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):
May 2, 2018
DiamondRock Hospitality Company
(Exact name of registrant as specified in charter)
Maryland | 001-32514 | 20-1180098 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
2 Bethesda Metro Center, Suite 1400
Bethesda, MD 20814
(Address of Principal Executive Offices) (Zip Code)
(240) 744-1150
(Registrant’s telephone number, including area code)
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 (see General Instruction A.2. below):
¨ | 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)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.
o 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. o
This Current Report on Form 8-K (“Current Report”) contains forward-looking statements within the meaning of federal securities laws and regulations. These forward-looking statements are identified by their use of terms and phrases such as “believe,” “expect,” “intend,” “project,” “anticipate,” “position,” and other similar terms and phrases, including references to assumptions and forecasts of future results. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially from those anticipated at the time the forward-looking statements are made. These risks include, but are not limited to those risks and uncertainties associated with our business described from time to time in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K filed on February 27, 2018. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this Current Report is as of the date of this Current Report, and we undertake no obligation to update any forward-looking statement to conform the statement to actual results or changes in our expectations.
ITEM 2.02. Results of Operations and Financial Condition.
On May 3, 2018, DiamondRock Hospitality Company (the “Company”) issued a press release announcing its financial results for the quarter ended March 31, 2018. A copy of that press release is furnished as Exhibit 99.1 and is incorporated by reference herein.
The information furnished pursuant to this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for any purpose, including for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.
ITEM 5.07. Submission of Matters to a Vote of Security Holders.
On May 2, 2018, the Company held its annual meeting of stockholders (the “Annual Meeting”). The results of the voting at the Annual Meeting were as follows:
1. | The following directors were elected to the Company’s Board of Directors (constituting the entire Board of Directors) to serve until the 2019 annual meeting of stockholders and until their respective successors are duly elected and qualified: |
Name | For | Against | Abstain | Broker Non-Votes |
Daniel J. Altobello | 179,747,823 | 5,140,744 | 53,983 | 5,106,404 |
Mark W. Brugger | 181,672,224 | 3,215,632 | 54,694 | 5,106,404 |
Timothy R. Chi | 183,165,334 | 1,723,363 | 53,853 | 5,106,404 |
Maureen L. McAvey | 179,795,084 | 4,662,769 | 484,697 | 5,106,404 |
William W. McCarten | 181,575,460 | 3,312,281 | 54,809 | 5,106,404 |
Gilbert T. Ray | 164,546,774 | 20,341,407 | 54,369 | 5,106,404 |
William J. Shaw | 183,148,944 | 1,739,237 | 54,369 | 5,106,404 |
Bruce D. Wardinski | 183,162,203 | 1,726,493 | 53,854 | 5,106,404 |
2. | The Company’s stockholders approved, on a non-binding, advisory basis, the compensation of the Company’s named executive officers. |
For | Against | Abstain | Broker Non-Votes |
137,042,879 | 47,679,728 | 219,943 | 5,106,404 |
3. | The Company’s stockholders ratified the appointment of KPMG LLP as the Company’s independent auditor for the fiscal year ending December 31, 2018. |
For | Against | Abstain |
188,641,229 | 1,401,940 | 5,785 |
ITEM 7.01. Regulation FD Disclosure.
A copy of a slide presentation the Company intends to use at investor meetings is attached to this Current Report on Form 8-K (“Current Report”) as Exhibit 99.2 and is incorporated by reference herein. Additionally, the Company has posted the slide presentation in the investor relations/presentations section of its website at www.drhc.com. The information available at the Company's website is not part of this Current Report or any other report filed or furnished by the Company with the Securities and Exchange Commission.
The information furnished pursuant to this Item 7.01, including Exhibit 99.2, shall not be deemed “filed” for any purpose, including for the purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that Section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.
ITEM 9.01. Financial Statements and Exhibits.
(d) Exhibits.
The following exhibits are included with this report:
Exhibit No. | Description | |
99.1 | ||
99.2 | ||
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 hereunto duly authorized.
DIAMONDROCK HOSPITALITY COMPANY | ||||||
Date: May 4, 2018 | By: | /s/ William J. Tennis | ||||
William J. Tennis | ||||||
Executive Vice President, General Counsel and Corporate Secretary | ||||||
COMPANY CONTACT
Jay Johnson
(240) 744-1150
FOR IMMEDIATE RELEASE
DIAMONDROCK HOSPITALITY COMPANY REPORTS FIRST QUARTER 2018 RESULTS
Raises 2018 RevPAR Outlook by 100 Basis Points at Midpoint
BETHESDA, Maryland, Thursday, May 3, 2018 – DiamondRock Hospitality Company (the “Company”) (NYSE: DRH), a lodging-focused real estate investment trust that owns a portfolio of 30 premium hotels in the United States, today announced results of operations for the quarter ended March 31, 2018.
First Quarter 2018 Highlights
• | Net Income: Net income was $4.3 million and earnings per diluted share was $0.02. |
• | Comparable RevPAR: RevPAR was $157.38, a 1.8% increase from the comparable period of 2017. |
• | Comparable Hotel Adjusted EBITDA Margin: Hotel Adjusted EBITDA margin was 24.42%, a 132 basis point contraction from the comparable period of 2017. |
• | Adjusted EBITDA: Adjusted EBITDA was $43.4 million, a decrease of $3.9 million from 2017. The decrease is primarily due to the hurricane-related closures of the Frenchman's Reef and Morning Star Marriott Beach Resort and Havana Cabana Key West. |
• | Adjusted FFO: Adjusted FFO was $33.7 million and Adjusted FFO per diluted share was $0.17. |
• | Hotel Acquisitions: The Company acquired The Landing Resort & Spa in South Lake Tahoe, California and the Hotel Palomar in Phoenix, Arizona on March 1, 2018. |
• | Business Interruption Insurance Income: The Company recognized $6.0 million of business interruption income during the quarter related to ongoing insurance claims for Frenchman's Reef and Morning Star Marriott Beach Resort, Havana Cabana Key West and the Lodge at Sonoma. |
• | Dividends: The Company declared a dividend of $0.125 per share during the first quarter, which was paid on April 12, 2018. |
Mark W. Brugger, President and Chief Executive Officer of DiamondRock Hospitality Company stated, “Lodging trends in the first quarter modestly exceeded our expectations and we are cautiously optimistic that this will continue for the balance of the year. Accordingly, we are pleased to be able to raise full year 2018 guidance. In the first quarter, DiamondRock remained focused on value-add capital allocation and strategically executed on internal and external growth opportunities. We took advantage of internal opportunities within the portfolio by investing over $25 million on hotel renovations to drive portfolio growth in net asset value. DiamondRock also grew its portfolio during the quarter with two exciting new acquisitions.”
Operating Results
Please see “Non-GAAP Financial Measures” attached to this press release for an explanation of the terms “EBITDAre,” “Adjusted EBITDA,” “Hotel Adjusted EBITDA Margin,” “FFO” and “Adjusted FFO” and a reconciliation of these measures to net income. Comparable operating results include our 2018 and 2017 acquisitions for all periods presented and exclude the Frenchman's Reef and Morning Star Marriott Beach Resort (“Frenchman's Reef”) and Havana Cabana Key West for all periods presented due to the closure of these hotels. See “Reconciliation of Comparable Operating Results” attached to this press release for a reconciliation to historical amounts.
For the quarter ended March 31, 2018, the Company reported the following:
First Quarter | ||||||||||
2018 | 2017 | Change | ||||||||
Comparable Operating Results (1) | ||||||||||
ADR | $213.14 | $211.28 | 0.9 | % | ||||||
Occupancy | 73.8 | % | 73.2 | % | 0.6 percentage points | |||||
RevPAR | $157.38 | $154.64 | 1.8 | % | ||||||
Revenues | $186.9 million | $184.2 million | 1.5 | % | ||||||
Hotel Adjusted EBITDA Margin | 24.42 | % | 25.74 | % | -132 basis points | |||||
Actual Operating Results (2) | ||||||||||
Revenues | $181.5 million | $196.2 million | -7.5 | % | ||||||
Net income | $4.3 million | $8.9 million | -$4.6 million | |||||||
Earnings per diluted share | $0.02 | $0.04 | -$0.02 | |||||||
Adjusted EBITDA | $43.4 million | $47.3 million | -$3.9 million | |||||||
Adjusted FFO | $33.7 million | $36.6 million | -$2.9 million | |||||||
Adjusted FFO per diluted share | $0.17 | $0.18 | -$0.01 | |||||||
(1) Comparable operating results exclude Frenchman’s Reef and Havana Cabana Key West for all periods presented and include pre-acquisition operating results for The Landing Resort & Spa and Hotel Palomar Phoenix from January 1, 2018 to February 28, 2018 and January 1, 2017 to March 31, 2017 and for L'Auberge de Sedona and Orchards Inn Sedona from January 1, 2017 to February 27, 2017. The pre-acquisition operating results were obtained from the seller of the hotels during the acquisition due diligence process. We have made no adjustments to the amounts provided to us by the seller. The pre-acquisition operating results were not audited or reviewed by the Company's independent auditors.
(2) Actual operating results include Frenchman’s Reef and Havana Cabana Key West and the operating results of hotels acquired for the Company's respective ownership periods.
Update on Impact from Natural Disasters
As previously disclosed, the Company is pursuing insurance claims for the remediation of property damage and business interruption at Frenchman's Reef, Havana Cabana Key West and the Lodge at Sonoma. The Company is insured for up to $361 million for each covered event, subject to certain deductibles and other conditions. During the first quarter, the Company recognized $6.0 million of business interruption income for Frenchman’s Reef, Havana Cabana Key West and the Lodge at Sonoma. The Company continues to negotiate with its insurers for additional business interruptions proceeds.
Frenchman’s Reef: The hotel was significantly damaged by last year's hurricanes and is expected to remain closed through 2019. The Company expects to receive insurance proceeds for its business interruption losses, including lost profits, during the closure period. The Company submitted its insurance claim during the first quarter and is working diligently with its insurance carriers and the USVI government to evaluate all alternatives to ensure the best outcome for its shareholders.
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Havana Cabana Key West: The Company substantially completed a comprehensive renovation and re-positioning of the hotel in connection with the remediation of substantial wind and water-related damage from Hurricane Irma. The hotel reopened as the Havana Cabana Key West in April 2018. The Company expects to receive insurance proceeds for its business interruption losses, including lost profits during the closure period.
Hotel Acquisitions
On March 1, 2018, the Company acquired the 77-room Landing Resort & Spa in South Lake Tahoe, California for $42 million, or $545,000 per key. The Landing is a premier luxury resort with one of the best locations in Lake Tahoe. Also on March 1, 2018, the Company acquired the 242-room Hotel Palomar in Phoenix, Arizona for $80 million, or $331,000 per key. The Hotel Palomar is a highly-rated boutique hotel located in the heart of the CityScape mixed-use project in downtown Phoenix.
