DIAMONDROCK HOSPITALITY COMPANY This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with these safe harbor provisions. These forward-looking statements are generally identifiable by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project" or similar expressions, whether in the negative or affirmative. Forward-looking statements are based on management's current expectations and assumptions and are not guarantees of future performance. Factors that may cause actual results to differ materially from current expectations include, but are not limited to, the risks discussed herein and the risk factors discussed from time to time in our periodic filings with theSecurities and Exchange Commission , including in Part I, Item 1A "Risk Factors" of our Annual Report on Form 10-K for the year endedDecember 31, 2019 as updated by our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Accordingly, there is no assurance that the Company's expectations will be realized. Except as otherwise required by the federal securities laws, the Company disclaims any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this report to reflect events, circumstances or changes in expectations after the date of this report.
Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:
• negative changes in the economy, including, but not limited to, a reversal
of current job growth trends, an increase in unemployment or a decrease in
corporate earnings and investment;
• increased competition in the lodging industry and from alternative lodging
channels or third party internet intermediaries in the markets in which we
own properties;
• failure to effectively execute our long-term business strategy and
successfully identify and complete acquisitions;
• risks and uncertainties affecting hotel renovations and management
(including, without limitation, construction delays, increased
construction costs, disruption in hotel operations and the risks
associated with our franchise agreements);
• risks associated with the availability and terms of financing and the use
of debt to fund acquisitions and renovations or refinance existing
indebtedness, including the impact of higher interest rates on the cost
and/or availability of financing;
• risks associated with our level of indebtedness and our ability to obtain
covenant waivers on our credit agreements for our senior unsecured credit
facility and unsecured term loans;
• risks associated with the lodging industry overall, including, without
limitation, an increase in alternative lodging channels, decreases in the
frequency of business travel and increases in operating costs;
• risks associated with natural disasters;
• the continuing adverse impact of the novel coronavirus (COVID-19) on the
on our financial condition and results of operations of our hotels;
• costs of compliance with government regulations, including, without
limitation, the Americans with Disabilities Act;
• potential liability for uninsured losses and environmental contamination;
• risks associated with security breaches through cyber-attacks or
otherwise, as well as other significant disruptions of our information
technologies and systems, which support our operations and our hotel
managers;
• risks associated with our potential failure to qualify as a REIT under the
Internal Revenue Code of 1986, as amended;
• possible adverse changes in tax and environmental laws; and
• risks associated with our dependence on key personnel whose continued
service is not guaranteed.
Overview
DiamondRock Hospitality Company is a lodging-focusedMaryland corporation operating as a real estate investment trust ("REIT"). As ofJune 30, 2020 , we owned a portfolio of 31 premium hotels and resorts that contain 10,102 guest rooms located in 21 different markets inNorth America and theU.S. Virgin Islands . Our hotel in theU.S. Virgin Islands , Frenchman'sReef & Morning Star Beach Resort ("Frenchman's Reef"), remains closed due to damage incurred from Hurricane Irma inSeptember 2017 . As an owner, rather than an operator, of lodging properties, we receive all of the operating profits or losses generated by our hotels after the payment of fees due to hotel managers, which are calculated based on the revenues and profitability of each hotel. Our strategy is to apply aggressive asset management, conservative leverage, and disciplined capital allocation to high quality lodging properties in North American urban and resort markets with superior growth prospects and high barriers-to-entry. Our goal is to deliver long-term stockholder returns that exceed those generated by our peers through a combination of dividends and enduring capital appreciation. - 21- --------------------------------------------------------------------------------
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Our primary business is to acquire, own, asset manage and renovate premium hotel properties inthe United States . Our portfolio is concentrated in key gateway cities and destination resort locations. Each of our hotels is managed by a third party- either an independent operator or a brand operator, such as Marriott International, Inc. ("Marriott"). We critically evaluate each of our hotels to ensure that we own a portfolio of hotels that conforms to our vision, supports our mission and corresponds with our strategy. On a regular basis, we analyze our portfolio to identify opportunities to invest capital in certain projects or market non-core assets for sale in order to increase our portfolio quality. We are committed to a conservative capital structure with prudent leverage. We regularly assess the availability and affordability of capital in order to maximize stockholder value and minimize enterprise risk. In addition, we are committed to following sound corporate governance practices and to being open and transparent in our communications with our stockholders.
Key Indicators of Financial Condition and Operating Performance
We use a variety of operating and other information to evaluate the financial condition and operating performance of our business. These key indicators include financial information that is prepared in accordance withU.S. Generally Accepted Accounting Principles ("U.S. GAAP"), as well as other financial information that is not prepared in accordance withU.S. GAAP. In addition, we use other information that may not be financial in nature, including statistical information and comparative data. We use this information to measure the performance of individual hotels, groups of hotels and/or our business as a whole. We periodically compare historical information to our internal budgets as well as industry-wide information. These key indicators include:
• Occupancy percentage;
• Average Daily Rate (or ADR);
• Revenue per
• Earnings Before Interest, Income Taxes, Depreciation and Amortization (or
EBITDA), Earnings Before Interest, Income Taxes, Depreciation and
Amortization for real estate (or EBITDAre), and Adjusted EBITDA; and
• Funds From Operations (or FFO) and Adjusted FFO.
Occupancy, ADR and RevPAR are commonly used measures within the hotel industry to evaluate operating performance. RevPAR, which is calculated as the product of ADR and occupancy percentage, is an important statistic for monitoring operating performance at the individual hotel level and across our business as a whole. We evaluate individual hotel RevPAR performance on an absolute basis with comparisons to budget and prior periods, as well as on a company-wide and regional basis. ADR and RevPAR include only room revenue. Room revenue comprised approximately 66% of our total revenues for the six months endedJune 30, 2020 and is dictated by demand, as measured by occupancy percentage, pricing, as measured by ADR, and our available supply of hotel rooms. Our ADR, occupancy percentage and RevPAR performance may be impacted by macroeconomic factors such asU.S. economic conditions generally, regional and local employment growth, personal income and corporate earnings, office vacancy rates and business relocation decisions, airport and other business and leisure travel, increased use of lodging alternatives, new hotel construction and the pricing strategies of our competitors. In addition, our ADR, occupancy percentage and RevPAR performance is dependent on the continued success of our hotels' global brands.
