DRH_8K_6.30.2015


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):
August 7, 2015
 
 
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.)
3 Bethesda Metro Center, Suite 1500
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))





The information in this Current Report on Form 8-K, including the exhibits attached hereto, is being furnished and 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. The information in this Current Report on Form 8-K shall not be deemed 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 2.02. Results of Operations and Financial Condition.
On August 7, 2015, DiamondRock Hospitality Company (the “Company”) issued a press release announcing its financial results for the three and six months ended June 30, 2015. A copy of that press release is furnished as Exhibit 99.1 and is incorporated by reference herein.
ITEM 9.01. Financial Statements and Exhibits.
(d) Exhibits.
The following exhibits are included with this report:
 
 
 
 
Exhibit No.
  
Description
 
 
99.1
  
Press release dated August 7, 2015.





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: August 7, 2015
 
 
 
By:
 
/s/ William J. Tennis
 
 
 
 
 
 
William J. Tennis
 
 
 
 
 
 
Executive Vice President, General Counsel and Corporate Secretary







Exhibit 99.1 2Q 2015



COMPANY CONTACT    

Sean Mahoney
(240) 744-1150

FOR IMMEDIATE RELEASE

DIAMONDROCK HOSPITALITY COMPANY REPORTS SECOND QUARTER 2015 RESULTS AND INCREASES FULL YEAR GUIDANCE TO REFLECT KEY WEST ACQUISITION
BETHESDA, Maryland, Friday, August 7, 2015 – DiamondRock Hospitality Company (the “Company”) (NYSE: DRH), a lodging-focused real estate investment trust that owns a portfolio of 29 premium hotels in the United States, today announced results of operations for the quarter ended June 30, 2015.

Second Quarter 2015 Highlights
Pro Forma RevPAR: Pro Forma RevPAR was $184.50, an increase of 6.0% from the comparable period of 2014 and a new record for the Company.
Pro Forma Hotel Adjusted EBITDA Margin: Pro Forma Hotel Adjusted EBITDA margin was 34.56%, an increase of 166 basis points from 2014.
Pro Forma Hotel Adjusted EBITDA: Pro Forma Hotel Adjusted EBITDA was $85.4 million, an increase of 11.3% from 2014.
Adjusted EBITDA: Adjusted EBITDA was $81.1 million, an increase of 14.3% from 2014.
Adjusted FFO: Adjusted FFO was $61.5 million and Adjusted FFO per diluted share was $0.31.
Key West Acquisition: The Company acquired the 184-suite Sheraton Suites Key West for $94.0 million on June 30, 2015.
Financing Activity: The Company refinanced the Renaissance Worthington in April 2015 with a new 10-year $85.0 million mortgage loan that bears interest at a fixed rate of 3.66%. The Company also repaid the $56.2 million mortgage loan secured by the Frenchman's Reef & Morning Star Marriott Beach Resort in May 2015.
Dividends: The Company declared a dividend of $0.125 per share during the second quarter, which was paid on July 14, 2015.
Recent Developments
Hotel Refinancing: The Company refinanced the JW Marriott Denver at Cherry Creek in July 2015 with a new 10-year $65 million mortgage loan bearing interest at a fixed rate of 4.33%.

Mark W. Brugger, President and Chief Executive Officer of DiamondRock Hospitality Company, stated, “Our second quarter results were strong and consistent with our expectations. We were particularly pleased that our RevPAR growth exceeded the upper upscale industry average and that we achieved a record profit margin for the Company as result of our focused asset management initiatives. Additionally, the execution of our external growth




strategy also drove shareholder value with an accretive acquisition in Key West, the highest RevPAR market in the United States.”
 
Operating Results    
Discussions of “Pro Forma” assumes the Company owned each of its 29 hotels since January 1, 2014 but excludes the Hilton Garden Inn Times Square Central, since the hotel opened for business on September 1, 2014. Please see “Certain Definitions” and “Non-GAAP Financial Measures” attached to this press release for an explanation of the terms “EBITDA,” “Adjusted EBITDA,” “Hotel Adjusted EBITDA Margin,” “FFO” and “Adjusted FFO.”

For the quarter ended June 30, 2015, the Company reported the following:
 
Second Quarter
 
 
2015
 
2014
Change

Pro Forma ADR

$220.97

 

$209.21

5.6
%
Pro Forma Occupancy
83.5
%
 
83.1
%
0.4 percentage points

Pro Forma RevPAR

$184.50

 

$174.13

6.0
%
Pro Forma Hotel Adjusted EBITDA Margin
34.56
%
 
32.90
%
166 basis points

Adjusted EBITDA
$81.1 million

 
$70.9 million

$10.2 million

Adjusted FFO
$61.5 million

 
$51.9 million

$9.6 million

Adjusted FFO per diluted share

$0.31

 

$0.26


$0.05


For the six months ended June 30, 2015, the Company reported the following:
 
Year To Date
 
 
2015
 
2014
Change

Pro Forma ADR

$212.01

 

$201.92

5.0
%
Pro Forma Occupancy
79.8
%
 
78.4
%
1.4 percentage points

Pro Forma RevPAR

$169.09

 

$158.26

6.8
%
Pro Forma Hotel Adjusted EBITDA Margin
30.67
%
 
29.13
%
154 basis points

Adjusted EBITDA
$129.6 million

 
$108.2 million

$21.4 million

Adjusted FFO
$99.2 million

 
$81.4 million

$17.8 million

Adjusted FFO per diluted share

$0.49

 

$0.41


$0.08


Key West Hotel Acquisition
The Company acquired the 184-suite Sheraton Suites Key West, located in Key West, Florida for $94.0 million on June 30, 2015. The purchase price represents a 12.8 multiple on forecasted 2015 Hotel Adjusted EBITDA. The hotel will continue to be managed by Ocean Properties, a leading third party manager that operates six hotels in Key West. The Company believes that there is upside in its investment by repositioning the Hotel over the next year into an all-suites, independent, boutique resort. The Company expects to improve the hotel's profit margins by approximately 500 basis points and expects the hotel to generate approximately $9.5 to $10.0 million of annual Hotel Adjusted EBITDA upon stabilization as an independent hotel.
Hotel Financing Activity
In April 2015, the Company refinanced the Renaissance Worthington with a new $85.0 million mortgage loan. The new loan has a term of 10 years and a fixed interest rate of 3.66%. The new loan is interest-only for the first two years after which principal will amortize on a 30-year schedule. The hotel was previously encumbered by a $52.6 million mortgage loan bearing interest at a fixed rate of 5.4%.


2



In May 2015, the Company repaid the mortgage loan secured by the Frenchman's Reef & Morning Star Marriott Beach Resort. The loan had an outstanding principal balance of $56.2 million and a fixed interest rate of 5.44%.
In July 2015, the Company refinanced the JW Marriott Denver at Cherry Creek with a new $65.0 million mortgage loan. The new loan has a term of 10 years and a fixed interest rate of 4.33%. The new loan is interest-only for the first year after which principal will amortize on a 30-year schedule. The hotel was previously encumbered by a $38.1 million mortgage loan bearing interest at a fixed rate of 6.47%.
Westin Boston Expansion Option Update
In connection with the 2007 acquisition of the Westin Boston Waterfront Hotel, the Company assumed an option to acquire a leasehold interest in a parcel of land adjacent to the hotel with development rights to expand the hotel. During the quarter ended June 30, 2015, the Company decided not to exercise this option. As a result, the Company recorded a non-cash impairment charge of approximately $9.6 million, which represented a write-off of the favorable lease asset and other assets related to the option.

Capital Expenditures

The Company spent approximately $32.2 million on capital improvements during the six months ended June 30, 2015, primarily related to the addition of 41 rooms at the Hilton Boston Downtown and the first phase of guest room renovation at the Chicago Marriott Downtown.

