Summit Hotel Properties Inc INN

Operating Income of $23.5 million for First Quarter 2024

Adjusted EBITDAre Grows 10% to $48.8 million; Adjusted FFO Increases 14% to $0.24 per Share

Sale of Three Hotels for $84.0 Million Further Deleverages Balance Sheet Subsequent to Quarter End

Common Dividend Increased 33% to Annualized $0.32 per Share

AUSTIN, Texas, May 1, 2024 /PRNewswire/ -- Summit Hotel Properties, Inc. (NYSE: INN) (the "Company"), today announced results for the three months ended March 31, 2024.

"We are pleased with our strong first quarter financial results, highlighted by 10 percent Adjusted EBITDAre growth and 14 percent Adjusted FFO growth.  RevPAR increased 1.5 percent in our pro forma portfolio during the quarter which exceeded the total U.S. and upscale RevPAR growth rates by 130 basis points and 140 basis points, respectively. Hotel EBITDA margins expanded 80 basis points from the first quarter of last year driven by strong cost controls that led to a decrease in operating expenses on a per occupied room basis year-over-year," said Jonathan P. Stanner, the Company's President and Chief Executive Officer.

"Subsequent to quarter end, we successfully completed the sale of three assets for $84.0 million at an attractive blended capitalization rate of 6.8 percent. The dispositions will further deleverage the balance sheet, enhance our liquidity position, and better position the Company for future growth.   We have updated our full year 2024 outlook to incorporate our strong first quarter results and a continued positive outlook for the remainder of 2024, which results in an increase in Adjusted EBITDAre and Adjusted FFO after consideration of adjustments related to recent asset sales.  Finally, our Board of Directors has authorized an increase of our common dividend to $0.32 per share on an annualized basis, an increase of 33 percent, which reflects the confidence we have in our operating results and the durability of our cash flows," continued Mr. Stanner.

First Quarter 2024 Summary

• Net Loss: Net loss attributable to common stockholders was $2.1 million, or $0.02 per diluted share, compared to a net loss of $5.2 million, or $0.05 per diluted share, for the first quarter of 2023.
• Pro forma RevPAR: Pro forma RevPAR increased 1.5 percent to $124.18 compared to the first quarter of 2023. Pro forma ADR decreased 1.4 percent to $173.01 compared to the same period in 2023, and pro forma occupancy increased 3.0 percent to 71.8 percent.
• Same Store RevPAR: Same Store RevPAR increased 1.7 percent to $123.19 compared to the first quarter of 2023. Same store ADR decreased 1.3 percent to $171.91 and same store occupancy increased 3.1 percent to 71.7 percent.
• Pro Forma Hotel EBITDA⁽¹⁾: Pro forma hotel EBITDA increased 5.6 percent to $68.6 million from $65.0 million in the same period in 2023. Pro forma hotel EBITDA margin expanded approximately 80 basis points to 36.5 percent from 35.7 percent in the same period of 2023.
• Same Store Hotel EBITDA⁽¹⁾: Same store hotel EBITDA increased 5.9 percent to $66.7 million from $63.0 million in the same period in 2023. Same store hotel EBITDA margin expanded approximately 90 basis points to 36.2 percent from 35.3 percent in the same period of 2023.
• Adjusted EBITDAre⁽¹⁾: Adjusted EBITDAre increase 9.8 percent to $48.8 million from $44.4 million in the first quarter of 2023.
• Adjusted FFO⁽¹⁾: Adjusted FFO was $30.0 million, or $0.24 per diluted share, compared to $26.3 million, or $0.22 per diluted share, in the first quarter of 2023.

The Company's results for the three months ended March 31, 2024 and 2023 are as follows (in thousands, except per share amounts and metrics):

Transaction Activity

Subsequent to quarter-end, the Company completed the sale of three hotels containing 529 guestrooms for a gross sales price of $84 million. The aggregate sales price for the transactions represents a blended 6.8 percent capitalization rate based the estimated net operating income after a FF&E reserve for the full year 2024 and after consideration of approximately $13 million of foregone near-term required capital expenditures. Net proceeds from the transaction were used to repay debt and other general corporate purposes, which included reducing the Company's corporate revolving credit facility balance from $55 million to zero. Sales transactions details below:

• The Company sold the Courtyard and SpringHill Suites New Orleans Warehouse Arts District, containing 410 guestrooms, for a gross sales price of $73 million in April. The aggregate sales price for the transaction represents a 6.7 percent capitalization rate based on the estimated net operating income after a 5.0 percent FF&E reserve for the full year 2024 and after consideration of approximately $10 million of foregone near-term required capital expenditures. The transaction will result in an estimated net gain on sale of $28 million which will be recorded in the second quarter.
  
