Maryland | 27-2962512 | |
(State or other jurisdiction | (I.R.S. Employer Identification No.) | |
of incorporation or organization) | ||
Large accelerated filer | x | Accelerated filer | o |
Non-accelerated filer | o | 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 | ||
March 31, 2019 | December 31, 2018 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Investment in hotel properties, net | $ | $ | ||||||
Undeveloped land | ||||||||
Assets held for sale, net | ||||||||
Investment in real estate loans, net | ||||||||
Right-of-use assets | — | |||||||
Cash and cash equivalents | ||||||||
Restricted cash | ||||||||
Trade receivables, net | ||||||||
Prepaid expenses and other | ||||||||
Deferred charges, net | ||||||||
Other assets | ||||||||
Total assets | $ | $ | ||||||
LIABILITIES AND EQUITY | ||||||||
Liabilities: | ||||||||
Debt, net of debt issuance costs | $ | $ | ||||||
Lease liabilities | — | |||||||
Accounts payable | ||||||||
Accrued expenses and other | ||||||||
Total liabilities | ||||||||
Commitments and contingencies (Note 9) | ||||||||
Equity: | ||||||||
Preferred stock, $0.01 par value per share, 100,000,000 shares authorized: | ||||||||
6.45% Series D - 3,000,000 shares issued and outstanding at March 31, 2019 and December 31, 2018 (aggregate liquidation preference of $75,417 at March 31, 2019 and December 31, 2018) | ||||||||
6.25% Series E - 6,400,000 shares issued and outstanding at March 31, 2019 and December 31, 2018 (aggregate liquidation preference of $160,861 at March 31, 2019 and December 31, 2018) | ||||||||
Common stock, $0.01 par value per share, 500,000,000 shares authorized, 105,080,113 and 104,783,179 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively | ||||||||
Additional paid-in capital | ||||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
(Distributions in excess of retained earnings) retained earnings | ( | ) | ||||||
Total stockholders’ equity | ||||||||
Non-controlling interests in operating partnership | ||||||||
Total equity | ||||||||
Total liabilities and equity | $ | $ | ||||||
For the Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Revenues: | ||||||||
Room | $ | $ | ||||||
Food and beverage | ||||||||
Other | ||||||||
Total revenues | ||||||||
Expenses: | ||||||||
Room | ||||||||
Food and beverage | ||||||||
Other hotel operating expenses | ||||||||
Property taxes, insurance and other | ||||||||
Management fees | ||||||||
Depreciation and amortization | ||||||||
Corporate general and administrative | ||||||||
Total expenses | ||||||||
Gain (loss) on disposal of assets, net | ( | ) | ||||||
Operating income | ||||||||
Other income (expense): | ||||||||
Interest expense | ( | ) | ( | ) | ||||
Other income, net | ||||||||
Total other income (expense) | ( | ) | ( | ) | ||||
Income from continuing operations before income taxes | ||||||||
Income tax expense (Note 11) | ( | ) | ( | ) | ||||
Net income | ||||||||
Non-controlling interest in Operating Partnership | ( | ) | ( | ) | ||||
Net income attributable to Summit Hotel Properties, Inc. | ||||||||
Preferred dividends | ( | ) | ( | ) | ||||
Premium on redemption of preferred stock | ( | ) | ||||||
Net income attributable to common stockholders | $ | $ | ||||||
Earnings per share: | ||||||||
Basic and diluted | $ | $ | ||||||
Weighted average common shares outstanding: | ||||||||
Basic | ||||||||
Diluted | ||||||||
For the Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Net income | $ | $ | ||||||
Other comprehensive income, net of tax: | ||||||||
Changes in fair value of derivative financial instruments | ( | ) | ||||||
Comprehensive income | ||||||||
Comprehensive income attributable to non-controlling interests: | ||||||||
Less - Comprehensive income attributable to non-controlling interest in Operating Partnership | ( | ) | ( | ) | ||||
Comprehensive income attributable to Summit Hotel Properties, Inc. | ||||||||
Preferred dividends | ( | ) | ( | ) | ||||
Premium on redemption of preferred stock | ( | ) | ||||||
Comprehensive income attributable to common stockholders | $ | $ | ||||||
Shares of Preferred Stock | Preferred Stock | Shares of Common Stock | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings (Deficit) and Distributions | Total Stockholders’ Equity | Non-controlling Interests in Operating Partnership | Total Equity | |||||||||||||||||||||||||||||
Balance at December 31, 2018 | $ | $ | $ | $ | ( | ) | $ | $ | $ | $ | ||||||||||||||||||||||||||||
Dividends | — | — | — | — | — | — | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
Equity-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||
Shares acquired for employee withholding requirements | — | — | ( | ) | ( | ) | ( | ) | — | — | ( | ) | — | ( | ) | |||||||||||||||||||||||
Other | — | — | — | — | ( | ) | — | — | ( | ) | — | ( | ) | |||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | ( | ) | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
Net income | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Balance at March 31, 2019 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||
Balance at December 31, 2017 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
Redemption of preferred stock | ( | ) | ( | ) | — | — | ( | ) | — | ( | ) | ( | ) | — | ( | ) | ||||||||||||||||||||||
Dividends | — | — | — | — | — | — | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
Equity-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||
Shares acquired for employee withholding requirements | — | — | ( | ) | ( | ) | ( | ) | — | — | ( | ) | — | ( | ) | |||||||||||||||||||||||
Other | — | — | — | — | ( | ) | — | — | ( | ) | — | ( | ) | |||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Balance at March 31, 2018 | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||||
For the Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | $ | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | ||||||||
Amortization of deferred financing costs | ||||||||
Equity-based compensation | ||||||||
(Gain) loss on disposal of assets, net | ( | ) | ||||||
Other | ( | ) | ||||||
Changes in operating assets and liabilities: | ||||||||
Trade receivables, net | ( | ) | ( | ) | ||||
Prepaid expenses and other | ||||||||
Accounts payable | ( | ) | ( | ) | ||||
Accrued expenses and other | ||||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | ||||||||
INVESTING ACTIVITIES | ||||||||
Acquisitions of hotel properties | ( | ) | ||||||
Investment in hotel properties under development | ( | ) | ||||||
Improvements to hotel properties | ( | ) | ( | ) | ||||
Proceeds from asset dispositions, net | ||||||||
Funding of real estate loans | ( | ) | ( | ) | ||||
Proceeds from collection of real estate loans | ||||||||
NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||||
FINANCING ACTIVITIES | ||||||||
Proceeds from issuance of debt | ||||||||
Principal payments on debt | ( | ) | ( | ) | ||||
Redemption of preferred stock | ( | ) | ||||||
Dividends paid | ( | ) | ( | ) | ||||
Financing fees on debt and other issuance costs | ( | ) | ( | ) | ||||
Repurchase of common shares for withholding requirements | ( | ) | ( | ) | ||||
NET CASH USED IN FINANCING ACTIVITIES | ( | ) | ( | ) | ||||
Net change in cash, cash equivalents and restricted cash | ( | ) | ||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH | ||||||||
Beginning of period | ||||||||
End of period | $ | $ | ||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
Cash payments for interest | $ | $ | ||||||
Accrued acquisition costs and improvements to hotel properties | $ | $ | ||||||
Capitalized interest | $ | $ | ||||||
Net cash (refunds) payments for income taxes | $ | ( | ) | $ | ||||
Level 1: | Observable inputs such as quoted prices in active markets. | |
Level 2: | Directly or indirectly observable inputs, other than quoted prices in active markets. | |
Level 3: | Unobservable inputs in which there is little or no market information, which require a reporting entity to develop its own assumptions. | |
Market approach: | Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. | |
Cost approach: | Amount required to replace the service capacity of an asset (replacement cost). | |
Income approach: | Techniques used to convert future amounts to a single amount based on market expectations (including present-value, option-pricing, and excess-earnings models). | |
March 31, 2019 | December 31, 2018 | |||||||
Hotel buildings and improvements | $ | $ | ||||||
Land | ||||||||
Furniture, fixtures and equipment | ||||||||
Construction in progress | ||||||||
Intangible assets | ||||||||
Less - accumulated depreciation and amortization | ( | ) | ( | ) | ||||
$ | $ | |||||||
For the Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Revenues | $ | $ | ||||||
Income from hotel operations | $ | $ | ||||||
Net income (1) | $ | $ | ||||||
Net income (loss) attributable to common stockholders, net of amount allocated to participating securities (1) (2) | $ | $ | ( | ) | ||||
Basic and diluted net income (loss) per share attributable to common stockholders (1) (2) | $ | $ | ( | ) | ||||
(1) | Pro forma amounts include depreciation expense, property tax expense, interest expense, income tax expense, and other corporate expenses totaling $ |
(2) |
March 31, 2019 | December 31, 2018 | |||||||
Hotel buildings and improvements | $ | $ | ||||||
Land | ||||||||
Furniture, fixtures and equipment | ||||||||
Franchise fees | ||||||||
Other | ||||||||
Less - accumulated depreciation and amortization | ( | ) | ( | ) | ||||
$ | $ | |||||||
March 31, 2019 | December 31, 2018 | |||||||
Revolving debt | $ | $ | ||||||
Term loans | ||||||||
Mortgage loans | ||||||||
Unamortized debt issuance costs | ( | ) | ( | ) | ||||
Debt, net of debt issuance costs | $ | $ | ||||||
March 31, 2019 | Percentage | December 31, 2018 | Percentage | |||||||||
Fixed-rate debt | $ | $ | ||||||||||
Variable-rate debt | ||||||||||||
$ | $ | |||||||||||
March 31, 2019 | December 31, 2018 | |||||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | Valuation Technique | ||||||||||||||
Fixed-rate debt | $ | $ | $ | $ | Level 2 - Market approach | |||||||||||||
2019 | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 | |||
Thereafter | |||
Total lease payments (1) | |||
Less interest | ( | ) | |
Total | $ | ||
(1) |
Notional Amount | Fair Value | |||||||||||||||||||
Contract date | Effective Date | Expiration Date | March 31, 2019 | December 31, 2018 | March 31, 2019 | December 31, 2018 | ||||||||||||||
October 2, 2017 | January 29, 2018 | January 31, 2023 | $ | (1) | $ | $ | $ | |||||||||||||
October 2, 2017 | January 29, 2018 | January 31, 2023 | (1) | |||||||||||||||||
June 11, 2018 | September 28, 2018 | September 30, 2024 | (2) | ( | ) | ( | ) | |||||||||||||
June 11, 2018 | December 31, 2018 | December 31, 2025 | (3) | ( | ) | ( | ) | |||||||||||||
$ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||
(1) | Interest rate swap partially fixes the interest rate on a portion of our variable interest rate unsecured indebtedness and converts LIBOR from a floating rate to an average annual fixed rate of |
(2) | Interest rate swap partially fixes the interest rate on a portion of our variable interest rate unsecured indebtedness and converts LIBOR from a floating rate to an average annual fixed rate of |
(3) | Interest rate swap partially fixes the interest rate on a portion of our variable interest rate unsecured indebtedness and converts LIBOR from a floating rate to an average annual fixed rate of |
For the Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(Loss) gain recognized in Other comprehensive income on derivative financial instruments | $ | ( | ) | $ | ||||
Gain (loss) reclassified from Other comprehensive income to Interest expense | $ | $ | ( | ) | ||||
Total interest expense in which the effects of cash flow hedges are recorded | $ | ( | ) | $ | ( | ) | ||
For the Three Months Ended March 31, | |||||
2019 | 2018 | ||||
Beginning common shares outstanding | |||||
Grants under the Equity Plan | |||||
Common stock issued for director fees | |||||
Performance share and other forfeitures | ( | ) | |||
Shares retained for employee tax withholding requirements | ( | ) | ( | ) | |
Ending common shares outstanding | |||||
Fair Value Measurements at March 31, 2019 using | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Interest rate swaps | $ | $ | $ | $ | ||||||||||||
Purchase options related to real estate loans | ||||||||||||||||
Liabilities: | ||||||||||||||||
Interest rate swaps | ||||||||||||||||
Fair Value Measurements at December 31, 2018 using | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Interest rate swaps | $ | $ | $ | $ | ||||||||||||
Purchase options related to real estate loans | ||||||||||||||||
Liabilities: | ||||||||||||||||
Interest rate swaps | ||||||||||||||||
Real Estate Loan 1 | Real Estate Loan 2 | Real Estate Loan 3 | ||||||||||
