenced by our RevPAR increase of 4.6%, despite the challenges the industry faced in August and September as a result of the shift in timing of certain holidays and the weakness in the Houston market that continues to impact our hotels there. With most of the RevPAR growth in our hotels resulting from ADR increases, we were able to offset fairly significant increases in real estate taxes at a number of our hotels and improve our hotel operating margin by 60 basis points this quarter."

Mr. Verbaas continued, "We maintain a positive outlook for the industry in general and our portfolio in particular. When excluding our Houston hotels we grew portfolio RevPAR by 5.9%. Given the particular third quarter challenges, we believe this result is a testament to both our commitment to our stated strategy, as well as the success of our asset management practices. We are also excited about the continued evolution of our portfolio. The addition of the three hotels we acquired in July and the completion of the Grand Bohemian Hotel Charleston are a further reflection of the execution of our strategic plan as we added four high quality lifestyle assets in excellent on-strategy locations."

Year to Date Results

For the nine months ended September 30, 2015, Same-Property RevPAR increased to $145.91, reflecting a 4.5% growth from the same period in 2014, driven by ADR growth of 5.3% and offset by a decrease in occupancy of 0.7%.  The Company's Same-Property Hotel EBITDA Margin was 32.2%, which improved 90 basis points compared to the same period in prior year. The Company's Adjusted EBITDA and Adjusted FFO per diluted share increased 16.7% and 26.2%, respectively, during the first nine months of 2015 as compared to the same period in 2014.

Acquisitions and Developments

In the third quarter, the Company added four hotels to its operating portfolio and announced one additional hotel acquisition that is expected to close in early 2016.

In July 2015 the Company completed the acquisition of three high-quality lifestyle boutique hotels for a combined purchase price of $245 million.  The 84-room RiverPlace Hotel located in downtown Portland, the 97-room Canary Hotel located in downtown Santa Barbara, and the 230-room Hotel Palomar located in downtown Philadelphia, are all managed by Kimpton Hotels & Restaurants.  The three hotels are well-located in high barrier to entry markets with diverse demand generators.

Additionally, the Grand Bohemian Hotel Charleston, a 50-room Autograph Collection hotel located in Charleston, South Carolina in which the Company owns a 75% interest, opened in late August 2015.  The hotel is located in the heart of the historic district in Charleston, surrounded by local landmarks, shopping and dining. The total cost to develop the hotel was approximately $32 million.

Finally, in August 2015 the Company announced it had entered into a purchase agreement to acquire the Hotel Commonwealth in Boston for a purchase price of $136 million.  The hotel has an irreplaceable location between Fenway Park and Boston University in the Kenmore Square section of Boston.  The transaction, which is subject to customary closing conditions and the completion of the current hotel expansion, is expected to close in early 2016.  The hotel will continue to be managed by Sage Hospitality.

Capital Investments

The Company invested $9.7 million in capital expenditures during the third quarter after having completed several major renovation projects during the first half of the year. For the nine months ended September 30, 2015, the Company has invested $38.2 million in capital expenditures including a guest room renovation and bathroom conversion at the Marriott San Francisco Airport Waterfront, a guest room renovation at the Hyatt Regency Santa Clara and a pool deck renovation at the Aston Waikiki Beach Resort.  The Company anticipates total capital expenditures for 2015 of $45 to $50 million, excluding earthquake remediation repairs at the Andaz Napa.

Balance Sheet

As of September 30, 2015, the Company had total outstanding debt of $1.2 billion, including $117 million outstanding on its $400 million senior unsecured credit facility, and a weighted average interest rate of 3.73%.  Total net debt to trailing 12 month pro forma Corporate EBITDA (as defined in the Company's senior unsecured credit facility) was 4.0x as of September 30, 2015.  As of the end of the third quarter, the Company had $99 million of cash and cash equivalents.

Subsequent Events

Portfolio Updates

In October 2015, the Company announced the sale of the 656-room Hyatt Regency Orange County in Garden Grove, California, for a price of $137 million.  The sale price represented an 11.8x multiple on the hotel's 2015 forecasted EBITDA and a 7.1% capitalization rate on 2015 forecasted NOI. In addition to the purchase price, the Company retained the approximate $5.9 million balance in the hotel's capital expenditure reserve account.

The Grand Bohemian Hotel Mountain Brook, a 100-room Autograph Collection hotel located in an upscale suburb of Birmingham, Alabama, in which the Company owns a 75% interest, opened in late October 2015.  The total cost to develop the hotel is expected to be approximately $45 million.

Also in October 2015, the Company transitioned the management of the Courtyard Pittsburgh Downtown, Hilton Garden Inn Evanston, Courtyard Kansas City Country Club Plaza and Homewood Suites Houston Galleria to Sage Hospitality, which now manages six hotels for the Company.

"The portfolio initiatives we were able to complete in the early part of the fourth quarter were particularly meaningful." said Mr. Verbaas. "We are excited about the completion of the Grand Bohemian Hotel Mountain Brook, our fifth hotel in Marriott's Autograph Collection, and also our fifth hotel managed by The Kessler Collection. Furthermore, as a result of the management transition at four of our urban upscale hotels that we initiated, Sage will be operating seven of our hotels upon completion of the Hotel Commonwealth transaction. We are looking forward to reaping the benefits from the continued strengthening of our relationship with Sage."

