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Section 1: 8-K (FORM 8-K)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): February 25, 2020

 

SUMMIT HOTEL PROPERTIES, INC.

(Exact Name of Registrant as Specified in its Charter)

 

Maryland 001-35074 27-2962512

(State or Other Jurisdiction

of Incorporation or Organization)

(Commission File Number) (I.R.S. Employer Identification No.)

 

13215 Bee Cave Parkway, Suite B-300

Austin, Texas 78738

(Address of Principal Executive Offices) (Zip Code)

 

(512) 538-2300

(Registrants’ telephone number, including area code)

 

Not applicable

(Former name or former address, if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:    
     
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.01 par value INN New York Stock Exchange
Series D Cumulative Redeemable Preferred Stock, $0.01 par value INN-PD New York Stock Exchange
Series E Cumulative Redeemable Preferred Stock, $0.01 par value INN-PE New York Stock Exchange

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

  ¨ Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ¨

 

 

 

 

 

 

Item 2.02.Results of Operations and Financial Condition.

 

On February 25, 2020, Summit Hotel Properties, Inc. (the “Company”) issued a press release announcing the consolidated operating results of the Company and its subsidiaries for the fourth quarter and year ended December 31, 2019.

 

A copy of the press release is furnished as Exhibit 99.1 to this report.

 

Item 9.01.Financial Statements and Exhibits.

 

  (d)        Exhibits

 

  99.1 Press release issued on February 25, 2020.

 

  104 Cover Page Interactive Data File – the cover page XBRL tags are embedded within the Inline XBRL document

 

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  SUMMIT HOTEL PROPERTIES, INC.  
   
  By: /s/ Christopher R. Eng
    Christopher R. Eng  
    Executive Vice President, General Counsel,  
Dated: February 25, 2020   Chief Risk Officer and Secretary

 

 

 

 

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

 

Exhibit 99.1

 

  13215 Bee Cave Pkwy, Suite B-300, Austin, TX 78738
  Telephone: 512-538-2300 Fax: 512-538-2333
 

www.shpreit.com

 

NEWS RELEASE

 

SUMMIT HOTEL PROPERTIES REPORTS FOURTH QUARTER AND FULL YEAR 2019 RESULTS

 

Net Income of $67.8 million for 2019;

Adjusted EBITDAre of $185.3 million and Adjusted FFO per share of $1.25 in 2019;

Completed Acquisition of Five Hotels for $275 Million Through GIC Joint Venture

 

Austin, Texas, February 25, 2020 - - - Summit Hotel Properties, Inc. (NYSE: INN) (the “Company”), today announced results for the quarter and year ended December 31, 2019.

 

“We are pleased with our fourth quarter and full year results as RevPAR growth in our diversified portfolio of well-located hotels exceeded both the Smith Travel Research Upscale and Total U.S. growth rates by 150 basis points and 10 basis points, respectively, for the full year 2019. We once again gained significant market share during the year as our RevPAR index increased by 170 basis points driven, in part, by the success of several creative revenue management strategies and a continued commitment to investing capital across our portfolio,” said Dan Hansen, the Company’s Chairman, President and Chief Executive Officer. “We had an extremely active year executing on several opportunistic transactions that we believe will create long-term shareholder value, including selling ten hotels at attractive valuations. That capital was recycled into the acquisition of five high-quality hotels through our newly established joint venture with GIC, which will enhance our overall return on investment and provides us a unique vehicle for opportunistic external growth,” commented Mr. Hansen.

 

Full Year 2019 Summary

 

·Net Income: Net income attributable to common stockholders decreased 4.5 percent to $67.8 million, or $0.65 per diluted share, compared with $71.0 million, or $0.68 per diluted share, in the same period of 2018.

 

·Pro Forma RevPAR: Pro forma revenue per available room (“RevPAR”) increased 1.0 percent to $127.82 from the same period in 2018. Pro forma average daily rate (“ADR”) increased 0.5 percent to $161.96 compared to the same period in 2018 and pro forma occupancy increased 0.5 percent to 78.9 percent.

 

·Same-Store RevPAR: Same-store RevPAR increased 1.1 percent to $124.21 from the same period in 2018. Same-store ADR increased 0.5 percent to $158.57 compared to the same period in 2018 and occupancy increased 0.6 percent to 78.3 percent.

 

·Pro Forma Hotel EBITDA: Pro forma hotel EBITDA was $215.4 million, a decrease of 0.3 percent from the same period in 2018. Pro forma hotel EBITDA margin contracted by 78 basis points to 37.6 percent from 38.4 percent in the same period of 2018.

 

·Adjusted EBITDAre: Adjusted EBITDAre decreased 5.7 percent to $185.3 million from $196.5 million in the same period of 2018.

 

·Adjusted FFO: AFFO decreased 7.5 percent to $130.4 million, or $1.25 per diluted share, from $141.0 million, or $1.35 per diluted share, in the same period of 2018.

