Xenia Hotels & Resorts, Inc. — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual report, not a filing limited to the fourth quarter. Xenia is a hotel REIT focused on luxury and upper-upscale properties in U.S. lodging markets and leisure destinations. At year-end it owned 35 hotels with 10,011 rooms; 34 hotels were operating, with Hyatt Regency Portland temporarily closed.
Financial and operating performance
| Metric | 2020 | 2019 |
|---|---|---|
| Total revenue | $369.8 million | $1,149.1 million |
| Operating income (loss) | ($241.7) million | $111.5 million |
| Net income (loss) | ($166.9) million | $57.2 million |
| Net income (loss) per share | ($1.44) | $0.49 |
| Hotel operating income | $18.2 million | $376.2 million |
| Portfolio occupancy | 27.1% | 76.0% |
| ADR | $198.88 | $221.59 |
| RevPAR | $53.88 | $168.43 |
| Net cash from operating activities | ($77.7) million | $246.6 million |
| Adjusted EBITDAre | ($51.7) million | $302.1 million |
| Adjusted FFO | ($94.0) million | $250.6 million |
Revenue fell 67.8% year over year; RevPAR declined 68.0%. Hotel operating income was approximately 4.9% of revenue, compared with approximately 32.7% in 2019. Food and beverage revenue fell 72.3%, rooms revenue 68.2%, and other revenue 43.0%. The filing attributes the sharp downturn primarily to COVID-19 disruption, temporary hotel closures and reduced travel demand.
Cash and cash equivalents were $389.8 million, with $39.0 million of restricted cash and escrows, at year-end. Total debt principal was approximately $1.390 billion ($1.374 billion net of financing items), with a 4.78% weighted-average interest rate and 4.1-year weighted-average maturity. The revolving credit facility had $163.1 million drawn and approximately $360 million available. Cash used in investing activities was not reported; instead, investing activities provided $254.2 million, chiefly from hotel sales, while financing activities provided $57.4 million. Cash and restricted cash totaled $428.8 million at year-end.
Material changes and significant items
- COVID-19 led Xenia to suspend operations at 31 hotels during March–April 2020. Most reopened during the year, but the company reported cancellations and limited new bookings into 2021; the majority of 2020 group business was canceled and management did not expect it to be rebooked.
- Xenia sold four hotels in the fourth quarter for gross proceeds of approximately $390.6 million and net proceeds of $320.4 million; the buyer assumed approximately $60.3 million of debt on Residence Inn Boston Cambridge. The dispositions generated a net gain on sale of $93.6 million.
- The company issued $500 million of 6.375% senior notes due 2025, using proceeds and cash on hand to repay two $2022 term loans and a $51 million mortgage, as well as reduce revolving borrowings. It amended credit facilities, extended the revolver’s maturity to February 2024, and extended financial covenant relief through year-end 2021.
- Reported other income included $28.8 million of forfeited deposits from terminated hotel-sale transactions. Impairment and other losses were $29.0 million, including $20.1 million of goodwill impairments at two Savannah hotels and an $8.9 million impairment on Renaissance Austin before its sale.
- The company recorded a $15.9 million income tax benefit, primarily related to CARES Act net operating loss carrybacks, and expected approximately $17.4 million of federal tax refunds in 2021. It also received $5.9 million of employee retention credits.
- Capital spending was $69.2 million, after cancelling or deferring $54.8 million, or 46.7% of the original budget. Corporate G&A cash spending was reduced by about $6 million from budget, excluding restructuring costs; corporate headcount was cut 25%.
Liquidity, debt, outlook and risks
Management said liquidity preservation and safe hotel operations were its principal priorities. It expected near-term liquidity to be supported by cash, its unencumbered asset base, dispositions and capital-market transactions. Management expects hotel demand recovery to be gradual and inconsistent, particularly for business transient and group travel, and stated that recovery to historical revenue levels could take several years. The filing gives no specific numerical earnings, revenue, occupancy or distribution guidance.
Xenia suspended its quarterly common dividend after paying $0.275 per share for the first quarter of 2020. Its credit amendments restrict dividends and share repurchases during the covenant-waiver period, subject to specified exceptions. At year-end, two mortgage loans were out of covenant compliance, triggering cash sweeps but not defaults; management anticipated possible additional mortgage covenant violations and the need for further lender waivers or modifications. Failure to obtain relief could require debt paydowns. The filing concludes that the company can continue as a going concern, citing its loan amendments, forecasts and liquidity actions.
Key risks include prolonged or renewed pandemic disruption; fixed hotel costs and continued weak occupancy; restrictions and covenant compliance under debt agreements; refinancing and interest-rate exposure; dependence on third-party managers and hotel brands; concentrated exposure to Texas, California and Florida; and uncertainty in hotel valuations and impairment estimates. Approximately $240.5 million of debt was exposed to unhedged variable rates; management estimated a 1% rate change would affect annual interest expense and cash flows by approximately $2.4 million. Transition from LIBOR was also identified as a risk. KPMG issued unqualified opinions on the financial statements and internal control; hotel-property impairment assessment was identified as a critical audit matter.
Investor verification priorities
- Track occupancy, ADR, RevPAR and booking trends, especially the return of group and business-travel demand and the status of the Portland hotel.
- Verify covenant compliance, cash-sweep effects, remaining covenant-waiver terms, available revolver capacity and the ability to obtain any further mortgage waivers.
- Reconcile cash and restricted reserves, including the $12.1 million of replacement reserves used for working capital and subject to replenishment.
- Assess debt maturities, refinancing needs, interest-rate hedges and LIBOR-transition provisions; distinguish debt principal from the balance-sheet debt amount net of financing items.
- Monitor whether the anticipated $17.4 million tax refund and further employee retention credits were received, and whether any additional impairment charges arise.
- Confirm when dividends may resume and how debt restrictions, REIT distribution requirements and operating cash generation affect that decision.