Capital Expenditures
The Company invested approximately $25.8 million in capital improvements at its hotels during the three months ended March 31, 2018. The Company expects to spend approximately $135 million for capital improvements in 2018. Significant projects that have been substantially completed to date include:
• | Chicago Marriott Downtown: The Company completed the final phase of the hotel's $110 million multi-year renovation during the first quarter, which included the remaining 258 of 1,200 guest rooms and the hotel's 60,000 square feet of meeting space. |
• | Havana Cabana Key West: The Company completed a comprehensive renovation of the hotel as part of the remediation of the substantial wind and water-related damage caused by Hurricane Irma. The hotel reopened as the Havana Cabana Key West in April 2018. |
• | Bethesda Marriott Suites: The Company substantially completed a renovation of the guest rooms at the hotel during the first quarter. |
• | Westin Boston Waterfront Hotel: The Company completed a refresh of the hotel's guest rooms during the first quarter. |
Other significant projects planned for the remainder of 2018 include:
• | Vail Marriott: The Company expects to renovate the hotel's guest rooms and meeting space to a luxury level in mid-2018 to help raise the average daily rate and close the rate gap with the hotel's luxury competitive set. |
• | Westin Fort Lauderdale Beach Resort: The Company expects to renovate and upgrade the hotel's 432 guest rooms in 2018 to drive market share. |
• | Hotel Rex: In connection with joining the Viceroy Collection, the Company expects to complete a comprehensive renovation and re-positioning of the hotel in the fourth quarter of 2018. The hotel will close for approximately four months during renovation. The renovation is expected to be completed in time to take advantage of an expected strong 2019 lodging market in San Francisco. |
• | JW Marriott Denver: The Company expects to begin renovating the hotel's guest rooms, public space and meeting rooms in the fourth quarter of 2018, with the majority of the work occurring in 2019. The renovation is expected to secure the hotel's position as the top luxury hotel in the high-end Cherry Creek submarket of Denver. |
The Company incurred approximately $2.0 million in renovation displacement of Hotel Adjusted EBITDA for the first quarter of 2018, primarily attributed to the renovations at the Chicago Marriott Downtown, Bethesda Marriott Suites and Westin Boston Waterfront. The Company anticipates approximately $4.0 million in additional renovation displacement of Hotel Adjusted EBITDA for the remainder of 2018, which is primarily attributable to the upgrade renovations at the Vail Marriott, Hotel Rex and Westin Fort Lauderdale Beach Resort. The displacement is expected to be approximately $1.0 million in the second quarter, and $1.5 million in each of the third and fourth quarters.
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Balance Sheet
As of March 31, 2018, the Company had $69.1 million of unrestricted cash on hand and approximately $937.6 million of total debt, which primarily consisted of property-specific mortgage debt and $300.0 million of unsecured term loans. The Company has no outstanding borrowings on its $300.0 million senior unsecured credit facility and 22 of its 30 hotels are unencumbered by debt.
Dividends
The Company’s Board of Directors declared a quarterly dividend of $0.125 per share to stockholders of record as of March 29, 2018. The dividend was paid on April 12, 2018.
Guidance
The Company is providing annual guidance for 2018, but does not undertake to update it for any developments in its business. Achievement of the anticipated results is subject to the risks disclosed in the Company’s filings with the U.S. Securities and Exchange Commission. Comparable RevPAR growth excludes Frenchman’s Reef and Havana Cabana Key West and includes the Company's 2017 and 2018 acquisitions for all periods.
Based on increased confidence in lodging fundamentals, the Company is raising its 2018 guidance and expects the full year 2018 results to be as follows:
Previous Guidance | Revised Guidance | Change at Midpoint | ||||
Metric | Low End | High End | Low End | High End | ||
Comparable RevPAR Growth | 0 percent | 2 percent | 1.5 percent | 2.5 percent | + 100bps | |
Adjusted EBITDA | $249 million | $261 million | $254 million | $263 million | + $3.5 million | |
Adjusted FFO | $199 million | $209 million | $205 million | $212 million | + $4.5 million | |
Adjusted FFO per share (based on 202 million diluted shares) | $0.99 per share | $1.03 per share | $1.01 per share | $1.05 per share | + $0.02 per share | |
The guidance above incorporates the following assumptions:
• | Business interruption insurance proceeds of approximately $20 million; |
• | Corporate expenses of $27 million to $28 million, excluding severance charges from the Company's CFO transition; |
• | Interest expense of $40 million to $41 million; and |
• | Income tax expense of $8 million to $11 million; |
The Company expects approximately 29% to 30% of its full year 2018 Adjusted EBITDA to be earned in the second quarter of 2018, which includes approximately $4.0 million of business interruption insurance income.
Selected Quarterly Comparable Operating Information
The following table is presented to provide investors with selected quarterly comparable operating information. The operating information includes the Company's 2018 and 2017 acquisitions and excludes Frenchman's Reef and Havana Cabana Key West for all periods presented.
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Quarter 1, 2017 | Quarter 2, 2017 | Quarter 3, 2017 | Quarter 4, 2017 | Full Year 2017 | |||||||||||
ADR | $ | 211.28 | $ | 237.36 | $ | 227.92 | $ | 235.86 | $ | 228.59 | |||||
Occupancy | 73.2 | % | 84.6 | % | 84.9 | % | 77.5 | % | 80.1 | % | |||||
RevPAR | $ | 154.64 | $ | 200.85 | $ | 193.51 | $ | 182.82 | $ | 183.05 | |||||
Revenues (in thousands) | $ | 184,233 | $ | 231,798 | $ | 218,565 | $ | 214,587 | $ | 849,183 | |||||
Hotel Adjusted EBITDA (in thousands) | $ | 47,424 | $ | 81,192 | $ | 68,999 | $ | 66,897 | $ | 264,512 | |||||
% of full Year | 17.9 | % | 30.7 | % | 26.1 | % | 25.3 | % | 100.0 | % | |||||
Hotel Adjusted EBITDA Margin | 25.74 | % | 35.03 | % | 31.57 | % | 31.17 | % | 31.15 | % | |||||
Available Rooms | 840,690 | 850,031 | 854,820 | 857,734 | 3,403,275 | ||||||||||
Earnings Call
The Company will host a conference call to discuss its first quarter results on Friday, May 4, 2018, at 9:00 a.m. Eastern Time (ET). To participate in the live call, investors are invited to dial 844-287-6622 (for domestic callers) or 530-379-4559 (for international callers). The participant passcode is 9795246. A live webcast of the call will be available via the investor relations section of DiamondRock Hospitality Company’s website at www.drhc.com or www.earnings.com. A replay of the webcast will also be archived on the website for one week.
About the Company
DiamondRock Hospitality Company is a self-advised real estate investment trust (REIT) that is an owner of a leading portfolio of geographically diversified hotels concentrated in top gateway markets and destination resort locations. The Company owns 30 premium quality hotels with over 9,900 rooms. The Company has strategically positioned its hotels to be operated both under leading global brand families such as Hilton and Marriott as well as unique boutique hotels in the lifestyle segment. For further information on the Company and its portfolio, please visit DiamondRock Hospitality Company’s website at www.drhc.com.
This press release contains forward-looking statements within the meaning of federal securities laws and regulations. These forward-looking statements are identified by their use of terms and phrases such as “believe,” “expect,” “intend,” “project,” “forecast,” “plan” and other similar terms and phrases, including references to assumptions and forecasts of future results. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially from those anticipated at the time the forward-looking statements are made, including statements related to the expected duration of closure of Frenchman’s Reef and anticipated insurance coverage. These risks include, but are not limited to: national and local economic and business conditions, including the potential for additional terrorist attacks, that will affect occupancy rates at the Company’s hotels and the demand for hotel products and services; operating risks associated with the hotel business; risks associated with the level of the Company’s indebtedness; relationships with property managers; the ability to compete effectively in areas such as access, location, quality of accommodations and room rate structures; changes in travel patterns, taxes and government regulations which influence or determine wages, prices, construction procedures and costs; and other risk factors contained in the Company’s filings with the Securities and Exchange Commission. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this release is as of the date of this release, and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.
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DIAMONDROCK HOSPITALITY COMPANY
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
March 31, 2018 | December 31, 2017 | ||||||
ASSETS | (unaudited) | ||||||
Property and equipment, net | $ | 2,810,965 | $ | 2,692,286 | |||
Restricted cash | 38,395 | 40,204 | |||||
Due from hotel managers | 100,343 | 86,621 | |||||
Favorable lease assets, net | 46,731 | 26,690 | |||||
Prepaid and other assets (1) | 36,220 | 71,488 | |||||
Cash and cash equivalents | 69,092 | 183,569 | |||||
Total assets | $ | 3,101,746 | $ | 3,100,858 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Liabilities: | |||||||
Mortgage and other debt, net of unamortized debt issuance costs | $ | 639,334 | $ | 639,639 | |||
Term loans, net of unamortized debt issuance costs | 298,268 | 298,153 | |||||
Total debt | 937,602 | 937,792 | |||||
Deferred income related to key money, net | 12,036 | 14,307 | |||||
Unfavorable contract liabilities, net | 75,459 | 70,734 | |||||
Deferred ground rent | 88,116 | 86,614 | |||||
Due to hotel managers | 89,738 | 74,213 | |||||
Dividends declared and unpaid | 25,605 | 25,708 | |||||
Accounts payable and accrued expenses (2) | 55,441 | 57,845 | |||||
Total other liabilities | 346,395 | 329,421 | |||||
Stockholders’ Equity: | |||||||
Preferred stock, $0.01 par value; 10,000,000 shares authorized; no shares issued and outstanding | — | — | |||||
Common stock, $0.01 par value; 400,000,000 shares authorized; 200,562,761 and 200,306,733 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively | 2,006 | 2,003 | |||||
Additional paid-in capital | 2,066,584 | 2,061,451 | |||||
Accumulated deficit | (250,841 | ) | (229,809 | ) | |||
Total stockholders’ equity | 1,817,749 | 1,833,645 | |||||
Total liabilities and stockholders’ equity | $ | 3,101,746 | $ | 3,100,858 | |||
(1) Includes $23.9 million and $55.8 million of insurance receivables, $0.9 million of deferred tax assets, $4.8 million and $8.0 million of prepaid expenses and $6.6 million and $6.8 million of other assets as of March 31, 2018 and December 31, 2017, respectively.
(2) Includes $6.0 million of deferred tax liabilities, $7.1 million and $11.2 million of accrued hurricane-related costs, $11.7 million and $15.3 million of accrued property taxes, $14.8 million and $11.7 million of accrued capital expenditures, and $15.8 million and $13.6 million of other accrued liabilities as of March 31, 2018 and December 31, 2017, respectively.
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DIAMONDROCK HOSPITALITY COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Revenues: | |||||||
Rooms | $ | 128,978 | $ | 137,832 | |||
Food and beverage | 40,792 | 44,778 | |||||
Other | 11,760 | 13,600 | |||||
Total revenues | 181,530 | 196,210 | |||||
Operating Expenses: | |||||||
Rooms | 35,600 | 36,901 | |||||
Food and beverage | 27,454 | 29,466 | |||||
Management fees | 2,833 | 6,012 | |||||
Other hotel expenses | 73,463 | 71,659 | |||||
Depreciation and amortization | 24,902 | 24,363 | |||||
Hotel acquisition costs | — | 2,251 | |||||
Corporate expenses | 9,786 | 6,262 | |||||
Gain on business interruption insurance | (6,027 | ) | — | ||||
Total operating expenses, net | 168,011 | 176,914 | |||||
Operating profit | 13,519 | 19,296 | |||||
Interest and other income, net | (511 | ) | (359 | ) | |||
Interest expense | 9,877 | 9,513 | |||||
Total other expenses, net | 9,366 | 9,154 | |||||
Income before income taxes | 4,153 | 10,142 | |||||
Income tax benefit (expense) | 185 | (1,255 | ) | ||||
Net income | $ | 4,338 | $ | 8,887 | |||
Earnings per share: | |||||||
Basic earnings per share | $ | 0.02 | $ | 0.04 | |||
Diluted earnings per share | $ | 0.02 | $ | 0.04 | |||
Weighted-average number of common shares outstanding: | |||||||
Basic | 201,145,014 | 200,654,092 | |||||
Diluted | 201,775,832 | 201,837,582 | |||||
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Non-GAAP Financial Measures
We use the following non-GAAP financial measures that we believe are useful to investors as key measures of our operating performance: EBITDA, EBITDAre, Adjusted EBITDA, Hotel EBITDA, Hotel Adjusted EBITDA, FFO and Adjusted FFO. These measures should not be considered in isolation or as a substitute for measures of performance in accordance with U.S. GAAP. EBITDA, EBITDAre, Adjusted EBITDA, Hotel EBITDA, Hotel Adjusted EBITDA, FFO and Adjusted FFO, as calculated by us, may not be comparable to other companies that do not define such terms exactly as the Company.
