Hotels

DiamondRock Hospitality Company Reports Second Quarter 2017 Results

DiamondRock Hospitality Company Reports Second Quarter 2017 Results

DiamondRock

DiamondRock Hospitality Company (NYSE: DRH), a lodging-focused real estate investment trust that owns a portfolio of 28 premium hotels in the United States, today announced results of operations for the quarter ended June 30, 2017.

Second Quarter 2017 Highlights

  • Net Income: Net income was $36.6 million and earnings per diluted share was $0.18.
  • Comparable RevPAR: RevPAR was $203.21, a 2.0% increase from the comparable period of 2016.
  • Comparable Hotel Adjusted EBITDA Margin: Hotel Adjusted EBITDA margin was 34.62%, a decrease of 96 basis points from the comparable period of 2016. Comparable hotel operating expenses increased approximately 2.7% from 2016, which was primarily due to property taxes. Excluding property taxes, the comparable hotel operating expense increase was 0.4% and Hotel Adjusted EBITDA margin increased 51 basis points.
  • Adjusted EBITDA: Adjusted EBITDA was $77.6 million, a decrease of $6.5 million from 2016.
  • Adjusted FFO: Adjusted FFO was $63.6 million and Adjusted FFO per diluted share was $0.32.
  • Term Loan: On April 26, 2017, the Company closed on a new five-year $200 million unsecured term loan.
  • Mortgage Loan Repayment: On April 26, 2017, the Company prepaid the $170.4 million mortgage loan secured by the Lexington Hotel New York with the proceeds from the new term loan.
  • Dividends: The Company declared a dividend of $0.125 per share during the second quarter, which was paid on July 12, 2017.

Mark W. Brugger, President and Chief Executive Officer of DiamondRock Hospitality Company stated, “We are pleased with our second quarter results and the ability to raise our full year guidance. Our second quarter results benefited from our asset management team’s strong execution in limiting total hotel expense growth, excluding property taxes, to less than 1%. As we look forward, with approximately $150 million of cash on hand, no borrowings on our $300 million credit facility and most of our hotels unencumbered by debt, DiamondRock is poised to be opportunistic.”

Operating Results

For the quarter ended June 30, 2017, the Company reported the following:

Second Quarter

2017

2016

Change

Comparable Operating Results (1)

ADR

$239.00

$233.36

2.4

%

Occupancy

85.0

%

85.4

%

-0.4 percentage points

RevPAR

$203.21

$199.22

2.0

%

Revenues

$243.3 million

$240.4 million

1.2

%

Hotel Adjusted EBITDA Margin

34.62

%

35.58

%

-96 basis points

Actual Operating Results (2)

Revenues

$243.3 million

$256.7 million

-5.2

%

Net income

$36.6 million

$44.2 million

-$7.6 million

Earnings per diluted share

$0.18

$0.22

-$0.04

Adjusted EBITDA

$77.6 million

$84.1 million

-$6.5 million

Adjusted FFO

$63.6 million

$63.1 million

$0.5 million

Adjusted FFO per diluted share

$0.32

$0.31

$0.01

(1) Comparable operating results include pre-acquisition operating results for Sedona L’Auberge and Sedona Orchards Inn from April 1, 2016 to June 30, 2016. The pre-acquisition operating results were obtained from the seller of the hotels during the acquisition due diligence process. We have made no adjustments to the amounts provided to us by the seller. The pre-acquisition operating results were not audited or reviewed by the Company’s independent auditors. Additionally, 2016 amounts exclude the operating results of the three hotels sold during 2016: Orlando Airport Marriott, Hilton Minneapolis and Hilton Garden Inn Chelsea.

(2) Actual operating results for 2016 include the operating results of the three hotels sold during 2016 for the Company’s respective ownership periods.

For the six months ended June 30, 2017, the Company reported the following:

Year to Date

2017

2016

Change

Comparable Operating Results (1)

ADR

$229.55

$225.97

1.6

%

Occupancy

79.6

%

79.2

%

0.4 percentage points

RevPAR

$182.66

$179.06

2.0

%

Revenues

$442.9 million

$437.8 million

1.2

%

Hotel Adjusted EBITDA Margin

31.09

%

31.59

%

-50 basis points

Actual Operating Results (2)

Revenues

$439.5 million

$469.7 million

-6.4

%

Net income

$45.5 million

$61.0 million

-$15.5 million

Earnings per diluted share

$0.23

$0.30

-$0.07

Adjusted EBITDA

$124.9 million

$134.5 million

-$9.6 million

Adjusted FFO

$100.2 million

$105.9 million

-$5.7 million

Adjusted FFO per diluted share

$0.50

$0.52

-$0.02

(1) Comparable operating results include pre-acquisition operating results for Sedona L’Auberge and Sedona Orchards Inn from January 1, 2017 to February 27, 2017 and January 1, 2016 to June 30, 2016. The pre-acquisition operating results were obtained from the seller of the hotels during the acquisition due diligence process. We have made no adjustments to the amounts provided to us by the seller. The pre-acquisition operating results were not audited or reviewed by the Company’s independent auditors. Additionally, 2016 amounts exclude the three hotels sold during 2016: Orlando Airport Marriott, Hilton Minneapolis and Hilton Garden Inn Chelsea.

(2) Actual operating results for 2016 include the operating results of the three hotels sold during 2016 for the Company’s respective ownership periods.

Financing Activity

On April 26, 2017, the Company entered into a new five-year $200 million unsecured term loan. The interest rate on the term loan is based on a pricing grid ranging from 145 to 220 basis points over LIBOR, based on the Company’s leverage ratio. The interest rate is currently 145 basis points over LIBOR. The proceeds were used to prepay the $170.4 millionmortgage loan secured by the Lexington Hotel New York and for general corporate purposes.

Capital Expenditures

The Company spent approximately $60.4 million on capital improvements during the six months ended June 30, 2017, primarily related to the third phase of the Chicago Marriott Downtown renovation and guest room renovations at the Gwen, Worthington Renaissance, Charleston Renaissance, and The Lodge at Sonoma. The Company expects to spend between $110 million and $120 million on capital improvements at its hotels in 2017. Significant projects include the following:

  • Chicago Marriott Downtown: The Company has completed the third phase of the multi-year renovation, which included the upgrade renovation of approximately 340 guest rooms. The Company expects to renovate the final 258 of 1,200 guest rooms during late 2017 with completion in early 2018.
  • The Gwen: The Company completed the renovation of the hotel’s 311 guest rooms in April 2017.
  • Worthington Renaissance: The Company completed the renovation of the hotel’s 504 guest rooms in January 2017.
  • Charleston Renaissance: The Company completed the renovation of the hotel’s 166 guest rooms in February 2017.
  • The Lodge at Sonoma: The Company completed the renovation of the hotel’s 182 guest rooms in April 2017.

Balance Sheet

As of June 30, 2017, the Company had $149.6 million of unrestricted cash on hand and approximately $943.7 million of total debt, which consisted of property-specific mortgage debt and $300.0 million of unsecured term loans. The Company has no outstanding borrowings on its $300 million senior unsecured credit facility and 20 of its 28 hotels are unencumbered by debt.

Dividends

The Company’s Board of Directors declared a quarterly dividend of $0.125 per share to stockholders of record as of June 30, 2017. The dividend was paid on July 12, 2017.

Guidance

The Company is providing updated annual guidance for 2017, but does not undertake to update it for any developments in its business. Achievement of the anticipated results is subject to the risks disclosed in the Company’s filings with the U.S. Securities and Exchange Commission. Comparable RevPAR assumes that all of the Company’s 28 hotels were owned since January 1, 2016.