 

 

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·Acquisitions: The Company acquired five hotels containing 798 guestrooms and two vacant parcels of land through its joint venture with GIC for an aggregate purchase price of $276.9 million.

 

·Dispositions: The Company sold 10 hotels containing 1,170 guestrooms for an aggregate gross sales price of $168.4 million. The 10 properties were sold at an average trailing twelve month capitalization rate of 6.7 percent including estimated foregone capital expenditures and resulted in the realization of an aggregate net gain on sale of $45.6 million.

 

The Company’s results for the three and twelve months ended December 31, 2019 and 2018 are as follows:

 

   For the Three Months Ended
December 31,
   For the Years Ended
December 31,
 
   2019   2018   2019   2018 
   (unaudited)     
Net income attributable to common stockholders  $5,532   $2,047   $67,772   $70,973 
Net income per diluted share  $0.05   $0.02   $0.65   $0.68 
Total revenues  $133,781   $132,509   $549,348   $567,270 
EBITDAre (1)  $42,129   $43,839   $181,148   $192,533 
Adjusted EBITDAre (1)  $40,917   $45,015   $185,263   $196,480 
FFO (1)  $25,936   $29,522   $122,491   $131,324 
Adjusted FFO (1)  $26,974   $31,289   $130,356   $140,989 
FFO per diluted share and unit (1,2)  $0.25   $0.28   $1.17   $1.26 
Adjusted FFO per diluted share and unit (1,2)  $0.26   $0.30   $1.25   $1.35 
                     
Pro Forma (3)                    
RevPAR  $117.85   $118.03   $127.82   $126.52 
RevPAR Growth   -0.2%        1.0%     
Hotel EBITDA  $46,369   $49,283   $215,372   $215,931 
Hotel EBITDA margin   34.7%   36.9%   37.6%   38.4%
Hotel EBITDA margin growth   -218 bps        -78bps     

 

(1)See tables later in this press release for a discussion and reconciliation of net income to non-GAAP financial measures, including earnings before interest, taxes, depreciation and amortization (“EBITDA”), EBITDAre, adjusted EBITDAre, funds from operations (“FFO”), FFO per diluted share and unit, adjusted FFO (“AFFO”), and AFFO per diluted share and unit, as well as a reconciliation of operating income to hotel EBITDA. See “Non-GAAP Financial Measures” at the end of this release.

 

(2)Amounts are based on 104,385,000 weighted average diluted common shares and units and 104,143,000 weighted average diluted common shares and units for the three months ended December 31, 2019, and 2018, respectively, and 104,363,000 weighted average diluted common shares and units and 104,315,000 weighted average diluted common shares and units for the twelve months ended December 31, 2019, and 2018, respectively. The Company includes the outstanding common units of limited partnership interests (“OP Units”) in Summit Hotel OP, LP, the Company’s operating partnership, held by limited partners other than the Company in the determination of weighted average diluted common shares and units because the OP Units are redeemable for cash or, at the Company’s option, shares of the Company’s common stock on a one-for-one basis.

 

(3)Unless stated otherwise in this release, all pro forma information includes operating and financial results for 72 hotels owned as of December 31, 2019, as if each hotel had been owned by the Company since January 1, 2018. As a result, all pro forma information includes operating and financial results for hotels acquired since January 1, 2018, which includes periods prior to the Company’s ownership. Pro forma and non-GAAP financial measures are unaudited.

 

 

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Fourth Quarter 2019 Summary

 

·Net Income: Net income attributable to common stockholders increased to $5.5 million, or $0.05 per diluted share, compared with $2.0 million, or $0.02 per diluted share, in the same period of 2018.

 

·Pro Forma RevPAR: Pro forma RevPAR decreased 0.2 percent to $117.85 from the same period in 2018. Pro forma ADR declined 1.2 percent to $155.30 from the same period in 2018 and pro forma occupancy increased 1.1 percent to 75.9 percent.

 

·Same-Store RevPAR: Same-store RevPAR increased 0.3 percent to $115.21 from the same period in 2018. Same-store ADR decreased 1.3 percent to $152.53 compared to the same period in 2018 and same-store occupancy increased 1.6 percent to 75.5 percent.

 

·Pro Forma Hotel EBITDA: Pro forma hotel EBITDA was $46.4 million, a decrease of 5.9 percent from the same period in 2018. Pro forma hotel EBITDA margin contracted by 218 basis points to 34.7 percent from 36.9 percent in the same period of 2018.

 

·Adjusted EBITDAre: Adjusted EBITDAre decreased 9.1 percent to $40.9 million from $45.0 million in the same period of 2018.

 

·Adjusted FFO: AFFO decreased 13.8 percent to $27.0 million, or $0.26 per diluted share, from $31.3 million, or $0.30 per diluted share, in the same period of 2018.

 

·Acquisitions: The Company acquired four hotels located on the west coast through its joint venture with GIC for an aggregate purchase price of $249 million.

