Xenia Hotels & Resorts, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021; comparisons are with the same 2020 periods. Xenia is a lodging REIT focused on luxury and upper-upscale hotels and resorts. At quarter-end it owned 35 hotels with 10,011 rooms in 15 states. All properties had resumed operations by May 2021.
Key financial and operating metrics
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Total revenue | $172.8 million | $64.0 million | $412.6 million | $294.1 million |
| Operating loss | $1.5 million | $70.0 million | $59.4 million | $194.8 million |
| Net loss | $22.7 million | $53.6 million | $123.4 million | $192.2 million |
| Net loss per share | $0.20 | $0.46 | $1.06 | $1.66 |
| Adjusted EBITDAre | $35.4 million | $(21.1) million | $59.1 million | $(41.6) million |
| Adjusted FFO | $15.3 million | $(30.6) million | $3.6 million | $(66.2) million |
Revenue rose 170.2% in Q3 and 40.3% for the first nine months year over year. Portfolio RevPAR was $119.17 in Q3, up 200.1%, and $95.35 for nine months, up 70.3%. Q3 occupancy was 53.7% versus 23.4%; average daily rate was $221.91 versus $169.76. The filing cautions that non-GAAP measures such as Adjusted EBITDAre and Adjusted FFO are supplemental and are not substitutes for GAAP results or cash flow.
Cash flow and liquidity: Nine-month operating cash flow was $29.4 million, compared with cash used of $43.7 million in 2020. Investing cash outflow was $16.6 million, including $19.2 million of capital expenditures. Financing cash inflow was $110.5 million. At September 30, cash and cash equivalents were $517.5 million, restricted cash was $34.5 million, and the $523 million revolving facility had no balance outstanding and was fully available.
Debt: Gross debt was $1.516 billion, with a 5.18% weighted-average rate, compared with $1.390 billion and 4.78% at year-end 2020. In May, Xenia issued $500 million of 4.875% senior notes due 2029; proceeds repaid the revolver and a $150 million term loan, among other uses. Interest expense increased to $21.4 million in Q3 and $59.8 million for nine months.
Material changes and unusual items
- Results improved as hotel demand recovered, while the 2020 comparison was affected by pandemic-related closures and unusually low activity. The 2020 periods also included $26.8 million of Q3 and $28.8 million of nine-month income from forfeited deposits on terminated transactions, making year-over-year net-loss comparisons less representative of underlying operations.
- Q3 demand softened in August and September amid the Delta variant, seasonal leisure declines, and holiday timing. Management also reported delayed office reopenings and group cancellations for 2021 and Q1 2022.
- Q3 hotel operating expenses increased 82.3% year over year, reflecting returning business and staffing costs; total revenue increased 170.2%. Labor availability and supply-chain constraints remained concerns.
- Xenia recorded a total $12.6 million impairment related to the Marriott Charleston Town Center and agreed to sell it for $5.0 million, subject to customary conditions and third-party approvals. The hotel was classified as held for sale at quarter-end.
- Hurricane Ida caused damage at Loews New Orleans Hotel; Xenia recorded a $0.5 million impairment and $1.0 million in repair and cleanup costs. Insurance claims were being pursued, but no recovery receivable had been accrued at September 30.
Outlook, risks, and contingencies
The filing provides no numerical earnings or operating guidance. Management expected recovery to be gradual and uneven, with business-transient and group travel likely to lag leisure demand and pre-pandemic levels. Future performance remained subject to COVID-19 resurgences and restrictions, demand shifts, staffing and supply-chain issues, inflation, seasonality, and the pace of business and group travel recovery.
Debt covenants remain a key liquidity risk. At September 30, Xenia was out of compliance with covenants on two mortgage loans; lenders could impose cash sweeps, allowing them to control excess property cash. Three mortgage-loan defaults arising at June 30 were waived through amendments in July, and the company reported compliance with those loans at quarter-end. Corporate credit-facility covenant testing was waived through the quarter ending June 30, 2022, subject to restrictions and a $150 million minimum-liquidity covenant during the waiver period.
The quarterly dividend remained suspended to preserve liquidity, and debt terms restricted share repurchases. Xenia said future distributions would depend on operating and financial conditions, debt restrictions, and REIT requirements. Renovation contracts represented $5.2 million of remaining commitments. Management did not expect ordinary-course legal proceedings to have a material adverse effect.
Important facts for investors to verify
- Whether RevPAR, occupancy, and rate recovery continued after the Q3 softening, especially for business-transient and group demand.
- Compliance with mortgage and corporate credit covenants, any cash sweeps, and maintenance of the $150 million minimum-liquidity covenant.
- Progress and final proceeds from the proposed $5.0 million Charleston Town Center sale, and the timing and collectability of storm-related insurance claims.
- Cash burn, debt service, refinancing needs, and the company’s ability to sustain liquidity without a dividend or unrestricted access to capital markets.
- How much of reported improvement reflects operating recovery versus prior-year one-time items, asset sales, impairment changes, and non-GAAP adjustments.