Summit Hotel Properties Reports Third Quarter 2021 Results

AUSTIN, Texas, Nov. 3, 2021 /PRNewswire/ -- Summit Hotel Properties, Inc. (NYSE: INN) (the "Company"), today announced results for the three and nine months ended September 30, 2021.

"We were pleased with the continued improvement in operating fundamentals during the third quarter which drove portfolio wide occupancy to nearly 70% and RevPAR to nearly $100, more than a 25% increase over the second quarter. While demand predictably slowed as the summer travel season concluded, we began to see a reacceleration of demand in the latter part of the quarter driven increasingly by improving average daily rates which grew 19% from the second quarter to the third quarter.  These improving trends have continued through October, which posted our strongest month since the onset of the pandemic with $106 RevPAR," said Jonathan P. Stanner, the Company's President and Chief Executive Officer.  "Overall, we remain excited about the future of our business highlighted by our existing portfolio of high-quality hotels, efficient and resilient operating model, strong liquidity profile, and announced plans for external growth early in this cycle positioning us very well to benefit from the continued recovery of lodging demand."

Third Quarter 2021 Summary

• Net Loss:  Net loss attributable to common stockholders was $11.0 million, or $0.10 per diluted share, compared with a net loss of  $38.3 million, or $0.37 per diluted share, in the same period of 2020.
• Pro Forma RevPAR:  Pro forma revenue per available room ("RevPAR") increased 109.0% percent to $97.89 from the same period in 2020. Pro forma average daily rate ("ADR") increased 37.1 percent to $142.54 compared to the same period in 2020, and pro forma occupancy increased 52.5 percent to 68.7 percent.
• Same-Store RevPAR:  Same-store RevPAR increased 107.7% percent to $97.29 from the same period in 2020. Same-store ADR increased 36.6 percent to $142.03 compared to the same period in 2020, and same-store occupancy increased 52.1 percent to 68.5 percent.
• Pro Forma Hotel EBITDA:  Pro forma hotel EBITDA increased to $38.8 million from $5.7 million in the same period in 2020. Pro forma hotel EBITDA margin expanded to 35.0 percent from 10.8 percent in the same period of 2020.
• Adjusted EBITDAre:  Adjusted EBITDAre increased to $34.0 million from $2.5 million in the same period of 2020.
• Adjusted FFO:  Adjusted FFO was $20.5 million, or $0.19 per diluted share, compared to ($10.8) million, or ($0.10) per diluted share, in the same period of 2020.

The Company's results for the three and nine months ended September 30, 2021, and 2020 are as follows (in thousands, except per share amounts):

Monthly Operating Data ⁽¹⁾

Year-to-Date 2021 Summary

• Net Loss:  Net loss attributable to common stockholders was $68.4 million, or $0.66 per diluted share, compared with a net loss of  $111.4 million, or $1.07 per diluted share, in the same period of 2020.
• Pro forma RevPAR:   Pro forma RevPAR increased 38.3% percent to $76.51 from the same period in 2020. Pro forma ADR decreased 2.0 percent to $124.46 compared to the same period in 2020, and pro forma occupancy increased 41.1 percent to 61.5 percent.
• Same-Store RevPAR:  Same-store RevPAR increased 37.4% percent to $76.02 from the same period in 2020. Same-store ADR decreased 2.3 percent to $124.02 compared to the same period in 2020, and same-store occupancy increased 40.7 percent to 61.3 percent.
• Pro Forma Hotel EBITDA:  Pro forma hotel EBITDA increased to $72.5 million from $25.4 million in the same period in 2020. Pro forma hotel EBITDA margin expanded to 28.2 percent from 13.6 percent in the same period of 2020.
• Adjusted EBITDAre:  Adjusted EBITDAre increased to $62.0 million from $16.5 million in the same period of 2020.
• Adjusted FFO:  Adjusted FFO was $22.0 million, or $0.21 per diluted share, compared to ($23.5) million, or ($0.22) per diluted share, in the same period of 2020.

