BETHESDA, Md.--(BUSINESS WIRE)--RLJ Lodging Trust (NYSE: RLJ) today reported results for the three and six months ended June 30, 2020 and is providing a business update on its operating performance related to the ongoing COVID-19 pandemic.
Highlights
- Reopened 21 hotels during the second quarter and 15 hotels during the third quarter
- Successfully amended unsecured revolver and term loans to waive certain financial covenants
- Maintained a strong balance sheet with over $1.0 billion of unrestricted cash
- Total revenue of $32.6 million
- Net loss of ($116.2) million
- Net loss per share of ($0.74)
- Adjusted EBITDA of ($50.5) million
- Adjusted FFO per diluted common share and unit of ($0.49)
"Against the backdrop of the most challenging quarter in our industry’s history, we made significant progress on several critical fronts; including reopening 21 hotels in a socially and financially responsible manner, reducing our monthly cash burn, and obtaining covenant waivers which created incremental flexibility," commented Leslie D. Hale, President and Chief Executive Officer. “Our second quarter performance underscores RLJ’s differentiating attributes including our lean operating model, the construct and geographic diversity of our portfolio, and our strong liquidity position. We believe these portfolio attributes provide us with an advantage that will allow us to navigate the current environment, emerge in a relative position of strength during the recovery, and enable us to take advantage of opportunities at the appropriate time.” Ms. Hale continued, “In light of the boarder discussion around racial equality today, it is important to affirm our unwavering commitment to diversity, which has always been a core value for RLJ. I remain proud of the diversity throughout all levels of our organization, including the Board of Trustees, and believe that RLJ can serve as real example for the broader REIT industry.”
Business Update
Update on Hotel Re-openings
Concurrent with its first quarter earnings release, the Company announced suspension of operations at 57 hotels in response to state mandated stay-in-place orders and the significant reduction in demand due to the COVID-19 pandemic. As stay-in-place restrictions were lifted, the Company developed a framework to open hotels in a socially and financially responsible manner. Based on this framework, the Company reopened 21 hotels in the second quarter and 15 hotels during in the third quarter. The reopened hotels are primarily transient oriented, select-service and extended stay hotels located in drive-to and leisure markets. The Company continues to evaluate reopening additional hotels based on market conditions.
Currently, 82 of the company's 103 hotels are open. All open hotels continue to operate under aggressive operating cost containment plans, including significantly reduced staffing, elimination of non-essential amenities and services, and the closure of several floors and most food and beverage outlets.
Monthly Cash Burn Update
The Company is updating its prior estimate of monthly cash burn for the period from April to December 2020. The Company’s monthly cash burn during the second quarter was lower than expectations as hotel operating shortfalls were lower due to: higher revenues at hotels that were open for the entire quarter, primarily driven by the lift in leisure demand; incremental revenues from reopening more hotels during the second quarter than previously expected; and, greater cost savings from successful cost containment initiatives. These factors resulted in second quarter average hotel monthly operating shortfalls to be 40% below the Company’s prior estimates.
Based on the success in reducing the burn rate during the second quarter, the Company now estimates that average monthly cash burn across its portfolio will be approximately $25.0 million to $30.0 million (excluding capital investments), representing a $5.0 million reduction to the high end of the prior range and a $2.5 million reduction to the mid-point of the prior range. The current cash burn range is based on the following assumptions:
– Average hotel-level monthly operating shortfalls of approximately $5.0 million to $9.0 million
– Average hotel fixed costs of $7.0 million, which includes property taxes and insurance;
– Corporate-level monthly general and administrative cash expenses of $2.0 million; and
– Corporate-level outflows of $11.0 million to $12.0 million, which includes interest and scheduled principal payments on the Company’s outstanding debt as well as both common and preferred dividends.
The actual monthly cash burn will vary based on the level of lodging demand. Our monthly cash burn is expected to be at the low end of the range if lodging demand remains at current levels and the high end of the range if lodging demand contracts from current levels. Management continues to believe that its current liquidity has positioned the Company to withstand a protracted period of limited hotel demand.
Covenant Waiver Update
On June 25, 2020, the Company successfully amended its $1.8 billion senior unsecured credit facilities, comprising a $600.0 million revolving credit facility (the “Revolving Credit Facility”) and $1,175 million in term loans. The amendments include the waiver of all financial maintenance covenants through the first quarter of 2021 and modification of certain financial covenant calculations through the second quarter of 2022. The Company is permitted to make certain investments during the relief period, subject to certain conditions, including $200.0 million of hotel acquisitions (depending on the outstanding balance on the Revolving Credit Facility), and approximately $260.0 million of capital expenditures.
Balance SheetAs of June 30, 2020, the Company had over $1.0 billion of unrestricted cash on its balance sheet, $200 million undrawn under the Revolving Credit Facility, no debt maturities until 2022, and $2.6 billion of debt outstanding.
DividendsThe Company’s Board of Trustees declared a quarterly cash dividend of $0.01 per common share of beneficial interest in the second quarter. The dividend was paid on July 15, 2020 to shareholders of record as of June 30, 2020.
The Company's Board of Trustees declared a quarterly cash dividend of $0.4875 on the Company’s Series A Preferred Shares. The dividend was paid on July 31, 2020 to shareholders of record as of June 30, 2020.
2020 OutlookGiven the uncertainties related to the pandemic and its impact on travel, the Company is unable to provide a future outlook at this time.
About Us RLJ Lodging Trust is a self-advised, publicly traded real estate investment trust that owns primarily premium-branded, high-margin, focused-service and compact full-service hotels. The Company's portfolio consists of 103 hotels with approximately 22,570 rooms, located in 23 states and the District of Columbia and an ownership interest in one unconsolidated hotel with 171 rooms.