The Company continues to expect to spend approximately $85 million on capital improvements at its hotels in 2015. Significant projects include the following:

Hilton Boston Downtown: The Company completed a return on investment project at the hotel to create an incremental 41 guest rooms and upgrade additional guest rooms, which created over 90 premium rooms.
Chicago Marriott Downtown: The Company commenced a multi-year guest room renovation at the hotel. Marriott is contributing to the cost of the renovation through an amendment to the hotel's management agreement to reduce management fees for the remaining term of the agreement. The amendment is expected to reduce management fees by approximately $1.8 million in 2015. The first phase of the guest room renovation, which consisted of 140 rooms, including all 25 suites, was successfully completed during the first quarter of 2015. The Company also added Marriott's new prototype F&B grab-and-go outlet in the hotel's lobby. The second phase of the guest room renovation will be completed during the seasonally slow winter months over the next three years and is not expected to result in material disruption.
The Lodge at Sonoma: The Company expects to renovate the guest rooms at the hotel during the seasonally slow winter months of late 2015 and early 2016.
Luxury Collection Hotel Chicago: The Company is rebranding the hotel currently known as the Conrad Chicago to Starwood's Luxury Collection during the third quarter. The renovation work associated with the brand conversion will take place over the next two seasonally slow winter seasons. The Company is currently finalizing the cost estimate of this project.
Balance Sheet
As of June 30, 2015, the Company had $84.1 million of unrestricted cash on hand and approximately $1.1 billion of total debt, which consisted of property-specific mortgage debt and $90.0 million outstanding on the Company's $200.0 million senior unsecured credit facility. Subsequent to June 30, 2015, the Company repaid $50.0 million of borrowings and currently has $40.0 million outstanding on its senior unsecured credit facility.

ATM Equity Offering Program

The Company did not sell any shares under its $200 million at-the-market ("ATM") equity offering program during the second quarter. The Company currently has $128.3 million remaining under the ATM program.

3




Dividends

The Company’s Board of Directors declared a quarterly dividend of $0.125 per share to stockholders of record as of June 30, 2015. The dividend was paid on July 14, 2015.

Outlook and Guidance
The Company has provided full year and third quarter guidance for 2015, 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.  Pro Forma RevPAR and Pro Forma Hotel Adjusted EBITDA margin growth assume that all of the Company's 29 hotels were owned since January 1, 2014 but excludes the Hilton Garden Inn Times Square Central until September 1, 2015, since the hotel opened on September 1, 2014.

The Company is increasing its full year 2015 guidance to incorporate the acquisition of Sheraton Suites Key West, as follows:
 
 
Previous Guidance
Current Guidance
 
Metric
Low End
High End
Low End
High End
 
 
Pro Forma RevPAR Growth

6 percent
7 percent
6 percent
7 percent
 
Pro Forma Hotel Adjusted EBITDA Margin Growth
100 basis points
150 basis points
125 basis points
175 basis points
 
Adjusted EBITDA

$264 million
$274 million
$266.5 million
$276.5 million
 
Adjusted FFO

$201 million
$206 million
$202 million
$208 million
 
Adjusted FFO per share
(based on 201.2 million shares)

$1.00 per share
$1.02 per share
$1.00 per share
$1.03 per share

In addition, the Company expects income tax expense of $11.4 million to $15.4 million, interest expense of approximately $53 million and corporate expenses of approximately $24 million for the full year 2015.

The Company expects the following for the third quarter of 2015:

Pro Forma RevPAR growth of 3 percent to 5 percent;
Adjusted EBITDA to range from 26 percent to 26.5 percent of full year 2015 Adjusted EBITDA; and
Income tax expense of $2.5 million to $3.5 million, which assumes the Company receives the extension of the income tax agreement with the U.S. Virgin Islands related to the Frenchman's Reef & Morning Star Marriott Beach Resort during the third quarter.

The following table is presented to provide investors with selected quarterly Pro Forma operating information for 2014. The operating information assumes that all of the Company's 29 hotels were owned since January 1, 2014, with the exception of the Hilton Garden Inn Times Square Central, which opened for business on September 1, 2014.

4



 
Quarter 1, 2014
Quarter 2, 2014
Quarter 3, 2014
Quarter 4, 2014
Full Year 2014
ADR
$
193.57

$
209.21

$
207.26

$
215.08

$
206.58

Occupancy
73.5
%
83.1
%
83.5
%
75.9
%
79.0
%
RevPAR
$
142.22

$
174.13

$
173.07

$
163.21

$
163.26

Revenues (in thousands)
$
196,962

$
233,298

$
227,547

$
224,153

$
881,960

Hotel Adjusted EBITDA (in thousands)
$
48,562

$
76,755

$
70,771

$
67,535

$
263,623

        % of full Year
18.4
%
29.1
%
26.8
%
25.7
%
100.0
%
Hotel Adjusted EBITDA Margin
24.66
%
32.90
%
31.10
%
30.13
%
29.89
%
Available Rooms
952,830

963,417

982,464

999,948

3,898,659

Earnings Call
The Company will host a conference call to discuss its second quarter results on Friday, August 7, 2015, at 10:00 a.m. Eastern Time (ET). To participate in the live call, investors are invited to dial 888-310-1786 (for domestic callers) or 330-863-3357 (for international callers). The participant passcode is 75900668. 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 29 premium quality hotels with over 10,900 rooms. The Company has strategically positioned its hotels to be operated both under leading global brands such as Hilton, Marriott, and Westin and 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. 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; the ability to extend the income tax agreement, 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.

5





DIAMONDROCK HOSPITALITY COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)

 
June 30, 2015
 
December 31, 2014
ASSETS
(unaudited)
 
 
Property and equipment, net
$
2,896,383

 
$
2,764,393

Deferred financing costs, net
7,751

 
8,023

Restricted cash
60,203

 
74,730

Due from hotel managers
100,323

 
79,827

Favorable lease assets, net
24,171

 
34,274

Prepaid and other assets (1)
54,314

 
52,739

Cash and cash equivalents
84,123

 
144,365

Total assets
$
3,227,268

 
$
3,158,351

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Liabilities:
 
 
 
Mortgage debt
$
1,007,326

 
$
1,038,330

Senior unsecured credit facility
90,000

 

Total debt
1,097,326

 
1,038,330

 
 
 
 
Deferred income related to key money, net
21,027

 
21,561

Unfavorable contract liabilities, net
75,613

 
76,220

Due to hotel managers
66,965

 
59,169

Dividends declared and unpaid
25,479

 
20,922

Accounts payable and accrued expenses (2)
118,786

 
113,162

Total other liabilities
307,870

 
291,034

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; 200,735,245 and 199,964,041 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively
2,007

 
2,000

Additional paid-in capital
2,053,938

 
2,045,755

Accumulated deficit
(233,873
)
 
(218,768
)
Total stockholders’ equity
1,822,072

 
1,828,987

Total liabilities and stockholders’ equity
$
3,227,268

 
$
3,158,351









(1) Includes $40.5 million of deferred tax assets, $9.8 million of prepaid expenses and $4.0 million of other assets as of June 30, 2015.
(2) Includes $67.5 million of deferred ground rent, $17.2 million of deferred tax liabilities, $15.9 million of accrued property taxes, $5.0 million of accrued capital expenditures and $13.2 million of other accrued liabilities as of June 30, 2015.