 

·Dispositions: The Company completed the disposition of two hotels located in Birmingham, AL for $21.8 million. The two properties were sold at an average trailing twelve month capitalization rate of 5.3 percent including estimated foregone capital improvements and resulted in the realization of an aggregate net gain on sale of $4.9 million

 

2019 Transaction Activity

 

Acquisitions

 

During 2019, the Company acquired five hotels containing 798 guestrooms and two adjacent land parcels for an aggregate purchase price of $276.9 million, all through its joint venture with GIC, Singapore’s sovereign wealth fund.

 

·88-guestroom Hampton Inn & Suites Silverthorne

 

·258-guestroom Residence Inn by Marriott Portland Downtown/RiverPlace

 

·169-guestroom Hilton Garden Inn San Francisco Airport North

 

·161-guestroom Hilton Garden Inn San Jose/Milpitas

 

·122-guestroom Residence Inn Portland Hillsboro

 

Acquired in August 2019, the 88-guestroom Hampton Inn & Suites located in Silverthorne, Colorado is ideally situated near popular ski destinations including Keystone, Breckenridge, Copper Mountain, and Arapahoe Basin, the hotel benefits from strong, year-round leisure demand and a local corporate base. The Company also acquired four hotels located on the west coast for $249 million in October 2019. The portfolio of four hotels is located in three high-growth markets and includes the 258-guestroom Residence Inn by Marriott Portland Downtown/RiverPlace, the 169-guestroom Hilton Garden Inn San Francisco Airport North, the 161-guestroom Hilton Garden Inn San Jose/Milpitas, and the 122-guestroom Residence Inn by Marriott Portland Hillsboro. Over the next three years, the Company expects to invest approximately $24 million of capital, $12 million on a pro rata basis, into the hotels on behalf of the joint venture.

 

 

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The hotels acquired in 2019 had an average RevPAR of $159 in 2019, which represents a 25% premium over the Company’s pro forma portfolio average RevPAR, and hotel EBITDA margin of 47.5 percent, which was 990 basis points higher than the pro forma portfolio average for the same period.

 

Dispositions

 

During 2019, the Company also sold 10 hotels containing 1,170 guestrooms in various markets for an aggregate gross sales price of $168.4 million. The aggregate gross sales price, plus estimated foregone capital investment, represented an average trailing twelve-month capitalization rate of 6.7 percent at the time of sale. The transactions resulted in an aggregate net gain on sale of $45.6 million.

 

·113-guestroom SpringHill Suites by Marriott Minneapolis-St. Paul Airport/Mall of America

 

·146-guestroom Hampton Inn & Suites Minneapolis-St. Paul Airport/Mall of America

 

·189-guestroom Residence Inn by Marriott Salt Lake City Downtown

 

·127-guestroom Hyatt Place Dallas/Arlington

 

·101-guestroom Hampton Inn Santa Barbara/Goleta

 

·139-guestroom Hampton Inn Boston/Norwood

 

·95-guestroom Hilton Garden Inn Birmingham/Lakeshore Drive

 

·130-guestroom Hilton Garden Inn Birmingham SE/Liberty Park

 

·66-guestroom Holiday Inn Express Charleston, WV

 

·64-guestroom Country Inn & Suites by Radisson Charleston, WV

 

The hotels sold in 2019 had an average trailing twelve month RevPAR of $102 at their respective sale dates, which is 20% lower than the Company’s pro forma portfolio average RevPAR, and hotel EBITDA margin of 32.3 percent, which was 530 basis points lower than the pro forma portfolio average for the same period.

 

Capital Improvements

 

The Company invested $12.6 million and $59.3 million in capital improvements during the three and twelve months ended December 31, 2019, respectively, and anticipates investing a total of $50 million to $70 million in capital improvements on a consolidated basis, and $45 million to $65 million on a pro rata basis, across its portfolio during 2020.

 

Capital Markets & Balance Sheet

 

At December 31, 2019, inclusive of its pro rata share of the Joint Venture credit facility, the Company had the following:

 

·Pro rata outstanding debt of $954.1 million with a weighted average interest rate of 3.95 percent.

 

·After giving effect to interest rate derivative agreements, $549.2 million, or 58 percent, of our pro rata outstanding debt had fixed interest rates, and $404.9 million, or 42 percent had variable interest rates.

 

 

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·Undrawn availability on its senior unsecured revolving credit facility of $315.0 million.

 

·Pro rata net debt to trailing twelve-month pro forma adjusted EBITDAre of 4.8x.

 

At February 18, 2020, inclusive of its pro rata share of the Joint Venture credit facility, the Company had the following:

 

·Pro rata outstanding debt of $943.5 million with a weighted average interest rate of 3.88 percent.

 

·After giving effect to interest rate derivative agreements, $548.7 million, or 58 percent, of our pro rata outstanding debt had fixed interest rates, and $394.8 million, or 42 percent had variable interest rates.

