ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Maryland | 27-4706509 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
3 Bethesda Metro Center, Suite 1000 | ||
Bethesda, Maryland | 20814 | |
(Address of Principal Executive Offices) | (Zip Code) |
Large accelerated filer | ý | Accelerated filer | o | |||
Non-accelerated filer | o (do not check if a smaller reporting company) | Smaller reporting company | o | |||
Emerging growth company | o | |||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o |
Page | ||
Consolidated Financial Statements (unaudited) | ||
March 31, 2017 | December 31, 2016 | ||||||
(unaudited) | |||||||
Assets | |||||||
Investment in hotel properties, net | $ | 3,341,219 | $ | 3,368,674 | |||
Cash and cash equivalents | 451,010 | 456,672 | |||||
Restricted cash reserves | 61,538 | 67,206 | |||||
Hotel and other receivables, net of allowance of $157 and $182, respectively | 34,668 | 26,018 | |||||
Deferred income tax asset | 43,676 | 44,614 | |||||
Prepaid expense and other assets | 60,653 | 60,209 | |||||
Total assets | $ | 3,992,764 | $ | 4,023,393 | |||
Liabilities and Equity | |||||||
Debt, net | $ | 1,582,432 | $ | 1,582,715 | |||
Accounts payable and other liabilities | 116,273 | 137,066 | |||||
Deferred income tax liability | 11,430 | 11,430 | |||||
Advance deposits and deferred revenue | 14,263 | 11,975 | |||||
Accrued interest | 3,697 | 3,444 | |||||
Distributions payable | 41,699 | 41,486 | |||||
Total liabilities | 1,769,794 | 1,788,116 | |||||
Commitments and Contingencies (Note 9) | |||||||
Equity | |||||||
Shareholders’ equity: | |||||||
Preferred shares of beneficial interest, $0.01 par value, 50,000,000 shares authorized; zero shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively | — | — | |||||
Common shares of beneficial interest, $0.01 par value, 450,000,000 shares authorized; 124,607,489 and 124,364,178 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively | 1,246 | 1,244 | |||||
Additional paid-in capital | 2,189,179 | 2,187,333 | |||||
Accumulated other comprehensive income (loss) | 646 | (4,902 | ) | ||||
Retained earnings | 18,711 | 38,249 | |||||
Total shareholders’ equity | 2,209,782 | 2,221,924 | |||||
Noncontrolling interest: | |||||||
Noncontrolling interest in consolidated joint venture | 5,907 | 5,973 | |||||
Noncontrolling interest in the Operating Partnership | 7,281 | 7,380 | |||||
Total noncontrolling interest | 13,188 | 13,353 | |||||
Total equity | 2,222,970 | 2,235,277 | |||||
Total liabilities and equity | $ | 3,992,764 | $ | 4,023,393 |
For the three months ended March 31, | |||||||
2017 | 2016 | ||||||
Revenue | |||||||
Operating revenue | |||||||
Room revenue | $ | 224,965 | $ | 239,512 | |||
Food and beverage revenue | 26,691 | 26,555 | |||||
Other operating department revenue | 8,576 | 9,104 | |||||
Total revenue | $ | 260,232 | $ | 275,171 | |||
Expense | |||||||
Operating expense | |||||||
Room expense | $ | 51,922 | $ | 55,028 | |||
Food and beverage expense | 19,297 | 19,817 | |||||
Management and franchise fee expense | 26,913 | 28,501 | |||||
Other operating expense | 57,823 | 60,021 | |||||
Total property operating expense | 155,955 | 163,367 | |||||
Depreciation and amortization | 38,665 | 40,730 | |||||
Property tax, insurance and other | 19,158 | 20,155 | |||||
General and administrative | 9,123 | 9,649 | |||||
Transaction and pursuit costs | 625 | 79 | |||||
Total operating expense | 223,526 | 233,980 | |||||
Operating income | 36,706 | 41,191 | |||||
Other income | 140 | 302 | |||||
Interest income | 485 | 397 | |||||
Interest expense | (14,328 | ) | (14,892 | ) | |||
Income before income tax expense | 23,003 | 26,998 | |||||
Income tax expense | (1,166 | ) | (1,476 | ) | |||
Income from operations | 21,837 | 25,522 | |||||
Loss on sale of hotel properties | (60 | ) | (172 | ) | |||
Net income | 21,777 | 25,350 | |||||
Net loss (income) attributable to noncontrolling interests | |||||||
Noncontrolling interest in consolidated joint venture | 66 | 62 | |||||
Noncontrolling interest in the Operating Partnership | (85 | ) | (114 | ) | |||
Net income attributable to common shareholders | $ | 21,758 | $ | 25,298 | |||
Basic per common share data: | |||||||
Net income per share attributable to common shareholders | $ | 0.17 | $ | 0.20 | |||
Weighted-average number of common shares | 123,734,173 | 123,739,823 | |||||
Diluted per common share data: | |||||||
Net income per share attributable to common shareholders | $ | 0.17 | $ | 0.20 | |||
Weighted-average number of common shares | 123,841,400 | 124,141,824 | |||||
Amounts attributable to the Company’s common shareholders: | |||||||
Income from operations | $ | 21,818 | $ | 25,470 | |||
Loss on sale of hotel properties | (60 | ) | (172 | ) | |||
Net income attributable to common shareholders | $ | 21,758 | $ | 25,298 | |||
Comprehensive income: | |||||||
Net income | $ | 21,777 | $ | 25,350 | |||
Unrealized gain (loss) on interest rate derivatives | 5,548 | (20,248 | ) | ||||
Comprehensive income | 27,325 | 5,102 | |||||
Comprehensive loss attributable to the noncontrolling interest in consolidated joint venture | 66 | 62 | |||||
Comprehensive income attributable to the noncontrolling interest in the Operating Partnership | (85 | ) | (114 | ) | |||
Comprehensive income attributable to the Company | $ | 27,306 | $ | 5,050 |
Shareholders’ Equity | Noncontrolling Interest | |||||||||||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||||||||||||
Shares | Par Value | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Operating Partnership | Consolidated Joint Venture | Total Non-controlling Interest | Total Equity | ||||||||||||||||||||||||||
Balance at December 31, 2016 | 124,364,178 | $ | 1,244 | $ | 2,187,333 | $ | 38,249 | $ | (4,902 | ) | $ | 7,380 | $ | 5,973 | $ | 13,353 | $ | 2,235,277 | ||||||||||||||||
Net income (loss) | — | — | — | 21,758 | — | 85 | (66 | ) | 19 | 21,777 | ||||||||||||||||||||||||
Unrealized gain on interest rate derivatives | — | — | — | — | 5,548 | — | — | — | 5,548 | |||||||||||||||||||||||||
Issuance of restricted stock | 264,303 | 2 | (2 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||
Amortization of share-based compensation | — | — | 2,334 | — | — | — | — | — | 2,334 | |||||||||||||||||||||||||
Shares acquired to satisfy minimum required federal and state tax withholding on vesting restricted stock | (20,861 | ) | — | (486 | ) | — | — | — | — | — | (486 | ) | ||||||||||||||||||||||
Forfeiture of restricted stock | (131 | ) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Distributions on common shares and units | — | — | — | (41,296 | ) | — | (184 | ) | — | (184 | ) | (41,480 | ) | |||||||||||||||||||||
Balance at March 31, 2017 | 124,607,489 | $ | 1,246 | $ | 2,189,179 | $ | 18,711 | $ | 646 | $ | 7,281 | $ | 5,907 | $ | 13,188 | $ | 2,222,970 |
Shareholders’ Equity | Noncontrolling Interest | |||||||||||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||||||||||||
Shares | Par Value | Additional Paid-in Capital | Retain Earnings (Distributions in excess of net earnings) | Accumulated Other Comprehensive Loss | Operating Partnership | Consolidated Joint Venture | Total Non-controlling Interest | Total Equity | ||||||||||||||||||||||||||
Balance at December 31, 2015 | 124,635,675 | $ | 1,246 | $ | 2,195,732 | $ | 2,439 | $ | (16,602 | ) | $ | 11,532 | $ | 6,177 | $ | 17,709 | $ | 2,200,524 | ||||||||||||||||
Net income (loss) | — | — | — | 25,298 | — | 114 | (62 | ) | 52 | 25,350 | ||||||||||||||||||||||||
Unrealized loss on interest rate derivatives | — | — | — | — | (20,248 | ) | — | — | — | (20,248 | ) | |||||||||||||||||||||||
Distributions to joint venture partner | — | — | — | — | — | — | (259 | ) | (259 | ) | (259 | ) | ||||||||||||||||||||||
Redemption of Operating Partnership units | 335,250 | 3 | 4,322 | — | — | (4,325 | ) | — | (4,325 | ) | — | |||||||||||||||||||||||
Issuance of restricted stock | 378,567 | 4 | (4 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||
Amortization of share-based compensation | — | — | 2,591 | — | — | — | — | — | 2,591 | |||||||||||||||||||||||||
Share grants to trustees | 1,447 | — | 33 | — | — | — | — | — | 33 | |||||||||||||||||||||||||
Shares acquired to satisfy minimum required federal and state tax withholding on vesting restricted stock | (32,398 | ) | — | (653 | ) | — | — | — | — | — | (653 | ) | ||||||||||||||||||||||
Shares acquired as part of a share repurchase program | (510,498 | ) | (5 | ) | (11,284 | ) | — | — | — | — | — | (11,289 | ) | |||||||||||||||||||||
Forfeiture of restricted stock | (263 | ) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Distributions on common shares and units | — | — | — | (41,185 | ) | — | (182 | ) | — | (182 | ) | (41,367 | ) | |||||||||||||||||||||
Balance at March 31, 2016 | 124,807,780 | $ | 1,248 | $ | 2,190,737 | $ | (13,448 | ) | $ | (36,850 | ) | $ | 7,139 | $ | 5,856 | $ | 12,995 | $ | 2,154,682 |
For the three months ended March 31, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities | |||||||
Net income | $ | 21,777 | $ | 25,350 | |||
Adjustments to reconcile net income to cash flow provided by operating activities: | |||||||
Loss on sale of hotel properties | 60 | 172 | |||||
Depreciation and amortization | 38,665 | 40,730 | |||||
Amortization of deferred financing costs | 843 | 1,013 | |||||
Amortization of deferred management fees | 188 | 188 | |||||
Accretion of interest income on investment in loan | (210 | ) | (127 | ) | |||
Share grants to trustees | — | 33 | |||||
Amortization of share-based compensation | 2,334 | 2,591 | |||||
Deferred income taxes | 938 | 1,131 | |||||
Changes in assets and liabilities: | |||||||
Hotel and other receivables, net | (8,650 | ) | (5,252 | ) | |||
Prepaid expense and other assets | 637 | (4,874 | ) | ||||
Accounts payable and other liabilities | (9,202 | ) | (7,606 | ) | |||
Advance deposits and deferred revenue | 2,288 | 1,813 | |||||
Accrued interest | 253 | (11 | ) | ||||
Net cash flow provided by operating activities | 49,921 | 55,151 | |||||
Cash flows from investing activities | |||||||
Proceeds from the sale of hotel properties, net | (60 | ) | 2,647 | ||||
Improvements and additions to hotel properties | (18,533 | ) | (22,315 | ) | |||
Additions to property and equipment | (3 | ) | (142 | ) | |||
Decrease in restricted cash reserves, net | 5,668 | 908 | |||||
Net cash flow used in investing activities | (12,928 | ) | (18,902 | ) | |||
Cash flows from financing activities | |||||||
Borrowings under Revolver | — | 30,000 | |||||
Repayments under Revolver | — | (30,000 | ) | ||||
Proceeds from mortgage loans | — | 11,000 | |||||
Payments of mortgage loans principal | (902 | ) | (936 | ) | |||
Repurchase of common shares under a share repurchase program | — | (11,289 | ) | ||||
Repurchase of common shares to satisfy employee withholding requirements | (486 | ) | (653 | ) | |||
Distributions on common shares | (41,040 | ) | (41,130 | ) | |||
Distributions on Operating Partnership units | (227 | ) | (288 | ) | |||
Payments of deferred financing costs | — | (882 | ) | ||||
Distribution to joint venture partner | — | (259 | ) | ||||
Net cash flow used in financing activities | (42,655 | ) | (44,437 | ) | |||
Net change in cash and cash equivalents | (5,662 | ) | (8,188 | ) | |||
Cash and cash equivalents, beginning of period | 456,672 | 134,192 | |||||
Cash and cash equivalents, end of period | $ | 451,010 | $ | 126,004 |
March 31, 2017 | December 31, 2016 | ||||||
Land and improvements | $ | 676,103 | $ | 675,889 | |||