6



 
DIAMONDROCK HOSPITALITY COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Revenues:
 
 
 
 
 
 
 
Rooms
$
181,563

 
$
165,088

 
$
326,199

 
$
294,824

Food and beverage
56,073

 
52,182

 
108,406

 
100,793

Other
12,165

 
12,664

 
24,084

 
24,401

Total revenues
249,801

 
229,934

 
458,689

 
420,018

Operating Expenses:
 
 
 
 
 
 
 
Rooms
41,993

 
41,143

 
80,457

 
79,248

Food and beverage
35,355

 
34,693

 
70,901

 
69,193

Management fees
8,903

 
8,459

 
15,103

 
13,752

Other hotel expenses
77,546

 
72,393

 
154,052

 
144,869

Depreciation and amortization
25,574

 
25,126

 
49,911

 
50,249

Impairment losses
9,675

 

 
10,461

 

Hotel acquisition costs
260

 

 
492

 

Corporate expenses
6,331

 
4,690

 
11,741

 
9,878

Gain on insurance proceeds

 
(608
)
 

 
(1,271
)
Gain on litigation settlement, net

 
(10,999
)
 

 
(10,999
)
Total operating expenses
205,637

 
174,897

 
393,118

 
354,919

Operating profit
44,164

 
55,037

 
65,571

 
65,099

 
 
 
 
 
 
 
 
Interest income
(60
)
 
(957
)
 
(150
)
 
(2,609
)
Interest expense
12,838

 
14,600

 
26,056

 
29,125

Other income, net
(167
)
 

 
(204
)
 

Gain on sale of hotel property

 
(1,290
)
 

 
(1,290
)
Gain on prepayment of note receivable

 
(13,550
)
 

 
(13,550
)
Total other expenses (income), net
12,611

 
(1,197
)
 
25,702

 
11,676

Income before income taxes
31,553

 
56,234

 
39,869

 
53,423

Income tax (expense) benefit
(6,731
)
 
(4,318
)
 
(4,405
)
 
2,530

Net income
$
24,822

 
$
51,916

 
$
35,464

 
$
55,953

Earnings per share:
 
 
 
 
 
 
 
Basic earnings per share
$
0.12

 
$
0.27

 
$
0.18

 
$
0.29

Diluted earnings per share
$
0.12

 
$
0.26

 
$
0.18

 
$
0.29

 
 
 
 
 
 
 
 
Weighted-average number of common shares outstanding:
 
 
 
 
 
 
 
Basic
200,830,064
 
195,776,924
 
200,738,301
 
195,700,864
Diluted
201,142,747
 
196,246,718
 
201,115,115
 
196,217,724


7



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, 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 GAAP. EBITDA, 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.

EBITDA and FFO

EBITDA represents net income excluding: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sale of assets; and (3) depreciation and amortization. We believe EBITDA is useful to an investor in evaluating our operating performance because it helps 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) from our operating results. In addition, covenants included in our indebtedness use EBITDA as a measure of financial compliance. We also use EBITDA as one measure in determining the value of hotel acquisitions and dispositions.

The Company computes FFO in accordance with standards established by NAREIT, which defines FFO as net income determined in accordance with 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 gain or loss on sale of assets. The Company also uses FFO as one measure in assessing its results.

Adjustments to EBITDA and FFO

We adjust EBITDA and FFO when evaluating our performance because we believe that the exclusion of certain additional recurring and non-recurring items described below provides useful supplemental information to investors regarding our ongoing operating performance and that the presentation of Adjusted EBITDA and Adjusted FFO, when combined with GAAP net income, EBITDA and FFO, is beneficial to an investor's complete understanding of our operating performance. We adjust EBITDA and FFO 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.
Non-Cash Amortization of Favorable and Unfavorable Contracts: We exclude the non-cash amortization of favorable and unfavorable contract assets and liabilities recorded in conjunction with certain acquisitions. The amortization of the favorable and unfavorable contracts does not reflect the underlying operating performance of our hotels.
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 one-time adjustments because they do not reflect our actual performance for that 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 we believe they do not accurately reflect the underlying performance of the Company.
Acquisition Costs:  We exclude acquisition transaction costs expensed during the period because we believe they do not reflect the underlying performance of the Company.
Allerton Loan: We exclude the gain from the prepayment of the loan in 2014.
Other Non-Cash and /or Unusual Items:  From time to time we incur costs or realize gains that we do not believe reflect the underlying performance of the Company. Such items include, but are not limited to, hotel pre-opening costs, hotel manager transition costs, contract termination fees, severance costs, gains or losses from legal settlements, bargain purchase gains, and insurance proceeds.
In addition, to derive Adjusted EBITDA we exclude gains or losses on dispositions and impairment losses because we believe that including them in EBITDA does not reflect the ongoing performance of our hotels. Additionally, the gains or losses on dispositions and impairment losses represent either accelerated depreciation or excess depreciation in previous periods, and depreciation is excluded from EBITDA.


8



In addition, to derive Adjusted FFO we exclude any fair value adjustments to debt instruments. Specifically, we exclude the impact of the non-cash amortization of the debt premium recorded in conjunction with the acquisition of the JW Marriott Denver at Cherry Creek and any fair market value adjustments to the Company's interest rate cap agreement.

The following tables are reconciliations of our GAAP net income to EBITDA and Adjusted EBITDA (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Net income
$
24,822

 
$
51,916

 
$
35,464

 
$
55,953

Interest expense
12,838

 
14,600

 
26,056

 
29,125

Income tax expense (benefit)
6,731

 
4,318

 
4,405

 
(2,530
)
Real estate related depreciation and amortization
25,574

 
25,126

 
49,911

 
50,249

EBITDA
69,965

 
95,960

 
115,836

 
132,797

Non-cash ground rent
1,479

 
1,596

 
2,987

 
3,292

Non-cash amortization of favorable and unfavorable contract liabilities, net
(374
)
 
(353
)
 
(727
)
 
(705
)
Impairment losses
9,675

 

 
10,461

 

Gain on insurance proceeds

 
(608
)
 

 
(1,271
)
Gain on sale of hotel property

 
(1,290
)
 

 
(1,290
)
Gain on litigation settlement (1)

 
(10,999
)
 

 
(10,999
)
Gain on prepayment of note receivable

 
(13,550
)
 

 
(13,550
)
Reversal of previously recognized Allerton income

 
(162
)
 

 
(453
)
Hotel acquisition costs
260

 
45

 
492

 
81

Hotel manager transition and pre-opening costs (2)
66

 
272

 
534

 
286

Adjusted EBITDA
$
81,071

 
$
70,911

 
$
129,583

 
$
108,188


(1) 
Includes $14.0 million of settlement proceeds, net of a $1.2 million contingency fee paid to our legal counsel and $1.8 million of legal fees and other costs incurred over the course of the legal proceedings. The $1.8 million of legal fees and other costs were previously recorded as corporate expenses and the repayment of those costs through the settlement proceeds is recorded as a reduction of corporate expenses.
(2) 
Classified as other hotel expenses on the consolidated statements of operations.

 
Full Year 2015 Guidance
 
Low End
 
High End
Net income
$
85,839

 
$
92,839

Interest expense
53,000

 
53,000

Income tax expense
11,400

 
15,400

Real estate related depreciation and amortization
100,000

 
99,000

EBITDA
250,239

 
260,239

Non-cash ground rent
5,700

 
5,700

Non-cash amortization of favorable and unfavorable contracts, net
(1,400
)
 
(1,400
)
Impairment losses
10,461

 
10,461

Hotel acquisition costs
500

 
500

Hotel manager transition and pre-opening costs
1,000

 
1,000

Adjusted EBITDA
$
266,500

 
$
276,500



9



The following tables are reconciliations of our GAAP net income to FFO and Adjusted FFO (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
 
 
 
 
 
 
 
2015
 
2014
 
2015
 
2014
Net income
$
24,822

 
$
51,916

 
$
35,464

 
$
55,953

Real estate related depreciation and amortization
25,574

 
25,126

 
49,911

 
50,249

Gain on sale of hotel property

 
(1,290
)
 

 
(1,290
)
Impairment losses
9,675

 

 
10,461

 

FFO
60,071

 
75,752

 
95,836

 
104,912

Non-cash ground rent
1,479

 
1,596

 
2,987

 
3,292

Non-cash amortization of favorable and unfavorable contract liabilities, net
(374
)
 
(353
)
 
(727
)
 
(705
)
Gain on insurance proceeds

 
(608
)
 

 
(1,271
)
Gain on litigation settlement (1)

 
(10,999
)
 

 
(10,999
)
Gain on prepayment of note receivable

 
(13,550
)
 

 
(13,550
)
Hotel acquisition costs
260

 
45

 
492

 
81

Hotel manager transition and pre-opening costs (2)
66

 
272

 
534

 
286

Reversal of previously recognized Allerton income

 
(162
)
 

 
(453
)
Fair value adjustments to debt instruments
(14
)
 
(90
)
 
66

 
(175
)
Adjusted FFO
$
61,488

 
$
51,903

 
$
99,188

 
$
81,418

Adjusted FFO per diluted share
$
0.31

 
$
0.26

 
$
0.49

 
$
0.41


(1) 
Includes $14.0 million of settlement proceeds, net of a $1.2 million contingency fee paid to our legal counsel and $1.8 million of legal fees and other costs incurred over the course of the legal proceedings. The $1.8 million of legal fees and other costs were previously recorded as corporate expenses and the repayment of those costs through the settlement proceeds is recorded as a reduction of corporate expenses.
(2) 
Classified as other hotel expenses on the consolidated statements of operations.
 