Exercise price | $ | $ | $ | |||||||||
First option exercise date (1) | 12/31/2018 | 3/31/2019 | 5/31/2019 | |||||||||
Last option exercise date | 11/1/2020 | 12/5/2020 | 12/1/2020 | |||||||||
Expected volatility | % | % | % | |||||||||
Risk free rate | % | % | % | |||||||||
Expected annualized equity dividend yield | % | % | % | |||||||||
(1) |
Number of Shares | Weighted Average Grant Date Fair Value | Aggregate Current Value | |||||||||
(per share) | (in thousands) | ||||||||||
Non-vested at December 31, 2018 | $ | $ | |||||||||
Granted | |||||||||||
Vested | ( | ) | |||||||||
Forfeited | ( | ) | |||||||||
Non-vested at March 31, 2019 | $ | $ | |||||||||
Number of Shares | Weighted Average Grant Date Fair Value (1) | Aggregate Current Value | |||||||||
(per share) | (in thousands) | ||||||||||
Non-vested at December 31, 2018 | $ | $ | |||||||||
Granted | |||||||||||
Vested | ( | ) | |||||||||
Forfeited | ( | ) | |||||||||
Non-vested at March 31, 2019 | $ | $ | |||||||||
For the Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Time-based restricted stock | $ | $ | ||||||
Performance-based restricted stock | ||||||||
Director stock | ||||||||
$ | $ | |||||||
Total | 2019 | 2020 | 2021 | 2022 | 2023 | |||||||||||||||||||
Time-based restricted stock | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Performance-based restricted stock | ||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||||||
For the Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Numerator: | ||||||||
Net income | $ | $ | ||||||
Less: Preferred dividends | ( | ) | ( | ) | ||||
Premium on redemption of preferred stock | ( | ) | ||||||
Allocation to participating securities | ( | ) | ( | ) | ||||
Attributable to non-controlling interest | ( | ) | ( | ) | ||||
Net income attributable to common stockholders, net of amount allocated to participating securities | $ | $ | ||||||
Denominator: | ||||||||
Weighted average common shares outstanding - basic | ||||||||
Dilutive effect of equity-based compensation awards | ||||||||
Weighted average common shares outstanding - diluted | ||||||||
Earnings per share: | ||||||||
Basic and diluted | $ | $ | ||||||
• | financing risks, including the risk of leverage and the corresponding risk of default on our existing indebtedness and potential inability to refinance or extend the maturities of our existing indebtedness; |
• | default by borrowers to which we lend or provide seller financing; |
• | global, national, regional and local economic and geopolitical conditions; |
• | levels of spending for business and leisure travel, as well as consumer confidence; |
• | supply and demand factors in our markets or sub-markets; |
• | adverse changes in occupancy, average daily rate (“ADR”) and revenue per available room (“RevPAR”) and other hotel operating metrics; |
• | hostilities, including future terrorist attacks, or fear of hostilities that affect travel; |
• | financial condition of, and our relationships with, third-party property managers and franchisors; |
• | the degree and nature of our competition; |
• | increased interest rates; |
• | increased operating costs, including but not limited to labor costs; |
• | increased renovation costs, which may cause actual renovation costs to exceed our current estimates; |
• | changes in zoning laws; |
• | increases in real property taxes that are significantly higher than our expectations; |
• | risks associated with hotel acquisitions, including the ability to ramp up and stabilize newly acquired hotels with limited or no operating history or that require substantial amounts of capital improvements for us to earn stabilized economic returns consistent with our expectations at the time of acquisition; |
• | risks associated with dispositions of hotel properties, including our ability to successfully complete the sale of hotel properties under contract to be sold, including the risk that the purchaser may not have access to the capital needed to complete the purchase; |
• | the nature of our structure and transactions such that our federal and state taxes are complex and there is risk of successful challenges to our tax positions by the Internal Revenue Service ("IRS") or other federal and state taxing authorities; |
• | availability of and our ability to retain qualified personnel; |
• | our failure to maintain our qualification as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "IRC"); |
• | changes in our business or investment strategy; |
• | availability, terms and deployment of capital; |
• | general volatility of the capital markets and the market price of our common stock; |
• | environmental uncertainties and risks related to natural disasters; |
• | our ability to recover fully under third party indemnities or our existing insurance policies for insurable losses and our ability to maintain adequate or full replacement cost “all-risk” property insurance policies on our properties on commercially reasonable terms; |
• | the effect of a data breach or significant disruption of hotel operator information technology networks as a result of cyber attacks that are greater than insurance coverages or indemnities from service providers; |
• | current and future changes to the IRC; and |
• | the other factors discussed under the heading "Risk Factors" included in our Annual Report on Form 10-K for the year ended December 31, 2018. |
Management Company | Number of Properties | Number of Guestrooms | ||||
Interstate Management Company, LLC and its affiliate Noble Management Group, LLC | 31 | 4,604 | ||||
OTO Development, LLC | 13 | 1,797 | ||||
Stonebridge Realty Advisors, Inc. | 8 | 1,143 | ||||
Affiliates of Marriott, including Courtyard Management Corporation, SpringHill SMC Corporation and Residence Inn by Marriott, Inc. | 7 | 1,176 | ||||
Select Hotels Group, LLC, an affiliate of Hyatt | 6 | 934 | ||||
White Lodging Services Corporation | 4 | 791 | ||||
American Liberty Hospitality, Inc. | 2 | 372 | ||||
Aimbridge Hospitality | 2 | 199 | ||||
Fillmore Hospitality | 1 | 261 | ||||
Intercontinental Hotel Group Resources, Inc., an affiliate of IHG | 1 | 252 | ||||
Total | 75 | 11,529 | ||||
Franchise/Brand | Number of Hotel Properties | Number of Guestrooms | ||||
Marriott | ||||||
Courtyard by Marriott | 15 | 2,760 | ||||
Residence Inn by Marriott | 10 | 1,445 | ||||
SpringHill Suites by Marriott | 6 | 874 | ||||
AC Hotel by Marriott | 1 | 255 | ||||
Fairfield Inn & Suites by Marriott | 1 | 140 | ||||
Four Points by Sheraton | 1 | 101 | ||||
Marriott | 1 | 165 | ||||
Total Marriott | 35 | 5,740 | ||||
Hilton | ||||||
Hampton Inn & Suites | 7 | 1,044 | ||||
Hilton Garden Inn | 7 | 962 | ||||
Hampton Inn | 2 | 240 | ||||
Homewood Suites | 2 | 251 | ||||
DoubleTree by Hilton | 1 | 210 | ||||
Total Hilton | 19 | 2,707 | ||||
Hyatt | ||||||
Hyatt Place | 14 | 2,035 | ||||
Hyatt House | 3 | 466 | ||||
Total Hyatt | 17 | 2,501 | ||||
IHG | ||||||
Holiday Inn Express & Suites | 2 | 345 | ||||
Hotel Indigo | 1 | 115 | ||||
Staybridge Suites | 1 | 121 | ||||
Total IHG | 4 | 581 | ||||
Total | 75 | 11,529 | ||||
For the Three Months Ended March 31, | Quarter-over-Quarter | Quarter-over-Quarter | |||||||||||||||||||||||||||||
2019 | 2018 | Dollar Change | Percentage/Basis Point Change | ||||||||||||||||||||||||||||
Total Portfolio (75 hotels) | Same-Store Portfolio (73 hotels) | Total Portfolio (83 hotels) | Same-Store Portfolio (73 hotels) | Total Portfolio (75/83 hotels) | Same-Store Portfolio (73 hotels) | Total Portfolio (75/83 hotels) | Same-Store Portfolio (73 hotels) | ||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||||
Room | $ | 128,100 | $ | 123,598 | $ | 129,572 | $ | 120,398 | $ | (1,472 | ) | $ | 3,200 | (1.1 | )% | 2.7 | % | ||||||||||||||
Food and beverage | 6,162 | 5,999 | 6,329 | 5,910 | (167 | ) | 89 | (2.6 | )% | 1.5 | % | ||||||||||||||||||||
Other | 4,690 | 4,642 | 4,298 | 4,233 | 392 | 409 | 9.1 | % | 9.7 | % | |||||||||||||||||||||
Total | $ | 138,952 | $ | 134,239 | $ | 140,199 | $ | 130,541 | $ | (1,247 | ) | $ | 3,698 | (0.9 | )% | 2.8 | % | ||||||||||||||
Expenses: | |||||||||||||||||||||||||||||||
Room | $ | 27,840 | $ | 26,719 | $ | 29,005 | $ | 26,941 | $ | (1,165 | ) | $ | (222 | ) | (4.0 | )% | (0.8 | )% | |||||||||||||
Food and beverage | 4,600 | 4,503 | 4,999 | 4,620 | (399 | ) | (117 | ) | (8.0 | )% | (2.5 | )% | |||||||||||||||||||
Other hotel operating expenses | 39,797 | 38,511 | 39,458 | 36,684 | 339 | 1,827 | 0.9 | % | 5.0 | % | |||||||||||||||||||||
Total | $ | 72,237 | $ | 69,733 | $ | 73,462 | $ | 68,245 | $ | (1,225 | ) | $ | 1,488 | (1.7 | )% | 2.2 | % | ||||||||||||||
Operational Statistics: | |||||||||||||||||||||||||||||||
Occupancy | 76.4 | % | 76.2 | % | 76.3 | % | 76.0 | % | n/a | n/a | 12 | bps | 22 | bps | |||||||||||||||||
ADR | $ | 160.80 | $ | 160.73 | $ | 154.22 | $ | 157.16 | $ | 6.58 | $ | 3.57 | 4.3 | % | 2.3 | % | |||||||||||||||
RevPAR | $ | 122.81 | $ | 122.50 | $ | 117.60 | $ | 119.42 | $ | 5.21 | $ | 3.08 | 4.4 | % | 2.6 | % | |||||||||||||||
For the Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Net income | $ | 12,900 | $ | 9,691 | ||||
Preferred dividends | (3,709 | ) | (5,543 | ) | ||||
Premium on redemption of preferred stock | — | (3,277 | ) | |||||
Net income applicable to common shares and common units | 9,191 | 871 | ||||||
Real estate-related depreciation | 25,425 | 25,123 | ||||||
(Gain) loss on disposal of assets, net | (4,166 | ) | 43 | |||||
FFO applicable to common shares and common units | 30,450 | 26,037 | ||||||
Amortization of lease-related intangible assets, net | 35 | 181 | ||||||
Amortization of deferred financing costs | 381 | 494 | ||||||
Amortization of franchise fees | 111 | 123 | ||||||
Equity-based compensation | 1,352 | 2,227 | ||||||
Debt transaction costs | 713 | 88 | ||||||
Premium on redemption of preferred stock | — | 3,277 | ||||||
Non-cash interest income | (507 | ) | (509 | ) | ||||
Non-cash lease expense, net | 156 | — | ||||||
Casualty (recoveries) losses, net | (427 | ) | 218 | |||||
AFFO applicable to common shares and common units | $ | 32,264 | $ | 32,136 | ||||
Weighted average diluted common shares/common units (1) | 104,198 | 104,403 | ||||||
FFO per common share/common unit | $ | 0.29 | $ | 0.25 | ||||
AFFO per common share/common unit | $ | 0.31 | $ | 0.31 | ||||
(1) | Includes common units in the Operating Partnership held by limited partners (other than us and our subsidiaries) because the common units are redeemable for cash or, at our election, shares of our common stock. |
For the Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Net income | $ | 12,900 | $ | 9,691 | ||||
Depreciation and amortization | 25,536 | 25,246 | ||||||
Interest expense | 10,852 | 9,329 | ||||||
Interest income | (69 | ) | (27 | ) | ||||
Income tax expense | 350 | 260 | ||||||
EBITDA | 49,569 | 44,499 | ||||||
(Gain) loss on disposal of assets, net | (4,166 | ) | 43 | |||||
EBITDAre | 45,403 | 44,542 | ||||||
Amortization of lease-related intangible assets, net | 35 | 181 | ||||||
Equity-based compensation | 1,352 | 2,227 | ||||||
Debt transaction costs | 713 | 88 | ||||||
Non-cash interest income | (507 | ) | (509 | ) | ||||
Non-cash lease expense, net | 156 | — | ||||||
Casualty (recoveries) losses, net | (427 | ) | 218 | |||||
Adjusted EBITDAre | $ | 46,725 | $ | 46,747 | ||||
Lender | Interest Rate | Amortization Period (Years) | Maturity Date | Number of Encumbered Properties | Principal Amount Outstanding | |||||||||||
$600 Million Senior Unsecured Credit Facility | ||||||||||||||||
Deutsche Bank AG New York Branch | ||||||||||||||||
$400 Million Revolver | 4.14% Variable | n/a | March 31, 2023 | n/a | $ | 125,000 | ||||||||||
$200 Million Term Loan | 4.09% Variable | n/a | April 1, 2024 | n/a | 200,000 | |||||||||||
Total Senior Unsecured Credit Facility | 325,000 | |||||||||||||||
Unsecured Term Loans | ||||||||||||||||
KeyBank National Association | ||||||||||||||||
Term Loan | 4.09% Variable | n/a | November 25, 2022 | n/a | 225,000 | |||||||||||
KeyBank National Association | ||||||||||||||||
Term Loan | 4.39% Variable | n/a | February, 14, 2025 | n/a | 225,000 | |||||||||||
Secured Mortgage Indebtedness | ||||||||||||||||
MetaBank | 4.44% Fixed | 25 | July 1, 2027 | 3 | 47,640 | |||||||||||
KeyBank National Association | 4.46% Fixed | 30 | February 1, 2023 | 3 | 19,812 | |||||||||||
4.52% Fixed | 30 | April 1, 2023 | 3 | 20,330 | ||||||||||||
4.30% Fixed | 30 | April 1, 2023 | 3 | 19,662 | ||||||||||||
4.95% Fixed | 30 | August 1, 2023 | 2 | 35,230 | ||||||||||||
Bank of the Cascades | 4.49% Variable | 25 | December 19, 2024 | 1 | (1 | ) | 8,690 | |||||||||
4.30% Fixed | 25 | December 19, 2024 | — | (1 | ) | 8,690 | ||||||||||
Compass Bank (2) | 4.89% Variable | 25 | May 6, 2020 | 3 | 21,996 | |||||||||||