The Company is raising its 2017 guidance and expects the full year 2017 results to be as follows:

Previous Guidance

Revised Guidance

Change at

Midpoint

Metric

Low End

High End

Low End

High End

Comparable RevPAR Growth

-1.0 percent

1.0 percent

1.0 percent

2.0 percent

+ 150 bps

Adjusted EBITDA

$238.5 million

$251.5 million

$245 million

$253 million

+ $4 million

Adjusted FFO

$193 million

$203 million

$196 million

$203 million

+ $1.5 million

Adjusted FFO per share (based

on 201.5 million shares)

$0.96 per share

$1.01 per share

$0.97 per share

$1.01 per share

+ $0.005 per

share

The full year guidance range above reflects expected income tax expense of $10 to $12 million, expected interest expense of $38 million to $39 million and expected corporate expenses of $25 million.

The Company expects approximately 25% to 26% of its full year 2017 Adjusted EBITDA and 24.5% to 25.5% of its full year 2017 Adjusted FFO to be earned during the third quarter of 2017.

Selected Quarterly Comparable Operating Information

The following table is presented to provide investors with selected quarterly comparable operating information for 2016. The operating information includes our 2017 acquisitions and excludes our 2016 dispositions for all periods presented.

Quarter 1, 2016

Quarter 2, 2016

Quarter 3, 2016

Quarter 4, 2016

Full Year 2016

ADR

$

217.33

$

233.36

$

224.91

$

232.89

$

227.35

Occupancy

73.1

%

85.4

%

84.0

%

76.1

%

79.6

%

RevPAR

$

158.88

$

199.22

$

188.88

$

177.20

$

181.06

Revenues (in thousands)

$

197,395

$

240,366

$

226,957

$

214,765

$

879,483

Hotel Adjusted EBITDA (in thousands)

$

52,775

$

85,525

$

71,997

$

67,070

$

277,367

% of full Year

19.0

%

30.8

%

26.0

%

24.2

%

100.0

%

Hotel Adjusted EBITDA Margin

26.74

%

35.58

%

31.72

%

31.23

%

31.54

%

Available Rooms

871,689

872,417

882,004

883,016

3,509,126

DiamondRock Hospitality Company is a self-advised real estate investment trust (REIT) that is an owner of a leading portfolio of geographically diversified hotels concentrated in top gateway markets and destination resort locations. The Company owns 28 premium quality hotels with over 9,600 rooms. The Company has strategically positioned its hotels to be operated both under leading global brand families such as Hilton and Marriott as well as unique boutique hotels in the lifestyle segment.

DIAMONDROCK HOSPITALITY COMPANY

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

June 30, 2017

December 31, 2016

ASSETS

(unaudited)

Property and equipment, net

$

2,739,193

$

2,646,676

Restricted cash

41,481

46,069

Due from hotel managers

99,150

77,928

Favorable lease assets, net

26,902

18,013

Prepaid and other assets (1)

40,640

37,682

Cash and cash equivalents

149,645

243,095

Total assets

$

3,097,011

$

3,069,463

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities:

Mortgage debt, net of unamortized debt issuance costs

$

645,798

$

821,167

Term loan, net of unamortized debt issuance costs

297,922

99,372

Senior unsecured credit facility

Total debt

943,720

920,539

Deferred income related to key money, net

19,025

20,067

Unfavorable contract liabilities, net

71,690

72,646

Deferred ground rent

83,576

80,509

Due to hotel managers

63,774

58,294

Dividends declared and unpaid

25,548

25,567

Accounts payable and accrued expenses (2)

54,936

55,054

Total other liabilities

318,549

312,137

Stockholders’ Equity:

Preferred stock, $0.01 par value; 10,000,000 shares authorized; no shares issued and

outstanding

Common stock, $0.01 par value; 400,000,000 shares authorized; 200,305,232 and

200,200,902 shares issued and outstanding at June 30, 2017 and December 31,

2016, respectively

2,003

2,002

Additional paid-in capital

2,058,380

2,055,365

Accumulated deficit

(225,641)

(220,580)

Total stockholders’ equity

1,834,742

1,836,787

Total liabilities and stockholders’ equity

$

3,097,011

$

3,069,463

(1)

Includes $23.1 million of deferred tax assets, $9.4 million and $6.0 million of prepaid expenses, and $8.1 million and $8.6 million of other assets as of June 30, 2017 and December 31, 2016, respectively.

(2)

Includes $20.5 million of deferred tax liabilities, $15.2 million and $12.1 million of accrued property taxes, $5.1 million and $10.8 million of accrued capital expenditures, and $14.1 million and $11.7 million of other accrued liabilities as of June 30, 2017 and December 31, 2016, respectively.

DIAMONDROCK HOSPITALITY COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2017

2016

2017

2016

Revenues:

Rooms

$

177,483

$

186,113

$

315,315

$

335,556

Food and beverage

52,762

57,407

97,540

107,781

Other

13,027

13,144

26,627

26,361

Total revenues

243,272

256,664

439,482

469,698

Operating Expenses:

Rooms

41,565

43,257

78,466

81,971

Food and beverage

33,064

35,265

62,530

68,615

Management fees

6,949

8,772

12,961

15,381

Other hotel expenses

78,608

79,524

150,267

158,453

Depreciation and amortization

25,585

25,005

49,948

50,126

Hotel acquisition costs

22

2,273

Corporate expenses

6,828

6,736

13,090

12,736

Total operating expenses, net

192,621

198,559

369,535

387,282

Operating profit

50,651

58,105

69,947

82,416

Interest and other income, net

(192)

(68)

(551)

(118)

Interest expense

9,585

11,074

19,098

22,738

Loss on early extinguishment of debt

274

274

Gain on sales of hotel properties

(8,121)

(8,121)

Total other expenses, net

9,667

2,885

18,821

14,499

Income before income taxes

40,984

55,220

51,126

67,917

Income tax expense

(4,389)

(11,045)

(5,644)

(6,964)

Net income

$

36,595

$

44,175

$

45,482

$

60,953

Earnings per share:

Basic earnings per share

$

0.18

$

0.22

$

0.23

$

0.30

Diluted earnings per share

$

0.18

$

0.22

$

0.23

$

0.30

Weighted-average number of common shares

outstanding:

Basic

200,810,323

201,273,767

200,732,639

201,133,321

Diluted

201,741,394

201,827,384

201,729,516

201,768,451

Use and Limitations of Non-GAAP Financial Measures

Our management and Board of Directors use EBITDA, Adjusted EBITDA, Hotel EBITDA, Hotel Adjusted EBITDA, FFO and Adjusted FFO to evaluate the performance of our hotels and to facilitate comparisons between us and other lodging REITs, hotel owners who are not REITs and other capital intensive companies. The use of these non-GAAP financial measures has certain limitations. These non-GAAP financial measures as presented by us, may not be comparable to non-GAAP financial measures as calculated by other real estate companies. These measures do not reflect certain expenses or expenditures that we incurred and will incur, such as depreciation, interest and capital expenditures. We compensate for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our reconciliations to the most comparable GAAP financial measures, and our consolidated statements of operations and cash flows, include interest expense, capital expenditures, and other excluded items, all of which should be considered when evaluating our performance, as well as the usefulness of our non-GAAP financial measures.

These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP. They should not be considered as alternatives to operating profit, cash flow from operations, or any other operating performance measure prescribed by GAAP. These non-GAAP financial measures reflect additional ways of viewing our operations that we believe, when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. We strongly encourage investors to review our financial information in its entirety and not to rely on a single financial measure.

EBITDA and FFO

EBITDA represents net income excluding: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sale of assets; and (3) depreciation and amortization. We believe EBITDA is useful to an investor in evaluating our operating performance because it helps investors evaluate and compare the results of our operations from period to period by removing the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortization) from our operating results. In addition, covenants included in our debt agreements use EBITDA as a measure of financial compliance. We also use EBITDA as one measure in determining the value of hotel acquisitions and dispositions.

