Pebblebrook Hotel Trust Reports Third Quarter 2021 Results

Pebblebrook Hotel Trust (NYSE: PEB):

⁽¹⁾ See tables later in this press release for a description of Same-Property information and reconciliations from net income (loss) to non-GAAP financial measures used in the table above and elsewhere in this press release.

Third Quarter and Year-to-Date Highlights

NM = Not Meaningful

1. See tables later in this press release for a description of same-property information and reconciliations from net income (loss) to non-GAAP financial measures, including Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), EBITDA for Real Estate ("EBITDAre"), Adjusted EBITDAre, Funds from Operations ("FFO"), FFO per share, Adjusted FFO and Adjusted FFO per share.
   
   
   
   For the details as to which hotels are included in Same-Property Room Revenues, Total Revenues, Expenses and EBITDA appearing in the table above and elsewhere in this press release, refer to the Same-Property Statistical Data table footnotes later in this press release.
   
   
2. Includes information for all of the hotels the Company owned as of September 30, 2021, which excludes Sir Francis Drake, The Roger New York and Villa Florence San Francisco on Union Square for January-September given the properties’ dispositions on April 1, June 10, and September 9, 2021, respectively.
   
   
3. Jekyll Island Club Resort is excluded from January-July given the property’s acquisition on July 22, 2021, and Margaritaville Hollywood Beach Resort is excluded from January-September given the property’s acquisition on September 23, 2021.

“Despite the pause in the recovery of demand caused by concerns around the Delta variant, our results exceeded expectations, led by same-property ADR which beat Q3 2019,” noted Mr. Bortz. “These exceptional results were driven largely by our resorts, which generated room rates more than 57% higher than the comparable quarter in 2019, with RevPAR 21.8% higher. Hotel EBITDA at our resorts for Q3 exceeded the comparable quarter in 2019 by 45.4%, and Hotel EBITDA margins at our resorts were more than 1,000 basis points higher, a significant accomplishment in this challenging environment. We are also pleased with our hotel management teams’ positive progress in attracting additional associates to our hotels to fill open positions while increasing operating efficiencies and expanding the use of technology at our properties, and we thank them all for their heroic efforts during these very challenging times for the hospitality industry.”

Capital Investments and Strategic Property Redevelopments

In the third quarter of 2021, the Company completed $25.8 million of capital investments throughout its portfolio. The Company has completed $52.8 million of capital investments and projects year to date through September 2021, which included the completion of the $11.7 million L’Auberge Del Mar redevelopment in the second quarter of 2021.

The Company expects to invest a total of $80.0 to $90.0 million during 2021. During the remainder of 2021, the Company will make progress on or complete its planned investments in the following redevelopment and repositioning projects that the Company believes will generate significant growth and returns:

• Southernmost Beach Resort (estimated at $15.0 million), a comprehensive guestroom renovation, including all case goods, soft goods, and bathrooms, including tub to shower conversions. The renovation commenced in July 2021 and was substantially completed earlier this week;

• Hotel Vitale (estimated at $25.0 million), a total transformation into the sustainability-focused, mission-driven, and luxury experiential 1 Hotel San Francisco, which will offer nature-inspired designs and environmentally focused aesthetics throughout guestrooms and suites, public areas, and meeting and event venues. The redevelopment began in July 2021, and the hotel will remain closed until the redevelopment’s targeted completion in the first quarter of 2022; and

• Grafton on Sunset (estimated at $5.5 million), a comprehensive redevelopment of the hotel’s indoor and outdoor public areas and suites, and a refresh of the guestrooms. The renovation began last week and is expected to be completed in the first quarter of 2022, when the hotel will be renamed, repositioned, and become part of the Company’s Unofficial Z Collection.

As plans are completed, and governmental approvals are received, the Company will evaluate commencing additional previously planned major renovation and repositioning projects in 2022.

Update on Strategic Acquisitions and Dispositions

On July 22, 2021, the Company acquired the iconic 200-room Jekyll Island Club Resort in Jekyll Island, Georgia for $94.0 million. On September 9, 2021, the Company completed the sale of Villa Florence San Francisco on Union Square in San Francisco, California for $87.5 million.