U.S. Bank, NA (3) | 6.13% Fixed | 25 | November 11, 2021 | 1 | 10,636 | |||||||||||
Total Mortgage Loans | 192,686 | |||||||||||||||
Total Debt | 19 | $ | 967,686 | |||||||||||||
(1) | The Bank of Cascades mortgage loans are secured by the same collateral and cross-defaulted. |
(2) | Paid in full on April 24, 2019. |
(3) | Paid in full on April 11, 2019. |
For the Three Months Ended March 31, | ||||||||||||
2019 | 2018 | Change | ||||||||||
(in thousands) | ||||||||||||
Net cash provided by operating activities | $ | 30,240 | $ | 37,746 | $ | (7,506 | ) | |||||
Net cash used in investing activities | (10,316 | ) | (22,766 | ) | 12,450 | |||||||
Net cash used in financing activities | (21,541 | ) | (6,069 | ) | (15,472 | ) | ||||||
Net change in cash, cash equivalents and restricted cash | $ | (1,617 | ) | $ | 8,911 | $ | (10,528 | ) | ||||
Payments Due By Period | ||||||||||||||||||||
Total | Less than One Year | One to Three Years | Four to Five Years | More than Five Years | ||||||||||||||||
Debt obligations (1) | $ | 967,686 | $ | 4,249 | $ | 39,781 | $ | 541,838 | $ | 381,818 | ||||||||||
Currently projected interest (2) | 196,084 | 41,650 | 81,685 | 56,880 | 15,869 | |||||||||||||||
Operating lease obligations (3) | 36,656 | 2,174 | 3,929 | 2,314 | 28,239 | |||||||||||||||
Purchase obligations (4) | 11,899 | 11,899 | — | — | — | |||||||||||||||
Total | $ | 1,212,325 | $ | 59,972 | $ | 125,395 | $ | 601,032 | $ | 425,926 | ||||||||||
(1) | Amounts shown include amortization of principal and debt maturities. |
(2) | Interest payments on our variable rate debt have been estimated using the interest rates in effect at March 31, 2019, after giving effect to our interest rate swaps. |
(3) | Amounts consist primarily of non-cancelable ground lease and corporate office lease obligations. |
(4) | This amount represents purchase orders and executed contracts for development or renovation projects at our hotel properties. |
Notional Amount | ||||||||
Contract date | Effective Date | Expiration Date | March 31, 2019 | |||||
October 2, 2017 | January 29, 2018 | January 31, 2023 | $ | 100,000 | ||||
October 2, 2017 | January 29, 2018 | January 31, 2023 | 100,000 | |||||
June 11, 2018 | September 28, 2018 | September 30, 2024 | 75,000 | |||||
June 11, 2018 | December 31, 2018 | December 31, 2025 | 125,000 | |||||
$ | 400,000 | |||||||
Period | Total Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | |||||||||
January 1, 2019 - January 31, 2019 | — | $ | — | — | — | ||||||||
February 1, 2019 - February 28, 2019 | — | $ | — | — | — | ||||||||
March 1, 2019 - March 31, 2019 | 73,892 | $ | 11.29 | — | — | ||||||||
Total | 73,892 | $ | 11.29 | — | — | ||||||||
Exhibit | ||
Number | Description of Exhibit | |
101.INS | The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. | |
101.SCH | XBRL Taxonomy Extension Schema Document (1) | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document (1) | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document (1) | |
101.LAB | XBRL Taxonomy Extension Labels Linkbase Document (1) | |
101.PRE | XBRL Taxonomy Presentation Linkbase Document (1) | |
SUMMIT HOTEL PROPERTIES, INC. (registrant) | ||
Date: May 1, 2019 | By: | /s/ Jonathan P. Stanner |
Jonathan P. Stanner Executive Vice President, Chief Financial Officer and Treasurer (principal financial officer) | ||
Date: May 1, 2019 | /s/ Daniel P. Hansen | |
Daniel P. Hansen | ||
Chairman of the Board of Directors, | ||
President and Chief Executive Officer | ||
(principal executive officer) | ||
Date: May 1, 2019 | /s/ Jonathan P. Stanner | ||
Jonathan P. Stanner | |||
Executive Vice President, Chief Financial Officer and Treasurer | |||
(principal financial officer) | |||
Date: May 1, 2019 | /s/ Daniel P. Hansen | ||
Daniel P. Hansen Chairman of the Board of Directors, President and Chief Executive Officer (principal executive officer) | |||
Date: May 1, 2019 | /s/ Jonathan P. Stanner | ||
Jonathan P. Stanner Executive Vice President, Chief Financial Officer and Treasurer (principal financial officer) | |||
Document and Entity Information - shares |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
Apr. 24, 2019 |
|
| Document and Entity Information | ||
| Entity Registrant Name | SUMMIT HOTEL PROPERTIES, INC. | |
| Entity Central Index Key | 0001497645 | |
| Current Fiscal Year End Date | --12-31 | |
| Entity Filer Category | Large Accelerated Filer | |
| Document Type | 10-Q | |
| Document Period End Date | Mar. 31, 2019 | |
| Document Fiscal Year Focus | 2019 | |
| Document Fiscal Period Focus | Q1 | |
| Amendment Flag | false | |
| Entity Emerging Growth Company | false | |
| Entity Small Business | false | |
| Entity Common Stock, Shares Outstanding | 105,080,973 |
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
| Statement of Comprehensive Income [Abstract] | ||
| Net income | $ 12,900 | $ 9,691 |
| Other comprehensive income, net of tax: | ||
| Changes in fair value of derivative financial instruments | (5,558) | 3,744 |
| Comprehensive income | 7,342 | 13,435 |
| Comprehensive income attributable to non-controlling interests: | ||
| Less - Comprehensive income attributable to non-controlling interest in Operating Partnership | (9) | (15) |
| Comprehensive income attributable to Summit Hotel Properties, Inc. | 7,333 | 13,420 |
| Preferred dividends | (3,709) | (5,543) |
| Premium on redemption of preferred stock | 0 | (3,277) |
| Comprehensive income attributable to common stockholders | $ 3,624 | $ 4,600 |
Condensed Consolidated Statements of Changes in Equity (Unaudited) - USD ($) $ in Thousands |
Total |
Preferred Stock |
Common Stock |
Additional Paid-In Capital |
Accumulated Other Comprehensive Income (Loss) |
Retained Earnings (Deficit) and Distributions |
Total Stockholders’ Equity |
Non-controlling Interests in Operating Partnership |
|---|---|---|---|---|---|---|---|---|
| Balance at beginning of year at Dec. 31, 2017 | $ 1,277,376 | $ 128 | $ 1,043 | $ 1,262,679 | $ 1,451 | $ 9,201 | $ 1,274,502 | $ 2,874 |
| Balance (in shares) at Dec. 31, 2017 | 12,800,000 | 104,287,128 | ||||||
| Changes in equity | ||||||||
| Redemption of preferred stock | (85,000) | $ (34) | (81,689) | (3,277) | (85,000) | |||
| Redemption of preferred stock (in shares) | (3,400,000) | |||||||
| Dividends | (24,380) | (24,322) | (24,322) | (58) | ||||
| Equity-based compensation | 2,227 | $ 6 | 2,214 | 2,220 | 7 | |||
| Equity-based compensation (in shares) | 584,520 | |||||||
| Shares acquired for employee withholding requirements | $ (2,724) | $ (2) | (2,722) | (2,724) | ||||
| Shares acquired for employee withholding requirements (in shares) | (187,850) | (187,850) | ||||||
| Other | $ (61) | (61) | (61) | |||||
| Other comprehensive loss | 3,744 | 3,732 | 3,732 | 12 | ||||
| Net income | 9,691 | 9,688 | 9,688 | 3 | ||||
| Balance at end of year at Mar. 31, 2018 | 1,180,873 | $ 94 | $ 1,047 | 1,180,421 | 5,183 | (8,710) | 1,178,035 | 2,838 |
| Balance (in shares) at Mar. 31, 2018 | 9,400,000 | 104,683,798 | ||||||
| Balance at beginning of year at Dec. 31, 2018 | 1,192,144 | $ 94 | $ 1,048 | 1,185,310 | (1,441) | 4,838 | 1,189,849 | 2,295 |
| Balance (in shares) at Dec. 31, 2018 | 9,400,000 | 104,783,179 | ||||||
| Changes in equity | ||||||||
| Dividends | (22,003) | (21,956) | (21,956) | (47) | ||||
| Equity-based compensation | 1,352 | $ 4 | 1,345 | 1,349 | 3 | |||
| Equity-based compensation (in shares) | 370,826 | |||||||
| Shares acquired for employee withholding requirements | $ (834) | $ (1) | (833) | (834) | ||||
| Shares acquired for employee withholding requirements (in shares) | (73,892) | (73,892) | ||||||
| Other | $ (32) | (32) | (32) | |||||
| Other comprehensive loss | (5,558) | (5,544) | (5,544) | (14) | ||||
| Net income | 12,900 | 12,877 | 12,877 | 23 | ||||
| Balance at end of year at Mar. 31, 2019 | $ 1,177,969 | $ 94 | $ 1,051 | $ 1,185,790 | $ (6,985) | $ (4,241) | $ 1,175,709 | $ 2,260 |
| Balance (in shares) at Mar. 31, 2019 | 9,400,000 | 105,080,113 |
DESCRIPTION OF BUSINESS |
3 Months Ended |
|---|---|
Mar. 31, 2019 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| DESCRIPTION OF BUSINESS | DESCRIPTION OF BUSINESS Summit Hotel Properties, Inc. (the “Company”) is a self-managed hotel investment company that was organized on June 30, 2010 as a Maryland corporation. The Company holds both general and limited partnership interests in Summit Hotel OP, LP (the “Operating Partnership”), a Delaware limited partnership also organized on June 30, 2010. Unless the context otherwise requires, “we,” “us,” and “our” refer to the Company and its consolidated subsidiaries. |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES |
3 Months Ended | ||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||
| BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying Condensed Consolidated Financial Statements of the Company consolidate the accounts of the Company and all entities that are controlled by the Company’s ownership of a majority voting interest in such entities, as well as variable interest entities for which the Company is the primary beneficiary. All significant intercompany balances and transactions have been eliminated in the Condensed Consolidated Financial Statements. We prepare our Condensed Consolidated Financial Statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Act of 1934 (the “Exchange Act”). Accordingly, the Condensed Consolidated Financial Statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation in accordance with GAAP have been included. Results for the three months ended March 31, 2019 may not be indicative of the results that may be expected for the full year of 2019. For further information, please read the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2018. Investment in Hotel Properties The Company allocates the purchase price of acquired hotel properties based on the fair value of the acquired land, land improvements, building, furniture, fixtures and equipment, identifiable intangible assets or liabilities, other assets and assumed liabilities. Intangible assets may include certain value associated with the on-going operations of the hotel business being acquired as part of the hotel property acquisition. We determine the acquisition-date fair values of all assets and assumed liabilities using methods similar to those used by independent appraisers, including using a discounted cash flow analysis that uses appropriate discount or capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. If substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset or group of similar identifiable assets, the asset or asset group is not considered a business. When we conclude that an acquisition meets this threshold, acquisition costs will be capitalized as part of our allocation of the purchase price of the acquired hotel properties. Our hotel properties and related assets are recorded at cost, less accumulated depreciation. We capitalize hotel development costs and the costs of significant additions and improvements that materially upgrade, increase the value or extend the useful life of the property. These costs may include hotel development, refurbishment, renovation, and remodeling expenditures, as well as certain indirect internal costs related to construction projects. If an asset requires a period of time in which to carry out the activities necessary to bring it to the condition necessary for its intended use, the interest cost incurred during that period as a result of expenditures for the asset is capitalized as part of the cost of the asset. We expense the cost of repairs and maintenance as incurred. On a limited basis, we provide financing to developers of hotel properties for development projects. We evaluate these arrangements to determine if we participate in residual profits of the hotel property through the loan provisions or other agreements. Where we conclude that these arrangements are more appropriately treated as an investment in the hotel property, we reflect the loan as an investment in hotel properties under development in our Condensed Consolidated Balance Sheets. If classified as hotel properties under development, no interest income is recognized on the loan and interest expense is capitalized as part of our investment in the hotel property during the construction period. We monitor events and changes in circumstances for indicators that the carrying value of a hotel property or undeveloped land may be impaired. Additionally, we perform at least annual reviews to monitor the factors that could trigger an impairment. Factors that we consider for an impairment analysis include, among others: i) significant underperformance relative to historical or anticipated operating results, ii) significant changes in the manner of use of a property or the strategy of our overall business, including changes in the estimated holding periods for hotel properties and land parcels, iii) a significant increase in competition, iv) a significant adverse change in legal factors or regulations, v) changes in values of comparable land or hotel sales, and vi) significant negative industry or economic trends. When such factors are identified, we prepare an estimate of the undiscounted future cash flows of the specific property and determine if the carrying amount of the asset is recoverable. If an impairment is identified, we estimate the fair value of the property based on discounted cash flows or sales price if the property is under contract and an adjustment is made to reduce the carrying value of the property to its estimated fair value. Leases In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which changed lessee accounting to reflect the financial liability and right-of-use assets that are inherent to leasing an asset on the balance sheet. We adopted ASU No. 2016-02 on January 1, 2019. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, to clarify how to apply certain aspects of the new leases standard. In July 2018, the FASB also issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, to give companies another option for transition and to provide lessors with a practical expedient to reduce the cost and complexity of implementing the new standard. The transition option allows companies to not apply the new lease standard in the comparative periods they present in their financial statements in the year of adoption. The Company elected the practical expedients allowed under the guidance and retained the original lease classification and historical accounting for initial direct costs for leases existing prior to the adoption date. The Company also elected not to restate prior periods for the effect of the adoption of the new standard. In accordance with ASU No. 2016-02, we reclassified certain existing lease-related assets and liabilities to Right-of-use assets as of January 1, 2019. The adoption of ASU No. 2016-02 resulted in the recognition of incremental right-of-use assets and related lease liabilities of $23.6 million on the Condensed Consolidated Balance Sheet as of January 1, 2019. Notes Receivables We selectively provide mezzanine lending to developers, where we also have the opportunity to acquire the hotel at or after the completion of the development project, and we also may provide seller financing under limited circumstances. We classify notes receivable as held-to-maturity and carry the notes receivable at cost less the unamortized discount, if any. We routinely evaluate our notes receivable for potential specific credit or collection issues that may indicate an impairment. Losses on notes receivable are recognized when incurred based on our best estimate of probable impairment. Cash and Cash Equivalents We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. At times, cash on deposit may exceed the federally insured limit. We maintain our cash with high credit quality financial institutions. Restricted Cash Restricted cash consists of certain funds maintained in escrow for property taxes, insurance, and certain capital expenditures. Funds may be disbursed from the account upon proof of expenditures and approval from the lender or other party requiring the restricted cash reserves. Revenue Recognition In accordance with ASU No. 2014-09, revenues from the operation of our hotels are recognized when guestrooms are occupied, services have been rendered or fees have been earned. Revenues are recorded net of any discounts and sales and other taxes collected from customers. Revenues consist of room sales, food and beverage sales, and other hotel revenues and are presented on a disaggregated basis on our Condensed Consolidated Statements of Operations. Room revenue is generated through short-term contracts with customers whereby customers agree to pay a daily rate for the right to occupy hotel rooms for one or more nights. Our performance obligations are fulfilled at the end of each night that the customers have the right to occupy the rooms. Room revenues are recognized daily at the contracted room rate in effect for each room night. Food and beverage revenues are generated when customers purchase food and beverage at a hotel's restaurant, bar or other facilities. Our performance obligations are fulfilled at the time that food and beverage is purchased and provided to our customers. Other revenues such as for parking, meeting space or telephone services are recognized at the point in time or over the time period that the associated good or service is provided. Ancillary services such as parking at certain hotels are provided by third parties and we assess whether we are the principal or agent in such arrangements. If we are determined to be the agent, revenue is recognized based upon the commission paid to us by the third party for the services rendered to our customers. If we are determined to be the principal, revenues are recognized based upon the gross contract price of the service provided. Certain of our hotels have retail spaces, restaurants or other spaces that we lease to third parties. Lease revenues are recognized on a straight line basis over the respective lease terms and are included in Other income on our Condensed Consolidated Statement of Operations. Cash received prior to customer arrival is recorded as an advance deposit from the customer and is recognized as revenue at the time of occupancy. Equity-Based Compensation Our 2011 Equity Incentive Plan, which was amended and restated effective June 15, 2015 (as amended, the “Equity Plan”), provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, and other stock-based awards. We account for the stock options granted upon completion of our IPO at fair value using the Black-Scholes option-pricing model and we account for all other awards of equity, including time-based and performance-based stock awards, using the grant date fair value of those equity awards. Restricted stock awards with performance-based vesting conditions are market-based awards tied to total stockholder return and are valued using a Monte Carlo simulation model in accordance with ASC Topic 718, Compensation — Stock Compensation. We expense the fair value of awards under the Equity Plan ratably over the vesting period and market-based awards are not adjusted for performance. The amount of stock-based compensation expense may be subject to adjustment in future periods due to a change in forfeiture assumptions or modification of previously granted awards. Derivative Financial Instruments and Hedging We use interest rate derivatives to hedge our risks on variable-rate debt. Interest rate derivatives could include swaps, caps and floors. We assess the effectiveness of each hedging relationship by comparing changes in fair value or cash flows of the derivative financial instrument with the changes in fair value or cash flows of the designated hedged item or transaction. All derivative financial instruments are recorded at fair value as a net asset or liability in our Condensed Consolidated Balance Sheets. The change in the fair value of the hedging instruments is recorded in Other comprehensive income. Amounts deferred in Other comprehensive income will be reclassified to Interest expense in our Condensed Consolidated Statements of Operations in the period in which the hedged item affects earnings. Income Taxes We have elected to be taxed as a REIT under certain provisions of the Internal Revenue Code. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute annually to our stockholders at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains, which does not necessarily equal net income as calculated in accordance with GAAP. As a REIT, we generally will not be subject to federal income tax (other than taxes paid by our TRS at regular corporate income tax rates) to the extent we distribute 100% of our REIT taxable income to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate income tax rates and generally will be unable to re- elect REIT status until the fifth calendar year after the year in which we failed to qualify as a REIT, unless we satisfy certain relief provisions. Fair Value Measurement Fair value measures are classified into a three-tiered fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Assets and liabilities measured at fair value are based on one or more of the following valuation techniques:
Our estimates of fair value were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts. We classify assets and liabilities in the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. We have elected a measurement alternative for equity investments, such as our purchase options, that do not have readily determinable fair values. Under the alternative, our purchase options are measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer, if any. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. New Accounting Standards In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which clarifies when an entity recognizes a credit loss on certain financial assets. ASU 2016-13 is effective for our fiscal year commencing on January 1, 2020, with early adoption permitted. The adoption of ASU No. 2016-13 will not have a material effect on our consolidated financial position or results of operations. |
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INVESTMENT IN HOTEL PROPERTIES, NET |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INVESTMENT IN HOTEL PROPERTIES, NET | INVESTMENT IN HOTEL PROPERTIES, NET Investment in Hotel Properties, net Investment in hotel properties, net at March 31, 2019 and December 31, 2018 is as follows (in thousands):
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which changed lessee accounting to reflect the financial liability and right-of-use assets that are inherent to leasing an asset on the balance sheet. In accordance with ASU No. 2016-02, we reclassified certain existing lease-related intangible assets to Right-of-use assets as of January 1, 2019 (See "Note 5 - Leases" for further information). Asset Sales On February 12, 2019, we completed the sale of two hotel properties, the Country Inn & Suites - Charleston, WV and the Holiday Inn Express - Charleston, WV, for an aggregate sales price of $11.6 million. The sale of these properties resulted in the realization of an aggregate gain of $4.2 million. Hotel Property Acquisitions We did not acquire any hotel properties during the three months ended March 31, 2019 and 2018. On January 31, 2019, we exercised our option pursuant to a ground lease agreement to purchase the land under our Residence Inn by Marriott in Baltimore (Hunt Valley), MD for $4.2 million, which resulted in a termination of obligations under the ground lease. As a result, this hotel property is no longer subject to a ground lease. The results of operations of acquired hotel properties are included in the Condensed Consolidated Statements of Operations beginning on their respective acquisition dates. The following unaudited pro forma information includes operating results for 75 hotels owned as of March 31, 2019 as if all such hotels had been owned by us since January 1, 2018. For hotels acquired by us after January 1, 2018 (the "Acquired Hotels"), we have included in the pro forma information the financial results of each of the Acquired Hotels for the period prior to acquisition by us (the "Preacquisition Period"). The financial results for the Pre-Acquisition Period were provided by the third-party owner of such Acquired Hotel prior to purchase by us and such information has not been audited or reviewed by our auditors or adjusted by us. For hotels sold by us between January 1, 2018 and March 31, 2019 (the "Disposed Hotels"), the unaudited pro forma information excludes the financial results, including gains on disposal of assets, of each of the Disposed Hotels for the period of ownership by us from January 1, 2018 through the date that the Disposed Hotels were sold by us. The unaudited pro forma information is included to enable comparison of results for the current reporting period to results for the comparable period of the prior year and is not indicative of what actual results of operations would have been had the hotel acquisitions and dispositions taken place on or before January 1, 2018. The pro forma amounts exclude the gain or loss on the sale of hotel properties during the three months ended March 31, 2019 and 2018. This information does not purport to be indicative of or represent results of operations for future periods. The unaudited condensed pro forma financial information for the 75 hotel properties owned at March 31, 2019 for the three months ended March 31, 2019 and 2018 is as follows (in thousands, except per share):