Buildings and improvements | 3,055,137 | 3,050,043 | |||||
Furniture, fixtures and equipment | 596,907 | 595,816 | |||||
Intangible assets | 2,309 | 2,309 | |||||
4,330,456 | 4,324,057 | ||||||
Accumulated depreciation and amortization | (989,237 | ) | (955,383 | ) | |||
Investment in hotel properties, net | $ | 3,341,219 | $ | 3,368,674 |
Property Name | Location | Sale Date | Rooms | ||||
Holiday Inn Express Merrillville | Merrillville, IN | February 22, 2016 | 62 | ||||
Total | 62 |
March 31, 2017 | December 31, 2016 | ||||||
Revolver and Term Loans, net | $ | 1,169,733 | $ | 1,169,308 | |||
Mortgage loans, net | 412,699 | 413,407 | |||||
Debt, net | $ | 1,582,432 | $ | 1,582,715 |
• | $400.0 million revolving credit facility with a scheduled maturity date of April 22, 2020 with a one-year extension option if certain conditions are satisfied (the "Revolver"); |
• | $400.0 million term loan with a scheduled maturity date of March 20, 2019 (the "$400 Million Term Loan Maturing 2019"); |
• | $225.0 million term loan with a scheduled maturity date of November 20, 2019 (the "$225 Million Term Loan Maturing 2019"); |
• | $400.0 million term loan with a scheduled maturity date of April 22, 2021 (the "$400 Million Term Loan Maturing 2021"); and |
• | $150.0 million term loan with a scheduled maturity date of January 22, 2022 (the "$150 Million Term Loan Maturing 2022"). |
Outstanding Borrowings at | ||||||||||||
Interest Rate at March 31, 2017 (1) | Maturity Date | March 31, 2017 | December 31, 2016 | |||||||||
Revolver (2) | 2.48% | April 2020 | $ | — | $ | — | ||||||
$400 Million Term Loan Maturing 2019 | 2.72% | March 2019 | 400,000 | 400,000 | ||||||||
$225 Million Term Loan Maturing 2019 | 4.04% | November 2019 | 225,000 | 225,000 | ||||||||
$400 Million Term Loan Maturing 2021 | 2.97% | April 2021 | 400,000 | 400,000 | ||||||||
$150 Million Term Loan Maturing 2022 | 3.43% | January 2022 | 150,000 | 150,000 | ||||||||
1,175,000 | 1,175,000 | |||||||||||
Deferred financing costs, net (3) | (5,267 | ) | (5,692 | ) | ||||||||
Total Revolver and Term Loans, net | $ | 1,169,733 | $ | 1,169,308 |
(1) | Interest rate at March 31, 2017 gives effect to interest rate hedges. |
(2) | At March 31, 2017 and December 31, 2016, there was $400.0 million of borrowing capacity on the Revolver. |
(3) | Excludes $2.1 million and $2.3 million as of March 31, 2017 and December 31, 2016, respectively, related to deferred financing costs on the Revolver, which are included in prepaid expense and other assets in the accompanying consolidated balance sheets. |
Principal balance at | ||||||||||||||||||
Lender | Number of Assets Encumbered | Interest Rate at March 31, 2017 (1) | Maturity Date | March 31, 2017 | December 31, 2016 | |||||||||||||
Wells Fargo | 4 | 4.02% | (2) | October 2017 | (3) | $ | 150,000 | $ | 150,000 | |||||||||
Wells Fargo (4) | 4 | 4.04% | March 2018 | (3) | 145,500 | 146,250 | ||||||||||||
PNC Bank (5) | 5 | 3.08% | (2) | March 2021 | (6) | 85,000 | 85,000 | |||||||||||
Wells Fargo (7) | 1 | 5.25% | June 2022 | 33,467 | 33,666 | |||||||||||||
14 | 413,967 | 414,916 | ||||||||||||||||
Deferred financing costs, net | (1,268 | ) | (1,509 | ) | ||||||||||||||
Total mortgage loans, net | $ | 412,699 | $ | 413,407 |
(1) | Interest rate at March 31, 2017 gives effect to interest rate hedges. |
(2) | Requires payments of interest only through maturity. |
(3) | Maturity date may be extended for four one-year terms at the Company’s option, subject to certain lender requirements. |
(4) | Two of the four hotels encumbered by the Wells Fargo loan are cross-collateralized. |
(5) | The five hotels encumbered by the PNC Bank loan are cross-collateralized. |
(6) | Maturity date may be extended for two one-year terms at the Company’s option, subject to certain lender requirements. |
(7) | Includes $1.0 million and $1.0 million at March 31, 2017 and December 31, 2016, respectively, related to a fair value adjustment on mortgage debt assumed in conjunction with an acquisition. |
For the three months ended March 31, | ||||||||
2017 | 2016 | |||||||
Revolver and Term Loans | $ | 9,517 | $ | 9,859 | ||||
Mortgage loans | 3,968 | 4,020 | ||||||
Amortization of deferred financing costs | 843 | 1,013 | ||||||
Total interest expense | $ | 14,328 | $ | 14,892 |
Notional value at | Fair value at | |||||||||||||||||||
Hedge type | Interest rate | Maturity | March 31, 2017 | December 31, 2016 | March 31, 2017 | December 31, 2016 | ||||||||||||||
Swap-cash flow | 1.12% | November 2017 | $ | 275,000 | $ | 275,000 | $ | (30 | ) | $ | (558 | ) | ||||||||
Swap-cash flow | 1.56% | March 2018 | 175,000 | 175,000 | (672 | ) | (1,251 | ) | ||||||||||||
Swap-cash flow | 1.64% | March 2018 | 175,000 | 175,000 | (802 | ) | (1,413 | ) | ||||||||||||
Swap-cash flow | 1.83% | September 2018 | 16,005 | 16,088 | (126 | ) | (193 | ) | ||||||||||||
Swap-cash flow | 1.75% | September 2018 | 16,005 | 16,088 | (108 | ) | (172 | ) | ||||||||||||
Swap-cash flow | 1.83% | September 2018 | 39,285 | 39,488 | (309 | ) | (474 | ) | ||||||||||||
Swap-cash flow | 1.75% | September 2018 | 40,255 | 40,462 | (271 | ) | (433 | ) | ||||||||||||
Swap-cash flow | 1.83% | September 2018 | 17,460 | 17,550 | (137 | ) | (211 | ) | ||||||||||||
Swap-cash flow | 1.75% | September 2018 | 16,490 | 16,575 | (111 | ) | (177 | ) | ||||||||||||
Swap-cash flow | 2.02% | March 2019 | 125,000 | 125,000 | (1,481 | ) | (2,090 | ) | ||||||||||||
Swap-cash flow | 1.94% | March 2019 | 100,000 | 100,000 | (1,036 | ) | (1,505 | ) | ||||||||||||
Swap-cash flow | 1.27% | March 2019 | 125,000 | 125,000 | 432 | 54 | ||||||||||||||
Swap-cash flow (1) | 1.96% | March 2019 | 100,000 | 100,000 | (444 | ) | (516 | ) | ||||||||||||
Swap-cash flow (1) | 1.85% | March 2019 | 50,000 | 50,000 | (148 | ) | (184 | ) | ||||||||||||
Swap-cash flow (1) | 1.81% | March 2019 | 50,000 | 50,000 | (123 | ) | (159 | ) | ||||||||||||
Swap-cash flow (1) | 1.74% | March 2019 | 25,000 | 25,000 | (39 | ) | (57 | ) | ||||||||||||
Swap-cash flow (2) | 1.80% | September 2020 | 33,000 | 33,000 | 124 | 111 | ||||||||||||||
Swap-cash flow (2) | 1.80% | September 2020 | 82,000 | 82,000 | 309 | 277 | ||||||||||||||
Swap-cash flow (2) | 1.80% | September 2020 | 35,000 | 35,000 | 132 | 118 | ||||||||||||||
Swap-cash flow | 1.81% | October 2020 | 143,000 | 143,000 | (461 | ) | (1,113 | ) | ||||||||||||
Swap-cash flow (3) | 1.15% | April 2021 | 100,000 | 100,000 | 2,560 | 2,513 | ||||||||||||||
Swap-cash flow (3) | 1.20% | April 2021 | 100,000 | 100,000 | 2,407 | 2,360 | ||||||||||||||
Swap-cash flow (3) | 2.15% | April 2021 | 75,000 | 75,000 | (372 | ) | (410 | ) | ||||||||||||
Swap-cash flow (3) | 1.91% | April 2021 | 75,000 | — | 184 | — | ||||||||||||||
Swap-cash flow | 1.61% | June 2021 | 50,000 | 50,000 | 418 | 224 | ||||||||||||||
Swap-cash flow | 1.56% | June 2021 | 50,000 | 50,000 | 539 | 352 | ||||||||||||||
Swap-cash flow | 1.71% | June 2021 | 50,000 | 50,000 | 211 | 5 | ||||||||||||||
$ | 2,138,500 | $ | 2,064,251 | $ | 646 | $ | (4,902 | ) |
(1) | Effective between the maturity of the existing swap in November 2017 and the maturity of the debt in March 2019. |
(2) | Effective between the maturity of the existing swaps in September 2018 and September 2020. |
(3) | Effective between the maturity of the existing swaps in March 2018 and the maturity of the debt in April 2021. |
• | Level 1 — Inputs include quoted market prices in an active market for identical assets or liabilities. |
• | Level 2 — Inputs are market data, other than Level 1, that are observable either directly or indirectly. Level 2 inputs include quoted market prices for similar assets or liabilities, quoted market prices in an inactive market, and other observable information that can be corroborated by market data. |
• | Level 3 — Inputs are unobservable and corroborated by little or no market data. |
• | Cash and cash equivalents, restricted cash reserves, hotel and other receivables, accounts payable and other liabilities — The carrying amounts reported in the consolidated balance sheets for these financial instruments approximate fair value because of their short term maturities. |
• | Debt — The carrying amounts, net of deferred financing costs, reported in the consolidated balance sheets for these financial instruments approximate fair value because the interest rates are at, or approximate, market interest rates. The Company determined that its debt is classified in Level 3 of the fair value hierarchy. |
Fair Value at March 31, 2017 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Interest rate swap asset | $ | — | $ | 7,316 | $ | — | $ | 7,316 | |||||||
Interest rate swap liability | — | (6,670 | ) | — | (6,670 | ) | |||||||||
Total | $ | — | $ | 646 | $ | — | $ | 646 |
Fair Value at December 31, 2016 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Interest rate swap asset | $ | — | $ | 6,014 | $ | — | $ | 6,014 | |||||||
Interest rate swap liability | — | (10,916 | ) | — | (10,916 | ) | |||||||||
Total | $ | — | $ | (4,902 | ) | $ | — | $ | (4,902 | ) |
2017 | ||||||
Number of Shares | Weighted-Average Grant Date Fair Value | |||||
Unvested at January 1, | 649,447 | $ | 23.00 | |||
Granted | 264,303 | 23.76 | ||||
Vested | (59,404 | ) | 23.61 | |||
Forfeited | (131 | ) | 21.66 | |||
Unvested at March 31, | 854,215 | $ | 23.20 |
For the three months ended March 31, | |||||||
2017 | 2016 | ||||||
Numerator: | |||||||
Net income attributable to common shareholders | $ | 21,758 | $ | 25,298 | |||
Less: Dividends paid on unvested restricted shares | (282 | ) | (413 | ) | |||
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares | $ | 21,476 | $ | 24,885 | |||
Denominator: | |||||||
Weighted-average number of common shares - basic | 123,734,173 | 123,739,823 | |||||
Unvested restricted shares | 107,227 | 402,001 | |||||
Weighted-average number of common shares - diluted | 123,841,400 | 124,141,824 | |||||
Net income per share attributable to common shareholders - basic | $ | 0.17 | $ | 0.20 | |||
Net income per share attributable to common shareholders - diluted | $ | 0.17 | $ | 0.20 |
For the three months ended March 31, | |||||||
2017 | 2016 | ||||||
Interest paid | $ | 13,280 | $ | 13,890 | |||
Income taxes paid | $ | 212 | $ | 271 | |||
Supplemental investing and financing transactions | |||||||
In conjunction with the sale of hotel properties, the Company recorded the following: | |||||||
Sale of hotel properties | $ | — | $ | 2,850 | |||
Transaction costs | (60 | ) | (104 | ) | |||
Operating prorations | — | (99 | ) | ||||
Proceeds from the sale of hotel properties, net | $ | (60 | ) | $ | 2,647 | ||
Supplemental non-cash transactions | |||||||
Accrued capital expenditures | $ | — | $ | 785 | |||
Redemption of Operating Partnership units | $ | — | $ | 4,325 |
• | Average Daily Rate ("ADR") |
• | Occupancy |
• | RevPAR |
For the three months ended March 31, | ||||||||||||||
2017 | 2016 | $ Change | % Change | |||||||||||
(amounts in thousands) | ||||||||||||||
Revenue | ||||||||||||||
Operating revenue | ||||||||||||||
Room revenue | $ | 224,965 | $ | 239,512 | $ | (14,547 | ) | (6.1 | )% | |||||
Food and beverage revenue | 26,691 | 26,555 | 136 | 0.5 | % | |||||||||
Other operating department revenue | 8,576 | 9,104 | (528 | ) | (5.8 | )% | ||||||||
Total revenue | $ | 260,232 | $ | 275,171 | $ | (14,939 | ) | (5.4 | )% | |||||
Expense | ||||||||||||||
Operating expense | ||||||||||||||
Room expense | $ | 51,922 | $ | 55,028 | $ | (3,106 | ) | (5.6 | )% | |||||