On September 23, 2021, the Company acquired the 369-room Margaritaville Hollywood Beach Resort in Hollywood, Florida for $270.0 million. In addition, on October 20, 2021, the Company acquired the 19-room Avalon Bed & Breakfast and 12-room Duval Gardens in Key West, Florida for $20.0 million. These two small properties will be integrated into and operated as part of the Company’s Southernmost Beach Resort.

Year-to-date, the Company has sold $276.1 million of assets and acquired $384.0 million of properties.

Balance Sheet and Liquidity

On July 27, 2021, the Company closed on its offering of $250.0 million of its new 5.70% Series H Cumulative Redeemable Preferred Shares. Proceeds from this offering were used to fully redeem the $125.0 million of 6.50% Series C Cumulative Redeemable Preferred Shares and the $125.0 million of 6.375% Series D Cumulative Redeemable Preferred Shares, reducing the Company’s annualized preferred equity dividend obligation by approximately $1.8 million.

As of September 30, 2021, the Company had $182.7 million of consolidated cash, cash equivalents, and restricted cash in addition to $644.2 million of additional undrawn availability on its senior unsecured revolving credit facility, for total liquidity of $826.9 million.

The Company had $2.4 billion in consolidated debt and convertible notes at an effective weighted-average interest rate of 3.3 percent. Approximately $2.2 billion, or 93 percent of the Company’s total outstanding debt and convertible notes, was at a weighted-average fixed interest rate of 3.4 percent, and approximately $0.2 billion, or 7 percent, was at a weighted-average floating interest rate of 2.4 percent. The Company had $1.4 billion of unsecured term loans, and there was no outstanding balance on its $650.0 million senior unsecured revolving credit facility. The Company has no significant loans maturing until the fourth quarter of 2022.

Common and Preferred Dividends

On September 15, 2021, the Company declared a quarterly cash dividend of $0.01 per share on its common shares as well as a quarterly cash dividend for the following preferred shares of beneficial interest:

• $0.39844 per 6.375% Series E Cumulative Redeemable Preferred Share (regular quarterly amount);
• $0.39375 per 6.3% Series F Cumulative Redeemable Preferred Share (regular quarterly amount);
• $0.67292 per 6.375% Series G Cumulative Redeemable Preferred Share (initial long-period amount); and
• $0.30875 per 5.7% Series H Cumulative Redeemable Preferred Share (initial short-period amount).

Update on Curator Hotel and Resort Collection

Curator Hotel and Resort Collection (“Curator”) is a distinct collection of hand-selected small brands and independent lifestyle hotels and resorts worldwide founded by Pebblebrook and several industry-leading independent hotel operators. Curator now has over 70 member hotels. Curator also announced strategic partnerships with numerous leading travel and technology companies, including Audio Visual Management Solutions, Burton Energy Group, Cloud5, Devera Technologies, Encore, Paylocity, Phonesuite Direct, React Mobile, and SOL VISTA. Curator now has more than 60 programs with preferred vendor partners, providing Curator member hotels with preferred pricing and enhanced operating terms.

2021 Outlook

The Company continues to be unable to provide a full-year outlook for 2021 due to the uncertainties caused by the COVID-19 pandemic. The Company intends to issue new guidance when it has more clarity on the economy, travel demand, and more predictable overall operating fundamentals and trends.

Third Quarter 2021 Earnings Call

The Company will conduct its quarterly analyst and investor conference call on Friday, October 29, 2021, at 9:00 AM ET. Please dial (877) 705-6003 approximately ten minutes before the call begins to participate. Additionally, a live webcast of the conference call will be available through the Investor Relations section of www.pebblebrookhotels.com. To access the webcast, click on https://investor.pebblebrookhotels.com/news-and-events/webcasts/default.aspx ten minutes before the conference call. A replay of the conference call webcast will be archived and available online.

About Pebblebrook Hotel Trust

Pebblebrook Hotel Trust (NYSE: PEB) is a publicly traded real estate investment trust (“REIT”) and the largest owner of urban and resort lifestyle hotels in the United States. The Company owns 52 hotels, totaling approximately 13,000 guest rooms across 15 urban and resort markets. For more information, visit www.pebblebrookhotels.com and follow us at @PebblebrookPEB.