Assets Held for Sale Assets held for sale at March 31, 2019 included a land parcel in Flagstaff, AZ and a portfolio of six properties that were sold on April 17, 2019. Assets held for sale at December 31, 2018 included a land parcel in Flagstaff, AZ and a portfolio of two properties that were sold on February 12, 2019. Assets held for sale were as follows (in thousands):
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DEBT |
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DEBT | DEBT At March 31, 2019 and December 31, 2018, our indebtedness was comprised of borrowings under our $600.0 million senior unsecured revolving credit and term loan facility (described below), the 2018 Term Loan (as defined below), the 2017 Term Loan (as defined below), and indebtedness secured by first priority mortgage liens on various hotel properties. The weighted average interest rate, after giving effect to our interest rate derivatives, for all borrowings was 4.26% at March 31, 2019 and 4.27% at December 31, 2018. Debt, net of debt issuance costs, is as follows (in thousands):
We have entered into interest rate swaps to partially fix the interest rates on a portion of our variable interest rate indebtedness. See "Note 6 - Derivative Financial Instruments and Hedging" to the Condensed Consolidated Financial Statements for additional information. Our total fixed-rate and variable-rate debt, after considering our interest rate derivative agreements that are currently effective, is as follows (in thousands):
Information about the fair value of our fixed-rate debt that is not recorded at fair value is as follows (in thousands):
At March 31, 2019 and December 31, 2018, we had $400.0 million of debt with variable interest rates that had been converted to fixed interest rates through derivative financial instruments which are carried at fair value. Differences between carrying value and fair value of our fixed-rate debt are primarily due to changes in interest rates. Inherently, fixed-rate debt is subject to fluctuations in fair value as a result of changes in the current market rate of interest on the valuation date. For additional information on our use of derivatives as interest rate hedges, refer to "Note 6 - Derivative Financial Instruments and Hedging." $600 Million Senior Unsecured Credit and Term Loan Facility On December 6, 2018, the Operating Partnership, as borrower, the Company, as parent guarantor, and each party executing the loan documentation as a subsidiary guarantor, entered into a $600.0 million senior unsecured facility (the “2018 Unsecured Credit Facility”). The 2018 Unsecured Credit Facility is comprised of a $400.0 million revolving credit facility (the “$400 Million Revolver”) and a $200.0 million term loan (the “$200 Million Term Loan”). At March 31, 2019, the maximum amount of borrowing provided by the 2018 Unsecured Credit Facility was $600.0 million, of which we had $325.0 million borrowed and $275.0 million available to borrow. The 2018 Unsecured Credit Facility has an accordion feature which will allow the Company to increase the total commitments by an aggregate of up to $300.0 million. The $400 Million Revolver will mature on March 31, 2023 and can be extended to March 31, 2024 at the Company’s option, subject to certain conditions. The $200 Million Term Loan will mature on April 1, 2024. The interest rate on the 2018 Unsecured Credit Facility is based on a pricing grid ranging from 140 basis points to 215 basis points plus LIBOR for the $400 Million Revolver and 135 basis points to 210 basis points plus LIBOR for the $200 Million Term Loan, depending upon the Company's leverage ratio. The interest rate at March 31, 2019 for the $200 Million Term Loan was 4.09%. Financial and Other Covenants. We are required to comply with various financial and other covenants to draw and maintain borrowings under the 2018 Unsecured Credit Facility. At March 31, 2019, we were in compliance with all financial covenants. Unencumbered Assets. The 2018 Unsecured Credit Facility is unsecured. However, borrowings under the 2018 Unsecured Credit Facility are limited by the value of hotel assets that qualify as unencumbered assets. At March 31, 2019, the Company had 53 unencumbered hotel properties (the "Unencumbered Properties") supporting the 2018 Unsecured Credit Facility. Former $450 Million Senior Unsecured Credit and Term Loan Facility On January 15, 2016, the Operating Partnership, as borrower, the Company, as parent guarantor, and each party executing the loan documentation as a subsidiary guarantor, entered into a $450.0 million senior unsecured credit facility (the "2016 Unsecured Credit Facility"). The 2016 Unsecured Credit Facility was comprised of a $300.0 million revolving credit facility (the “$300 Million Revolver”) and a $150.0 million term loan (the “$150 Million Term Loan”). The 2016 Unsecured Credit Facility was replaced by the 2018 Unsecured Credit Facility. The outstanding principal balance on the 2016 Unsecured Credit Facility was transferred to the 2018 Unsecured Credit Facility and the 2016 Unsecured Credit Facility was paid off in full and terminated. Unsecured Term Loans 2018 Term Loan On February 15, 2018, our Operating Partnership, as borrower, the Company, as parent guarantor, and each party executing the term loan documentation as a subsidiary guarantor, entered into a new $225.0 million unsecured term loan (the “2018 Term Loan”) with KeyBank National Association, as administrative agent, and a syndicate of lenders listed in the loan documentation. The 2018 Term Loan has an accordion feature that allows us to increase the total commitments by $150.0 million prior to the maturity date of February 14, 2025, subject to certain conditions. At closing, we drew $140.0 million of the $225.0 million available under the 2018 Term Loan and used the proceeds to pay off and replace the 2015 Term Loan. On May 16, 2018, we drew the remaining $85.0 million available under the 2018 Term Loan and used the proceeds to pay down the $300 Million Revolver. We pay interest on advances at varying rates, based upon, at our option, either (i) 1-, 2-, 3-, or 6-month LIBOR, plus a LIBOR margin between 1.80% and 2.55%, depending upon our leverage ratio (as defined in the loan documents), or (ii) the applicable base rate, which is the greatest of the administrative agent’s prime rate, the federal funds rate plus 0.50%, and 1-month LIBOR plus 1.00%, plus a base rate margin between 0.80% and 1.55%, depending upon our leverage ratio. We are required to pay other fees, including customary arrangement and administrative fees. The interest rate at March 31, 2019 was 4.39%. Financial and Other Covenants. We are required to comply with a series of financial and other covenants to draw and maintain borrowings under the 2018 Term Loan. At March 31, 2019, we were in compliance with all financial covenants. Unencumbered Assets. The 2018 Term Loan is unsecured. However, borrowings under the term loan are limited by the value of the assets that qualify as unencumbered assets. At March 31, 2019, the Unencumbered Properties also supported the 2018 Term Loan. 2017 Term Loan On September 26, 2017, our Operating Partnership, as borrower, the Company, as parent guarantor, and each party executing the term loan documentation as a subsidiary guarantor, entered into a $225.0 million unsecured term loan (the "2017 Term Loan") with KeyBank National Association, as administrative agent, and a syndicate of lenders listed in the loan documentation. The 2017 Term Loan has an accordion feature which allows us to increase the total commitments by an aggregate of $175.0 million prior to the maturity date, subject to certain conditions. The 2017 Term Loan matures on November 25, 2022. We pay interest on advances at varying rates, based upon, at our option, either (i) 1-, 2-, 3-, or 6-month LIBOR, plus a LIBOR margin between 1.45% and 2.20%, depending upon our leverage ratio (as defined in the loan documents), or (ii) the applicable base rate, which is the greatest of the administrative agent’s prime rate, the federal funds rate plus 0.50%, and 1-month LIBOR plus 1.00%, plus a base rate margin between 0.45% and 1.20%, depending upon our leverage ratio. We are required to pay other fees, including customary arrangement and administrative fees. Financial and Other Covenants. We are required to comply with a series of financial and other covenants to draw and maintain borrowings under the 2017 Term Loan. At March 31, 2019, we were in compliance with all financial covenants. Unencumbered Assets. The 2017 Term Loan is unsecured. However, borrowings under the term loan are limited by the value of the assets that qualify as unencumbered assets. At March 31, 2019, the Unencumbered Properties also supported the 2017 Term Loan. At closing, we drew $125.0 million of the $225.0 million available under the 2017 Term Loan and used the proceeds to pay down the principal balance of our $300 Million Revolver. On December 11, 2017, we drew the remaining $100.0 million of the $225.0 million available under the 2017 Term Loan and used the proceeds to pay down the principal balance of our $300 Million Revolver. The interest rate at March 31, 2019 was 4.09%. 2015 Term Loan On April 7, 2015, our Operating Partnership, as borrower, the Company, as parent guarantor, and each party executing the term loan documentation as a subsidiary guarantor, entered into an unsecured term loan (the “2015 Term Loan”), with an original principal amount of $125.0 million, that was later increased to $140.0 million, upon exercise of an accordion feature. On February 15, 2018, we terminated the facility and repaid the $140.0 million outstanding balance with funds received from the 2018 Term Loan. Metabank Loan On June 30, 2017, we entered into a $47.6 million secured, non-recourse loan with MetaBank (the "MetaBank Loan"). During the year ended December 31, 2017, we drew $47.6 million on the MetaBank Loan and used the proceeds to pay down the principal balance of our $300 Million Revolver. The MetaBank Loan provides for a fixed interest rate of 4.44% and originally provided for interest-only payments for 18 months following the closing date. On January 31, 2019, we entered into a modification agreement, at no additional cost, that increased the interest-only period from 18 months to 24 months following the closing date. After this 24 month period, the loan is amortized over 25 years through the maturity date of July 1, 2027. The MetaBank Loan is secured by three hotels and is subject to a prepayment penalty if prepaid prior to April 1, 2027. Mortgage Loans |
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LEASES |
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| Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||
| LEASES | LEASES The Company has operating leases related to the land under certain hotel properties, conference centers, parking spaces, automobiles, our corporate office and other miscellaneous office equipment. These leases have remaining terms of 1 year to 80 years, some of which include options to extend the leases for additional years. The exercise of lease renewal options is at our sole discretion. Certain leases also include options to purchase the leased property. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. Certain of our lease agreements include rental payments based on a percentage of revenue over contractual levels and others include rental payments adjusted periodically for inflation. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We rent or sublease certain real estate to third parties. On January 1, 2019, the Company adopted ASC No. 842, Leases, and recognized right-of-use lease assets and related liabilities. The right-of-use assets and related liabilities include renewal options reasonably certain to be exercised. Since most of the Company's leases do not provide an implicit rate, we used our incremental borrowing rate of 5.0% calculated based on information available at adoption. During the three months ended March 31, 2019, the Company's total operating lease cost was $1.0 million and the operating cash outflows from operating leases was $0.9 million. As of March 31, 2019, the weighted average operating lease term was 29.4 years. On January 31, 2019, we exercised our option pursuant to a ground lease agreement to purchase the land under our hotel property in Baltimore (Hunt Valley), MD for $4.2 million, which resulted in a termination of obligations under the ground lease. Operating lease maturities as of March 31, 2019 are as follows (in thousands):
(1) Certain payments above include future increases to the minimum fixed rent based on the Consumer Price Index in effect at the initial measurement of the lease balances.