We also use EBITDA, EBITDAre, Adjusted EBITDA, FFO and Adjusted FFO as measures of the financial performance of our business. See "Non-GAAP Financial Measures."
COVID-19 Pandemic
InMarch 2020 , theWorld Health Organization declared COVID-19 a global pandemic. The pandemic has reduced travel and adversely affected the hospitality industry in general. We have seen a significant reduction in or elimination of lodging demand generators, including city-wide conferences, sporting and entertainment events, corporate and leisure travel, and overall domestic airlift capacity.
In response to COVID-19, we have taken the following aggressive actions at the property and corporate levels:
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• In coordination with our hotel operators, we suspended operations at 20 of
our hotels throughout March and
June 30, 2020 , we reopened 12 hotels. Subsequent toJune 30, 2020 , we reopened three additional hotels and have 25 of our 30 previously operating hotels open as ofAugust 7, 2020 .
• We have developed and implemented action plans with our hotel operators to
significantly reduce operating costs at each of our hotels.
• We have cultivated alternative demand for our hotels, where possible,
including accommodating first responders and quarantined military
personnel.
• We have canceled or deferred over 65% of our capital expenditures planned
for the remainder of 2020.
• We have paused the rebuild of Frenchman's Reef, which we had expected to
open as two separate hotels in late 2020.
• We suspended our quarterly dividend beginning with the dividend that would
have been paid in April 2020 . We expect to pay a dividend in January 2021
sufficient to cover 100% of our taxable income, if any, for the year
ending December 31, 2020 .
• We drew down funds on our
million of borrowing capacity on our the senior unsecured credit facility
and
• On
unsecured term loans. The amendments provide for a waiver of the
quarterly-tested financial covenants beginning with the second quarter of
2020 through the first quarter of 2021 and certain other modifications to
the covenants thereafter through the fourth quarter of 2021.
• On June 25, 2020 , we refinanced our only significant near-term debt
maturity by closing on a $48.0 million mortgage loan secured by the Salt
Lake City Marriott Downtown . The loan proceeds were used to repay the
existing $52.5 million mortgage loan secured by the Salt Lake City
Marriott Downtown that was scheduled to mature on November 1, 2020 . The
new loan matures in January 2022 with an option to extend maturity to
January 2023 , subject to the satisfaction of certain conditions.
• We are exploring possible modifications to existing hotel management and
franchise agreements and are currently in discussions with certain hotel
managers and franchisors regarding potentially amending or restructuring
those agreements to our benefit. Given the early nature of these
negotiations, it is unclear what, if any, changes will result from such
discussions.
The situation surrounding the COVID-19 pandemic remains fluid. Market demand for
lodging at our hotels is closely correlated with reported infection levels near
our hotel locations, consumer confidence, and guidance from health officials and
federal, state, and local governments.
Demand for our leisure-focused hotels has recovered more quickly than our urban
hotels. As demand returns, we will continue to aggressively asset manage our
hotels. We continue to carefully assess staffing needs, cleanliness and safety
protocols, business mix, and other initiatives. We expect that the COVID-19
pandemic will decrease the pipeline of supply of new hotel rooms within the
markets we operate, which will further stabilize RevPAR and profitability.
See also "Risk Factors" in Part II, Item 1A of this report.
Our Hotels
The following tables set forth certain operating information for the six months endedJune 30, 2020 for each of our hotels. The table indicates the operating status of each hotel and the occupancy percentage, ADR and RevPAR for each hotel for the portion of the six months endedJune 30, 2020 that it was open. - 23- --------------------------------------------------------------------------------
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Hotels Open Throughout the Six Months EndedJune 30, 2020 (1) % Change Number of from 2019 Property Location Rooms
Occupancy (%) ADR ($) RevPAR($) RevPAR
Salt
510 28.0 % 167.49 46.81 (58.3 )%
Renaissance Fort Worth,
Worthington Texas 504 34.4 % 187.14 64.47 (56.8 )%
San Diego,
Westin San Diego California 436 47.3 % 182.76 86.53 (44.6 )%
Westin Fort
Lauderdale Beach Fort Lauderdale,
Resort Florida 433 49.5 % 251.18 124.30 (38.2 )%
Westin Washington,
D.C. City Center Washington, D.C. 410 31.0 % 191.70 59.48 (68.5 )%
Marriott Atlanta
Alpharetta Atlanta, Georgia 318 29.1 % 167.54 48.74 (60.2 )%
Courtyard
Manhattan/Midtown New York, New
East York 321 76.2 % 154.60 117.86 (46.7 )%
Bethesda Marriott Bethesda,
Suites Maryland 272 25.9 % 168.34 43.57 (67.7 )%
Huntington
Beach,
Shorebreak Hotel California 157 55.2 % 211.59 116.73 (39.0 )%
L'Auberge de Sedona Sedona, Arizona 88 50.3 % 568.53 286.00 (44.1 )%
TOTAL/WEIGHTED
AVERAGE FOR OPEN
HOTELS 3,449 40.7 % 200.33 81.47 (52.1 )%
