BETHESDA, Md.--(BUSINESS WIRE)--RLJ Lodging Trust (NYSE:RLJ) today reported results for the three and nine months ended September 30, 2018.

Highlights

• Sold Vinoy Renaissance for total consideration of $188.5 million, representing 19.6x TTM EBITDA
• Sold Embassy Suites Napa Valley for $102.0 million, equating to 14.6x TTM EBITDA
• Sold DoubleTree Burlington Vermont for $35.0 million, representing 17.3x TTM EBITDA inclusive of required capital expenditures
• Sold Holiday Inn Fisherman's Wharf for gross proceeds of $75.3 million subsequent to quarter-end, representing 18.8x TTM EBITDA
• Repaid $85.0 million mortgage loan secured by the Knickerbocker Hotel subsequent to quarter-end
• Pro forma RevPAR decreased 0.8%
• Net income was $74.7 million
• Adjusted EBITDA increased 22.4% to $132.7 million
• Adjusted FFO per diluted common share and unit was $0.58

“We are proud of our team's accomplishments over the last twelve months, as we have continued to execute incredibly well on our strategic initiatives, and are tracking ahead of our expectations for each of our objectives,” commented Leslie D. Hale, President and Chief Executive Officer. “We have sold non-core assets for over $700 million at a combined trailing EBITDA multiple of 16.5x and exceeded our leverage targets. Through these dispositions and subsequent debt reduction, RLJ is well positioned to deliver shareholder value in 2019 and beyond. Furthermore, we were very pleased with cost control initiatives during the third quarter that led us to exceed our revised guidance range despite transitory headwinds.”

Financial and Operating Results

Performance metrics such as Occupancy, Average Daily Rate (“ADR”), Revenue Per Available Room (“RevPAR”), Hotel EBITDA, and Hotel EBITDA Margin are Pro forma. The prefix “Pro forma” as defined by the Company, denotes operating results which include results for periods prior to its ownership and excludes sold hotels. Pro forma RevPAR and Pro forma Hotel EBITDA Margin are reported on a comparable basis and therefore exclude any hotels sold during the period and non-comparable hotels that were not open for operation or were closed for renovation for comparable periods. Explanations of EBITDA, EBITDAre, Adjusted EBITDA, Hotel EBITDA, Hotel EBITDA Margin, FFO, and Adjusted FFO, as well as reconciliations of those measures to net income or loss, if applicable, are included within this release. Trailing twelve months ("TTM") represents the twelve months of results prior to the disposition date.

Net income for the three months ended September 30, 2018, increased $70.5 million to $74.7 million over the comparable period in 2017. For the nine months ended September 30, 2018, net income increased $94.6 million to $162.9 million over the comparable period in 2017. For the three months and nine months ended September 30, 2017, net income included transaction costs of $32.6 million and $36.9 million, respectively, primarily related to the FelCor merger.

Pro forma RevPAR for the three months ended September 30, 2018, decreased 0.8% over the comparable period in 2017, driven by a Pro forma ADR increase of 0.9%, and by a Pro forma Occupancy decrease of 1.6%. Hurricane Florence, which directly affected the Company's Myrtle Beach and Charleston markets that account for 5% of the Company's EBITDA, impacted Pro forma RevPAR by 40 basis points. The Company also experienced incremental softness in Louisville, Austin, and Denver. Excluding these three markets and the impact from Hurricane Florence, Pro forma RevPAR would have increased 0.8%. For the nine months ended September 30, 2018, Pro forma RevPAR decreased 0.1% over the comparable period in 2017, driven by a Pro forma ADR increase of 0.3%, and by a Pro forma Occupancy decrease of 0.3%.

Pro forma Hotel EBITDA Margin for the three months ended September 30, 2018, was 32.3%, a decrease of 183 basis points over the comparable period in 2017. The impact of Proposition 13 on our acquired California hotels decreased margins by 36 basis points. For the nine months ended September 30, 2018, Pro forma Hotel EBITDA Margin decreased 132 basis points over the comparable period in 2017 to 32.7%.

Pro forma Hotel EBITDA for the three months ended September 30, 2018, decreased $8.9 million to $140.0 million, representing a 6.0% decrease over the comparable period in 2017. For the three months ended September 30, 2017, Pro forma Hotel EBITDA includes results from prior ownership of $37.6 million from the hotel properties acquired pursuant to the FelCor merger.