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DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING |
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| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING | DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING Information about our derivative financial instruments at March 31, 2019 and December 31, 2018 is as follows (dollars in thousands):
Our interest rate swaps have been designated as cash flow hedges and are valued using a market approach, which is a Level 2 valuation technique. At March 31, 2019 and December 31, 2018, two of our interest rate swaps were in an asset position and two were in a liability position. We are not required to post any collateral related to these agreements and are not in breach of any financial provisions of the agreements. Changes in the fair value of the hedging instruments are deferred in Other comprehensive income and are reclassified to Interest expense in our Condensed Consolidated Statements of Operations in the period in which the hedged item affects earnings. In the next twelve months, we estimate that $0.2 million will be reclassified from Other comprehensive income and recorded as an increase to Interest expense. The table below details the location in the financial statements of the gain or loss recognized on derivative financial instruments designated as cash flow hedges (in thousands):
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EQUITY |
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| Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| EQUITY | EQUITY Common Stock The Company is authorized to issue up to 500,000,000 shares of common stock, $0.01 par value per share. Each outstanding share of our common stock entitles the holder to one vote on all matters submitted to a vote of stockholders, including the election of directors and, except as may be provided with respect to any other class or series of stock, the holders of such shares possess the exclusive voting power. Changes in common stock during the three months ended March 31, 2019 and 2018 were as follows:
Preferred Stock The Company is authorized to issue up to 100,000,000 shares of preferred stock, $0.01 par value per share, of which 90,600,000 is currently undesignated, 3,000,000 shares have been designated as 6.45% Series D Cumulative Redeemable Preferred Stock (the "Series D preferred shares") and 6,400,000 shares have been designated as 6.25% Series E Cumulative Redeemable Preferred Stock (the "Series E preferred shares"). On March 20, 2018, the Company paid $85.3 million to redeem all 3,400,000 of its outstanding 7.125% Series C Cumulative Redeemable Preferred Stock at a redemption price of $25 per share plus accrued and unpaid dividends. The Company's outstanding shares of preferred stock (collectively, “Preferred Shares”) rank senior to our common stock and on parity with each other with respect to the payment of dividends and distributions of assets in the event of a liquidation, dissolution, or winding up. The Preferred Shares do not have any maturity date and are not subject to mandatory redemption or sinking fund requirements. The Company may not redeem the Series D or Series E preferred shares prior to June 28, 2021 and November 13, 2022, respectively, except in limited circumstances relating to the Company’s continuing qualification as a REIT or in connection with certain changes in control. After those dates, the Company may, at its option, redeem the applicable Preferred Shares, in whole or from time to time in part, by payment of $25 per share, plus any accumulated, accrued and unpaid distributions up to, but not including, the date of redemption. If the Company does not exercise its rights to redeem the Preferred Shares upon certain changes in control, the holders of the Preferred Shares have the right to convert some or all of their shares into a number of the Company’s common shares based on a defined formula, subject to a share cap, or alternative consideration. The share cap on each Series D preferred share is 3.9216 shares of common stock and each Series E preferred share is 3.1686 shares of common stock, all subject to certain adjustments. The Company pays dividends at an annual rate of $1.6125 for each Series D preferred share and $1.5625 for each Series E preferred share. Dividend payments are made quarterly in arrears on or about the last day of February, May, August and November of each year. Non-controlling Interests in Operating Partnership Pursuant to the limited partnership agreement of our Operating Partnership, the unaffiliated third parties who hold common units of limited partnership interest ("Common Units") in our Operating Partnership have the right to cause us to redeem their Common Units in exchange for cash based upon the fair value of an equivalent number of our shares of common stock at the time of redemption; however, the Company has the option to redeem Common Units with shares of our common stock on a one-for-one basis. The number of shares of our common stock issuable upon redemption of Common Units may be adjusted upon the occurrence of certain events such as share dividend payments, share subdivisions or combinations. At March 31, 2019 and December 31, 2018, unaffiliated third parties owned 259,265 Common Units of the Operating Partnership, representing less than a 1% limited partnership interest in the Operating Partnership for each period. |
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COMMITMENTS AND CONTINGENCIES |
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| Commitments and Contingencies Disclosure [Abstract] | |
| COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Restricted Cash The Company maintains reserve funds for property taxes, insurance, capital expenditures and replacement or refurbishment of furniture, fixtures and equipment at some of our hotel properties in accordance with management, franchise or mortgage loan agreements. These agreements generally require us to reserve cash ranging from 2% to 5% of the revenues of the individual hotel in restricted cash escrow accounts. Any unused restricted cash balances revert to us upon the termination of the underlying agreement or may be released to us from the restricted cash escrow accounts upon proof of expenditures and approval from the lender or other party requiring the restricted cash reserves. At March 31, 2019 and December 31, 2018, approximately $28.0 million and $28.5 million, respectively, was available in restricted cash reserve funds for property taxes, insurance, capital expenditures and replacement or refurbishment of furniture, fixtures and equipment at our hotel properties. Franchise Agreements We expensed fees related to our franchise agreements of $11.5 million for both the three months ended March 31, 2019 and 2018. Management Agreements Our hotel properties operate pursuant to management agreements with various professional third-party management companies. We pay base management fees that are a percentage of gross room revenues and incentive management fees based on achievement of certain financial targets pursuant to contracts that generally have remaining terms of less than five years. Management fee expenses for the three months ended March 31, 2019 and 2018 were $5.1 million and $5.4 million, respectively. Litigation |
FAIR VALUE MEASUREMENT |
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| Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FAIR VALUE MEASUREMENT | FAIR VALUE MEASUREMENT The following table presents information about our financial instruments measured at fair value on a recurring basis at March 31, 2019 and December 31, 2018. In instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, we classify assets and liabilities based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Disclosures concerning financial instruments measured at fair value are as follows (in thousands):
We are a mezzanine lender on three construction loans to fund up to an aggregate of $29.6 million for the development of three hotel properties. The three real estate loans closed in the fourth quarter of 2017 and each has a stated interest rate of 8% and an initial term of approximately three years. As of March 31, 2019, we have funded the full amount of $29.6 million. We have separate options related to each loan (each the "Initial Option") to purchase a 90% interest in each joint venture that owns the respective hotel upon completion of construction. We also have the right to purchase the remaining interests in each joint venture at future dates, generally five years after we exercise our Initial Option. We have recorded the aggregate estimated fair values of the Initial Options totaling $6.1 million in Other assets and as a discount to the related real estate loans. The discount will be amortized as a component of interest income over the term of the real estate loans using the straight-line method, which approximates the interest method. We recorded amortization of the discount of $0.5 million during the three months ended March 31, 2019 and 2018. Our purchase options do not have readily determinable fair values. The fair value of each purchase option was estimated using a binomial lattice model. The estimated fair values of the purchase options were based on unobservable inputs for which there is little or no market information available and required us to develop our own assumptions as follows (dollar amounts in thousands):
On June 29, 2018 we sold the Holiday Inn Duluth, GA and the Hilton Garden Inn in Duluth, GA for an aggregate selling price of $24.9 million. We provided seller financing of $3.6 million on the sale of these properties under two three-and-a-half-year second mortgage notes with a blended interest rate of 7.38%. The amortized cost basis of these loans were $3.0 million at March 31, 2019. |
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EQUITY-BASED COMPENSATION |
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| Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| EQUITY-BASED COMPENSATION | EQUITY-BASED COMPENSATION Our currently outstanding equity-based awards were issued under the Equity Plan which provides for the granting of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, and other equity-based awards or incentive awards. Stock options granted may be either incentive stock options or non-qualified stock options. Vesting terms may vary with each grant, and stock option terms are generally five to ten years. We have outstanding equity-based awards in the form of stock options and restricted stock awards. All of our outstanding equity-based awards are classified as equity awards. The Company's former Chief Financial Officer retired on March 31, 2018. In connection with his retirement, the Company recorded $1.0 million of additional stock-based compensation expense during the three months ended March 31, 2018 related to the modification of certain stock award agreements. Stock Options Granted Under our Equity Plan As of March 31, 2019, we had 235,000 outstanding and exercisable stock options with a weighted average exercise price of $9.75 per share, weighted average contractual term of 1.9 years and an aggregate intrinsic value of $0.4 million. Time-Based Restricted Stock Awards Made Pursuant to Our Equity Plan The following table summarizes time-based restricted stock award activity under our Equity Plan for the three months ended March 31, 2019:
The awards granted to our non-executive employees generally vest over a four-year period based on continuous service (20% on the first, second and third anniversary of the grant date and 40% on the fourth anniversary of the grant date). The awards granted to our executive officers generally vest over a three-year period based on continuous service (25% on the first and second anniversary of the grant date and 50% on the third anniversary of the grant date) or in certain circumstances upon a change in control. The holders of these awards have the right to vote the related shares of common stock and receive all dividends declared and paid whether or not vested. The fair value of time-based restricted stock awards granted is calculated based on the market value of our common stock on the date of grant. Performance-Based Restricted Stock Awards Made Pursuant to Our Equity Plan The following table summarizes performance-based restricted stock activity under the Equity Plan for the three months ended March 31, 2019:
(1) The amounts included in this column represent the expected future value of the performance-based restricted stock awards calculated using the Monte Carlo simulation valuation model. Our performance-based restricted stock awards are market-based awards and are accounted for based on the fair value of our common stock on the grant date. The fair value of the performance-based restricted stock awards granted was estimated using a Monte Carlo simulation valuation model. These awards generally vest over a three-year period based on our percentile ranking within the SNL U.S. REIT Hotel Index at the end of the period or upon a change in control. The awards require continued service during the measurement period and are subject to the other conditions described in the Equity Plan or award document. The number of shares the executive officers may earn under these awards range from zero shares to twice the number of shares granted based on our percentile ranking within the index at the end of the measurement period. In addition, a portion of the performance-based shares may be earned based on the Company's absolute total shareholder return calculated during the performance period. The holders of these grants have the right to vote the granted shares of common stock and any dividends declared will be accumulated and will be subject to the same vesting conditions as the awards. Further, if additional shares are earned based on our percentile ranking within the index, dividend payments will be issued as if the additional shares had been held throughout the measurement period. Equity-Based Compensation Expense Equity-based compensation expense included in Corporate general and administrative expenses in the Condensed Consolidated Statements of Operations for the three months ended March 31, 2019 and 2018 was as follows (in thousands):
We recognize equity-based compensation expense ratably over the vesting periods. The amount of expense may be subject to adjustment in future periods due to a change in the forfeiture assumptions. Unrecognized equity-based compensation expense for all non-vested awards pursuant to our Equity Plan was $11.7 million at March 31, 2019 and will be recorded as follows (in thousands):
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EARNINGS PER SHARE |
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| EARNINGS PER SHARE | EARNINGS PER SHARE We apply the two-class method of computing earnings per share, which requires the calculation of separate earnings per share amounts for our non-vested time-based restricted stock awards with non-forfeitable dividends and for our common stock. Our non-vested time-based restricted stock awards with non-forfeitable rights to dividends are considered securities which participate in undistributed earnings with common stock. Under the two-class computation method, net losses are not allocated to participating securities unless the holder of the security has a contractual obligation to share in the losses. Our non-vested time-based restricted stock awards with non-forfeitable dividends do not have such an obligation so they are not allocated losses. Below is a summary of the components used to calculate basic and diluted earnings per share (in thousands, except per share):
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INCOME TAXES |
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Mar. 31, 2019 | |
| Income Tax Disclosure [Abstract] | |