This press release contains certain “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Reform Act of 1995. Forward-looking statements are generally identifiable by the use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “seek,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” “forecast,” “continue,” “assume,” “plan,” references to “outlook” 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 and forecasts and other forward-looking information and estimates. Examples of forward-looking statements include the following: descriptions of the Company’s plans or objectives for future capital investment projects, operations or services; forecasts of the Company’s future economic performance; forecasts of hotel industry performance; and descriptions of assumptions underlying or relating to any of the foregoing expectations including assumptions regarding the timing of their occurrence. These forward-looking statements are subject to various risks and uncertainties, 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 and the supply of hotel properties, and other factors as are described in greater detail in the Company’s filings with the SEC, including, without limitation, the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. 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 further 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 filings with the U.S. Securities and Exchange Commission, including, but not limited to, its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, copies of which may be obtained at the Investor Relations section of the Company’s website at www.pebblebrookhotels.com.

All information in this press release is as of October 28, 2021. The Company undertakes no duty to update the statements in this press release to conform the statements to actual results or changes in the Company’s expectations.

For additional information or to receive press releases via email, please visit our website at www.pebblebrookhotels.com

This press release includes certain non-GAAP financial measures. These measures are not in accordance with, or an alternative to, measures prepared in accordance with GAAP and may be different from similarly titled non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.

Funds from Operations (“FFO”) - FFO represents net income (computed in accordance with GAAP), excluding gains or losses from sales of properties, plus real estate-related depreciation and amortization and after adjustments for unconsolidated partnerships. The Company considers FFO a useful measure of performance for an equity REIT because it facilitates an understanding of the Company's operating performance without giving effect to real estate depreciation and amortization, which assume that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, the Company believes that FFO provides a meaningful indication of its performance. The Company also considers FFO an appropriate performance measure given its wide use by investors and analysts. The Company computes FFO in accordance with standards established by the Board of Governors of Nareit in its March 1995 White Paper (as amended in November 1999 and April 2002), which may differ from the methodology for calculating FFO utilized by other equity REITs and, accordingly, may not be comparable to that of other REITs. Further, FFO does not represent amounts available for management’s discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments and uncertainties, nor is it indicative of funds available to fund the Company’s cash needs, including its ability to make distributions. The Company presents FFO per diluted share calculations that are based on the outstanding dilutive common shares plus the outstanding Operating Partnership units for the periods presented.

The Company also evaluates its performance by reviewing Adjusted FFO because it believes that adjusting FFO to exclude certain recurring and non-recurring items described below provides useful supplemental information regarding the Company's ongoing operating performance and that the presentation of Adjusted FFO, when combined with the primary GAAP presentation of net income (loss), more completely describes the Company's operating performance. The Company adjusts FFO available to common share and unit holders for the following items, which may occur in any period, and refers to this measure as Adjusted FFO:

- Transaction costs: The Company excludes transaction costs expensed during the period because it believes that including these costs in FFO does not reflect the underlying financial performance of the Company and its hotels.

- Non-cash ground rent: The Company excludes the non-cash ground rent expense, which is primarily made up of the straight-line rent impact from a ground lease.

- Management/franchise contract transition costs: The Company excludes one-time management and/or franchise contract transition costs expensed during the period because it believes that including these costs in FFO does not reflect the underlying financial performance of the Company and its hotels.

- Interest expense adjustment for acquired liabilities: The Company excludes interest expense adjustment for acquired liabilities assumed in connection with acquisitions, because it believes that including these non-cash adjustments in FFO does not reflect the underlying financial performance of the Company.

- Finance lease adjustment: The Company excludes the effect of non-cash interest expense from finance leases because it believes that including these non-cash adjustments in FFO does not reflect the underlying financial performance of the Company.

- Non-cash amortization of acquired intangibles: The Company excludes the non-cash amortization of acquired intangibles, which includes but is not limited to the amortization of favorable and unfavorable leases or management agreements and above/below market real estate tax reduction agreements because it believes that including these non-cash adjustments in FFO does not reflect the underlying financial performance of the Company.