 
Full Year 2015 Guidance
 
Low End
 
High End
Net income
$
85,839

 
$
92,839

Real estate related depreciation and amortization
100,000

 
99,000

Impairment losses
10,461

 
10,461

FFO
196,300

 
202,300

Non-cash ground rent
5,700

 
5,700

Non-cash amortization of favorable and unfavorable contract liabilities, net
(1,400
)
 
(1,400
)
Hotel acquisition costs
500

 
500

Hotel manager transition and pre-opening costs
1,000

 
1,000

Fair value adjustments to debt instruments
(100
)
 
(100
)
Adjusted FFO
$
202,000

 
$
208,000

Adjusted FFO per diluted share
$
1.00

 
$
1.03

  

Use and Limitations of Non-GAAP Financial Measures

Our management and Board of Directors use EBITDA, 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

10



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 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 GAAP. 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 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.

Certain Definitions
In this release, when we discuss “Hotel Adjusted EBITDA,” we exclude from Hotel EBITDA the non-cash expense incurred by the hotels due to the straight lining of the rent from our ground lease obligations, the non-cash amortization of our favorable lease assets and other contracts, and the non-cash amortization of our unfavorable contract liabilities. Hotel EBITDA represents hotel net income excluding: (1) interest expense; (2) income taxes; and (3) depreciation and amortization. Hotel Adjusted EBITDA margins are calculated as Hotel Adjusted EBITDA divided by total hotel revenues. Net debt is calculated as total debt outstanding less unrestricted cash.

11




DIAMONDROCK HOSPITALITY COMPANY
HOTEL OPERATING DATA
Schedule of Property Level Results - Pro Forma (1) 
(unaudited and in thousands)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
% Change
 
2015
 
2014
 
% Change
 
 
 
 
 
 
 
 
 
 
 
 
ADR
$
220.97

 
$
209.21

 
5.6
 %
 
$
212.01

 
$
201.92

 
5.0
 %
Occupancy
83.5
%
 
83.1
%
 
0.4
 %
 
79.8
%
 
78.4
%
 
1.4
 %
RevPAR
$
184.50

 
$
174.13

 
6.0
 %
 
$
169.09

 
$
158.26

 
6.8
 %
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Rooms
$
178,231

 
$
167,756

 
6.2
 %
 
$
324,462

 
$
303,268

 
7.0
 %
Food and beverage
56,571

 
53,251

 
6.2
 %
 
109,725

 
103,215

 
6.3
 %
Other
12,375

 
12,289

 
0.7
 %
 
24,565

 
23,782

 
3.3
 %
Total revenues
$
247,177

 
$
233,296

 
5.9
 %
 
$
458,752

 
$
430,265

 
6.6
 %
Operating Expenses:
 
 
 
 
 
 
 
 
 
 
 
Rooms departmental expenses
$
41,463

 
$
40,666

 
2.0
 %
 
$
79,950

 
$
77,955

 
2.6
 %
Food and beverage departmental expenses
35,714

 
35,228

 
1.4
 %
 
71,902

 
69,837

 
3.0
 %
Other direct departmental
4,286

 
4,717

 
(9.1
)%
 
8,804

 
9,941

 
(11.4
)%
General and administrative
18,139

 
17,177

 
5.6
 %
 
35,607

 
33,349

 
6.8
 %
Utilities
6,586

 
6,586

 
 %
 
13,856

 
14,007

 
(1.1
)%
Repairs and maintenance
8,945

 
9,245

 
(3.2
)%
 
18,101

 
18,412

 
(1.7
)%
Sales and marketing
16,844

 
15,393

 
9.4
 %
 
32,077

 
28,938

 
10.8
 %
Franchise fees
5,043

 
4,109

 
22.7
 %
 
9,902

 
7,819

 
26.6
 %
Base management fees
6,235

 
5,749

 
8.5
 %
 
11,448

 
10,773

 
6.3
 %
Incentive management fees
2,649

 
2,814

 
(5.9
)%
 
3,695

 
3,379

 
9.4
 %
Property taxes
10,406

 
9,497

 
9.6
 %
 
21,416

 
19,841

 
7.9
 %
Ground rent
3,796

 
3,754

 
1.1
 %
 
7,578

 
7,496

 
1.1
 %
Other fixed expenses
2,750

 
2,834

 
(3.0
)%
 
5,971

 
5,666

 
5.4
 %
Hotel manager transition and pre-opening costs
66

 
272

 
(75.7
)%
 
534

 
286

 
86.7
 %
Total hotel operating expenses
162,922

 
158,041

 
3.1
 %
 
320,841

 
307,699

 
4.3
 %
Hotel EBITDA
$
84,255

 
$
75,255

 
12.0
 %
 
$
137,911

 
$
122,566

 
12.5
 %
Non-cash ground rent
1,479

 
1,580

 
(6.4
)%
 
2,987

 
3,169

 
(5.7
)%
Non-cash amortization of unfavorable contract liabilities
(364
)
 
(352
)
 
3.4
 %
 
(732
)
 
(704
)
 
4.0
 %
Hotel manager transition and pre-opening costs (2)
66

 
272

 
(75.7
)%
 
534

 
286

 
86.7
 %
Hotel Adjusted EBITDA
$
85,436

 
$
76,755

 
11.3
 %
 
$
140,700

 
$
125,317

 
12.3
 %

(1) 
Pro forma assumes the Company owned each of its 29 hotels since January 1, 2014 but excludes the Hilton Garden Inn Times Square Central, since the hotel opened for business on September 1, 2014.
(2) 
Classified as other hotel expenses on the consolidated statements of operations.




12



Market Capitalization as of June 30, 2015
(in thousands)

Enterprise Value
 
 
 
 
 
Common equity capitalization (at June 30, 2015 closing price of $12.81/share)
 
$
2,578,938

Consolidated debt
 
1,097,326

Cash and cash equivalents
 
(84,123)

Total enterprise value
 
$
3,592,141

Share Reconciliation
 
 
 
 
 
Common shares outstanding
 
200,735

Unvested restricted stock held by management and employees
 
475

Share grants under deferred compensation plan held by directors
 
112

Combined shares outstanding
 
201,322


Debt Summary as of June 30, 2015
(dollars in thousands)

Property
 
Interest Rate
 
Term
 
Outstanding Principal

 
Maturity
JW Marriott Denver at Cherry Creek (1)
 
6.47%
 
Fixed
 
$
38,055

 
July 2015
Orlando Airport Marriott
 
5.68%
 
Fixed
 
55,475

 
January 2016
Chicago Marriott Downtown Magnificent Mile
 
5.98%
 
Fixed
 
203,449

 
April 2016
Courtyard Manhattan / Fifth Avenue
 
6.48%
 
Fixed
 
48,640

 
June 2016
Marriott Salt Lake City Downtown
 
4.25%
 
Fixed
 
60,734

 
November 2020
Hilton Minneapolis
 
5.46%
 
Fixed
 
91,789

 
May 2021
Westin Washington D.C. City Center
 
3.99%
 
Fixed
 
69,711

 
January 2023
The Lodge at Sonoma, a Renaissance Resort & Spa
 
3.96%
 
Fixed
 
29,819

 
April 2023
Westin San Diego
 
3.94%
 
Fixed
 
68,286

 
April 2023
Courtyard Manhattan / Midtown East
 
4.40%
 
Fixed
 
86,000

 
August 2024
Renaissance Worthington
 
3.66%
 
Fixed
 
85,000

 
May 2025
Total Weighted-Average Interest Fixed Rate Debt
 
5.10%
 
 
 
$
836,958

 
 
 
 
 
 
 
 
 
 
 
Lexington Hotel New York
 
LIBOR + 2.25
 
Variable
 
170,368

 
October 2017 (2)
Total mortgage debt
 
 
 
 
 
$
1,007,326

 
 
Senior unsecured credit facility
 
LIBOR + 1.75
 
Variable
 
90,000

 
January 2017 (3)
Total debt
 
 
 
$
1,097,326

 
 
Total Weighted-Average Interest Rate
 
4.43%
 
 
 
 
 
 

(1) The loan was repaid on July 1, 2015, at which time we entered into a new $65 million mortgage loan with a fixed rate of 4.33%. The new loan matures in 2025 and is interest-only for the first year, after which principal will amortize on a 30-year schedule.
(2) The loan may be extended for two additional one-year terms subject to the satisfaction of certain conditions and the payment of an extension fee.
(3) The credit facility may be extended for an additional year upon the payment of applicable fees and the satisfaction of certain customary conditions.    