Hotels Closed for a Portion of the Six Months Ended
June 30, 2020 (1)
Date of % Change
Date of Reopening Number of from 2019
Property Location Closure (2) Rooms
Occupancy (%) ADR ($) RevPAR($)
Illinois 4/10/2020 - 1,200 21.5 % $ 164.29 $ 35.30 (76.0 )%
Westin Boston Boston,
Waterfront Hotel Massachusetts 3/25/2020 - 793 29.9 % 196.96 58.95 (68.1 )%
Lexington Hotel New New York, New
York York 3/29/2020 - 725 30.7 % 183.27 56.34 (72.3 )%
Hilton Boston Boston,
Downtown Massachusetts 3/23/2020 (3) 403 32.8 % 191.87 62.99 (75.1 )%
33.1 % 442.11 146.46 (33.2 )%
Chicago,
The Gwen Chicago Illinois 3/31/2020 6/10/2020 311 31.8 % 193.42 61.51 (68.0 )%
Hilton Garden Inn New York, New
Times Square Central York 3/29/2020 - 282 38.5 % 154.35 59.40 (73.6 )%
Burlington,
Hilton Burlington Vermont 3/31/2020 (4) 258 19.7 % 133.81 26.38 (79.2 )%
Hotel
37.4 % 225.78 84.49 (52.5 )%
JW Marriott Denver at
Cherry Creek Denver, Colorado 3/22/2020 6/1/2020 199 31.6 % 228.56 72.19 (55.3 )%
Courtyard
Manhattan/Fifth New York, New Avenue York 3/27/2020 - 189 30.8 % 206.17 63.49 (69.1 )% BarbaryBeach House Key West (formerly the Sheraton Suites Key West, Key West ) (5) Florida 3/23/2020 6/1/2020 184 46.6 % 315.35 146.87 (41.5 )% The Lodge at Sonoma, Sonoma, 3/21/2020 182 23.0 % 233.39 53.58 (73.1 )% a Renaissance Resort California (6) & Spa Courtyard Denver Downtown Denver, Colorado 3/20/2020 6/1/2020 177 26.0 % 163.06 42.40 (71.7 )% Renaissance Charleston, Charleston South Carolina 4/6/2020 5/14/2020 166 40.2 % 225.04 90.56 (61.6 )% Cavallo Point, The Lodge at the Golden Sausalito, Gate California 3/17/2020 6/24/2020 142 23.5 % 445.49 104.56 (63.7 )% Havana Cabana Key Key West, West Florida 3/23/2020 6/1/2020 106 48.7 % 271.00 131.99 (37.7 )% San Francisco, Hotel Emblem California 3/23/2020 6/26/2020 96 33.9 % 255.03 86.46 (49.3 )% South Lake The Landing Resort & Tahoe, Spa California 3/23/2020 6/5/2020 82 33.1 % 299.20 99.16 (32.9 )% Orchards Inn Sedona Sedona, Arizona 3/31/2020 5/15/2020 70 37.2 % 209.22 77.91 (62.6 )% TOTAL/WEIGHTED AVERAGE FOR CLOSED HOTELS 6,151 30.0 % 219.62 65.88 (65.5 )% TOTAL/WEIGHTED AVERAGE 9,600 33.8 %$ 211.29 $ 71.48 (61.0 )% - 24-
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(1) Frenchman's Reef closed on
remains closed. Accordingly, there is no operating information for the six
months ended
(2) Reopening dates, if applicable, as of
(3) The hotel reopened on
(4) The hotel reopened on
(5) On
House
(6) The hotel reopened on
Results of Operations
The comparability of our results of operations for the three and six months endedJune 30, 2020 to the three and six months endedJune 30, 2019 has been significantly impacted by the effects of the the COVID-19 pandemic. We expect the comparability of our results of operations in future periods of 2020 will be similarly impacted.
Comparison of the Three Months Ended
In response to the COVID-19 pandemic, we suspended operations at 20 of our hotels for all or a portion of the three months endedJune 30, 2020 . Twelve of these hotels reopened byJune 30, 2020 . Eight of these hotels remained closed as ofJune 30, 2020 .
Revenue. Revenue consists primarily of the room, food and beverage and other operating revenues from our hotels, as follows (dollars in millions):
Three Months Ended June 30,
2020 2019 % Change
Rooms $ 13.1 $ 181.6 (92.8 )%
Food and beverage 3.0 60.7 (95.1 )%
Other 4.3 15.6 (72.4 )%
Total revenues $ 20.4 $ 257.9 (92.1 )%
Our total revenues decreased $237.5 million from $257.9 million for the three
months ended June 30, 2019 to $20.4 million for the three months ended June 30,
2020 .
The following are key hotel operating statistics for the three months ended
Three Months Ended June 30,
2020 2019 % Change
Occupancy % 8.5 % 83.1 % (74.6 )%
ADR $ 175.74 $ 250.23 (29.8 )%
RevPAR $ 14.99 $ 208.02 (92.8 )%
Food and beverage revenues decreased
Other revenues, which primarily represent spa, parking, resort fees and
attrition and cancellation fees, decreased by
Hotel operating expenses. The operating expenses consisted of the following (dollars in millions):
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Three Months Ended June 30,
2020 2019 % Change
Rooms departmental expenses $ 7.1 $ 42.9 (83.4 )%
Food and beverage departmental expenses 4.7 36.5 (87.1 )
Other departmental expenses 0.6 3.8 (84.2 )
General and administrative 6.4 21.6 (70.4 )
Utilities 3.0 4.9 (38.8 )
Repairs and maintenance 4.2 8.8 (52.3 )
Sales and marketing 4.5 17.2 (73.8 )
Franchise fees 0.8 7.2 (88.9 )
Base management fees (0.1 ) 5.5 (101.8 )
Incentive management fees - 1.8 (100.0 )
Property taxes 14.6 14.0 4.3
Other fixed charges 4.6 4.0 15.0
Professional fees and pre-opening costs
related to Frenchman's Reef 0.1 3.7 (97.3 )
Lease expense 2.8 3.3 (15.2 )
Total hotel operating expenses $ 53.3 $ 175.2 (69.6 )%
Our hotel operating expenses decreased $121.9 million from $175.2 million for
the three months ended June 30, 2019 to $53.3 million for the three months ended
June 30, 2020 . For the three months ended June 30, 2020 , we accrued $2.9 million
of compensation and benefits expense for employees furloughed or laid-off at our
properties in connection with the the COVID-19 pandemic, which is included in
the general and administrative expenses above.
