Sunstone Hotel Investors Reports Results For Third Quarter 2021

Sunstone Hotel Investors, Inc. (NYSE: SHO), the owner of Long-Term Relevant Real Estate in the hospitality sector, today announced results for the third quarter ended September 30, 2021.

Third Quarter 2021 Operational Results (as compared to Third Quarter 2020):

  • Net Loss: Net loss was $22.1 million as compared to $91.1 million.
  • 16 Hotel Portfolio RevPAR: RevPAR at the comparable 16 hotels the Company owned during both 2021 and 2020, except the Renaissance Westchester which was sold in October 2021 (the “16 Hotel Portfolio”), increased 633.4% to $136.12. The average daily rate was $248.40 and occupancy was 54.8%.
  • 17 Hotel Portfolio RevPAR: RevPAR at the 17 Hotels, which includes the 16 Hotel Portfolio and the Montage Healdsburg was $145.79, comprised of an average daily rate of $265.56 and occupancy of 54.9%.
  • Adjusted EBITDAre: Adjusted EBITDAre, excluding noncontrolling interest increased 197.7% to $35.4 million.
  • Adjusted FFO: Adjusted FFO attributable to common stockholders per diluted share increased 138.5% to $0.10.

Douglas M. Pasquale, Interim Chief Executive Officer, stated, “We are pleased with our third quarter and year to date results, which meaningfully exceeded our revenue and profitability expectations despite some headwinds from the Delta variant. While leisure demand over the summer travel season was the strongest since the onset of the pandemic, our portfolio saw continued demand growth from all primary segments which added significantly to the quarter’s successes. While concerns related to the Delta variant have impacted short-term group demand, we are seeing a re-acceleration of both business transient and group bookings for the fourth quarter and into 2022.”

Mr. Pasquale continued, “During the quarter, we accelerated capital recycling initiatives and have recently completed or are under contract to complete several transactions that will better position the Company for future value creation. The disposition of the Renaissance Westchester is consistent with our strategy of divesting non-Long-Term Relevant Real Estate, while the sale of the Embassy Suites La Jolla is a great example of capitalizing on an opportunity to realize the value of well-located real estate at a sale price far in excess of the hotel’s value. The opportunistic sale of the Embassy Suites La Jolla for $226.7 million, or approximately $667,000 per key, will further strengthen our balance sheet and provide capacity for future growth. The acquisition of Four Seasons Resort Napa Valley will increase our exposure to one of the strongest leisure and group markets, which, combined with Montage Healdsburg, will increase our ownership in the wine country to approximately 10% of our portfolio. Upon completion, we will own the two premiere hotels in the market and control approximately 32% of the luxury meeting space. I am very pleased with the progress and execution the team has achieved during my tenure as Interim CEO.”

Unaudited Selected Statistical and Financial Data ($ in millions, except RevPAR, ADR and per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

Change

2021

2020

Change

Net Loss

$

(22.1)

$

(91.1)

75.7

%

$

(105.3)

$

(371.1)

71.6

%

Loss Attributable to Common Stockholders per Diluted Share

$

(0.13)

$

(0.43)

69.8

%

$

(0.56)

$

(1.74)

67.8

%

16 Hotel Portfolio RevPAR

$

136.12

$

18.56

633.4

%

$

93.59

$

53.90

73.6

%

16 Hotel Portfolio Occupancy

54.8

%

12.4

%

4,240

bps

41.0

%

24.9

%

1,610

bps

16 Hotel Portfolio ADR

$

248.40

$

149.70

65.9

%

$

228.27

$

216.47

5.5

%

Montage Healdsburg RevPAR (1)

$

796.48

N/A

N/A

$

532.51

N/A

N/A

Montage Healdsburg Occupancy (1)

63.9

%

N/A

N/A

48.6

%

N/A

N/A

Montage Healdsburg ADR (1)

$

1,246.45

N/A

N/A

$

1,095.70

N/A

N/A

16 Hotel Portfolio Adjusted EBITDAre Margin (2)

24.3

%

(136.7)

%

16,100

bps

12.9

%

(21.6)

%

3,450

bps

Adjusted EBITDAre, excluding noncontrolling interest

$

35.4

$

(36.2)

197.7

%

$

36.0

$

(69.1)

