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Sunstone Hotel Investors Reports Net Income Decreased of 39.7% For Fourth Quarter 2017

Sunstone Hotel Investors Reports Results For Fourth Quarter And Full Year 2017

Sunstone Hotel Investors, Inc. (NYSE: SHO) yesterday announced results for the fourth quarter and year ended December 31, 2017.

Fourth Quarter 2017 Operational Results (as compared to Fourth Quarter 2016):

Full Year 2017 Operational Results (as compared to Full Year 2016):

John Arabia, President and Chief Executive Officer, stated, “During the fourth quarter, all demand segments outperformed our expectations, resulting in RevPAR and profitability significantly above the high-end of our prior guidance range. Profitability benefited from strong rate growth, increased group spend on banquets and audio visual and tight expense controls, despite wage and benefits pressure. The Wailea Beach Resort continued to gain market share and grow its rate and profitability as the repositioned resort continues to establish itself as one of the premier Maui destinations.” 

Mr. Arabia continued, “In 2018, we expect to continue to recycle capital into long-term relevant real estate. To that end, we recently sold the Marriott Philadelphia and the Marriott Quincy, which increased our already significant investment capacity, and improved the long-term earnings prospects of the portfolio. Additionally, we will continue to build internal growth through our 2018 capital investment projects which are expected to enhance our existing portfolio and provide growth in 2019 and beyond.”

 

UNAUDITED SELECTED STATISTICAL AND FINANCIAL DATA

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

Three Months Ended December 31,

Year Ended December 31,

2017

2016

Change

2017

2016

Change

Net Income (1)

$

20.7

$

34.3

(39.7)

%

$

153.0

$

140.7

8.8

%

Income Attributable to Common Stockholders per Diluted Share

$

0.07

$

0.14

(50.0)

%

$

0.59

$

0.55

7.3

%

24 Hotel Comparable Portfolio RevPAR Growth (2)

$

167.53

$

160.61

4.3

%

$

175.17

$

169.08

3.6

%

25 Hotel Pro Forma Portfolio RevPAR (3)

$

167.16

$

175.12

24 Hotel Comparable Portfolio Occupancy (2)

80.4

%

78.7

%

170

bps

82.9

%

82.7

%

20

bps

24 Hotel Comparable Portfolio ADR (2)

$

208.37

$

204.08

2.1

%

$

211.30

$

204.45

3.4

%

24 Hotel Comparable Portfolio Adjusted EBITDA Margin (2) (4)

29.6

%

28.7

%

90

bps

30.9

%

30.2

%

70

bps

25 Hotel Pro Forma Portfolio Adjusted EBITDA Margin (3) (4)

29.5

%

30.8

%

Adjusted EBITDA

$

79.2

$

79.1

0.1

%

$

338.6

$

330.0

2.6

%

Adjusted FFO Attributable to Common Stockholders

$

62.5

$

62.2

0.6

%

$

271.0

$

260.8

3.9

%

Adjusted FFO Attributable to Common Stockholders per Diluted Share

$

0.28

$

0.29

(3.4)

%

$

1.22

$

1.21

0.8

%

 

________________

(1)

Net income includes the impairment recognized on the Company’s Houston hotels along with other noncash items.

(2)

The 24 Hotel Comparable Portfolio is comprised of all 27 hotels the Company owned as of December 31, 2017, with the exception of the newly-developed Oceans Edge Hotel & Marina, which was not open until January 2017, as well as the Marriott Philadelphia and the Marriott Quincy, which the Company classified as held for sale as of December 31, 2017, and subsequently sold in January 2018.

(3)

The 25 Hotel Pro Forma Portfolio includes the 24 Hotel Comparable Portfolio, plus both prior ownership results and the Company’s results for the Oceans Edge Hotel & Marina acquired in July 2017. The newly-developed hotel opened in January 2017; therefore, there is no prior year information.

(4)

Both the 24 Hotel Comparable Portfolio and the 25 Hotel Pro Forma Portfolio Adjusted EBITDA Margins exclude prior year property tax adjustments, net.

Disclosures regarding the non-GAAP financial measures in this release are included on pages 6 through 8. Reconciliations of non-GAAP financial measures to the most comparable GAAP measure for each of the periods presented are included on pages 11 through 15 of this release. 

