Condor Hospitality Trust Reports Second Quarter 2019 Results

Condor Hospitality Trust, Inc. (NYSE American: CDOR) yesterday announced results for the second quarter ended June 30, 2019.

SECOND QUARTER RELEASE FINANCIAL HIGHLIGHTS

  • Revenue in the second quarter 2019 of $16.2 million, comprised of $16.2 million generated entirely from New Investment Platform Hotels, a 1.2% decrease from $16.4 million generated by New Investment Platform Hotels in the $17.8 million 2018 second quarter Revenue that included $1.4 million of Legacy Hotel Revenue.
  • Same-Store Revenue of $37.5 million for the first six months of 2019 increased $0.5 million over the first six months Same-Store Revenue of $37.0 million in 2018.
  • Same-Store RevPAR for the New Investment Platform Hotels in the 2019 second quarter decreased 0.7% compared to the same quarter in 2018, affected by a weak convention schedule in San Antonio that had a direct impact on the SpringHill Suites. Excluding the SpringHill Suites, New Investment Platform RevPAR increased by 0.4%. Same-Store RevPAR of $105.47 for the New Investment Platform Hotels for the first six months of 2019 Increased 1.6% over 2018 first six months RevPAR of $103.84.
  • Net Earnings (Loss) Attributable to Common Shareholders of ($1.4 million), or ($0.12) per Diluted Share, compared to $2.7 million, or $0.23 per share, in the 2018 second quarter. Decline in Net Earnings Attributable to Common Shareholders primarily caused by no Legacy Hotels remaining in the second quarter 2019, compared to $0.4 million of EBITDA generated from Legacy Hotels in the second quarter 2018, $0.8 million in Equity Transaction and Strategic Alternatives costs incurred in the second quarter 2019, $0.4 million increase in income tax expense, and $0.5 million Decline in Net Gain on Derivatives and Convertible Debt for the quarter. Additionally, the second quarter 2018 included a $1.9 million gain from Legacy Hotel sales.
  • Adjusted Funds from Operations was $3.5 million, or $0.28 per Diluted Share, a $0.9 million Decline from $4.4 million, or $0.34, in the 2018 second quarter. The decline was a result of a $0.4 million increase in income tax expense, and a $0.2 million increase in stock-based compensation expense in the second quarter 2019 and the second quarter 2018 included $0.4 million of EBITDA from Legacy Hotels.
  • Same-Store Hotel EBITDA decreased to $7.5 million from $7.6 million, a 1.3% decrease over prior year second quarter influenced by the weakness in the San Antonio market mentioned above and the positive impact of FEMA business in hurricane affected Texas and Florida markets in Q2 2018.

MANAGEMENT COMMENTARY

Bill Blackham, Condor’s Chief Executive Officer, commented:

“For the first six months of 2019 our portfolio has outperformed the overall market when compared to the U.S. national RevPAR growth of 1.3% for all chain scales excluding luxury and upper upscale reported by Smith Travel Research. Our proforma same-store RevPAR for the second quarter 2019 excluding the SpringHill Suites increased 0.4% as compared to (0.4)% for upscale and 0.0% for upper midscale, as reported by Smith Travel Research. Importantly for the first six months our operating results as a portfolio are slightly ahead of our projections. In the first six months of 2019 Same-Store Hotel EBITDA is approximately 0.7% higher than the same period in the prior year at $14.9 million compared to $14.8 million, and our margins while declining in the quarter, did so moderately reducing 30 bps from 40.2% in 2018 to 39.9% in 2019 and were 39.8% for the first six months of 2019 compared to 40.1%. Additionally, we have elected to not renew 3 hotel management contracts and with new management we believe we will be better positioned to increase performance on our San Antonio and Jacksonville assets which experienced $0.33 million in revenue decline and $0.28 million in EBITDA decline in the quarter compared to 2018. On July 22, 2019 Condor announced the conclusion of a strategic alternatives process with the signing of a definitive agreement that contemplates the merger of the Company with the operating partnership of NexPoint Hospitality Trust, an unincorporated, open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario and listed on the TSXV, resulting in a $11.10 per share cash price to be paid to common shareholders and a $10.00 per share cash price to be paid to Series E preferred shareholders at closing. We anticipate completing and closing the mergers during the fourth quarter of 2019.”

FINANCIAL SUMMARY

At June 30, 2019, the Company’s total portfolio included 15 hotels, representing 1,908 rooms. The Company’s last remaining legacy asset was sold during the first quarter of 2019.