13



Pro Forma Operating Statistics – Second Quarter
 
 
ADR
 
Occupancy
 
RevPAR
 
Hotel Adjusted EBITDA Margin
 
 
2Q 2015
2Q 2014
B/(W)
 
2Q 2015
2Q 2014
B/(W)
 
2Q 2015
2Q 2014
B/(W)
 
2Q 2015
2Q 2014
B/(W)
Atlanta Alpharetta Marriott
 
$
156.63

$
160.85

(2.6
)%
 
77.9
%
73.9
%
4.0
 %
 
$
122.04

$
118.83

2.7
 %
 
34.07
%
35.49
%
-142 bps
Bethesda Marriott Suites
 
$
182.77

$
169.79

7.6
 %
 
77.4
%
77.6
%
(0.2
)%
 
$
141.45

$
131.68

7.4
 %
 
36.40
%
33.70
%
270 bps
Boston Westin
 
$
261.84

$
244.25

7.2
 %
 
81.7
%
87.1
%
(5.4
)%
 
$
213.80

$
212.79

0.5
 %
 
36.73
%
34.51
%
222 bps
Hilton Boston Downtown
 
$
315.17

$
281.25

12.1
 %
 
88.6
%
94.0
%
(5.4
)%
 
$
279.15

$
264.32

5.6
 %
 
45.92
%
42.31
%
361 bps
Hilton Burlington
 
$
163.37

$
164.39

(0.6
)%
 
84.7
%
78.5
%
6.2
 %
 
$
138.40

$
129.06

7.2
 %
 
41.88
%
42.16
%
-28 bps
Renaissance Charleston
 
$
248.37

$
232.47

6.8
 %
 
95.2
%
95.4
%
(0.2
)%
 
$
236.43

$
221.86

6.6
 %
 
42.90
%
41.13
%
177 bps
Hilton Garden Inn Chelsea
 
$
245.59

$
245.18

0.2
 %
 
96.7
%
97.3
%
(0.6
)%
 
$
237.51

$
238.45

(0.4
)%
 
34.39
%
45.70
%
-1131 bps
Chicago Marriott
 
$
245.52

$
228.09

7.6
 %
 
85.0
%
81.6
%
3.4
 %
 
$
208.64

$
186.21

12.0
 %
 
32.91
%
30.03
%
288 bps
Chicago Conrad
 
$
245.09

$
248.55

(1.4
)%
 
83.3
%
88.8
%
(5.5
)%
 
$
204.18

$
220.61

(7.4
)%
 
37.65
%
40.14
%
-249 bps
Courtyard Denver Downtown
 
$
207.82

$
192.74

7.8
 %
 
82.6
%
83.5
%
(0.9
)%
 
$
171.60

$
161.03

6.6
 %
 
49.44
%
51.23
%
-179 bps
Courtyard Fifth Avenue
 
$
289.68

$
299.58

(3.3
)%
 
91.7
%
89.7
%
2.0
 %
 
$
265.57

$
268.74

(1.2
)%
 
30.80
%
31.90
%
-110 bps
Courtyard Midtown East
 
$
285.21

$
299.12

(4.7
)%
 
94.3
%
93.4
%
0.9
 %
 
$
268.89

$
279.36

(3.7
)%
 
38.12
%
38.96
%
-84 bps
Fort Lauderdale Westin
 
$
172.43

$
174.86

(1.4
)%
 
84.7
%
81.0
%
3.7
 %
 
$
146.01

$
141.58

3.1
 %
 
29.78
%
19.76
%
1002 bps
Frenchman's Reef
 
$
242.58

$
218.75

10.9
 %
 
87.4
%
89.4
%
(2.0
)%
 
$
211.98

$
195.47

8.4
 %
 
25.37
%
22.24
%
313 bps
JW Marriott Denver Cherry Creek
 
$
281.04

$
260.20

8.0
 %
 
81.3
%
84.2
%
(2.9
)%
 
$
228.51

$
219.17

4.3
 %
 
36.33
%
33.34
%
299 bps
Inn at Key West
 
$
210.18

$
205.61

2.2
 %
 
90.6
%
87.5
%
3.1
 %
 
$
190.42

$
179.90

5.8
 %
 
50.25
%
54.43
%
-418 bps
Key West Sheraton Suites
 
$
235.94

$
220.66

6.9
 %
 
94.6
%
88.6
%
6.0
 %
 
$
223.20

$
195.41

14.2
 %
 
40.10
%
35.47
%
463 bps
Lexington Hotel New York
 
$
265.83

$
259.45

2.5
 %
 
95.3
%
94.0
%
1.3
 %
 
$
253.42

$
243.98

3.9
 %
 
37.55
%
37.96
%
-41 bps
Hilton Minneapolis
 
$
157.27

$
153.53

2.4
 %
 
83.9
%
85.8
%
(1.9
)%
 
$
131.95

$
131.68

0.2
 %
 
27.98
%
31.84
%
-386 bps
Orlando Airport Marriott
 
$
110.28

$
101.68

8.5
 %
 
75.7
%
79.7
%
(4.0
)%
 
$
83.46

$
81.03

3.0
 %
 
24.67
%
22.16
%
251 bps
Hotel Rex
 
$
226.06

$
193.88

16.6
 %
 
90.1
%
89.0
%
1.1
 %
 
$
203.76

$
172.64

18.0
 %
 
37.19
%
33.83
%
336 bps
Salt Lake City Marriott
 
$
150.61

$
141.95

6.1
 %
 
75.1
%
70.2
%
4.9
 %
 
$
113.10

$
99.71

13.4
 %
 
33.52
%
32.34
%
118 bps
Shorebreak
 
$
227.09

$
201.89

12.5
 %
 
81.5
%
85.3
%
(3.8
)%
 
$
185.07

$
172.23

7.5
 %
 
32.74
%
27.44
%
530 bps
The Lodge at Sonoma
 
$
286.72

$
261.79

9.5
 %
 
84.0
%
86.5
%
(2.5
)%
 
$
240.84

$
226.35

6.4
 %
 
34.27
%
32.33
%
194 bps
Hilton Garden Inn Times Square Central
 
$
277.41

 N/A

N/A

 
98.5
%
 N/A

N/A

 
$
273.37

 N/A

N/A

 
49.34
%
 N/A

N/A
Vail Marriott
 
$
161.62

$
160.65

0.6
 %
 
52.4
%
48.8
%
3.6
 %
 
$
84.68

$
78.40

8.0
 %
 
8.31
%
7.61
%
70 bps
Westin San Diego
 
$
185.89

$
163.55

13.7
 %
 
86.4
%
87.4
%
(1.0
)%
 
$
160.61

$
143.02

12.3
 %
 
32.99
%
32.50
%
49 bps
Westin Washington D.C. City Center
 
$
257.18

$
213.86

20.3
 %
 
87.3
%
83.5
%
3.8
 %
 
$
224.44

$
178.60

25.7
 %
 
43.07
%
38.29
%
478 bps
Renaissance Worthington
 
$
184.68

$
176.59

4.6
 %
 
71.2
%
70.0
%
1.2
 %
 
$
131.57

$
123.63

6.4
 %
 
37.53
%
34.60
%
293 bps
Pro Forma Total (1)
 
$
220.97

$
209.21

5.6
 %
 
83.5
%
83.1
%
0.4
 %
 
$
184.50

$
174.13

6.0
 %
 
34.56
%
32.90
%
166 bps

(1) Assumes all hotels were owned as of January 1, 2014 but excludes the Hilton Garden Inn Times Square Central (282 rooms), which opened for business on September 1, 2014.