The Company’s actual results for the quarter and year ended December 31, 2017 compare to its guidance originally provided as follows: 

 

Metric

Quarter Ended
December 31, 2017
Guidance (1)

Quarter Ended
December 31, 2017
Actual Results
(unaudited)

Performance Relative
to Prior
Guidance Midpoint

Net Income ($ millions)

$20 to  $25

$21

– $2

26 Hotel Comparable Portfolio RevPAR Growth (2)

+ 0.5% to + 2.5%

4.2%

+ 2.7%

Adjusted EBITDA ($ millions)

$72  to  $76

$79

+ $5

Adjusted FFO Attributable to Common Stockholders ($ millions)

$54  to  $58

$63

+ $6

Adjusted FFO Attributable to Common Stockholders per Diluted Share

$0.24  to  $0.26

$0.28

+ $0.03

Diluted Weighted Average Shares Outstanding

224,800,000

224,700,000

– 100,000

 

Metric

Full Year 2017
Guidance (1)

Full Year 2017
Actual Results
(unaudited except Net
Income)

Performance Relative
to Prior
Guidance Midpoint

Net Income ($ millions)

$153 to  $157

$153

– $2

26 Hotel Comparable Portfolio RevPAR Growth (2)

+ 2.25% to + 3.25%

3.5%

+ 0.8%

Adjusted EBITDA ($ millions)

$331  to  $335

$339

+ $6

Adjusted FFO Attributable to Common Stockholders ($ millions)

$263  to  $267

$271

+ $6

Adjusted FFO Attributable to Common Stockholders per Diluted Share

$1.18  to  $1.20

$1.22

+ $0.03

Diluted Weighted Average Shares Outstanding

222,500,000

222,300,000

– 200,000

 

_________________

(1)

Represents guidance presented on October 30, 2017.

(2)

The 26 Hotel Comparable Portfolio is comprised of all 27 hotels the Company owned as of December 31, 2017, with the exception of the newly-developed Oceans Edge Hotel & Marina, which was not open until January 2017.

Recent Developments

On January 9, 2018, the Company sold the 289-room Marriott Philadelphia and the 464-room Marriott Quincy, located in Pennsylvania and Massachusetts, respectively, for a combined gross sales price of $139.0 million.

Balance Sheet/Liquidity Update

As of December 31, 2017, the Company had $559.3 million of cash and cash equivalents, including restricted cash of $71.3 million. Adjusting for the significant cash transactions that occurred in January 2018, including the $133.9 millionpayment of the Company’s common and preferred dividends and the sales of the Marriott Philadelphia and the Marriott Quincy, total pro forma unrestricted cash as of December 31, 2017 would have been $493.1 million.

As of December 31, 2017, the Company had total assets of $3.9 billion, including $3.1 billion of net investments in hotel properties, total consolidated debt of $990.4 million and stockholders’ equity of $2.5 billion. 

Capital Improvements

The Company invested $33.6 million and $115.1 million into capital improvements of its portfolio during the three months and year ended December 31, 2017, respectively. In 2018, the Company expects to invest approximately $150 million to $175 million into its portfolio. Several of the 2018 projects began in the fourth quarter 2017 and are expected to be completed during the first half of 2018. Based on the expected timing and scope of its 2018 projects, the Company expects $9 million to $11 million of total revenue displacement related to all capital projects in 2018. The anticipated revenue displacement is expected to reduce the Company’s 2018 total pro forma RevPAR growth by approximately 80 basis points. A selection of the Company’s planned 2018 capital investment projects include:

Mr. Arabia continued, “We are excited about the prospects of these additions and renovations, as we believe they will position the hotels to drive consumer preference, increase the hotels’ RevPAR index and add to the Company’s profitability in 2019 and beyond.”

2018 Outlook 

The Company’s achievement of the anticipated results is subject to risks and uncertainties, including those disclosed in the Company’s filings with the Securities and Exchange Commission. The Company’s guidance does not take into account the impact of any unanticipated developments in its business or changes in its operating environment, nor does it take into account the gain on sale or the results of operations for dispositions completed during the first quarter or any unannounced hotel acquisitions, dispositions, re-brandings, management changes, transition costs, noncash impairment expense, changes in deferred tax assets or valuation allowances, severance costs associated with restructuring hotel services, uninsured property losses, early lease termination costs, prior year property tax assessments or credits, debt repurchases/repayments, or unannounced financings during 2018. The Company’s 2018 guidance does include anticipated displacement from the scheduled 2018 capital investment projects. The Company expects the negative impact of its 2018 capital investment projects to result in approximately 80 basis points less annual RevPAR growth and approximately $6 million to $8 million less Adjusted EBITDA. The Company’s 2018 guidance does not anticipate any acceleration in business travel resulting from the recent federal tax cuts or other stimulus programs. 