Total Company Financial Results

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions except per share amounts)

                               

 

 

Three months ended June 30,

 

Six months ended June 30,

 

 

2019

 

2018

 

Change

 

2019

 

2018

 

Change

Revenue

 

$

16.2

 

$

17.8

 

-9.3%

 

$

32.1

 

$

34.5

 

-7.0%

Net Earnings (Loss) Attributable to Common Shareholders

 

$

(1.4)

 

$

2.7

 

NA

 

$

(1.5)

 

$

3.4

 

NA

Diluted Earnings (Loss) per Share

 

$

(0.12)

 

$

0.23

 

NA

 

$

(0.13)

 

$

0.28

 

NA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Funds from Operations (FFO)*

 

$

1.4

 

$

3.8

 

-61.7%

 

$

4.1

 

$

7.0

 

-42.0%

FFO per Diluted Share*

 

$

0.11

 

$

0.30

 

-63.3%

 

$

0.32

 

$

0.56

 

-42.9%

Adjusted FFO*

 

$

3.4

 

$

4.2

 

-19.4%

 

$

6.9

 

$

7.7

 

-10.7%

Adjusted FFO per Diluted Share*

 

$

0.28

 

$

0.34

 

-17.6%

 

$

0.57

 

$

0.63

 

-9.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hotel EBITDA*

 

$

7.5

 

$

8.0

 

-6.8%

 

$

15.0

 

$

15.4

 

-2.6%

Adjusted EBITDAre*

 

$

6.3

 

$

6.6

 

-4.8%

 

$

12.4

 

$

12.4

 

0.0%

*Please see the Reg. G reconciliation tables at the end of this release.

Same Store Operational Results**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions except per share amounts and operating metrics)

               

 

 

Three months ended June 30,

 

Six months ended June 30,

 

 

2019

 

2018

 

Change

 

2019

 

2018

 

Change

Same-Store RevPAR

 

$

104.63

 

$

105.36

 

-0.7%

 

$

105.47

 

$

103.84

 

1.6%

Same-Store Occupancy

 

 

82.64%

 

 

84.18%

 

-1.8%

 

 

81.24%

 

 

82.24%

 

-1.2%

Same-Store ADR

 

$

126.62

 

$

125.15

 

1.2%

 

$

129.83

 

$

126.25

 

2.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same-Store Hotel EBITDA*

 

$

7.5

 

$

7.6

 

-1.5%

 

$

14.9

 

$

14.8

 

0.7%

Same-Store Hotel EBITDA Margin*

 

 

39.9%

 

 

40.1%

 

-0.2%

 

 

39.8%

 

 

40.1%

 

-0.3%

                                 

*Please see the Reg. G reconciliation tables at the end of this release.

**Financial results presented above include results from prior to our ownership.

PORTFOLIO ACTIVITY

The Company’s investment strategy is to assemble a portfolio of premium-branded, select-service hotels in the top 100 Metropolitan Statistical Areas (“MSAs”) with a particular focus on MSAs ranked between 20 to 60. Since restarting its portfolio transformation in 2015, the Company has acquired 14 high-quality select-service hotels representing 1,808 rooms in its target markets for a total purchase price of approximately $277 million. Additionally, during this time, the Company has sold 55 legacy assets for a total gross sales price of approximately $170 million. Following the sale of the Quality Inn Solomons in the first quarter of 2019, there are no legacy hotels remaining in the Company’s portfolio.

BALANCE SHEET AND CAPITAL MARKETS ACTIVITY

As of June 30, 2019, the Company had cash and cash equivalents (including restricted cash) of $8.9 million and available revolver borrowing capacity of $9.0 million. As of June 30, 2019, the Company had total outstanding long-term debt of $136.0 million associated with assets held for use with a weighted average maturity of 2.0 years and a weighted average interest rate of 5.12%.

CAPITAL INVESTMENTS

The Company invested $0.3 million in capital improvements throughout the portfolio in the three months ended June 30, 2019 to upgrade its properties and maintain brand standards.

OUTLOOK AND GUIDANCE

The Company has suspended guidance until further notice.

DIVIDENDS

On May 23, 2019, the Board of Directors declared a quarterly cash common stock dividend of $0.195 per share for the second quarter of 2019. The common stock dividend represented an annualized yield of approximately 8.1% based on the closing price of the Company’s common shares on June 7, 2019. The second quarter dividend was paid on July 1, 2019 to shareholders of record as of June 24, 2019.

On July 19, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with NHT Operating Partnership LLC, a Delaware limited liability company (the “Parent”) and other parties thereto. During the term of the Merger Agreement, the Company may not pay cash dividends to holders of the Company common stock or the Series E Preferred Stock, except the Company is permitted to declare and pay a dividend to shareholders during the month in which an extension option for the closing of the transactions contemplated by the Merger Agreement is exercised by the Parent, subject to limitations as set forth in the Merger Agreement and the disclosure schedule delivered therewith on amount and the our prior month adjusted funds from operations. The holders of the Series E preferred stock have agreed to waive accrual of any unpaid dividends between signing and closing.

About Condor Hospitality Trust, Inc.

Condor Hospitality Trust, Inc. (NYSE American: CDOR) is a self-administered real estate investment trust that specializes in the investment and ownership of upper midscale and upscale, premium-branded, select-service, extended-stay, and limited-service hotels in the top 100 Metropolitan Statistical Areas (“MSAs”) with a particular focus on the top 20 to 60 MSAs. The Company currently owns 15 hotels in 8 states. Condor’s hotels are franchised by a number of the industry’s most well-regarded brand families including Hilton, Marriott, and InterContinental Hotels.