The Company computes FFO in accordance with standards established by NAREIT, which defines FFO as net income determined in accordance with GAAP, excluding gains or losses from sales of properties and impairment losses, plus depreciation and amortization. The Company believes that the presentation of FFO provides useful information to investors regarding its operating performance because it is a measure of the Company’s operations without regard to specified non-cash items, such as real estate depreciation and amortization and gain or loss on sale of assets. The Company also uses FFO as one measure in assessing its operating results.

Hotel EBITDA

Hotel EBITDA represents net income excluding: (1) interest expense, (2) income taxes, (3) depreciation and amortization, (4) corporate general and administrative expenses (shown as corporate expenses on the consolidated statements of operations), and (5) hotel acquisition costs. We believe that Hotel EBITDA provides our investors a useful financial measure to evaluate our hotel operating performance, excluding the impact of our capital structure (primarily interest), our asset base (primarily depreciation and amortization), and our corporate-level expenses (corporate expenses and hotel acquisition costs). With respect to Hotel EBITDA, we believe that excluding the effect of corporate-level expenses provides a more complete understanding of the operating results over which individual hotels and third-party management companies have direct control. We believe property-level results provide investors with supplemental information on the ongoing operational performance of our hotels and effectiveness of the third-party management companies operating our business on a property-level basis.

Adjustments to EBITDA, FFO and Hotel EBITDA

We adjust EBITDA, FFO and Hotel EBITDA when evaluating our performance because we believe that the exclusion of certain additional items described below provides useful supplemental information to investors regarding our ongoing operating performance and that the presentation of Adjusted EBITDA, Adjusted FFO and Hotel Adjusted EBIDTA when combined with GAAP net income, EBITDA, FFO and Hotel EBITDA, is beneficial to an investor’s complete understanding of our consolidated and property-level operating performance. Hotel Adjusted EBITDA margins are calculated as Hotel Adjusted EBITDA divided by total hotel revenues.

We adjust EBITDA, FFO and Hotel EBITDA for the following items:

  • Non-Cash Ground Rent: We exclude the non-cash expense incurred from the straight line recognition of rent from our ground lease obligations and the non-cash amortization of our favorable lease assets. We exclude these non-cash items because they do not reflect the actual rent amounts due to the respective lessors in the current period and they are of lesser significance in evaluating our actual performance for that period.
  • Non-Cash Amortization of Favorable and Unfavorable Contracts: We exclude the non-cash amortization of favorable and unfavorable contracts recorded in conjunction with certain acquisitions because the non-cash amortization is based on historical cost accounting and is of lesser significance in evaluating our actual performance for that period.
  • Cumulative Effect of a Change in Accounting Principle: Infrequently, the Financial Accounting Standards Board (FASB) promulgates new accounting standards that require the consolidated statement of operations to reflect the cumulative effect of a change in accounting principle. We exclude the effect of these adjustments, which include the accounting impact from prior periods, because they do not reflect the Company’s actual underlying performance for the current period.
  • Gains or Losses from Early Extinguishment of Debt: We exclude the effect of gains or losses recorded on the early extinguishment of debt because these gains or losses result from transaction activity related to the Company’s capital structure that we believe are not indicative of the ongoing operating performance of the Company or our hotels.
  • Hotel Acquisition Costs: We exclude hotel acquisition costs expensed during the period because we believe these transaction costs are not reflective of the ongoing performance of the Company or our hotels.
  • Severance Costs: We exclude corporate severance costs incurred with the termination of corporate-level employees and severance costs incurred at our hotels related to lease terminations or structured severance programs because we believe these costs do not reflect the ongoing performance of the Company or our hotels.
  • Hotel Manager Transition Costs: We exclude the transition costs associated with a change in hotel manager because we believe these costs do not reflect the ongoing performance of the Company or our hotels.
  • Other Items: From time to time we incur costs or realize gains that we consider outside the ordinary course of business and that we do not believe reflect the ongoing performance of the Company or our hotels. Such items may include, but are not limited to the following: pre-opening costs incurred with newly developed hotels; lease preparation costs incurred to prepare vacant space for marketing; management or franchise contract termination fees; gains or losses from legal settlements; bargain purchase gains incurred upon acquisition of a hotel; and gains from insurance proceeds.

In addition, to derive Adjusted EBITDA we exclude gains or losses on dispositions and impairment losses because we believe that including them in EBITDA does not reflect the ongoing performance of our hotels. Additionally, the gains or losses on dispositions and impairment losses are based on historical cost accounting and represent either accelerated depreciation or excess depreciation in previous periods, and depreciation is excluded from EBITDA.

In addition, to derive Adjusted FFO we exclude any fair value adjustments to debt instruments. We exclude these non-cash amounts because they do not reflect the underlying performance of the Company.

Reconciliations of Non-GAAP Measures

EBITDA and Adjusted EBITDA

The following tables are reconciliations of our GAAP net income to EBITDA and Adjusted EBITDA (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

2017

2016

2017

2016

Net income

$

36,595

$

44,175

$

45,482

$

60,953

Interest expense

9,585

11,074

19,098

22,738

Income tax expense

4,389

11,045

5,644

6,964

Real estate related depreciation and amortization

25,585

25,005

49,948

50,126

EBITDA

76,154

91,299

120,172

140,781

Non-cash ground rent

1,614

1,328

3,164

2,662

Non-cash amortization of favorable and

unfavorable contract liabilities, net

(478)

(478)

(956)

(956)

Hotel acquisition costs

22

2,273

Loss on early extinguishment of debt

274

274

Gain on sale of hotel properties

(8,121)

(8,121)

Severance costs (1)

119

119

Adjusted EBITDA

$

77,586

$

84,147

$

124,927

$

134,485

(1) Classified as corporate expenses on the consolidated statements of operations.

Full Year 2017 Guidance

Low End

High End

Net income

$

87,053

$

95,053

Interest expense

39,000

38,000

Income tax expense

10,000

12,000

Real estate related depreciation and amortization

102,000

101,000

EBITDA

238,053

246,053

Non-cash ground rent

6,300

6,300

Non-cash amortization of favorable and unfavorable contracts, net

(1,900)

(1,900)

Acquisition costs

2,273

2,273

Loss on early extinguishment of debt

274

274

Adjusted EBITDA

$

245,000

$

253,000

Hotel EBITDA and Hotel Adjusted EBITDA

The following table is a reconciliation of our GAAP net income to Hotel EBITDA and Hotel Adjusted EBITDA (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

2017

2016

2017

2016

Net income

$

36,595

$

44,175

$

45,482

$

60,953

Interest expense

9,585

11,074

19,098

22,738

Income tax expense (benefit)

4,389

11,045

5,644

6,964

Real estate related depreciation and amortization

25,585

25,005

49,948

50,126

EBITDA

76,154

91,299

120,172

140,781

Corporate expenses

6,828

6,736

13,090

12,736

Interest and other income, net

(192)

(68)

(551)

(118)

Hotel acquisition costs

22

2,273

Loss on early extinguishment of debt

274

274

Gain on sale of hotel properties

(8,121)

(8,121)

Hotel EBITDA

83,086

89,846

135,258

145,278

Non-cash ground rent

1,614

1,328

3,164

2,662

Non-cash amortization of favorable and

unfavorable contract liabilities, net

(478)

(478)

(956)

(956)

Hotel Adjusted EBITDA

$

84,222

$

90,696

$

137,466

$

146,984

FFO and Adjusted FFO

The following tables are reconciliations of our GAAP net income to FFO and Adjusted FFO (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

2017

2016

2017

2016

Net income

$

36,595

$

44,175

$

45,482

$

60,953

Real estate related depreciation and amortization

25,585

25,005

49,948

50,126

Gain on sales of hotel properties, net of income tax

(7,010)

(7,010)

FFO

62,180

62,170

95,430

104,069

Non-cash ground rent

1,614

1,328

3,164

2,662

Non-cash amortization of favorable and unfavorable

contract liabilities, net

(478)

(478)

(956)

(956)

Hotel acquisition costs

22

2,273

Loss on early extinguishment of debt

274

274

Severance costs (1)

119

119

Fair value adjustments to debt instruments

4

18

Adjusted FFO

$

63,612

$

63,143

$

100,185

$

105,912

Adjusted FFO per diluted share

$

0.32

$

0.31

$

0.50

$

0.52

(1) Classified as corporate expenses on the consolidated statements of operations.