For the first quarter of 2018, the Company expects: 

 

Metric

Quarter Ended
March 31, 2018
Guidance (1)

Net Income ($ millions)

$11 to  $14

25 Hotel Pro Forma Portfolio RevPAR Growth

– 2.5% to – 0.5%

Adjusted EBITDA ($ millions)

$57  to  $60

Adjusted FFO Attributable to Common Stockholders ($ millions)

$41  to  $44

Adjusted FFO Attributable to Common Stockholders per Diluted Share

$0.18  to  $0.20

Diluted Weighted Average Shares Outstanding

224,700,000

For the full year of 2018, the Company expects: 

 

Metric

Full Year 2018
Guidance (1)

Net Income ($ millions)

$115 to  $140

25 Hotel Pro Forma Portfolio RevPAR Growth

– 0.5% to + 2.5%

Adjusted EBITDA ($ millions)

$303  to  $327

Adjusted FFO Attributable to Common Stockholders ($ millions)

$235  to  $259

Adjusted FFO Attributable to Common Stockholders per Diluted Share

$1.05  to  $1.15

Diluted Weighted Average Shares Outstanding

225,000,000

 

(1)

See pages 13 and 14 for detailed reconciliations of Net Income to non-GAAP financial measures.

First quarter and full year 2018 guidance are based in part on the following assumptions:

Dividend Update 

On February 9, 2018, the Company’s board of directors declared a cash dividend of $0.05 per share of common stock, as well as cash dividends of $0.434375 per share payable to its Series E cumulative redeemable preferred stockholders and $0.403125 per share payable to its Series F cumulative redeemable preferred stockholders. The dividends will be paid on April 16, 2018 to stockholders of record as of March 30, 2018.

The Company expects to continue to pay a quarterly cash dividend of $0.05 per share of common stock throughout 2018. Consistent with the Company’s past practice and to the extent that the expected regular quarterly dividends for 2018 do not satisfy the annual distribution requirements, the Company expects to satisfy the annual distribution requirement by paying a “catch-up” dividend in January 2019. The level of any future quarterly dividends will be determined by the Company’s board of directors after considering long-term operating projections, expected capital requirements, and risks affecting the Company’s business.

About Sunstone Hotel Investors, Inc.

Sunstone Hotel Investors, Inc. is a lodging real estate investment trust (“REIT”) that as of February 12, 2018 has interests in 25 hotels comprised of 12,450 rooms. Sunstone’s hotels are primarily in the urban and resort upper upscale segment and are predominantly operated under nationally recognized brands, such as Marriott, Hilton and Hyatt. 

 

Sunstone Hotel Investors, Inc.

Consolidated Balance Sheets

(In thousands, except share data)

December 31,

December 31,

2017

2016

Assets

Current assets:

Cash and cash equivalents

$

488,002

$

369,537

Restricted cash

71,309

67,923

Accounts receivable, net

34,219

39,337

Inventories

1,323

1,225

Prepaid expenses

10,464

10,489

Assets held for sale, net

122,807

79,113

Total current assets

728,124

567,624

Investment in hotel properties, net

3,106,066

3,158,219

Deferred financing fees, net

1,305

4,002

Other assets, net

22,317

9,389

Total assets

$

3,857,812

$

3,739,234

Liabilities and Equity

Current liabilities:

Accounts payable and accrued expenses

$

31,810

$

36,110

Accrued payroll and employee benefits

26,687

24,896

Dividends and distributions payable

133,894

119,847

Other current liabilities

44,502

39,869

Current portion of notes payable, net

5,477

184,929

Liabilities of assets held for sale

189

3,153

Total current liabilities

242,559

408,804

Notes payable, less current portion, net

977,282

746,374

Capital lease obligations, less current portion

26,804

15,574

Other liabilities

28,989

36,650

Total liabilities

1,275,634

1,207,402

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, 4,600,000 shares issued and outstanding at December 31, 2017 and 2016, stated at liquidation preference of $25.00 per share

