Summit Hotel Properties Reports Second Quarter 2019 Results And Announces Newly-Formed Joint Venture With GIC

Summit Hotel Properties, Inc. (NYSE: INN) (the "Company"), has announced results for the quarter ended June 30, 2019.

"We continue to be pleased with the financial performance of our portfolio as stable top line growth and a focus on cost controls held operating margins generally unchanged during the quarter.  Additionally, RevPAR growth for our well-located and diverse portfolio of high-quality hotels exceeded the STR Upscale average by 160 basis points in the second quarter and also surpassed RevPAR growth for the overall industry," said Dan Hansen, the Company's Chairman, President and Chief Executive Officer.  "We are also thrilled to announce our partnership with GIC, a well-respected and highly regarded investor that shares our disciplined, long-term approach to creating value.  The pending acquisition of the Hampton Inn & Suites Silverthorne will serve as our first investment in the joint venture and we look forward to growing the scale of the partnership," commented Mr. Hansen.

Second Quarter 2019 Highlights

• Net Income:  Net income attributable to common stockholders increased 33.6 percent to $45.2 million, or $0.43per diluted share, compared with $33.9 million, or $0.32 per diluted share, in the same period of 2018.
• Pro Forma RevPAR:  Pro forma revenue per available room ("RevPAR") increased 1.2 percent to $133.51 from the same period in 2018.  Pro forma average daily rate ("ADR") increased 1.2 percent to $163.15 compared to the same period in 2018 and pro forma occupancy increased 0.1 percent to 81.8 percent.
• Same-Store RevPAR:  Same-store RevPAR increased 1.1 percent to $131.91 from the same period in 2018.  Same-store ADR increased 1.3 percent to $161.64 compared to the same period in 2018 and occupancy decreased 0.2 percent to 81.6 percent.
• Pro Forma Hotel EBITDA:  Pro forma hotel EBITDA was $55.2 million, an increase of 2.7 percent from the same period in 2018.  Pro forma hotel EBITDA margin contracted by 3 basis points to 39.0 percent from 39.1 percent in the same period of 2018. 
• Adjusted EBITDAre:  Adjusted EBITDAre decreased 5.0 percent to $52.4 million from $55.2 million in the same period of 2018.
• Adjusted FFO:  AFFO decreased 6.7 percent to $38.6 million, or $0.37 per diluted share, from $41.4 million, or $0.40per diluted share, in the same period of 2018.
• Dispositions:  The Company sold six hotels, containing 815 guestrooms, for an aggregate gross sales price of $135.0 million.  The sale price, plus estimated near-term capital improvements, represented a 12.8x EBITDA multiple and 6.9 percent capitalization rate for the trailing twelve months ended March 31, 2019 and resulted in a net gain of $36.6 million.

The Company's results for the three and six months ended June 30, 2019 and 2018 are as follows:

Year-To-Date 2019 Highlights

• Net Income:  Net income attributable to common stockholders increased 56.7 percent to $54.4 million, or $0.52per diluted share, compared with $34.7 million, or $0.33 per diluted share, in the same period of 2018.
• Pro Forma RevPAR:  Pro forma RevPAR increased 2.3 percent to $129.36 from the same period in 2018.  Pro forma ADR grew to $163.34, an increase of 1.9 percent from the same period in 2018 and pro forma occupancy increased 0.4 percent to 79.2 percent
• Same-Store RevPAR:  Same-store RevPAR increased 2.1 percent to $128.21 from the same period in 2018.  Same-store ADR increased 2.0 percent to $162.45 compared to the same period in 2018 and same-store occupancy increased 0.1 percent to 78.9 percent.
• Pro Forma Hotel EBITDA:  Pro forma hotel EBITDA was $103.4 million, an increase of 4.8 percent from the same period in 2018.  Pro forma hotel EBITDA margin expanded by 27 basis points to 37.9 percent from 37.6 percent in the same period of 2018.
• Adjusted EBITDAre:  Adjusted EBITDAre decreased 2.7 percent to $99.1 million from $101.9 million in the same period of 2018.
• Adjusted FFO:  AFFO decreased 3.6 percent to $70.9 million, or $0.68 per diluted share, from $73.6 million, or $0.71per diluted share, in the same period of 2018.
• Dispositions:  The Company sold eight hotels containing 945 guestrooms for an aggregate gross sales price of $146.6 million, or $155,100 per key.  The eight properties were sold at an average trailing capitalization rate of 7.0 percent and resulted in the realization of an aggregate net gain on sale of $40.8 million.

GIC Joint Venture (the "Joint Venture")

The Company has entered into the Joint Venture with GIC, Singapore's sovereign wealth fund, to acquire assets that align with the Company's current investment strategy and criteria.  The Company will serve as general partner and asset manager of the Joint Venture and intends to invest 51% of the equity capitalization of the limited partnership, with GIC investing the remaining 49%.  The Joint Venture intends to finance assets with an anticipated 50% overall leverage target.  The Company will earn fees for providing services to the Joint Venture and will have the potential to earn incentive fees based on the Joint Venture achieving certain return thresholds.  The pending acquisition of the Hampton Inn & Suites in Silverthorne, CO is expected to be acquired by the Joint Venture.  Financial results of the Joint Venture will be consolidated into the Company's consolidated financial statements.