- Non-cash interest expense, one-time operation suspension expenses, non-cash canceled share-based compensation, early extinguishment of debt, and issuance costs of redeemed preferred shares: The Company excludes these items because the Company believes that including these adjustments in FFO does not reflect the underlying financial performance of the Company and its hotels.

The Company’s presentation of FFO in accordance with the Nareit White Paper, and as adjusted by the Company, should not be considered as an alternative to net income (computed in accordance with GAAP) as an indicator of the Company’s financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of its liquidity.

This press release includes certain non-GAAP financial measures. These measures are not in accordance with, or an alternative to, measures prepared in accordance with GAAP and may be different from similarly titled non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.

Earnings before Interest, Taxes, and Depreciation and Amortization ("EBITDA") - The Company believes that EBITDA provides investors a useful financial measure to evaluate its operating performance, excluding the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortization).

Earnings before Interest, Taxes, and Depreciation and Amortization for Real Estate ("EBITDAre") - The Company believes that EBITDAre provides investors a useful financial measure to evaluate its operating performance, and the Company presents EBITDAre in accordance with Nareit guidelines, as defined in its September 2017 white paper "Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate." EBITDAre adjusts EBITDA for the following items, which may occur in any period, and refers to these measures as Adjusted EBITDAre: (1) gains or losses on the disposition of depreciated property, including gains or losses on change of control; (2) impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate; and (3) adjustments to reflect the entity's share of EBITDAre of unconsolidated affiliates.

The Company also evaluates its performance by reviewing Adjusted EBITDAre because it believes that adjusting EBITDAre to exclude certain recurring and non-recurring items described below provides useful supplemental information regarding the Company's ongoing operating performance and that the presentation of Adjusted EBITDAre, when combined with the primary GAAP presentation of net income (loss), more completely describes the Company's operating performance. The Company adjusts EBITDAre for the following items, which may occur in any period, and refers to these measures as Adjusted EBITDAre:

- Transaction costs: The Company excludes transaction costs expensed during the period because it believes that including these costs in EBITDAre does not reflect the underlying financial performance of the Company and its hotels.

- Non-cash ground rent: The Company excludes the non-cash ground rent expense, which is primarily made up of the straight-line rent impact from a ground lease.

- Management/franchise contract transition costs: The Company excludes one-time management and/or franchise contract transition costs expensed during the period because it believes that including these costs in EBITDAre does not reflect the underlying financial performance of the Company and its hotels.

- Non-cash amortization of acquired intangibles: The Company excludes the non-cash amortization of acquired intangibles, which includes but is not limited to the amortization of favorable and unfavorable leases or management agreements and above/below market real estate tax reduction agreements because it believes that including these non-cash adjustments in EBITDAre does not reflect the underlying financial performance of the Company and its hotels.

- One-time operation suspension expenses and non-cash canceled share-based compensation: The Company excludes these items because it believes that including these costs in EBITDAre does not reflect the underlying financial performance of the Company and its hotels.

The Company’s presentation of EBITDAre, and as adjusted by the Company, should not be considered as an alternative to net income (computed in accordance with GAAP) as an indicator of the Company’s financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of its liquidity.

Notes:

While the operations of many of the Company's hotels were temporarily suspended beginning in March 2020, this schedule of hotel results for the three months ended September 30 includes information from all of the hotels the Company owned as of September 30, 2021, except for Margaritaville Hollywood Beach Resort for Q3 2021, 2020 and 2019, and excludes Hotel Vitale for Q3 in 2021, 2020 and 2019 because it was closed for renovation during Q3 2021.

This schedule of hotel results for the nine months ended September 30 includes information from all of the hotels the Company owned as of September 30, 2021 but excludes: Hotel Zena Washington DC, formerly known as Donovan Hotel, for Q1 and Q2 in 2021, 2020 and 2019 because it was closed for renovation during the first and second quarters of 2020; Hotel Vitale for Q3 in 2021, 2020 and 2019 because it was closed for renovation during Q3 2021; and Margaritaville Hollywood Beach Resort for Q3 in 2021, 2020 and 2019. Also included in this schedule is information for Sir Francis Drake and The Roger New York for Q1 in 2021, 2020 and 2019; and Villa Florence San Francisco on Union Square for Q1 and Q2 in 2021, 2020 and 2019.

