INN Summit Hotel Properties Inc

First Quarter 2023 Pro Forma RevPAR Grows 19.3%

Operating Income Increase Drives Adjusted EBITDAre Growth of 35% to $44.4 Million

Common Dividend Increased 50% to an Annualized $0.24 Per Share

AUSTIN, Texas, May 3, 2023 /PRNewswire/ -- Summit Hotel Properties, Inc. (NYSE: INN) (the "Company"), today announced results for the first quarter ended March 31, 2023.

"We are pleased with our first quarter operating results as average daily rate in our pro forma portfolio reached the highest level in the Company's history, increasing 11% year-over-year and driving 19% RevPAR growth for the quarter. Our operating results were particularly strong in urban markets, where RevPAR increased 25% from the prior year and the recently acquired NewcrestImage hotels where RevPAR grew 22% year-over-year and exceeded 2019 levels for the first time in our ownership history.  The industry's recovery is increasingly being driven by midweek, group and business-oriented demand which positions our high-quality portfolio – of which approximately half is located in urban markets – particularly well for this new phase of growth," said Jonathan P. Stanner, the Company's President and Chief Executive Officer.

"Given the continued recovery in operating fundamentals and strength of our balance sheet, our Board of Directors has authorized an increase of our common dividend by 50%, to $0.24 per share on an annualized basis. This increase reflects the confidence we have in the ongoing strength and durability of our business, supported by continued positive forward booking trends and pace data, while still maintaining a prudent payout ratio," continued Mr. Stanner.

First Quarter 2023 Summary

• Net Loss: Net loss attributable to common stockholders narrowed to $5.2 million, or $0.05 per diluted share, compared to a net loss of $12.4 million, or $0.12 per diluted share, for the first quarter of 2022.
• Pro forma RevPAR:   Pro forma RevPAR increased 19.3 percent to $118.18 compared to the first quarter of 2022. Pro forma ADR increased 11.2 percent to $171.63 compared to the same period in 2022, and pro forma occupancy increased 7.3 percent to 68.9 percent.
• Same Store RevPAR:   Same Store RevPAR increased 19.3 percent to $116.28 compared to the first quarter of 2022. Same store ADR increased 11.2 percent to $169.33 compared to the same period in 2022, and same store occupancy increased 7.3 percent to 68.7 percent.
• Pro Forma Hotel EBITDA ⁽¹⁾:  Pro forma hotel EBITDA increased 26.8 percent to $62.9 million from $49.6 million in the same period in 2022. Pro forma hotel EBITDA margin expanded to 34.5 percent from 33.0 percent in the same period of 2022.
• Same Store Hotel EBITDA ⁽¹⁾:  Same store hotel EBITDA increased 25.8 percent to $59.0 million from $46.8 million in the same period in 2022. Same store hotel EBITDA margin expanded to 34.3 percent from 32.5 percent in the same period of 2022.
• Adjusted EBITDAre ⁽¹⁾:  Adjusted EBITDAre increased 35.0 percent to $44.4 million from $32.9 million in the first quarter of 2022.
• Adjusted FFO ⁽¹⁾:  Adjusted FFO was $26.3 million, or $0.22 per diluted share, compared to $20.1 million, or $0.17 per diluted share, in the first quarter of 2022.

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

Pending Transaction Activity

As previously announced, the Company remains under contract to dispose of an aggregate of six hotels totaling 750 guestrooms and a vacant land parcel. The aggregate gross sales price for the pending disposition activity is $79.9 million and the hotel transactions are expected to close during the second quarter of 2023 with the vacant land sale closing expected in the second half of 2023. The sales price for all transactions represents a 3.9% capitalization rate based on net operating income after a 4% FF&E reserve for the year ended December 31, 2022. The Company expects to forego between $33 million and $38 million of future near-term required capital expenditures at the six hotels as a result of the sales which would reduce the all-in capitalization rate to approximately 2.6%. All of the pending dispositions are wholly owned assets and net proceeds will be used to reduce the Company's overall balance sheet net leverage by repaying outstanding debt and increasing liquidity.

The four-hotel portfolio totaling 467 guestrooms is under contract for a gross sales price of $28.1 million. The hotels for sale are:

• 151-guestroom – Hyatt Place Chicago/Lombard/Oak Brook
• 126-guestroom – Hyatt Place Chicago/Hoffman Estates
• 97-guestroom – Hilton Garden Inn Minneapolis/Eden Prairie
• 93-guestroom – Holiday Inn Express & Suites Eden Prairie – Minnetonka

The two-hotel portfolio totaling 283 guestrooms is under contract for a gross sales price of $50.5 million. The hotels for sale are:

• 160-guestroom – Residence Atlanta Midtown/Peachtree at 17^th
• 123-guestroom – Courtyard Kansas City Country Club Plaza

The Company makes no assurances that it will be able to complete the sale transactions based on the current contractual terms or at all.

Capital Markets & Balance Sheet

On March 24, 2023, subsidiaries of the GIC joint venture entered into two $100 million interest rate swaps to fix one-month term SOFR at 3.354% until January 2026. The interest rate swaps have an effective date of July 1, 2023, and will increase the Company's fixed rate indebtedness to approximately 73% of total pro rata debt outstanding and approximately 79% when included the Company's fixed coupon preferred securities.

On March 31, 2023, the Company exercised the first of four available maturity date extension options on its $400 million senior revolving credit facility. The new maturity date of the revolving credit facility is September 30, 2023, and the Company has three remaining six-month extension options at the Company's sole discretion available that result in a fully extended maturity date of March 31, 2025.

As of March 31, 2023, inclusive of its pro rata share of the GIC Joint Venture credit facility, the Company had the following:

• Outstanding debt of $1.2 billion with a weighted average interest rate of 4.81 percent. After giving effect to interest rate derivative agreements, $748.4 million, or 64 percent, of our outstanding debt had an average fixed interest rate, and $416.0 million, or 36 percent, had a variable interest rate.
• Unrestricted cash and cash equivalents of $45.9 million.
• Revolving credit facility availability of $366.5 million on its $400.0 million credit facility.
• Total liquidity of $412.4 million, including unrestricted cash and cash equivalents and revolving credit facility availability.

Common Dividend Increased 50%

On April 27, 2023, the Company declared an increase to its quarterly cash dividend rate to $0.06 per share on its common stock and per common unit of limited partnership interest in Summit Hotel OP, LP. The quarterly dividend of $0.06 per share represents an increase of $0.02 per share, or 50%, and an annualized dividend yield of 3.9% based on the closing price of shares of the common stock on April 26, 2023.

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, 2023, to holders of record as of May 17, 2023.

2023 Outlook

The Company is reiterating its previously provided outlook for the full year 2023 based on 103 lodging assets, 61 of which were wholly owned as of May 3, 2023. There are no pending acquisitions, dispositions, or additional capital markets activities assumed in the Company's full year 2023 outlook.

First Quarter 2023 Earnings Conference Call

The Company will conduct its quarterly conference call on Thursday, May 4, 2023, 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, 2023.

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 properties with efficient operating models primarily in the upscale segment of the lodging industry. As of May 3, 2023, the Company's portfolio consisted of 103 assets, 61 of which are wholly owned, with a total of 15,334 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, 2022, 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") and 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, transaction costs, debt transaction costs, premiums on redemption of preferred shares, losses from net casualties, non-cash interest income and non-cash income tax related adjustments to our deferred tax asset. 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, and certain transaction costs related to lodging property acquisition activities and debt, 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 depreciation and amortization expense on assets at our corporate offices, which is de minimus. 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.