Full Year 2017 Guidance

Low End

High End

Net income

$

87,053

$

95,053

Real estate related depreciation and amortization

102,000

101,000

FFO

189,053

196,053

Non-cash ground rent

6,300

6,300

Non-cash amortization of favorable and unfavorable contract liabilities, net

(1,900)

(1,900)

Acquisition costs

2,273

2,273

Loss on early extinguishment of debt

274

274

Adjusted FFO

$

196,000

$

203,000

Adjusted FFO per diluted share

$

0.97

$

1.01

Reconciliation of Comparable Operating Results

The following presents the revenues, Hotel Adjusted EBITDA and Hotel Adjusted EBITDA Margin together with comparable prior year results, which includes the pre-acquisition results for our 2017 acquisitions and excludes the results for our 2016 dispositions (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

2017

2016

2017

2016

Revenues

$

243,272

$

256,664

$

439,482

$

469,698

Hotel revenues from prior ownership (1)

7,866

3,422

13,231

Hotel revenues from sold hotels (2)

(24,164)

(45,164)

Comparable Revenues

$

243,272

$

240,366

$

442,904

$

437,765

Hotel Adjusted EBITDA

$

84,222

$

90,696

$

137,466

$

146,984

Hotel Adjusted EBITDA from prior ownership (1)

2,163

229

2,970

Hotel Adjusted EBITDA from sold hotels (2)

(7,334)

(11,654)

Comparable Hotel Adjusted EBITDA

$

84,222

$

85,525

$

137,695

$

138,300

Hotel Adjusted EBITDA Margin

34.62

%

35.34

%

31.28

%

31.29

%

Comparable Hotel Adjusted EBITDA Margin

34.62

%

35.58

%

31.09

%

31.59

%

(1)

Amounts represent the pre-acquisition operating results of the L’Auberge de Sedona and Orchards Inn Sedona for the period from January 1, 2017 to February 27, 2017 and January 1, 2016 to June 30, 2016, respectively. The pre-acquisition operating results were obtained from the respective sellers of the hotels during the acquisition due diligence process. We have made no adjustments to the amounts provided to us by the seller. The pre-acquisition operating results were not audited or reviewed by the Company’s independent auditors.

(2)

Amounts represent the historical operating results of the Orlando Airport Marriott, Minneapolis Hilton and Hilton Garden Inn Chelsea for their

respective ownership periods.

Comparable Hotel Operating Expenses

The following table sets forth hotel operating expenses for the three and six months ended June 30, 2017 and 2016 for each of the hotels that we owned as of June 30, 2017. Our GAAP hotel operating expenses for the three and six months ended June 30, 2017 consisted of the line items set forth below (dollars in thousands) under the column titled “As Reported.” The amounts reported in this column include amounts that are not comparable period-over-period. In order to reflect the period in 2017 comparable to our ownership period in 2016, the amounts in the column titled “Adjustments for Acquisitions and Dispositions” represent the pre-acquisition operating results of the L’Auberge de Sedona and Orchards Inn Sedona for the period from January 1, 2017 to February 27, 2017 and January 1, 2016 to June 30, 2016 and excludes the operating results of the Orlando Airport Marriott, Minneapolis Hilton and Hilton Garden Inn Chelsea for the time periods presented. We provide this important supplemental information to our investors because this information provides a useful means for investors to measure our operating performance on a comparative basis. See the column titled “Comparable.”

These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP in this release. They should not be considered as alternatives to operating profit, cash flow from operations, or any other operating performance measure prescribed by GAAP. These non-GAAP financial measures reflect additional ways of viewing our operations at our hotels that we believe, when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. We strongly encourage investors to review our financial information in its entirety and not to rely on a single financial measure. In particular, we note the pre-acquisition operating results set forth in the column titled “Adjustments for Acquisitions” were obtained from the respective sellers of the hotels during the acquisition due diligence process. We have made no adjustments to the amounts provided to us by the respective sellers. The pre-acquisition operating results were not audited or reviewed by our independent auditors.

As Reported

Adjustments for

Acquisitions/Dispositions

Comparable

Three Months Ended June 30,

Three Months Ended June 30,

2017

2016

% Change

2017

2016

2017

2016

% Change

Rooms departmental expenses

$

41,565

$

43,257

(3.9)

%

$

$

(2,587)

$

41,565

$

40,670

2.2

%

Food and beverage departmental expenses

33,064

35,265

(6.2)

%

(2,052)

33,064

33,213

(0.4)

%

Other direct departmental

3,092

3,056

1.2

%

318

3,092

3,374

(8.4)

%

General and administrative

19,511

20,598

(5.3)

%

(1,360)

19,511

19,238

1.4

%

Utilities

6,079

6,483

(6.2)

%

(466)

6,079

6,017

1.0

%

Repairs and maintenance

8,875

9,175

(3.3)

%

(527)

8,875

8,648

2.6

%

Sales and marketing

15,628

16,931

(7.7)

%

(1,454)

15,628

15,477

1.0

%

Franchise fees

6,015

5,749

4.6

%

(344)

6,015

5,405

11.3

%

Base management fees

5,816

6,296

(7.6)

%

(453)

5,816

5,843

(0.5)

%

Incentive management fees

1,133

2,476

(54.2)

%

6

1,133

2,482

(54.4)

%

Property taxes

13,871

10,656

30.2

%

(485)

13,871

10,171

36.4

%

Ground rent

2,617

3,726

(29.8)

%

(1,411)

2,617

2,315

13.0

%

Insurance

1,644

2,058

(20.1)

%

(66)

1,644

1,992

(17.5)

%

Other fixed expenses

1,276

1,092

16.8

%

25

1,276

1,117

14.2

%

Total hotel operating expenses

$

160,186

$

166,818

(4.0)

%

$

$

(10,856)

$

160,186

$

155,962

2.7

%

As Reported

Adjustments for

Acquisitions/Dispositions

Comparable

Six Months Ended June 30,

Six Months Ended June 30,

2017

2016

% Change

2017

2016

2017

2016

% Change

Rooms departmental expenses

$

78,466

$

81,971

(4.3)

%

$

773

$

(5,066)

$

79,239

$

76,905

3.0

%

Food and beverage departmental expenses

62,530

68,615

(8.9)

%

919

(4,678)

63,449

63,937

(0.8)

%

Other direct departmental

6,087

6,156

(1.1)

%

257

584

6,344

6,740

(5.9)

%

General and administrative

37,506

40,294

(6.9)

%

416

(2,892)

37,922

37,402

1.4

%

Utilities

12,139

13,295

(8.7)

%

107

(974)

12,246

12,321

(0.6)

%

Repairs and maintenance

17,560

18,491

(5.0)

%

209

(1,148)

17,769

17,343

2.5

%

Sales and marketing

29,429

32,615

(9.8)

%

263

(2,994)

29,692

29,621

0.2

%

Franchise fees

11,046

11,037

0.1

%

(573)

11,046

10,464

5.6

%

Base management fees

10,360

11,612

(10.8)

%

84

(915)

10,444

10,697

(2.4)

%

Incentive management fees

2,601

3,769

(31.0)

%

2,601

3,769

(31.0)

%

Property taxes

26,101

22,910

13.9

%

82

(1,003)

26,183

21,907

19.5

%

Ground rent

5,130

7,525

(31.8)

%

(2,901)

5,130

4,624

10.9

%

Insurance

3,332

3,848

(13.4)

%

45

(165)