These hotel results for the respective periods may include information reflecting operational performance prior to the Company's ownership of the hotels. Any differences are a result of rounding.

The information above has not been audited and is presented only for comparison purposes.

Notes:

While the operations of many of the Company's hotels were temporarily suspended beginning in March 2020, this schedule of hotel results for the three months ended September 30 includes information from all of the hotels the Company owned as of September 30, 2021, except for Margaritaville Hollywood Beach Resort for Q3 2021, 2020 and 2019, and excludes Hotel Vitale for Q3 in 2021, 2020 and 2019 because it was closed for renovation during Q3 2021.

This schedule of hotel results for the nine months ended September 30 includes information from all of the hotels the Company owned as of September 30, 2021 but excludes: Hotel Zena Washington DC, formerly known as Donovan Hotel, for Q1 and Q2 in 2021, 2020 and 2019 because it was closed for renovation during the first and second quarters of 2020; Hotel Vitale for Q3 in 2021, 2020 and 2019 because it was closed for renovation during Q3 2021; and Margaritaville Hollywood Beach Resort for Q3 in 2021, 2020 and 2019. Also included in this schedule is information for Sir Francis Drake and The Roger New York for Q1 in 2021, 2020 and 2019; and Villa Florence San Francisco on Union Square for Q1 and Q2 in 2021, 2020 and 2019.

"Other" includes New York City, NY; Philadelphia, PA; and Santa Cruz, CA.

These hotel results for the respective periods may include information reflecting operational performance prior to the Company's ownership of the hotels. Any differences are a result of rounding.

The information above has not been audited and is presented only for comparison purposes.

Notes:

While the operations of many of the Company's hotels were temporarily suspended beginning in March 2020, this schedule of hotel results for the three months ended September 30 includes information from all of the hotels the Company owned as of September 30, 2021, except for Margaritaville Hollywood Beach Resort for Q3 2021, 2020 and 2019, and excludes Hotel Vitale for Q3 in 2021, 2020 and 2019 because it was closed for renovation during Q3 2021.

This schedule of hotel results for the nine months ended September 30 includes information from all of the hotels the Company owned as of September 30, 2021 but excludes: Hotel Zena Washington DC, formerly known as Donovan Hotel, for Q1 and Q2 in 2021, 2020 and 2019 because it was closed for renovation during the first and second quarters of 2020; Hotel Vitale for Q3 in 2021, 2020 and 2019 because it was closed for renovation during Q3 2021; and Margaritaville Hollywood Beach Resort for Q3 in 2021, 2020 and 2019. Also included in this schedule is information for Sir Francis Drake and The Roger New York for Q1 in 2021, 2020 and 2019; and Villa Florence San Francisco on Union Square for Q1 and Q2 in 2021, 2020 and 2019.

These hotel results for the respective periods may include information reflecting operational performance prior to the Company's ownership of the hotels. Any differences are a result of rounding.

The information above has not been audited and is presented only for comparison purposes.

Notes:

A property marked with an "X" in a specific quarter denotes that the same-property operating results of that property are included in the Same-Property Statistical Data and in the Schedule of Same-Property Results.

The Company’s third quarter Same-Property RevPAR, RevPAR Growth, Total RevPAR, Total RevPAR Growth, ADR, Occupancy, Revenues, Expenses, EBITDA and EBITDA Margin include all of the hotels the Company owned as of September 30, 2021, except for Margaritaville Hollywood Beach Resort for Q3 2021, 2020 and 2019, and excludes Hotel Vitale for Q3 in 2021, 2020 and 2019 because it was closed for renovation during Q3 2021.

Operating statistics and financial results may include periods prior to the Company’s ownership of the hotels.

Notes:

These historical hotel operating results include information for all of the hotels the Company owned as of September 30, 2021, which include the acquisitions of Jekyll Island Club Resort and Margaritaville Hollywood Beach Resort, as if they were owned as of January 1, 2019. These historical operating results include periods prior to the Company's ownership of the hotels. The information above does not reflect the Company's corporate general and administrative expense, interest expense, property acquisition costs, depreciation and amortization, taxes and other expenses. Any differences are a result of rounding.

The information above has not been audited and is presented only for comparison purposes.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211028006046/en/