Depreciation and amortization. Depreciation and amortization is recorded on our
hotel buildings over 40 years for the periods subsequent to acquisition.
Depreciable lives of hotel furniture, fixtures and equipment are estimated as
the time period between the acquisition date and the date that the hotel
furniture, fixtures and equipment will be replaced. Our depreciation and
amortization expense decreased $0.6 million , or 1.9%, from the three months
ended June 30, 2019 . This is primarily due to the timing of fully depreciated
capital expenditures.
Corporate expenses. Corporate expenses principally consist of employee-related
costs, including base payroll, bonus, restricted stock and severance. Corporate
expenses also include corporate operating costs, professional fees and
directors' fees. Our corporate expenses decreased $0.6 million , or 7.8%, from
$7.4 million for the three months ended June 30, 2019 to $6.8 million for the
three months ended June 30, 2020 primarily due to decreases in employee
compensation and other employee-related expenses. We expect corporate expenses
to decrease for each of the remaining quarters in 2020 compared with the
comparable quarter in 2019.
Interest expense. Our interest expense was $11.6 million and $12.4 million for
the three months ended June 30, 2020 and 2019, respectively, and was comprised
of the following (in millions):
Three Months Ended June 30,
2020 2019
Mortgage debt interest $ 6.5 $ 6.6
Unsecured term loan interest 2.9 3.5
Credit facility interest and unused fees 1.8 1.0
Amortization of debt issuance costs and debt premium 0.5 0.5
Capitalized interest (1.1 ) (0.3 )
Interest rate swap mark-to-market and net settlements 1.0 1.1
$ 11.6 $ 12.4
The decrease in interest expense is primarily related to the decrease in
unsecured term loan interest and an increase in capitalized interest recognized
related to Frenchman's Reef, partially offset by an increase in credit facility
interest incurred on the full draw down of our $400 million senior unsecured
credit facility in March 2020 .
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Income taxes. We recorded an income tax benefit of$6.6 million for the three months endedJune 30, 2020 and an income tax expense of$4.6 million for the three months endedJune 30, 2019 . The income tax benefit for the three months endedJune 30, 2020 includes$6.7 million of income tax benefit on the$24.6 million pre-tax loss of our domestic TRSs and foreign income tax expense of$0.1 million incurred on the$1.0 million pre-tax income of the TRS that owns Frenchman's Reef. The income tax expense for the three months endedJune 30, 2019 includes$4.7 million of income tax expense on the$17.1 million pre-tax income of our domestic TRSs and foreign income tax benefit of$0.1 million incurred on the$3.6 million pre-tax loss of the TRS that owns Frenchman's Reef.
Comparison of the Six Months Ended
In response to the COVID-19 pandemic, we suspended operations at 20 of our
hotels for a portion of the six months ended
Revenue. Revenue consists primarily of the room, food and beverage and other operating revenues from our hotels, as follows (dollars in millions):
Six Months Ended June 30,
2020 2019 % Change
Rooms $ 124.9 $ 318.3 (60.8 )%
Food and beverage 46.9 111.2 (57.8 )%
Other 18.6 30.8 (39.6 )%
Total revenues $ 190.4 $ 460.3 (58.6 )%
Our total revenues decreased
The following are key hotel operating statistics for the six months ended
Six Months Ended June 30,
2020 2019 % Change
Occupancy % 33.8 % 78.2 % (44.4 )%
ADR $ 211.29 $ 234.48 (9.9 )%
RevPAR $ 71.48 $ 183.30 (61.0 )%
Food and beverage revenues decreased
Other revenues, which primarily represent spa, parking, resort fees and
attrition and cancellation fees, decreased by
Hotel operating expenses. The operating expenses consisted of the following (dollars in millions):
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Six Months Ended June 30,
2020 2019 % Change
Rooms departmental expenses $ 42.8 $ 81.7 (47.6 )%
Food and beverage departmental expenses 35.8 69.6 (48.6 )
Other departmental expenses 4.6 7.6 (39.5 )
General and administrative 31.4 41.1 (23.6 )
Utilities 7.8 10.1 (22.8 )
Repairs and maintenance 12.4 17.3 (28.3 )
Sales and marketing 18.6 32.7 (43.1 )
Franchise fees 6.6 13.1 (49.6 )
Base management fees 3.4 9.9 (65.7 )
Incentive management fees - 2.8 (100.0 )
Property taxes 29.2 28.5 2.5
Other fixed charges 8.9 8.0 11.3
Professional fees and pre-opening costs
related to Frenchman's Reef (0.2 ) 5.1 (103.9 )
Lease expense 5.8 6.4 (9.4 )
Total hotel operating expenses $ 207.1 $ 333.9 (38.0 )%
Our hotel operating expenses decreased $126.8 million from $333.9 million for
the six months ended June 30, 2019 to $207.1 million for the six months ended
June 30, 2020 .
Depreciation and amortization. Depreciation and amortization is recorded on our
hotel buildings over 40 years for the periods subsequent to acquisition.
Depreciable lives of hotel furniture, fixtures and equipment are estimated as
the time period between the acquisition date and the date that the hotel
furniture, fixtures and equipment will be replaced. Our depreciation and
amortization expense increased $0.6 million , or 0.9%, from the six months ended
June 30, 2019 . This is primarily due to capital expenditures from our recent
hotel renovations.
Corporate expenses. Corporate expenses principally consist of employee-related
costs, including base payroll, bonus, restricted stock and severance. Corporate
expenses also include corporate operating costs, professional fees and
directors' fees. Our corporate expenses decreased $2.1 million , or 14.4%, from
$14.5 million for the six months ended June 30, 2019 to $12.4 million for the
six months ended June 30, 2020 primarily due to decreases in employee
compensation and other employee-related expenses. We expect corporate expenses
to decrease for the second half of 2020 compared with the comparable period in
2019.