115,000

115,000

6.45% Series F Cumulative Redeemable Preferred Stock, 3,000,000 shares issued and outstanding at December 31, 2017 and 2016, stated at liquidation preference of $25.00 per share

75,000

75,000

Common stock, $0.01 par value, 500,000,000 shares authorized, 225,321,660 shares issued and outstanding at December 31, 2017 and 220,073,140 shares issued and outstanding at December 31, 2016

2,253

2,201

Additional paid in capital

2,679,221

2,596,620

Retained earnings

932,277

786,901

Cumulative dividends and distributions

(1,270,013)

(1,092,952)

Total stockholders’ equity

2,533,738

2,482,770

Noncontrolling interest in consolidated joint venture

48,440

49,062

Total equity

2,582,178

2,531,832

Total liabilities and equity

$

3,857,812

$

3,739,234

 

Sunstone Hotel Investors, Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

Three Months Ended December 31,

Year Ended December 31,

2017

2016

2017

2016

(unaudited)

Revenues

Room

$

199,532

$

195,195

$

829,320

$

824,340

Food and beverage

73,990

72,984

296,933

294,415

Other operating

16,668

21,405

67,385

70,585

Total revenues

290,190

289,584

1,193,638

1,189,340

Operating expenses

Room

53,019

51,762

213,301

211,947

Food and beverage

50,457

50,060

201,225

204,102

Other operating

4,272

4,168

16,392

16,684

Advertising and promotion

13,762

14,801

58,572

60,086

Repairs and maintenance

11,653

11,168

46,298

44,307

Utilities

7,575

7,310

30,419

30,424

Franchise costs

9,314

9,245

36,681

36,647

Property tax, ground lease and insurance

20,239

21,038

83,716

82,979

Other property-level expenses

33,510

35,044

138,525

142,742

Corporate overhead

7,232

6,073

28,817

25,991

Depreciation and amortization

38,583

41,847

158,634

163,016

Impairment loss

5,626

40,053

Total operating expenses

255,242

252,516

1,052,633

1,018,925

Operating income

34,948

37,068

141,005

170,415

Interest and other income

1,743

673

4,340

1,800

Interest expense

(10,425)

(3,265)

(51,766)

(50,283)

Loss on extinguishment of debt

(820)

(25)

(824)

(284)

Gain on sale of assets

190

45,474

18,413

Income before income taxes and discontinued operations

25,446

34,641

138,229

140,061

Income tax (provision) benefit, net

(4,766)

(343)

7,775

616

Income from continuing operations

20,680

34,298

146,004

140,677

Income from discontinued operations

7,000

Net income

20,680

34,298

153,004

140,677

Income from consolidated joint venture attributable to noncontrolling interest

(1,284)

(1,122)

(7,628)

(6,480)

Preferred stock dividends and redemption charge

(3,208)

(3,208)

(12,830)

(15,964)

Income attributable to common stockholders

$

16,188

$

29,968

$

132,546

$

118,233

Basic and diluted per share amounts:

Income from continuing operations attributable to common stockholders

$

0.07

$

0.14

$

0.56

$

0.55

Income from discontinued operations

0.03

Basic and diluted income attributable to common stockholders per common share

$

0.07

$

0.14

$

0.59

$

0.55

Basic and diluted weighted average common shares outstanding

224,147

216,163

221,898

214,966

Distributions declared per common share

$

0.58

$

0.53

$

0.73

$

0.68

 

Sunstone Hotel Investors, Inc.

Reconciliation of Net Income to Non-GAAP Financial Measures

(Unaudited and in thousands)

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

Three Months Ended December 31,

Year Ended December 31,

2017

2016

2017

2016

Net income

$

20,680

$

34,298

$

153,004

$

140,677

Operations held for investment:

Depreciation and amortization

38,583

41,847

158,634

163,016

Amortization of lease intangibles

62

63

251

252

Interest expense

10,425

3,265

51,766

50,283

Income tax provision (benefit), net

4,766

343

(7,775)

(616)

Noncontrolling interest:

Income from consolidated joint venture attributable to noncontrolling interest

(1,284)

(1,122)

(7,628)

(6,480)

Depreciation and amortization

(620)

(873)

(2,767)

(3,480)