Food and beverage expense | 19,297 | 19,817 | (520 | ) | (2.6 | )% | ||||||||
Management and franchise fee expense | 26,913 | 28,501 | (1,588 | ) | (5.6 | )% | ||||||||
Other operating expense | 57,823 | 60,021 | (2,198 | ) | (3.7 | )% | ||||||||
Total property operating expense | 155,955 | 163,367 | (7,412 | ) | (4.5 | )% | ||||||||
Depreciation and amortization | 38,665 | 40,730 | (2,065 | ) | (5.1 | )% | ||||||||
Property tax, insurance and other | 19,158 | 20,155 | (997 | ) | (4.9 | )% | ||||||||
General and administrative | 9,123 | 9,649 | (526 | ) | (5.5 | )% | ||||||||
Transaction and pursuit costs | 625 | 79 | 546 | — | % | |||||||||
Total operating expense | 223,526 | 233,980 | (10,454 | ) | (4.5 | )% | ||||||||
Operating income | 36,706 | 41,191 | (4,485 | ) | (10.9 | )% | ||||||||
Other income | 140 | 302 | (162 | ) | (53.6 | )% | ||||||||
Interest income | 485 | 397 | 88 | 22.2 | % | |||||||||
Interest expense | (14,328 | ) | (14,892 | ) | 564 | (3.8 | )% | |||||||
Income before income tax expense | 23,003 | 26,998 | (3,995 | ) | (14.8 | )% | ||||||||
Income tax expense | (1,166 | ) | (1,476 | ) | 310 | (21.0 | ) | |||||||
Income from operations | 21,837 | 25,522 | (3,685 | ) | (14.4 | )% | ||||||||
Loss on sale of hotel properties | (60 | ) | (172 | ) | 112 | (65.1 | )% | |||||||
Net income | 21,777 | 25,350 | (3,573 | ) | (14.1 | )% | ||||||||
Net loss (income) attributable to noncontrolling interests | ||||||||||||||
Noncontrolling interest in consolidated joint venture | 66 | 62 | 4 | 6.5 | % | |||||||||
Noncontrolling interest in the Operating Partnership | (85 | ) | (114 | ) | 29 | (25.4 | )% | |||||||
Net income attributable to common shareholders | $ | 21,758 | $ | 25,298 | $ | (3,540 | ) | (14.0 | )% |
For the three months ended March 31, | ||||||||||
2017 | 2016 | % Change | ||||||||
Number of comparable properties (at end of period) | 122 | 122 | — | |||||||
Occupancy | 74.4 | % | 75.0 | % | (0.8 | )% | ||||
ADR | $ | 166.82 | $ | 166.60 | 0.1 | % | ||||
RevPAR | $ | 124.12 | $ | 124.91 | (0.6 | )% |
For the three months ended March 31, | ||||||||||||||
2017 | 2016 | $ Change | % Change | |||||||||||
Revolver and Term Loans | $ | 9,517 | $ | 9,859 | $ | (342 | ) | (3.5 | )% | |||||
Mortgage loans | 3,968 | 4,020 | (52 | ) | (1.3 | )% | ||||||||
Amortization of deferred financing costs | 843 | 1,013 | (170 | ) | (16.8 | )% | ||||||||
Total interest expense | $ | 14,328 | $ | 14,892 | $ | (564 | ) | (3.8 | )% |
For the three months ended March 31, | |||||||
2017 | 2016 | ||||||
Net income | $ | 21,777 | $ | 25,350 | |||
Depreciation and amortization | 38,665 | 40,730 | |||||
Loss on sale of hotel properties | 60 | 172 | |||||
Noncontrolling interest in consolidated joint venture | 66 | 62 | |||||
Adjustments related to consolidated joint venture (1) | (33 | ) | (39 | ) | |||
FFO | 60,535 | 66,275 | |||||
Transaction and pursuit costs | 625 | 79 | |||||
Amortization of share-based compensation | 2,334 | 2,591 | |||||
Non-cash income tax expense | 938 | 1,131 | |||||
Loan related costs (2) | — | 341 | |||||
Other expenses (3) | — | 356 | |||||
Adjusted FFO | $ | 64,432 | $ | 70,773 |
(1) | Includes depreciation and amortization expense allocated to the noncontrolling interest in the joint venture. |
(2) | Represents debt modification costs. |
(3) | Represents expenses outside of the normal course of operations, including property-level severance costs. |
For the three months ended March 31, | |||||||
2017 | 2016 | ||||||
Net income | $ | 21,777 | $ | 25,350 | |||
Depreciation and amortization | 38,665 | 40,730 | |||||
Interest expense, net (1) | 14,317 | 14,886 | |||||
Income tax expense | 1,166 | 1,476 | |||||
Noncontrolling interest in consolidated joint venture | 66 | 62 | |||||
Adjustments related to consolidated joint venture (2) | (33 | ) | (39 | ) | |||
EBITDA | 75,958 | 82,465 | |||||
Transaction and pursuit costs | 625 | 79 | |||||
Loss on sale of hotel properties | 60 | 172 | |||||
Amortization of share-based compensation | 2,334 | 2,591 | |||||
Loan related costs (3) | — | 341 | |||||
Other expenses (4) | — | 356 | |||||
Adjusted EBITDA | $ | 78,977 | $ | 86,004 |
(1) | Excludes amounts attributable to investment in loans of $0.5 million and $0.4 million for the three months ended March 31, 2017 and 2016, respectively. |
(2) | Includes depreciation and amortization expense allocated to the noncontrolling interest in the joint venture. |
(3) | Represents debt modification costs. |
(4) | Represents expenses outside of the normal course of operations, including property-level severance costs. |
• | recurring maintenance and capital expenditures necessary to maintain our hotel properties in accordance with brand standards; |
• | interest expense and scheduled principal payments on outstanding indebtedness; and |
• | distributions necessary to qualify for taxation as a REIT. |
2017 | 2018 | 2019 | 2020 | 2021 | Thereafter | Total | |||||||||||||||||||||
Fixed rate debt (1)(2) | $ | 396 | $ | 626 | $ | 660 | $ | 691 | $ | 734 | $ | 29,389 | $ | 32,496 | |||||||||||||
Weighted-average interest rate | 5.25 | % | 5.25 | % | 5.25 | % | 5.25 | % | 5.25 | % | 5.25 | % | 5.25 | % | |||||||||||||
Variable rate debt (2) | $ | 152,250 | $ | 143,250 | $ | 625,000 | $ | — | $ | 485,000 | $ | 150,000 | $ | 1,555,500 | |||||||||||||
Weighted-average interest rate (3) | 4.02 | % | 4.04 | % | 3.19 | % | — | % | 2.99 | % | 3.43 | % | 3.31 | % | |||||||||||||
Total | $ | 152,646 | $ | 143,876 | $ | 625,660 | $ | 691 | $ | 485,734 | $ | 179,389 | $ | 1,587,996 |
(1) | Excludes $1.0 million related to a fair value adjustment on mortgage debt assumed in conjunction with an acquisition. |
(2) | Excludes $5.3 million and $1.3 million of net deferred financing costs on the Term Loans and mortgage loans, respectively. |
(3) | The weighted-average interest rate gives effect to interest rate swaps, as applicable. |
• | our shareholders may be prevented from realizing the anticipated benefits of the mergers; |
• | the market price of our Common Shares could decline significantly; |
• | reputational harm due to the adverse perception of any failure to successfully complete the mergers; |
• | we are being required, under certain circumstances, to pay to the other party a termination fee of $95.0 million and/or $20.0 million in expense reimbursement; |
• | incurrence of substantial costs relating to the proposed mergers, such as legal, accounting, financial advisor, filing, printing and mailing fees; and |
• | our management’s and employees’ attention may be diverted from our day-to-day business and operational matters and our relationships with our hotel properties may be disrupted as a result of efforts relating to attempting to consummate the mergers. |
• | the inability to successfully combine our and FelCor’s business in a manner that permits us to achieve the cost savings anticipated to result from the mergers, which would result in the anticipated benefits of the mergers not being realized in the timeframe currently anticipated or at all; |
• | the complexities associated with integrating personnel from the two companies; |
• | the complexities of combining two companies with different histories, cultures, geographic footprints and hotel properties; |
• | potential unknown liabilities and unforeseen increased expenses, delays or conditions associated with the mergers; and |
• | performance shortfalls as a result of the diversion of management’s attention caused by completing the mergers and integrating the companies’ operations. |
• | market reaction to the announcement of the mergers; |
• | changes in our or FelCor’s respective businesses, operations, assets, liabilities and prospects; |
• | changes in market assessments of the business, operations, financial position and prospects of either company or the combined company; |
• | market assessments of the likelihood that the mergers will be completed; |
• | interest rates, general market and economic conditions and other factor generally affecting the market prices of our Common Shares and the FelCor Common Stock; |
• | the actual or perceived impact of U.S. monetary policy; |
• | federal, state and local legislation, governmental regulation and legal developments in the businesses in which we and FelCor operate; and |
• | other factors beyond our control, including those described or referred to elsewhere in this “Risk Factors” section. |
• | we may not have enough cash to pay such dividends due to changes in our cash requirements, capital spending plans, cash flow or financial position; |
• | decisions on whether, when and in what amounts to make any future dividends will remain at all times entirely at the discretion of our board of trustees, which reserves the right to change our dividend practices at any time and for any reason; and |
• | the amount of dividends that our subsidiaries may distribute to us may be subject to restrictions imposed by state law and restrictions imposed by the terms of any current or future indebtedness that these subsidiaries may incur. |
• | hindering our ability to adjust to changing market, industry or economic conditions; |
• | limiting our ability to access the capital markets to raise additional equity or refinance maturing debt on favorable terms or to fund acquisitions or emerging businesses; |
• | limiting the amount of free cash flow available for future operations, acquisitions, dividends, stock repurchases or other uses; |
• | making us more vulnerable to economic or industry downturns, including interest rate increases; and |
• | placing us at a competitive disadvantage compared to less leveraged competitors. |
Period | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced plans or programs | Maximum number of shares that may yet be purchased under the plans or programs (1) | ||||||||||
January 1, 2017 through January 31, 2017 | 1,335 | $ | 24.15 | — | 8,683,441 | |||||||||
February 1, 2017 through February 28, 2017 | 19,526 | $ | 23.26 | — | 8,855,126 | |||||||||
March 1, 2017 through March 31, 2017 | — | $ | — | — | 8,572,636 | |||||||||
Total | 20,861 | — |
(1) | The maximum number of shares that may yet be repurchased under the share repurchase program is calculated by dividing the total dollar amount available to repurchase shares by the closing price of our common shares on the last business day of the respective month. |
RLJ LODGING TRUST | |
Dated: May 9, 2017 | /s/ ROSS H. BIERKAN |
Ross H. Bierkan | |
President, Chief Executive Officer, Chief Investment Officer and Trustee | |
Dated: May 9, 2017 | /s/ LESLIE D. HALE |
Leslie D. Hale | |
Chief Operating Officer, Chief Financial Officer and Executive Vice President | |
(Principal Financial Officer) | |
Dated: May 9, 2017 | /s/ CHRISTOPHER A. GORMSEN |
Christopher A. Gormsen | |
Chief Accounting Officer | |
(Principal Accounting Officer) |
Exhibit Number | Description of Exhibit | |||
2.1 | Agreement and Plan of Merger, dated April 23, 2017, by and among RLJ Lodging Trust, RLJ Lodging Trust, L.P., Rangers Sub I, LLC, Rangers Sub II, LP, FelCor Lodging Trust Incorporated and FelCor Lodging Limited Partnership (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed on April 25, 2017) | |||
3.1 | Articles of Amendment and Restatement of Declaration of Trust of RLJ Lodging Trust (incorporated by reference to Exhibit 3.1 to Amendment No. 4 to the Registrant's Registration Statement on Form S-11 (File. No. 333-172011) filed on May 5, 2011) | |||