Business interruption insurance income. In September 2017 , Hurricane Irma caused
significant damage to Frenchman's Reef, which resulted in lost revenue and
additional expenses covered under our insurance policies. In December 2019 , we
settled the insurance claim for Frenchman's Reef. We did not recognize any
business interruption insurance income for the six months ended June 30, 2020
and we recognized $8.8 million of business interruption insurance income for the
six months ended June 30, 2019 related to the claim for Frenchman's Reef.
Interest expense. Our interest expense was $32.8 million and $24.1 million for
the six months ended June 30, 2020 and 2019, respectively, and was comprised of
the following (in millions):
Six Months Ended June 30,
2020 2019
Mortgage debt interest $ 13.0 $ 13.2
Unsecured term loan interest 6.1 6.9
Credit facility interest and unused fees 2.5
1.7
Amortization of debt issuance costs and debt premium 1.0
1.1
Capitalized interest (2.1 ) (0.5 )
Interest rate swap mark-to-market and net settlements 12.3 1.7
$ 32.8 $ 24.1
The increase in interest expense is primarily related to the mark-to-market of
our interest rate swaps, partially offset by an increase in capitalized interest
recognized related to Frenchman's Reef.
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Income taxes. We recorded an income tax benefit of$13.1 million for the six months endedJune 30, 2020 and an income tax expense of$0.7 million for the six months endedJune 30, 2019 . The income tax benefit for the six months endedJune 30, 2020 includes$13.4 million of income tax benefit on the$48.7 million pre-tax loss of our domestic TRSs and foreign income tax expense of$0.3 million incurred on the$2.2 million pre-tax income of the TRS that owns Frenchman's Reef. The income tax expense for the six months endedJune 30, 2019 includes$0.5 million of income tax expense on the$2.0 million pre-tax income of our domestic TRSs and foreign income tax expense of$0.2 million incurred on the$3.8 million pre-tax income of the TRS that owns Frenchman's Reef.
Liquidity and Capital Resources
Our short-term liquidity requirements consist primarily of funds necessary to pay our scheduled debt service and operating expenses and capital expenditures directly associated with our hotels. We have suspended our quarterly dividend and expect to pay a dividend inJanuary 2021 sufficient to cover 100% of our taxable income, if any, for the year endingDecember 31, 2020 . We currently expect that our existing cash balances and available capacity on our senior unsecured credit facility will be sufficient to meet our short-term liquidity requirements. Some of our mortgage debt agreements contain "cash trap" provisions that are triggered when the hotel's operating results fall below a certain debt service coverage ratio. When these provisions are triggered, all of the excess cash flow generated by the hotel is deposited directly into cash management accounts for the benefit of our lenders until a specified debt service coverage ratio is reached and maintained for a certain period of time. Such provisions do not allow the lender the right to accelerate repayment of the underlying debt. As ofJune 30, 2020 , the debt service coverage ratios or debt yields for the Courtyard ManhattanMidtown East ,Westin Boston Waterfront Hotel , The Lodge atSonoma ,Westin Washington ,D.C. City Center ,JW Marriott Denver atCherry Creek , and Renaissance Worthington were below the minimum thresholds such that the cash trap provision of each respective loan was triggered. We expect that the cash trap provision on theWestin San Diego mortgage loan will be triggered as of the third quarter of 2020 due to the continuing negative impact of the COVID-19 pandemic on our hotel operations. We do not expect that such cash traps affect our ability to satisfy our short-term liquidity requirements. Our long-term liquidity requirements consist primarily of funds necessary to pay for the costs of acquiring additional hotels, renovations, and other capital expenditures that need to be made periodically to our hotels, scheduled debt payments, debt maturities, redemption of limited operating partnership units ("common OP units") and making distributions to our stockholders. We expect to meet our long-term liquidity requirements through various sources of capital, including cash provided by operations, borrowings, issuances of additional equity, including common OP units, and/or debt securities and proceeds from property dispositions. Our ability to incur additional debt is dependent upon a number of factors, including the state of the credit markets, our degree of leverage, the value of our unencumbered assets and borrowing restrictions imposed by existing lenders. Our ability to raise capital through the issuance of additional equity and/or debt securities is also dependent on a number of factors including the current state of the capital markets, investor sentiment and intended use of proceeds. We may need to raise additional capital if we identify acquisition opportunities that meet our investment objectives and require liquidity in excess of existing cash balances. Our ability to raise funds through the issuance of equity securities depends on, among other things, general market conditions for hotel companies and REITs and market perceptions about our Company. Our Financing Strategy Since our formation in 2004, we have been committed to a conservative capital structure with prudent leverage. Our outstanding debt consists of fixed interest rate mortgage debt, unsecured term loans and borrowings on our senior unsecured credit facility. We have a preference to maintain a significant portion of our portfolio as unencumbered assets in order to provide balance sheet flexibility. We expect that our strategy will enable us to maintain a balance sheet with an appropriate amount of debt throughout all phases of the lodging cycle. We believe that it is prudent to reduce the inherent risk of highly cyclical lodging fundamentals through a low leveraged capital structure. We prefer a relatively simple but efficient capital structure. We generally structure our hotel acquisitions to be straightforward and to fit within our capital structure; however, we will consider a more complex transaction, such as the issuance of common OP units in connection with the acquisition ofCavallo Point , if we believe that the projected returns to our stockholders will significantly exceed the returns that would otherwise be available. We believe that we maintain a reasonable amount of debt. As ofJune 30, 2020 , we had$1.2 billion of debt outstanding with a weighted average interest rate of 3.80% and a weighted average maturity date of approximately 3.9 years. We have no near-term mortgage debt maturities and 23 of our 31 hotels unencumbered by mortgage debt. We remain committed to our core strategy of prudent leverage. - 29- --------------------------------------------------------------------------------
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Information about our financing activities is available in Note 8 to the accompanying consolidated financial statements. Further information is available in Note 1 to the accompanying consolidated financial statements for measures taken in response to the impact of COVID-19.