152.2

%

Adjusted FFO Attributable to Common Stockholders

$

21.3

$

(54.7)

139.0

%

$

(9.2)

$

(121.7)

92.5

%

Adjusted FFO Attributable to Common Stockholders per Diluted Share

$

0.10

$

(0.26)

138.5

%

$

(0.04)

$

(0.56)

92.9

%

(1)

Operating statistics for the Montage Healdsburg, acquired on April 22, 2021, include prior ownership results obtained by the Company from the prior owner of the hotel during the due diligence period before the Company’s acquisition was completed. The Company performed a limited review of the information as part of its analysis of the acquisition. The newly-developed hotel opened in December 2020; therefore, there is no prior year information.

(2)

The 16 Hotel Portfolio Adjusted EBITDAre Margins exclude prior year property tax adjustments, net.

Recent Developments

Preferred Stock Redemption: On August 12, 2021, the Company redeemed all 3,000,000 shares of its Series F Cumulative Redeemable Preferred Stock at a redemption price of $25.00 per share, plus accrued and unpaid dividends up to, but not including, the redemption date, using proceeds received from its July 16, 2021 issuance of 4,000,000 shares of its 5.70% Series I Cumulative Redeemable Preferred Stock (“Series I preferred stock”).

Renaissance Westchester: On October 15, 2021, the Company sold the 348-room Renaissance Westchester for a contractual sale price of $18.8 million. Net proceeds received from the sale of the hotel after the payment of costs arising from the transaction will be used to partially fund the acquisition of the Four Seasons Resort Napa Valley.

Four Seasons Resort Napa Valley: On October 7, 2021, the Company made a non-refundable earnest money deposit in connection with its agreement to acquire the fee-simple interest in the 85-room Four Seasons Resort Napa Valley. The newly-constructed luxury resort recently opened in October 2021, and will be acquired for a gross purchase price of $177.5 million. The acquisition includes nearly 4.5 acres of vineyards and the Elusa Winery along with the inventory of prior wine vintages. The acquisition is expected to be funded through a combination of cash on hand and from borrowings on the Company’s currently undrawn $500.0 million revolving credit facility. The Company expects to close the transaction in the fourth quarter of 2021, but can give no assurances that the acquisition will be completed. Upon stabilization, the Company expects the resort to generate a 6% to 7% net operating income yield. The acquisition of the Four Seasons Resort Napa Valley will further advance Sunstone’s strategy of owning a portfolio of Long-Term Relevant Real Estate. For additional information on the acquisition, please refer to the Four Seasons Resort Napa Valley presentation located in the Investor Relations section of the Company’s website.

Embassy Suites La Jolla: On October 18, 2021, the Company entered into an agreement to sell the 340-room Embassy Suites La Jolla for a contractual sale price of $226.7 million or approximately $667,000 per key. On October 21, 2021, the purchaser’s earnest money deposit became non-refundable. The sale price represents a 22.3x multiple on 2019 Hotel Adjusted EBITDAre and a 4.0% cap rate on 2019 Hotel Net Operating Income. As part of the transaction, the buyer intends to assume the hotel’s existing $56.9 million mortgage loan. The disposition of the hotel demonstrates the ability to generate significant value from the ownership of Long-Term Relevant Real Estate. The Company expects the sale to close during the fourth quarter of 2021, subject to customary closing conditions.

Hurricane Ida:  On August 29, 2021, Hurricane Ida impacted the Company’s JW Marriott New Orleans and Hilton New Orleans St. Charles causing exterior damage and water infiltration at the hotels. The storm impacted the two hotels to varying degrees with the bulk of the damage incurred at the Hilton New Orleans St. Charles. The Company incurred $0.4 million of restoration expense during the third quarter of 2021 related to the JW Marriott New Orleans, and currently anticipates that the cost to restore damages at the hotel will not exceed the property’s insurance deductible. The Company incurred $1.2 million of restoration expense and recorded a $1.0 million impairment charge in the third quarter of 2021 as a result of the write-off of assets at the Hilton New Orleans St. Charles due to hurricane-related damage. The Company is working with its insurers to identify and settle a property damage claim at the Hilton New Orleans St. Charles and expects that losses to the Company will be mitigated by the hotel’s property insurance deductible of approximately $3.0 million. In addition, the Company may also pursue a business interruption insurance claim at the Hilton New Orleans St. Charles. The Company expects that restoration work on the hotels will continue into 2022 and that both hotels will remain in operation while the work is performed.