Use and Limitations of Non-GAAP Financial Measures
Our management and Board of Directors use EBITDA, EBITDAre, Adjusted EBITDA, Hotel EBITDA, Hotel Adjusted EBITDA, FFO and Adjusted FFO to evaluate the performance of our hotels and to facilitate comparisons between us and other lodging REITs, hotel owners who are not REITs and other capital intensive companies. The use of these non-GAAP financial measures has certain limitations. These non-GAAP financial measures as presented by us, may not be comparable to non-GAAP financial measures as calculated by other real estate companies. These measures do not reflect certain expenses or expenditures that we incurred and will incur, such as depreciation, interest and capital expenditures. We compensate for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our reconciliations to the most comparable U.S. GAAP financial measures, and our consolidated statements of operations and cash flows, include interest expense, capital expenditures, and other excluded items, all of which should be considered when evaluating our performance, as well as the usefulness of our non-GAAP financial measures.
These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with U.S. GAAP. They should not be considered as alternatives to operating profit, cash flow from operations, or any other operating performance measure prescribed by U.S. GAAP. These non-GAAP financial measures reflect additional ways of viewing our operations that we believe, when viewed with our U.S. GAAP results and the reconciliations to the corresponding U.S. GAAP financial measures, provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. We strongly encourage investors to review our financial information in its entirety and not to rely on a single financial measure.
EBITDA, EBITDAre and FFO
EBITDA represents net income (calculated in accordance with U.S. GAAP) excluding: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sale of assets; and (3) depreciation and amortization. The Company computes EBITDAre in accordance with the National Association of Real Estate Investment Trusts ("Nareit") guidelines, as defined in its September 2017 white paper "Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate." EBITDAre represents net income (calculated in accordance with U.S. GAAP) adjusted for: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sale of assets; (3) depreciation and amortization; (4) gains or losses on the disposition of depreciated property including gains or losses on change of control; (5) 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 (6) adjustments to reflect the entity's share of EBITDAre of unconsolidated affiliates.
We believe EBITDA and EBITDAre are useful to an investor in evaluating our operating performance because they help investors evaluate and compare the results of our operations from period to period by removing the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortization, and in the case of EBITDAre, impairment and gains or losses on dispositions of depreciated property) from our operating results. In addition, covenants included in our debt agreements use EBITDA as a measure of financial compliance. We also use EBITDA and EBITDAre as one measure in determining the value of hotel acquisitions and dispositions.
The Company computes FFO in accordance with standards established by the Nareit, which defines FFO as net income determined in accordance with U.S. GAAP, excluding gains or losses from sales of properties and impairment losses, plus depreciation and amortization. The Company believes that the presentation of FFO provides useful information to investors regarding its operating performance because it is a measure of the Company's operations without regard to specified non-cash items, such as real estate depreciation and amortization and gains or losses on the sale of assets. The Company also uses FFO as one measure in assessing its operating results.
Hotel EBITDA
Hotel EBITDA represents net income excluding: (1) interest expense, (2) income taxes, (3) depreciation and amortization, (4) corporate general and administrative expenses (shown as corporate expenses on the consolidated statements of operations), and (5) hotel acquisition costs. We believe that Hotel EBITDA provides our investors a useful financial measure to evaluate our hotel operating
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performance, excluding the impact of our capital structure (primarily interest), our asset base (primarily depreciation and amortization), and our corporate-level expenses (corporate expenses and hotel acquisition costs). With respect to Hotel EBITDA, we believe that excluding the effect of corporate-level expenses provides a more complete understanding of the operating results over which individual hotels and third-party management companies have direct control. We believe 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.
Adjustments to EBITDA, FFO and Hotel EBITDA
We adjust EBITDA, FFO and Hotel EBITDA when evaluating our performance because we believe that the exclusion of certain additional items described below provides useful supplemental information to investors regarding our ongoing operating performance and that the presentation of Adjusted EBITDA, Adjusted FFO and Hotel Adjusted EBITDA when combined with U.S. GAAP net income, EBITDA, FFO and Hotel EBITDA, is beneficial to an investor's complete understanding of our consolidated and property-level operating performance. Hotel Adjusted EBITDA margins are calculated as Hotel Adjusted EBITDA divided by total hotel revenues.
We adjust EBITDA, FFO and Hotel EBITDA for the following items:
• | Non-Cash Ground Rent: We exclude the non-cash expense incurred from the straight line recognition of rent from our ground lease obligations and the non-cash amortization of our favorable lease assets. We exclude these non-cash items because they do not reflect the actual rent amounts due to the respective lessors in the current period and they are of lesser significance in evaluating our actual performance for that period. |
• | Non-Cash Amortization of Favorable and Unfavorable Contracts: We exclude the non-cash amortization of the favorable and unfavorable contracts recorded in conjunction with certain acquisitions because the non-cash amortization is based on historical cost accounting and is of lesser significance in evaluating our actual performance for that period. |
• | Cumulative Effect of a Change in Accounting Principle: Infrequently, the Financial Accounting Standards Board (FASB) promulgates new accounting standards that require the consolidated statement of operations to reflect the cumulative effect of a change in accounting principle. We exclude the effect of these adjustments, which include the accounting impact from prior periods, because they do not reflect the Company’s actual underlying performance for the current period. |
• | Gains or Losses from Early Extinguishment of Debt: We exclude the effect of gains or losses recorded on the early extinguishment of debt because these gains or losses result from transaction activity related to the Company’s capital structure that we believe are not indicative of the ongoing operating performance of the Company or our hotels. |
• | Hotel Acquisition Costs: We exclude hotel acquisition costs expensed during the period because we believe these transaction costs are not reflective of the ongoing performance of the Company or our hotels. |
• | Severance Costs: We exclude corporate severance costs incurred with the termination of corporate-level employees and severance costs incurred at our hotels related to lease terminations or structured severance programs because we believe these costs do not reflect the ongoing performance of the Company or our hotels. |
• | Hotel Manager Transition Items: We exclude the transition items associated with a change in hotel manager because we believe these items do not reflect the ongoing performance of the Company or our hotels. |
• | Other Items: From time to time we incur costs or realize gains that we consider outside the ordinary course of business and that we do not believe reflect the ongoing performance of the Company or our hotels. Such items may include, but are not limited to, the following: pre-opening costs incurred with newly developed hotels; lease preparation costs incurred to prepare vacant space for marketing; management or franchise contract termination fees; gains or losses from legal settlements; costs incurred related to natural disasters; and gains from insurance proceeds, other than income related to business interruption insurance. |
In addition, to derive Adjusted FFO we exclude any fair value adjustments to debt instruments. We exclude these non-cash amounts because they do not reflect the underlying performance of the Company.
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Reconciliations of Non-GAAP Measures
EBITDA, EBITDAre and Adjusted EBITDA
The following tables are reconciliations of our GAAP net income to EBITDA, EBITDAre and Adjusted EBITDA (in thousands):
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Net income | $ | 4,338 | $ | 8,887 | |||
Interest expense | 9,877 | 9,513 | |||||
Income tax (benefit) expense | (185 | ) | 1,255 | ||||
Real estate related depreciation | 24,902 | 24,363 | |||||
EBITDA | 38,932 | 44,018 | |||||
Impairment losses | — | — | |||||
Gain on sale of hotel properties | — | — | |||||
EBITDAre | 38,932 | 44,018 | |||||
Non-cash ground rent | 1,535 | 1,550 | |||||
Non-cash amortization of favorable and unfavorable contract liabilities, net | (478 | ) | (478 | ) | |||
Hotel acquisition costs | — | 2,251 | |||||
Hurricane-related costs (1) | (214 | ) | — | ||||
Hotel manager transition items (2) | (2,183 | ) | — | ||||
Severance costs (3) | 5,847 | — | |||||
Adjusted EBITDA | $ | 43,439 | $ | 47,341 | |||
(1) | Represents stabilization, cleanup, and other costs (such as hotel labor) incurred at our hotels impacted by Hurricanes Irma or Maria that have not been or are not expected to be recovered by insurance. |
(2) | Represents accelerated amortization of key money received from Marriott for Frenchman's Reef in connection with the termination of the hotel's management agreement. |
(3) Consists of (a) $3.0 million related to the departure of our former Executive Vice President and Chief Financial Officer, which is classified within corporate expenses on the consolidated statement of operations and (b) $2.8 million related to payments made to unionized employees under a voluntary buyout program at the Lexington Hotel New York, which are classified within other hotel expenses on the consolidated statement of operations.
Full Year 2018 Guidance | |||||||
Low End | High End | ||||||
Net income | $ | 83,683 | $ | 91,683 | |||
Interest expense | 41,000 | 40,000 | |||||
Income tax expense | 8,000 | 11,000 | |||||
Real estate related depreciation | 100,000 | 99,000 | |||||
EBITDAre | 232,683 | 241,683 | |||||
Non-cash ground rent | 6,400 | 6,400 | |||||
Non-cash amortization of favorable and unfavorable contracts, net | (1,900 | ) | (1,900 | ) | |||
Manager transition items | (2,183 | ) | (2,183 | ) | |||
Hurricane-related costs | 1,000 | 1,000 | |||||
Severance costs | 18,000 | 18,000 | |||||
Adjusted EBITDA | $ | 254,000 | $ | 263,000 | |||
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Hotel EBITDA and Hotel Adjusted EBITDA
The following table is a reconciliation of our GAAP net income to Hotel EBITDA and Hotel Adjusted EBITDA (in thousands):
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Net income | $ | 4,338 | $ | 8,887 | |||
Interest expense | 9,877 | 9,513 | |||||
Income tax (benefit) expense | (185 | ) | 1,255 | ||||
Real estate related depreciation | 24,902 | 24,363 | |||||
EBITDA | 38,932 | 44,018 | |||||
Corporate expenses | 9,786 | 6,262 | |||||
Interest and other income, net | (511 | ) | (359 | ) | |||
Gain on business interruption insurance | (6,027 | ) | — | ||||
Hotel acquisition costs | — | 2,251 | |||||
Hurricane-related costs (1) | (214 | ) | — | ||||
Severance (2) | 2,833 | — | |||||
Hotel EBITDA | 44,799 | 52,172 | |||||
Non-cash ground rent | 1,535 | 1,550 | |||||
Non-cash amortization of favorable and unfavorable contract liabilities, net | (478 | ) | (478 | ) | |||
Hotel manager transition items (3) | (2,183 | ) | — | ||||
Hotel Adjusted EBITDA | $ | 43,673 | $ | 53,244 | |||
(1) Represents stabilization, cleanup, and other costs (such as hotel labor) incurred at our hotels impacted by Hurricanes Irma or Maria that have not been or are not expected to be recovered by insurance.
