Pebblebrook Lodge Belief reported Q2 2024 outcomes. Highlights embrace:
- Internet earnings of $32.2 million
- Identical-Property Whole RevPAR elevated by 2.5 p.c vs. Q2 2023, with city properties enhancing 3.4 p.c and resort properties rising 0.6 p.c
- Identical-Property EBITDA of $117.2 million, up $9.6 million, or 8.9 p.c, vs. Q2 2023
- Adjusted EBITDAre of $123.5 million, forward by $7.2 million, or 6.2 p.c, vs. Q2 2023
- Adjusted FFO per diluted share of $0.69, growing 11.3 p.c from Q2 2023
Lodge Working Traits
- Each city and resort occupancies grew in Q2. City same-property occupancy elevated 2.5 proportion factors, with beneficial properties pushed by San Diego, Chicago, Boston, and Washington, D.C. Resort same-property occupancy rose by 3.5 proportion factors, bolstered by continued enchancment in weekday demand from enterprise transient and teams and weekend occupancy from leisure vacationers.
- Targeted efforts to realize working price efficiencies, coupled with lowered expense pressures and better-than-expected progress in realizing actual property tax reductions, resulted in a 0.1 p.c year-over-year decline in same-property complete bills. This helped to enhance same-property EBITDA margins by 182 foundation factors.
Portfolio Updates & Capital Repositioning
- Pebblebrook’s multiyear complete redevelopment and repositioning tasks, totaling over $520 million, have been accomplished, positioning the corporate to realize income beneficial properties and money move enhancements over the subsequent a number of years.
- LaPlaya Seashore Resort & Membership (LaPlaya) continues to ramp up its working efficiency following its redevelopment and restoration after Hurricane Ian. In Q2, EBITDAre reached $7.0 million. Moreover, $7.3 million of enterprise interruption earnings was recorded, exceeding the corporate’s Q2 outlook by $3.3 million.
- Le Méridien Delfina Santa Monica will likely be transformed and rebranded to Hyatt Centric in mid-September 2024, changing into the primary Hyatt-affiliated franchise on this extremely fascinating beachfront vacation spot.
2024 Outlook
- Internet loss: ($13.0) to ($4.0) million
- Identical-Property RevPAR Development Fee: up 1.25 p.c to up 2.25 p.c (midpoint down 125 bps)
- Adjusted EBITDAre: $351.0 to $360.0 million (midpoint elevated $9.0 million)
- Adjusted FFO per diluted share: $1.59 to $1.67 (midpoint elevated $0.08)
“Second quarter demand was according to our expectations, with wholesome enterprise group, transient and leisure boosting the city markets, and robust weekday and weekend demand positively affecting our resort portfolio. Our not too long ago redeveloped and repositioned properties—Estancia La Jolla Lodge & Spa, Skamania Lodge, Hilton Gaslamp San Diego Quarter, Margaritaville San Diego Gaslamp Quarter, and Newport Harbor Island Resort—are performing nicely, ramping up efficiently and gaining market share. Our bottom-line working outcomes exceeded our outlook, primarily as a consequence of better-than-expected execution of working effectivity initiatives, lowered expense pressures, and barely greater-than-expected financial savings from actual property tax reductions. Each our city resorts and resorts grew Identical-Property EBITDA throughout the second quarter, which could be very encouraging.
“For the rest of the yr, growing geopolitical and financial uncertainties are prone to impression business efficiency and working outcomes, prompting us to undertake a modestly extra cautious outlook. Whereas we’re barely decreasing our income development outlook for the yr, we’re elevating our 2024 outlook for Lodge EBITDA, Adjusted EBITDAre, Adjusted FFO, and AFFO/share. Though our total group and transient tempo stays forward for the steadiness of the yr in contrast with 2023, the margin of benefit has been narrowing. Enterprise group and transient segments stay wholesome. Nonetheless, leisure customers have turn out to be more and more price-conscious, notably throughout the lower-priced segments, and this development is starting to impression some higher-end segments. We have been beforehand anticipating total ADR declines to ease within the second half of this yr, however we now anticipate continued stress all through the rest of the yr. Regardless of this, luxurious and upscale vacationers have remained resilient, and we’re on monitor for a profitable summer season season throughout our portfolio.