Transaction to Acquire 27-Hotel Portfolio Announced

In a separate press release, the Company today announced that it has entered into a definitive contribution agreement with NewcrestImage to acquire a 27-hotel portfolio totaling 3,709 guestrooms, two parking structures and various economic incentives through its existing joint venture with GIC for total consideration of $822 million.  The total consideration for the transaction is comprised of $776.5 million, or $209,000 per key, for the 27-hotel portfolio, $24.8 million for the two parking structures and $20.7 million for the incentives.  The hotel portfolio is comprised of 27 high-quality, well-located assets that are highly complementary to our existing portfolio and significantly expands our presence in high-growth Sun Belt markets.

The transaction is expected to be funded with a combination of cash, debt, common equity and preferred equity.  The Company expects to fund its 51% equity contribution through the issuance of 15.865 million common operating partnership units valued at $160 million based on the 10-day VWAP of $10.0853 per unit as of November 2, 2021, and $50 million of preferred operating partnership units with an annual coupon of 5.25%.  The joint venture has secured a $410 million financing commitment from Bank of America and Wells Fargo Bank and GIC's estimated equity contribution of $208 million will be funded in cash.  The transaction has been structured to preserve nearly all of our $450 million of existing liquidity and is expected to be immediately accretive to earnings, leverage neutral to our balance sheet and preserve ample investment capacity to continue to grow our portfolio.

For additional information and transaction highlights regarding the announcement, please see the press release and investor presentation dated November 3, 2021, on the Company's website @ www.shpreit.com.

Acquisition of Residence Inn Steamboat Springs Completed

On July 9, 2021, the Company completed the acquisition of the 110-guestroom Residence Inn by Marriott Steamboat Springs for $33.0 million through its joint venture with GIC. The Company funded its 51% interest in the joint venture acquisition using approximately $17 million of cash on-hand. Since closing on the acquisition, the hotel has performed exceptionally well, generating occupancy and RevPAR of nearly 87% and $160, respectively, and hotel EBITDA margin of 49% for the third quarter. This resulted in an annualized net operating income yield of 9.0% in less than three months of ownership despite the hotel having been open for less than one year.

Capital Markets & Balance Sheet

On August 12, 2021, the Company completed an offering of 4,000,000 shares of 5.875% Series F Cumulative Redeemable Preferred Stock for gross proceeds of $100 million. Net proceeds from the transaction were used to redeem all 3,000,000 shares of its 6.45% Series D Cumulative Redeemable Preferred Stock on September 4, 2021, while the remainder was used to partially repay the Company's existing term loan maturing in 2022 by $22 million.

On September 30, 2021, inclusive of its pro rata share of the Joint Venture credit facility, the Company had the following:

• Pro rata outstanding debt of $998.7 million with a weighted average interest rate of 3.39 percent.
• After giving effect to interest rate derivative agreements, $792.5 million, or 79 percent, of our pro rata outstanding debt had fixed interest rates, and $206.2 million, or 21 percent, had variable interest rates.
• Pro rata unrestricted cash and cash equivalents of $53.1 million.
• Revolving credit facility availability of $340.0 million, plus an additional $50.0 million available to borrow subject to certain requirements. The Company had no borrowings outstanding on its revolving credit facility.
• Total liquidity of $443.1 million, including unrestricted cash and cash equivalents and revolving credit facility availability.

On October 20, 2021, inclusive of its pro rata share of the Joint Venture credit facility, the Company had the following:

• Pro rata outstanding debt of $998.4 million with a weighted average interest rate of 3.39 percent.
• After giving effect to interest rate derivative agreements, $792.2 million, or 79 percent, of our pro rata outstanding debt had fixed interest rates, and $206.2 million, or 21 percent, had variable interest rates.
• Pro rata unrestricted cash and cash equivalents of $56.9 million.
• Revolving credit facility availability of $340.0 million, plus an additional $50.0 million available to borrow subject to certain requirements. The Company had no borrowings outstanding on its revolving credit facility.
• Total liquidity of $446.9 million, including unrestricted cash and cash equivalents and revolving credit facility availability.

Capital Improvements

The Company invested $4.2 million and $10.7 million in capital improvements during the three and nine months ended September 30, 2021, respectively, and plans to invest a total of $15.0 million to $20.0 million for the full year of 2021.

Dividends

On October 29, 2021, the Company declared a quarterly cash preferred dividend of $0.390625 per share on its 6.25% Series E Cumulative Redeemable Preferred Stock and $0.440625 per share on its 5.875% Series F Cumulative Redeemable Preferred Stock. The preferred dividends are payable on November 30, 2021, to holders of record as of November 16, 2021.