(2) Represents payments made to unionized employees under a voluntary buyout program at the Lexington Hotel New York, which are classified within other hotel expenses on the condensed consolidated statement of operations.
(3) Represents accelerated amortization of key money received from Marriott for Frenchman's Reef in connection with the termination of the hotel's management agreement.
FFO and Adjusted FFO
The following tables are reconciliations of our GAAP net income to FFO and Adjusted FFO (in thousands):
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Net income | $ | 4,338 | $ | 8,887 | |||
Real estate related depreciation | 24,902 | 24,363 | |||||
FFO | 29,240 | 33,250 | |||||
Non-cash ground rent | 1,535 | 1,550 | |||||
Non-cash amortization of favorable and unfavorable contract liabilities, net | (478 | ) | (478 | ) | |||
Hotel acquisition costs | — | 2,251 | |||||
Hurricane-related costs (1) | (214 | ) | — | ||||
Hotel manager transition items (2) | (2,183 | ) | — | ||||
Severance costs (3) | 5,847 | — | |||||
Adjusted FFO | $ | 33,747 | $ | 36,573 | |||
Adjusted FFO per diluted share | $ | 0.17 | $ | 0.18 | |||
(1) | Represents stabilization, cleanup, and other costs (such as hotel labor) incurred at our hotels impacted by Hurricanes Irma or Maria that have not been or are not expected to be recovered by insurance. |
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(2) | Represents accelerated amortization of key money received from Marriott for Frenchman's Reef in connection with the termination of the hotel's management agreement. |
(3) Consists of (a) $3.0 million related to the departure of our former Executive Vice President and Chief Financial Officer, which is classified within corporate expenses on the consolidated statement of operations and (b) $2.8 million related to payments made to unionized employees under a voluntary buyout program at the Lexington Hotel New York, which are classified within other hotel expenses on the consolidated statement of operations.
Full Year 2018 Guidance | |||||||
Low End | High End | ||||||
Net income | $ | 83,683 | $ | 91,683 | |||
Real estate related depreciation | 100,000 | 99,000 | |||||
FFO | 183,683 | 190,683 | |||||
Non-cash ground rent | 6,400 | 6,400 | |||||
Non-cash amortization of favorable and unfavorable contract liabilities, net | (1,900 | ) | (1,900 | ) | |||
Manager transition items | (2,183 | ) | (2,183 | ) | |||
Hurricane-related costs | 1,000 | 1,000 | |||||
Severance costs | 18,000 | 18,000 | |||||
Adjusted FFO | $ | 205,000 | $ | 212,000 | |||
Adjusted FFO per diluted share | $ | 1.01 | $ | 1.05 | |||
Reconciliation of Comparable Operating Results
The following presents the revenues, Hotel Adjusted EBITDA and Hotel Adjusted EBITDA Margin together with comparable prior year results, which includes the pre-acquisition results for our 2018 and 2017 acquisitions and excludes the results for the closed hotels (in thousands):
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Revenues | $ | 181,530 | $ | 196,210 | |||
Hotel revenues from prior ownership (1) | 5,305 | 12,092 | |||||
Hotel revenues from closed hotels (2) | 40 | (24,069 | ) | ||||
Comparable Revenues | $ | 186,875 | $ | 184,233 | |||
Hotel Adjusted EBITDA | $ | 43,673 | $ | 53,244 | |||
Hotel Adjusted EBITDA from prior ownership (1) | 1,766 | 3,235 | |||||
Hotel Adjusted EBITDA from closed hotels (2) | 198 | (9,055 | ) | ||||
Comparable Hotel Adjusted EBITDA | $ | 45,637 | $ | 47,424 | |||
Hotel Adjusted EBITDA Margin | 24.06 | % | 27.14 | % | |||
Comparable Hotel Adjusted EBITDA Margin | 24.42 | % | 25.74 | % | |||
(1) | Amounts represent the pre-acquisition operating results of The Landing Resort & Spa and Hotel Palomar for the period from January 1, 2018 to February 28, 2018 and January 1, 2017 to March 31, 2017, respectively and the pre-acquisition operating results of the L'Auberge de Sedona and Orchards Inn Sedona for the period from January 1, 2017 to February 27, 2017. The pre-acquisition operating results were obtained from the respective sellers of the hotels during the acquisition due diligence process. We have made no adjustments to the amounts provided to us by the seller. The pre-acquisition operating results were not audited or reviewed by the Company's independent auditors. |
(2) | Amounts represent the operating results of Frenchman's Reef and Havana Cabana Key West as they are closed due to hurricane damage. |
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Comparable Hotel Operating Expenses
The following table sets forth hotel operating expenses for the three months ended March 31, 2018 and 2017 for each of the hotels that we owned during these periods. Our GAAP hotel operating expenses for the three months ended March 31, 2018 and 2017 consisted of the line items set forth below (dollars in thousands) under the column titled “As Reported.” The amounts reported in this column include amounts that are not comparable period-over-period. In order to reflect the period in 2018 comparable to 2017, the amounts in the column titled “Adjustments for Acquisitions” represent the pre-acquisition operating costs of The Landing Resort & Spa and the Hotel Palomar for the period from January 1, 2018 to February 28, 2018 and January 1, 2017 to March 31, 2017, respectively and the L'Auberge de Sedona and Orchards Inn Sedona for the period from January 1, 2017 to February 27, 2017. The amounts in the column titled “Adjustments for Closed Hotels” represent the operating costs for all periods presented of Frenchman's Reef and Morning Star Marriott Beach Resort and Havana Cabana Key West as they are closed due to hurricane damage. We provide this important supplemental information to our investors because this information provides a useful means for investors to measure our operating performance on a comparative basis. See the column titled “Comparable."
These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP in this release. They should not be considered as alternatives to operating profit, cash flow from operations, or any other operating performance measure prescribed by GAAP. These non-GAAP financial measures reflect additional ways of viewing our operations at our hotels that we believe, when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. We strongly encourage investors to review our financial information in its entirety and not to rely on a single financial measure. In particular, we note the pre-acquisition operating results set forth in the column titled “Adjustments for Acquisitions” were obtained from the respective sellers of the hotels during the acquisition due diligence process. We have made no adjustments to the amounts provided to us by the respective sellers. The pre-acquisition operating results were not audited or reviewed by our independent auditors.
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As Reported | Adjustments for Closed Hotels | Adjustments for Acquisitions | Comparable | ||||||||||||||||||||||||||||||||||
Three Months Ended March 31, | Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | % Change | ||||||||||||||||||||||||||||
Rooms departmental expenses | $ | 35,600 | $ | 36,901 | (3.5 | )% | $ | — | $ | (2,757 | ) | $ | 788 | $ | 2,015 | $ | 36,388 | $ | 36,159 | 0.6 | % | ||||||||||||||||
Food and beverage departmental expenses | 27,454 | 29,466 | (6.8 | )% | — | (4,392 | ) | 1,162 | 2,733 | 28,616 | 27,807 | 2.9 | % | ||||||||||||||||||||||||
Other direct departmental | 2,502 | 2,995 | (16.5 | )% | — | (696 | ) | 103 | 359 | 2,605 | 2,658 | (2.0 | )% | ||||||||||||||||||||||||
General and administrative | 17,019 | 17,995 | (5.4 | )% | — | (2,036 | ) | 467 | 1,335 | 17,486 | 17,294 | 1.1 | % | ||||||||||||||||||||||||
Utilities | 5,031 | 6,060 | (17.0 | )% | — | (1,259 | ) | 138 | 349 | 5,169 | 5,150 | 0.4 | % | ||||||||||||||||||||||||
Repairs and maintenance | 7,788 | 8,684 | (10.3 | )% | — | (1,100 | ) | 126 | 406 | 7,914 | 7,990 | (1.0 | )% | ||||||||||||||||||||||||
Sales and marketing | 13,933 | 13,801 | 1.0 | % | (34 | ) | (1,348 | ) | 340 | 828 | 14,239 | 13,281 | 7.2 | % | |||||||||||||||||||||||
Franchise fees | 5,909 | 5,031 | 17.5 | % | — | — | — | — | 5,909 | 5,031 | 17.5 | % | |||||||||||||||||||||||||
Base management fees | 1,621 | 4,545 | (64.3 | )% | 2,173 | (687 | ) | 223 | 453 | 4,017 | 4,311 | (6.8 | )% | ||||||||||||||||||||||||
Incentive management fees | 1,212 | 1,467 | (17.4 | )% | — | — | — | — | 1,212 | 1,467 | (17.4 | )% | |||||||||||||||||||||||||
Property taxes | 13,655 | 12,230 | 11.7 | % | (53 | ) | (61 | ) | 81 | 140 | 13,683 | 12,309 | 11.2 | % | |||||||||||||||||||||||
Ground rent | 2,504 | 2,513 | (0.4 | )% | — | — | — | — | 2,504 | 2,513 | (0.4 | )% | |||||||||||||||||||||||||
Insurance | 1,201 | 1,688 | (28.9 | )% | (53 | ) | (488 | ) | 37 | 87 | 1,185 | 1,287 | (7.9 | )% | |||||||||||||||||||||||
Severance costs | 2,833 | — | 100.0 | % | — | — | — | — | 2,833 | — | 100.0% | ||||||||||||||||||||||||||
Hurricane-related costs | (214 | ) | — | (100.0 | )% | 214 | — | — | — | — | — | — | % | ||||||||||||||||||||||||
Other fixed expenses | 1,302 | 662 | 96.7 | % | (1 | ) | (189 | ) | 117 | 242 | 1,418 | 715 | 98.3 | % | |||||||||||||||||||||||
Total hotel operating expenses | $ | 139,350 | $ | 144,038 | (3.3 | )% | $ | 2,246 | $ | (15,013 | ) | $ | 3,582 | $ | 8,947 | $ | 145,178 | $ | 137,972 | 5.2 | % | ||||||||||||||||