ATM Program
We have equity distribution agreements, datedAugust 8, 2018 , with a number of sales agents (the "ATM Program") to issue and sell, from time to time, shares of our common stock, par value$0.01 per share, having an aggregate offering price of up to$200 million (the "ATM Shares"). Sales of the ATM Shares can be made in privately negotiated transactions and/or any other method permitted by law, including sales deemed to be an "at the market" offering, which includes sales made directly on theNew York Stock Exchange or sales made to or through a market maker other than on an exchange. Actual future sales of the ATM Shares will depend upon a variety of factors, including but not limited to market conditions, the trading price of the Company's common stock and the Company's capital needs. We have no obligation to sell the ATM Shares under the ATM Program. During the three and six months endedJune 30, 2020 , we sold 135,481 shares of our common stock at an average price of$7.56 per share for proceeds of$1.0 million , net of approximately$10 thousand in fees paid to the applicable sales agent. As ofAugust 7, 2020 , shares of common stock having an aggregate offering price of up to$199.0 million remained available for sale under the ATM Program. Share Repurchase Program Our board of directors has approved a share repurchase program (the "Share Repurchase Program") authorizing us to repurchase shares of our common stock having an aggregate price of up to$250 million . Information about our Share Repurchase Program is found in Note 5 to the accompanying consolidated financial statements. During the first quarter of 2020, we repurchased 1,119,438 shares of our common stock at an average price of$8.91 per share for a total purchase price of$10.0 million . These shares were all repurchased prior toMarch 4, 2020 . We retired all repurchased shares on their respective settlement dates. We have suspended share repurchases and, pursuant to our Amended Credit Agreements, as defined below, may not repurchase shares while our financial covenant requirements are waived. As ofAugust 7, 2020 , we have$165.2 million of authorized capacity remaining under our Share Repurchase Program.
Short-Term Borrowings
Other than borrowings under our senior unsecured credit facility, discussed below, we do not utilize short-term borrowings to meet liquidity requirements.
Senior Unsecured Credit Facility and Unsecured Term Loans
We are party to a$400 million senior unsecured credit facility expiring inJuly 2023 , a$350 million unsecured term loan maturing inJuly 2024 and a$50 million unsecured term loan maturing inOctober 2023 . The maturity date for the senior unsecured credit facility may be extended for an additional year upon the payment of applicable fees and the satisfaction of certain customary conditions. OnJune 9, 2020 , we executed amendments to the credit agreements ("Amended Credit Agreements") for our$400 million senior unsecured credit facility and$400 million of unsecured term loans. The Amended Credit Agreements provide for a waiver of the quarterly-tested financial covenants beginning with the second quarter of 2020 through the first quarter of 2021 and certain other modifications to the covenants thereafter through the fourth quarter of 2021. Additional information about the Amended Credit Agreements, including the restrictions imposed by the Amended Credit Agreements and their impacts on our liquidity, sources of capital, and ability to incur additional debt, can be found in Note 8 to the accompanying consolidated financial statements. As ofJune 30, 2020 , we had$149.0 million of borrowings outstanding under our senior unsecured credit facility. Sources and Uses of Cash Our principal sources of cash are net cash flow from hotel operations, sales of common stock, debt financings and proceeds from hotel dispositions. Our principal uses of cash are acquisitions of hotel properties, debt service and maturities, share repurchases, capital expenditures, operating costs, corporate expenses, and distributions to holders of common stock and units. As ofJune 30, 2020 , we had$87.8 million of unrestricted cash and$36.4 million of restricted cash.
Our net cash used in operations was
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Our net cash used in investing activities was$60.4 million for the six months endedJune 30, 2020 , which is composed of capital expenditures at our operating hotels of$31.8 million , capital expenditures for the rebuild of Frenchman's Reef of$37.7 million , and$1.6 million of cash paid for the acquisition of the remaining interest in land underlying theShorebreak Hotel , offset by$10.7 million of proceeds from our property insurance policy related to our hotels impacted by Hurricanes Irma and Maria. Our net cash provided by financing activities was$25.0 million for the six months endedJune 30, 2020 , which consisted of$74.0 million in net draws on our senior unsecured credit facility and$48.0 million proceeds of mortgage debt offset by the$52.5 million repayment of mortgage debt from the refinancing of the mortgage loan secured by theSalt Lake City Marriott Downtown ,$25.6 million of distributions paid to holders of common stock and units,$10.0 million of share repurchases,$7.1 million of scheduled mortgage debt principal payments,$1.0 million proceeds from the sale of common stock under the ATM Program,$1.4 million paid for financing costs on the Amended Credit Agreements andSalt Lake City Marriott mortgage loan refinancing,$1.2 million paid to repurchase shares upon the vesting of restricted stock for the payment of tax withholding obligations, and$0.2 million paid for the redemption of common OP units. We do not anticipate that we will receive any meaningful net cash flow from operations at our operating hotels for the remainder of the year endingDecember 31, 2020 . We expect our uses of cash for the remainder of the year endingDecember 31, 2020 will be regularly scheduled debt service payments, capital expenditures, potential funding of hotel working capital requirements, the distribution of 100% of our taxable income, if any, for the year endedDecember 31, 2020 to holders of common stock and units, and corporate expenses.
Dividend Policy
We intend to distribute to our stockholders dividends at least equal to our REIT taxable income to avoid paying corporate income tax and excise tax on our earnings (other than the earnings of our TRS, which are all subject to tax at regular corporate rates) and to qualify for the tax benefits afforded to REITs under the Code. In order to qualify as a REIT under the Code, we generally must make distributions to our stockholders each year in an amount equal to at least:
• 90% of our REIT taxable income determined without regard to the dividends
paid deduction and excluding net capital gains, plus
• 90% of the excess of our net income from foreclosure property over the tax
imposed on such income by the Code, minus
• any excess non-cash income.
