RLJ Lodging Trust 10-Q for FY2020 Q1

RLJ Lodging Trust (RLJ-PA)

10-Q 2020-05-11 For: 2020-03-31

Added on April 10, 2026

About this 10-Q

RLJ Lodging Trust filed this 10-Q on May 11, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $265.48M; down 33.5% from $399.27M a year earlier
Net loss: $29.32M; compared with net income of $27.25M a year earlier
Diluted EPS: -$0.21; compared with $0.12 a year earlier

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Maryland		27-4706509
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)



3 Bethesda Metro Center, Suite 1000
Bethesda,	Maryland	20814
(Address of Principal Executive Offices)		(Zip Code)



Title of Class	Trading Symbol	Name of Exchange on Which Registered

Common Shares of beneficial interest, par value $0.01 per share	RLJ	New York Stock Exchange

$1.95 Series A Cumulative Convertible Preferred Shares, par value $0.01 per share	RLJ-A	New York Stock Exchange



Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐



		Page

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Financial Statements (unaudited)
	Balance Sheets as of March 31, 2020 and December 31, 2019	1
	Statements of Operations and Comprehensive (Loss) Income for the three months ended March 31, 2020 and 2019	2
	Statements of Changes in Equity for the three months ended March 31, 2020 and 2019	4
	Statements of Cash Flows for the three months ended March 31, 2020 and 2019	6
	Notes to the Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	35

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	39

Signatures		40



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	March 31, 2020			December 31, 2019
Assets
Investment in hotel properties, net	$	4,592,016		$	4,614,966
Investment in unconsolidated joint ventures	15,820			15,171
Cash and cash equivalents	1,157,818			882,474
Restricted cash reserves	43,548			44,686
Hotel and other receivables, net of allowance of $339 and $251, respectively	22,773			39,762
Lease right-of-use assets	143,010			144,358
Deferred income tax asset, net	52,689			51,447
Prepaid expense and other assets	41,551			58,536
Total assets	$	6,069,225		$	5,851,400
Liabilities and Equity
Debt, net	$	2,594,492		$	2,195,707
Accounts payable and other liabilities	209,710			183,408
Advance deposits and deferred revenue	48,930			57,459
Lease liabilities	120,514			121,154
Accrued interest	15,027			3,024
Distributions payable	8,718			64,165
Total liabilities	2,997,391			2,624,917
Commitments and Contingencies (Note 10)
Equity
Shareholders’ equity:
Preferred shares of beneficial interest, $0.01 par value, 50,000,000 shares authorized
Series A Cumulative Convertible Preferred Shares, $0.01 par value, 12,950,000 shares authorized; 12,879,475 shares issued and outstanding, liquidation value of $328,266, at March 31, 2020 and December 31, 2019	366,936			366,936
Common shares of beneficial interest, $0.01 par value, 450,000,000 shares authorized; 164,842,781 and 169,852,246 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively	1,649			1,699
Additional paid-in capital	3,067,693			3,127,982
Accumulated other comprehensive loss	(75,991		)	(19,514		)
Distributions in excess of net earnings	(311,224		)	(274,769		)
Total shareholders’ equity	3,049,063			3,202,334
Noncontrolling interest:
Noncontrolling interest in consolidated joint ventures	13,022			14,065
Noncontrolling interest in the Operating Partnership	9,749			10,084
Total noncontrolling interest	22,771			24,149
Total equity	3,071,834			3,226,483
Total liabilities and equity	$	6,069,225		$	5,851,400