 

·Undrawn availability on its senior unsecured revolving credit facility of $325.0 million.

 

·Pro rata net debt to trailing twelve-month pro forma adjusted EBITDAre of 4.8x.

 

Also on February 18, 2020, the Company repriced its $225 million seven-year term loan, lowering the interest rate to 150 basis points plus LIBOR based on the Company’s current pricing level, which represents a reduction of 40 basis points compared to the prior rate of 190 basis points plus LIBOR. All other material provisions of the loan remain unchanged, including the maturity date of the loan which remains February 14, 2025. The Company expects to realize approximately $0.9 million in annual interest expense savings as a result of the transaction.

 

Dividends

 

On January 31, 2020, the Company declared a quarterly cash dividend of $0.18 per share on its common stock and per common unit of limited partnership interest in Summit Hotel OP, LP. The annualized dividend of $0.72 per share and per unit represents an annual dividend yield of 6.7 percent based on the February 24, 2020, closing stock price.

 

In addition, the Company declared a quarterly cash dividend of:

 

·$0.403125 per share on its 6.45% Series D Cumulative Redeemable Preferred Stock.

 

·$0.390625 per share on its 6.25% Series E Cumulative Redeemable Preferred Stock.

 

The common and preferred dividends are payable on February 28, 2020 to holders of record as of February 14, 2020.

 

 

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2020 Outlook

 

The Company is providing its outlook for the full year 2020 based on 72 hotels, 67 of which were wholly owned, as of February 25, 2020. There are no future acquisitions, dispositions, or additional capital markets activities assumed in the Company’s outlook for full year 2019 beyond those previously mentioned.

 

FULL YEAR 2020
(Dollars in thousands, except RevPAR and per unit data)
   Low   High 
Pro forma RevPAR (72) 1  $125.25   $129.00 
Pro forma RevPAR growth (72) 1   (2.00)%   1.00%
RevPAR (same-store 65) 2  $123.00   $126.75 
RevPAR growth (same-store 65) 2   (2.00)%   1.00%
Adjusted EBITDAre  $177,600   $190,400 
Adjusted FFO  $120,100   $133,200 
Adjusted FFO per diluted unit 3  $1.15   $1.27 
Capital improvements  $50,000   $70,000 

 

(1)As of February 25, 2020, the Company owns a majority interest in 72 hotels, 67 of which are wholly owned. Pro forma outlook information for the full year 2020 includes operating estimates for 72 hotels as if each hotel had been owned since January 1, 2019.

 

(2)As of February 25, 2020, the Company owned 67 same-store hotels. The same-store outlook information includes operating estimates for 67 hotels owned by the Company since January 1, 2019.

 

(3)Assumes weighted average diluted common shares and units outstanding of 104,600,000 for the full year 2020.

 

 

 

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Fourth Quarter and Full Year 2019 Earnings Conference Call

 

The Company will conduct its quarterly conference call on Wednesday, February 26, 2020, at 9:00 AM ET. To participate in the conference call, please dial 877-930-8101. The conference identification code for the call is 5687929. 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 Wednesday, March 4, 2020, by dialing 855-859-2056, conference identification code 5687929. A replay will also be available in the Investor Relations section of the Company’s website until April 30, 2020.

 

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 February 25, 2020, the Company’s portfolio consisted of 72 hotels, 67 of which were wholly owned, with a total of 11,288 guestrooms located in 23 states.

 

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

 

Contact:

Adam Wudel

SVP – Finance & Capital Markets

Summit Hotel Properties, Inc.

(512) 538-2325

  

  

(1) Includes all acquisitions and dispositions completed as of February 25, 2020.

 

 

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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, 2019, 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.

  

 

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Summit Hotel Properties, Inc.

Condensed Consolidated Balance Sheets

(Dollars in thousands)

  

   December 31, 2019   December 31, 2018 
ASSETS          
Investment in hotel properties, net  $2,184,232   $2,065,554 
Undeveloped land   1,500    2,267 
Assets held for sale, net   425    7,633 
Investment in real estate loans, net   30,936    30,700 
Right-of-use assets   29,884    - 
Cash and cash equivalents   42,238    44,088 
Restricted cash   27,595    28,468 
Trade receivables, net   13,281    13,978 
Prepaid expenses and other   8,844    10,111 
Deferred charges, net   4,709    4,691 
Other assets   12,039    14,807 
Total assets  $2,355,683   $2,222,297 
LIABILITIES AND EQUITY          
Liabilities:          
Debt, net of debt issuance costs  $1,016,163   $958,712 
Lease liabilities   19,604    - 
Accounts payable   4,767    5,391 
Accrued expenses and other   71,759    66,050 
Total liabilities   1,112,293    1,030,153 
           
Total stockholders' equity   1,173,778    1,189,849 
Non-controlling interests in operating partnership   1,809    2,295 
Non-controlling interest in joint venture   67,803    - 
Total equity   1,243,390    1,192,144 
Total liabilities and equity  $2,355,683   $2,222,297 

  

 

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Summit Hotel Properties, Inc.