14



Pro Forma Operating Statistics – Year to Date
 
 
ADR
 
Occupancy
 
RevPAR
 
Hotel Adjusted EBITDA Margin
 
 
YTD 2015
YTD 2014
B/(W)
 
YTD 2015
YTD 2014
B/(W)
 
YTD 2015
YTD 2014
B/(W)
 
YTD 2015
YTD 2014
B/(W)
Atlanta Alpharetta Marriott
 
$
165.05

$
165.84

(0.5
)%
 
73.1
%
70.5
%
2.6
 %
 
$
120.67

$
116.93

3.2
 %
 
35.10
%
35.30
%
-20 bps
Bethesda Marriott Suites
 
$
177.33

$
167.91

5.6
 %
 
67.1
%
66.3
%
0.8
 %
 
$
118.95

$
111.28

6.9
 %
 
29.62
%
26.97
%
265 bps
Boston Westin
 
$
234.85

$
221.08

6.2
 %
 
77.3
%
76.1
%
1.2
 %
 
$
181.44

$
168.24

7.8
 %
 
29.63
%
25.90
%
373 bps
Hilton Boston Downtown
 
$
270.15

$
234.08

15.4
 %
 
79.1
%
88.4
%
(9.3
)%
 
$
213.69

$
206.96

3.3
 %
 
35.42
%
33.51
%
191 bps
Hilton Burlington
 
$
149.26

$
144.01

3.6
 %
 
73.9
%
71.4
%
2.5
 %
 
$
110.35

$
102.78

7.4
 %
 
34.03
%
34.73
%
-70 bps
Renaissance Charleston
 
$
225.84

$
208.13

8.5
 %
 
91.3
%
91.5
%
(0.2
)%
 
$
206.24

$
190.49

8.3
 %
 
37.35
%
36.19
%
116 bps
Hilton Garden Inn Chelsea
 
$
205.97

$
210.94

(2.4
)%
 
92.2
%
94.4
%
(2.2
)%
 
$
190.00

$
199.08

(4.6
)%
 
25.14
%
38.26
%
-1312 bps
Chicago Marriott
 
$
213.90

$
199.04

7.5
 %
 
71.1
%
69.8
%
1.3
 %
 
$
152.18

$
139.02

9.5
 %
 
20.71
%
19.81
%
90 bps
Chicago Conrad
 
$
213.82

$
210.89

1.4
 %
 
73.4
%
80.3
%
(6.9
)%
 
$
156.92

$
169.42

(7.4
)%
 
23.67
%
27.56
%
-389 bps
Courtyard Denver Downtown
 
$
198.69

$
183.36

8.4
 %
 
78.8
%
82.5
%
(3.7
)%
 
$
156.66

$
151.19

3.6
 %
 
46.40
%
47.41
%
-101 bps
Courtyard Fifth Avenue
 
$
252.85

$
260.95

(3.1
)%
 
87.8
%
87.2
%
0.6
 %
 
$
221.92

$
227.66

(2.5
)%
 
18.63
%
20.70
%
-207 bps
Courtyard Midtown East
 
$
249.30

$
261.88

(4.8
)%
 
89.7
%
90.0
%
(0.3
)%
 
$
223.70

$
235.57

(5.0
)%
 
27.59
%
30.56
%
-297 bps
Fort Lauderdale Westin
 
$
202.13

$
203.68

(0.8
)%
 
90.7
%
86.1
%
4.6
 %
 
$
183.39

$
175.29

4.6
 %
 
36.66
%
28.43
%
823 bps
Frenchman's Reef
 
$
287.65

$
273.65

5.1
 %
 
88.5
%
90.3
%
(1.8
)%
 
$
254.47

$
247.18

2.9
 %
 
29.94
%
29.76
%
18 bps
JW Marriott Denver Cherry Creek
 
$
270.71

$
248.52

8.9
 %
 
77.8
%
81.7
%
(3.9
)%
 
$
210.50

$
203.16

3.6
 %
 
32.20
%
31.46
%
74 bps
Inn at Key West
 
$
247.13

$
229.84

7.5
 %
 
92.4
%
91.4
%
1.0
 %
 
$
228.44

$
210.12

8.7
 %
 
57.33
%
59.21
%
-188 bps
Key West Sheraton Suites
 
$
273.42

$
257.35

6.2
 %
 
96.7
%
92.6
%
4.1
 %
 
$
264.30

$
238.34

10.9
 %
 
46.17
%
42.54
%
363 bps
Lexington Hotel New York
 
$
224.30

$
225.90

(0.7
)%
 
92.2
%
87.5
%
4.7
 %
 
$
206.81

$
197.60

4.7
 %
 
24.86
%
25.57
%
-71 bps
Hilton Minneapolis
 
$
141.89

$
138.01

2.8
 %
 
75.3
%
71.4
%
3.9
 %
 
$
106.78

$
98.48

8.4
 %
 
19.62
%
21.57
%
-195 bps
Orlando Airport Marriott
 
$
126.62

$
111.88

13.2
 %
 
82.7
%
85.3
%
(2.6
)%
 
$
104.73

$
95.39

9.8
 %
 
33.92
%
29.83
%
409 bps
Hotel Rex
 
$
226.72

$
188.90

20.0
 %
 
84.2
%
83.7
%
0.5
 %
 
$
190.82

$
158.09

20.7
 %
 
33.65
%
29.04
%
461 bps
Salt Lake City Marriott
 
$
154.92

$
144.34

7.3
 %
 
74.2
%
68.7
%
5.5
 %
 
$
114.92

$
99.21

15.8
 %
 
34.07
%
31.49
%
258 bps
Shorebreak
 
$
216.55

$
194.15

11.5
 %
 
80.3
%
81.6
%
(1.3
)%
 
$
173.95

$
158.43

9.8
 %
 
26.81
%
24.57
%
224 bps
The Lodge at Sonoma
 
$
253.07

$
240.46

5.2
 %
 
79.4
%
72.7
%
6.7
 %
 
$
200.87

$
174.83

14.9
 %
 
25.60
%
22.96
%
264 bps
Hilton Garden Inn Times Square Central
 
$
230.42

 N/A

N/A

 
96.4
%
 N/A

N/A

 
$
222.03

 N/A

N/A

 
43.78
%
 N/A

N/A
Vail Marriott
 
$
307.06

$
298.18

3.0
 %
 
71.8
%
67.7
%
4.1
 %
 
$
220.58

$
201.73

9.3
 %
 
40.77
%
39.42
%
135 bps
Westin San Diego
 
$
186.76

$
163.72

14.1
 %
 
83.8
%
84.7
%
(0.9
)%
 
$
156.55

$
138.75

12.8
 %
 
34.24
%
31.52
%
272 bps
Westin Washington D.C. City Center
 
$
234.49

$
210.80

11.2
 %
 
80.0
%
69.0
%
11.0
 %
 
$
187.68

$
145.39

29.1
 %
 
36.32
%
30.16
%
616 bps
Renaissance Worthington
 
$
184.05

$
178.05

3.4
 %
 
72.9
%
71.0
%
1.9
 %
 
$
134.25

$
126.44

6.2
 %
 
37.99
%
35.26
%
273 bps
Pro Forma Total (1)
 
$
212.01

$
201.92

5.0
 %
 
79.8
%
78.4
%
1.4
 %
 
$
169.09

$
158.26

6.8
 %
 
30.67
%
29.13
%
154 bps

(1) Assumes all hotels were owned as of January 1, 2014 but excludes the Hilton Garden Inn Times Square Central (282 rooms), which opened for business on September 1, 2014.