Capital Investments:  The Company invested $25.1 million and $41.9 million into its portfolio during the third quarter and first nine months ended September 30, 2021, respectively. In 2021, the Company expects to invest approximately $70 million to $80 million.

Balance Sheet and Liquidity Update

As of September 30, 2021, the Company had $221.6 million of cash and cash equivalents, including restricted cash of $42.1 million, total assets of $3.0 billion, including $2.7 billion of net investments in hotel properties, total consolidated debt of $745.5 million and stockholders’ equity of $2.1 billion.

Operations Update

Operating statistics for the 17 Hotel Portfolio were as follows:

July

August

September

Third Quarter

2021

2021

2021

2021

RevPAR

$

168.38

$

137.11

$

131.53

$

145.79

Occupancy

62.9

%

51.1

%

50.6

%

54.9

%

Average Daily Rate

$

267.70

$

268.31

$

259.95

$

265.56

Preliminary October 2021 results for the 16 Hotel Portfolio and the 17 Hotel Portfolio include the following ($ in millions, except RevPAR and ADR):

October

2021 (1)

2020

Change

16 Hotel Portfolio Room Revenue

$

37.2

$

6.8

448.3

%

16 Hotel Portfolio RevPAR

$

138.29

$

25.25

447.7

%

16 Hotel Portfolio Occupancy

56.7

%

17.0

%

3,970

bps

16 Hotel Portfolio ADR

$

243.90

$

148.51

64.2

%

17 Hotel Portfolio Room Revenue (2)

$

40.9

N/A

N/A

17 Hotel Portfolio RevPAR (2)

$

150.22

N/A

N/A

17 Hotel Portfolio Occupancy (2)

57.0

%

N/A

N/A

17 Hotel Portfolio ADR (2)

$

263.55

N/A

N/A

(1)

October 2021 results are preliminary and may be adjusted during the Company’s month-end close process.

(2)

Operating statistics for the 17 Hotel Portfolio include the Montage Healdsburg, acquired by the Company in April 2021. The newly-developed hotel opened in December 2020; therefore, there is no prior year information.

Due to continued uncertainty regarding the duration and extent of the COVID-19 pandemic, the Company cannot provide further assurances regarding the pandemic’s effect on the Company’s results, and the Company does not intend to provide further updates unless deemed appropriate.

Dividend Update

On November 3, 2021, the Company’s Board of Directors declared cash dividends of $0.123426 per share payable to its Series G cumulative redeemable preferred stockholder, $0.382813 per share payable to its Series H cumulative redeemable preferred stockholders and $0.356250 per share payable to its Series I preferred stockholders. The dividends will be paid on January 18, 2022 to stockholders of record as of December 31, 2021.

The Company has suspended its quarterly common stock cash dividends. The resumption in quarterly common dividends will be determined by the Company’s Board of Directors after considering the Company’s obligations under its various financing agreements, projected taxable income, compliance with its debt covenants, long-term operating projections, expected capital requirements and risks affecting the Company’s business.

Supplemental Disclosures

Contemporaneous with this release, the Company has furnished a Form 8-K with unaudited financial information. This additional information is being provided as a supplement to the information in this release and other filings with the SEC. The Company has no obligation to update any of the information provided to conform to actual results or changes in the Company’s portfolio, capital structure or future expectations.

About Sunstone Hotel Investors, Inc.

Sunstone Hotel Investors, Inc. is a lodging real estate investment trust (“REIT”) that as of the date of this release has interests in 17 hotels comprised of 8,799 rooms, the majority of which are operated under nationally recognized brands. Sunstone’s business is to acquire, own, asset manage and renovate or reposition hotels considered to be Long-Term Relevant Real Estate.

Sunstone Hotel Investors, Inc.