Hurricane-related costs | 214 | — | 100.0 | % | (214 | ) | — | — | — | — | — | — | % | ||||||||||||||||||||||||
Severance costs | (2,833 | ) | — | (100.0 | )% | — | — | — | (2,833 | ) | — | (100.0 | )% | ||||||||||||||||||||||||
Manager transition items | 2,183 | — | 100.0 | % | (2,183 | ) | — | — | — | — | — | — | % | ||||||||||||||||||||||||
Non-cash ground rent | (1,535 | ) | (1,550 | ) | (1.0 | )% | — | — | (50 | ) | (91 | ) | (1,585 | ) | (1,641 | ) | (3.4 | )% | |||||||||||||||||||
Non-cash amortization of favorable and unfavorable contract liabilities, net | 478 | 478 | — | % | — | — | — | — | 478 | 478 | — | % | |||||||||||||||||||||||||
Total adjusted hotel operating expenses | $ | 137,857 | $ | 142,966 | (3.6 | )% | $ | (151 | ) | $ | (15,013 | ) | $ | 3,532 | $ | 8,856 | $ | 141,238 | $ | 136,809 | 3.2 | % | |||||||||||||||
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Market Capitalization as of March 31, 2018 | ||||
(in thousands) | ||||
Enterprise Value | ||||
Common equity capitalization (at March 31, 2018 closing price of $10.44/share) | $ | 2,110,142 | ||
Consolidated debt (face amount) | 943,934 | |||
Cash and cash equivalents | (69,092) | |||
Total enterprise value | $ | 2,984,984 | ||
Share Reconciliation | ||||
Common shares outstanding | 200,563 | |||
Unvested restricted stock held by management and employees | 666 | |||
Share grants under deferred compensation plan | 892 | |||
Combined shares outstanding | 202,121 | |||
Debt Summary as of March 31, 2018 | |||||||||||
(dollars in thousands) | |||||||||||
Property | Interest Rate | Term | Outstanding Principal | Maturity | |||||||
Marriott Salt Lake City Downtown | 4.25% | Fixed | 56,295 | November 2020 | |||||||
Westin Washington D.C. City Center | 3.99% | Fixed | 64,307 | January 2023 | |||||||
The Lodge at Sonoma, a Renaissance Resort & Spa | 3.96% | Fixed | 28,115 | April 2023 | |||||||
Westin San Diego | 3.94% | Fixed | 64,487 | April 2023 | |||||||
Courtyard Manhattan / Midtown East | 4.40% | Fixed | 83,698 | August 2024 | |||||||
Renaissance Worthington | 3.66% | Fixed | 83,717 | May 2025 | |||||||
JW Marriott Denver at Cherry Creek | 4.33% | Fixed | 63,237 | July 2025 | |||||||
Westin Boston Waterfront Hotel | 4.36% | Fixed | 197,135 | November 2025 | |||||||
New Market Tax Credit loan(1) | 5.17% | Fixed | 2,943 | December 2020 | |||||||
Debt issuance costs, net | (4,600 | ) | |||||||||
Total mortgage and other debt, net of unamortized debt issuance costs | $ | 639,334 | |||||||||
Unsecured term loan | LIBOR + 1.45(2) | Variable | 100,000 | May 2021 | |||||||
Unsecured term loan | LIBOR + 1.45(2) | Variable | 200,000 | April 2022 | |||||||
Debt issuance costs, net | (1,732 | ) | |||||||||
Unsecured term loans, net of unamortized debt issuance costs | $ | 298,268 | |||||||||
Senior unsecured credit facility | LIBOR + 1.50 | Variable | $ | — | May 2020 (3) | ||||||
Total debt, net of unamortized debt issuance costs | $ | 937,602 | |||||||||
Weighted-average interest rate of fixed rate debt | 4.23 | % | |||||||||
Total weighted-average interest rate | 3.89 | % | |||||||||
(1) | Assumed in connection with the acquisition of the Hotel Palomar Phoenix in March 2018. |
(2) | The interest rate as of March 31, 2018 was 3.11%. |
(3) | May be extended for an additional year upon the payment of applicable fees and the satisfaction of certain customary conditions. |
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Operating Statistics – First Quarter | |||||||||||||||||||||||||||||||
ADR | Occupancy | RevPAR | Hotel Adjusted EBITDA Margin | ||||||||||||||||||||||||||||
1Q 2018 | 1Q 2017 | B/(W) | 1Q 2018 | 1Q 2017 | B/(W) | 1Q 2018 | 1Q 2017 | B/(W) | 1Q 2018 | 1Q 2017 | B/(W) | ||||||||||||||||||||
Atlanta Alpharetta Marriott | $ | 187.52 | $ | 179.49 | 4.5 | % | 65.0 | % | 70.2 | % | (5.2 | )% | $ | 121.95 | $ | 125.98 | (3.2 | )% | 35.96 | % | 33.33 | % | 263 bps | ||||||||
Bethesda Marriott Suites | $ | 174.77 | $ | 170.50 | 2.5 | % | 52.7 | % | 70.1 | % | (17.4 | )% | $ | 92.16 | $ | 119.47 | (22.9 | )% | 14.24 | % | 26.00 | % | -1176 bps | ||||||||
Boston Westin | $ | 205.91 | $ | 207.73 | (0.9 | )% | 64.5 | % | 67.6 | % | (3.1 | )% | $ | 132.86 | $ | 140.34 | (5.3 | )% | 14.40 | % | 20.42 | % | -602 bps | ||||||||
Hilton Boston Downtown | $ | 200.74 | $ | 202.90 | (1.1 | )% | 79.2 | % | 72.7 | % | 6.5 | % | $ | 158.97 | $ | 147.60 | 7.7 | % | 18.13 | % | 17.50 | % | 63 bps | ||||||||
Hilton Burlington | $ | 131.22 | $ | 122.29 | 7.3 | % | 72.3 | % | 67.3 | % | 5.0 | % | $ | 94.89 | $ | 82.32 | 15.3 | % | 19.61 | % | 14.23 | % | 538 bps | ||||||||
Renaissance Charleston | $ | 237.08 | $ | 240.22 | (1.3 | )% | 82.4 | % | 57.3 | % | 25.1 | % | $ | 195.26 | $ | 137.59 | 41.9 | % | 36.22 | % | 18.90 | % | 1732 bps | ||||||||
Chicago Marriott | $ | 163.12 | $ | 164.76 | (1.0 | )% | 49.7 | % | 49.5 | % | 0.2 | % | $ | 81.05 | $ | 81.51 | (0.6 | )% | (14.51 | )% | (3.16 | )% | -1135 bps | ||||||||
Chicago Gwen | $ | 185.02 | $ | 161.61 | 14.5 | % | 72.0 | % | 45.2 | % | 26.8 | % | $ | 133.23 | $ | 73.10 | 82.3 | % | (4.17 | )% | (23.13 | )% | 1896 bps | ||||||||
Courtyard Denver Downtown | $ | 175.23 | $ | 187.94 | (6.8 | )% | 80.1 | % | 71.5 | % | 8.6 | % | $ | 140.32 | $ | 134.32 | 4.5 | % | 39.70 | % | 40.92 | % | -122 bps | ||||||||
Courtyard Fifth Avenue | $ | 213.08 | $ | 198.63 | 7.3 | % | 82.9 | % | 83.3 | % | (0.4 | )% | $ | 176.60 | $ | 165.38 | 6.8 | % | (3.36 | )% | (7.67 | )% | 431 bps | ||||||||
Courtyard Midtown East | $ | 192.23 | $ | 196.41 | (2.1 | )% | 87.5 | % | 81.9 | % | 5.6 | % | $ | 168.21 | $ | 160.86 | 4.6 | % | 3.88 | % | 7.12 | % | -324 bps | ||||||||
Fort Lauderdale Westin | $ | 255.63 | $ | 237.77 | 7.5 | % | 94.6 | % | 96.0 | % | (1.4 | )% | $ | 241.92 | $ | 228.24 | 6.0 | % | 42.73 | % | 45.44 | % | -271 bps | ||||||||
JW Marriott Denver Cherry Creek | $ | 237.06 | $ | 243.00 | (2.4 | )% | 74.3 | % | 74.4 | % | (0.1 | )% | $ | 176.15 | $ | 180.69 | (2.5 | )% | 26.89 | % | 28.05 | % | -116 bps | ||||||||
Sheraton Suites Key West | $ | 300.06 | $ | 297.84 | 0.7 | % | 92.3 | % | 93.4 | % | (1.1 | )% | $ | 277.07 | $ | 278.06 | (0.4 | )% | 53.10 | % | 52.08 | % | 102 bps | ||||||||
The Landing Resort & Spa (1) | $ | 265.59 | $ | 272.24 | (2.4 | )% | 48.2 | % | 52.9 | % | (4.7 | )% | $ | 128.06 | $ | 143.93 | (11.0 | )% | (7.18 | )% | 16.85 | % | -2403 bps | ||||||||
Lexington Hotel New York | $ | 187.93 | $ | 177.62 | 5.8 | % | 82.3 | % | 87.2 | % | (4.9 | )% | $ | 154.75 | $ | 154.92 | (0.1 | )% | (8.02 | )% | (14.97 | )% | 695 bps | ||||||||
Hotel Palomar Phoenix (1) | $ | 257.82 | $ | 265.34 | (2.8 | )% | 87.3 | % | 86.9 | % | 0.4 | % | $ | 225.00 | $ | 230.57 | (2.4 | )% | 46.32 | % | 45.14 | % | 118 bps | ||||||||
Hotel Rex | $ | 203.51 | $ | 249.07 | (18.3 | )% | 77.8 | % | 76.2 | % | 1.6 | % | $ | 158.35 | $ | 189.72 | (16.5 | )% | 31.05 | % | 34.72 | % | -367 bps | ||||||||
Salt Lake City Marriott | $ | 179.72 | $ | 170.62 | 5.3 | % | 72.0 | % | 76.8 | % | (4.8 | )% | $ | 129.46 | $ | 130.97 | (1.2 | )% | 39.15 | % | 43.34 | % | -419 bps | ||||||||
L'Auberge de Sedona | $ | 587.28 | $ | 493.33 | 19.0 | % | 75.9 | % | 74.5 | % | 1.4 | % | $ | 445.87 | $ | 367.69 | 21.3 | % | 20.86 | % | 17.72 | % | 314 bps | ||||||||
Orchards Inn Sedona | $ | 259.53 | $ | 212.53 | 22.1 | % | 73.9 | % | 75.1 | % | (1.2 | )% | $ | 191.76 | $ | 159.54 | 20.2 | % | 37.00 | % | 29.86 | % | 714 bps | ||||||||
Shorebreak | $ | 240.42 | $ | 219.08 | 9.7 | % | 72.6 | % | 62.2 | % | 10.4 | % | $ | 174.54 | $ | 136.21 | 28.1 | % | 24.68 | % | 16.47 | % | 821 bps | ||||||||
The Lodge at Sonoma | $ | 237.70 | $ | 236.41 | 0.5 | % | 59.6 | % | 41.8 | % | 17.8 | % | $ | 141.56 | $ | 98.91 | 43.1 | % | 12.77 | % | (9.98 | )% | 2275 bps | ||||||||
Hilton Garden Inn Times Square Central | $ | 182.20 | $ | 174.40 | 4.5 | % | 96.7 | % | 95.2 | % | 1.5 | % | $ | 176.20 | $ | 166.10 | 6.1 | % | 12.99 | % | 8.72 | % | 427 bps | ||||||||
Vail Marriott | $ | 420.70 | $ | 422.64 | (0.5 | )% | 85.2 | % | 91.7 | % | (6.5 | )% | $ | 358.61 | $ | 387.75 | (7.5 | )% | 52.75 | % | 52.91 | % | -16 bps | ||||||||
Westin San Diego | $ | 186.41 | $ | 197.49 | (5.6 | )% | 80.8 | % | 84.6 | % | (3.8 | )% | $ | 150.54 | $ | 167.12 | (9.9 | )% | 37.77 | % | 41.58 | % | -381 bps | ||||||||
Westin Washington D.C. City Center | $ | 193.28 | $ | 230.68 | (16.2 | )% | 84.8 | % | 82.9 | % | 1.9 | % | $ | 163.99 | $ | 191.33 | (14.3 | )% | 28.25 | % | 39.29 | % | -1104 bps | ||||||||
Renaissance Worthington | $ | 194.67 | $ | 184.65 | 5.4 | % | 76.9 | % | 77.4 | % | (0.5 | )% | $ | 149.70 | $ | 142.97 | 4.7 | % | 40.24 | % | 39.95 | % | 29 bps | ||||||||
Total (2) | $ | 212.45 | $ | 219.15 | (3.1 | )% | 73.9 | % | 74.1 | % | (0.2 | )% | $ | 156.93 | $ | 162.43 | (3.4 | )% | 24.06 | % | 27.01 | % | -295 bps | ||||||||
Comparable Total (3) | $ | 213.14 | $ | 211.28 | 0.9 | % | 73.8 | % | 73.2 | % | 0.6 | % | $ | 157.38 | $ | 154.64 | 1.8 | % | 24.42 | % | 25.74 | % | -132 bps | ||||||||
(1) | Hotels were acquired on March 1, 2018. Amounts reflect the operating results for these hotels for the period from March 1, 2018 to March 31, 2018 and March 1, 2017 to March 31, 2017. |
(2) | Amounts include the pre-acquisition operating results of The Landing Resort & Spa and Hotel Palomar Phoenix for the period from March 1, 2017 to March 31, 2017 and L'Auberge de Sedona and Orchards Inn Sedona for the period from January 1, 2017 to February 27, 2017. |
