Xenia Hotels & Resorts, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Xenia is a REIT focused on luxury and upper-upscale U.S. hotels and resorts. At quarter-end it owned 34 hotels with 9,814 rooms.
Financial and operating highlights
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Total revenue | $210.3 million | $87.9 million |
| Operating income (loss) | $17.7 million | $(39.2) million |
| Net loss | $(5.5) million | $(58.0) million |
| Net loss per diluted share | $(0.05) | $(0.50) |
| Operating cash flow | $32.6 million | $(31.2) million |
| Capital expenditures | $7.5 million | $7.2 million |
| Adjusted EBITDAre | $49.9 million | $(3.6) million |
| Adjusted FFO | $29.1 million | $(20.8) million |
Operating margin was approximately 8.4%, versus negative 44.6% a year earlier; net margin was approximately negative 2.6%, versus negative 66.0%. These are calculations from reported GAAP figures. Portfolio occupancy was 56.6% versus 32.7%, ADR was $254.57 versus $188.68, and RevPAR was $143.99 versus $61.76.
At March 31, cash and cash equivalents were $179.1 million, with an additional $40.2 million of restricted cash and escrows. The company reported $1.449 billion of gross debt ($1.430 billion net of premiums, discounts and financing costs), at a 5.18% weighted-average rate. Its $450 million revolving facility had no borrowings and was available, subject to agreement restrictions. Total cash and restricted cash fell to $219.2 million from $554.2 million at year-end, largely reflecting the hotel acquisition and debt repayment.
Material changes and notable items
- Revenue rose 139.4% year over year, and net loss narrowed substantially, mainly reflecting the recovery in hotel demand from pandemic-affected 2021 levels. Leisure demand strengthened, with business-transient and group demand improving from mid-February.
- On March 29, Xenia acquired the 346-room W Nashville for $328.5 million, funded with cash on hand. In January, it sold Kimpton Hotel Monaco Chicago for $36.0 million; the sale closed without a gain or loss.
- In January, Xenia repaid the $65.0 million mortgage on The Ritz-Carlton, Pentagon City. Interest expense nevertheless increased 9.5% to $20.5 million, attributed to higher average rates and debt levels.
- Investing cash outflow was $301.1 million, principally for W Nashville, partly offset by $32.8 million of property-sale proceeds. Financing cash outflow was $66.5 million, mainly the mortgage repayment.
- Q1 included $1.3 million of additional Hurricane Ida repair and cleanup costs and a $1.0 million insurance recovery gain. The company also recorded $1.6 million of costs from terminating two interest-rate swaps and a $0.3 million debt-extinguishment loss.
Outlook, risks and contingencies
The filing provides no specific financial guidance. Management reported continued recovery but cautioned that the timing and extent of a return in business travel and large group meetings to pre-pandemic levels remained uncertain and could vary by market. It also highlighted inflation, labor shortages and wage pressure, supply-chain constraints, and continuing COVID-19 and variant risks.
Xenia was not in compliance with covenants on one mortgage loan; this was not an event of default, but the lender could impose a cash sweep. Corporate credit-facility covenant testing was suspended through delivery of the Q2 2022 financial statements, with certain covenants modified after testing resumes. Restrictions during the waiver period include a minimum-liquidity covenant and limits on transactions including acquisitions, capital spending and distributions. The company had suspended dividends and could not repurchase shares under its credit-facility terms. It had $6.9 million of outstanding hotel renovation commitments. Management did not expect ordinary-course legal proceedings to have a material adverse effect.
Important facts for investors to verify
- Progress toward covenant compliance, whether the mortgage lender imposes a cash sweep, and the terms and timing for resumption of corporate covenant testing.
- Liquidity after the W Nashville purchase, including unrestricted cash, revolving-facility availability and compliance with minimum-liquidity requirements.
- Hotel demand and margins as business-transient and group travel recover, including the effects of inflation, wages and supply-chain costs.
- Debt maturities, particularly the approximately $280.2 million due in 2024 and $503.5 million in 2025, and refinancing or rate exposure.
- Timing and amount of any further storm-related insurance recoveries, repair costs, and decisions on dividend resumption.