Xenia Hotels & Resorts, Inc. — Q2 2021 Form 10-Q
Business context and reporting period
Reports the quarter and six months ended June 30, 2021. Xenia is a REIT focused on luxury and upper-upscale U.S. hotels and resorts. At quarter-end it owned 35 hotels with 10,011 rooms across 15 states; all properties were open. The results reflect a lodging recovery from pandemic-related closures and demand weakness in 2020.
Financial and operating results
| Metric | Three months ended June 30, 2021 | Six months ended June 30, 2021 |
|---|---|---|
| Revenue | $152.0 million | $239.8 million |
| Operating loss | $18.7 million | $57.9 million |
| Net loss | $42.7 million | $100.7 million |
| Net loss attributable to common stockholders | $42.0 million; $0.36 per share | $98.4 million; $0.86 per share |
| Adjusted EBITDAre attributable to common stock and unit holders | $27.4 million | $23.7 million |
| Adjusted FFO attributable to common stock and unit holders | $9.1 million | $(11.7) million |
Operating loss was 12.3% of revenue in Q2 and 24.1% for the first half, calculated from reported figures. Q2 RevPAR was $104.50, occupancy 48.8%, and average daily rate (ADR) $214.03. First-half RevPAR was $83.25.
At June 30, cash and cash equivalents were $500.3 million, restricted cash was $34.6 million, and total debt before financing-cost adjustments was $1.516 billion, at a weighted-average rate of 5.12%. The $523 million revolving facility had no borrowings outstanding. First-half operating cash flow was $4.8 million; capital expenditures were $11.9 million. Cash and restricted cash increased $106.1 million during the half.
Changes versus the prior comparable period
- Q2 revenue increased 925.1% from $14.8 million in 2020, reflecting reopening and recovering leisure demand; Q2 net loss narrowed from $101.5 million to $42.7 million.
- Q2 RevPAR rose from $6.80 to $104.50, occupancy from 3.7% to 48.8%, and ADR from $182.36 to $214.03. First-half revenue increased 4.2%, while first-half net loss narrowed from $138.6 million to $100.7 million.
- Q2 hotel operating expenses rose 146.7% year over year as more hotels operated and revenue recovered. First-half hotel operating expenses declined 14.4%, partly due to lower staffing and the sale of four hotels in late 2020.
- Interest expense increased to $19.7 million in Q2 and $38.4 million for the half. The company issued $500 million of 4.875% senior notes due 2029 in May, repaying its revolving-credit borrowings, a $150 million term loan, and a $56.8 million mortgage loan.
Outlook, risks, contingencies, and unusual items
- Management reported accelerating leisure demand and early improvement in business-transient and group demand, including increased group prospects and bookings for later 2021 and 2022. It expects lodging recovery—particularly business and group travel—to be gradual and potentially inconsistent. No quantified financial guidance is provided.
- COVID-19 resurgence and variants, vaccine effectiveness and acceptance, travel restrictions, labor availability, and the pace of business travel recovery remain significant uncertainties.
- At June 30, the company was in default on covenants for three mortgage loans; July 2021 amendments waived those defaults and adjusted covenant calculations for five quarters. Two other mortgage loans were out of covenant compliance, allowing lenders to impose cash sweeps. Corporate credit-facility covenants were waived through the reporting period for Q2 2022, subject to restrictions and a $150 million minimum-liquidity covenant during the waiver period.
- A planned sale of the 352-room Marriott Charleston Town Center resulted in a $12.3 million impairment; estimated fair value was $5.0 million. Other unusual items included $1.1 million of business-interruption insurance proceeds, $2.8 million of interest-rate-swap termination costs, and $1.4 million of debt-extinguishment loss.
- The quarterly dividend remained suspended, and debt terms restrict share repurchases until applicable covenant compliance and the waiver-period conditions are met. Remaining renovation-contract commitments were $3.1 million. Management said ordinary-course legal matters were not expected to have a material adverse effect.
Important facts for investors to verify
- Progress in hotel demand, especially business-transient and group bookings, and whether RevPAR gains translate into sustained operating cash flow and margins.
- Completion and proceeds of the planned Charleston hotel sale, compared with its $5.0 million estimated fair value.
- Compliance with mortgage and corporate credit covenants, the effect of the July waivers, cash-sweep exposure, and available liquidity against the $150 million minimum covenant.
- Debt refinancing and maturity exposure, including the $568.5 million scheduled principal amount in 2025 and the 5.12% weighted-average debt rate.
- Timing and conditions for any dividend resumption, alongside capital needs and restrictions under debt agreements.