  
• Through its joint venture with GIC, the Company sold the 119-guestroom Hilton Garden Inn College Station for a gross sales price of $11 million in April. The sales price for the transaction represents a 7.9 percent capitalization rate based on the estimated net operating income after a 4.0 percent FF&E reserve for the full year 2024 and after consideration of approximately $3 million of foregone near-term required capital expenditures. Net proceeds from the transaction were used to repay debt and other general corporate purposes of the joint venture, including a partial repayment of the GIC joint venture term loan by $6 million.

Capital Markets and Balance Sheet

The Company continues to enhance its balance sheet including successfully closing the following previously announced transactions:

• In February 2024, the Company completed a new $200 million senior unsecured term loan financing (the "2024 Term Loan"). The 2024 Term Loan provides for a fully extended maturity date of February 2029 and interest rate pricing ranging from 135 basis points to 235 basis points over the applicable adjusted term SOFR. Proceeds from the 2024 Term Loan financing, along with asset sale proceeds, cash on hand, and revolver availability, were used to repay in full the Company's $225 million term loan that was scheduled to mature in February 2025.
  
  
• In January 2024, subsidiaries of the GIC joint venture entered into a $100 million interest rate swap to fix one-month term SOFR at 3.77 percent until January 2026, which compares to the current term SOFR rate of 5.32. The interest rate swap has an effective date of October 1, 2024.

On a pro rata basis as of March 31, 2024, the Company had the following outstanding indebtedness and liquidity available:

• Outstanding debt of $1.2 billion with a weighted average interest rate of 4.84 percent. After giving effect to interest rate derivative agreements, $848.8 million, or 73 percent, of our outstanding debt had an average fixed interest rate, and $309.7 million, or 27 percent, had a variable interest rate.
  
  
• Unrestricted cash and cash equivalents of $49.6 million.

On a pro rata basis as of April 30, 2024, the Company currently estimates it has the following outstanding indebtedness and liquidity available:

• As a result of the 2024 Term Loan financing, the Company has no significant debt maturities until 2026 and has an average length to maturity of approximately 3.3 years.
  
  
• Outstanding debt of $1.1 billion with a weighted average interest rate of 4.67 percent. After giving effect to interest rate derivative agreements, $848.8 million, or 77 percent, of our outstanding debt had an average fixed interest rate, and $251.6 million, or 23 percent, had a variable interest rate.
  
  
• Unrestricted cash and cash equivalents of $68.1 million.
  
  
• Total liquidity of $434.7 million, including unrestricted cash and cash equivalents and revolving credit facility availability.

Common Dividend Increased 33% to Annualized $0.32 Per Share

On May 1, 2024, the Company declared a 33 percent increase to its quarterly cash dividend rate to $0.08 per share on its common stock and per common unit of limited partnership interest in Summit Hotel OP, LP. The quarterly dividend of $0.08 per share represents an annualized dividend yield of 5.3 percent, based on the closing price of shares of the common stock on April 30, 2024.

In addition, the Board of Directors declared a quarterly cash dividend of:

• $0.390625 per share on its 6.25% Series E Cumulative Redeemable Preferred Stock
• $0.3671875 per share on its 5.875% Series F Cumulative Redeemable Preferred Stock.
• $0.328125 per unit on its 5.25% Series Z Cumulative Perpetual Preferred Units

The dividends are payable on May 31, 2024, to holders of record as of May 17, 2024.

2024 Outlook

The Company's updated outlook for the full year 2024 based on 96 lodging assets, 54 of which were wholly owned as of May 1, 2024. The updated outlook incorporates all transaction activity closed to date, including the three hotels sold subsequent to quarter end, and there are no additional acquisitions, dispositions, or capital markets activities assumed in the Company's full year 2024 outlook beyond the transactions already completed.  The Company estimates that the sold hotels subsequent to quarter-end would have contributed approximately $4.0 million of Adjusted EBITDAre for the remainder of 2024.