“Each our city resorts and resorts demonstrated constructive efficiency within the second quarter. Yr so far, our city properties have improved occupancy by 2.4 proportion factors and elevated same-property EBITDA by 7.0 p.c over the prior-year interval. In the meantime, our resort same-property occupancy elevated by 3.5 proportion factors for the quarter and 1.8 proportion factors yr so far, with resort same-property EBITDA yr so far growing by 2.0 p.c over final yr.
‘We’re additionally very happy with the super progress our property groups and asset managers have made in delivering working effectivity enhancements throughout the portfolio. It has been a major focus for our groups. Our same-property lodge working bills decreased by 0.1 p.c versus Q2 2023, with prices per occupied room declining by 3.8 p.c. Excluding property taxes and insurance coverage, our lodge working bills rose by only one.4 p.c, whereas reducing by 2.4 p.c on a per-occupied room foundation. Usually, we now have additionally skilled lowered working price pressures throughout the portfolio, which we anticipate will proceed via the rest of the yr,” Jon E. Bortz, chairman and CEO, Pebblebrook Lodge Belief.
LaPlaya Seashore Resort & Membership
Following the post-hurricane reconstruction completion and full reopening of LaPlaya in Naples, Florida, earlier this yr, the posh resort’s working efficiency continues to enhance. Yr so far, LaPlaya has achieved $15.3 million in lodge EBITDA, as in comparison with a lack of $3.7 million in the identical interval final yr, and a constructive $23.1 million in the identical interval of 2022, which was the resort’s best-performing yr earlier than Hurricane Ian in September 2022. The property’s underlying efficiency is anticipated to proceed to ramp up, and LaPlaya is poised to capitalize on the upcoming journey season in Naples, beginning within the fourth quarter of 2024. As a part of the corporate’s elevated 2024 outlook, LaPlaya is anticipated to contribute $24 million of EBITDA for the whole yr, which represents a $2 million enchancment from the Firm’s prior expectations.
Concerning insurance coverage claims, the corporate expects all operational and bodily disruptions to be coated beneath its enterprise interruption (BI) and property insurance coverage insurance policies, internet of deductibles. In Q2 2024, a preliminary settlement of $7.3 million for BI proceeds associated to earnings losses from October 2023 via February 2024 was recorded, exceeding the corporate’s Q2 outlook by $3.3 million. Yr so far, the corporate has recorded $11.3 million in BI earnings and forecasts a further $2.7 million for the rest of 2024, bringing the whole anticipated BI earnings for 2024 to $14.0 million. That is $3.0 million greater than beforehand anticipated. These projections at the moment are included into the corporate’s 2024 Outlook. You will need to notice that whereas enterprise interruption proceeds will improve Adjusted EBITDAre and Adjusted FFO, they don’t seem to be included in same-property lodge EBITDA. LaPlaya’s working efficiency is excluded from all same-property reporting outcomes for 2024 and 2023.
Le Méridien Delfina Santa Monica to Convert to Hyatt Centric
The corporate not too long ago reached an settlement with Hyatt Lodges & Resorts to reflag its present 315-room Le Méridien Delfina Santa Monica because the Hyatt Centric Delfina Santa Monica in mid-September 2024. This conversion will embrace an approximate $16.0 million property refresh, commencing within the fourth quarter of this yr, with anticipated completion within the second quarter of 2025. Hyatt is offering cash, offsetting a portion of the property refresh.
“We’re thrilled that our lifestyle-oriented Delfina Santa Monica lodge will turn out to be a part of Hyatt Centric,” famous Bortz. “After evaluating many various choices, we decided that changing to Hyatt Centric was the optimum selection for this distinctive lifestyle-oriented property. We have been already planning a refresh, and the extra scope to fulfill Hyatt Centric requirements was comparatively minor. This would be the solely Hyatt-branded lodge within the fascinating and excessive barrier-to-entry beachside Santa Monica lodge market, which must be an incredible profit for the property.”