3.2 | Articles of Amendment to Articles of Amendment and Restatement of Declaration of Trust of RLJ Lodging Trust (incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed on May 7, 2015) | |||
3.3 | Articles of Amendment to Articles of Amendment and Restatement of Declaration of Trust of RLJ Lodging Trust (incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed on May 5, 2016) | |||
3.4 | Articles Supplementary to Articles of Amendment and Restatement of Declaration of Trust (incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed on February 26, 2015) | |||
3.5 | Third Amended and Restated Bylaws of RLJ Lodging Trust (incorporated by reference to Exhibit 3.2 to the Registrant's Current Report on Form 8-K filed on May 5, 2016) | |||
31.1* | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||
31.2* | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||
32.1* | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||
101.INS | XBRL Instance Document | Submitted electronically with this report | ||
101.SCH | XBRL Taxonomy Extension Schema Document | Submitted electronically with this report | ||
101.CAL | XBRL Taxonomy Calculation Linkbase Document | Submitted electronically with this report | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | Submitted electronically with this report | ||
101.LAB | XBRL Taxonomy Label Linkbase Document | Submitted electronically with this report | ||
101.PRE | XBRL Taxonomy Presentation Linkbase Document | Submitted electronically with this report |
RLJ LODGING TRUST | |
Dated: May 9, 2017 | /s/ ROSS H. BIERKAN |
Ross H. Bierkan | |
President, Chief Executive Officer, Chief Investment Officer and Trustee | |
RLJ LODGING TRUST | |
Dated: May 9, 2017 | /s/ LESLIE D. HALE |
Leslie D. Hale | |
Chief Operating Officer, Chief Financial Officer and Executive Vice President | |
RLJ LODGING TRUST | |
Dated: May 9, 2017 | /s/ ROSS H. BIERKAN |
Ross H. Bierkan | |
President, Chief Executive Officer, Chief Investment Officer and Trustee | |
/s/ LESLIE D. HALE | |
Leslie D. Hale | |
Chief Operating Officer, Chief Financial Officer and Executive Vice President | |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
May 01, 2017 |
|
Document and Entity Information | ||
Entity Registrant Name | RLJ Lodging Trust | |
Entity Central Index Key | 0001511337 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 124,668,134 | |
Entity Current Reporting Status | Yes |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Hotel and other receivables, allowance | $ 157 | $ 182 |
Preferred shares of beneficial interest, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred shares of beneficial interest, shares authorized | 50,000,000 | 50,000,000 |
Preferred shares of beneficial interest, shares issued | 0 | 0 |
Preferred shares of beneficial interest, shares outstanding | 0 | 0 |
Common shares of beneficial interest, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common shares of beneficial interest, shares authorized | 450,000,000 | 450,000,000 |
Common shares of beneficial interest, shares issued | 124,607,489 | 124,364,178 |
Common shares of beneficial interest, shares outstanding | 124,607,489 | 124,364,178 |
Organization |
3 Months Ended |
---|---|
Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Organization RLJ Lodging Trust (the "Company") was formed as a Maryland real estate investment trust ("REIT") on January 31, 2011. The Company is a self-advised and self-administered REIT that acquires primarily premium-branded, focused-service and compact full-service hotels. The Company elected to be taxed as a REIT, for U.S. federal income tax purposes, commencing with its taxable year ended December 31, 2011. Substantially all of the Company’s assets and liabilities are held by, and all of its operations are conducted through RLJ Lodging Trust, L.P. (the "Operating Partnership"). The Company is the sole general partner of the Operating Partnership. As of March 31, 2017, there were 125,166,239 units of limited partnership interest in the Operating Partnership ("OP units") outstanding and the Company owned, through a combination of direct and indirect interests, 99.6% of the outstanding OP units. As of March 31, 2017, the Company owned 122 hotel properties with approximately 20,100 rooms, located in 21 states and the District of Columbia, and an interest in one mortgage loan secured by a hotel. The Company, through wholly-owned subsidiaries, owned a 100% interest in all of its hotel properties, with the exception of the DoubleTree Metropolitan Hotel New York City, in which the Company, through wholly-owned subsidiaries, owned a 98.3% controlling interest in a joint venture, DBT Met Hotel Venture, LP, which was formed to engage in the hotel operations related to this hotel. An independent operator manages the operations of each hotel property. |
Summary of Significant Accounting Policies |
3 Months Ended |
---|---|
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies The Company's Annual Report on Form 10-K for the year ended December 31, 2016 contains a discussion of the significant accounting policies. Other than noted below, there have been no other significant changes to the Company's significant accounting policies since December 31, 2016. Basis of Presentation and Principles of Consolidation The unaudited consolidated financial statements and related notes have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America ("GAAP") and in conformity with the rules and regulations of the Securities and Exchange Commission ("SEC") applicable to financial information. The unaudited financial statements include all adjustments that are necessary, in the opinion of management, to fairly state the consolidated balance sheets, statements of operations and comprehensive income, statements of changes in equity and statements of cash flows. The unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto as of and for the year ended December 31, 2016, included in the Company's Annual Report on Form 10-K filed with the SEC on February 23, 2017. The consolidated financial statements include the accounts of the Company, the Operating Partnership and its wholly-owned subsidiaries, and a joint venture in which the Company has a majority voting interest and control. For the controlled subsidiaries that are not wholly-owned, the third-party ownership interest represents a noncontrolling interest, which is presented separately in the consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation. Reclassifications Certain prior year amounts in these financial statements have been reclassified to conform to the current year presentation with no impact to net income, shareholders’ equity or cash flows. Use of Estimates The preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and the amounts of contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Recently Issued Accounting Pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers, which supersedes or replaces nearly all GAAP revenue recognition guidance. The new guidance establishes a new control-based revenue recognition model that changes the basis for deciding when revenue is recognized over time or at a point in time and expands the disclosures about revenue. The new guidance also applies to sales of real estate and the new principles-based approach is largely based on the transfer of control of the real estate to the buyer. The guidance is effective for annual reporting periods beginning after December 15, 2017, and the interim periods within those annual periods, with early adoption permitted. The Company expects to adopt this new standard on January 1, 2018 using the modified retrospective transition method. Based on the Company's assessment, the adoption of this standard will not have a material impact on the Company's consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The new guidance will require lessees to recognize a right-of-use asset and a lease liability for most of their leases on the balance sheet, and an entity will need to classify its leases as either an operating or finance lease in order to determine the income statement presentation. Leases with a term of 12 months or less will be accounted for similar to the existing guidance today for operating leases. Lessors will classify their leases using an approach that is substantially equivalent to the existing guidance today for operating, direct financing, or sales-type leases. Lessors may only capitalize the incremental direct costs of leasing, so any indirect costs of leasing will be expensed as incurred. The new guidance requires an entity to separate the lease components from the non-lease components in a contract, with the lease components being accounted for in accordance with ASC 842 and the non-lease components being accounted for in accordance with other applicable accounting guidance. The guidance is effective for annual reporting periods beginning after December 15, 2018, and the interim periods within those annual periods, with early adoption permitted. The Company expects to adopt this new standard on January 1, 2019. The Company has not yet completed its analysis on this new standard, but it believes the application of the new standard will result in the recording of a right-of-use asset and a lease liability on the consolidated balance sheet for each of its ground leases and equipment leases, which represent the majority of the Company's current operating lease payments. The Company does not expect the adoption of this standard will materially affect its consolidated statements of operations. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. This new guidance is intended to reduce the diversity in practice in how certain transactions are classified in the statement of cash flows. In addition, in November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash. This new guidance provides additional guidance related to transfers between cash and restricted cash and how entities present, in their statement of cash flows, the cash receipts and cash payments that directly affect the restricted cash accounts. Both of these ASUs will be effective for the annual reporting periods beginning after December 15, 2017, and the interim periods within those annual periods. Early adoption is permitted, provided that all of the amendments are adopted in the same period, and the guidance requires application using a retrospective transition method. The Company expects to adopt the new guidance on January 1, 2018. The adoption of ASU 2016-15 and ASU 2016-18 will modify the Company's current disclosures and reclassifications within the consolidated statement of cash flows, but they are not expected to have a material impact on the Company's consolidated financial statements. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The new guidance clarifies the definition of a business with the objective of adding guidance to assist companies and other reporting organizations with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The changes to the definition of a business will likely result in more acquisitions being accounted for as asset acquisitions across all industries. The guidance is effective for annual reporting periods beginning after December 15, 2017, and the interim periods within those annual periods. The Company expects to adopt this new guidance on January 1, 2018. The Company is currently evaluating whether this ASU will have a material impact on the Company's consolidated financial statements. In February 2017, the FASB issued ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. The new guidance clarifies that ASC 610-20 applies to the derecognition of nonfinancial assets, including real estate, and in substance nonfinancial assets, which are defined as assets or a group of assets for which substantially all of the fair value consists of nonfinancial assets and the group or subsidiary is not a business. As a result of the new guidance, sales and partial sales of real estate assets will be accounted for similar to all other sales of nonfinancial and in substance nonfinancial assets. The guidance is effective for annual reporting periods beginning after December 15, 2017, and the interim periods within those annual periods, with early adoption permitted. The Company expects to adopt this new guidance on January 1, 2018. Based on the Company's assessment, the adoption of this guidance will not have a material impact on the Company's consolidated financial statements. |