First Quarter 2024 Earnings Conference Call

The Company will conduct its quarterly conference call on Thursday, May 2, 2024, at 9:00 AM ET.

1. To access the conference call, please pre-register using this link. Registrants will receive a confirmation with dial-in details.
   
   
2. A live webcast of the conference call can be accessed using this link. A replay of the webcast will be available in the Investors section of the Company's website, www.shpreit.com, until July 31, 2024.

Supplemental Disclosures

In conjunction with this press release, the Company has furnished a financial supplement with additional disclosures on its website. Visit www.shpreit.com for more information. The Company has no obligation to update any of the information provided to conform to actual results or changes in portfolio, capital structure or future expectations.

About Summit Hotel Properties

Summit Hotel Properties, Inc. is a publicly traded real estate investment trust focused on owning premium-branded lodging facilities with efficient operating models primarily in the upscale segment of the lodging industry. As of May 1, 2024, the Company's portfolio consisted of 96 assets, 54 of which are wholly owned, with a total of 14,256 guestrooms located in 24 states.

For additional information, please visit the Company's website, www.shpreit.com, and follow on Twitter at @SummitHotel_INN and on Facebook at facebook.com/SummitHotelProperties.

Forward-Looking Statements

This press release contains statements that are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally identifiable by use of forward-looking terminology such as "may," "will," "should," "potential," "intend," "expect," "seek," "anticipate," "estimate," "approximately," "believe," "could," "project," "predict," "forecast," "continue," "plan," "likely," "would" or other similar words or expressions. Forward-looking statements are based on certain assumptions and can include future expectations, future plans and strategies, financial and operating projections, or other forward-looking information. Examples of forward-looking statements include the following: the Company's ability to realize growth from the deployment of renovation capital; projections of the Company's revenues and expenses, capital expenditures or other financial items; descriptions of the Company's plans or objectives for future operations, acquisitions, dispositions, financings, redemptions or services; forecasts of the Company's future financial performance and potential increases in average daily rate, occupancy, RevPAR, room supply and demand, EBITDAre, Adjusted EBITDAre, FFO and AFFO; the Company's outlook with respect to pro forma RevPAR, pro forma RevPAR growth, RevPAR, RevPAR growth, AFFO, AFFO per diluted share and unit and renovation capital deployed; and descriptions of assumptions underlying or relating to any of the foregoing expectations regarding the timing of their occurrence. These forward-looking statements are subject to various risks and uncertainties, not all of which are known to the Company and many of which are beyond the Company's control, which could cause actual results to differ materially from such statements. These risks and uncertainties include, but are not limited to, the state of the U.S. economy, supply and demand in the hotel industry, and other factors as are described in greater detail in the Company's filings with the Securities and Exchange Commission ("SEC"). Unless legally required, the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.

For information about the Company's business and financial results, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections of the Company's Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC, and its quarterly and other periodic filings with the SEC. The Company undertakes no duty to update the statements in this release to conform the statements to actual results or changes in the Company's expectations.

Non-GAAP Financial Measures

We disclose certain "non-GAAP financial measures," which are measures of our historical financial performance. Non-GAAP financial measures are financial measures not prescribed by Generally Accepted Accounting Principles ("GAAP"). These measures are as follows: (i) Funds From Operations ("FFO") and Adjusted Funds from Operations ("AFFO"), (ii) Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA"), Earnings before Interest, Taxes, Depreciation and Amortization for Real Estate ("EBITDAre"), Adjusted EBITDAre, and hotel EBITDA (as described below). We caution investors that amounts presented in accordance with our definitions of non-GAAP financial measures may not be comparable to similar measures disclosed by other companies, since not all companies calculate these non-GAAP financial measures in the same manner. Our non-GAAP financial measures should be considered along with, but not as alternatives to, net income (loss) as a measure of our operating performance. Our non-GAAP financial measures may include funds that may not be available for our discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, debt service obligations and other commitments and uncertainties. Although we believe that our non-GAAP financial measures can enhance the understanding of our financial condition and results of operations, these non-GAAP financial measures are not necessarily better indicators of any trend as compared to a comparable measure prescribed by GAAP such as net income (loss).