	For the three months ended March 31,
	2020			2019
Revenues
Operating revenues
Room revenue	$	218,892		$	337,670
Food and beverage revenue	30,767			44,246
Other revenue	15,822			17,351
Total revenues	265,481			399,267
Expenses
Operating expenses
Room expense	63,753			84,188
Food and beverage expense	26,381			34,209
Management and franchise fee expense	17,144			34,118
Other operating expense	80,957			97,118
Total property operating expenses	188,235			249,633
Depreciation and amortization	49,173			58,403
Property tax, insurance and other	28,692			30,597
General and administrative	11,769			11,160
Transaction costs	10			559
Total operating expenses	277,879			350,352
Other income	579			274
Interest income	2,966			1,171
Interest expense	(23,813		)	(20,062		)
Gain on sale of hotel properties, net	102			—
(Loss) income before equity in income (loss) from unconsolidated joint ventures	(32,564		)	30,298
Equity in income (loss) from unconsolidated joint ventures	585			(381		)
(Loss) income before income tax benefit (expense)	(31,979		)	29,917
Income tax benefit (expense)	1,150			(1,586		)
Net (loss) income	(30,829		)	28,331
Net loss (income) attributable to noncontrolling interests:
Noncontrolling interest in consolidated joint ventures	1,313			353
Noncontrolling interest in the Operating Partnership	192			(92		)
Preferred distributions - consolidated joint venture	—			(186		)
Redemption of preferred equity - consolidated joint venture	—			(1,153		)
Net (loss) income attributable to RLJ	(29,324		)	27,253
Preferred dividends	(6,279		)	(6,279		)
Net (loss) income attributable to common shareholders	$	(35,603	)	$	20,974

Basic per common share data:
Net (loss) income per share attributable to common shareholders	$	(0.21	)	$	0.12
Weighted-average number of common shares	167,149,733			172,796,998



Diluted per common share data:
Net (loss) income per share attributable to common shareholders	$	(0.21	)	$	0.12
Weighted-average number of common shares	167,149,733			172,856,230

Comprehensive (loss) income:
Net (loss) income	$	(30,829	)	$	28,331
Unrealized loss on interest rate derivatives	(56,477		)	(14,136		)
Reclassification of unrealized gain on discontinued cash flow hedges to interest expense	—			(2,250		)
Comprehensive (loss) income	(87,306		)	11,945
Comprehensive loss (income) attributable to noncontrolling interests:
Noncontrolling interest in consolidated joint ventures	1,313			353
Noncontrolling interest in the Operating Partnership	192			(92		)
Preferred distributions - consolidated joint venture	—			(186		)
Redemption of preferred equity - consolidated joint venture	—			(1,153		)
Comprehensive (loss) income attributable to RLJ	$	(85,801	)	$	10,867



	Shareholders’ Equity																	Noncontrolling Interest
	Preferred Stock			Common Stock
	Shares	Amount		Shares		Par Value			Additional Paid-in Capital			Distributions in excess of net earnings			Accumulated Other Comprehensive Loss			Operating Partnership			Consolidated Joint Ventures			Total Equity
Balance at December 31, 2019	12,879,475	$	366,936	169,852,246		$	1,699		$	3,127,982		$	(274,769	)	$	(19,514	)	$	10,084		$	14,065		$	3,226,483
Net loss	—	—		—		—			—			(29,324		)	—			(192		)	(1,313		)	(30,829		)
Unrealized loss on interest rate derivatives	—	—		—		—			—			—			(56,477		)	—			—			(56,477		)
Redemption of Operating Partnership units	—	—		—		—			—			—			—			(8		)	—			(8		)
Contributions from consolidated joint venture partners	—	—		—		—			—			—			—			—			270			270
Issuance of restricted stock	—	—		525,169		5			(5		)	—			—			—			—			—
Amortization of share-based compensation	—	—		—		—			2,900			—			—			—			—			2,900
Shares acquired to satisfy minimum required federal and state tax withholding on vesting restricted stock	—	—		(38,875	)	—			(634		)	—			—			—			—			(634		)
Shares acquired as part of a share repurchase program	—	—		(5,489,335	)	(55		)	(62,550		)	—			—			—			—			(62,605		)
Forfeiture of restricted stock	—	—		(6,424	)	—			—			—			—			—			—			—
Distributions on preferred shares	—	—		—		—			—			(6,279		)	—			—			—			(6,279		)
Distributions on common shares and units	—	—		—		—			—			(852		)	—			(135		)	—			(987		)
Balance at March 31, 2020	12,879,475	$	366,936	164,842,781		$	1,649		$	3,067,693		$	(311,224	)	$	(75,991	)	$	9,749		$	13,022		$	3,071,834