| INCOME TAXES | INCOME TAXES Income taxes for the interim periods presented have been included in our Condensed Consolidated Financial Statements on the basis of an estimated annual effective tax rate. Our effective tax rate is affected by the mix of earnings and losses by taxing jurisdictions. Our earnings, other than from our TRS, are not generally subject to federal and state corporate income taxes due to our REIT election, provided that we distribute 100% of our taxable income to our shareholders. However, there are a limited number of local and state jurisdictions that tax the taxable income of the Operating Partnership. Accordingly, we provide for income taxes in these jurisdictions for the Operating Partnership. We recorded an income tax expense of $0.4 million and $0.3 million for the three months ended March 31, 2019 and 2018, respectively. The Company had deferred tax assets of $2.0 million at both March 31, 2019 and December 31, 2018. |
SUBSEQUENT EVENTS |
3 Months Ended |
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Mar. 31, 2019 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | SUBSEQUENT EVENTS Dividends On April 29, 2019, our Board of Directors declared cash dividends of $0.18 per share of common stock, $0.403125 per share of 6.45% Series D Cumulative Redeemable Preferred Stock, and $0.390625 per share of 6.25% Series E Cumulative Redeemable Preferred Stock. These dividends are payable May 31, 2019 to stockholders of record on May 17, 2019. Asset Sales On April 17, 2019, we completed the sale of six hotel properties for a gross aggregate sales price of $135.0 million, or a net aggregate sales price of $133.0 million after a buyer credit of $2.0 million. The sale resulted in a net gain of approximately $36.6 million. Debt Transactions On April 11, 2019, we repaid a $10.6 million mortgage loan with U.S. Bank to release the encumbrance on the Hampton Inn in Goleta, CA to facilitate the sale of the property. As a result of this transaction, we incurred debt transaction costs of $1.0 million. |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||
| Basis of Presentation | Basis of Presentation The accompanying Condensed Consolidated Financial Statements of the Company consolidate the accounts of the Company and all entities that are controlled by the Company’s ownership of a majority voting interest in such entities, as well as variable interest entities for which the Company is the primary beneficiary. All significant intercompany balances and transactions have been eliminated in the Condensed Consolidated Financial Statements. |
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| Investment in Hotel Properties | Investment in Hotel Properties The Company allocates the purchase price of acquired hotel properties based on the fair value of the acquired land, land improvements, building, furniture, fixtures and equipment, identifiable intangible assets or liabilities, other assets and assumed liabilities. Intangible assets may include certain value associated with the on-going operations of the hotel business being acquired as part of the hotel property acquisition. We determine the acquisition-date fair values of all assets and assumed liabilities using methods similar to those used by independent appraisers, including using a discounted cash flow analysis that uses appropriate discount or capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. If substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset or group of similar identifiable assets, the asset or asset group is not considered a business. When we conclude that an acquisition meets this threshold, acquisition costs will be capitalized as part of our allocation of the purchase price of the acquired hotel properties. Our hotel properties and related assets are recorded at cost, less accumulated depreciation. We capitalize hotel development costs and the costs of significant additions and improvements that materially upgrade, increase the value or extend the useful life of the property. These costs may include hotel development, refurbishment, renovation, and remodeling expenditures, as well as certain indirect internal costs related to construction projects. If an asset requires a period of time in which to carry out the activities necessary to bring it to the condition necessary for its intended use, the interest cost incurred during that period as a result of expenditures for the asset is capitalized as part of the cost of the asset. We expense the cost of repairs and maintenance as incurred. On a limited basis, we provide financing to developers of hotel properties for development projects. We evaluate these arrangements to determine if we participate in residual profits of the hotel property through the loan provisions or other agreements. Where we conclude that these arrangements are more appropriately treated as an investment in the hotel property, we reflect the loan as an investment in hotel properties under development in our Condensed Consolidated Balance Sheets. If classified as hotel properties under development, no interest income is recognized on the loan and interest expense is capitalized as part of our investment in the hotel property during the construction period. We monitor events and changes in circumstances for indicators that the carrying value of a hotel property or undeveloped land may be impaired. Additionally, we perform at least annual reviews to monitor the factors that could trigger an impairment. Factors that we consider for an impairment analysis include, among others: i) significant underperformance relative to historical or anticipated operating results, ii) significant changes in the manner of use of a property or the strategy of our overall business, including changes in the estimated holding periods for hotel properties and land parcels, iii) a significant increase in competition, iv) a significant adverse change in legal factors or regulations, v) changes in values of comparable land or hotel sales, and vi) significant negative industry or economic trends. When such factors are identified, we prepare an estimate of the undiscounted future cash flows of the specific property and determine if the carrying amount of the asset is recoverable. If an impairment is identified, we estimate the fair value of the property based on discounted cash flows or sales price if the property is under contract and an adjustment is made to reduce the carrying value of the property to its estimated fair value.
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| Leases | Leases |
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| Notes Receivables | Notes Receivables |
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| Cash and Cash Equivalents | Cash and Cash Equivalents |
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| Restricted Cash | Restricted Cash |
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| Revenue Recognition | Revenue Recognition In accordance with ASU No. 2014-09, revenues from the operation of our hotels are recognized when guestrooms are occupied, services have been rendered or fees have been earned. Revenues are recorded net of any discounts and sales and other taxes collected from customers. Revenues consist of room sales, food and beverage sales, and other hotel revenues and are presented on a disaggregated basis on our Condensed Consolidated Statements of Operations. Room revenue is generated through short-term contracts with customers whereby customers agree to pay a daily rate for the right to occupy hotel rooms for one or more nights. Our performance obligations are fulfilled at the end of each night that the customers have the right to occupy the rooms. Room revenues are recognized daily at the contracted room rate in effect for each room night. Food and beverage revenues are generated when customers purchase food and beverage at a hotel's restaurant, bar or other facilities. Our performance obligations are fulfilled at the time that food and beverage is purchased and provided to our customers. Other revenues such as for parking, meeting space or telephone services are recognized at the point in time or over the time period that the associated good or service is provided. Ancillary services such as parking at certain hotels are provided by third parties and we assess whether we are the principal or agent in such arrangements. If we are determined to be the agent, revenue is recognized based upon the commission paid to us by the third party for the services rendered to our customers. If we are determined to be the principal, revenues are recognized based upon the gross contract price of the service provided. Certain of our hotels have retail spaces, restaurants or other spaces that we lease to third parties. Lease revenues are recognized on a straight line basis over the respective lease terms and are included in Other income on our Condensed Consolidated Statement of Operations. Cash received prior to customer arrival is recorded as an advance deposit from the customer and is recognized as revenue at the time of occupancy. |
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| Equity-Based Compensation | Equity-Based Compensation |
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| Derivative Financial Instruments and Hedging | Derivative Financial Instruments and Hedging We use interest rate derivatives to hedge our risks on variable-rate debt. Interest rate derivatives could include swaps, caps and floors. We assess the effectiveness of each hedging relationship by comparing changes in fair value or cash flows of the derivative financial instrument with the changes in fair value or cash flows of the designated hedged item or transaction. All derivative financial instruments are recorded at fair value as a net asset or liability in our Condensed Consolidated Balance Sheets. |
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| Income Taxes | Income Taxes We have elected to be taxed as a REIT under certain provisions of the Internal Revenue Code. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute annually to our stockholders at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains, which does not necessarily equal net income as calculated in accordance with GAAP. As a REIT, we generally will not be subject to federal income tax (other than taxes paid by our TRS at regular corporate income tax rates) to the extent we distribute 100% of our REIT taxable income to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate income tax rates and generally will be unable to re- elect REIT status until the fifth calendar year after the year in which we failed to qualify as a REIT, unless we satisfy certain relief provisions.
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| Fair Value Measurement | air Value Measurement Fair value measures are classified into a three-tiered fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Assets and liabilities measured at fair value are based on one or more of the following valuation techniques:
Our estimates of fair value were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts. We classify assets and liabilities in the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. We have elected a measurement alternative for equity investments, such as our purchase options, that do not have readily determinable fair values. Under the alternative, our purchase options are measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer, if any. |
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| Use of Estimates | Use of Estimates |
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| New Accounting Standards | New Accounting Standards In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which clarifies when an entity recognizes a credit loss on certain financial assets. ASU 2016-13 is effective for our fiscal year commencing on January 1, 2020, with early adoption permitted. The adoption of ASU No. 2016-13 will not have a material effect on our consolidated financial position or results of operations. |
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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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| Fair value measurements | Fair value measures are classified into a three-tiered fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
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| Fair value valuation techniques | Assets and liabilities measured at fair value are based on one or more of the following valuation techniques:
(1) The first option exercise date is the date used for valuing the purchase option. The actual option exercise dates are on or after the hotels are fully constructed and open for business. As of March 31, 2019, one of the three hotels were open for business.
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INVESTMENT IN HOTEL PROPERTIES, NET (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of investment in hotel properties, net | Investment in hotel properties, net at March 31, 2019 and December 31, 2018 is as follows (in thousands):
|
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| Schedule of pro forma information | The unaudited condensed pro forma financial information for the 75 hotel properties owned at March 31, 2019 for the three months ended March 31, 2019 and 2018 is as follows (in thousands, except per share):
(2) Pro forma amounts for the three months ended March 31, 2018 include the effect of the premium on redemption of preferred stock of $3.3 million.
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| Schedule of asset held for sale |
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DEBT (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of outstanding indebtedness | Debt, net of debt issuance costs, is as follows (in thousands):
|
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| Schedule of fixed-rate and variable-rate debt, after giving effect to interest rate derivative | Our total fixed-rate and variable-rate debt, after considering our interest rate derivative agreements that are currently effective, is as follows (in thousands):
|
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| Schedule of the fair value of fixed-rate that is debt not recorded at fair value | Information about the fair value of our fixed-rate debt that is not recorded at fair value is as follows (in thousands):
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LEASES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||
| Schedule of operating lease maturity | Operating lease maturities as of March 31, 2019 are as follows (in thousands):
(1) Certain payments above include future increases to the minimum fixed rent based on the Consumer Price Index in effect at the initial measurement of the lease balances.
|
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DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of derivative financial instruments | Information about our derivative financial instruments at March 31, 2019 and December 31, 2018 is as follows (dollars in thousands):
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| Schedule of the location in the financial statements of the gain or loss recognized on derivative financial instruments designated as cash flow hedges | The table below details the location in the financial statements of the gain or loss recognized on derivative financial instruments designated as cash flow hedges (in thousands):
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EQUITY (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of common stock activity | Changes in common stock during the three months ended March 31, 2019 and 2018 were as follows:
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FAIR VALUE MEASUREMENT (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of disclosures concerning financial instruments measured at fair value | Disclosures concerning financial instruments measured at fair value are as follows (in thousands):
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| Fair value valuation techniques | Assets and liabilities measured at fair value are based on one or more of the following valuation techniques:
(1) The first option exercise date is the date used for valuing the purchase option. The actual option exercise dates are on or after the hotels are fully constructed and open for business. As of March 31, 2019, one of the three hotels were open for business.