(3) | Amounts exclude the operating results of Frenchman's Reef and Morning Star Marriott Beach Resort and Havana Cabana Key West, which are closed due to hurricane damage and include the pre-acquisition operating results of The Landing Resort & Spa and Hotel Palomar Phoenix for the period from January 1, 2018 to February 28, 2018 and January 1, 2017 to March 31, 2017, respectively and L'Auberge de Sedona and Orchards Inn Sedona for the period from January 1, 2017 to February 27, 2017. |
16
Hotel Adjusted EBITDA Reconciliation | ||||||||||||||||||||
First Quarter 2018 | ||||||||||||||||||||
Plus: | Plus: | Plus: | Equals: | |||||||||||||||||
Total Revenues | Net Income / (Loss) | Depreciation | Interest Expense | Adjustments (1) | Hotel Adjusted EBITDA | |||||||||||||||
Atlanta Alpharetta Marriott | $ | 4,867 | $ | 1,279 | $ | 471 | $ | — | $ | — | $ | 1,750 | ||||||||
Bethesda Marriott Suites | $ | 3,097 | $ | (1,451 | ) | $ | 379 | $ | — | $ | 1,513 | $ | 441 | |||||||
Boston Westin | $ | 17,470 | $ | (1,980 | ) | $ | 2,354 | $ | 2,202 | $ | (60 | ) | $ | 2,516 | ||||||
Hilton Boston Downtown | $ | 6,521 | $ | (55 | ) | $ | 1,237 | $ | — | $ | — | $ | 1,182 | |||||||
Hilton Burlington | $ | 2,769 | $ | 33 | $ | 510 | $ | — | $ | — | $ | 543 | ||||||||
Renaissance Charleston | $ | 3,426 | $ | 875 | $ | 398 | $ | — | $ | (32 | ) | $ | 1,241 | |||||||
Chicago Marriott | $ | 12,889 | $ | (5,466 | ) | $ | 3,932 | $ | 61 | $ | (397 | ) | $ | (1,870 | ) | |||||
Chicago Gwen | $ | 5,063 | $ | (1,315 | ) | $ | 1,104 | $ | — | $ | — | $ | (211 | ) | ||||||
Courtyard Denver Downtown | $ | 2,456 | $ | 661 | $ | 314 | $ | — | $ | — | $ | 975 | ||||||||
Courtyard Fifth Avenue | $ | 3,066 | $ | (545 | ) | $ | 447 | $ | — | $ | (5 | ) | $ | (103 | ) | |||||
Courtyard Midtown East | $ | 5,046 | $ | (1,464 | ) | $ | 686 | $ | 974 | $ | — | $ | 196 | |||||||
Fort Lauderdale Westin | $ | 15,914 | $ | 5,450 | $ | 1,350 | $ | — | $ | — | $ | 6,800 | ||||||||
Frenchman's Reef | $ | (40 | ) | $ | (99 | ) | $ | — | $ | — | $ | — | $ | (99 | ) | |||||
JW Marriott Denver Cherry Creek | $ | 4,880 | $ | 101 | $ | 517 | $ | 694 | $ | — | $ | 1,312 | ||||||||
Havana Cabana Key West | $ | — | $ | (99 | ) | $ | — | $ | — | $ | — | $ | (99 | ) | ||||||
Sheraton Suites Key West | $ | 5,475 | $ | 2,481 | $ | 426 | $ | — | $ | — | $ | 2,907 | ||||||||
The Landing Resort & Spa | $ | 585 | $ | (163 | ) | $ | 121 | $ | — | $ | — | $ | (42 | ) | ||||||
Lexington Hotel New York | $ | 11,498 | $ | (4,338 | ) | $ | 3,404 | $ | 4 | $ | 8 | $ | (922 | ) | ||||||
Hotel Palomar Phoenix | $ | 2,731 | $ | 1,043 | $ | 222 | $ | — | $ | — | $ | 1,265 | ||||||||
Hotel Rex | $ | 1,662 | $ | 377 | $ | 139 | $ | — | $ | — | $ | 516 | ||||||||
Salt Lake City Marriott | $ | 8,565 | $ | 2,115 | $ | 616 | $ | 622 | $ | — | $ | 3,353 | ||||||||
L'Auberge de Sedona | $ | 5,811 | $ | 725 | $ | 487 | $ | — | $ | — | $ | 1,212 | ||||||||
Orchards Inn Sedona | $ | 2,143 | $ | 516 | $ | 235 | $ | — | $ | 42 | $ | 793 | ||||||||
Shorebreak | $ | 3,744 | $ | 559 | $ | 380 | $ | — | $ | (15 | ) | $ | 924 | |||||||
The Lodge at Sonoma | $ | 4,512 | $ | (201 | ) | $ | 492 | $ | 285 | $ | — | $ | 576 | |||||||
Hilton Garden Inn Times Square Central | $ | 4,619 | $ | (218 | ) | $ | 818 | $ | — | $ | — | $ | 600 | |||||||
Vail Marriott | $ | 14,928 | $ | 7,344 | $ | 530 | $ | — | $ | — | $ | 7,874 | ||||||||
Westin San Diego | $ | 9,206 | $ | 1,736 | $ | 1,097 | $ | 644 | $ | — | $ | 3,477 | ||||||||
Westin Washington D.C. City Center | $ | 7,470 | $ | 112 | $ | 1,316 | $ | 682 | $ | — | $ | 2,110 | ||||||||
Renaissance Worthington | $ | 11,157 | $ | 2,779 | $ | 919 | $ | 790 | $ | 2 | $ | 4,490 | ||||||||
Total | $ | 181,530 | $ | 10,792 | $ | 24,901 | $ | 6,958 | $ | 1,056 | $ | 43,673 | ||||||||
Add: Prior Ownership Results (2) | $ | 5,305 | $ | 1,101 | $ | 577 | $ | 38 | $ | 50 | $ | 1,766 | ||||||||
Less: Closed Hotels (3) | $ | 40 | $ | 198 | $ | — | $ | — | $ | — | $ | 198 | ||||||||
Comparable Total | $ | 186,875 | $ | 12,091 | $ | 25,478 | $ | 6,996 | $ | 1,106 | $ | 45,637 | ||||||||
(1) | Includes non-cash expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations, the non-cash amortization favorable and unfavorable contract liabilities and hotel manager transition costs. |
(2) | Amounts represent the pre-acquisition operating results of The Landing Resort & Spa and Hotel Palomar Phoenix for the period from January 1, 2018 to February 28, 2018. |
(3) | Amounts represent the operating results of Frenchman's Reef and Morning Star Marriott Beach Resort and Havana Cabana Key West, which are closed due to hurricane damage. |
17
Hotel Adjusted EBITDA Reconciliation | ||||||||||||||||||||
First Quarter 2017 | ||||||||||||||||||||
Plus: | Plus: | Plus: | Equals: | |||||||||||||||||
Total Revenues | Net Income / (Loss) | Depreciation | Interest Expense | Adjustments (1) | Hotel Adjusted EBITDA | |||||||||||||||
Atlanta Alpharetta Marriott | $ | 5,014 | $ | 1,287 | $ | 384 | $ | — | $ | — | $ | 1,671 | ||||||||
Bethesda Marriott Suites | $ | 3,931 | $ | (848 | ) | $ | 347 | $ | — | $ | 1,523 | $ | 1,022 | |||||||
Boston Westin | $ | 18,300 | $ | (607 | ) | $ | 2,181 | $ | 2,231 | $ | (69 | ) | $ | 3,736 | ||||||
Hilton Boston Downtown | $ | 6,137 | $ | (162 | ) | $ | 1,236 | $ | — | $ | — | $ | 1,074 | |||||||
Hilton Burlington | $ | 2,523 | $ | (157 | ) | $ | 516 | $ | — | $ | — | $ | 359 | |||||||
Renaissance Charleston | $ | 2,344 | $ | 145 | $ | 330 | $ | — | $ | (32 | ) | $ | 443 | |||||||
Chicago Marriott | $ | 15,721 | $ | (3,613 | ) | $ | 3,478 | $ | 35 | $ | (397 | ) | $ | (497 | ) | |||||
Chicago Gwen | $ | 2,542 | $ | (1,443 | ) | $ | 855 | $ | — | $ | — | $ | (588 | ) | ||||||
Courtyard Denver Downtown | $ | 2,314 | $ | 664 | $ | 283 | $ | — | $ | — | $ | 947 | ||||||||
Courtyard Fifth Avenue | $ | 2,895 | $ | (723 | ) | $ | 449 | $ | — | $ | 52 | $ | (222 | ) | ||||||
Courtyard Midtown East | $ | 4,891 | $ | (1,303 | ) | $ | 662 | $ | 989 | $ | — | $ | 348 | |||||||
Fort Lauderdale Westin | $ | 14,728 | $ | 5,424 | $ | 1,269 | $ | — | $ | — | $ | 6,693 | ||||||||
Frenchman's Reef | $ | 21,856 | $ | 6,160 | $ | 1,658 | $ | — | $ | — | $ | 7,818 | ||||||||
JW Marriott Denver Cherry Creek | $ | 5,152 | $ | 231 | $ | 508 | $ | 706 | $ | — | $ | 1,445 | ||||||||
Havana Cabana Key West | $ | 2,213 | $ | 1,044 | $ | 193 | $ | — | $ | — | $ | 1,237 | ||||||||
Sheraton Suites Key West | $ | 5,495 | $ | 2,575 | $ | 287 | $ | — | $ | — | $ | 2,862 | ||||||||
Lexington Hotel New York | $ | 10,801 | $ | (6,567 | ) | $ | 3,475 | $ | 1,467 | $ | 8 | $ | (1,617 | ) | ||||||
Hotel Rex | $ | 1,875 | $ | 508 | $ | 143 | $ | — | $ | — | $ | 651 | ||||||||
Salt Lake City Marriott | $ | 9,230 | $ | 2,843 | $ | 518 | $ | 639 | $ | — | $ | 4,000 | ||||||||
L'Auberge de Sedona | $ | 2,372 | $ | 595 | $ | 184 | $ | — | $ | — | $ | 779 | ||||||||
Orchards Inn Sedona | $ | 967 | $ | 322 | $ | 77 | $ | — | $ | 14 | $ | 413 | ||||||||
Shorebreak | $ | 2,532 | $ | 32 | $ | 400 | $ | — | $ | (15 | ) | $ | 417 | |||||||
The Lodge at Sonoma | $ | 3,045 | $ | (985 | ) | $ | 390 | $ | 291 | $ | — | $ | (304 | ) | ||||||
Hilton Garden Inn Times Square Central | $ | 4,337 | $ | (413 | ) | $ | 791 | $ | — | $ | — | $ | 378 | |||||||
Vail Marriott | $ | 16,255 | $ | 8,097 | $ | 503 | $ | — | $ | — | $ | 8,600 | ||||||||
Westin San Diego | $ | 9,438 | $ | 2,158 | $ | 1,108 | $ | 658 | $ | — | $ | 3,924 | ||||||||
Westin Washington D.C. City Center | $ | 8,420 | $ | 1,323 | $ | 1,283 | $ | 702 | $ | — | $ | 3,308 | ||||||||
Renaissance Worthington | $ | 10,882 | $ | 2,691 | $ | 855 | $ | 799 | $ | 2 | $ | 4,347 | ||||||||
Total | $ | 196,210 | $ | 19,278 | $ | 24,363 | $ | 8,517 | $ | 1,086 | $ | 53,244 | ||||||||
Add: Prior Ownership Results(2) | $ | 12,092 | $ | 1,732 | $ | 1,388 | $ | 38 | $ | 77 | $ | 3,235 | ||||||||
Less: Closed Hotels (3) | $ | (24,069 | ) | $ | (7,204 | ) | $ | (1,851 | ) | $ | — | $ | — | $ | (9,055 | ) | ||||
Comparable Total | $ | 184,233 | $ | 13,806 | $ | 23,900 | $ | 8,555 | $ | 1,163 | $ | 47,424 | ||||||||
(1) | Includes non-cash expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations, the non-cash amortization favorable and unfavorable contract liabilities and hotel manager transition costs. |
(2) | Amounts represent the pre-acquisition operating results of The Landing Resort & Spa and Hotel Palomar Phoenix for the period from January 1, 2017 to March 31, 2017 and L'Auberge de Sedona and Orchards Inn Sedona for the period from January 1, 2017 to February 27, 2017. |
(3) | Amounts represent the operating results of Frenchman's Reef and Morning Star Marriott Beach Resort and Havana Cabana Key West, which are closed due to hurricane damage. |
18
INVESTOR PRESENTATION May 2018
DiamondRock at a Glance KEY STATISTICS RAISED 2018 GUIDANCE Hotels (Rooms) 30 (9.9K) • Raised 2018 Full-Year Guidance: Enterprise Value $3.0B − Comparable RevPAR Growth of 1.5% to 2.5% Market Cap $2.2B Enterprise Value / Key ~$300K − Adj. EBITDA of $254M - $263M Dividend Yield 4.5% − Adj. FFO per share of $1.01 - $1.05 YE18 Net Debt/EBITDA(1) 3.4x Market data as of 5/2/18. Note: RevPAR excludes Frenchman’s Reef and Havana Cabana for all periods. Guidance pro forma for acquisition of the Landing Resort & Spa and Palomar Phoenix. URBAN AND RESORT HOTELS IN TOP MARKETS(2) RECENT ACQUISITIONS ADDING VALUE Other 4% San Fran. 1% San Diego 5% Washington, DC 5% Destination Resorts Denver 5% 32% Other CBD The Landing Lake Tahoe Hotel Palomar Phoenix 12% New York 10% Boston 15% Chicago 11% (1) Based on PF 2018 EBITDA at guidance midpoint and current pro form net debt. L’Auberge De Sedona Orchards Inn Sedona (2) Based on 2017 EBITDA. Pro forma for acquisitions of the Landing Tahoe, Phoenix Palomar, L’Auberge de Sedona and Orchards Inn Sedona for full-year. Includes Frenchman’s Reef and Havana Cabana budget pre-hurricane. 2