Investment in Hotel Properties |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment in Hotel Properties | Investment in Hotel Properties Investment in hotel properties consisted of the following (in thousands):
For the three months ended March 31, 2017 and 2016, the Company recognized depreciation and amortization expense related to its investment in hotel properties of approximately $38.6 million and $40.7 million, respectively. Impairment The Company determined that there was no impairment of any assets for either the three months ended March 31, 2017 or 2016. |
Sale of Hotel Properties |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||
Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Disposal of Hotel Properties | Sale of Hotel Properties During the three months ended March 31, 2017, the Company did not sell any hotel properties. During the three months ended March 31, 2016, the Company sold one hotel property for a sale price of approximately $2.9 million. In conjunction with this transaction, the Company recorded a $0.2 million loss on sale which is included in the accompanying consolidated statement of operations. The following table discloses the hotel property that was sold during the three months ended March 31, 2016:
|
Debt |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt Debt consisted of the following (in thousands):
Revolver and Term Loans The Company has the following unsecured credit agreements in place:
The $400 Million Term Loan Maturing 2019, the $225 Million Term Loan Maturing 2019, the $400 Million Term Loan Maturing 2021, and the $150 Million Term Loan Maturing 2022 are collectively the "Term Loans". The Revolver and Term Loans are subject to customary financial covenants. As of March 31, 2017 and December 31, 2016, the Company was in compliance with all financial covenants. As of March 31, 2017 and December 31, 2016, the details of the unsecured credit agreements were as follows (in thousands):
Mortgage Loans As of March 31, 2017 and December 31, 2016, the Company had the following mortgage loans (in thousands):
Certain mortgage agreements are subject to customary financial covenants. The Company was in compliance with all financial covenants at March 31, 2017 and December 31, 2016. Interest Expense For the three months ended March 31, 2017 and 2016, the components of interest expense were as follows (in thousands):
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Derivatives and Hedging |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivatives and Hedging | Derivatives and Hedging As of March 31, 2017 and December 31, 2016, the Company had entered into the following interest rate swaps (in thousands):
As of March 31, 2017 and December 31, 2016, the aggregate fair value of the interest rate swap assets of $7.3 million and $6.0 million, respectively, was included in prepaid expense and other assets in the accompanying consolidated balance sheets. As of March 31, 2017 and December 31, 2016, the aggregate fair value of the interest rate swap liabilities of $6.7 million and $10.9 million, respectively, was included in accounts payable and other liabilities in the accompanying consolidated balance sheets. As of March 31, 2017, there was approximately $0.6 million of unrealized gains included in accumulated other comprehensive income related to interest rate hedges that are effective in offsetting the variable cash flows. As of December 31, 2016, there was approximately $4.9 million of unrealized losses included in accumulated other comprehensive loss related to interest rate hedges that are effective in offsetting the variable cash flows. There was no ineffectiveness recorded on the designated hedges during the three month periods ended March 31, 2017 and 2016. For the three months ended March 31, 2017 and 2016, approximately $2.8 million and $4.2 million, respectively, of amounts included in accumulated other comprehensive income (loss) were reclassified into interest expense. Approximately $6.2 million of the net unrealized losses included in accumulated other comprehensive income (loss) at March 31, 2017 is expected to be reclassified into interest expense within the next 12 months. |
Fair Value |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value | Fair Value Fair Value Measurement Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market. The fair value hierarchy has three levels of inputs, both observable and unobservable:
Fair Value of Financial Instruments The Company used the following market assumptions and/or estimation methods:
Recurring Fair Value Measurements The following table presents the Company’s fair value hierarchy for those financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2017 (in thousands):
The following table presents the Company’s fair value hierarchy for those financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2016 (in thousands):
The fair values of the derivative financial instruments are determined using widely accepted valuation techniques including a discounted cash flow analysis on the expected cash flows for each derivative. The Company determined that the significant inputs, such as interest yield curves and discount rates, used to value its derivatives fall within Level 2 of the fair value hierarchy and that the credit valuation adjustments associated with the Company’s counterparties and its own credit risk utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. As of March 31, 2017, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments were not significant to the overall valuation of its derivatives. As a result, the Company determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. |
Income Taxes |
3 Months Ended |
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Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code, as amended, commencing with its taxable year ended December 31, 2011. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that it distribute at least 90% of its REIT taxable income, subject to certain adjustments and excluding any net capital gain, to shareholders. The Company’s intention is to adhere to the REIT qualification requirements and to maintain its qualification for taxation as a REIT. As a REIT, the Company is generally not subject to federal corporate income tax on the portion of taxable income that is distributed to shareholders. If the Company fails to qualify for taxation as a REIT in any taxable year, the Company will be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and it may not be able to qualify as a REIT for four subsequent taxable years. As a REIT, the Company may be subject to certain state and local taxes on its income and property, and to federal income and excise taxes on undistributed taxable income. The Company’s taxable REIT subsidiaries ("TRS") will generally be subject to federal, state, and local income taxes at the applicable rates. The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases, and for net operating loss, capital loss and tax credit carryforwards. The deferred tax assets and liabilities are measured using the enacted income tax rates in effect for the year in which those temporary differences are expected to be realized or settled. The effect on the deferred tax assets and liabilities from a change in tax rates is recognized in earnings in the period when the new rate is enacted. However, deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of all available evidence, including the future reversals of existing taxable temporary differences, future projected taxable income and tax planning strategies. Valuation allowances are provided if, based upon the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company had no accruals for tax uncertainties as of March 31, 2017 and December 31, 2016. |
Commitments and Contingencies |
3 Months Ended |
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Mar. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Restricted Cash Reserves The Company is obligated to maintain cash reserve funds for future capital expenditures at the hotels (including the periodic replacement or refurbishment of furniture, fixtures and equipment ("FF&E")) as determined pursuant to the management agreements, franchise agreements and/or mortgage loan documents. The management agreements, franchise agreements and/or mortgage loan documents require the Company to reserve cash ranging typically from 3.0% to 5.0% of the individual hotel’s revenues and maintain the reserves in restricted cash reserve escrows. Any unexpended amounts will remain the property of the Company upon termination of the management agreements, franchise agreements or mortgage loan documents. As of March 31, 2017 and December 31, 2016, approximately $61.5 million and $67.2 million, respectively, was available in the restricted cash reserves for future capital expenditures, real estate taxes and insurance. Litigation Neither the Company nor any of its subsidiaries is currently involved in any regulatory or legal proceedings that management believes will have a material and adverse effect on the Company's financial position, results of operations or cash flows. Management Agreements As of March 31, 2017, 122 of the Company's hotel properties were operated pursuant to long-term management agreements with initial terms ranging from 3 to 25 years. This number includes four and ten hotels that receive the benefits of a franchise agreement pursuant to management agreements with Marriott and Hyatt, respectively. Each management company receives a base management fee generally between 3.0% and 3.5% of hotel revenues. Management agreements that include the benefits of a franchise agreement incur a base management fee generally equal to 7.0% of hotel revenues. The management companies are also eligible to receive an incentive management fee if hotel operating income, as defined in the management agreements, exceeds certain thresholds. The incentive management fee is generally calculated as a percentage of hotel operating income after the Company has received a priority return on its investment in the hotel. Management fees are included in management and franchise fee expense in the accompanying consolidated statements of operations. For the three months ended March 31, 2017 and 2016, the Company incurred management fee expense, including amortization of deferred management fees, of approximately $10.4 million and $11.1 million, respectively. Franchise Agreements As of March 31, 2017, 108 of the Company’s hotel properties were operated under franchise agreements with initial terms ranging from 10 to 30 years. This number excludes four and ten hotels that receive the benefits of a franchise agreement pursuant to management agreements with Marriott and Hyatt, respectively. Franchise agreements allow the hotel properties to operate under the respective brands. Pursuant to the franchise agreements, the Company pays a royalty fee, generally between 4.0% and 6.0% of room revenue, plus additional fees for marketing, central reservation systems and other franchisor costs generally between 1.0% and 4.3% of room revenue. Certain hotels are also charged a royalty fee generally between 1.5% and 3.0% of food and beverage revenues. Franchise fees are included in management and franchise fee expense in the accompanying consolidated statements of operations. For the three months ended March 31, 2017 and 2016, the Company incurred franchise fee expense of approximately $16.5 million and $17.4 million, respectively. |