Consolidated Balance Sheets

(In thousands, except share and per share data)

September 30,

December 31,

2021

2020

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$

179,487

$

368,406

Restricted cash

42,124

47,733

Accounts receivable, net

28,349

8,566

Prepaid expenses and other current assets

18,512

10,440

Assets held for sale, net

13,759

Total current assets

282,231

435,145

Investment in hotel properties, net

2,669,169

2,461,498

Finance lease right-of-use asset, net

45,079

46,182

Operating lease right-of-use assets, net

23,971

26,093

Deferred financing costs, net

2,928

4,354

Other assets, net

11,217

12,445

Total assets

$

3,034,595

$

2,985,717

Liabilities and Equity

Current liabilities:

Accounts payable and accrued expenses

$

48,740

$

37,326

Accrued payroll and employee benefits

18,057

15,392

Dividends and distributions payable

3,112

3,208

Other current liabilities

57,129

32,606

Current portion of notes payable, net

87,396

2,261

Liabilities of assets held for sale

5,490

Total current liabilities

219,924

90,793

Notes payable, less current portion, net

655,713

742,528

Finance lease obligation, less current portion

15,568

15,569

Operating lease obligations, less current portion

26,432

29,954

Other liabilities

14,495

17,494

Total liabilities

932,132

896,338

Commitments and contingencies

Equity:

Stockholders’ equity:

Preferred stock, $0.01 par value, 100,000,000 shares authorized:

6.95% Series E Cumulative Redeemable Preferred Stock, zero shares and 4,600,000 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively, stated at liquidation preference of $25.00 per share

115,000

6.45% Series F Cumulative Redeemable Preferred Stock, zero shares and 3,000,000 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively, stated at liquidation preference of $25.00 per share

75,000

Series G Cumulative Redeemable Preferred Stock, 2,650,000 shares and zero shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively, stated at liquidation preference of $25.00 per share

66,250

6.125% Series H Cumulative Redeemable Preferred Stock, 4,600,000 shares and zero shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively, stated at liquidation preference of $25.00 per share

115,000

5.70% Series I Cumulative Redeemable Preferred Stock, 4,000,000 shares and zero shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively, stated at liquidation preference of $25.00 per share

100,000

Common stock, $0.01 par value, 500,000,000 shares authorized, 219,333,783 shares issued and outstanding at September 30, 2021 and 215,593,401 shares issued and outstanding at December 31, 2020

2,193

2,156

Additional paid in capital

2,629,148

2,586,108

Retained earnings

810,075

913,766

Cumulative dividends and distributions

(1,660,675)

(1,643,386)

Total stockholders’ equity

2,061,991

2,048,644

Noncontrolling interest in consolidated joint venture

40,472

40,735

Total equity

2,102,463

2,089,379

Total liabilities and equity

$

3,034,595

$

2,985,717

Sunstone Hotel Investors, Inc.

Unaudited Consolidated Statements of Operations

(In thousands, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Revenues

Room

$

118,061

$

16,266

$

236,877

$

147,535

Food and beverage

27,338

2,109

47,547

50,312

Other operating

22,022

10,535

50,840

32,699

Total revenues

167,421

28,910

335,264

230,546

Operating expenses

Room

32,106

13,715

66,692

65,037

Food and beverage

27,440

7,748

49,088

54,533

Other operating

4,643

1,295

9,934

6,283

Advertising and promotion

8,883

3,895

20,800

20,447

Repairs and maintenance

10,001

6,075

22,678

21,499

Utilities

6,164

4,170

14,998

13,238

Franchise costs

4,181

663

7,468

6,337

Property tax, ground lease and insurance

17,528

20,800

47,821

59,975

Other property-level expenses

21,633

9,528

48,177

47,109

Corporate overhead

15,422

6,582

32,066

22,414

Depreciation and amortization

32,585

33,005

96,084

104,290

Impairment losses

1,014

1,014

133,466

Total operating expenses

181,600

107,476

416,820

554,628

Interest and other income (loss)

2

139

(356)

2,751

Interest expense

(7,983)

(12,742)

(23,697)

(43,199)

Gain on sale of assets

189

189

Gain (loss) on extinguishment of debt

61

(210)

371

(210)

Loss before income taxes

(22,099)

(91,190)

(105,238)

(364,551)

Income tax (provision) benefit, net

(25)

83

(91)

(6,575)

Net loss

(22,124)

(91,107)

(105,329)

(371,126)

(Income) loss from consolidated joint venture attributable to noncontrolling interest

(933)

1,816

1,638

4,436

Preferred stock dividends and redemption charges

(6,287)

(3,208)

(17,289)

(9,622)

Loss attributable to common stockholders

$

(29,344)

$

(92,499)

$

(120,980)

$

(376,312)

Basic and diluted per share amounts:

Basic and diluted loss attributable to common stockholders per common share

$

(0.13)

$

(0.43)

$

(0.56)

$

(1.74)

Basic and diluted weighted average common shares outstanding

217,709

214,257

215,765

216,498

Distributions declared per common share

$

$

$

$

0.05

Sunstone Hotel Investors, Inc.