Interest expense

(482)

(433)

(1,950)

(1,684)

EBITDA

72,130

77,388

343,535

341,968

Operations held for investment:

Amortization of deferred stock compensation

1,854

1,541

8,042

7,157

Amortization of favorable and unfavorable contracts, net

3

52

218

394

Noncash ground rent

(281)

465

(1,122)

1,878

Capital lease obligation interest – cash ground rent

(590)

(351)

(1,867)

(1,404)

Gain on sale of assets, net

(11)

(196)

(45,747)

(18,422)

Loss on extinguishment of debt

820

25

824

284

Impairment loss

5,626

40,053

Hurricane-related uninsured losses

41

1,690

Closing costs – completed acquisition

729

Prior year property tax adjustments, net

(251)

308

(800)

(3,971)

Property-level restructuring, severance and management transition costs

1,578

Lease termination costs

1,000

Noncontrolling interest:

Noncash ground rent

73

(112)

290

(450)

Loss on extinguishment of debt

(205)

(205)

Discontinued operations:

Gain on sale of assets

(7,000)

7,079

1,732

(4,895)

(11,956)

Adjusted EBITDA

$

79,209

$

79,120

$

338,640

$

330,012

 

Sunstone Hotel Investors, Inc.

Reconciliation of Net Income to Non-GAAP Financial Measures

(Unaudited and in thousands, except per share amounts)

Reconciliation of Net Income to FFO Attributable to Common Stockholders and

Adjusted FFO Attributable to Common Stockholders

Three Months Ended December 31,

Year Ended December 31,

2017

2016

2017

2016

Net income

$

20,680

$

34,298

$

153,004

$

140,677

Preferred stock dividends and redemption charge

(3,208)

(3,208)

(12,830)

(15,964)

Operations held for investment:

Real estate depreciation and amortization

38,486

41,716

158,177

162,431

Amortization of lease intangibles

62

63

251

252

Gain on sale of assets, net

(11)

(196)

(45,747)

(18,422)

Impairment loss

5,626

40,053

Noncontrolling interest:

Income from consolidated joint venture attributable to noncontrolling interest

(1,284)

(1,122)

(7,628)

(6,480)

Real estate depreciation and amortization

(620)

(873)

(2,767)

(3,480)

Discontinued operations:

Gain on sale of assets

(7,000)

FFO attributable to common stockholders

59,731

70,678

275,513

259,014

Operations held for investment:

Amortization of favorable and unfavorable contracts, net

3

52

218

394

Noncash ground rent

(281)

465

(1,122)

1,878

Noncash interest on derivatives and capital lease obligations, net

(1,777)

(9,236)

3,106

(1,426)

Loss on extinguishment of debt

820

25

824

284

Hurricane-related uninsured losses

41

1,690

Closing costs – completed acquisition

729

Prior year property tax adjustments, net

(251)

308

(800)

(3,971)

Property-level restructuring, severance and management transition costs

1,578

Lease termination costs

1,000

Noncash income tax provision (benefit), net

4,393

(9,235)

(1,596)

Preferred stock redemption charge

4,052

Noncontrolling interest:

Noncash ground rent

73

(112)

290

(450)

Noncash interest related to loss on derivative, net

(25)

(30)

Loss on extinguishment of debt

(205)

(205)

2,791

(8,498)

(4,535)

1,743

Adjusted FFO attributable to common stockholders

$

62,522

$

62,180

$

270,978

$

260,757

FFO attributable to common stockholders per diluted share

$

0.27

$

0.33

$

1.24

$

1.20

Adjusted FFO attributable to common stockholders per diluted share

$

0.28

$

0.29

$

1.22

$

1.21

Basic weighted average shares outstanding

224,147

216,163

221,898

214,966

Shares associated with unvested restricted stock awards

566

445

391

242

Diluted weighted average shares outstanding

224,713

216,608

222,289

215,208

 

Sunstone Hotel Investors, Inc.