15



 
Pro Forma Hotel Adjusted EBITDA Reconciliation
 
 
Second Quarter 2015
 
 
 
 
 
Plus:
Plus:
Plus:
Equals:
 
 
Total Revenues
 
Net Income / (Loss)
Depreciation
Interest Expense
Non-Cash Adjustments (1)
Hotel Adjusted EBITDA
Atlanta Alpharetta Marriott
 
$
4,799

 
$
1,254

$
381

$

$

$
1,635

Bethesda Marriott Suites
 
$
4,656

 
$
(213
)
$
367

$

$
1,541

$
1,695

Boston Westin
 
$
26,231

 
$
7,422

$
2,210

$

$
3

$
9,635

Hilton Boston Downtown
 
$
10,493

 
$
3,624

$
1,152

$

$
42

$
4,818

Hilton Burlington
 
$
4,308

 
$
1,327

$
454

$

$
23

$
1,804

Renaissance Charleston
 
$
4,026

 
$
1,366

$
393

$

$
(32
)
$
1,727

Hilton Garden Inn Chelsea
 
$
3,740

 
$
924

$
362

$

$

$
1,286

Chicago Marriott
 
$
32,040

 
$
5,278

$
2,545

$
3,119

$
(397
)
$
10,545

Chicago Conrad
 
$
8,039

 
$
2,289

$
738

$

$

$
3,027

Courtyard Denver Downtown
 
$
2,951

 
$
1,174

$
285

$

$

$
1,459

Courtyard Fifth Avenue
 
$
4,507

 
$
60

$
448

$
828

$
52

$
1,388

Courtyard Midtown East
 
$
8,041

 
$
1,373

$
684

$
1,008

$

$
3,065

Fort Lauderdale Westin
 
$
10,560

 
$
2,016

$
1,129

$

$

$
3,145

Frenchman's Reef
 
$
17,234

 
$
2,390

$
1,608

$
374

$

$
4,372

JW Marriott Denver Cherry Creek
 
$
6,630

 
$
1,332

$
523

$
554

$

$
2,409

Inn at Key West
 
$
2,177

 
$
920

$
174

$

$

$
1,094

Key West Sheraton Suites
 
$
4,566

 
$
1,318

$
513

$

$

$
1,831

Lexington Hotel New York
 
$
17,936

 
$
2,080

$
3,356

$
1,293

$
6

$
6,735

Minneapolis Hilton
 
$
14,838

 
$
705

$
2,357

$
1,291

$
(202
)
$
4,151

Orlando Airport Marriott
 
$
6,031

 
$
110

$
577

$
801

$

$
1,488

Hotel Rex
 
$
1,952

 
$
584

$
142

$

$

$
726

Salt Lake City Marriott
 
$
7,208

 
$
983

$
758

$
675

$

$
2,416

Shorebreak
 
$
3,696

 
$
703

$
522

$

$
(15
)
$
1,210

The Lodge at Sonoma
 
$
6,901

 
$
1,684

$
377

$
304

$

$
2,365

Hilton Garden Inn Times Square Central
 
$
7,124

 
$
2,738

$
777

$

$

$
3,515

Vail Marriott
 
$
4,679

 
$
(108
)
$
497

$

$

$
389

Westin San Diego
 
$
8,520

 
$
1,058

$
1,018

$
689

$
46

$
2,811

Westin Washington D.C. City Center
 
$
9,971

 
$
2,348

$
1,157

$
743

$
47

$
4,295

Renaissance Worthington
 
$
10,447

 
$
2,559

$
585

$
775

$
2

$
3,921

Pro Forma Total (2)
 
$
247,177

 
$
46,560

$
25,312

$
12,454

$
1,116

$
85,436

(1) The non-cash adjustments include expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations, the non-cash amortization of our favorable lease assets, and the non-cash amortization of our unfavorable contract liabilities.
(2) Assumes all hotels were owned as of January 1, 2014 but excludes the Hilton Garden Inn Times Square Central, which opened for business on September 1, 2014.
 

16



Pro Forma Hotel Adjusted EBITDA Reconciliation
 
 
Second Quarter 2014
 
 
 
 
 
Plus:
Plus:
Plus:
Equals:
 
 
Total Revenues
 
Net Income / (Loss)
Depreciation
Interest Expense
Non-Cash Adjustments (1)
Hotel Adjusted EBITDA
Atlanta Alpharetta Marriott
 
$
4,581

 
$
1,219

$
407

$

$

$
1,626

Bethesda Marriott Suites
 
$
4,413

 
$
(414
)
$
360

$

$
1,541

$
1,487

Boston Westin
 
$
25,514

 
$
6,611

$
2,191

$

$
2

$
8,804

Hilton Boston Downtown
 
$
9,305

 
$
2,833

$
1,062

$

$
42

$
3,937

Hilton Burlington
 
$
3,961

 
$
1,225

$
422

$

$
23

$
1,670

Renaissance Charleston
 
$
4,075

 
$
1,300

$
408

$

$
(32
)
$
1,676

Hilton Garden Inn Chelsea
 
$
3,766

 
$
1,229

$
492

$

$

$
1,721

Chicago Marriott
 
$
29,534

 
$
2,820

$
3,255

$
3,192

$
(397
)
$
8,870

Chicago Conrad
 
$
8,188

 
$
2,322

$
965

$

$

$
3,287

Courtyard Denver Downtown
 
$
2,754

 
$
1,137

$
274

$

$

$
1,411

Courtyard Fifth Avenue
 
$
4,543

 
$
120

$
439

$
838

$
52

$
1,449

Courtyard Midtown East
 
$
8,318

 
$
1,585

$
685

$
971

$

$
3,241

Fort Lauderdale Westin
 
$
10,894

 
$
1,058

$
1,095

$

$

$
2,153

Frenchman's Reef
 
$
16,246

 
$
1,240

$
1,563

$
810

$

$
3,613

JW Marriott Denver Cherry Creek
 
$
6,032

 
$
922

$
517

$
572

$

$
2,011

Inn at Key West
 
$
1,962

 
$
906

$
162

$

$

$
1,068

Key West Sheraton Suites
 
$
3,913

 
$
875

$
513

$

$

$
1,388

Lexington Hotel New York
 
$
17,124

 
$
1,473

$
3,265

$
1,732

$
31

$
6,501

Minneapolis Hilton
 
$
14,833

 
$
1,108

$
2,423

$
1,321

$
(129
)
$
4,723

Orlando Airport Marriott
 
$
5,546

 
$
(184
)
$
599

$
814

$

$
1,229

Hotel Rex
 
$
1,673

 
$
372

$
194

$

$

$
566

Salt Lake City Marriott
 
$
6,759

 
$
750

$
745

$
691

$

$
2,186

Shorebreak
 
$
3,648

 
$
536

$
465

$

$

$
1,001

The Lodge at Sonoma
 
$
6,517

 
$
1,415

$
382

$
310

$

$
2,107

Vail Marriott
 
$
4,101

 
$
(201
)
$
513

$

$

$
312

Westin San Diego
 
$
7,446

 
$
576

$
1,097

$
701

$
46

$
2,420

Westin Washington D.C. City Center
 
$
8,093

 
$
1,042

$
1,249

$
761

$
47

$
3,099

Renaissance Worthington
 
$
9,557

 
$
1,924

$
643

$
738

$
2

$
3,307

Pro Forma Total (2)
 
$
233,296

 
$
35,799

$
26,385

$
13,451

$
1,228

$
76,755


(1) 
The non-cash adjustments include expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations, the non-cash amortization of our favorable lease assets and the non-cash amortization of our unfavorable contract liabilities.
(2) 
Assumes all hotels were owned as of January 1, 2014 but excludes the Hilton Garden Inn Times Square Central, which opened for business on September 1, 2014.
 