Why DiamondRock? 1 Top Tier Quality Portfolio & Growth • Top tier quality portfolio as measured by ADR • Top tier growth with 2017 RevPAR growth of 2.5% (top two of peer set) 2 Compelling Valuation • 12.1x 2018 Consensus EBITDA multiple 1.0x discount to 13.1x peer average • $300K EV per key ~30% discount to replacement cost • Trading at large discount to Company’s NAV estimate 3 Internal Growth Opportunities • Frenchman’s Reef hurricane impact creates opportunities • Chicago Gwen Repositioning: >$3M EBITDA upside • Hotel Rex San Francisco 2018 repositioning to Viceroy: $1.2M EBITDA upside The Gwen, A Luxury Collection Hotel • Completed Sonoma, Charleston, Worthington, and Shorebreak renovations to continue to drive growth from $37M in repositionings • Havana Cabana Key West opened April 2018: ~$1M in EBITDA upside • Vail Marriott Resort upgrade renovation to close luxury rate gap with potential ~$5M in stabilized EBITDA upside 4 External Growth Driving Value • The Landing Resort & Spa in Lake Tahoe, CA for $42M • The Hotel Palomar Phoenix for $80M • L’Auberge de Sedona and Orchards Inn grew combined RevPAR >19% in 2017 and exceeded underwriting by $1.2M in EBITDA with $2.1M YoY EBITDA growth 5 Portfolio Well-Positioned for 2018 • Increased 2018 full-year RevPAR and EBITDA guidance Vail Marriott Mountain Resort • Renovations paying off: several strategic renovations and repositionings throughout portfolio from ‘17-’18 to continue to drive growth and long-term value • Resort concentration: resort markets to continue to outperform (450bps of outperformance in 2017) 3
High Quality Portfolio in Key Gateway Markets Approximately 2/3 of DRH’s portfolio EBITDA is concentrated in top, gateway markets. 4
Strong Resort Market Presence DRH’s Resort Portfolio represents 1/3 of its pro forma EBITDA concentration. 5
Top-Tier Performance 2017 RevPAR Growth Among Best in Peer Group 3.6% 2.5% 2.3% 1.4% 1.3% 0.7% Peer Average: 0.5% -0.5% -1.8% -2.2% Top Tier -2.4% SHO DRH HT XHR HST PK RLJ LHO PEB CHSP • DRH comparable 2017 RevPAR growth of 2.5% among best in peer group - Portfolio gained 2.6 percentage points of market share during the year - EBITDA margins approximately flat excluding property taxes • Fourth quarter comparable RevPAR growth of 3.8% - Business transient up 11.2% and group up 6.8% - Resorts up 8.4% in the fourth quarter Source: Company Filings as of Q4 2017. 6
Top-Tier Portfolio Quality 2017 Portfolio Average Daily Rate $246 $243 $229 $227 $225 $220 $211 $209 Peer Average: $215 $202 $171 PEB LHO DRH HST CHSP HT SHO XHR PK RLJ Top Tier Source: Company Filings as of Q4 2017. 7
Compelling Valuation 2018 Consensus EBITDA Multiple Trading at 1.0x Discount to SHO… 13.1 +1.0x 12.1 14.9 14.6 14.3 13.8 13.1 Peer Average: 13.1x DRH SHO 12.2 Valuation at SHO’s multiple would translate 12.1 12.0 into ~$12.26 share price or >10% premium 11.4 11.4 to current price. …Despite Relative Strength in Portfolio DRH SHO Diff. 2017 ADR $229.06 $211.30 $17.76 2017 RevPAR $183.99 $175.17 $8.82 2017 Hotel EBITDA 31.2% 30.9% 27bps PEB LHO CHSP HT SHO HST DRH XHR PK RLJ Margins Lower-Tier Midpoint of 2018 2.0% 1.0%(1) 100bps RevPAR Guidance • DRH currently trading at 1.0x discount to peer group (1) As of Q4 2017 earnings call. Source: Baird, FactSet. Data as of 5/2/18. Valuation at PEB’s offer for LHO would translate into ~$15.64 per share or ~40% premium to current price. 8
Diverse Operator Base Drives Best Practices More than half of portfolio is subject to short-term or terminable management agreements. HEI 16% Recent Operator Changes Driving Value Interstate 8% • Two Roads Hospitality brought in as new operator for L’Auberge de Sedona and Orchards Inn in Highgate 7% December 2017 • Viceroy Hotels brought in as new operator for Hotel Davidson 6% Rex in October 2017 Marriott 40% Sage 5% • Courtyard Midtown East converted to franchise and Marriott replaced with HEI Hotels as operator in August 2017 Vail 5% • DRH recently exercised its right to terminate Marriott at Frenchman’s Reef and unencumber hotel Two Roads 4% Kimpton 4% Viceroy Ocean 1% Properties 4% (1) Based on 2017 EBITDA for all properties. Pro forma for acquisition of The Landing Tahoe, Palomar Phoenix, L’Auberge de Sedona and Orchards Inn Sedona for the full-year. Excludes Frenchman’s Reef. 9
Recent Acquisitions Driving Value
The Landing Resort & Spa (Lake Tahoe, CA) $42M Acquisition of Luxury Hotel in Premier Resort Market • Numerous awards including 2018 TripAdvisor Traveler’s Choice Award as a Top 25 Hotel in the US and 2016 Conde Nast Readers’ Choice #1 Northern California resort • Beachfront location and walking distance to Heavenly Ski Resort (Vail Resorts) and both Harrah’s and Hard Rock casino resorts • Attractive Deal Metrics: ‒ 13.5x multiple on 2017 EBITDA ‒ 10.4x stabilized EBITDA multiple • Nearby casinos and nightlife includes Hard Rock and Harrah’s • South Lake Tahoe RevPAR grew at 9.2% CAGR from ’13 -‘17 • Proximity to Northern California, San Francisco, Silicon Valley and Reno EBITDA Upside Opportunities 11
Hotel Palomar (Phoenix, AZ) $80M Acquisition of Boutique, Lifestyle Hotel in High-Growth Market • Attractive Deal Metrics: ‒ 12.6x EBITDA multiple for first year of ownership ‒ 10.8x EBITDA multiple by 2022 • Terminable management contract in 2020 • TripAdvisor ranked #2 of 174 Phoenix hotels • Centerpiece of the 1.2M SF CityScape mixed-use development in downtown Phoenix; City Scape phase II to be completed in 2019 ‒ 23.4M SF of office space in Downtown Phoenix • Centrally located in Downtown Phoenix: walking distance to Phoenix Convention Center, Talking Stick Resort Arena, and Chase Field • Since 2012, the Phoenix market achieved an 8.5% RevPAR CAGR, outperforming US average by 270bps Clear Path to Stabilized EBITDA +$0.2M >$7.5M +$0.5M +$0.2M +$0.3M $6.3M 2018 EBITDA Market Growth Asset Facility Fee Signage Income Stabilized Management EBITDA Initiatives 12
DRH Resort Portfolio Overview
DRH’s Differentiated Resort Portfolio Resort Portfolio Overview Hotels 12 Rooms 2,536 2017 RevPAR $193 2017 EBITDA $90 Million EBITDA Multiple on Investment 9.2 L’Auberge De Sedona Orchards Inn Sedona Shorebreak Hotel 1 Low-to-zero supply in majority of resort markets 2 Diversified demand drivers Sonoma Renaissance The Landing Lake Tahoe Vail Marriott Shift to experience-based travel driving long-term 3 market demand Low seasonality in consolidated resort portfolio 4 (beach, skiing and other seasonal drivers) Westin Ft. Lauderdale Havana Cabana Key West Key West Suites Beach 5 Non-union markets 6 Multiple asset management and ROI initiatives Frenchman’s Reef Charleston Renaissance Hilton Vermont - Burlington 14
DRH Resorts Have Proven Successful DRH Resort RevPAR Has Outperformed Broader Portfolio by Average of 300bps… 8.4% 8.8% 4.0% 3.1% 3.3% 1.9% 2.5% 0.8% 3.8% 1.7% 0.8% (0.3%) 2.9% 1.9% 2.0% Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 (2.1%) Total DRH Resort Outperformance Note: Historical RevPAR for ten resort properties. RevPAR excludes resorts under renovation during quarter of renovation and resorts affected by natural disasters during quarter affected by natural disaster. … Diversified With Strong Base of Group …With Clear RevPAR Premium… and BT Business $192.74 Group 23% Business Leisure Transient 56% $183.05 18% Contract / Other 3% 2017A Resort RevPAR Note: Historical RevPAR and EBITDA results pro forma for acquisitions for full period. Segmentation and RevPAR charts represent full-year 2017 data. Excludes resort affected by natural disasters. 15
Strong Return on Investment DRH’s resort portfolio EBITDA multiple has improved approximately five turns since acquisition with over $280M of NAV created. EBITDA Multiple @ EBITDA Increase Investment ($M) Purchase YE 2017 $M Burlington Hilton $61.6 16.5x 8.9x $3.7 Charleston Renaissance $41.1 11.9x 7.8x(2) $2.0 Fort Lauderdale Westin $156.4 14.8x 9.7x $6.0 Key West Suites $94.4 14.9x 11.6x $1.8 The Landing Resort & Spa(1) $42.0 13.5x 10.4x $1.8 Sedona - L'Auberge $66.0 15.8x 10.8x $1.9 Sedona - Orchards Inn $31.0 13.7x 11.0x $0.5 Shorebreak $62.4 14.6x 14.8x(2) $0.2 Sonoma Renaissance $38.2 10.7x 7.1x(2) $2.4 Vail Marriott Mountain Resort $71.7 13.4x 5.9x $7.4 Total Resort $664.9 14.2x 9.2x $27.9 DRH values its resort portfolio at a 6.5% cap rate, which implies over $280M of NAV value over investment. Note: Historical RevPAR and EBITDA results pro forma for acquisitions for full period year prior to acquisition. Frenchman’s Reef and Havana Cabana excluded due to natural disaster closure. Landing uses stabilized EBITDA as proxy for multiple. (1) Landing uses stabilized EBITDA as proxy for multiple and EBITDA increase for current year given acquired in 2018. (2) Renovation disruption in 2017. 16