Pending Acquisition

An affiliate of the Joint Venture is currently under contract to acquire the 88-guestroom Hampton Inn & Suites located in Silverthorne, Colorado for a purchase price of $25.5 million.  Ideally situated near popular ski destinations including Keystone, Breckenridge, Copper Mountain, and Arapahoe Basin, the hotel benefits from strong, year-round leisure demand and a local corporate base.  Opened in December 2015, the hotel will require minimal initial capital investment, had trailing twelve-month RevPAR of $153, and hotel EBITDA margin of 45.1 percent for the period ended June 30, 2019, which are premiums to the Company's pro forma portfolio average.  The Company estimates a capitalization rate of 8.3 percent based on management's current estimate of the hotel's forward twelve-month net operating income and expects the hotel to generate $0.8 million of EBITDAre from the scheduled acquisition date through the remainder of 2019. 

An affiliate of the Joint Venture is also under contract to acquire two adjacent, contiguous land parcels to the Hampton Inn & Suites Silverthorne, totaling 1.3 acres, for an aggregate purchase price of $2.4 million, which offers an attractive opportunity for a potential future development.

The Joint Venture expects to close the transactions concurrently during the third quarter.  The transactions remain subject to customary closing conditions, and no assurances can be made that the transactions will close on the intended timeline, or at all.

Capital Improvements

The Company invested $15.3 million and $32.6 million in capital improvements during the three and six months ended June 30, 2019 and anticipates investing a total of $50.0 million to $60.0 million in capital improvements across its portfolio during 2019.

Capital Markets & Balance Sheet

At June 30, 2019, the Company had the following:

• Total outstanding debt of $834.4 million with a weighted average interest rate of 4.21 percent.
• After giving effect to interest rate derivative agreements, $550.8 million, or 66 percent, of the Company's debt had fixed interest rates, and $283.6 million, or 34 percent had variable interest rates.
• Undrawn availability on its senior unsecured revolving credit facility of $375.0 million.
• Total net debt, which the Company defines as total outstanding debt less cash and cash equivalents, to trailing twelve-month pro forma adjusted EBITDAre of 4.2x.

At July 24, 2019, the Company had the following:

• Total outstanding debt of $834.2 million with a weighted average interest rate of 4.16 percent.
• After giving effect to interest rate derivative agreements, $550.6 million, or 66 percent, of our debt had fixed interest rates, and $283.6 million, or 34 percent had variable interest rates.
• Undrawn availability on its senior unsecured revolving credit facility of $375.0 million.
• Total net debt to trailing twelve-month pro forma adjusted EBITDAre of 4.2x.

Dividends

On July 29, 2019, the Company declared a quarterly cash dividend of $0.18 per share on its common stock and per common unit of limited partnership interest in Summit Hotel OP, LP.  The annualized dividend of $0.72 per share and per unit represents an annual dividend yield of 6.2 percent based on the July 30, 2019 closing stock price.

In addition, the Company declared a quarterly cash dividend of:

• $0.403125 per share on its 6.45% Series D Cumulative Redeemable Preferred Stock.
• $0.390625 per share on its 6.25% Series E Cumulative Redeemable Preferred Stock.

The common and preferred dividends are payable on August 30, 2019 to holders of record as of August 16, 2019.

2019 Outlook

The Company is providing its updated outlook for the full year 2019 which includes 69 hotels owned as of July 31, 2019and the pending acquisition of the Hampton Inn & Suites Silverthorne in partnership with GIC, which is expected to close during the third quarter.  There are no future acquisitions, dispositions, or additional capital markets activities assumed in the Company's outlook for full year 2019 beyond those previously mentioned.

Second Quarter 2019 Earnings Conference Call

The Company will conduct its quarterly conference call on Thursday, August 1, 2019, at 9:00 AM ET.  To participate in the conference call, please dial 877-930-8101.  The conference identification code for the call is 3438916.  Additionally, a live webcast of the quarterly conference call will be available through the Company's website, www.shpreit.com.  A replay of the quarterly conference call webcast will be available until 12:00 PM ET Thursday, August 8, 2019, by dialing 855-859-2056, conference identification code 3438916.  A replay will also be available in the Investor Relations section of the Company's website until October 31, 2019.

About Summit Hotel Properties

Summit Hotel Properties, Inc. is a publicly-traded real estate investment trust focused on owning premium-branded hotels with efficient operating models primarily in the Upscale segment of the lodging industry.  As of July 31, 2019, the Company's portfolio consisted of 69 hotels with a total of 10,715 guestrooms located in 24 states.