Xenia Hotels & Resorts, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; compared with the three months ended March 31, 2020. Xenia is a U.S. lodging REIT focused on luxury and upper-upscale hotels and resorts. At quarter-end it owned 35 hotels with 10,011 rooms; 34 hotels were open. Hyatt Regency Portland at the Oregon Convention Center remained suspended.
Financial and operating highlights
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Total revenue | $87.9 million | $215.4 million |
| Operating loss | $39.2 million | $31.5 million |
| Net loss | $58.0 million | $37.1 million |
| Net loss attributable to common stockholders | $56.4 million; $0.50 per share | $36.1 million; $0.32 per share |
| Adjusted EBITDAre attributable to common stock and unit holders | $(3.6) million | $24.5 million |
| Adjusted FFO attributable to common stock and unit holders | $(20.8) million | $19.4 million |
| Cash from operating activities | $(31.2) million | $5.4 million |
| Capital expenditures | $7.2 million | $22.2 million |
Revenue fell 59.2% year over year: rooms revenue declined 55.3%, food and beverage revenue 70.7%, and other revenue 38.0%. Portfolio occupancy was 32.7%, ADR was $188.68, and RevPAR was $61.76, down 49.2% from $121.68. Monthly occupancy improved from 23.1% in January to 42.7% in March, with leisure demand driving the sequential recovery. The comparison also reflects four hotel sales in Q4 2020 and the pandemic’s effect on hotel operations.
Hotel operating expenses declined 54.9% to $77.1 million, but lower costs did not offset the revenue decline. Interest expense increased 44.0% to $18.8 million, primarily due to a higher weighted-average interest rate. Q1 2021 included $1.1 million of business-interruption insurance proceeds; Q1 2020 included $16.4 million of goodwill impairment charges and a $7.3 million income tax benefit under the CARES Act. No impairment was recorded in Q1 2021.
Balance sheet, debt, and liquidity
- At March 31, 2021, cash and cash equivalents were $354.6 million and restricted cash was $34.6 million, for total cash and restricted cash of $389.2 million. Total assets were $3.02 billion and total equity was $1.51 billion.
- Gross debt was approximately $1.389 billion, with a weighted-average rate of 4.78%; reported debt net of premiums, discounts, and financing costs was $1.374 billion. The revolving credit facility had $163.1 million drawn and approximately $360 million available.
- Debt maturities are concentrated in 2023–2025, including $567.1 million scheduled for 2025. The company reported four mortgage-loan covenant violations at quarter-end; these were not events of default but could permit lender cash sweeps. Xenia expected additional mortgage covenant failures within 12 months and may need waivers, modifications, or debt paydowns.
- Corporate credit covenant testing was suspended through year-end 2021, with modified covenants thereafter; restrictions and a minimum-liquidity covenant apply during the waiver period. The company reported compliance with its corporate credit facility covenants was subject to these amended terms.
- The company had used $13.5 million of furniture, fixtures and equipment reserves for working capital, subject to replenishment. Required reserve contributions had been temporarily suspended. Q1 cash and restricted cash declined $39.6 million.
Outlook, risks, and notable items
Management said leisure demand improved during Q1, but business transient and group demand remained limited. It expected lodging recovery, particularly in those segments, to be gradual, uneven, and potentially slower than recovery in other industries. Management expected the hotel portfolio to begin generating net operating income in the second half of 2021, but provided no quantified earnings or operating guidance in the supplied filing text.
The pandemic, travel restrictions, renewed outbreaks or variants, vaccine uptake, staffing challenges, and economic conditions could delay recovery or require renewed operating restrictions. Management also cited risks to access to capital, debt service, property transactions, renovations, and cash flows. Interest-rate swaps had $512.8 million aggregate notional value; the filing estimated a 1 percentage-point change in rates on variable-rate debt would affect annual earnings and cash flows by approximately $2.0 million. About $9.2 million of accumulated hedge losses was expected to be reclassified as additional interest expense over the next 12 months.
The quarterly dividend remained suspended, and debt terms restricted distributions and share repurchases. The amended credit facilities prohibited repurchases until covenant compliance and the end of the waiver period. Management stated that ordinary-course legal matters were not expected to materially affect the company. Disclosure controls were assessed as effective at a reasonable-assurance level.
Important facts for investors to verify
- Progress in occupancy, ADR, and RevPAR recovery, especially business transient and group demand, and the timing of the expected second-half 2021 operating recovery.
- Cash burn and liquidity runway, including the use and required replenishment of restricted replacement reserves and availability of the revolving facility.
- Mortgage covenant compliance, lender cash-sweep actions, anticipated covenant failures, and the status of any required waivers, modifications, or paydowns.
- Debt maturities and refinancing capacity, especially the large 2025 maturity, alongside restrictions on distributions and repurchases.
- Future impairments, operating restrictions, and the impact of pandemic-related uncertainty on property values and planned capital projects.