Condensed Consolidated Statements of Operations

(Dollars in thousands, except per share amounts)

 

   For the Three Months Ended
December 31,
   For the Years Ended
December 31,
 
   2019   2018   2019   2018 
Revenues:                    
Room  $122,474   $121,788   $505,342   $523,439 
Food and beverage   5,803    5,979    23,785    24,225 
Other   5,504    4,742    20,221    19,606 
Total revenues   133,781    132,509    549,348    567,270 
Expenses:                    
Room   28,093    28,752    112,244    119,724 
Food and beverage   4,771    4,602    18,552    19,191 
Other hotel operating expenses   40,049    37,499    158,181    159,173 
Property taxes, insurance and other   11,421    11,089    44,220    43,339 
Management fees   3,295    3,593    16,575    18,521 
Depreciation and amortization   26,928    25,872    99,445    101,013 
Corporate general and administrative   6,180    4,430    23,622    21,509 
Loss on impairment of assets   836    1,075    2,521    1,075 
Total expenses   121,573    116,912    475,360    483,545 
Gain (loss) on disposal of assets, net   5,763    (640)   45,418    41,474 
Operating income   17,971    14,957    119,406    125,199 
Other income (expense):                    
Interest expense   (10,962)   (11,365)   (41,030)   (41,944)
Other income, net   2,217    1,363    5,472    6,949 
Total other expense   (8,745)   (10,002)   (35,558)   (34,995)
Income from continuing operations before income taxes   9,226    4,955    83,848    90,204 
Income tax (expense) benefit   (473)   802    (1,500)   922 
Net income   8,753    5,757    82,348    91,126 
Less: (Income) loss attributable to non-controlling interests:                    
Operating Partnership   (7)   (1)   (157)   (205)
Joint venture   496    -    419    - 
Net income attributable to Summit Hotel Properties, Inc.   9,242    5,756    82,610    90,921 
Preferred dividends   (3,710)   (3,709)   (14,838)   (16,671)
Premium on redemption of preferred stock   -    -    -    (3,277)
Net income attributable to common stockholders  $5,532   $2,047   $67,772   $70,973 
Earnings per share:                    
Basic and diluted  $0.05   $0.02   $0.65   $0.68 
Weighted average common shares outstanding:                    
Basic   103,964    103,682    103,887    103,623 
Diluted   104,008    103,759    103,939    103,842 
Dividends per share  $0.18   $0.18   $0.72   $0.72 

 

 

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Summit Hotel Properties, Inc.
Reconciliation of Net Income to Non-GAAP Measures – Funds From Operations

(Unaudited)

(Dollars in thousands, except per share and unit amounts)

 

   For the Three Months Ended
December 31,
   For the Years Ended
December 31,
 
   2019   2018   2019   2018 
Net income  $8,753   $5,757   $82,348   $91,126 
Preferred dividends   (3,710)   (3,709)   (14,838)   (16,671)
Premium on redemption of preferred stock   -    -    -    (3,277)
Loss from non-controlling interest in consolidated joint venture   496    -    419    - 
Net income applicable to common shares and common units  $5,539   $2,048   $67,929   $71,178 
Real estate-related depreciation (1)   26,813    25,759    99,013    100,545 
Loss on impairment of assets   836    1,075    2,521    1,075 
(Gain) loss on disposal of assets, net   (5,763)   640    (45,418)   (41,474)
Adjustments related to non-controlling interest in consolidated joint venture   (1,489)   -    (1,554)   - 
FFO applicable to common shares and common units  $25,936   $29,522   $122,491   $131,324 
Amortization of lease-related intangible assets, net   22    95    127    712 
Amortization of deferred financing costs   444    478    1,485    1,973 
Amortization of franchise fees (1)   115    113    432    468 
Equity-based compensation   1,453    1,298    6,219    6,665 
Debt transaction costs   45    136    1,892    401 
Premium on redemption of preferred stock   -    -    -    3,277 
Non-cash interest income   (764)   (517)   (2,477)   (2,045)
Non-cash lease expense, net   111    -    494    - 
Casualty (recoveries) losses, net   (321)   164    (239)   (1,786)
Adjustments related to non-controlling interest in consolidated joint venture   (67)   -    (68)   - 
AFFO applicable to common shares and common units  $26,974   $31,289   $130,356   $140,989 
Weighted average diluted common shares / common units (2)   104,385    104,143    104,363    104,315 
FFO per common share / common unit  $0.25   $0.28   $1.17   $1.26 
AFFO per common share / common unit  $0.26   $0.30   $1.25   $1.35 

 

(1)The total of these line items represents depreciation and amortization as reported on the Company’s Condensed Consolidated Statements of Operations for the periods presented.

