Summit Hotel Properties Suffers 2020 Net Loss of $158.2M 

Summit Hotel Properties Inc. reported a net loss of $46.8 million for the fourth quarter ended Dec. 31, 2020, and $158.2 million for full-year 2020.

“Hotel demand remained stable during the fourth quarter and combined with strong market share gains across our portfolio and the efficient operating model of our business, led to hotel-level profitability for the second consecutive quarter and positive adjusted EBITDAre for the full year,” said Jonathan P. Stanner, the company’s president/CEO. “While 2020 was an extremely challenging year for our business, we took meaningful action in response, which has positioned the company well for the future, including the successful completion of a second amendment to our revolving and term loan credit facilities. The modification provides for key financial covenant waivers through March 31, 2022, full access to our $400 million revolver, significant acquisition capacity and overall enhanced flexibility. Combined with our recent $287.5 million convertible notes offering, we have greatly enhanced our liquidity which uniquely positions us to opportunistically pursue a broad range of capital alternatives and growth opportunities as our business continues to recover.”

Fourth-Quarter 2020 Summary

  • Net loss attributable to common stockholders was $46.8 million, or ($0.45) per diluted share, compared with net income of $5.5 million, or $0.05 per diluted share, in the same period of 2019.
  • Pro forma RevPAR decreased 63.7% to $42.79 from the same period in 2019. Pro forma ADR decreased 35.4% to $100.27 compared to the same period in 2019, and pro forma occupancy decreased 43.8% to 42.7%.
  • Same-store RevPAR decreased 64.0% to $41.85 from the same period in 2019. Same-store ADR decreased 35.9% to $98.49 compared to the same period in 2019, and same-store occupancy decreased 43.9% to 42.5%.
  • Pro forma hotel EBITDA was $2.4 million, a decrease of 94.8% from the same period in 2019. Pro forma hotel EBITDA margin contracted to 5.0% from 34.7% in the same period of 2019.
  • Adjusted EBITDAre decreased to ($2.1) million from $40.9 million in the same period of 2019.
  • AFFO was ($15.1) million, or ($0.14) per diluted share, compared to $27.0 million, or $0.26 per diluted share, in the same period of 2019.
  • The company invested $3.4 million in capital improvements during the fourth quarter.
  • Average monthly cash burn run-rate for the fourth quarter was $6.8 million and current liquidity, including cash on hand, is approximately $400 million resulting in nearly 60 months of liquidity at current corporate cash burn levels.

Full-Year 2020 Summary

  • Net loss attributable to common stockholders was $158.2 million, or ($1.52) per diluted share, compared with net income of $67.8 million, or $0.65 per diluted share, in the same period of 2019.
  • Pro forma RevPAR decreased 59.2% to $52.16 from the same period in 2019. Pro forma ADR decreased 25.7% to $120.36 compared to the same period in 2019, and pro forma occupancy decreased 45.1% to 43.3%.
  • Same-store RevPAR decreased 59.3% to $51.09 from the same period in 2019. Same-store ADR decreased 25.6% to $118.83 compared to the same period in 2019, and same-store occupancy decreased 45.3% to 43.0%.
  • Pro forma hotel EBITDA was $27.8 million, a decrease of 87.1% from the same period in 2019. Pro forma hotel EBITDA margin contracted to 11.9% from 37.6% in the same period of 2019.
  • Adjusted EBITDAre decreased 92.2% to $14.4 million from $185.3 million in the same period of 2019.
  • Adjusted FFO was ($38.6) million, or ($0.37) per diluted share, compared to $130.4 million, or $1.25 per diluted share, in the same period of 2019.
  • The company invested $22.6 million in capital improvements during 2020.

Capital Markets & Balance Sheet
On Dec. 31, 2020, inclusive of its pro rata share of the joint venture credit facility, the company had the following:

  • Pro rata outstanding debt of $1.0 billion with a weighted average interest rate of 3.50%.
  • After giving effect to interest rate derivative agreements, $545.8 million, or 53%, of its pro rata outstanding debt had fixed interest rates, and $485.9 million, or 47%, had variable interest rates.
  • Pro rata unrestricted cash and cash equivalents of $19.7 million.
  • Revolving credit facility availability of $165.0 million, plus an additional $50.0 million available to borrow subject to certain requirements.

On Jan. 12, 2021, the company closed on a $287.5 million 1.50% convertible senior notes offering due February 2026 with an initial conversion price of $11.99 per share. Concurrent with the offering, the company used $21.1 million of the offering proceeds to enter into capped call transactions with various counterparties that effectively increased the conversion price to $15.26 per share, which represents a 75% premium over the last reported sale price of common stock on Jan. 7. Net proceeds from the offering were used to repay the company’s then-outstanding senior revolving credit facility balance from $160.0 million to zero and the $225 million senior term loan maturing in November 2022 down to $126.5 million.

On Feb. 5, the company amended the credit agreements for its $400 million revolving credit facility and three senior term loans totaling approximately $550 million to extend the covenant waiver period, increase liquidity, create investment capacity and enhance overall flexibility.

Key terms and enhancements of the amendments:

  • Waiver of key financial covenants through March 31, 2022 (with covenant testing to resume June 30, 2022). Certain financial and other covenants are modified or adjusted through Dec. 31, 2023.
  • Full availability of $400 million revolver, subject to certain conditions, which is an increase of $20 million compared to the previous amendment. The $400 million revolver currently has an outstanding balance of $10 million. Combined with current cash of approximately $25 million, the company has more than $400 million of total liquidity.
  • Ability to fund up to $150 million of new investments with existing liquidity subject to maintaining total liquidity of at least $150 million. The $150 million acquisition allotment may also be increased for certain future capital events.
  • Unlimited ability to fund acquisitions with equity proceeds so long as the assets acquired are contributed to the unencumbered asset pool. Equity-funded acquisitions not contributed to the unencumbered asset pool are permitted subject to a $300 million limit.
  • Continuation of the company’s ability to make preferred distributions and invest in various capital improvement projects.
  • Flexibility to use net proceeds from future capital events to repay outstanding balances on the revolving credit facility first and subsequently reduce certain term loan balances to preserve future liquidity.

On Feb. 15, inclusive of its pro rata share of the joint venture credit facility, the company had the following:

  • Pro rata outstanding debt of $1.1 billion with a weighted average interest rate of 3.21%.
  • After giving effect to interest rate derivative agreements, $833.0 million, or 77%, of its pro rata outstanding debt had fixed interest rates, and $242.4 million, or 23%, had variable interest rates.
  • Pro rata unrestricted cash and cash equivalents of $23.5 million.
  • Revolving credit facility availability of $330.0 million, plus an additional $50.0 million available to borrow subject to certain requirements.

The company’s balance sheet continues to be well-positioned with no debt maturities until November 2022 and ample current capacity to pay off all maturing debt through at least year-end 2023.

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