17



 
Pro Forma Hotel Adjusted EBITDA Reconciliation
 
 
Year to Date 2015
 
 
 
 
 
Plus:
Plus:
Plus:
Equals:
 
 
Total Revenues
 
Net Income / (Loss)
Depreciation
Interest Expense
Non-Cash Adjustments (1)
Hotel Adjusted EBITDA
Atlanta Alpharetta Marriott
 
$
9,663

 
$
2,618

$
774

$

$

$
3,392

Bethesda Marriott Suites
 
$
7,981

 
$
(1,474
)
$
755

$

$
3,083

$
2,364

Boston Westin
 
$
46,325

 
$
9,268

$
4,456

$

$
4

$
13,728

Hilton Boston Downtown
 
$
15,753

 
$
3,259

$
2,237

$

$
84

$
5,580

Hilton Burlington
 
$
6,938

 
$
1,410

$
906

$

$
45

$
2,361

Renaissance Charleston
 
$
7,176

 
$
1,959

$
784

$

$
(63
)
$
2,680

Hilton Garden Inn Chelsea
 
$
5,995

 
$
783

$
724

$

$

$
1,507

Chicago Marriott
 
$
48,139

 
$
401

$
4,108

$
6,255

$
(795
)
$
9,969

Chicago Conrad
 
$
12,097

 
$
1,257

$
1,606

$

$

$
2,863

Courtyard Denver Downtown
 
$
5,379

 
$
1,929

$
567

$

$

$
2,496

Courtyard Fifth Avenue
 
$
7,500

 
$
(1,252
)
$
897

$
1,649

$
103

$
1,397

Courtyard Midtown East
 
$
13,343

 
$
306

$
1,369

$
2,006

$

$
3,681

Fort Lauderdale Westin
 
$
25,715

 
$
7,171

$
2,256

$

$

$
9,427

Frenchman's Reef
 
$
38,304

 
$
7,126

$
3,178

$
1,164

$

$
11,468

JW Marriott Denver Cherry Creek
 
$
12,268

 
$
1,786

$
1,052

$
1,112

$

$
3,950

Inn at Key West
 
$
5,036

 
$
2,541

$
346

$

$

$
2,887

Key West Sheraton Suites
 
$
10,423

 
$
3,786

$
1,026

$

$

$
4,812

Lexington Hotel New York
 
$
29,259

 
$
(2,111
)
$
6,685

$
2,663

$
37

$
7,274

Minneapolis Hilton
 
$
24,607

 
$
(2,048
)
$
4,703

$
2,576

$
(404
)
$
4,827

Orlando Airport Marriott
 
$
14,714

 
$
2,256

$
1,138

$
1,597

$

$
4,991

Hotel Rex
 
$
3,667

 
$
950

$
284

$

$

$
1,234

Salt Lake City Marriott
 
$
14,643

 
$
2,148

$
1,495

$
1,346

$

$
4,989

Shorebreak
 
$
6,950

 
$
1,136

$
756

$

$
(29
)
$
1,863

The Lodge at Sonoma
 
$
12,354

 
$
1,803

$
753

$
607

$

$
3,163

Hilton Garden Inn Times Square Central
 
$
11,556

 
$
3,505

$
1,554

$

$

$
5,059

Vail Marriott
 
$
19,260

 
$
6,871

$
982

$

$

$
7,853

Westin San Diego
 
$
17,569

 
$
2,518

$
2,033

$
1,373

$
91

$
6,015

Westin Washington D.C. City Center
 
$
16,822

 
$
2,185

$
2,347

$
1,483

$
95

$
6,110

Renaissance Worthington
 
$
20,872

 
$
5,266

$
1,165

$
1,495

$
4

$
7,930

Pro Forma Total (2)
 
$
458,752

 
$
63,848

$
49,382

$
25,326

$
2,255

$
140,700

(1) The non-cash adjustments include expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations, the non-cash amortization of our favorable lease assets, and the non-cash amortization of our unfavorable contract liabilities.
(2) Assumes all hotels were owned as of January 1, 2014 but excludes the Hilton Garden Inn Times Square Central, which opened for business on September 1, 2014.
 

18



Pro Forma Hotel Adjusted EBITDA Reconciliation
 
 
Year to Date 2014
 
 
 
 
 
Plus:
Plus:
Plus:
Equals:
 
 
Total Revenues
 
Net Income / (Loss)
Depreciation
Interest Expense
Non-Cash Adjustments (1)
Hotel Adjusted EBITDA
Atlanta Alpharetta Marriott
 
$
9,164

 
$
2,425

$
810

$

$

$
3,235

Bethesda Marriott Suites
 
$
7,564

 
$
(1,774
)
$
723

$

$
3,091

$
2,040

Boston Westin
 
$
41,898

 
$
6,460

$
4,386

$

$
4

$
10,850

Hilton Boston Downtown
 
$
14,764

 
$
2,690

$
2,173

$

$
84

$
4,947

Hilton Burlington
 
$
6,374

 
$
1,296

$
873

$

$
45

$
2,214

Renaissance Charleston
 
$
7,036

 
$
1,803

$
806

$

$
(63
)
$
2,546

Hilton Garden Inn Chelsea
 
$
6,302

 
$
1,428

$
983

$

$

$
2,411

Chicago Marriott
 
$
45,991

 
$
(2,830
)
$
6,370

$
6,364

$
(794
)
$
9,110

Chicago Conrad
 
$
12,751

 
$
1,599

$
1,915

$

$

$
3,514

Courtyard Denver Downtown
 
$
5,161

 
$
1,902

$
545

$

$

$
2,447

Courtyard Fifth Avenue
 
$
7,662

 
$
(1,056
)
$
869

$
1,670

$
103

$
1,586

Courtyard Midtown East
 
$
13,987

 
$
954

$
1,375

$
1,945

$

$
4,274

Fort Lauderdale Westin
 
$
25,589

 
$
5,086

$
2,190

$

$

$
7,276

Frenchman's Reef
 
$
38,594

 
$
6,794

$
3,077

$
1,615

$

$
11,486

JW Marriott Denver Cherry Creek
 
$
11,249

 
$
1,359

$
1,031

$
1,149

$

$
3,539

Inn at Key West
 
$
4,469

 
$
2,322

$
324

$

$

$
2,646

Key West Sheraton Suites
 
$
9,259

 
$
2,913

$
1,026

$

$

$
3,939

Lexington Hotel New York
 
$
27,787

 
$
(2,943
)
$
6,526

$
3,460

$
63

$
7,106

Minneapolis Hilton
 
$
23,474

 
$
(1,977
)
$
4,663

$
2,636

$
(258
)
$
5,064

Orlando Airport Marriott
 
$
12,507

 
$
883

$
1,226

$
1,622

$

$
3,731

Hotel Rex
 
$
3,096

 
$
484

$
415

$

$

$
899

Salt Lake City Marriott
 
$
13,753

 
$
1,449

$
1,505

$
1,377

$

$
4,331

Shorebreak
 
$
6,789

 
$
738

$
930

$

$

$
1,668

The Lodge at Sonoma
 
$
10,321

 
$
988

$
764

$
618

$

$
2,370

Vail Marriott
 
$
17,588

 
$
5,894

$
1,040

$

$

$
6,934

Westin San Diego
 
$
14,719

 
$
966

$
2,185

$
1,398

$
91

$
4,640

Westin Washington D.C. City Center
 
$
13,350

 
$
48

$
2,364

$
1,519

$
95

$
4,026

Renaissance Worthington
 
$
19,067

 
$
3,959

$
1,288

$
1,472

$
4

$
6,723

Pro Forma Total (2)
 
$
430,265

 
$
43,860

$
52,382

$
26,845

$
2,465

$
125,317


(1) 
The non-cash adjustments include expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations, the non-cash amortization of our favorable lease assets and the non-cash amortization of our unfavorable contract liabilities.
(2) 
Assumes all hotels were owned as of January 1, 2014 but excludes the Hilton Garden Inn Times Square Central, which opened for business on September 1, 2014.
 


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