3,377

3,683

(8.3)

%

Other fixed expenses

1,937

2,282

(15.1)

%

41

(10)

1,978

2,272

(12.9)

%

Total hotel operating expenses

$

304,224

$

324,420

(6.2)

%

$

3,196

$

(22,735)

$

307,420

$

301,685

1.9

%

Market Capitalization as of June 30, 2017

(in thousands)

Enterprise Value

Common equity capitalization (at June 30, 2017 closing price of $10.95/share)

$

2,206,000

Consolidated debt (face amount)

950,981

Cash and cash equivalents

(149,645)

Total enterprise value

$

3,007,336

Share Reconciliation

Common shares outstanding

200,305

Unvested restricted stock held by management and employees

627

Share grants under deferred compensation plan

529

Combined shares outstanding

201,461

Debt Summary as of June 30, 2017

(dollars in thousands)

Property

Interest Rate

Term

Outstanding

Principal

Maturity

Marriott Salt Lake City Downtown

4.25%

Fixed

$

57,523

November 2020

Westin Washington D.C. City Center

3.99%

Fixed

65,847

January 2023

The Lodge at Sonoma, a Renaissance Resort & Spa

3.96%

Fixed

28,585

April 2023

Westin San Diego

3.94%

Fixed

65,571

April 2023

Courtyard Manhattan / Midtown East

4.40%

Fixed

84,761

August 2024

Renaissance Worthington

3.66%

Fixed

84,878

May 2025

JW Marriott Denver at Cherry Creek

4.33%

Fixed

64,051

July 2025

Westin Boston Waterfront Hotel

4.36%

Fixed

199,765

November 2025

Debt issuance costs, net

(5,183)

Total mortgage debt, net of unamortized debt issuance costs

$

645,798

Unsecured term loan

LIBOR + 1.45(1)

Variable

100,000

May 2021

Unsecured term loan

LIBOR + 1.45(2)

Variable

200,000

April 2022

Debt issuance costs, net

(2,078)

Unsecured term loans, net of unamortized debt issuance costs

$

297,922

Senior unsecured credit facility

LIBOR + 1.50

Variable

$

May 2020 (3)

Total debt, net of unamortized debt issuance costs

$

943,720

Weighted-average interest rate of fixed rate debt

4.22%

Total weighted-average interest rate

3.69%

(1)

The interest rate as of June 30, 2017 was 2.51%.

(2)

The interest rate as of June 30, 2017 was 2.50%.

(3)

May be extended for an additional year upon the payment of applicable fees and the satisfaction of certain customary conditions.

Operating Statistics – Second Quarter

ADR

Occupancy

RevPAR

Hotel Adjusted EBITDA Margin

2Q 2017

2Q 2016

B/(W)

2Q 2017

2Q 2016

B/(W)

2Q 2017

2Q 2016

B/(W)

2Q 2017

2Q 2016

B/(W)

Atlanta Alpharetta Marriott

$

164.29

$

171.07

(4.0)

%

82.5

%

77.6

%

4.9

%

$

135.61

$

132.78

2.1

%

34.02

%

35.89

%

-187 bps

Bethesda Marriott Suites

$

185.30

$

182.79

1.4

%

83.3

%

84.6

%

(1.3)

%

$

154.42

$

154.63

(0.1)

%

36.02

%

38.02

%

-200 bps

Boston Westin

$

282.66

$

264.70

6.8

%

88.0

%

87.1

%

0.9

%

$

248.75

$

230.60

7.9

%

38.68

%

38.18

%

50 bps

Hilton Boston Downtown

$

327.05

$

308.62

6.0

%

93.6

%

93.9

%

(0.3)

%

$

306.01

$

289.82

5.6

%

47.13

%

46.20

%

93 bps

Hilton Burlington

$

175.89

$

178.81

(1.6)

%

84.4

%

85.0

%

(0.6)

%

$

148.43

$

152.06

(2.4)

%

41.37

%

43.29

%

-192 bps

Renaissance Charleston

$

265.72

$

253.81

4.7

%

92.3

%

94.0

%

(1.7)

%

$

245.23

$

238.64

2.8

%

46.02

%

46.54

%

-52 bps

Chicago Marriott

$

242.44

$

243.58

(0.5)

%

82.2

%

83.3

%

(1.1)

%

$

199.26

$

202.88

(1.8)

%

33.53

%

38.67

%

-514 bps

Chicago Gwen

$

245.87

$

225.43

9.1

%

84.0

%

86.2

%

(2.2)

%

$

206.45

$

194.28

6.3

%

34.10

%

37.79

%

-369 bps

Courtyard Denver Downtown

$

214.81

$

211.62

1.5

%

83.4

%

84.6

%

(1.2)

%

$

179.06

$

178.98

%

51.25

%

52.39

%

-114 bps

Courtyard Fifth Avenue

$

277.10

$

270.48

2.4

%

91.0

%

92.3

%

(1.3)

%

$

252.12

$

249.74

1.0

%

25.26

%

25.45

%

-19 bps

Courtyard Midtown East

$

269.84

$

272.85

(1.1)

%

93.5

%

95.0

%

(1.5)

%

$

252.23

$

259.21

(2.7)

%

33.65

%

35.43

%

-178 bps

Fort Lauderdale Westin

$

186.42

$

190.41

(2.1)

%

84.6

%

93.6

%

(9.0)

%

$

157.79

$

178.22

(11.5)

%

36.65

%

38.47

%

-182 bps

Frenchman’s Reef

$

260.47

$

233.85

11.4

%

85.5

%

88.7

%

(3.2)

%

$

222.79

$

207.51

7.4

%

23.59

%

23.19

%

40 bps

JW Marriott Denver Cherry Creek

$

270.82

$

277.31

(2.3)

%

83.2

%

81.4

%

1.8

%

$

225.30

$

225.81

(0.2)

%

35.64

%

38.66

%

-302 bps

Inn at Key West

$

187.05

$

189.50

(1.3)

%

77.0

%

85.7

%

(8.7)

%

$

144.04

$

162.37

(11.3)

%

45.49

%

45.26

%

23 bps

Sheraton Suites Key West

$

242.52

$

239.78

1.1

%

92.6

%

90.8

%

1.8

%

$

224.46

$

217.77

3.1

%

44.98

%

43.13

%

185 bps

Lexington Hotel New York

$

254.99

$

249.39

2.2

%

95.1

%

95.2

%

(0.1)

%

$

242.42

$

237.36

2.1

%

22.94

%

23.53

%

-59 bps

Hotel Rex

$

202.26

$

228.36

(11.4)

%

82.6

%

87.7

%

(5.1)

%

$

167.10

$

200.28

(16.6)

%

29.38

%

36.89

%

-751 bps

Salt Lake City Marriott

$

160.23

$

152.89

4.8

%

80.9

%

74.0

%

6.9

%

$

129.66

$

113.09

14.7

%

38.03

%

35.33

%

270 bps

L’Auberge de Sedona

$

592.67

$

492.58

20.3

%

79.5

%

76.7

%

2.8

%

$

471.14

$

377.80

24.7

%

30.02

%

25.08

%

494 bps

Orchards Inn Sedona

$

245.99

$

216.52

13.6

%

86.3

%

83.5

%

2.8

%

$

212.39

$

180.69

17.5

%

39.21

%

34.16

%

505 bps

Shorebreak

$

224.60

$

221.47

1.4

%

82.6

%

82.7

%

(0.1)

%

$

185.61

$

183.09

1.4

%

23.48

%

33.80

%

-1032 bps

The Lodge at Sonoma

$

329.76

$

312.21

5.6

%

72.7

%

82.5

%

(9.8)

%

$

239.79

$

257.49

(6.9)

%

32.90

%

32.57

%

33 bps

Hilton Garden Inn Times Square Central

$

256.68

$

259.62

(1.1)