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EQUITY-BASED COMPENSATION (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of restricted stock awards | The following table summarizes time-based restricted stock award activity under our Equity Plan for the three months ended March 31, 2019:
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| Schedule of equity-based compensation expense | Equity-based compensation expense included in Corporate general and administrative expenses in the Condensed Consolidated Statements of Operations for the three months ended March 31, 2019 and 2018 was as follows (in thousands):
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| Schedule of unrecognized equity-based compensation expense for all non-vested awards | Unrecognized equity-based compensation expense for all non-vested awards pursuant to our Equity Plan was $11.7 million at March 31, 2019 and will be recorded as follows (in thousands):
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EARNINGS PER SHARE (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of the components used to calculate basic and diluted earnings per share | Below is a summary of the components used to calculate basic and diluted earnings per share (in thousands, except per share):
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DESCRIPTION OF BUSINESS (Details) |
Mar. 31, 2019
hotel
Room
State
|
|---|---|
| Properties | |
| Number of hotels | 75 |
| Number of states in which hotel properties are located | State | 25 |
| Hotels | |
| Properties | |
| Number of hotels | 75 |
| Number of guestrooms | Room | 11,529 |
| TRS Lessees | Operating partnership | |
| Properties | |
| Ownership interest in joint venture | 100.00% |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Jan. 01, 2019 |
|---|---|---|
| New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
| Right-of-use assets | $ 29,722 | |
| Lease liabilities | $ 19,273 | |
| Accounting Standards Update 2016-02 | ||
| New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
| Right-of-use assets | $ 23,600 | |
| Lease liabilities | $ 24,000 |
INVESTMENT IN HOTEL PROPERTIES, NET - Schedule of investment in hotel properties (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Investment in Hotel Properties | ||
| Investment in hotel properties at cost | $ 2,292,724 | $ 2,413,176 |
| Less - accumulated depreciation and amortization | (340,563) | (347,622) |
| Investment in hotel properties, net | 1,952,161 | 2,065,554 |
| Hotel buildings and improvements | ||
| Investment in Hotel Properties | ||
| Investment in hotel properties at cost | 1,814,628 | 1,916,194 |
| Land | ||
| Investment in Hotel Properties | ||
| Investment in hotel properties at cost | 277,452 | 288,833 |
| Furniture, fixtures and equipment | ||
| Investment in Hotel Properties | ||
| Investment in hotel properties at cost | 166,688 | 165,026 |
| Construction in progress | ||
| Investment in Hotel Properties | ||
| Investment in hotel properties at cost | 22,442 | 21,059 |
| Intangible assets | ||
| Investment in Hotel Properties | ||
| Investment in hotel properties at cost | $ 11,514 | $ 22,064 |
INVESTMENT IN HOTEL PROPERTIES, NET - Narrative (Details) $ in Thousands |
3 Months Ended | ||||
|---|---|---|---|---|---|
|
Apr. 17, 2019
USD ($)
hotel
|
Feb. 12, 2019
USD ($)
hotel
|
Jan. 31, 2019
USD ($)
|
Mar. 31, 2019
USD ($)
hotel
|
Mar. 31, 2018
USD ($)
|
|
| Business Acquisition [Line Items] | |||||
| Number of hotels | hotel | 75 | ||||
| Acquisitions of hotel properties | $ 4,178 | $ 0 | |||
| Disposed of by Sale | Two hotel properties sold on February 12, 2019 | |||||
| Business Acquisition [Line Items] | |||||
| Number of hotels | hotel | 2 | ||||
| Aggregate sales price | $ 11,600 | ||||
| Net gain on sale of properties | $ 4,200 | ||||
| Subsequent Event | Disposed of by Sale | Six properties sold on April 17, 2019 | |||||
| Business Acquisition [Line Items] | |||||
| Number of hotels | hotel | 6 | ||||
| Aggregate sales price | $ 135,000 | ||||
| Net gain on sale of properties | $ 36,600 | ||||
| Residence Inn by Marriott | Baltimore (Hunt Valley), MD | |||||
| Business Acquisition [Line Items] | |||||
| Acquisitions of hotel properties | $ 4,200 | ||||
INVESTMENT IN HOTEL PROPERTIES, NET - Pro forma financial information (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
| Business Combinations [Abstract] | ||
| Revenues | $ 138,682 | $ 132,580 |
| Income from hotel operations | 50,248 | 47,633 |
| Net income | 8,887 | 8,344 |
| Net income (loss) attributable to common stockholders, net of amount allocated to participating securities | $ 5,098 | $ (545) |
| Basic net income (loss) per share attributable to common shareholders (in dollars per share) | $ 0.05 | $ (0.01) |
| Diluted net income (loss) per share attributable to common shareholders (in dollars per share) | $ 0.05 | $ (0.01) |
| Real estate tax expense, depreciation expense, interest expense, and other corporate expenses | $ 51,200 | $ 48,200 |
| Premium on redemption of preferred stock | $ 3,300 | |
DEBT - Schedule of debt (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Debt Instrument [Line Items] | ||
| Debt, gross | $ 967,686 | $ 965,011 |
| Unamortized debt issuance costs | (5,860) | (6,299) |
| Debt, net of debt issuance costs | 961,826 | 958,712 |
| Unsecured debt | Revolving debt | ||
| Debt Instrument [Line Items] | ||
| Debt, gross | 125,000 | 115,000 |
| Unsecured debt | Term loans | ||
| Debt Instrument [Line Items] | ||
| Debt, gross | 650,000 | 650,000 |
| Mortgage loans | ||
| Debt Instrument [Line Items] | ||
| Debt, gross | $ 192,686 | $ 200,011 |
DEBT - Fixed-rate and variable-rate debt (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Debt | ||
| Fixed-rate debt | $ 562,000 | $ 569,103 |
| Fixed rate debt, percentage | 58.00% | 59.00% |
| Variable-rate debt | $ 405,686 | $ 395,908 |
| Variable-rate debt, percentage | 42.00% | 41.00% |
| Debt, gross | $ 967,686 | $ 965,011 |
| Carrying Value | ||
| Debt | ||
| Fixed-rate debt | 162,000 | 169,103 |
| Level 2 | Fair Value | ||
| Debt | ||
| Fixed-rate debt | $ 160,638 | $ 166,256 |
LEASES - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
|---|---|---|---|
Jan. 31, 2019 |
Mar. 31, 2019 |
Mar. 31, 2018 |
|
| Lessee, Lease, Description [Line Items] | |||
| Operating lease cost | $ 1,000 | ||
| Operating cash outflows from operating leases | $ 900 | ||
| Operating lease weighted average remaining lease term | 29 years 4 months 24 days | ||
| Operating lease weighted average discount rate | 5.00% | ||
| Acquisitions of hotel properties | $ 4,178 | $ 0 | |
| Minimum | |||
| Lessee, Lease, Description [Line Items] | |||
| Lease remaining term | 1 year | ||
| Maximum | |||
| Lessee, Lease, Description [Line Items] | |||
| Lease remaining term | 80 years | ||
| Residence Inn by Marriott | Baltimore (Hunt Valley), MD | |||
| Lessee, Lease, Description [Line Items] | |||
| Acquisitions of hotel properties | $ 4,200 | ||
LEASES - Operating lease maturities (Details) $ in Thousands |
Mar. 31, 2019
USD ($)
|
|---|---|
| Leases [Abstract] | |
| 2019 | $ 1,651 |
| 2020 | 2,051 |
| 2021 | 1,934 |
| 2022 | 1,715 |
| 2023 | 863 |
| Thereafter | 28,442 |
| Total lease payments | 36,656 |
| Less interest | (17,383) |
| Total | $ 19,273 |
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING - Narrative (Details) - Interest rate swaps $ in Millions |
Mar. 31, 2019
USD ($)
Instrument
|
Dec. 31, 2018
Instrument
|
|---|---|---|
| Derivative [Line Items] | ||
| Reclassification from other comprehensive income in next 12 months | $ | $ 0.2 | |
| Designated as hedges | ||
| Derivative [Line Items] | ||
| Number of derivatives in an asset position | 2 | 2 |
| Number of derivatives in a liability position | 2 | 2 |
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING - Schedule of gain or loss recognized on derivative financial instruments (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
| Derivative instruments, gain (loss) recognized | ||
| Total interest expense in which the effects of cash flow hedges are recorded | $ 10,852 | $ 9,329 |
| Cash flow hedges | Interest rate swaps | ||
| Derivative instruments, gain (loss) recognized | ||
| (Loss) gain recognized in Other comprehensive income on derivative financial instruments | (5,497) | 3,537 |
| Total interest expense in which the effects of cash flow hedges are recorded | 10,852 | 9,329 |
| Cash flow hedges | Interest rate swaps | Interest expense | ||
| Derivative instruments, gain (loss) recognized | ||
| Gain (loss) reclassified from Other comprehensive income to Interest expense | $ 61 | $ (207) |
EQUITY - Changes in common stock (Details) - shares |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
| Changes in Common Stock [Roll Forward] | ||
| Beginning common shares outstanding | 104,783,179 | 104,287,128 |
| Grants under the Equity Plan | 537,304 | 583,373 |
| Common stock issued for director fees | 0 | 1,147 |
| Performance share and other forfeitures | (166,478) | 0 |
| Shares retained for employee tax withholding requirements | (73,892) | (187,850) |
| Ending common shares outstanding | 105,080,113 | 104,683,798 |
COMMITMENTS AND CONTINGENCIES - Restricted Cash (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|
| Loss Contingencies [Line Items] | ||
| Restricted cash | $ 28,026 | $ 28,468 |
| Minimum | ||
| Loss Contingencies [Line Items] | ||
| Restricted cash reserve as percentage of hotel revenues | 2.00% | |
| Maximum | ||
| Loss Contingencies [Line Items] | ||
| Restricted cash reserve as percentage of hotel revenues | 5.00% |
COMMITMENTS AND CONTINGENCIES - Franchise and Management Agreements (Details) - USD ($) $ in Millions |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
| Franchise agreements | ||
| Commitments and contingencies | ||
| Fees related to the agreement | $ 11.5 | $ 11.5 |
| Management Agreements | ||
| Commitments and contingencies | ||
| Fees related to the agreement | $ 5.1 | $ 5.4 |
| Management Agreements | Maximum | ||
| Commitments and contingencies | ||
| Term of contract | 5 years | |
FAIR VALUE MEASUREMENT - Schedule of Financial Instruments Measured at Fair Value (Details) - Recurring basis - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Assets: | ||
| Purchase options related to real estate loans | $ 6,120 | $ 6,120 |
| Level 1 | ||
| Assets: | ||
| Purchase options related to real estate loans | 0 | 0 |
| Level 2 | ||
| Assets: | ||
| Purchase options related to real estate loans | 0 | 0 |
| Level 3 | ||
| Assets: | ||
| Purchase options related to real estate loans | 6,120 | 6,120 |
| Interest rate swaps | ||
| Assets: | ||
| Derivative asset | 1,215 | 3,461 |
| Liabilities: | ||
| Derivative liabilities | 8,354 | 5,042 |
| Interest rate swaps | Level 1 | ||
| Assets: | ||
| Derivative asset | 0 | 0 |
| Liabilities: | ||
| Derivative liabilities | 0 | 0 |
| Interest rate swaps | Level 2 | ||
| Assets: | ||
| Derivative asset | 1,215 | 3,461 |
| Liabilities: | ||
| Derivative liabilities | 8,354 | 5,042 |
| Interest rate swaps | Level 3 | ||
| Assets: | ||
| Derivative asset | 0 | 0 |
| Liabilities: | ||
| Derivative liabilities | $ 0 | $ 0 |
EQUITY-BASED COMPENSATION - Stock options (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
| Stock options | ||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
| Number of exercisable shares (in shares) | 235,000 | |
| Weighted average exercise price, exercisable (in dollars per share) | $ 9.75 | |
| Weighted average remaining contractual terms, exercisable | 1 year 10 months 24 days | |
| Aggregate intrinsic value, outstanding | $ 0.4 | |
| Minimum | ||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
| Stock options term | 5 years | |
| Maximum | ||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
| Stock options term | 10 years | |
| Chief Financial Officer | ||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
| Share based compensation expense | $ 1.0 | |
INCOME TAXES (Details) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
| Income Tax Disclosure [Abstract] | |||
| Percentage of taxable income distributed to shareholders | 100.00% | ||
| Income tax expense | $ 350,000 | $ 260,000 | |
| Deferred tax assets | 2,000,000.0 | $ 2,000,000 | |
| Unrecognized tax benefits | $ 0 | ||
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
| Numerator: | ||
| Net income | $ 12,900 | $ 9,691 |
| Less: Preferred dividends | (3,709) | (5,543) |
| Premium on redemption of preferred stock | 0 | (3,277) |
| Allocation to participating securities | (67) | (70) |
| Attributable to non-controlling interest | (23) | (3) |
| Net income attributable to common stockholders | $ 9,101 | $ 798 |
| Denominator: | ||
| Weighted average common shares outstanding - basic (in shares) | 103,749,000 | 103,500,000 |
| Dilutive effect of equity-based compensation awards (in shares) | 88,000 | 399,000 |
| Weighted average common shares outstanding - diluted (in shares) | 103,837,000 | 103,899,000 |
| Basic and diluted (in dollars per share) | $ 0.09 | $ 0.01 |
| Restricted Stock Awards | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Anti-dilutive securities excluded from computation of diluted earnings per share (in shares) | 755,991 | 453,664 |
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