Pebblebrook Hotel Trust(PEB) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements The unaudited consolidated financial statements for Q1 2023 reflect a reduced net loss and slight asset decrease, driven by increased revenues and strategic transactions Consolidated Balance Sheets As of March 31, 2023, total assets slightly decreased to $6.08 billion, while total liabilities marginally increased and total equity decreased to $3.00 billion Consolidated Balance Sheets | Account | March 31, 2023 (Unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $6,077,735 | $6,133,540 | | Investment in hotel properties, net | $5,703,446 | $5,874,876 | | Cash and cash equivalents | $138,515 | $41,040 | | Total Liabilities | $3,073,624 | $3,048,997 | | Debt | $2,388,017 | $2,387,293 | | Total Equity | $3,004,111 | $3,084,543 | Consolidated Statements of Operations and Comprehensive Income For Q1 2023, total revenues increased to $305.7 million, resulting in a net loss of $22.0 million, a significant improvement from $100.2 million in Q1 2022 due to property sales and insurance income Consolidated Statements of Operations and Comprehensive Income | Metric | Q1 2023 (in thousands) | Q1 2022 (in thousands) | | :--- | :--- | :--- | | Total Revenues | $305,719 | $258,068 | | Total Operating Expenses | $300,517 | $335,731 | | Operating Income (Loss) | $5,202 | $(77,663) | | Net Loss | $(22,045) | $(100,216) | | Net Loss Attributable to Common Shareholders | $(33,916) | $(110,874) | | Net Loss Per Share (Basic & Diluted) | $(0.27) | $(0.85) | - Q1 2023 results include a $6.6 million gain on sale of hotel properties and $8.1 million in business interruption insurance income, which were not present in Q1 2022[16] - Q1 2022 results were negatively impacted by a $61.0 million impairment charge[16] Consolidated Statements of Equity Total equity decreased to $3.00 billion by March 31, 2023, primarily due to the net loss, $42.7 million in common share repurchases, and $12.2 million in shareholder distributions - The company repurchased 3,003,513 common shares for $42.7 million during the three months ended March 31, 2023[22] - Distributions on common and preferred shares/units amounted to $1.2 million and $11.0 million, respectively, during Q1 2023[22] Consolidated Statements of Cash Flows Q1 2023 saw net cash from operations increase to $46.2 million, with investing activities providing $105.2 million from property sales, leading to a $94.3 million net increase in cash Cash Flow Activities (in thousands) | Cash Flow Activity (in thousands) | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $46,229 | $38,832 | | Net cash provided by (used in) investing activities | $105,176 | $(19,953) | | Net cash used in financing activities | $(57,125) | $(15,173) | | Net change in cash | $94,280 | $3,706 | - Investing activities in Q1 2023 were significantly boosted by $131.9 million in proceeds from the sale of hotel properties[27] - Financing activities in Q1 2023 included $42.7 million for repurchases of common shares, compared to just $1.1 million in the prior-year period[27] Notes to the Consolidated Financial Statements The notes detail the company's REIT structure with 49 hotels, Q1 2023 property dispositions totaling $135.3 million, Hurricane Ian's impact, the $2.4 billion debt structure, and share repurchase programs - As of March 31, 2023, the Company owned interests in 49 hotels with 12,451 guest rooms[31] - In Q1 2023, the company sold three properties (The Heathman Hotel, retail at The Westin Michigan Avenue Chicago, and Hotel Colonnade Coral Gables) for total proceeds of $135.3 million[40] - The company's LaPlaya resort in Florida was significantly impacted by Hurricane Ian and is expected to fully reopen by the end of 2023. The company has received $29.3 million in preliminary insurance advances through March 31, 2023[45][46] - In Q1 2023, the company repurchased 2.9 million common shares for $41.0 million. A new $150.0 million common share repurchase program and a $100.0 million preferred share repurchase program were authorized in February 2023[75][76][81] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q1 2023 operating performance driven by strong leisure travel, strategic property sales, and share repurchases, with Same-Property RevPAR increasing to $171.05 and $783.4 million in liquidity Overview and Key Indicators Q1 2023 performance was driven by strong leisure travel and improving corporate demand, with Same-Property Occupancy rising to 58.0% and RevPAR increasing by 18.5% year-over-year Same-Property Operating Metrics | Same-Property Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Occupancy | 58.0% | 48.5% | | ADR | $295.02 | $297.31 | | RevPAR | $171.05 | $144.33 | | Total