•	Suspension of Hotel Operations: The Company has temporarily suspended operations at over 50% of its hotel properties, with additional suspensions under consideration;


•	Cost Containment Initiatives: The Company has reduced operating expenses by implementing stringent operational cost containment measures. These measures include significantly reduced staffing, elimination of non-essential amenities and services and the closure of several floors and all food and beverage outlets at properties that remain open;


•	Capital Investment Reduction: The Company has reduced its 2020 capital expenditure program by over 80% by deferring all capital investments, other than completing projects that are substantially underway and nearing completion; and


•	Return on Investment ("ROI") Project Suspensions: The Company suspended 90% of the 2020 ROI projects.


•	Increased Liquidity to $1.2 billion in Corporate Cash: The Company enhanced its liquidity position by drawing down $400.0 million under its $600.0 million revolving credit facility, adding to the Company's existing cash balance of approximately $800.0 million for a total cash balance of approximately $1.2 billion.



	March 31, 2020			December 31, 2019
Land and improvements	$	1,089,347		$	1,088,436
Buildings and improvements	4,058,247			4,039,012
Furniture, fixtures and equipment	691,546			685,699
	5,839,140			5,813,147
Accumulated depreciation	(1,247,124		)	(1,198,181		)
Investment in hotel properties, net	$	4,592,016		$	4,614,966



	For the three months ended March 31, 2020								For the three months ended March 31, 2019
	Room Revenue		Food and Beverage Revenue		Other Revenue		Total Revenue		Room Revenue		Food and Beverage Revenue		Other Revenue		Total Revenue
Northern California	$	33,511	$	3,785	$	1,305	$	38,601	$	50,881	$	4,956	$	1,421	$	57,258
South Florida	31,124		4,497		1,952		37,573		44,646		5,849		2,057		52,552
Southern California	23,860		2,862		2,144		28,866		29,064		3,692		2,090		34,846
New York City	16,295		2,134		934		19,363		22,659		2,903		963		26,525
Houston	10,939		714		974		12,627		16,252		964		1,170		18,386
Chicago	8,914		2,222		466		11,602		12,906		2,964		436		16,306
Louisville	5,898		3,778		862		10,538		9,390		3,830		530		13,750
Austin	7,508		1,261		1,250		10,019		24,097		2,960		951		28,008
Washington DC	8,824		200		541		9,565		13,367		335		550		14,252
Denver	6,760		2,267		335		9,362		13,130		2,844		306		16,280
Other	65,259		7,047		5,059		77,365		101,278		12,949		6,877		121,104
Total	$	218,892	$	30,767	$	15,822	$	265,481	$	337,670	$	44,246	$	17,351	$	399,267



			Outstanding Borrowings at
	Interest Rate	Maturity Date	March 31, 2020		December 31, 2019
Senior unsecured notes (1) (2) (3)	6.00%	June 2025	$	499,303	$	500,484


•	Common Stock Dividend Reduction: The Company’s board of trustees has authorized a reduction in the first quarter common cash dividend to $0.01 per common share; and



	March 31, 2020			December 31, 2019
Equity basis of the joint venture investments	$	(3,307	)	$	(4,236	)
Cost of the joint venture investments in excess of the joint venture book value	19,127			19,407
Investment in unconsolidated joint ventures	$	15,820		$	15,171



	March 31, 2020		December 31, 2019
Senior Notes	$	499,303	$	500,484
Revolver and Term Loans, net	1,569,233		1,168,793
Mortgage loans, net	525,956		526,430
Debt, net	$	2,594,492	$	2,195,707


(2)	The senior unsecured notes include $24.4 million and $25.6 million at March 31, 2020 and December 31, 2019, respectively, related to acquisition related fair value adjustments on the senior unsecured notes.


(3)	The Company has the option to redeem the senior unsecured notes beginning June 1, 2020 at a price of 103.0% of face value.


