Pebblebrook sees improvement in city hotels in Q3
Pebblebrook Hotel Trust for the third quarter ended September 30 reported a comparable RevPAR of $ 142.48, ADR of $ 272.54 and occupancy rate of 52.3%.
âFor the first time since the start of the pandemic, we have achieved a positive adjusted FFO [funds from operations]in the third trimester; in this case, $ 21.4 million, âsaid Jon E. Bortz, president / chairman / CEO of Pebblebrook Hotel Trust. âWe experienced strong growth at our resorts throughout the quarter, and business and leisure travel improved at many of our city hotels. As the resumption of business travel temporarily halted from mid-August to mid-September due to concerns about the Delta variant and many companies delaying their plans to return to the office, demand from companies has started. to accelerate again in mid-September and continued throughout October. Current hotel demand and future booking trends for the rest of the year and early 2022 are encouraging and recovering, led by our resorts and properties in Los Angeles, Boston, Philadelphia and San Diego. We are also delighted with the great success we have had this year in reallocating the capital of our recent real estate sales into $ 384 million for very attractive and immediately accretive investment opportunities.
Trends in hotel operations in Q3
- Comparable hotel EBITDA of $ 66.6 million, driven by the company’s lifestyle resorts and improved business demand at its city hotels.
- ADR for the same properties of $ 272.54 was 38% higher in the third quarter of 2019, driven by rate premiums from leisure-oriented travelers and price escalation in our urban markets.
- The RevPAR of comparable properties of $ 142.48 increased sequentially 49% from the second quarter of 2021 to the third quarter of 2021, ending down only 37.8% from the third quarter of 2019.
- Hotel demand and future bookings temporarily eased from mid-August to mid-September due to the increase in the number of cases induced by the Delta variant.
- The demand trends and the dynamics of reservations accelerated from mid-September and continue until October; leisure remains healthy and demand from business groups and passengers is improving every week.
- For the fourth quarter of 2021, the company expects a 38% to 42% decrease in revenue from rooms at the same properties and total revenue compared to the fourth quarter of 2019.
âDespite the pause in the recovery in demand caused by concerns around the Delta variant, our results exceeded expectations, led by the comparable ADR which beat the third quarter of 2019,â noted Bortz. âThese exceptional results are largely due to our resorts, which generated room rates more than 57% higher than the comparable quarter in 2019, with a RevPAR higher of 21.8%. EBITDA for hotels in our resorts in the third quarter was 45.4% higher than the comparable quarter of 2019 and EBITDA margins for hotels in our resorts increased by more than 1,000 basis points, a significant achievement in this difficult environment. We are also delighted with the positive progress of our hotel management teams in attracting additional associates to our hotels to fill vacancies while increasing operational efficiency and expanding the use of technology at our properties, and we thank them. all for their heroic efforts during these very difficult times for the hospitality industry.
Strategic capital investments and real estate redevelopments
In the third quarter, Pebblebrook made $ 25.8 million in capital investments across its portfolio. It completed $ 52.8 million in capital and project investments since the start of the year through September, which included the completion of the $ 11.7 million L’Auberge Del Mar redevelopment. in the second trimester.
The company plans to invest a total of $ 80 million to $ 90 million in 2021. Over the remainder of the year, it will make progress or complete its planned investments in the following redevelopment and repositioning projects which it believes will will generate significant growth and returns:
Southernmost Beach Resort in Key West, Florida (estimated at $ 15.0 million), a complete room renovation including all suitcases, toiletries, and bathrooms, including tub-to-shower conversions. The renovation began in July and was largely completed at the end of October.
Hotel Vitale (valued at $ 25.0 million), a total transformation into an experiential luxury hotel focused on sustainability, mission and luxury, which will deliver nature-inspired designs and an environmentally-focused aesthetic in rooms and suites, public spaces and meeting and event venues. The redevelopment began in July and the hotel will remain closed until the redevelopment is targeted for completion in the first quarter of 2022.
Grafton on Sunset in West Hollywood, Calif. (Estimated at $ 5.5 million), a complete redevelopment of the hotel’s indoor and outdoor public spaces and suites, and a refresh of the rooms. The renovation began at the end of October and is expected to be completed in the first quarter of 2022, when the hotel will be renamed, repositioned and become part of the company’s unofficial Z Collection.
As plans are completed and government approvals are received, the company will assess the start of other major renovation and repositioning projects previously scheduled for 2022.
Strategic acquisitions and disposals
On July 22, Pebblebrook acquired the 200-room Jekyll Island Club Resort in Jekyll Island, Georgia for $ 94 million. On September 9, she finalized the sale of Villa Florence San Francisco in Union Square for $ 87.5 million.
On September 23, the company acquired the 369-room Margaritaville Hollywood Beach Resort in Hollywood, Florida for $ 270 million. Also, on October 20, it acquired the 19-room Avalon Bed & Breakfast and the 12-room Duval Gardens in Key West, Florida for $ 20 million. These two small properties will be integrated and operated as part of the company’s Southernmost Beach Resort.
So far this year, Pebblebrook has sold $ 276.1 million in assets and acquired $ 384 million in properties.
Balance sheet and liquidity
On July 27, the company closed its offering of $ 250 million of its new 5.70% cumulative redeemable Series H preferred shares. The proceeds of this placement were used to fully redeem the $ 125 million cumulative redeemable 6.50% C Series preferred shares and the $ 125 million cumulative Series D redemption preferred shares. to 6.375%, thereby reducing the company’s annualized preferred stock dividend obligation by approximately $ 1.8 million.
As at September 30, Pebblebrook had $ 182.7 million in consolidated cash, cash equivalents and restricted cash, in addition to $ 644.2 million of additional unused availability on its non-revolving credit facility. senior guarantee, for total liquidity of $ 826.9 million.
The company had $ 2.4 billion in consolidated debt and convertible notes at a weighted average effective interest rate of 3.3%. About $ 2.2 billion, or 93% of its total outstanding debt and convertible notes, were at a weighted average fixed interest rate of 3.4%, and about $ 0.2 billion, or 7%, at a weighted average variable interest rate of 2.4%. . The company had $ 1.4 billion in unsecured term loans and there were no outstanding balances on its $ 650 million senior unsecured revolving credit facility. It has no significant loans maturing until the fourth quarter of 2022.