RevPAR | $266.92 | $215.69 | - Key transactions in Q1 2023 included the sale of The Heathman Hotel ($45.0 million), retail at The Westin Michigan Avenue Chicago ($27.3 million), and Hotel Colonnade Coral Gables ($63.0 million)[123] - The company repurchased 2,923,978 common shares at an average price of $14.04 per share during the quarter[123] Non-GAAP Financial Measures The company's key non-GAAP measures, FFO and EBITDAre, showed strong Q1 2023 growth, with FFO available to common shareholders more than doubling to $17.5 million Non-GAAP Financial Measures (in thousands) | Metric (in thousands) | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net Loss | $(22,045) | $(100,216) | | FFO | $29,604 | $19,777 | | FFO available to common share and unit holders | $17,452 | $8,433 | | EBITDA | $63,754 | $(18,544) | | EBITDAre | $57,119 | $42,439 | Results of Operations Q1 2023 total revenues increased by $47.7 million due to travel recovery, while results benefited from a $6.6 million gain on property sales and $8.1 million in insurance income - Total revenues increased by $47.7 million, primarily due to increased leisure travel and recovery in business and group bookings[130] - Interest expense increased by $4.9 million due to higher interest rates on floating rate debt[133] - The company recognized $8.1 million in business interruption insurance income related to LaPlaya Beach Resort & Club[132] Liquidity and Capital Resources As of March 31, 2023, total liquidity was $783.4 million, with total debt at $2.4 billion, and planned 2023 capital investments are estimated at $145.0 million to $155.0 million - Total liquidity as of March 31, 2023, was $783.4 million, comprising cash, restricted cash, and available borrowing capacity on the senior unsecured revolving credit facility[137] Debt Component (in thousands) | Debt Component (in thousands) | March 31, 2023 | | :--- | :--- | | Term loans | $1,380,000 | | Convertible senior notes | $750,000 | | Senior unsecured notes | $50,000 | | Mortgage loans | $220,487 | | Total debt at face value | $2,400,487 | - The company plans to invest $145.0 million to $155.0 million in capital investments in 2023, including approximately $50.0 million in redevelopment and repositioning projects[155] Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate market risk, with 29.2% of its debt at variable rates, and uses interest rate swaps to mitigate potential impacts on annual interest expense - As of March 31, 2023, $701.5 million (29.2%) of the company's debt was subject to variable interest rates[166] - A 0.1% (10 basis point) increase or decrease in interest rates on variable rate debt would change annual interest expense by approximately $0.7 million[166] - The company utilizes interest rate swap agreements with an aggregate notional amount of $840.0 million to hedge variable interest rates on its unsecured term loans[165] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective as of March 31, 2023[167] - No material changes to internal control over financial reporting occurred during the most recent fiscal quarter[168] PART II. OTHER INFORMATION Legal Proceedings The company is not currently subject to any material litigation or threatened legal proceedings beyond routine business claims - The Company is not presently subject to any material litigation[171] Risk Factors No material changes have occurred in the company's risk factors since the last Annual Report on Form 10-K - No material changes have occurred in the risk factors since the last Annual Report on Form 10-K[172] Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2023, the company repurchased over 3.0 million common shares at an average price of $14.03, with $46.0 million remaining under the current program and a new $150.0 million program authorized Common Share Repurchases | Period (2023) | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | January | 977,100 | $14.40 | | February | 111,556 | $14.72 | | March | 1,957,462 | $13.81 | | Total Q1 | 3,046,118 | $14.03 | - As of March 31, 2023, $46.0 million remained available for repurchase under the $100.0 million share repurchase program[173] Defaults Upon Senior Securities No defaults upon senior securities were reported - None[174] Mine Safety Disclosures Mine safety disclosures are not applicable to the company's operations - Not applicable[175] Other Information No other material information was reported in this section - None[176] Exhibits This section lists exhibits filed with the Form 10-Q, including amended bylaws, executive compensation agreements, and required certifications - Exhibits filed include amended bylaws, executive compensation agreements, and required certifications under the Sarbanes-Oxley Act[178]