Pebblebrook Hotel Trust — Q3 2022 Form 10-Q
Business context and period. This unaudited filing covers the quarter and nine months ended September 30, 2022. Pebblebrook owned 51 hotels with 12,756 rooms, primarily in major U.S. cities and resort markets. Results reflect a recovering hotel business, alongside two hotel acquisitions and four dispositions during the first nine months.
Financial and operating performance
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Total revenue | $416.7 million | $238.8 million | $1,072.3 million | $485.8 million |
| Operating income (loss) | $52.2 million | $(0.6) million | $26.5 million | $(70.5) million |
| Net income (loss) | $26.3 million | $(23.5) million | $(45.1) million | $(143.6) million |
| Net income (loss) attributable to common shareholders | $13.7 million; $0.10 per share | $(44.0) million; $(0.34) per share | $(80.5) million; $(0.62) per share | $(181.3) million; $(1.39) per share |
| EBITDAre (non-GAAP) | $119.4 million | $54.7 million | $286.3 million | $45.3 million |
Q3 revenue increased approximately 74% year over year; nine-month revenue increased approximately 121%. Management attributed the improvement mainly to leisure demand and a recovery in business and group bookings, as well as reopened hotels and acquired properties. Same-property Q3 occupancy rose to 72.7% from 54.9%, ADR to $320.53 from $290.71, RevPAR to $232.99 from $159.70, and Total RevPAR to $349.67 from $242.48.
For the first nine months, operating cash flow was $254.4 million, versus $44.3 million in 2021. Investing cash outflow was $66.6 million, including $68.3 million of hotel improvements, $247.2 million for acquisitions and $248.9 million of sale proceeds. Financing cash outflow was $69.9 million. Cash and cash equivalents were $190.8 million at quarter-end; including restricted cash, total cash was $210.1 million.
At September 30, debt was $2.419 billion carrying value, or $2.428 billion at face value. Total assets were $6.336 billion and total equity was $3.223 billion. The company reported $598.4 million available on its senior unsecured revolver and $20.0 million available under the PHL facility; management reported total cash, restricted cash and senior revolver availability of $808.5 million. The company was in compliance with debt covenants and had exited its covenant-waiver period at the end of Q2.
Material changes, outlook and risks
- Hotel portfolio activity: Acquired Inn on Fifth for $156.0 million and Newport Harbor Island Resort for $174.0 million. Sold four hotels for aggregate stated sale prices of $260.9 million.
- Debt refinancing after quarter-end: On October 13, 2022, the company refinanced its revolving facility and term loans through a $2.0 billion credit agreement: a $650 million revolver maturing in October 2026, plus three $460 million term loans maturing in October 2024, 2025 and 2027. The filing says there are no significant debt maturities due within one year following the refinancing.
- Impairments and hurricane: Nine-month impairment losses were $86.1 million, including $73.3 million related to two hotels and $12.9 million associated with Hurricane Ian damage at LaPlaya Beach Resort and Southernmost Beach Resort. LaPlaya remained closed at September 30, with staged reopening expected to begin in Q4 2022. Insurance coverage is available, but recoveries and the ultimate impact were still under evaluation.
- Capital spending: Management expected 2022 capital investments of $100–$110 million, excluding Hurricane Ian repair and remediation costs. Nine-month investment was $68.3 million.
- Demand, costs and risks: Management said leisure travel had led the recovery, with corporate and group demand also improving but still recovering. COVID-19 variants and changes in travel demand remain uncertainties. Inflation was increasing labor and other costs, while higher interest rates raised floating-rate debt costs. A 0.1 percentage-point rate change was estimated to change annual interest expense by approximately $0.5 million.
- Shareholder distributions: Common dividends were $0.01 per share per quarter during the first nine months. The company expected approximately $50 million of annual distributions on outstanding preferred shares and Series Z preferred units over the next 12 months.
No full-year earnings or revenue guidance is provided in the supplied filing text. The filing states that results are seasonal and that interim performance is not necessarily indicative of the full year.
Most important facts for investors to verify
- Whether hotel demand, occupancy and pricing continue to recover, particularly in corporate and group business, and how comparable-property performance develops.
- Whether LaPlaya reopens as expected and the timing and amount of insurance recoveries and remaining hurricane-related costs.
- The terms, borrowing costs, covenant compliance and execution of the October 2022 refinancing, including the impact of floating interest rates.
- Whether the $100–$110 million capital-investment expectation is met and whether additional property impairments or renovation costs arise.
- How reported GAAP losses and non-GAAP EBITDAre/FFO translate into sustainable cash generation after interest, capital spending, leases and preferred distributions.