The timing and frequency of distributions will be authorized by our board of
directors and declared by us based upon a variety of factors, including our
financial performance, restrictions under applicable law and our current and
future loan agreements, our debt service requirements, our capital expenditure
requirements, the requirements for qualification as a REIT under the Code and
other factors that our board of directors may deem relevant from time to time.
We have paid the following dividends to holders of our common stock and
distributions to holders of common OP units and LTIP units during 2020 as
follows:
Dividend
Payment Date Record Date per Share
January 13, 2020 January 2, 2020 $ 0.125
Our board of directors suspended the quarterly dividend that would have been
paid in April 2020 and July 2020 . We expect to pay a dividend in January 2021
sufficient to cover 100% of our taxable income, if any, for the year
ending December 31, 2020 .
Capital Expenditures
The management and franchise agreements for each of our hotels provide for the establishment of separate property improvement funds to cover, among other things, the cost of replacing and repairing furniture, fixtures and equipment at our hotels and other routine capital expenditures. Contributions to the property improvement fund are calculated as a percentage of hotel revenues. In addition, we may be required to pay for the cost of certain additional improvements that are not permitted to be funded from the property improvement fund under the applicable management or franchise agreement. As ofJune 30, 2020 , we have set aside$31.2 million for capital projects in property improvement funds, which are included in restricted cash. - 31- --------------------------------------------------------------------------------
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We spent approximately$31.8 million on capital improvements at our operating hotels during the six months endedJune 30, 2020 . Additionally, we spent approximately$37.7 million on the rebuild of Frenchman's Reef during the six months endedJune 30, 2020 . In response to the COVID-19 pandemic, we have canceled or deferred a significant portion of the planned capital improvements at our operating hotels. We currently expect to spend approximately$50 million on capital improvements at our operating hotels during 2020. We have paused the rebuild of Frenchman's Reef and currently expect construction to resume in 2021.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Non-GAAP Financial Measures
We use the following non-GAAP financial measures that we believe are useful to investors as key measures of our operating performance: EBITDA, EBITDAre, Adjusted EBITDA, FFO and Adjusted FFO. These measures should not be considered in isolation or as a substitute for measures of performance in accordance withU.S. GAAP. EBITDA, EBITDAre, Adjusted EBITDA, FFO and Adjusted FFO, as calculated by us, may not be comparable to other companies that do not define such terms exactly as the Company.
Use and Limitations of Non-GAAP Financial Measures
Our management and Board of Directors use EBITDA, EBITDAre, Adjusted EBITDA, FFO and Adjusted FFO to evaluate the performance of our hotels and to facilitate comparisons between us and other lodging REITs, hotel ownerswho 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 comparableU.S. 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 withU.S. GAAP. They should not be considered as alternatives to operating profit, cash flow from operations, or any other operating performance measure prescribed byU.S. GAAP. These non-GAAP financial measures reflect additional ways of viewing our operations that we believe, when viewed with ourU.S. GAAP results and the reconciliations to the correspondingU.S. 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, EBITDAre and FFO
EBITDA represents net income (calculated in accordance withU.S. GAAP) excluding: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sale of assets; and (3) depreciation and amortization. The Company computes EBITDAre in accordance with theNational Association of Real Estate Investment Trusts ("Nareit") guidelines, as defined in itsSeptember 2017 white paper "Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate." EBITDAre represents net income (calculated in accordance withU.S. GAAP) adjusted for: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sale of assets; (3) depreciation and amortization; (4) gains or losses on the disposition of depreciated property, including gains or losses on change of control; (5) impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate; and (6) adjustments to reflect the entity's share of EBITDAre of unconsolidated affiliates. We believe EBITDA and EBITDAre are useful to an investor in evaluating our operating performance because they help 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, and in the case of EBITDAre, impairment and gains or losses on dispositions of depreciated property) from our operating results. In addition, covenants included in our debt - 32- --------------------------------------------------------------------------------
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agreements use EBITDA as a measure of financial compliance. We also use EBITDA and EBITDAre as measures in determining the value of hotel acquisitions and dispositions.
The Company computes FFO in accordance with standards established by the Nareit, which defines FFO as net income determined in accordance withU.S. GAAP, excluding gains or losses from sales of properties and impairment losses, plus real estate related 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 related depreciation and amortization and gains or losses on the sale of assets. The Company also uses FFO as one measure in assessing its operating results.
Adjustments to EBITDAre and FFO
We adjust EBITDAre and FFO 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 and Adjusted FFO, when combined withU.S. GAAP net income, EBITDAre and FFO, is beneficial to an investor's complete understanding of our consolidated operating performance. We adjust EBITDAre and FFO for the following items:
• Non-Cash Lease Expense and Other Amortization: We exclude the non-cash
expense incurred from the straight line recognition of expense from our
ground leases and other contractual obligations and the non-cash
amortization of our favorable and unfavorable contracts, originally
recorded in conjunction with certain hotel acquisitions. We exclude these
non-cash items because they do not reflect the actual cash amounts due to
the respective lessors in the current period and they are of lesser
significance in evaluating our actual performance for that period.
• Cumulative Effect of a Change in Accounting Principle: The Financial
Accounting Standards Board promulgates new accounting standards that
require or permit 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.
•
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, or reversals
thereof, 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 Items : We exclude the transition items
associated with a change in hotel manager because we believe these items
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 weconsider 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; costs
incurred related to natural disasters; and gains on property insurance
claim settlements, other than income related to business interruption
insurance.
In addition, to derive Adjusted FFO we exclude any unrealized fair value adjustments to derivative instruments. We exclude these non-cash amounts because they do not reflect the underlying performance of the Company.