%

98.0

%

97.2

%

0.8

%

$

251.46

$

252.33

(0.3)

%

36.26

%

35.92

%

34 bps

Vail Marriott

$

168.86

$

160.01

5.5

%

54.9

%

53.9

%

1.0

%

$

92.75

$

86.21

7.6

%

(5.30)

%

1.24

%

-654 bps

Westin San Diego

$

197.51

$

187.94

5.1

%

85.4

%

84.5

%

0.9

%

$

168.62

$

158.73

6.2

%

38.47

%

35.51

%

296 bps

Westin Washington D.C. City Center

$

250.45

$

259.45

(3.5)

%

90.2

%

91.1

%

(0.9)

%

$

225.85

$

236.31

(4.4)

%

46.69

%

45.77

%

92 bps

Renaissance Worthington

$

183.50

$

184.87

(0.7)

%

78.7

%

75.4

%

3.3

%

$

144.48

$

139.31

3.7

%

39.91

%

39.67

%

24 bps

Comparable Total (1)

$

239.00

$

233.36

2.4

%

85.0

%

85.4

%

(0.4)

%

$

203.21

$

199.22

2.0

%

34.62

%

35.58

%

-96 bps

(1)

Amounts include the pre-acquisition operating results of the L’Auberge de Sedona and Orchards Inn Sedona for the period from April 1, 2016 to June 30, 2016 and exclude the three hotels sold in 2016.

Operating Statistics – Year to Date

ADR

Occupancy

RevPAR

Hotel Adjusted EBITDA Margin

YTD 2017

YTD 2016

B/(W)

YTD 2017

YTD 2016

B/(W)

YTD 2017

YTD 2016

B/(W)

YTD 2017

YTD 2016

B/(W)

Atlanta Alpharetta Marriott

$

171.24

$

177.54

(3.5)

%

76.4

%

73.3

%

3.1

%

$

130.82

$

130.08

0.6

%

33.69

%

35.76

%

-207 bps

Bethesda Marriott Suites

$

178.58

$

173.45

3.0

%

76.7

%

72.6

%

4.1

%

$

137.04

$

125.94

8.8

%

31.62

%

30.34

%

128 bps

Boston Westin

$

250.32

$

236.15

6.0

%

77.8

%

79.2

%

(1.4)

%

$

194.85

$

186.97

4.2

%

31.56

%

30.59

%

97 bps

Hilton Boston Downtown

$

273.08

$

262.60

4.0

%

83.2

%

85.3

%

(2.1)

%

$

227.24

$

224.09

1.4

%

37.03

%

37.82

%

-79 bps

Hilton Burlington

$

152.25

$

155.50

(2.1)

%

75.9

%

76.5

%

(0.6)

%

$

115.56

$

118.98

(2.9)

%

31.65

%

35.46

%

-381 bps

Renaissance Charleston

$

256.02

$

229.83

11.4

%

74.9

%

90.2

%

(15.3)

%

$

191.71

$

207.31

(7.5)

%

36.24

%

40.85

%

-461 bps

Chicago Marriott

$

213.45

$

217.00

(1.6)

%

65.9

%

61.8

%

4.1

%

$

140.71

$

134.20

4.9

%

21.31

%

21.69

%

-38 bps

Chicago Gwen

$

216.58

$

199.94

8.3

%

64.7

%

70.7

%

(6.0)

%

$

140.14

$

141.32

(0.8)

%

20.25

%

23.59

%

-334 bps

Courtyard Denver Downtown

$

202.48

$

199.18

1.7

%

77.4

%

80.2

%

(2.8)

%

$

156.81

$

159.68

(1.8)

%

46.82

%

47.51

%

-69 bps

Courtyard Fifth Avenue

$

239.82

$

240.81

(0.4)

%

87.1

%

85.3

%

1.8

%

$

208.99

$

205.39

1.8

%

12.20

%

13.74

%

-154 bps

Courtyard Midtown East

$

235.75

$

240.70

(2.1)

%

87.7

%

90.2

%

(2.5)

%

$

206.80

$

217.20

(4.8)

%

23.28

%

25.26

%

-198 bps

Fort Lauderdale Westin

$

213.57

$

222.00

(3.8)

%

90.3

%

95.6

%

(5.3)

%

$

192.82

$

212.23

(9.1)

%

41.60

%

43.64

%

-204 bps

Frenchman’s Reef

$

306.95

$

285.65

7.5

%

88.2

%

89.0

%

(0.8)

%

$

270.82

$

254.30

6.5

%

30.41

%

30.76

%

-35 bps

JW Marriott Denver Cherry Creek

$

257.69

$

267.08

(3.5)

%

78.8

%

79.2

%

(0.4)

%

$

203.12

$

211.54

(4.0)

%

32.26

%

35.08

%

-282 bps

Inn at Key West

$

213.30

$

227.04

(6.1)

%

78.8

%

91.1

%

(12.3)

%

$

168.15

$

206.82

(18.7)

%

51.26

%

50.00

%

126 bps

Sheraton Suites Key West

$

270.15

$

278.09

(2.9)

%

93.0

%

93.1

%

(0.1)

%

$

251.11

$

259.04

(3.1)

%

48.78

%

48.10

%

68 bps

Lexington Hotel New York

$

218.18

$

219.60

(0.6)

%

91.2

%

88.1

%

3.1

%

$

198.91

$

193.42

2.8

%

8.03

%

11.17

%

-314 bps

Hotel Rex

$

224.58

$

239.01

(6.0)

%

79.4

%

83.4

%

(4.0)

%

$

178.34

$

199.43

(10.6)

%

32.30

%

36.02

%

-372 bps

Salt Lake City Marriott

$

165.26

$

158.77

4.1

%

78.9

%

69.8

%

9.1

%

$

130.31

$

110.79

17.6

%

40.86

%

34.78

%

608 bps

L’Auberge de Sedona (1)

$

601.65

$

501.20

20.0

%

80.0

%

76.4

%

3.6

%

$

481.61

$

382.71

25.8

%

30.75

%

26.01

%

474 bps

Orchards Inn Sedona (1)

$

248.99

$

220.22

13.1

%

87.7

%

84.9

%

2.8

%

$

218.26

$

186.91

16.8

%

40.19

%

36.81

%

338 bps

Shorebreak

$

222.24

$

218.53

1.7

%

72.5

%

79.1

%

(6.6)

%

$

161.05

$

172.92

(6.9)

%

20.63

%

29.77

%

-914 bps

The Lodge at Sonoma

$

295.91

$

271.24

9.1

%

57.4

%

78.0

%

(20.6)

%

$

169.74

$

211.57

(19.8)

%

19.01

%

26.70

%

-769 bps

Hilton Garden Inn Times Square Central

$

216.35

$

221.61

(2.4)

%

96.6

%

95.6

%

1.0

%

$

209.01

$

211.80

(1.3)

%

25.29

%

26.95

%

-166 bps

Vail Marriott

$

326.95

$

317.45

3.0

%

73.2

%

71.6

%

1.6

%

$

239.43

$

227.15

5.4

%

39.33

%

41.35

%

-202 bps

Westin San Diego

$

197.50

$

187.57

5.3

%

85.0

%

84.1

%

0.9

%

$

167.87

$

157.72

6.4

%

40.05

%

37.62

%

243 bps

Westin Washington D.C. City Center

$

241.03

$

235.06

2.5

%

86.6

%

85.7

%

0.9

%

$

208.68

$

201.41

3.6

%

43.38

%

40.49

%

289 bps

Renaissance Worthington

$

184.07

$

183.79

0.2

%

78.1

%

71.2

%

6.9

%

$

143.73

$

130.88

9.8

%

39.93

%

37.10

%

283 bps

Total

$

229.16

$

225.89

1.4

%

79.6

%

79.4

%

0.2

%

$

182.48

$

179.27

1.8

%

31.28

%

31.29

%

-1 bps

Comparable Total (2)

$

229.55

$

225.97

1.6

%

79.6

%

79.2

%

0.4

%

$

182.66

$

179.06

2.0

%

31.09

%

31.59

%

-50 bps

(1)

Hotels were acquired on February 28, 2017. Amounts reflect the operating results these hotels for the period from February 28, 2017 to June 30, 2017 and February 28, 2016 to June 30, 2016, respectively.