 

(2)Non-cash interest income relates to the amortization of the discount on certain notes receivable. The discount on these notes receivable was recorded at inception of the related loans based on the estimated value of the embedded purchase options in the notes receivable.

 

(3)The Company includes the outstanding OP units issued by Summit Hotel OP, LP, the Company’s operating partnership, held by limited partners other than the Company because the OP units are redeemable for cash or, at the Company’s option, shares of the Company’s common stock on a one-for-one basis.

 

 

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Summit Hotel Properties, Inc.

Reconciliation of Net Income to Non-GAAP Measures – EBITDAre

(Unaudited)

(Dollars in thousands)

 

  

 For the Three Months Ended
December 31,

   For the Years Ended
December 31,
 
   2019   2018   2019   2018 
Net income  $8,753   $5,757   $82,348   $91,126 
Depreciation and amortization   26,928    25,872    99,445    101,013 
Interest expense   10,962    11,365    41,030    41,944 
Interest income   (60)   (68)   (278)   (229)
Income tax expense (benefit)   473    (802)   1,500    (922)
EBITDA  $47,056   $42,124   $224,045   $232,932 
Loss on impairment of assets   836    1,075    2,521    1,075 
(Gain) loss on disposal of assets, net   (5,763)   640    (45,418)   (41,474)
EBITDAre  $42,129   $43,839   $181,148   $192,533 
Amortization of lease-related intangible assets, net   22    95    127    712 
Equity-based compensation   1,453    1,298    6,219    6,665 
Debt transaction costs   45    136    1,892    401 
Non-cash interest income (1)   (764)   (517)   (2,477)   (2,045)
Non-cash lease expense, net   111    -    494    - 
Casualty (recoveries) losses, net   (321)   164    (239)   (1,786)
Loss from non-controlling interest in consolidated joint venture   496    -    419    - 
Adjustments related to non-controlling interest in consolidated joint venture   (2,254)   -    (2,320)   - 
Adjusted EBITDAre  $40,917   $45,015   $185,263   $196,480 

 

(1)Non-cash interest income relates to the amortization of the discount on certain notes receivable. The discount on these notes receivable was recorded at inception of the related loans based on the estimated value of the embedded purchase options in the notes receivable.

 

 

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Summit Hotel Properties, Inc.

Pro Forma Hotel Operating Data

(Unaudited)

(Dollars in thousands)

 

   For the Three Months Ended
December 31,
   For the Years Ended
December 31,
 
   2019   2018   2019   2018 
Pro Forma Operating Data (1) (2)                    
Pro forma room revenue  $122,384   $122,563   $526,622   $517,340 
Pro forma other hotel operations revenue   11,318    11,120    45,640    44,757 
Pro forma total revenues   133,702    133,683    572,262    562,097 
Pro forma total hotel operating expenses   87,333    84,400    356,890    346,166 
Pro forma hotel EBITDA  $46,369   $49,283   $215,372   $215,931 
Pro forma hotel EBITDA Margin   34.7%   36.9%   37.6%   38.4%

 

Reconciliations of Non-GAAP financial measures to comparable GAAP financial measures

 

Revenue:                    
Total revenues  $133,781   $132,509   $549,348   $567,270 
Total revenues - acquisitions (1)   775    11,414    38,778    58,178 
Total revenues - dispositions (2)   (854)   (10,240)   (15,864)   (63,351)
Pro forma total revenues   133,702    133,683    572,262    562,097 
                     
Hotel Operating Expenses:                    
Total hotel operating expenses   87,629    85,535    349,772    359,948 
Hotel operating expenses - acquisitions (1)   520    6,152    19,474    28,667 
Hotel operating expenses - dispositions (2)   (816)   (7,287)   (12,356)   (42,449)
Pro forma hotel operating expenses   87,333    84,400    356,890    346,166 
                     
Hotel EBITDA:                    
Operating income   17,971    14,957    119,406    125,199 
(Gain) loss on disposal of assets, net   (5,763)   640    (45,418)   (41,474)
Loss on impairment of assets   836    1,075    2,521    1,075 
Corporate general and administrative   6,180    4,430    23,622    21,509 
Depreciation and amortization   26,928    25,872    99,445    101,013 
Hotel EBITDA   46,152    46,974    199,576    207,322 
Hotel EBITDA - acquisitions (1)   255    5,262    19,304    29,511 
Hotel EBITDA - dispositions (2)   (38)   (2,953)   (3,508)   (20,902)
Pro forma hotel EBITDA  $46,369   $49,283   $215,372   $215,931 

 

(1)Unaudited pro forma information includes operating results for 72 hotels owned as of December 31, 2019, as if all such hotels had been owned by the Company since January 1, 2018. For hotels acquired by the Company after January 1, 2018 (the “Acquired Hotels”), the Company has included in the pro forma information the financial results of each of the Acquired Hotels for the period from January 1, 2018, to the date the Acquired Hotels were purchased by the Company (the “Pre-acquisition Period”). The financial results for the Pre-acquisition Period were provided by the third-party owner of such Acquired Hotel prior to purchase by the Company and have not been audited or reviewed by our auditors or adjusted by us. The pro forma information is included to enable comparison of results for the current reporting period to results for the comparable period of the prior year and are not indicative of future results.

