XML 43 R45.htm IDEA: XBRL DOCUMENT v3.20.1
SUBSEQUENT EVENTS - REIT
 3 Months Ended
Mar. 31, 2020
Subsequent Event [Line Items]  
SUBSEQUENT EVENTS SUBSEQUENT EVENTS
In April 2020, 6,422 shares of the Corporation's 8.0% mandatorily redeemable voting preferred stock were redeemed for $6.4 million, plus accrued and unpaid dividends.
On May 6, 2020, the Board of Directors of ESH REIT declared a cash distribution of $0.01 per share for the first quarter of 2020 on its Class A and Class B common stock. This distribution is payable on June 4, 2020 to shareholders of record as of May 21, 2020.
Corporation Revolving Credit Facility Amendment
On May 6, 2020, the Company executed an amendment to the Corporation Revolving Credit Facility and obtained a suspension of the quarterly tested leverage covenant from the beginning of the second quarter of 2020 through the end of the first quarter of 2021 (the “Four Quarter Suspension Period”). For the second quarter of 2021 through the fourth quarter of 2021, the leverage covenant calculation has been modified to use annualized EBITDA, as opposed to trailing twelve-month EBITDA. Additionally, the amendment provides for the Corporation to borrow up to $150.0 million from ESH REIT through an intercompany loan facility. Throughout the Four Quarter Suspension Period, the Company has agreed to maintain minimum liquidity of $150.0 million and to limit share repurchases and dividend payments made by the Corporation.
COVID-19 Pandemic Update
In December 2019, an outbreak of a novel strain of coronavirus (“COVID-19”) originated in Wuhan, China and has since spread worldwide, posing public health risks that, by March 2020, reached pandemic proportions. The COVID-19 pandemic has significantly affected the global economy and strained the lodging industry due to travel restrictions, stay-at-home directives and shelter-in-place ordinances that have resulted in cancellations and reduced travel around the world. The impact on the lodging industry and other macroeconomic effects has resulted in materially reduced occupancy, ADR, RevPAR and subsequent decreases in hotel room revenues. All of our hotel properties remain open through the COVID-19 pandemic and we expect that our hotels will remain open, subject to government ordinances requiring their closure.
We expect our business and operational outlook to be materially negatively impacted by the COVID-19 pandemic. As the COVID-19 pandemic evolves, we will continue to monitor the impacts of the pandemic on our operations and financial condition and implement mitigation strategies while working to preserve our liquidity. As of April 30, 2020, the Company had unrestricted and restricted cash and cash equivalents of $678.0 million. Based on a preliminary assessment of our performance for the first four weeks of the second quarter and current trends, we expect a decline in total revenues in the second quarter of 2020 compared to the second quarter of 2019, in addition to declines in RevPAR and Adjusted EBITDA. Because our second quarter results are not complete and the actual performance of the remaining portion of the quarter could deviate from current trends, our expectations with respect to any of the foregoing quarterly measures or metrics are subject to change. The Company does not expect to, and undertakes no obligation to, announce any change in expectations prior to the announcement of actual second quarter results.
In response to the continuing negative impact on our business, results of operations and financial condition, we have taken, or intend to take, additional steps to reduce operating costs and maintain financial and liquidity flexibility, such as, but not limited to the following:
•increasing effort and focus for the remainder of 2020 to attract guests staying for one month or longer at a time, which has proven significantly more resilient to date than typical transient and group guests in the broader lodging industry;
•reducing labor hours at hotels in response to the decline in occupancy and longer length of stay guests at a number of our properties;
•reducing planned capital expenditures related to non-guest facing capital investments, as well as hotel renovations and construction of new hotels;
•drawing the full $400 million of borrowing capacity under our revolving credit facilities (see Note 7);
•reducing the quarterly dividend to holders of Paired Shares for the first quarter of 2020 and likely reducing it in future periods; and
•suspending Paired Share repurchases until the RevPAR environment stabilizes.
On March 27, 2020, President Trump signed into law the CARES Act. The CARES Act, among other things, includes provisions relating to net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The Company continues to examine the impacts the COVID-19 pandemic and the CARES Act may have on its business; however, it is impossible to predict the complete effect and ultimate impact of the COVID-19 pandemic at this time as the situation is continuously evolving.
We may implement further discretionary changes as needed to address the volatility and changing dynamics of hotel and travel demand and the impact of revenue changes, regulatory and public health directives and prevailing government policy and economic conditions.
ESH Hospitality, Inc.  
Subsequent Event [Line Items]  
SUBSEQUENT EVENTS SUBSEQUENT EVENTS
On May 6, 2020, the Board of Directors of ESH REIT declared a cash distribution of $0.01 per share for the first quarter of 2020 on its Class A and Class B common stock. This distribution is payable on June 4, 2020 to shareholders of record as of May 21, 2020.
COVID-19 Pandemic Update
In December 2019, an outbreak of a novel strain of coronavirus (“COVID-19”) originated in Wuhan, China and has since spread worldwide, posing public health risks that, by March 2020, reached pandemic proportions. The COVID-19 pandemic has significantly affected the global economy and strained the lodging industry due to travel restrictions, stay-at-home directives and shelter-in-place ordinances that have resulted in cancellations and reduced travel around the world.
ESH REIT's business and operational outlook is expected to be materially negatively impacted by the COVID-19 pandemic, specifically its ability to generate material, if any, percentage rental revenues under its leases due to material decreases in hotel revenues of the Operating Lessees. As the COVID-19 pandemic evolves, ESH REIT will continue to monitor the impacts of the pandemic on the operations of the Operating Lessees, including their ability to pay fixed minimum rents in accordance with the terms of the lease agreements. ESH REIT will also continue to monitor its financial condition and implement mitigation strategies while working to preserve liquidity. As of April 30, 2020, ESH REIT had unrestricted cash and cash equivalents of $608.4 million. Based on a preliminary assessment of our performance for the first four weeks of the second quarter and current trends, ESH REIT expects a decline in cash percentage rental payments in the second quarter of 2020 compared to the second quarter of 2019. Because second quarter results are not complete and the actual performance of the remaining portion of the quarter could deviate from current trends, ESH REIT's expectations with respect to any of the foregoing are subject to change. ESH REIT does not expect to, and undertakes no obligation to, announce any change in expectations prior to the announcement of actual second quarter results.
In response to the negative impact on ESH REIT's business and financial condition, ESH REIT has taken, or intends to take, additional steps to reduce operating costs and maintain financial and liquidity flexibility, such as, but not limited to the following:
•reducing planned capital expenditures related to non-guest facing capital investments, as well as hotel renovations and construction of new hotels;
•drawing the full $350 million of borrowing capacity under the ESH REIT Revolving Credit Facility (see Note 7);
•reducing the quarterly distribution to holders of ESH REIT's Class A and Class B common stock for the first quarter of 2020 and likely reducing it in future periods; and
•suspending Paired Share repurchases until the economic environment stabilizes.
On March 27, 2020, President Trump signed into law the CARES Act. The CARES Act, among other things, includes provisions relating to net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. ESH REIT continues to examine the impacts the COVID-19 pandemic and the CARES Act may have on its business; however, it is impossible to predict the complete effect and ultimate impact as the situation is continuously evolving.