Third Quarter 2021 Earnings Conference Call

The Company will conduct its quarterly conference call on Thursday, November 4, 2021, at 9:00 AM ET.  To participate in the conference call, dial 877-930-8101 approximately ten minutes before the call begins (8:50 AM ET). The conference identification code for the call is 6195606. Additionally, a live webcast of the quarterly conference call will be available through the Company's website, www.shpreit.com. A replay of the quarterly conference call webcast will be available until 12:00 PM ET Thursday, November 11, 2021, by dialing 855-859-2056, conference identification code 6195606. A replay will also be available in the Investor Relations section of the Company's website until January 31, 2022.

About Summit Hotel Properties

Summit Hotel Properties, Inc. is a publicly traded real estate investment trust focused on owning premium-branded hotels with efficient operating models primarily in the Upscale segment of the lodging industry.  As of November  3, 2021, the Company's portfolio consisted of 73 hotels, 61 of which are wholly owned, with a total of 11,398 guestrooms located in 23 states.

For additional information, please visit the Company's website, www.shpreit.com, and follow on Twitter at @SummitHotel_INN.

Contact:
Adam Wudel
SVP – Finance & Capital Markets
Summit Hotel Properties, Inc.
(512) 538-2325

Forward-Looking Statements

This press release contains statements that are "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, pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally identifiable by use of forward-looking terminology such as "may," "will," "should," "potential," "intend," "expect," "seek," "anticipate," "estimate," "approximately," "believe," "could," "project," "predict," "forecast," "continue," "plan," "likely," "would" or other similar words or expressions. Forward-looking statements are based on certain assumptions and can include future expectations, future plans and strategies, financial and operating projections, or other forward-looking information. Examples of forward-looking statements include the following: the Company's ability to realize growth from the deployment of renovation capital; projections of the Company's revenues and expenses, capital expenditures or other financial items; descriptions of the Company's plans or objectives for future operations, acquisitions, dispositions, financings, redemptions or services; forecasts of the Company's future financial performance and potential increases in average daily rate, occupancy, RevPAR, room supply and demand, EBITDAre, Adjusted EBITDAre, FFO and AFFO; the Company's outlook with respect to pro forma RevPAR, pro forma RevPAR growth, RevPAR, RevPAR growth,  AFFO,  AFFO per diluted share and unit and renovation capital deployed; and descriptions of assumptions underlying or relating to any of the foregoing expectations regarding the timing of their occurrence. These forward-looking statements are subject to various risks and uncertainties, not all of which are known to the Company and many of which are beyond the Company's control, which could cause actual results to differ materially from such statements. These risks and uncertainties include, but are not limited to, the state of the U.S. economy, supply and demand in the hotel industry, and other factors as are described in greater detail in the Company's filings with the Securities and Exchange Commission ("SEC"). Unless legally required, the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.

For 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 Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC, and its quarterly and other periodic filings with the SEC. The Company undertakes no duty to update the statements in this release to conform the statements to actual results or changes in the Company's expectations.

Non-GAAP Financial Measures
We disclose certain "non-GAAP financial measures," which are measures of our historical financial performance. Non-GAAP financial measures are financial measures not prescribed by Generally Accepted Accounting Principles ("GAAP"). These measures are as follows: (i) Funds From Operations ("FFO") and Adjusted Funds from Operations ("AFFO"), (ii) Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA"), Earnings before Interest, Taxes, Depreciation and Amortization for Real Estate ("EBITDAre"), Adjusted EBITDAre, and hotel EBITDA (as described below). We caution investors that amounts presented in accordance with our definitions of non-GAAP financial measures may not be comparable to similar measures disclosed by other companies, since not all companies calculate these non-GAAP financial measures in the same manner. Our non-GAAP financial measures should be considered along with, but not as alternatives to, net income (loss) as a measure of our operating performance. Our non-GAAP financial measures may include funds that may not be available for our discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, debt service obligations and other commitments and uncertainties. Although we believe that our non-GAAP financial measures can enhance the understanding of our financial condition and results of operations, these non-GAAP financial measures are not necessarily better indicators of any trend as compared to a comparable measure prescribed by GAAP such as net income (loss).