Westin Fort Lauderdale Beach Resort & Spa Asset Overview Location Fort Lauderdale, FL Rooms 432 Acquisition Date December 4th, 2014 Meeting Space (SF) 40,000 Operator HEI Hotels Purchase Price $149 million Purchase price per key $344,000 • Increased NAV by $44M • Investment currently represents a 9.7x multiple on 2017 EBITDA and 9.6% NOI cap rate • Has exceeded underwriting by over $5M in EBITDA to date • Eliminated over $5M of annual expenses in first year of ownership with continued asset management overhaul of expense structure and operations in subsequent years Performance Since Acquisition 2014 2017 Increase RevPAR $148.94 $162.31 9.0% EBITDA $9.6M $16.1M 68.0% EBITDA Margin 21.9% 35.9% 1395bps EBITDA Multiple(1) 14.8 9.7 53% NAV(2) $156M $200M 28% (1) EBITDA multiple on current investment basis. (2) NAV based on internal estimates. 17
2018 Highlights
2018 DRH Key Market Drivers Market 2018 Outlook DRH / Market Commentary: (% of 2017 EBITDA) Chicago The Gwen to outperform off of renovation tailwinds; final phase of Chicago Marriott renovation completed in Q1. (11%) Strong Chicago citywide calendar in 2018 (+25%) combined group pace up 13% for remainder of year. Sedona Sedona market to continue to be one of fastest-growing markets; significant AM upside. (3%) Charleston Completed 2017 rooms renovation to drive performance. (2%) Huntington Beach F&B and Lobby renovation yielding strong market share gains. (2%) Sonoma Outperformance from 2017 renovation tailwinds; recovery following wildfires. (2%) Lake Tahoe High-ADR, fast-growing resort market; EBITDA upside due to asset management initiatives. (2%) Phoenix High-growth, Western market with significant asset management upside. (2%) San Francisco Hotel Rex comprehensive renovation planned in 2018 with Viceroy in as new manager; Citywide performance to improve (1%) relative to 2017. Boston Strong transient demand; Seaport district continues to expand. (15%) Ft. Lauderdale Stabilization from 2017 challenges (Supply, Miami weakness due to convention center and Zika); guestroom renovation (6%) in 2018. San Diego Citywide Calendar up 9% in rooms. (5%) Denver Continuing to absorb high supply, but expect stabilization of Cherry Creek submarket. (5%) Courtyard Denver recently renovated lobby and meeting space. Ft. Worth, TX Planned meeting space renovation in 2018. (5%) Washington, DC Tough Q1 Comps due to Inauguration / Women’s March. (5%) New York City NYC supply to peak in 2018 and stabilize thereafter; Waldorf-Astoria closure a catalyst for Midtown East. (10%) Lexington gaining market share with refocused rev. mgmt. and in beta program for new $25 facility fee. 19
Unique Drivers to Enhance NAV 1 Chicago Marriott 4 Westin Fort Lauderdale • $110M renovation substantially • 2018 guestroom upgrade completed • Opened popular, new restaurant Lona • Scope included 1,200 guestrooms and all 60K SF of meeting space • Elevated product to drive market share • Post-renovation group pace +12% 2 Havana Cabana Key West 5 Hotel Rex San Francisco • Comprehensive renovation post- • Boutique hotel in heart of Union Square hurricane damage will close for last four months of 2018 to position for big 2019 • Reopened April 2019 • Relaunch as Viceroy hotel Havana Cabana Key West • Refreshed theme and identity • $1.2M in incremental EBITDA post- • Stabilized EBITDA to increase by $1M renovation on $9M renovation 3 Vail Marriott 6 JW Marriott Denver • Comprehensive 2018 renovation of • Renovating hotel’s guestrooms, public hotel’s guestrooms and meeting space space, and meeting space following ski season • Cements position as the high-end hotel in • Reno to luxury standard; currently $175 Cherry Creek district ADR gap with luxury comp set • New restaurant / bar area to drive ROI • Every incremental $1 of rate yields ~$30K in annual EBITDA profit • $750K EBITDA upside following renovation from F&B repositioning Westin Fort Lauderdale Beach Resort 20
Frenchman’s Reef Update • Iconic location in Virgin Islands • Strong historical performance (1) • 2017 forecast of $16.7M EBITDA • 2018 pre-hurricane budget of $19.6M EBITDA • Impacted by hurricanes in September 2017 - Closed through at least 2019 - Remediation and stabilization ongoing (2) • Covered under $361M Insurance Policy • Currently negotiating with insurance companies - 2018 Guidance includes $20M of business interruption for all natural disaster impacted hotels - Insurance entitles DRH to business interruption compensation until re-opened - If rebuilt, unique opportunity to create one of the most popular Caribbean resorts • DRH recently exercised its right to terminate Marriott at Frenchman’s Reef and unencumber hotel (1) Based on pre-hurricane forecast as of July 2017. (2) $361M insurance coverage per event. 21
Intense Asset Management
Focus Asset Management Areas Labor Management Energy Food Cost • Working with third-party to reduce • Conducting comprehensive hands- • Opportunities for food cost savings labor expenses and improve on energy efficiency audits through purchasing management productivity throughout the portfolio and operational optimization • Study historical productivity and - Direct bidding with energy - Invoice Monitoring benchmark against other suppliers and LED lighting comparable hotels conversions - Menu Pricing / Menu Reengineering • Complete new staffing standards • $1.3M of annual cost savings and implement new labor identified across 17 hotels - Annual Operating Audits management system to maximize efficiency • 53% IRR and two-year payback - Specs vs Brand • Range of potential expense • Energy reduction of up to 78% for - Compliance Metrics savings: the least efficient assets - Labor Productivity - Boston Westin ($421K - $673K) • Case Study: Worthington Improvement Renaissance LED conversion - Lexington ($626K - $965K) • 150bps of F&B margin - Estimated First Year Electric improvement would yield $1.7M in - Chicago Marriott ($352 - $761K) Savings: $183K (22%) savings 23
Fortress Balance Sheet
Fortress Balance Sheet CONSERVATIVE BALANCE SHEET STRATEGY 22 UNENCUMBERED HOTELS • Completed 2017 financing program in 1H17 with 5- Unencumbered Pool 8 Encumbered Hotels year $200M term loan Hilton Boston Boston Westin The Gwen Courtyard Midtown East Vail Marriott Salt Lake City Marriott • $300M Line of Credit with no outstanding borrowings Courtyard Denver Westin Washington, DC Hotel Rex San Francisco Sonoma Renaissance Hilton Vermont - Burlington Westin San Diego • $69 million unrestricted cash at 3/31/18 Worthington Renaissance Alpharetta Marriott JW Marriott Cherry Creek Charleston Renaissance • PF 2018 Net Debt to EBITDA of 3.4x Bethesda Marriott Suites Unencumbered Pool (cont’d) HGI Times Square Frenchman’s Reef Marriott • Weighted average debt maturity of 5 years with 4.0% Havana Cabana Chicago Marriott Courtyard 5th Avenue weighted average interest rate Key West Suites Westin Fort Lauderdale L’Auberge de Sedona Orchards Inn Shorebreak Hotel Lexington Hotel The Landing Resort & Spa Hotel Palomar Phoenix LEVERAGE AT LOW END OF PEER GROUP 22 UNENCUMBERED HOTELS (~$185M in 2017 Hotel Adj. EBITDA) 9.1 8.4 8.4 WELL-LADDERED DEBT MATURITIES ($M) 400 346 4.8 4.8 Average: 4.9X 300 4.4 3.7 3.7 3.5 3.4 200 2.8 200 158 1.9 100 84 100 57 - AHT AHPBHR HT PEB RLJ CHSP PK XHR LHO DRH HST SHO 2018 2019 2020 2021 2022 2023 2024 2025 2026 Source: Baird. 2018F Net Debt plus preferred / EBITDA. 25
Key Takeaways Top-Tier Portfolio as Measured by Quality and Growth Trading at Significant Discount to Peers, Replacement Cost, and Company’s NAV Est. L’Auberge de Sedona Internal Growth Enhanced by Significant Investment in Portfolio over Last Five Years ($500M) Many Strategic Repositionings Recently The Gwen Chicago Completed and More Potential ROI Opportunities Ahead Opportunistic Balance Sheet Capacity Key West Suites 26
Forward Looking Statements Certain statements made during this presentation are forward-looking statements that are subject to risks and uncertainties. Forward-looking statements generally include the words “believe,” “expect,” “anticipate,” “plan,” “estimate,” “project,” “will,” “intend” or other similar expressions. Forward-looking statements include, without limitation, statements regarding, industry outlook, results of operations, cash flows, business strategies, growth and value opportunities, capital and other expenditures, financing plans, expense reduction initiatives and projected dispositions. Factors that could cause actual results to materially differ from those contained in the forward-looking statements include, without limitation, those risks and uncertainties discussed in the Company’s most recent Annual Report on Form 10-K, quarterly report on Form 10-Q and current reports on Form 8-K, which have been filed with the Securities and Exchange Commission, all of which you should carefully review. The forward-looking statements made are based on our beliefs, assumptions and expectations of future performance, taking into account all information currently available to us. Actual results could differ materially from the forward-looking statements made during this presentation. The forward-looking statements made during this presentation are subject to the safe harbor of the Private Securities Litigation Reform Act of 1995. Any forward-looking statement speaks only as of the date on which it is made. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this presentation is as of the date of this presentation, and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations. This presentation contains statistics and other data that has been obtained or compiled from information made available by third-party service providers. 27