 

(2)For hotels sold by the Company between January 1, 2018 and December 31, 2019 (the “Disposed Hotels”), the unaudited pro forma information excludes the financial results of each of the Disposed Hotels for the period of ownership by the Company from January 1, 2018 through the date that the Disposed Hotels were sold by the Company.

  

 

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Summit Hotel Properties, Inc.

Pro Forma Hotel Operating Data

(Unaudited)

(Dollars in thousands, except operating statistics)

 

   2019   Year Ended 
   Q1   Q2   Q3   Q4   December 31, 2019 
Pro Forma Operating Data (1) (2)                         
Pro forma room revenue  $130,512   $140,368   $133,358   $122,384   $526,622 
Pro forma other hotel operations revenue   11,244    11,872    11,206    11,318    45,640 
Pro forma total revenues   141,756    152,240    144,564    133,702    572,262 
Pro forma total hotel operating expenses   87,948    91,335    90,274    87,333    356,890 
Pro forma hotel EBITDA  $53,808   $60,905   $54,290   $46,369   $215,372 
Pro forma hotel EBITDA Margin   38.0%   40.0%   37.6%   34.7%   37.6%
                          
Pro Forma Statistics (1) (2)                         
Rooms sold   780,232    844,867    838,378    788,040    3,251,517 
Rooms available   1,015,830    1,027,178    1,038,496    1,038,496    4,120,000 
Occupancy   76.8%   82.3%   80.7%   75.9%   78.9%
ADR  $167.27   $166.14   $159.07   $155.30   $161.96 
RevPAR  $128.48   $136.65   $128.41   $117.85   $127.82 
                          
                          
Actual Statistics                         
Rooms sold   796,661    808,354    793,599    790,751    3,189,365 
Rooms available   1,043,070    988,075    990,708    1,042,076    4,063,929 
Occupancy   76.4%   81.8%   80.1%   75.9%   78.5%
ADR  $160.80   $162.87   $155.13   $154.88   $158.45 
RevPAR  $122.81   $133.25   $124.27   $117.53   $124.35 

 

Reconciliations of Non-GAAP financial measures to comparable GAAP financial measures

 

Revenue:                         
Total revenues   138,952    142,930    133,685    133,781   $549,348 
Total revenues from acquisitions (1)   12,343    12,899    12,761    775    38,778 
Total revenues from dispositions (2)   (9,539)   (3,589)   (1,882)   (854)   (15,864)
Pro forma total revenues   141,756    152,240    144,564    133,702    572,262 
                          
Hotel Operating Expenses:                         
Total hotel operating expenses   88,791    87,676    85,676    87,629    349,772 
Total hotel operating expenses from acquisitions (1)   6,239    6,570    6,145    520    19,474 
Total hotel operating expenses from dispositions (2)   (7,082)   (2,911)   (1,547)   (816)   (12,356)
Pro forma total hotel operating expenses   87,948    91,335    90,274    87,333    356,890 
                          
Hotel EBITDA:                         
Operating income   22,801    59,390    19,244    17,971    119,406 
(Gain) loss on disposal of assets, net   (4,166)   (35,520)   31    (5,763)   (45,418)
Loss on impairment of assets   -    1,685    -    836    2,521 
Corporate general and administrative   5,990    5,920    5,532    6,180    23,622 
Depreciation and amortization   25,536    23,779    23,202    26,928    99,445 
Hotel EBITDA   50,161    55,254    48,009    46,152    199,576 
Hotel EBITDA from acquisitions (1)   6,104    6,329    6,616    255    19,304 
Hotel EBITDA from dispositions (2)   (2,457)   (678)   (335)   (38)   (3,508)
Pro forma hotel EBITDA  $53,808   $60,905   $54,290   $46,369   $215,372 

 

(1)Unaudited pro forma information includes operating results for 72 hotels owned as of December 31, 2019 as if all such hotels had been owned by the Company since January 1, 2019. For hotels acquired by the Company after January 1, 2019 (the “Acquired Hotels”), the Company has included in the pro forma information the financial results of each of the Acquired Hotels for the period from January 1, 2019 to the date the Acquired Hotels were purchased by the Company (the “Pre-acquisition Period”). The financial results for the Pre-acquisition Period were provided by the third-party owner of such Acquired Hotel prior to purchase by the Company and have not been audited or reviewed by our auditors or adjusted by us. The pro forma information is included to enable comparison of results for the current reporting period to results for the comparable period of the prior year and are not indicative of future results.