Capital Investments and Strategic Property Redevelopments
Throughout the second quarter, the corporate accomplished $28.7 million of capital investments all through its portfolio, excluding capital expenditures associated to the restore and rebuilding of LaPlaya. These investments relate to quite a few the corporate’s final main property redevelopments, together with:
- The $50 million complete redevelopment of Newport Harbor Island Resort right into a luxurious island resort, which totally launched on Memorial Day weekend;
- The finalization of Estancia La Jolla Lodge & Spa’s $26 million redevelopment and repositioning, which was accomplished in mid-April and included renovating public areas and public space landscaping, including a foyer bar and patio, outside assembly venues, an out of doors pool bar and grill, and new cabanas, and upgrading the primary ballroom and the Mustangs and Burros restaurant; and
- The Could completion of Skamania Lodge’s $20 million section 1 of its a lot bigger grasp plan to increase and introduce different lodging lodging, together with the latest addition of two new two-bedroom cabins, one new three-bedroom villa, and 5 glamping items. Different latest resort additions included a multi-million-dollar outside assembly and occasion venue adjoining to the resort’s new 18-hole placing course, three further treehouses bringing the whole variety of treehouses to 9, and street and utility infrastructure for present and future different lodging.
With the completion of those investments, just about the entire firm’s properties have undergone latest main redevelopments or renovations. This marks a transition to a interval of lowered capital investments deliberate for the subsequent few years. The corporate continues to anticipate it’ll make investments a complete of $85 to $90 million within the portfolio in 2024, internet of key cash.
Stability Sheet and Liquidity
As of June 30, 2024, the corporate had $111.2 million in money, money equivalents, and restricted money, plus $636.3 million of undrawn availability on its $650 million senior unsecured revolving credit score facility. The corporate’s present $2.2 billion of consolidated debt and convertible notes is structured, with an estimated efficient weighted-average rate of interest of 4.4 p.c as of the start of the third quarter. Seventy-five p.c of the mixed debt and convertible notes is mounted at an estimated efficient weighted-average rate of interest of three.4 p.c, whereas the remaining 25 p.c is floating at an estimated weighted-average rate of interest of seven.3 p.c. As well as, roughly 91 p.c of the corporate’s excellent debt is unsecured, and the weighted-average maturity of the corporate’s debt is roughly 2.7 years. The corporate has no significant debt maturities till This autumn 2025.
Widespread and Most well-liked Dividends
On June 14, 2024, the corporate declared a quarterly money dividend of $0.01 per share on its widespread shares and a daily quarterly money dividend for the next most well-liked shares of helpful curiosity:
- $0.39844 per 6.375% Collection E Cumulative Redeemable Most well-liked Share;
- $0.39375 per 6.3% Collection F Cumulative Redeemable Most well-liked Share;
- $0.39844 per 6.375% Collection G Cumulative Redeemable Most well-liked Share; and
- $0.35625 per 5.7% Collection H Cumulative Redeemable Most well-liked Share.
Replace on Curator Lodge & Resort Assortment
Curator Lodge & Resort Assortment is a set of experientially centered small manufacturers and unbiased life-style resorts and resorts worldwide based by Pebblebrook and a number of other unbiased life-style lodge operators. As of June 30, 2024, Curator had 97 member resorts and resorts and 117 grasp service agreements with most well-liked vendor companions. The grasp service agreements present Curator member resorts with most well-liked pricing, working phrases, and early entry to curated new applied sciences.
2024 Outlook
The corporate’s 2024 Outlook, which doesn’t assume any acquisitions or tendencies, incorporates deliberate capital investments and key assumptions, together with an estimated $14.0 million in enterprise interruption proceeds and $24.0 million of Lodge EBITDA associated to LaPlaya, which is included into Adjusted EBITDAre and Adjusted FFO, however doesn’t impression same-property lodge EBITDA.
This forecast assumes secure journey circumstances, unaffected by pandemics, main climate occasions, federal shutdowns, or deteriorating macro-economic components.