Reconciliation of Net Loss to Non-GAAP Financial Measures

(Unaudited and in thousands)

Reconciliation of Net Loss to EBITDAre and Adjusted EBITDAre, Excluding Noncontrolling Interest

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Net loss

$

(22,124)

$

(91,107)

$

(105,329)

$

(371,126)

Operations held for investment:

Depreciation and amortization

32,585

33,005

96,084

104,290

Interest expense

7,983

12,742

23,697

43,199

Income tax provision (benefit), net

25

(83)

91

6,575

Loss (gain) on sale of assets

12

(189)

82

(189)

Impairment losses – hotel properties

1,014

1,014

131,164

EBITDAre

19,495

(45,632)

15,639

(86,087)

Operations held for investment:

Amortization of deferred stock compensation

3,165

2,238

10,576

7,509

Amortization of right-of-use assets and liabilities

(335)

(330)

(1,004)

(923)

Finance lease obligation interest – cash ground rent

(351)

(351)

(1,053)

(1,053)

Property-level severance

1,242

2,117

Property-level severance related to held for sale/sold hotels

4,562

5,602

4,562

5,840

(Gain) loss on extinguishment of debt

(61)

210

(371)

210

Prior year property tax adjustments, net

605

(12)

(1,384)

214

Lawsuit settlement cost

691

691

CEO transition costs

7,976

7,976

Hurricane-related losses

1,621

1,621

Impairment loss – abandoned development costs

2,302

Noncontrolling interest:

(Income) loss from consolidated joint venture attributable to noncontrolling interest

(933)

1,816

1,638

4,436

Depreciation and amortization

(791)

(808)

(2,407)

(2,418)

Interest expense

(181)

(244)

(501)

(970)

Amortization of right-of-use asset and liability

72

72

217

217

Lawsuit settlement cost

(173)

(173)

Impairment loss – abandoned development costs

(449)

Adjustments to EBITDAre, net

15,867

9,435

20,388

17,032

Adjusted EBITDAre, excluding noncontrolling interest

$

35,362

$

(36,197)

$

36,027

$

(69,055)

Sunstone Hotel Investors, Inc.

Reconciliation of Net Loss to Non-GAAP Financial Measures

(Unaudited and in thousands, except per share amounts)

Reconciliation of Net Loss to FFO Attributable to Common Stockholders and

Adjusted FFO Attributable to Common Stockholders

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Net loss

$

(22,124)

$

(91,107)

$

(105,329)

$

(371,126)

Preferred stock dividends and redemption charges

(6,287)

(3,208)

(17,289)

(9,622)

Operations held for investment:

Real estate depreciation and amortization

31,959

32,383

94,206

102,422

Loss (gain) on sale of assets

12

(189)

82

(189)

Impairment losses – hotel properties

1,014

1,014

131,164

Noncontrolling interest:

(Income) loss from consolidated joint venture attributable to noncontrolling interest

(933)

1,816

1,638

4,436

Real estate depreciation and amortization

(791)

(808)

(2,407)

(2,418)

FFO attributable to common stockholders

2,850

(61,113)

(28,085)

(145,333)

Operations held for investment:

Real estate amortization of right-of-use assets and liabilities

87

80

249

298

Noncash interest on derivatives, net

(616)

(762)

(2,194)

5,534

Property-level severance

1,242

2,117

Property-level severance related to held for sale/sold hotels

4,562

5,602

4,562

5,840

(Gain) loss on extinguishment of debt

(61)

210

(371)

210

Prior year property tax adjustments, net

605

(12)

(1,384)