(2)

Amounts include the pre-acquisition operating results of the L’Auberge de Sedona and Orchards Inn Sedona for the period from January 1, 2017 to February 27, 2017 and January 1, 2016 to March 31, 2016, respectively, and exclude the three hotels sold in 2016.

Hotel Adjusted EBITDA Reconciliation

Second Quarter 2017

Plus:

Plus:

Plus:

Equals:

Total Revenues

Net Income / (Loss)

Depreciation

Interest Expense

Adjustments (1)

Hotel Adjusted

EBITDA

Atlanta Alpharetta Marriott

$

5,291

$

1,415

$

385

$

$

$

1,800

Bethesda Marriott Suites

$

4,991

$

(60)

$

345

$

$

1,513

$

1,798

Boston Westin

$

28,627

$

6,686

$

2,192

$

2,246

$

(51)

$

11,073

Hilton Boston Downtown

$

11,868

$

4,356

$

1,237

$

$

$

5,593

Hilton Burlington

$

4,525

$

1,356

$

516

$

$

$

1,872

Renaissance Charleston

$

4,135

$

1,541

$

394

$

$

(32)

$

1,903

Chicago Marriott

$

31,455

$

7,142

$

3,735

$

68

$

(397)

$

10,548

Chicago Gwen

$

7,959

$

1,640

$

1,074

$

$

$

2,714

Courtyard Denver Downtown

$

3,081

$

1,281

$

298

$

$

$

1,579

Courtyard Fifth Avenue

$

4,411

$

615

$

447

$

$

52

$

1,114

Courtyard Midtown East

$

7,631

$

912

$

660

$

996

$

$

2,568

Fort Lauderdale Westin

$

11,457

$

2,902

$

1,297

$

$

$

4,199

Frenchman’s Reef

$

17,178

$

2,420

$

1,633

$

$

$

4,053

JW Marriott Denver Cherry Creek

$

6,426

$

1,073

$

507

$

710

$

$

2,290

Inn at Key West

$

1,796

$

623

$

194

$

$

$

817

Sheraton Suites Key West

$

4,729

$

1,835

$

292

$

$

$

2,127

Lexington Hotel New York

$

16,702

$

(108)

$

3,472

$

460

$

8

$

3,832

Hotel Rex

$

1,593

$

328

$

140

$

$

$

468

Salt Lake City Marriott

$

8,056

$

1,891

$

531

$

642

$

$

3,064

L’Auberge de Sedona

$

6,988

$

1,591

$

507

$

$

$

2,098

Orchards Inn Sedona

$

2,479

$

682

$

234

$

$

56

$

972

Shorebreak

$

3,697

$

437

$

446

$

$

(15)

$

868

The Lodge at Sonoma

$

6,343

$

1,327

$

467

$

293

$

$

2,087

Hilton Garden Inn Times Square Central

$

6,545

$

1,582

$

791

$

$

$

2,373

Vail Marriott

$

4,947

$

(758)

$

496

$

$

$

(262)

Westin San Diego

$

9,096

$

1,749

$

1,088

$

662

$

$

3,499

Westin Washington D.C. City Center

$

10,401

$

2,846

$

1,306

$

704

$

$

4,856

Renaissance Worthington

$

10,865

$

2,626

$

901

$

807

$

2

$

4,336

Total

$

243,272

$

49,930

$

25,585

$

7,588

$

1,136

$

84,222

(1)

Includes non-cash expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations and the non-cash amortization favorable and unfavorable contract liabilities.

Hotel Adjusted EBITDA Reconciliation

Second Quarter 2016

Plus:

Plus:

Plus:

Equals:

Total Revenues

Net Income / (Loss)

Depreciation

Interest Expense

Adjustments (1)

Hotel Adjusted

EBITDA

Atlanta Alpharetta Marriott

$

5,274

$

1,533

$

360

$

$

$

1,893

Bethesda Marriott Suites

$

5,031

$

24

$

356

$

$

1,533

$

1,913

Boston Westin

$

29,014

$

6,655

$

2,199

$

2,283

$

(60)

$

11,077

Hilton Boston Downtown

$

11,314

$

4,032

$

1,195

$

$

$

5,227

Hilton Burlington

$

4,756

$

1,583

$

476

$

$

$

2,059

Renaissance Charleston

$

3,971

$

1,631

$

249

$

$

(32)

$

1,848

Hilton Garden Inn Chelsea

$

3,747

$

1,092

$

240

$

$

$

1,332

Chicago Marriott

$

31,358

$

9,018

$

3,476

$

28

$

(397)

$

12,125

Chicago Gwen

$

7,045

$

1,961

$

701

$

$

$

2,662

Courtyard Denver Downtown

$

3,050

$

1,312

$

286

$

$

$

1,598

Courtyard Fifth Avenue

$

4,374

$

222

$

448

$

391

$

52

$

1,113

Courtyard Midtown East

$

7,872

$

1,112

$

669

$

1,008

$

$

2,789

Fort Lauderdale Westin

$

12,255

$

3,546

$

1,169

$

$

$

4,715

Frenchman’s Reef

$

16,963

$

2,330

$

1,604

$

$

$

3,934

JW Marriott Denver Cherry Creek

$

6,523

$

1,288

$

515

$

719

$

$

2,522

Inn at Key West

$

2,026

$

733

$

184

$

$

$

917

Sheraton Suites Key West

$

4,653

$

1,493

$

514

$

$

$

2,007

Lexington Hotel New York

$

16,372

$

(892)

$

3,405

$

1,331

$

8

$

3,852

Minneapolis Hilton

$

15,370

$

2,283

$

1,455

$

1,246

$

(240)

$

4,744

Orlando Airport Marriott

$

5,047

$

1,258

$

$

$

$

1,258

Hotel Rex

$

1,930

$

568

$

144

$

$

$

712

Salt Lake City Marriott

$

7,190

$

1,364

$

517

$

659

$

$

2,540

Shorebreak

$

3,612

$

864

$

372

$

$

(15)

$

1,221

The Lodge at Sonoma

$

6,863

$

1,570

$

366

$

299

$

$

2,235

Hilton Garden Inn Times Square Central

$

6,582

$

1,587

$

777

$

$

$

2,364

Vail Marriott

$

4,847

$

(416)

$

476

$

$

$

60

Westin San Diego

$

8,557

$

1,329

$

1,034

$

676

$

$

3,039

Westin Washington D.C. City Center

$

10,618

$

2,903

$

1,233

$

724

$

$

4,860

Renaissance Worthington

$

10,450

$

2,750

$

585

$

808

$

2

$

4,145

Total

$

256,664

$

54,733

$

25,005

$

10,172

$

851

$

90,696

Add: Prior Ownership Results(2)

$

7,866

$

1,197

$

934

$

$

32

$

2,163

Less: Sold Hotels (3)

$

(24,164)

$

(4,633)

$

(1,695)

$

(1,246)

$

240

$

(7,334)

Comparable Total

$

240,366

$

51,297

$

24,244

$

8,926

$

1,123

$

85,525

(1)

Includes non-cash expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations, the non-cash amortization favorable and unfavorable contract liabilities and hotel manger transition costs.

(2)

Amounts represent the pre-acquisition operating results of the L’Auberge de Sedona and Orchards Inn Sedona for the period from April 1, 2016 to June 30, 2016.

(3)

Amounts represent the operating results of the three hotels sold in 2016: Orlando Airport Marriott, Minneapolis Hilton and Hilton Garden Inn Chelsea.