Mr. Verbaas added, "The sale of our Hyatt Regency in Garden Grove was the result of a well-executed strategic decision. Based on the characteristics of the hotel and the market, we felt the time was right to explore a sale for this legacy hotel. Given the experience of our management team with these type of transactions, both as a seller and a buyer over many years, we were able to complete this disposition smoothly and expeditiously at an attractive sale price. The sale of this asset allowed us to reduce debt and create further balance sheet flexibility to continue to execute on our strategy of owning a portfolio of high-quality hotels primarily in top 25 markets and key leisure destinations."

Capital Markets

On October 22, the Company closed on two new senior unsecured term loans, a $175 million unsecured term loan maturing in February 2021 and a $125 million unsecured term loan maturing in October 2022. The $175 million term loan bears an interest rate based on a pricing grid with a range of 145 to 225 basis points plus LIBOR, determined by the Company's leverage ratio. Based on the Company's pro forma leverage ratio, the current effective interest rate is LIBOR plus 160 basis points.  In conjunction with the term loan, the Company executed interest rate swaps to fix LIBOR over the period of the loan at 1.29%.  As a result the current annual interest rate on the term loan is 2.89%.

The $125 million term loan bears an interest rate based on a pricing grid with a range of 170 to 255 basis points plus LIBOR, determined by the Company's leverage ratio. Based on the Company's pro forma leverage ratio, the current effective interest rate is LIBOR plus 190 basis points. Funding of the term loan is expected to occur in early 2016 in connection with the anticipated closing of the Company's previously announced Hotel Commonwealth acquisition.

Additionally the Company completed a refinancing of the $30 million, 5.50% fixed rate mortgage on the Residence Inn Cambridge subsequent to quarter end with the existing lender.  The new $63 million mortgage has a ten year term at a fixed annual interest rate of 4.48%.

With the proceeds from the $175 million term loan, excess proceeds from the refinancing of the Residence Inn Cambridge and net sale proceeds from the Hyatt Regency Orange County, the Company was able to pay down the outstanding balance on its revolving line of credit, as well as unencumber four hotels including the Marriott San Francisco Airport Waterfront, the Marriott Woodlands Waterway Hotel & Convention Center, the Hilton Garden Inn Evanston, and the Hampton Inn & Suites Denver Downtown.

Pro forma for the refinancings subsequent to quarter end, the Company has total debt outstanding of $1.1 billion with no outstanding balance on its revolving line of credit and a weighted average interest rate of 3.57%.

"We are pleased with the progress we have made to proactively address our 2016 and 2017 maturities and extend our maturity profile, while maintaining full capacity on our $400 million unsecured credit facility," commented Andy Welch, Executive Vice President and Chief Financial Officer of Xenia Hotels & Resorts.  "The completion of these financings allows us to further stagger and increase the weighted average tenor of our debt maturities, unencumber four additional hotels, and lower our weighted average interest rate."

2015 Outlook and Guidance

On October 5, 2015, the Company provided an update to its 2015 outlook based on preliminary third quarter results, revising its projected same-property RevPAR growth to 4.5% to 5.25% and forecasting that 2015 Adjusted EBITDA would fall between the low and mid-point of its previously announced range of $288 to $297 million. The Company is now updating its outlook for 2015 to incorporate the recent disposition of the Hyatt Regency Orange County, actual third quarter results and updated projections for the fourth quarter of 2015.  The Company's outlook for 2015 is based on the current economic environment, incorporates all expected renovation disruption and assumes no further acquisitions or dispositions. The Company's 2015 capital expenditure range includes its renovation projects, but excludes earthquake damage remediation at the two Napa hotels. The Company's updated financial expectations for 2015 are as follows:

"Based on our third quarter results as well as the visibility we now have into our anticipated fourth quarter results, including portfolio RevPAR growth of 6.7% in October, we are maintaining our previous RevPAR range guidance of 4.5% to 5.25%," said Mr. Verbaas. "Despite the loss of the $1.9 million projected EBITDA contribution from the Hyatt Regency Orange County from the sale date to the end of the year, we now expect to offset this loss mainly as a result of continued margin improvement and G&A savings, enabling us to maintain Adjusted EBITDA guidance consistent with the range we indicated in early October. Additionally, we are increasing our guidance range for Adjusted FFO, primarily as a result of lower income taxes and interest expense than we had previously projected."

Third Quarter 2015 Earnings Call

The Company will conduct its quarterly conference call on Thursday, November 12, 2015 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 50 hotels, including 48 wholly owned hotels, comprising 12,548 rooms, across 21 states and the District of Columbia. Xenia's hotels are primarily operated by industry leaders such as Marriott®, Hilton®, Hyatt®, Starwood®, Kimpton®, Aston®, Fairmont® and Loews®, as well as leading independent management companies including Sage Hospitality, Urgo Hotels & Resorts, Davidson Hotels & Resorts, The Kessler Collection 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 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, Adjusted EBITDA, Adjusted FFO, 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 and (ix) 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.

See accompanying notes to the combined condensed consolidated financial statements in the Company's Form 10-Q.

See accompanying notes to the combined condensed consolidated financial statements in the Company's Form 10-Q.

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, FFO and Adjusted FFO.  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 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.

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 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.