Funds From Operations ("FFO") and Adjusted FFO ("AFFO")

As defined by Nareit, FFO represents net income or loss (computed in accordance with GAAP), excluding preferred dividends, gains (or losses) from sales of real property, impairment losses on real estate assets, items classified by GAAP as extraordinary, the cumulative effect of changes in accounting principles, plus depreciation and amortization related to real estate assets, and adjustments for unconsolidated partnerships, and joint ventures. AFFO represents FFO excluding amortization of deferred financing costs, franchise fees, equity-based compensation expense, debt transaction costs, premiums on redemption of preferred shares, losses from net casualties, non-cash lease expense, non-cash interest income and non-cash income tax related adjustments to our deferred tax assets. Unless otherwise indicated, we present FFO and AFFO applicable to our common shares and common units. We present FFO and AFFO because we consider FFO and AFFO an important supplemental measure of our operational performance and believe it is frequently used by securities analysts, investors, and other interested parties in the evaluation of REITs, many of which present FFO and AFFO when reporting their results. FFO and AFFO are intended to exclude GAAP historical cost depreciation and amortization, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO and AFFO exclude depreciation and amortization related to real estate assets, gains and losses from real property dispositions and impairment losses on real estate assets, FFO and AFFO provide performance measures that, when compared year over year, reflect the effect to operations from trends in occupancy, guestroom rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income. Our computation of FFO differs slightly from the computation of Nareit-defined FFO related to the reporting of corporate depreciation and amortization expense. Our computation of FFO may also differ from the methodology for calculating FFO used by other equity REITs and, accordingly, may not be comparable to such other REITs. FFO and AFFO should not be considered as an alternative to net income (loss) (computed in accordance with GAAP) as an indicator of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions. Where indicated in this release, FFO is based on our computation of FFO and not the computation of Nareit-defined FFO unless otherwise noted.

EBITDA, EBITDAre, Adjusted EBITDAre, and Hotel EBITDA

In September 2017, Nareit proposed a standardized performance measure, called EBITDAre, which is based on EBITDA and is expected to provide additional relevant information about REITs as real estate companies in support of growing interest among generalist investors. The conclusion was reached that, while dedicated REIT investors have long been accustomed to utilizing the industry's supplemental measures such as FFO and net operating income ("NOI") to evaluate the investment quality of REITs as real estate companies, it would be helpful to generalist investors for REITs as real estate companies to also present EBITDAre as a more widely known and understood supplemental measure of performance. EBITDAre is intended to be a supplemental non-GAAP performance measure that is independent of a company's capital structure and will provide a uniform basis for one measurement of the enterprise value of a company compared to other REITs.

EBITDAre, as defined by Nareit, is calculated as EBITDA, excluding: (i) loss and gains on disposition of property and (ii) asset impairments, if any. We believe EBITDAre is useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results.

We make additional adjustments to EBITDAre when evaluating our performance because we believe that the exclusion of certain additional non-recurring or unusual items described below provides useful supplemental information to investors regarding our ongoing operating performance. We believe that the presentation of Adjusted EBITDAre, when combined with the primary GAAP presentation of net income, is useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results.

With respect to hotel EBITDA, we believe that excluding the effect of corporate-level expenses and non-cash items provides a more complete understanding of the operating results over which individual hotels and operators have direct control. We believe the property-level results provide investors with supplemental information on the ongoing operational performance of our hotels and effectiveness of the third-party management companies operating our business on a property-level basis.

We caution investors that amounts presented in accordance with our definitions of EBITDA, EBITDAre, adjusted EBITDAre, and hotel EBITDA may not be comparable to similar measures disclosed by other companies, since not all companies calculate these non-GAAP measures in the same manner. EBITDA, EBITDAre, adjusted EBITDAre, and hotel EBITDA should not be considered as an alternative measure of our net income (loss) or operating performance. EBITDA, EBITDAre, adjusted EBITDAre, and hotel EBITDA may include funds that may not be available for our discretionary use due to functional requirements to conserve funds for capital expenditures and property acquisitions and other commitments and uncertainties. Although we believe that EBITDA, EBITDAre, adjusted EBITDAre, and hotel EBITDA can enhance your understanding of our financial condition and results of operations, these non-GAAP financial measures are not necessarily a better indicator of any trend as compared to a comparable GAAP measure such as net income (loss). Above, we include a quantitative reconciliation of EBITDA, EBITDAre, adjusted EBITDAre and hotel EBITDA to the most directly comparable GAAP financial performance measure, which is net income (loss) and operating income (loss).

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SOURCE Summit Hotel Properties, Inc.