RLJ Lodging Trust — 2021 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2021. This is an annual filing; it does not provide a standalone fourth-quarter financial summary. RLJ is a lodging REIT focused on premium-branded, focused-service and compact full-service hotels. At year-end it owned 98 hotels with approximately 21,700 rooms.
Financial and operating performance
| Metric | 2021 | 2020 |
|---|---|---|
| Total revenue | $785.7 million | $473.1 million |
| Net loss | $311.1 million | $408.8 million |
| Net loss attributable to common shareholders | $330.3 million; $2.01 per share | $429.6 million; $2.61 per share |
| Cash flow from operations | $43.0 million provided | $168.7 million used |
| Adjusted EBITDA (non-GAAP) | $162.0 million | $41.1 million loss |
| Adjusted FFO attributable to common shareholders and unitholders (non-GAAP) | $31.4 million | $161.4 million loss |
Revenue increased 66% year over year, largely as travel demand recovered. Comparable-property occupancy was 57.6% versus 34.2% in 2020; ADR was $148.48 versus $144.20; and RevPAR was $85.52 versus $49.35. Comparable RevPAR remained below 2019’s $144.64, with 2019 occupancy of 78.7% and ADR of $183.71. The filing does not state a single company-wide operating margin.
At December 31, cash and cash equivalents were $665.3 million and restricted cash was $48.5 million, for $713.9 million combined. The company had $400 million available under its $600 million revolving credit facility at year-end; it repaid the $200 million revolver balance in February 2022. Debt principal was approximately $2.425 billion ($2.409 billion net on the balance sheet), with a 3.94% weighted-average interest rate. Debt maturities included $200 million in 2022, $418.7 million in 2023 and $381 million in 2024. Management reported that debt was fixed or effectively fixed after swaps.
RLJ paid common-share dividends of $0.01 per share each quarter in 2021, or $0.04 for the year. Preferred dividends were $1.95 per share annually.
Material changes and significant items
- Revenue rose $312.6 million from 2020, while the net loss narrowed by $97.7 million. Operating recovery reflected increased vaccine distribution, easing restrictions and pent-up leisure demand; management said results remained affected by weaker business travel and higher labor costs.
- Recorded $144.8 million of hotel impairment losses, including $138.9 million for the DoubleTree Metropolitan New York City and $5.9 million for two hotels subsequently sold.
- Sold seven hotels for approximately $208.5 million and acquired three hotels for stated purchase prices totaling approximately $198.3 million. Investing cash flow included $198.6 million of net sale proceeds and $174.7 million of net acquisition outlays.
- Issued $500 million of 3.75% notes due 2026 and $500 million of 4.00% notes due 2029. Proceeds funded debt repayment and redemption, including redemption of the 2025 notes.
- Amended credit agreements to suspend financial maintenance covenant testing through the first quarter of 2022 and temporarily modify covenant thresholds afterward. The agreements also imposed restrictions, including on certain distributions, capital spending, asset-sale proceeds and additional debt.
Outlook, risks and contingencies
- Management said COVID-19, changing travel demand and consumer confidence, reduced business travel, labor shortages and higher wages could continue to adversely affect results; it could not estimate the pandemic’s ultimate financial or operational impact. No quantified earnings or operating guidance is provided in the supplied filing text.
- Management stated that it might not meet amended financial covenant thresholds once testing resumed. Failure to comply with debt covenants or refinance maturities could constrain liquidity, trigger defaults or require asset sales.
- Other material risks include inflation and operating-cost increases, hotel-market concentration, competition, dependence on third-party managers and major hotel brands, required property renovations, ground-lease exposure, weather and climate events, and access to capital.
- Two mortgage loans were in cash-trap events for failing debt-service coverage thresholds at year-end; approximately $22.4 million was restricted by lenders, of which restrictions on approximately $10.8 million were removed in February 2022.
- The company reported no material litigation and no material internal-control weaknesses. The auditor identified the hotel-property impairment assessment as a critical audit matter, citing judgment involved in cash-flow assumptions and impairment identification.
Important facts for investors to verify
- Recovery in comparable RevPAR and whether it approaches 2019 levels, particularly as business travel returns and labor costs evolve.
- Debt maturities, covenant compliance after relief periods, the effect of restrictions, and availability of refinancing.
- Cash availability after distinguishing unrestricted cash from restricted reserves and lender cash traps.
- Assumptions and valuation support behind the $144.8 million impairment charge and the economics of hotel acquisitions and dispositions.
- Definition and reconciliations of non-GAAP Adjusted EBITDA and Adjusted FFO; these measures do not replace GAAP results and may not be comparable across companies.
- Whether cash flows and financing capacity can support hotel capital needs, preferred dividends and any future common distributions.