214

Lawsuit settlement cost

691

691

Preferred stock redemption charges

2,624

6,640

CEO transition costs

7,976

7,976

Amortization of deferred stock compensation associated with CEO transition costs

1,117

1,117

Hurricane-related losses

1,621

1,621

Impairment loss – abandoned development costs

2,302

Noncash income tax provision, net

7,415

Noncontrolling interest:

Real estate amortization of right-of-use asset and liability

72

72

217

217

Noncash interest on derivatives, net

(20)

(1)

(20)

(27)

Lawsuit settlement cost

(173)

(173)

Impairment loss – abandoned development costs

(449)

Adjustments to FFO attributable to common stockholders, net

18,485

6,431

18,931

23,671

Adjusted FFO attributable to common stockholders

$

21,335

$

(54,682)

$

(9,154)

$

(121,662)

FFO attributable to common stockholders per diluted share

$

0.01

$

(0.29)

$

(0.13)

$

(0.67)

Adjusted FFO attributable to common stockholders per diluted share

$

0.10

$

(0.26)

$

(0.04)

$

(0.56)

Basic weighted average shares outstanding

217,709

214,257

215,765

216,498

Shares associated with unvested restricted stock awards

296

287

Diluted weighted average shares outstanding

218,005

214,257

216,052

216,498

Sunstone Hotel Investors, Inc.

Non-GAAP Financial Measures

Hotel Adjusted EBITDAre and Margins

(Unaudited and in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

16 Hotel Portfolio Adjusted EBITDAre Margin, excluding prior year property tax adjustments, net  (1)

24.3%

(136.7)%

12.9%

(21.6)%

Total revenues

$

167,421

$

28,910

$

335,264

$

230,546

Non-hotel revenues (2)

(22)

(23)

(66)

(68)

Reimbursements to offset net losses (3)

(1,662)

(4,595)

(8,773)

(6,965)

Total Actual Hotel Revenues

165,737

24,292

326,425

223,513

Non-comparable hotel revenues (4)

(15,381)

(25,433)

Held for sale and Sold/Disposed hotel revenues (5)

(67)

(1,952)

(154)

(26,500)

Total 16 Hotel Portfolio Revenues

$

150,289

$

22,340

$

300,838

$

197,013

Net loss

$

(22,124)

$

(91,107)

$

(105,329)

$

(371,126)

Non-hotel revenues (2)

(22)

(23)

(66)

(68)

Reimbursements to offset net losses (3)

(1,662)

(4,595)

(8,773)

(6,965)

Non-hotel operating expenses, net (6)

(593)

(596)

(3,902)

(1,733)

Property-level severance (7)

1,242

2,117

Property-level severance related to held for sale/sold/disposed hotels (7)

4,562

5,602

4,562

5,840

Property-level prior year property tax adjustments, net (8)

605

(12)

379

214

Property-level legal fees and settlements (9)

691

(60)

749

1,287

Property-level hurricane-related losses (10)

1,621

1,621

Taxes assessed on commercial rents (11)

(95)

10

Corporate overhead

15,422

6,582

32,066

22,414

Depreciation and amortization

32,585

33,005

96,084

104,290

Impairment losses

1,014

1,014

133,466

Interest and other (income) loss

(2)

(139)

356

(2,751)

Interest expense

7,983

12,742

23,697

43,199

Gain on sale of assets

(189)

(189)

Gain on extinguishment of debt

(61)

210

(371)

210

Income tax provision (benefit), net

25

(83)

91

6,575

Actual Hotel Adjusted EBITDAre

40,044

(37,516)

42,178

(63,210)

Non-comparable hotel EBITDAre (4)

(3,635)

(5,248)

Held for sale and Sold/Disposed hotel Adjusted EBITDAre (5)

39

6,986

1,989

20,744

16 Hotel Portfolio Adjusted EBITDAre, excluding prior year property tax adjustments, net

$

36,448

$

(30,530)

$

38,919

$

(42,466)

*Footnotes on following page

(1)

16 Hotel Portfolio Adjusted EBITDAre Margin, excluding prior year property tax adjustments, net is calculated as 16 Hotel Portfolio Adjusted EBITDAre, excluding prior year property tax adjustments, net divided by Total 16 Hotel Portfolio Revenues.