Hotel Adjusted EBITDA Reconciliation

Year to Date 2017

Plus:

Plus:

Plus:

Equals:

Total Revenues

Net Income / (Loss)

Depreciation

Interest Expense

Adjustments (1)

Hotel Adjusted

EBITDA

Atlanta Alpharetta Marriott

$

10,306

$

2,702

$

770

$

$

$

3,472

Bethesda Marriott Suites

$

8,922

$

(909)

$

693

$

$

3,037

$

2,821

Boston Westin

$

46,928

$

6,079

$

4,373

$

4,477

$

(120)

$

14,809

Hilton Boston Downtown

$

18,006

$

4,194

$

2,473

$

$

$

6,667

Hilton Burlington

$

7,049

$

1,199

$

1,032

$

$

$

2,231

Renaissance Charleston

$

6,479

$

1,686

$

725

$

$

(63)

$

2,348

Chicago Marriott

$

47,176

$

3,529

$

7,214

$

103

$

(795)

$

10,051

Chicago Gwen

$

10,501

$

197

$

1,929

$

$

$

2,126

Courtyard Denver Downtown

$

5,395

$

1,945

$

581

$

$

$

2,526

Courtyard Fifth Avenue

$

7,306

$

(108)

$

896

$

$

103

$

891

Courtyard Midtown East

$

12,522

$

(391)

$

1,321

$

1,985

$

$

2,915

Fort Lauderdale Westin

$

26,185

$

8,326

$

2,566

$

$

$

10,892

Frenchman’s Reef

$

39,034

$

8,580

$

3,290

$

$

$

11,870

JW Marriott Denver Cherry Creek

$

11,577

$

1,304

$

1,015

$

1,416

$

$

3,735

Inn at Key West

$

4,009

$

1,667

$

388

$

$

$

2,055

Sheraton Suites Key West

$

10,225

$

4,409

$

579

$

$

$

4,988

Lexington Hotel New York

$

27,500

$

(6,678)

$

6,942

$

1,927

$

16

$

2,207

Hotel Rex

$

3,468

$

836

$

284

$

$

$

1,120

Salt Lake City Marriott

$

17,287

$

4,734

$

1,049

$

1,281

$

$

7,064

L’Auberge de Sedona

$

9,360

$

2,186

$

692

$

$

$

2,878

Orchards Inn Sedona

$

3,446

$

1,018

$

311

$

$

56

$

1,385

Shorebreak

$

6,229

$

469

$

845

$

$

(29)

$

1,285

The Lodge at Sonoma

$

9,387

$

342

$

858

$

584

$

$

1,784

Hilton Garden Inn Times Square Central

$

10,881

$

1,170

$

1,582

$

$

$

2,752

Vail Marriott

$

21,202

$

7,339

$

999

$

$

$

8,338

Westin San Diego

$

18,534

$

3,907

$

2,196

$

1,320

$

$

7,423

Westin Washington D.C. City Center

$

18,821

$

4,169

$

2,589

$

1,406

$

$

8,164

Renaissance Worthington

$

21,747

$

5,317

$

1,756

$

1,606

$

4

$

8,683

Total

$

439,482

$

69,218

$

49,948

$

16,105

$

2,209

$

137,466

Add: Prior Ownership Results (2)

$

3,422

$

(293)

$

522

$

$

$

229

Comparable Total

$

442,904

$

68,925

$

50,470

$

16,105

$

2,209

$

137,695

(1)

Includes non-cash expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations, the non-cash amortization favorable and unfavorable contract liabilities and hotel manger transition costs.

(2)

Amounts represent the pre-acquisition operating results of the L’Auberge de Sedona and Orchards Inn Sedona for the period from January 1, 2017 to February 27, 2017.

Hotel Adjusted EBITDA Reconciliation

Year to Date 2016

Plus:

Plus:

Plus:

Equals:

Total Revenues

Net Income / (Loss)

Depreciation

Interest Expense

Adjustments (1)

Hotel Adjusted

EBITDA

Atlanta Alpharetta Marriott

$

10,491

$

3,034

$

718

$

$

$

3,752

Bethesda Marriott Suites

$

8,341

$

(1,247)

$

713

$

$

3,065

$

2,531

Boston Westin

$

47,338

$

5,626

$

4,402

$

4,574

$

(120)

$

14,482

Hilton Boston Downtown

$

17,902

$

4,339

$

2,424

$

$

8

$

6,771

Hilton Burlington

$

7,553

$

1,735

$

943

$

$

$

2,678

Renaissance Charleston

$

7,070

$

2,451

$

500

$

$

(63)

$

2,888

Hilton Garden Inn Chelsea

$

6,260

$

1,062

$

601

$

$

$

1,663

Chicago Marriott

$

43,734

$

3,421

$

6,414

$

444

$

(795)

$

9,484

Chicago Gwen

$

10,202

$

1,048

$

1,359

$

$

$

2,407

Courtyard Denver Downtown

$

5,504

$

2,043

$

572

$

$

$

2,615

Courtyard Fifth Avenue

$

7,207

$

(1,214)

$

889

$

1,212

$

103

$

990

Courtyard Midtown East

$

13,121

$

(42)

$

1,341

$

2,016

$

$

3,315

Fort Lauderdale Westin

$

27,999

$

9,882

$

2,337

$

$

$

12,219

Frenchman’s Reef

$

38,722

$

8,694

$

3,217

$

$

$

11,911

JW Marriott Denver Cherry Creek

$

12,431

$

1,883

$

1,040

$

1,438

$

$

4,361

Inn at Key West

$

4,844

$

2,059

$

363

$

$

$

2,422

Sheraton Suites Key West

$

10,618

$

4,079

$

1,028

$

$

$

5,107

Lexington Hotel New York

$

26,792

$

(6,464)

$

6,772

$

2,670

$

15

$

2,993

Minneapolis Hilton

$

24,788

$

(13)

$

2,917

$

2,514

$

(482)

$

4,936

Orlando Airport Marriott

$

14,116

$

4,482

$

573

$

$

$

5,055

Hotel Rex

$

3,889

$

1,115

$

286

$

$

$

1,401

Salt Lake City Marriott

$

14,403

$

2,626

$

1,062

$

1,322

$

$

5,010

Shorebreak

$

6,926

$

1,344

$

747

$

$

(29)

$

2,062

The Lodge at Sonoma

$

12,338

$

1,962

$

733

$

599

$

$

3,294

Hilton Garden Inn Times Square Central

$

11,083

$

1,433

$

1,554

$

$

$

2,987

Vail Marriott

$

20,262

$

7,423

$

956

$

$

$

8,379

Westin San Diego

$

17,677

$

3,236

$

2,060

$

1,354

$

$

6,650

Westin Washington D.C. City Center

$

18,305

$

3,507

$

2,452

$

1,453

$

$

7,412

Renaissance Worthington

$

19,782

$

4,567

$

1,153

$

1,615

$

4

$

7,339

Total

$

469,698

$

74,071

$

50,126

$

21,211

$

1,706

$

146,984

Add: Prior Ownership Results(2)

$

13,231

$

1,071

$

1,867

$

$

32

$

2,970

Less: Sold Hotels (3)

$

(45,164)

$

(5,531)

$

(4,091)

$

(2,514)

$

482

$

(11,654)

Comparable Total

$

437,765

$

69,611

$

47,902

$

18,697

$

2,220

$

138,300

(1)

Includes non-cash expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations, the non-cash amortization favorable and unfavorable contract liabilities and hotel manger transition costs.

(2)

Amounts represent the pre-acquisition operating results of the L’Auberge de Sedona and Orchards Inn Sedona for the period from January 1, 2016 to June 30, 2016.

(3)

Amounts represent the operating results of the three hotels sold in 2016: Orlando Airport Marriott, Minneapolis Hilton and Hilton Garden Inn Chelsea.

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