Equity |
3 Months Ended |
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Mar. 31, 2017 | |
Equity [Abstract] | |
Equity | Equity In 2015, the Company's board of trustees authorized a share repurchase program to acquire up to $400.0 million of the Company's common shares through December 31, 2016. On February 17, 2017, the Company's board of trustees extended the duration of the share repurchase program to February 28, 2018 and increased the authorized amount that may be repurchased by $40.0 million to a total of $440.0 million. During the three months ended March 31, 2017, the Company did not repurchase and retire any of its common shares. As of March 31, 2017, the share repurchase program had a remaining capacity of $201.5 million. During the three months ended March 31, 2016, the Company repurchased and retired 510,498 of its common shares for approximately $11.3 million. The Company consolidates the Operating Partnership, which is a majority-owned limited partnership that has a noncontrolling interest. The outstanding OP units held by the limited partners are redeemable for cash, or at the option of the Company, for a like number of common shares of beneficial interest of the Company. During the three months ended March 31, 2016, the Company issued 335,250 common shares of beneficial interest in exchange for redeemed units. After the redemption, 558,750 outstanding OP units are held by the limited partners. The noncontrolling interest is included in the noncontrolling interest in the Operating Partnership on the consolidated balance sheets. |
Equity Incentive Plan |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Incentive Plan | Equity Incentive Plan The Company may issue share-based awards to officers, employees, non-employee trustees and other eligible persons under the RLJ Lodging Trust 2015 Equity Incentive Plan (the "2015 Plan"). The 2015 Plan provides for a maximum of 7,500,000 common shares of beneficial interest to be issued in the form of share options, share appreciation rights, restricted share awards, unrestricted share awards, share units, dividend equivalent rights, long-term incentive units, other equity-based awards and cash bonus awards. Share Awards From time to time, the Company may award unvested restricted shares under the 2015 Plan as compensation to officers, employees and non-employee trustees. The issued shares vest over a period of time as determined by the board of trustees at the date of grant. The Company recognizes compensation expense for time-based unvested restricted shares on a straight-line basis over the vesting period based upon the fair market value of the shares on the date of issuance, adjusted for forfeitures. Non-employee trustees may also elect to receive unrestricted shares under the 2015 Plan as compensation that would otherwise be paid in cash for their services. The shares issued to non-employee trustees in lieu of cash compensation are unrestricted and include no vesting conditions. The Company recognizes compensation expense for the unrestricted shares issued in lieu of cash compensation on the date of issuance based upon the fair market value of the shares on that date. A summary of the unvested restricted shares as of March 31, 2017 is as follows:
For the three months ended March 31, 2017 and 2016, the Company recognized approximately $2.0 million and $2.1 million, respectively, of share-based compensation expense related to restricted share awards. As of March 31, 2017, there was $17.8 million of total unrecognized compensation costs related to unvested restricted share awards and these costs are expected to be recognized over a weighted-average period of 2.8 years. The total fair value of the shares vested (calculated as the number of shares multiplied by the vesting date share price) during the three months ended March 31, 2017 and 2016 was approximately $1.4 million and $1.8 million, respectively. Performance Units In July 2012, the Company awarded performance units to certain employees. The performance units vested over a four-year period, including three years of performance-based vesting (the "2012 performance units measurement period") plus an additional one year of time-based vesting. In July 2015, following the end of the 2012 performance units measurement period, the Company issued 838,934 restricted shares upon conversion of the performance units. Half of the restricted shares vested immediately and the remaining half vested in July 2016. In May 2016, the Company awarded 280,000 performance units with a grant date fair value of $10.31 per unit to certain employees. The performance units vest over a four-year period, including three years of performance-based vesting plus an additional one year of time-based vesting. In February 2017, the Company awarded 259,000 performance units with a grant date fair value of $14.93 per unit to certain employees. The performance units vest over a four-year period, including three years of performance-based vesting (the “2017 performance units measurement period”) plus an additional one year of time-based vesting. These performance units may convert into restricted shares at a range of 25% to 150% of the number of performance units granted contingent upon the Company achieving an absolute total shareholder return and a relative total shareholder return over the measurement period at specified percentiles of the peer group, as defined by the award. If at the end of the 2017 performance units measurement period the target criterion is met, then 50% of the restricted shares will vest immediately. The remaining 50% will vest one year later. The award recipients will not be entitled to receive any dividends prior to the date of conversion. For any restricted shares issued upon conversion, the award recipient will be entitled to receive payment of an amount equal to all dividends that would have been paid if such restricted shares had been issued at the beginning of the 2017 performance units measurement period. The fair value of the performance units is determined using a Monte Carlo simulation with the following assumptions: a risk-free interest rate of 1.57%, volatility of 25.73%, and an expected term equal to the requisite service period for the awards. The Company estimated the compensation expense for the performance units on a straight line basis using a calculation that recognizes 50% of the grant date fair value over three years and 50% of the grant date fair value over four years. For the three months ended March 31, 2017 and 2016, the Company recognized approximately $0.3 million and $0.5 million, respectively, of share-based compensation expense related to the performance unit awards. As of March 31, 2017, there was $5.9 million of total unrecognized compensation cost related to the performance unit awards and these costs are expected to be recognized over a weighted-average period of 3.1 years. As of March 31, 2017, there were 3,610,370 common shares available for future grant under the 2015 Plan. |
Earnings per Common Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Common Share | Earnings per Common Share Basic earnings per common share is calculated by dividing net income attributable to common shareholders by the weighted-average number of common shares outstanding during the period excluding the weighted-average number of unvested restricted shares outstanding during the period. Diluted earnings per common share is calculated by dividing net income attributable to common shareholders by the weighted-average number of common shares outstanding during the period, plus any shares that could potentially be outstanding during the period. The potential shares consist of the unvested restricted share grants and unvested performance units, calculated using the treasury stock method. Any anti-dilutive shares have been excluded from the diluted earnings per share calculation. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating shares and are considered in the computation of earnings per share pursuant to the two-class method. If there were any undistributed earnings allocable to the participating shares, they would be deducted from net income attributable to common shareholders used in the basic and diluted earnings per share calculations. The limited partners’ outstanding limited partnership units in the Operating Partnership (which may be redeemed for common shares of beneficial interest under certain circumstances) have been excluded from the diluted earnings per share calculation as there was no effect on the amounts for the three months ended March 31, 2017 and 2016, since the limited partners’ share of income would also be added back to net income attributable to common shareholders. The computation of basic and diluted earnings per common share is as follows (in thousands, except share and per share data):
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Supplemental Information to Statements of Cash Flows |
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Supplemental Cash Flow Elements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Information to Statements of Cash Flows | Supplemental Information to Statements of Cash Flows (in thousands)
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Subsequent Events (Notes) |
3 Months Ended |
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Mar. 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On April 23, 2017, the Company and FelCor Lodging Trust Incorporated (“FelCor”) entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”) under which FelCor will merge with and into an indirect subsidiary of the Company in a stock-for-stock merger transaction. Under the terms of the Merger Agreement, each share of FelCor common stock will be converted into 0.362 common shares of the Company. In addition, each share of FelCor’s Series A cumulative convertible preferred stock will be converted into a Series A cumulative convertible preferred share of the Company. A joint proxy statement/prospectus will be filed with the Securities and Exchange Commission and, following its effectiveness, will be mailed to the shareholders of both companies. The transaction is expected to close by the end of 2017. The transaction is subject to customary closing conditions, including the approval of certain aspects of the transaction by both the Company’s and FelCor’s shareholders. |
Summary of Significant Accounting Policies (Policies) |