•	$600.0 million revolving credit facility with a scheduled maturity date of May 18, 2024 and a one year extension option if certain conditions are satisfied (the "Revolver");


•	$150.0 million term loan with a scheduled maturity date of January 22, 2022 (the "$150 Million Term Loan Maturing 2022");


•	$400.0 million term loan with a scheduled maturity date of January 25, 2023 (the "$400 Million Term Loan Maturing 2023");


•	$225.0 million term loan with a scheduled maturity date of January 25, 2023 (the "$225 Million Term Loan Maturing 2023"); and



	Covenant	Actual at March 31, 2020	Compliance
Leverage ratio (1)	<= 7.00x	4.21x	Yes
Fixed charge coverage ratio (2)	>= 1.50x	2.51x	Yes
Secured indebtedness ratio	<= 45.0%	18.6%	Yes
Unsecured indebtedness ratio	<= 60.0%	24.6%	Yes
Unsecured interest coverage ratio	>= 2.00x	1.69x	No (3)


(1)	Leverage ratio is net indebtedness, as defined in the Revolver and Term Loan agreement, to corporate earnings before interest, taxes, depreciation, and amortization ("EBITDA"), as defined in the Revolver and Term Loan agreement.


(2)	Fixed charge coverage ratio is Adjusted EBITDA, generally defined in the Revolver and Term Loan agreement as EBITDA less furniture, fixtures and equipment ("FF&E") reserves, to fixed charges, which is generally defined in the Revolver and Term Loan agreement as interest expense, all regularly schedule principal payments, preferred dividends paid, and cash taxes paid.


(3)	The Company is currently working with its lenders on an amendment to its Revolver and unsecured Term Loans. The Company expects that this amendment will adjust the compliance threshold for this covenant to a level where the Company will be in compliance at March 31, 2020.



			Outstanding Borrowings at
	Interest Rate at March 31, 2020 (1)	Maturity Date	March 31, 2020			December 31, 2019
Revolver (2)	2.44%	May 2024	$	400,000		$	—
$150 Million Term Loan Maturing 2022	3.08%	January 2022	150,000			150,000
$400 Million Term Loan Maturing 2023	3.78%	January 2023	400,000			400,000
$225 Million Term Loan Maturing 2023	3.78%	January 2023	225,000			225,000
$400 Million Term Loan Maturing 2025	2.92%	May 2025	400,000			400,000
			1,575,000			1,175,000
Deferred financing costs, net (3)			(5,767		)	(6,207		)
Total Revolver and Term Loans, net			$	1,569,233		$	1,168,793


(1)	Interest rate at March 31, 2020 gives effect to interest rate hedges.


(2)	At March 31, 2020 and December 31, 2019, there was $200.0 million and $600.0 million, respectively, undrawn on the Revolver. The Company also has the ability to extend the maturity date for an additional one year period ending May 2025 if certain conditions are satisfied.


(3)	Excludes $3.3 million and $3.4 million as of March 31, 2020 and December 31, 2019, respectively, related to deferred financing costs on the Revolver, which are included in prepaid expense and other assets in the accompanying consolidated balance sheets.



					Outstanding Borrowings at
	Number of Assets Encumbered	Interest Rate at March 31, 2020 (1)	Maturity Date		March 31, 2020			December 31, 2019
Mortgage loan (2)	7	3.33%	April 2022	(6)	$	200,000		$	200,000
Mortgage loan (3)	1	5.25%	June 2022		31,050			31,215
Mortgage loan (4)	3	4.95%	October 2022		88,769			89,299
Mortgage loan (5)	1	4.94%	October 2022		28,635			28,785
Mortgage loan (2)	4	3.35%	April 2024	(6)	85,000			85,000
Mortgage loan (2)	3	2.88%	April 2024	(6)	96,000			96,000
	19				529,454			530,299
Deferred financing costs, net					(3,498		)	(3,869		)
Total mortgage loans, net					$	525,956		$	526,430


(2)	The hotels encumbered by the mortgage loan are cross-collateralized. Requires payments of interest only through maturity.


(3)	Includes $0.4 million and $0.5 million at March 31, 2020 and December 31, 2019, respectively, related to a fair value adjustment on a mortgage loan.