For the nine months ended September 30, 2018, Pro forma Hotel EBITDA decreased $17.2 million to $422.0 million, representing a 3.9% decrease over the comparable period in 2017. For the nine months ended September 30, 2017, Pro forma Hotel EBITDA includes results from prior ownership of $132.9 million from the hotel properties acquired pursuant to the FelCor merger.

Adjusted FFO for the three months ended September 30, 2018, increased $14.9 million to $101.4 million, representing a 17.2% increase over the comparable period in 2017. For the nine months ended September 30, 2018, Adjusted FFO increased $71.1 million to $310.8 million, representing a 29.7% increase over the comparable period in 2017.

Adjusted FFO per diluted common share and unit for the three months ended September 30, 2018, decreased $0.03 to $0.58, representing a 4.9% decrease over the comparable period in 2017. For the nine months ended September 30, 2018, Adjusted FFO per diluted common share and unit decreased $0.07 to $1.77, representing a 3.8% decrease over the comparable period in 2017.

Adjusted EBITDA for the three months ended September 30, 2018, increased $24.3 million to $132.7 million, representing a 22.4% increase over the comparable period in 2017. For the nine months ended September 30, 2018, Adjusted EBITDA increased $117.2 million to $408.3 million, representing a 40.3% increase over the comparable period in 2017.

Non-recurring items and other adjustments which were noteworthy for the three months ended September 30, 2018, include a $1.7 million loss on extinguishment of indebtedness. For the nine months ended September 30, 2018, non-recurring items and other adjustments which were noteworthy include a gain on extinguishment of indebtedness of $6.0 million.

Non-recurring items are included in net income but are excluded from Adjusted EBITDA and Adjusted FFO, as applicable. A complete listing of non-recurring items is provided in the Non-GAAP reconciliation tables located in this press release.

Net cash flow from operating activities totaled $313.5 million for the nine months ended September 30, 2018, representing a 51.2% increase over the comparable period in 2017.

Dispositions

During the three months ended September 30, 2018, the Company sold the 205-room Embassy Suites Napa Valley for $102.0 million in July 2018, the 152-room DoubleTree Hotel Columbia in August 2018 for $12.9 million, the 362-room Vinoy Renaissance St. Petersburg Resort & Golf Club for total consideration of $188.5 million in August 2018, and the 309-room DoubleTree by Hilton Burlington Vermont for $35.0 million in September 2018.

Subsequent Events

The Holiday Inn San Francisco - Fisherman's Wharf consists of two separate buildings, the 342-room Columbus Street building and the 243-room Annex building. On October 31, 2018, the ground lease under the Columbus Street building expired and the building was transferred to the lessor in accordance with the ground lease. On October 15, 2018, the Company separately sold the remaining 243-room Annex building for a contractual sales price of $75.3 million of which the Company's pro rata share was approximately $30.4 million.

On November 5, 2018, the Company repaid the $85.0 million mortgage loan secured by the Knickerbocker Hotel with corporate cash. The repayment will reduce annual interest expense by over $4 million.

Balance Sheet

As of September 30, 2018, the Company had $425.4 million of unrestricted cash on its balance sheet, $600.0 million available on its revolving credit facility, and $2.3 billion of debt outstanding.

The Company’s ratio of net debt to Adjusted EBITDAfor the trailing twelve-month period ended September 30, 2018, was 3.5x.

Dividends

The Company’s Board of Trustees declared a cash dividend of $0.33 per common share of beneficial interest in the third quarter. The dividend was paid on October 15, 2018, to shareholders of record as of September 28, 2018.

The Company's Board of Trustees declared a preferred dividend of $0.4875 on its Series A cumulative convertible preferred shares. The dividend was paid on October 31, 2018, to shareholders of record as of September 28, 2018.

2018 Outlook

The Company’s outlook includes all hotels owned as of November 6, 2018. Potential future acquisitions or dispositions could result in a material change to the Company’s outlook. The 2018 outlook incorporates the Company's third quarter results including the impact from Hurricane Florence, asset sales, including $4 million of Pro forma Hotel EBITDA related to the transfer and sale of Holiday Inn San Francisco - Fisherman's Wharf, recent trends in Denver, Austin, and Louisville, and risks associated with the ongoing labor strike in San Francisco. The outlook is also based on a number of other assumptions, many of which are outside the Company’s control and all of which are subject to change.

About Us

RLJ Lodging Trust is a self-advised, publicly traded real estate investment trust that owns primarily premium-branded, high-margin, focused-service and compact full-service hotels. The Company's portfolio consists of 150 hotels with approximately 28,600 rooms located in 25 states and the District of Columbia and an ownership interest in one unconsolidated hotel with 171 rooms.