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Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation The unaudited consolidated financial statements and related notes have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America ("GAAP") and in conformity with the rules and regulations of the Securities and Exchange Commission ("SEC") applicable to financial information. The unaudited financial statements include all adjustments that are necessary, in the opinion of management, to fairly state the consolidated balance sheets, statements of operations and comprehensive income, statements of changes in equity and statements of cash flows. The unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto as of and for the year ended December 31, 2016, included in the Company's Annual Report on Form 10-K filed with the SEC on February 23, 2017. The consolidated financial statements include the accounts of the Company, the Operating Partnership and its wholly-owned subsidiaries, and a joint venture in which the Company has a majority voting interest and control. For the controlled subsidiaries that are not wholly-owned, the third-party ownership interest represents a noncontrolling interest, which is presented separately in the consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation. |
Reclassifications | Reclassifications Certain prior year amounts in these financial statements have been reclassified to conform to the current year presentation with no impact to net income, shareholders’ equity or cash flows. |
Use of Estimates | Use of Estimates The preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and the amounts of contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Share-Based Compensation | Share Awards From time to time, the Company may award unvested restricted shares under the 2015 Plan as compensation to officers, employees and non-employee trustees. The issued shares vest over a period of time as determined by the board of trustees at the date of grant. The Company recognizes compensation expense for time-based unvested restricted shares on a straight-line basis over the vesting period based upon the fair market value of the shares on the date of issuance, adjusted for forfeitures. Non-employee trustees may also elect to receive unrestricted shares under the 2015 Plan as compensation that would otherwise be paid in cash for their services. The shares issued to non-employee trustees in lieu of cash compensation are unrestricted and include no vesting conditions. The Company recognizes compensation expense for the unrestricted shares issued in lieu of cash compensation on the date of issuance based upon the fair market value of the shares on that date. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers, which supersedes or replaces nearly all GAAP revenue recognition guidance. The new guidance establishes a new control-based revenue recognition model that changes the basis for deciding when revenue is recognized over time or at a point in time and expands the disclosures about revenue. The new guidance also applies to sales of real estate and the new principles-based approach is largely based on the transfer of control of the real estate to the buyer. The guidance is effective for annual reporting periods beginning after December 15, 2017, and the interim periods within those annual periods, with early adoption permitted. The Company expects to adopt this new standard on January 1, 2018 using the modified retrospective transition method. Based on the Company's assessment, the adoption of this standard will not have a material impact on the Company's consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The new guidance will require lessees to recognize a right-of-use asset and a lease liability for most of their leases on the balance sheet, and an entity will need to classify its leases as either an operating or finance lease in order to determine the income statement presentation. Leases with a term of 12 months or less will be accounted for similar to the existing guidance today for operating leases. Lessors will classify their leases using an approach that is substantially equivalent to the existing guidance today for operating, direct financing, or sales-type leases. Lessors may only capitalize the incremental direct costs of leasing, so any indirect costs of leasing will be expensed as incurred. The new guidance requires an entity to separate the lease components from the non-lease components in a contract, with the lease components being accounted for in accordance with ASC 842 and the non-lease components being accounted for in accordance with other applicable accounting guidance. The guidance is effective for annual reporting periods beginning after December 15, 2018, and the interim periods within those annual periods, with early adoption permitted. The Company expects to adopt this new standard on January 1, 2019. The Company has not yet completed its analysis on this new standard, but it believes the application of the new standard will result in the recording of a right-of-use asset and a lease liability on the consolidated balance sheet for each of its ground leases and equipment leases, which represent the majority of the Company's current operating lease payments. The Company does not expect the adoption of this standard will materially affect its consolidated statements of operations. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. This new guidance is intended to reduce the diversity in practice in how certain transactions are classified in the statement of cash flows. In addition, in November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash. This new guidance provides additional guidance related to transfers between cash and restricted cash and how entities present, in their statement of cash flows, the cash receipts and cash payments that directly affect the restricted cash accounts. Both of these ASUs will be effective for the annual reporting periods beginning after December 15, 2017, and the interim periods within those annual periods. Early adoption is permitted, provided that all of the amendments are adopted in the same period, and the guidance requires application using a retrospective transition method. The Company expects to adopt the new guidance on January 1, 2018. The adoption of ASU 2016-15 and ASU 2016-18 will modify the Company's current disclosures and reclassifications within the consolidated statement of cash flows, but they are not expected to have a material impact on the Company's consolidated financial statements. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The new guidance clarifies the definition of a business with the objective of adding guidance to assist companies and other reporting organizations with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The changes to the definition of a business will likely result in more acquisitions being accounted for as asset acquisitions across all industries. The guidance is effective for annual reporting periods beginning after December 15, 2017, and the interim periods within those annual periods. The Company expects to adopt this new guidance on January 1, 2018. The Company is currently evaluating whether this ASU will have a material impact on the Company's consolidated financial statements. In February 2017, the FASB issued ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. The new guidance clarifies that ASC 610-20 applies to the derecognition of nonfinancial assets, including real estate, and in substance nonfinancial assets, which are defined as assets or a group of assets for which substantially all of the fair value consists of nonfinancial assets and the group or subsidiary is not a business. As a result of the new guidance, sales and partial sales of real estate assets will be accounted for similar to all other sales of nonfinancial and in substance nonfinancial assets. The guidance is effective for annual reporting periods beginning after December 15, 2017, and the interim periods within those annual periods, with early adoption permitted. The Company expects to adopt this new guidance on January 1, 2018. Based on the Company's assessment, the adoption of this guidance will not have a material impact on the Company's consolidated financial statements. |
Management Agreements | Management Agreements As of March 31, 2017, 122 of the Company's hotel properties were operated pursuant to long-term management agreements with initial terms ranging from 3 to 25 years. This number includes four and ten hotels that receive the benefits of a franchise agreement pursuant to management agreements with Marriott and Hyatt, respectively. Each management company receives a base management fee generally between 3.0% and 3.5% of hotel revenues. Management agreements that include the benefits of a franchise agreement incur a base management fee generally equal to 7.0% of hotel revenues. The management companies are also eligible to receive an incentive management fee if hotel operating income, as defined in the management agreements, exceeds certain thresholds. The incentive management fee is generally calculated as a percentage of hotel operating income after the Company has received a priority return on its investment in the hotel. Management fees are included in management and franchise fee expense in the accompanying consolidated statements of operations. |
Franchise Agreements | Franchise Agreements As of March 31, 2017, 108 of the Company’s hotel properties were operated under franchise agreements with initial terms ranging from 10 to 30 years. This number excludes four and ten hotels that receive the benefits of a franchise agreement pursuant to management agreements with Marriott and Hyatt, respectively. Franchise agreements allow the hotel properties to operate under the respective brands. Pursuant to the franchise agreements, the Company pays a royalty fee, generally between 4.0% and 6.0% of room revenue, plus additional fees for marketing, central reservation systems and other franchisor costs generally between 1.0% and 4.3% of room revenue. Certain hotels are also charged a royalty fee generally between 1.5% and 3.0% of food and beverage revenues. Franchise fees are included in management and franchise fee expense in the accompanying consolidated statements of operations. |
Earnings Per Share | Basic earnings per common share is calculated by dividing net income attributable to common shareholders by the weighted-average number of common shares outstanding during the period excluding the weighted-average number of unvested restricted shares outstanding during the period. Diluted earnings per common share is calculated by dividing net income attributable to common shareholders by the weighted-average number of common shares outstanding during the period, plus any shares that could potentially be outstanding during the period. The potential shares consist of the unvested restricted share grants and unvested performance units, calculated using the treasury stock method. Any anti-dilutive shares have been excluded from the diluted earnings per share calculation. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating shares and are considered in the computation of earnings per share pursuant to the two-class method. If there were any undistributed earnings allocable to the participating shares, they would be deducted from net income attributable to common shareholders used in the basic and diluted earnings per share calculations. The limited partners’ outstanding limited partnership units in the Operating Partnership (which may be redeemed for common shares of beneficial interest under certain circumstances) have been excluded from the diluted earnings per share calculation as there was no effect on the amounts for the three months ended March 31, 2017 and 2016, since the limited partners’ share of income would also be added back to net income attributable to common shareholders. |
