RLJ Lodging Trust — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing; it does not provide a clear standalone fourth-quarter results summary. RLJ is a lodging REIT that owned 97 hotels with approximately 21,400 rooms across 23 states and Washington, D.C.
Financial and operating performance
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Total revenue | $1,325.6 million | $1,193.7 million | +$131.9 million, 11.0% |
| Net income attributable to RLJ | $76.4 million | $41.9 million | +$34.5 million |
| Net income attributable to common shareholders | $51.3 million; $0.32 per diluted share | $16.8 million; $0.10 per diluted share | +$34.5 million |
| FFO attributable to common shareholders and unitholders | $231.4 million | $201.6 million | +14.8% |
| Adjusted FFO | $260.4 million | $221.1 million | +17.8% |
| Adjusted EBITDA | $364.5 million | $336.5 million | +8.3% |
| Cash from operating activities | $315.1 million | $256.5 million | +$58.6 million |
Comparable-hotel occupancy rose to 71.8% from 68.9%; ADR increased to $196.43 from $187.84; and RevPAR increased to $141.09 from $129.46. Room revenue was 82.6% of total revenue. Property operating expenses grew 12.1%, faster than revenue; property operating income before depreciation was approximately $490.9 million, or 37.0% of revenue, versus $449.3 million, or 37.6%, in 2022. These margins are calculated from reported revenue and property operating expenses.
Year-end cash and cash equivalents were $516.7 million, with an additional $38.7 million in restricted cash reserves. The $600 million revolving facility was undrawn. Debt was $2.231 billion principal amount, with a reported weighted-average interest rate of 4.12%; 88.5% was fixed or effectively fixed after swaps. Approximately $381 million of principal was scheduled to mature in 2024, excluding extension options. Common dividends totaled $0.36 per share for 2023, and preferred dividends totaled $1.95 per share.
Material changes and notable items
- Revenue growth reflected improved comparable-hotel RevPAR, recovery in business and group travel, and ramp-up at converted hotels. Food and beverage and ancillary revenue also increased.
- Operating costs rose, particularly wages and benefits, sales and marketing, management fees, insurance, property taxes, and ground rent. Interest expense increased to $98.8 million from $93.2 million, partly due to higher rates on unhedged variable-rate debt and increased mortgage interest.
- RLJ repurchased and retired approximately 7.5 million common shares for $76.0 million during 2023. The $250 million repurchase program was authorized through May 8, 2024.
- RLJ refinanced approximately $224.7 million of term loans and extended the revolver maturity to May 2027. It also entered into $525 million of new interest-rate swaps as $425 million of swaps expired.
- No hotel impairment losses were recorded in 2023 or 2022. PwC identified the hotel-property impairment assessment as a critical audit matter because of management judgment in assessing recoverability; the auditor issued an unqualified opinion on the financial statements and internal controls.
Outlook, risks, and contingencies
The filing provides no numerical 2024 earnings or operating guidance. Management’s strategy emphasizes asset management, selective acquisitions and dispositions, hotel conversions, capital improvements, and balance-sheet flexibility. In January 2024, RLJ acquired the fee-simple interest in Wyndham Boston Beacon Hill for approximately $125 million.
Key risks include economic weakness or reduced business travel, inflation and labor costs, interest rates and refinancing access, hotel competition and new supply, concentration in certain markets and the Marriott, Hilton, and Hyatt brand families, reliance on third-party managers, required renovations and capital spending, and natural disasters and insurance costs. RLJ also disclosed ground-lease exposure: the Wyndham San Diego Bayside ground lease expires in 2029, and non-renewal could result in loss of the property. A lender’s review of an extension notice for one mortgage loan was pending at year-end; the filing text does not provide a clear resolution. The company reported no material pending litigation and no cybersecurity incidents materially affecting, or reasonably likely to materially affect, it.
Important facts for investors to verify
- How the $381 million of debt scheduled for 2024 was addressed after year-end, including the mortgage extension status and refinancing terms.
- Whether RevPAR gains and operating cash flow can continue to outpace labor, insurance, property-tax, and financing-cost increases.
- Liquidity available after the Boston fee-simple acquisition, ongoing capital improvements, dividends, and share repurchases; restricted cash is not equivalent to unrestricted cash.
- Performance and valuation assumptions underlying hotel impairment testing, and the timing and cost of required renovations and brand-improvement plans.
- Whether the company sustains common and preferred distributions while meeting debt covenants and REIT distribution requirements.