 

(2)For hotels sold by the Company between January 1, 2019 and December 31, 2019 (the “Disposed Hotels”), the pro forma information excludes the financial results of each of the Disposed Hotels for the period of ownership by the Company from January 1, 2019 through the date that the Disposed Hotels were sold by the Company.

 

 

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Summit Hotel Properties, Inc.

Pro Forma and Same-Store Data

(Unaudited)

  

   For the Three Months Ended
December 31,
   For the Years Ended
December 31,
 
   2019   2018   2019   2018 
Pro Forma (72) 1                    
Rooms sold   788,040    779,729    3,251,517    3,211,655 
Rooms available   1,038,496    1,038,404    4,120,000    4,089,087 
Occupancy   75.9%   75.1%   78.9%   78.5%
ADR  $155.30   $157.19   $161.96   $161.08 
RevPAR  $117.85   $118.03   $127.82   $126.52 
                     
Occupancy change   1.1%        0.5%     
ADR change   -1.2%        0.5%     
RevPAR change   -0.2%        1.0%     

 

    For the Three Months Ended
December 31,
    For the Years Ended
December 31,
 
    2019    2018    2019    2018 
Same-Store (65) 1                    
Rooms sold   706,835    695,321    2,908,141    2,890,403 
Rooms available   935,824    935,732    3,712,660    3,711,483 
Occupancy   75.5%   74.3%   78.3%   77.9%
ADR  $152.53   $154.58   $158.57   $157.83 
RevPAR  $115.21   $114.86   $124.21   $122.91 
                     
Occupancy change   1.6%        0.6%     
ADR change   -1.3%        0.5%     
RevPAR change   0.3%        1.1%     

 

 

(1)Unaudited pro forma information includes operating results for 72 hotels owned as of December 31, 2019, as if each hotel had been owned by the Company since January 1, 2018. As a result, these pro forma operating and financial measures include operating results for certain hotels for periods prior to the Company’s ownership.

 

(2)Same-store information includes operating results for 65 hotels owned by the Company as of January 1, 2018, and at all times during the three and twelve months ended December 31, 2019, and 2018.

 

 

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Summit Hotel Properties, Inc.

Reconciliation of Net Income to Non-GAAP Measures – Funds From Operations for Financial Outlook

(Unaudited)

(Dollars in thousands, except per share and unit)

 

   For the Year Ending
December 31, 2020
 
   Low   High 
Net income  $26,500   $39,600 
Preferred dividends   (14,900)   (14,900)
Income from non-controlling interest in consolidated joint venture   (1,400)   (1,400)
Net income applicable to common shares and units   10,200    23,300 
Real estate-related depreciation   109,600    109,600 
Adjustments related to non-controlling interest in consolidated joint venture   (6,100)   (6,100)
FFO applicable to common shares and common units   113,700    126,800 
Amortization of lease-related intangible assets, net   100    100 
Amortization of deferred financing costs   1,800    1,800 
Amortization of franchise fees   500    500 
Equity-based compensation   6,700    6,700 
Debt transaction costs   200    200 
Non-cash interest income   (3,000)   (3,000)
Non-cash lease expense, net   400    400 
Casualty recoveries, net   -    - 
Adjustments related to non-controlling interest in consolidated joint venture   (300)   (300)
AFFO applicable to common shares and common units  $120,100   $133,200 
Weighted average diluted common shares/common units (1)   104,600    104,600 
FFO per common share and common unit  $1.09   $1.21 
AFFO per common share and common unit  $1.15   $1.27 

  

(1)The Company includes the outstanding OP units issued by Summit Hotel OP, LP, the Company’s operating partnership, held by limited partners other than the Company because the OP units are redeemable for cash or, at the Company’s option, shares of the Company’s common stock on a one-for-one basis.

 

 

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Summit Hotel Properties, Inc.

Reconciliation of Net Income to Non-GAAP Measures – EBITDA for Financial Outlook

(Unaudited)

(Dollars in thousands)

  

   For the Year Ending
December 31, 2020
 
   Low   High 
Net income  $26,500   $39,600 
Depreciation and amortization   110,100    110,100 
Interest expense   43,800    43,500 
Interest income   (300)   (300)
Income tax expense   3,700    3,700 
EBITDA   183,800    196,600 
Loss on impairment of assets   -    - 
Gain on disposal of assets, net   -    - 
EBITDAre   183,800    196,600 
Amortization of lease-related intangible assets, net   100    100 
Equity-based compensation   6,700    6,700 
Debt transaction costs   200    200 
Non-cash interest income   (3,000)   (3,000)
Non-cash lease expense, net   400    400 
Casualty recoveries, net   -    - 
Income from non-controlling interest in consolidated joint venture   (1,400)   (1,400)
Adjustments related to non-controlling interest in consolidated joint venture   (9,200)   (9,200)
Adjusted EBITDAre  $177,600   $190,400 

 

 

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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.

 

 

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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.

 

 

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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).

  

 

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