Investment in Hotel Properties (Tables) |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of investment in hotel properties | Investment in hotel properties consisted of the following (in thousands):
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Sale of Hotel Properties (Tables) |
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Schedule of property disposed during period | The following table discloses the hotel property that was sold during the three months ended March 31, 2016:
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Debt (Tables) |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Debt | Debt consisted of the following (in thousands):
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Schedule of Revolver and Term Loans | As of March 31, 2017 and December 31, 2016, the details of the unsecured credit agreements were as follows (in thousands):
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Schedule of mortgage loans | As of March 31, 2017 and December 31, 2016, the Company had the following mortgage loans (in thousands):
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Interest Expense Components | For the three months ended March 31, 2017 and 2016, the components of interest expense were as follows (in thousands):
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Derivatives and Hedging (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of interest rate swaps | As of March 31, 2017 and December 31, 2016, the Company had entered into the following interest rate swaps (in thousands):
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Fair Value (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of fair value hierarchy for financial assets and liabilities measured at fair value on a recurring basis | The following table presents the Company’s fair value hierarchy for those financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2017 (in thousands):
The following table presents the Company’s fair value hierarchy for those financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2016 (in thousands):
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Equity Incentive Plan (Tables) |
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Summary of the unvested restricted shares | A summary of the unvested restricted shares as of March 31, 2017 is as follows:
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Earnings per Common Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of computation of basic and diluted earnings per common share | The computation of basic and diluted earnings per common share is as follows (in thousands, except share and per share data):
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Supplemental Information to Statements of Cash Flows (Tables) |
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Elements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of supplemental information to statements of cash flows |
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Organization (Details) |
3 Months Ended |
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Mar. 31, 2017
property
loan
state
room
shares
| |
Sale of Stock | |
OP units outstanding (in units) | shares | 125,166,239 |
Company's Ownership interest in OP units through a combination of direct and indirect interests (as a percent) | 99.60% |
Number of properties owned | property | 122 |
Number of hotel rooms owned | room | 20,100 |
Number of states in which hotels owned by the entity are located | state | 21 |
Number of mortgage loans owned | loan | 1 |
Hotel property ownership interest (as a percent) | 100.00% |
Doubletree Metropolitan Hotel New York City (Joint Venture) | |
Sale of Stock | |
Hotel property ownership interest (as a percent) | 98.30% |
Summary of Significant Accounting Policies (Details) - USD ($) $ in Millions |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Accounting Standards Update 2015-03 | Prepaid expenses and other assets | ||
Summary of Significant Accounting Policies | ||
Deferred financing costs | $ 2.1 | $ 2.3 |
Investment in Hotel Properties (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Dec. 31, 2016 |
|
Property, Plant and Equipment [Abstract] | |||
Land and improvements | $ 676,103,000 | $ 675,889,000 | |
Buildings and improvements | 3,055,137,000 | 3,050,043,000 | |
Furniture, fixtures and equipment | 596,907,000 | 595,816,000 | |
Intangible assets | 2,309,000 | 2,309,000 | |
Total | 4,330,456,000 | 4,324,057,000 | |
Accumulated depreciation and amortization | (989,237,000) | (955,383,000) | |
Investment in hotel and other properties, net | 3,341,219,000 | $ 3,368,674,000 | |
Depreciation and amortization expense related to investment in hotel and other properties, excluding discontinued operations | (38,600,000) | $ 40,700,000 | |
Impairment loss | $ 0 | $ 0 |
Sale of Hotel Properties (Narrative) (Details) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017
USD ($)
|
Mar. 31, 2016
USD ($)
property
|
|
Discontinued Operations and Disposal Groups [Abstract] | ||
Hotel properties sold, Number | property | 1 | |
Disposal of hotel properties | $ 0 | $ 2,850 |
Loss on sale of hotel properties | $ (60) | $ (172) |
Sale of Hotel Properties (Schedule of Properties Disposed) (Details) - room |
Mar. 31, 2016 |
Feb. 22, 2016 |
---|---|---|
2016 Disposals | ||
Discontinued operations | ||
Property disposed, number of rooms | 62 | |
Holiday Inn Express Merrillville | ||
Discontinued operations | ||
Property disposed, number of rooms | 62 |
Debt (Components of Interest Expense) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Debt | ||
Amortization of deferred financing costs | $ 843 | $ 1,013 |
Total Interest Expense | 14,328 | 14,892 |
Secured Debt | ||
Debt | ||
Interest expense | 3,968 | 4,020 |
Revolver and Term Loans | ||
Debt | ||
Interest expense | $ 9,517 | $ 9,859 |
Income Taxes (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Dec. 31, 2016 |
|
Income Tax Disclosure [Abstract] | ||
Minimum percentage of adjusted taxable income to be distributed to shareholders in order to qualify as a REIT | 90.00% | |
Accruals for tax uncertainties | $ 0 | $ 0 |
Commitments and Contingencies (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Dec. 31, 2016 |
|
Commitments and Contingencies Disclosure [Abstract] | ||
Minimum restricted cash reserve escrows to be maintained as a percentage of the hotel's revenue | 3.00% | |
Maximum restricted cash reserve escrows to be maintained as percentage of hotel's revenue | 5.00% | |
Restricted cash reserves for future capital expenditures, real estate taxes and insurance | $ 61,538 | $ 67,206 |
Commitments and Contingencies (Management Agreements) (Details) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017
USD ($)
hotel
|
Mar. 31, 2016
USD ($)
|
|
Other Commitments | ||
Number of Hotel Properties Operated under Management Agreements | hotel | 122 | |
Management Agreements which include Franchise Agreement, Base Management Fee as Percentage of Hotel Revenues | 7.00% | |
Management fee expense | $ | $ 10.4 | $ 11.1 |
Minimum | ||
Other Commitments | ||
Management Agreement Term | 3 years | |
Base Management Fee as Percentage of Hotel Revenues | 3.00% | |
Maximum | ||
Other Commitments | ||
Management Agreement Term | 25 years | |
Base Management Fee as Percentage of Hotel Revenues | 3.50% |
Commitments and Contingencies (Franchise Agreements) (Details) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017
USD ($)
hotel
|
Mar. 31, 2016
USD ($)
|
|
Other Commitments | ||
Number of Hotel Properties Operated under Franchise Agreements | hotel | 108 | |
Franchise fee expense | $ | $ 16.5 | $ 17.4 |
Minimum | ||
Other Commitments | ||
Franchise Agreements Term | 10 years | |
Franchise Agreements, Royalty Fee as Percentage of Room Revenue | 4.00% | |
Franchise Agreements, Additional Fees for Marketing Central Reservation Systems and Other Franchisor Costs as Percentage of Room Revenue | 1.00% | |
Franchise Agreements, Royalty Fee as Percentage of Food and Beverage Revenue | 1.50% | |
Maximum | ||
Other Commitments | ||
Franchise Agreements Term | 30 years | |
Franchise Agreements, Royalty Fee as Percentage of Room Revenue | 6.00% | |
Franchise Agreements, Additional Fees for Marketing Central Reservation Systems and Other Franchisor Costs as Percentage of Room Revenue | 4.30% | |
Franchise Agreements, Royalty Fee as Percentage of Food and Beverage Revenue | 3.00% |
Equity (Details) - USD ($) |
3 Months Ended | ||||
---|---|---|---|---|---|
Apr. 23, 2017 |
Mar. 31, 2016 |
Mar. 31, 2017 |
Feb. 17, 2017 |
Dec. 31, 2016 |
|
Equity, Class of Treasury Stock | |||||
Share repurchase program, authorized amount | $ 440,000,000.0 | $ 400,000,000.0 | |||
Share repurchase program, additional authorized amount | $ 40,000,000.0 | ||||
Stock repurchased during the period, Value | $ 11,289,000 | ||||
Common shares of beneficial interest, par value (in dollars per share) | $ 0.01 | $ 0.01 | |||
Share repurchase program, remaining authorized amount | $ 201,542,669 | ||||
Common Stock | |||||
Equity, Class of Treasury Stock | |||||
Common shares repurchased and retired (in shares) | 510,498 | ||||
Stock repurchased during the period, Value | $ 5,000 | ||||
Redemption of Operating Partnership units (in shares) | 335,250 | ||||
Limited Partners | |||||
Equity, Class of Treasury Stock | |||||
Remaining limited partner ownership interest in Operating Partnership units (in shares) | 558,750 | ||||
FelCor Lodging Trust | Subsequent Event | |||||
Equity, Class of Treasury Stock | |||||
Common Stock, Conversion Basis | 0.362 |
Earnings per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Numerator: | ||
Net income attributable to common shareholders | $ 21,758 | $ 25,298 |
Less: Dividends paid on unvested restricted shares | (282) | (413) |
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares | $ 21,476 | $ 24,885 |
Denominator: | ||
Weighted-average number of common shares - basic (in shares) | 123,734,173 | 123,739,823 |
Unvested restricted shares (in shares) | 107,227 | 402,001 |
Weighted-average number of common shares - diluted (in shares) | 123,841,400 | 124,141,824 |
Net income per share attributable to common shareholders - basic (in dollars per share) | $ 0.17 | $ 0.20 |
Net income per share attributable to common shareholders - diluted (in dollars per share) | $ 0.17 | $ 0.20 |
Supplemental Information to Statements of Cash Flows (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Supplemental Cash Flow Elements [Abstract] | ||
Interest paid | $ 13,280 | $ 13,890 |
Income taxes paid | 212 | 271 |
In conjunction with the sale of hotel properties, the Company recorded the following: | ||
Sale of hotel properties | 0 | 2,850 |
Transaction costs | (60) | (104) |
Operating prorations | 0 | (99) |
Proceeds from the sale of hotel properties, net | (60) | 2,647 |
Supplemental non-cash transactions | ||
Accrued capital expenditures | 0 | 785 |
Redemption of Operating Partnership units | $ 0 | $ 4,325 |
Subsequent Events (Details) |
Apr. 23, 2017 |
---|---|
FelCor Lodging Trust | Subsequent Event | |
Subsequent Event [Line Items] | |
Common Stock, Conversion Basis | 0.362 |
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