Funds From Operations ("FFO") and Adjusted FFO ("AFFO")

As defined by Nareit, FFO represents net income or loss (computed in accordance with GAAP), excluding preferred dividends, gains (or losses) from sales of real property, impairment losses on real estate assets, items classified by GAAP as extraordinary, the cumulative effect of changes in accounting principles, plus depreciation and amortization related to real estate assets, and adjustments for unconsolidated partnerships, and joint ventures. AFFO represents FFO excluding amortization of deferred financing costs, franchise fees, equity-based compensation expense, debt transaction costs, premiums on redemption of preferred shares, losses from net casualties, non-cash lease expense, non-cash interest income and non-cash income tax related adjustments to our deferred tax assets. Unless otherwise indicated, we present FFO and AFFO applicable to our common shares and common units. We present FFO and AFFO because we consider FFO and AFFO an important supplemental measure of our operational performance and believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO and AFFO when reporting their results. FFO and AFFO are intended to exclude GAAP historical cost depreciation and amortization, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO and AFFO exclude depreciation and amortization related to real estate assets, gains and losses from real property dispositions and impairment losses on real estate assets, FFO and AFFO provide performance measures that, when compared year over year, reflect the effect to operations from trends in occupancy, guestroom rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income. Our computation of FFO differs slightly from the computation of Nareit-defined FFO related to the reporting of corporate depreciation and amortization expense. Our computation of FFO may also differ from the methodology for calculating FFO used by other equity REITs and, accordingly, may not be comparable to such other REITs. FFO and AFFO should not be considered as an alternative to net income (loss) (computed in accordance with GAAP) as an indicator of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions.  Where indicated in this release, FFO is based on our computation of FFO and not the computation of Nareit-defined FFO unless otherwise noted.

EBITDA, EBITDAre, Adjusted EBITDAre, and Hotel EBITDA

EBITDA

EBITDA represents net income or loss, excluding: (i) interest, (ii) income tax expense and (iii) depreciation and amortization. We believe EBITDA is useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results. Our management team also uses EBITDA as one measure in determining the value of acquisitions and dispositions.

EBITDAre and Adjusted EBITDAre

EBITDAre is based on EBITDA and is expected to provide additional relevant information about REITs as real estate companies in support of growing interest among generalist investors. EBITDAre is intended to be a supplemental non-GAAP performance measure that is independent of a company's capital structure and will provide a uniform basis to measure the enterprise value of a company compared to other REITs.

EBITDAre, as defined by Nareit, is calculated as EBITDA, excluding: (i) loss and gains on disposition of property and (ii) asset impairments, if any. We believe EBITDAre is useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results.

We make additional adjustments to EBITDAre when evaluating our performance because we believe that the exclusion of certain additional non-recurring or certain non-cash items described below provides useful supplemental information to investors regarding our ongoing operating performance. We believe that the presentation of Adjusted EBITDAre, when combined with the primary GAAP presentation of net income, is useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results.

Hotel EBITDA

With respect to hotel EBITDA, we believe that excluding the effect of corporate-level expenses and non-cash items provides a more complete understanding of the operating results over which individual hotels and operators have direct control.  We believe the property-level results provide investors with supplemental information on the ongoing operational performance of our hotels and effectiveness of the third-party management companies operating our business on a property-level basis.

We caution investors that amounts presented in accordance with our definitions of EBITDA, EBITDAre, adjusted EBITDAre, and hotel EBITDA may not be comparable to similar measures disclosed by other companies, since not all companies calculate these non-GAAP measures in the same manner. EBITDA, EBITDAre, adjusted EBITDAre, and hotel EBITDA should not be considered as an alternative measure of our net income (loss) or operating performance. EBITDA, EBITDAre, adjusted EBITDAre, and hotel EBITDA may include funds that may not be available for our discretionary use due to functional requirements to conserve funds for capital expenditures and property acquisitions and other commitments and uncertainties. Although we believe that EBITDA, EBITDAre, adjusted EBITDAre, and hotel EBITDA can enhance your understanding of our financial condition and results of operations, these non-GAAP financial measures are not necessarily a better indicator of any trend as compared to a comparable GAAP measure such as net income (loss). Above, we include a quantitative reconciliation of EBITDA, EBITDAre, adjusted EBITDAre and hotel EBITDA to the most directly comparable GAAP financial performance measure, which is net income (loss) and operating income (loss).

SOURCE Summit Hotel Properties, Inc.