RLJ Lodging Trust — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited. RLJ is a lodging REIT with 97 hotels and approximately 21,400 rooms across 23 states and Washington, D.C. It owned 97 hotels at both March 31, 2024 and March 31, 2023.
Key financial results
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total revenue | $324.4 million | $314.5 million | +3.1% |
| Net income | $4.7 million | $10.5 million | Down $5.8 million |
| Net income (loss) attributable to common shareholders | $(1.3) million | $4.4 million | Down $5.7 million |
| FFO attributable to common shareholders and unitholders | $43.5 million | $49.6 million | Down 12.2% |
| Adjusted FFO | $51.9 million | $56.1 million | Down 7.5% |
| EBITDA / EBITDAre | $71.7 million | $76.7 million | Down 6.4% |
| Adjusted EBITDA | $79.6 million | $82.7 million | Down 3.7% |
| Cash provided by operating activities | $20.8 million | $42.0 million | Down $21.3 million |
Revenue growth came from room, food and beverage, and other revenue. Occupancy improved to 69.3% from 68.5%; ADR was $198.84 versus $199.07; and RevPAR rose to $137.88 from $136.45. Property operating expenses increased 6.2% to $213.5 million, faster than revenue. Property operating profit before depreciation and amortization was $110.9 million, or about 34.2% of revenue, compared with $113.5 million, or about 36.1%, a year earlier.
Interest expense rose to $26.5 million from $24.1 million, principally because of higher rates on unhedged variable-rate debt and a larger unhedged balance. The filing reports basic and diluted loss per common share of $0.01, versus income per share of $0.03. Preferred dividends were $6.3 million in both periods.
Balance sheet, cash flow and capital
- At March 31, cash and cash equivalents were $350.2 million; restricted cash reserves were $40.7 million. Combined cash and restricted reserves were $391.0 million, down from $555.3 million at year-end 2023.
- Debt, net, was $2.222 billion, compared with $2.221 billion at December 31, 2023. Principal debt outstanding was approximately $2.231 billion. The company had $600 million available on its Revolver at quarter-end.
- Investing cash outflow was $158.0 million, including $122.7 million for the Boston land acquisition and $33.8 million in hotel improvements and additions. Financing cash outflow was $27.2 million, including distributions and share repurchases.
- At quarter-end, $1.206 billion, or 54.1% of total indebtedness, was variable-rate debt. After swaps, 81.8% of debt was fixed or effectively fixed. Management estimated that a 100-basis-point rise in rates on unhedged variable debt would reduce annual earnings and cash flow by approximately $4.1 million.
- Common distributions declared were $0.10 per share, versus $0.08 a year earlier; Series A preferred distributions were $0.4875 per share in both periods.
Material developments and outlook
- On January 29, RLJ acquired the fee-simple interest in the land under its Wyndham Boston Beacon Hill hotel for approximately $125 million, replacing its prior leasehold interest.
- In April, RLJ drew $200 million on its Revolver to repay a $200 million mortgage loan that matured that month. This reduced Revolver availability to $400 million.
- In April, RLJ exercised extension options on $181 million of mortgage loans, extending their maturities to April 2025; further one-year extension options remain subject to conditions.
- On April 26, the board approved a share repurchase program for up to $250 million of common and preferred shares, running May 9, 2024 through May 8, 2025.
- Management attributed revenue growth to stronger business travel, ramp-up of converted and renovated hotels, higher banquet and catering revenue, and increased parking and resort fees. Wage and benefit costs, sales and marketing, property taxes, and insurance contributed to expense growth. Other income included certain COVID-19 relief awards.
- The filing provides no numerical operating or earnings guidance. Management cautions that forward-looking expectations are not guarantees and identifies macroeconomic factors affecting business travel as particularly relevant to hotel demand. It reports no material changes to previously disclosed risk factors and no material litigation expected to adversely affect financial position, results, or cash flows.
Most important facts for investors to verify
- How hotel demand, occupancy, ADR, and RevPAR evolve, particularly business travel, and whether revenue growth can outpace labor, insurance, tax, and other operating costs.
- Debt refinancing and extension outcomes, including the April mortgage repayment, remaining Revolver capacity, and upcoming debt maturities.
- Exposure to floating interest rates and the effectiveness and duration of existing hedges.
- Cash generation and liquidity after the Boston land purchase, planned capital spending, shareholder distributions, and the new repurchase authorization.
- The contribution of COVID-19 relief awards and other non-recurring items to reported results and non-GAAP measures.