Reconciliation of Net Income to Non-GAAP Financial Measures

Guidance for First Quarter 2018

(Unaudited and in thousands, except per share amounts)

Reconciliation of Net Income to Adjusted EBITDA

Quarter Ended

March 31, 2018

Low

High

Net income

$

10,600

$

14,100

Depreciation and amortization

36,000

35,900

Amortization of lease intangibles

100

100

Interest expense

12,200

12,000

Income tax provision

300

300

Noncontrolling interest

(3,300)

(3,500)

Amortization of deferred stock compensation

2,000

2,000

Noncash ground rent

(300)

(300)

Capital lease obligation interest – cash ground rent

(600)

(600)

Adjusted EBITDA

$

57,000

$

60,000

Reconciliation of Net Income to Adjusted FFO Attributable to Common Stockholders

Net income

$

10,600

$

14,100

Preferred stock dividends

(3,200)

(3,200)

Real estate depreciation and amortization

35,900

35,800

Amortization of lease intangibles

100

100

Noncontrolling interest

(2,500)

(2,600)

Noncash ground rent

(300)

(300)

Adjusted FFO attributable to common stockholders

$

40,600

$

43,900

Adjusted FFO attributable to common stockholders per diluted share

$

0.18

$

0.20

Diluted weighted average shares outstanding

224,700

224,700

 

Sunstone Hotel Investors, Inc.

Reconciliation of Net Income to Non-GAAP Financial Measures

Guidance for Full Year 2018

(Unaudited and in thousands, except per share amounts)

Reconciliation of Net Income to Adjusted EBITDA

Year Ended

December 31, 2018

Low

High

Net income

$

114,900

$

140,200

Depreciation and amortization

144,400

143,800

Amortization of lease intangibles

300

300

Interest expense

48,700

48,300

Income tax provision

1,400

1,400

Noncontrolling interest

(12,300)

(12,600)

Amortization of deferred stock compensation

9,200

9,200

Noncash ground rent

(1,200)

(1,200)

Capital lease obligation interest – cash ground rent

(2,400)

(2,400)

Adjusted EBITDA

$

303,000

$

327,000

Reconciliation of Net Income to Adjusted FFO Attributable to Common Stockholders

Net income

$

114,900

$

140,200

Preferred stock dividends

(12,800)

(12,800)

Real estate depreciation and amortization

143,900

143,300

Amortization of lease intangibles

300

300

Noncontrolling interest

(10,100)

(10,600)

Noncash ground rent

(1,200)

(1,200)

Noncash interest on capital lease obligations

200

200

Adjusted FFO attributable to common stockholders

$

235,200

$

259,400

Adjusted FFO attributable to common stockholders per diluted share

$

1.05

$

1.15

Diluted weighted average shares outstanding

225,000

225,000

 

Sunstone Hotel Investors, Inc.

Non-GAAP Financial Measures

24 Hotel Comparable Portfolio Adjusted EBITDA and Margins

(Unaudited and in thousands)

Three Months Ended December 31,

Year Ended December 31,

2017

2016

2017

2016

24 Hotel Comparable Portfolio Adjusted EBITDA Margin (1)

29.7%

28.7%

31.0%

30.6%

24 Hotel Comparable Portfolio Adjusted EBITDA Margin, excluding prior year property tax adjustments, net  (2)

29.6%

28.7%

30.9%

30.2%

Total revenues

$

290,190

$

289,584

$

1,193,638

$

1,189,340

Non-hotel revenues (3)

(20)

(5,066)

(82)

(5,076)

Total Actual Hotel Revenues

290,170

284,518

1,193,556

1,184,264

Non-comparable hotel revenues(4)

(3,275)

(5,123)

Sold/held for sale hotel revenues (5)

(12,207)

(21,825)

(58,403)

(98,151)

Total 24 Hotel Comparable Portfolio Revenues

$

274,688

$

262,693

$

1,130,030

$

1,086,113

Net income

$

20,680

$

34,298

$

153,004

$

140,677

Non-hotel revenues (3)

(20)

(66)

(82)

(76)

Performance guarantee (3)

(5,000)

(5,000)

Non-hotel operating expenses, net (6)

(775)

304

(2,396)

1,244

Property-level restructuring, severance and management transition costs (7)

1,578

Lease termination costs (7)

420

1,420

Hurricane-related uninsured losses (8)

41

1,690

Corporate overhead

7,232

6,073

28,817

25,991

Depreciation and amortization

38,583

41,847

158,634

163,016

Impairment loss

5,626

40,053

Interest and other income

(1,743)

(673)

(4,340)

(1,800)

Interest expense

10,425

3,265

51,766

50,283

Loss on extinguishment of debt

820

25

824

284

Gain on sale of assets

(190)