The following table is a reconciliation of our
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Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Net (loss) income $ (73,387 ) $ 29,074 $ (108,079 ) $ 38,054
Interest expense 11,629 12,418 32,847 24,080
Income tax (benefit)
expense (6,615 ) 4,571 (13,058 ) 722
Real estate related
depreciation and
amortization 28,783 29,335 58,883 58,331
EBITDA / EBITDAre (39,590 ) 75,398 (29,407 ) 121,187
Non-cash lease expense and
other amortization 1,708 1,784 3,458 3,499
Professional fees and
pre-opening costs related
to Frenchman's Reef (1) 122 3,700 (175 ) 5,067
Hotel manager transition
costs (2) 334 171 561 468
Severance costs (3) 393 - 393 -
Adjusted EBITDA $ (37,033 ) $ 81,053 $ (25,170 ) $ 130,221
____________________(1) Represents pre-opening costs related to the reopening of Frenchman's Reef,
as well as legal and professional fees and other costs incurred at
Frenchman's Reef as a result of Hurricane Irma that are not covered by
insurance.
(2) Three months ended
ended
related to the L'Auberge de
termination fees for the Sheraton Suites
Three months ended
pre-opening costs related to the reopening of the
million of pre-opening costs related to the reopening of the
and (b)
(3) Three and six months ended
incurred with the elimination of positions at our hotels, which are
classified within other hotel expenses on the consolidated statement of
operations.
The following table is a reconciliation of our
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Net (loss) income $ (73,387 ) $ 29,074 $ (108,079 ) $ 38,054
Real estate related
depreciation and amortization 28,783 29,335 58,883 58,331
FFO (44,604 ) 58,409 (49,196 ) 96,385
Non-cash lease expense and
other amortization 1,708 1,784 3,458 3,499
Professional fees and
pre-opening costs related to
Frenchman's Reef (1) 122 3,700 (175 ) 5,067
Hotel manager transition
costs (2) 334 171 561 468
Severance costs (3) 393 - 393 -
Fair value adjustments to
interest rate swaps 1,000 1,075 12,312 1,647
Adjusted FFO $ (41,047 ) $ 65,139 $ (32,647 ) $ 107,066 ____________________
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(1) Represents pre-opening costs related to the reopening of Frenchman's Reef,
as well as legal and professional fees and other costs incurred at
Frenchman's Reef as a result of Hurricane Irma that are not covered by
insurance.
(2) Three months ended
ended
related to the L'Auberge de
termination fees for the Sheraton Suites
Three months ended
pre-opening costs related to the reopening of the
million of pre-opening costs related to the reopening of the
and (b)
(3) Three and six months ended
incurred with the elimination of positions at our hotels, which are
classified within other hotel expenses on the consolidated statement of
operations.
Critical Accounting Policies
Our unaudited consolidated financial statements have been prepared in conformity
with U.S. GAAP, which requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities at the date of our
financial statements and the reported amounts of revenues and expenses during
the reporting period. While we do not believe that the reported amounts would be
materially different, application of these policies involves the exercise of
judgment and the use of assumptions as to future uncertainties and, as a result,
actual results could differ from these estimates. We evaluate our estimates and
judgments on an ongoing basis. We base our estimates on experience and on
various other assumptions that we believe to be reasonable under the
circumstances. All of our significant accounting policies, including certain
critical accounting policies, are disclosed in our Annual Report on Form 10-K
for the year ended December 31, 2019 .
Investment in Hotels
Acquired hotels, land improvements, building and furniture, fixtures and
equipment and identifiable intangible assets that are generally accounted for as
asset acquisitions are recorded at total cost and allocated based on relative
fair value. Direct acquisition-related costs are capitalized as a component of
the acquired assets. Additions to property and equipment, including current
buildings, improvements, furniture, fixtures and equipment are recorded at cost.
Property and equipment are depreciated using the straight-line method over an
estimated useful life of 5 to 40 years for buildings, land improvements, and
building improvements and 1 to 10 years for furniture and equipment.
Identifiable intangible assets are typically related to contracts, including
ground lease agreements and hotel management agreements, which are recorded at
fair value. Above-market and below-market contract values are based on the
present value of the difference between contractual amounts to be paid pursuant
to the contracts acquired and our estimate of the fair market contract rates for
corresponding contracts. Contracts acquired that are at market do not have
significant value. We enter into a hotel management agreement at the time of
acquisition and such agreements are generally based on market terms. Intangible
assets are amortized using the straight-line method over the remaining
non-cancelable term of the related agreements. In making estimates of fair
values for purposes of allocating purchase price, we may utilize a number of
sources that may be obtained in connection with the acquisition or financing of
a property and other market data. Management also considers information obtained
about each property as a result of its pre-acquisition due diligence in
estimating the fair value of the tangible and intangible assets acquired.
We review our investments in hotels for impairment whenever events or changes in
circumstances indicate that the carrying value of our investments in hotels may
not be recoverable. Events or circumstances that may cause us to perform a
review include, but are not limited to, adverse changes in the demand for
lodging at our properties, current or projected losses from operations, and an
expectation that the property is more likely than not to be sold significantly
before the end of its useful life. Management performs an analysis to determine
if the estimated undiscounted future cash flows from operations and the proceeds
from the ultimate disposition of a hotel, less costs to sell, exceed the its
carrying value. If the estimated undiscounted future cash flows are less than
the carrying amount of the asset, an adjustment to reduce the carrying value to
the related hotels' estimated fair market value is recorded and an impairment
loss is recognized.
While our hotels have experienced improvement in certain key operating measures
as the general economic conditions improve, the operating performance at certain
of our hotels has not achieved our expected levels. As part of our overall
capital allocation strategy, we assess underperforming hotels for possible
disposition, which could result in a reduction in the carrying values of these
properties.
Inflation
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Operators of hotels, in general, possess the ability to adjust room rates daily to reflect the effects of inflation. However, competitive pressures may limit the ability of our management companies to raise room rates.
Seasonality
The periods during which our hotels experience higher revenues vary from property to property, depending principally upon location and the customer base served. Accordingly, we expect some seasonality in our business. Volatility in our financial performance from the seasonality of the lodging industry could adversely affect our financial condition and results of operations.
New Accounting Pronouncements Not Yet Implemented
None.
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