(2)

Non-hotel revenues include the amortization of contract intangibles recorded in conjunction with the Company’s acquisitions of the Boston Park Plaza and the Hilton Garden Inn Chicago Downtown/Magnificent Mile.

(3)

Reimbursements to offset net losses for the third quarter and first nine months of 2021 include $1.7 million and $8.8 million, respectively, at the Hyatt Regency San Francisco as stipulated by the hotel’s operating lease agreement. Reimbursements to offset net losses for the third quarter and first nine months of 2020 include $4.6 million and $7.0 million, respectively.

(4)

Non-comparable hotel includes hotel revenues and Adjusted EBITDAre generated during the Company’s ownership period for the Montage Healdsburg, acquired in April 2021. The newly-developed hotel is considered non-comparable as it did not open until December 2020.

(5)

Held for sale hotel includes hotel revenues and Adjusted EBITDAre for the Renaissance Westchester, which the Company sold in October 2021. Sold/Disposed hotel includes hotel revenues and Adjusted EBITDAre generated during the Company’s ownership period for the Renaissance Harborplace and the Renaissance Los Angeles Airport, sold in July 2020 and December 2020, respectively, along with the Hilton Times Square, which was assigned to the hotel’s mortgage holder in December 2020.

(6)

Non-hotel operating expenses, net include the following: the amortization of hotel real estate-related right-of-use assets and liabilities; the amortization of a favorable management agreement; finance lease obligation interest – cash ground rent; and prior year property tax credits, net received in the first nine months of 2021 for the Renaissance Los Angeles Airport.

(7)

Property-level severance for the third quarter and first nine months of 2020 includes a total of $1.2 million and $2.1 million, respectively, in COVID-19-related severance recorded at a majority of the Company’s 16 Hotel Portfolio. Property-level severance related to held for sale/sold/disposed hotels for both the third quarter and first nine months of 2021 includes $4.6 million at the Renaissance Westchester. Property-level severance related to held for sale/sold/disposed hotels for the third quarter and first nine months of 2020 includes $5.6 million and $5.8 million, respectively, in COVID-19-related severance recorded at the Sold/Disposed hotels.

(8)

Property-level prior year property tax adjustments, net for the third quarter and first nine months of 2021 include total net assessments of $0.6 million received at the Embassy Suites Chicago, the Hilton Garden Inn Chicago Downtown/Magnificent Mile, the Hyatt Centric Chicago Magnificent Mile and the Renaissance Long Beach. For the first nine months of 2021, property-level prior year property tax adjustments, net also include total credits of $0.2 million received by the Hyatt Centric Chicago Magnificent Mile and the Renaissance Washington DC. Property-level prior year property tax adjustments, net for the third quarter and first nine months of 2020 include a total credit of $12,000 received at the Renaissance Long Beach. Property-level prior year property tax adjustments, net for the first nine months of 2020 also include total net assessments of $0.2 million received at the Embassy Suites Chicago, the Hilton Garden Inn Chicago Downtown/Magnificent Mile, the Hyatt Centric Chicago Magnificent Mile and the Renaissance Harborplace.

(9)

Property-level legal fees and settlements for the third quarter and first nine months of 2021 include a $0.7 million lawsuit settlement cost at the Hilton San Diego Bayfront. Property-level legal fees and settlements for the first nine months of 2021 also include $0.1 million in legal fees at the Renaissance Westchester. Property-level legal fees and settlements for the third quarter and first nine months of 2020 include a total credit of $0.1 million as follows: $0.6 million credit card merchant class action settlement proceeds received at the Boston Park Plaza, the Hilton Times Square, the Hyatt Centric Chicago Magnificent Mile and the Oceans Edge Resort & Marina; and $0.6 million in legal fees at the Renaissance Westchester. Property-level legal fees and settlements for the first nine months of 2020 also include a $1.3 million union labor dispute expense at the Hilton Times Square.

(10)

Property-level hurricane-related losses for the third quarter and first nine months of 2021 include a total of $1.6 million in Hurricane Ida-related repairs at the Hilton New Orleans St. Charles and the JW Marriott New Orleans.

(11)

Taxes assessed on commercial rents at the Hyatt Regency San Francisco include a $0.1 million true-up credit for the third quarter of 2020 and a $10,000 net assessment for the first nine months of 2020.