(45,474)

(18,413)

Income tax provision (benefit)

4,766

343

(7,775)

(616)

Discontinued operations

(7,000)

Actual Hotel Adjusted EBITDA

85,635

80,646

367,721

358,588

Non-comparable hotel Adjusted EBITDA (4)

(704)

(906)

Sold /held for sale hotel Adjusted EBITDA (5)

(3,478)

(5,199)

(16,745)

(26,548)

24 Hotel Comparable Portfolio Adjusted EBITDA

81,453

75,447

350,070

332,040

Prior year property tax adjustments, net (9)

(251)

35

(800)

(4,216)

24 Hotel Comparable Portfolio Adjusted EBITDA, excluding prior year property tax adjustments, net

$

81,202

$

75,482

$

349,270

$

327,824

 

* Footnotes on page 16

(1)

24 Hotel Comparable Portfolio Adjusted EBITDA Margin is calculated as 24 Hotel Comparable Portfolio Adjusted EBITDA divided by Total 24 Hotel Comparable Portfolio Revenues.

(2)

24 Hotel Comparable Portfolio Adjusted EBITDA Margin, excluding prior year property tax adjustments, net is calculated as 24 Hotel Comparable Portfolio Adjusted EBITDA, excluding prior year property tax adjustments, net divided by Total 24 Hotel Comparable Portfolio Revenues.

(3)

Non-hotel revenues include the amortization of favorable and unfavorable tenant lease contracts recorded in conjunction with the Company’s acquisitions of the Boston Park Plaza, the Hilton Garden Inn Chicago Downtown/Magnificent Mile, the Hilton New Orleans St. Charles, the Hyatt Regency San Francisco and the Wailea Beach Resort. Non-hotel revenues for the fourth quarter and year ended December 31, 2016 also include a $5.0 million performance guarantee paid by the brand manager of the Wailea Beach Resort in January 2017 to compensate the Company while the hotel underwent extensive repositioning.

(4)

Non-comparable hotel includes hotel revenues and Adjusted EBITDA generated during the Company’s ownership period for the Oceans Edge Hotel & Marina, acquired in July 2017. The newly-developed hotel is considered non-comparable as it was not opened until January 2017.

(5)

Sold/held for sale hotel includes hotel revenues and Adjusted EBITDA generated during the Company’s ownership period for Marriott Park City, the Fairmont Newport Beach and the Sheraton Cerritos, sold in June 2017, February 2017 and May 2016, respectively, as well as for the Marriott Philadelphia and the Marriott Quincy, classified as held for sale as of December 31, 2017 and subsequently sold in January 2018.

(6)

Non-hotel operating expenses, net include the following: the amortization of lease intangibles; the amortization of a favorable management agreement; noncash ground rent; and capital lease obligation interest – cash ground rent.

(7)

Property-level restructuring, severance and management transition costs for the year ended December 31, 2016 include the following severance costs: Hilton Times Square $0.5 million; Hyatt Regency San Francisco $0.9 million; Marriott Boston Long Wharf $45,000; Renaissance Washington DC $(10,000); and Wailea Beach Resort $0.1 million. Lease termination costs for the fourth quarter and year ended December 31, 2016 include $0.4 million at the Boston Park Plaza. Lease termination costs for the year ended December 31, 2016 also include $1.0 million at the Wailea Beach Resort.

(8)

Hurricane-related uninsured losses for the fourth quarter 2017 include an adjustment totaling $(0.1) million at the two Houston hotels, and additional cost of $0.1 million at the Oceans Edge Hotel & Marina. Hurricane-related uninsured losses for the year ended December 31, 2017 include the following costs: a total of $0.8 million at the two Houston hotels; $0.8 million at the Oceans Edge Hotel & Marina; and $0.1 million at the Renaissance Orlando at SeaWorld®.

(9)

Prior year property tax adjustments, net for the 24 Hotel Comparable Portfolio for the fourth quarters ended December 31, 2017 and 2016 exclude the additional net benefit of $0.3 million and the additional net expense of $35,000, respectively. Prior year property tax adjustments, net for the 24 Hotel Comparable Portfolio for the years ended December 31, 2017 and 2016 exclude the additional net benefit of $0.8 million and $4.2 million, respectively.

Posted by on February 13, 2018.

Categories: Financial

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