Pebblebrook Hotel Trust Reports 2024 Results and Provides 2025 Outlook

Business Wire 26-Feb-2025 4:06 PM

Pebblebrook Hotel Trust (NYSE:PEB):

Note: See tables later in this press release for a description of Same-Property information and reconciliations from net income (loss) to non-GAAP financial measures used in the table above and elsewhere in this press release.

Fourth Quarter and Full Year Highlights

"Our fourth-quarter results exceeded expectations, bolstered by strong resort demand, both group and leisure, and impressive performances at our recently redeveloped properties, including Margaritaville Hotel San Diego Gaslamp Quarter, Estancia La Jolla Hotel & Spa, and Hilton San Diego Gaslamp Quarter," said Mr. Bortz. "In addition, our hotel and asset management teams made significant progress in controlling operating expenses through enhanced efficiencies and a broad array of cost-reduction measures. Same-Property expenses before fixed expenses rose just 3.1 percent year-over-year in Q4, equating to a decline of 1.7 percent on a per-occupied room basis. These strategic initiatives should drive sustained benefits in 2025 and beyond, helping offset rising wage pressures from newly ratified labor agreements and city-mandated minimum wage increases in several urban markets. While these wage increases will have their greatest cost impact in 2025, we anticipate a more moderate pace of wage growth in subsequent years."

Update on the Impact of Los Angeles Fires

While the Los Angeles wildfires devastated two significant residential communities, the Company's properties are not located in affected areas, none of them sustained any physical damage, and all guests and employees remained safe.

However, year-to-date the Company's nine Los Angeles area hotels – spanning from West Hollywood on the east to Santa Monica on the west – have experienced a significant increase in business cancellations and a material slowdown in bookings due to the fires. This slowdown in bookings has continued, and while the timing and pace of Los Angeles' demand and recovery are unknowable, the Company currently estimates:

• Q1 2025 Same-Property RevPAR impact: -330 to -430 bps
• Q1 2025 Same-Property Total RevPAR impact: -280 to -360 bps
• Full-year 2025 Same-Property RevPAR impact: -115 bps
• Full-year 2025 Same-Property Total RevPAR impact: -100 bps
• Projected Same-Property Hotel EBITDA impact: ~$9.0 million, with ~$6.5 million in Q1 2025

This impact has been incorporated into the Company's Q1 2025 and full-year outlooks. Pebblebrook remains committed to supporting the local community and is closely monitoring the ongoing recovery efforts.

Update on Impact from Named Storms

LaPlaya Beach Resort & Club ("LaPlaya"), a 189-room luxury waterfront resort in Naples, Florida, made significant progress in restoring areas damaged by Hurricanes Helene (September 26, 2024) and Milton (October 9, 2024). On January 16, 2025, LaPlaya reopened the upper floors (59 rooms) of its Beach House building (79 rooms), with the remaining ground-floor rooms (20 rooms) set for substantial completion in Q2 2025.

Despite the disruptions from restoration efforts due to Hurricane Ian in Q1 2024 and Hurricanes Helene and Milton later in 2024, LaPlaya generated $19.0 million in Hotel EBITDA for 2024, including $1.2 million in Q4. Although its results are non-comparable and thereby excluded from Same-Property metrics for both 2024 and 2023, LaPlaya's performance is included in the Company's Adjusted EBITDAre, Adjusted FFO ("AFFO"), and AFFO per diluted share.

In Q4 2024, the Company successfully finalized its insurance claims related to Hurricane Ian. As a result, the Company realized an additional $5.4 million in unforecasted business interruption insurance ("BI") income. This amount increased total BI income in 2024 to $23.8 million. Including the $33.0 million of BI income recognized in 2023, the Company realized over $56 million in BI income associated with Hurricane Ian.

In 2025, LaPlaya will be included in the Company's Same-Property metrics for Q1-Q3 but excluded in Q4 for both 2025 and 2024. The Company expects LaPlaya will generate between $24 and $26 million in EBITDA in 2025, with $16.5 to $18.5 million reflected in its 2025 Same-Property Hotel EBITDA outlook. Additionally, Pebblebrook anticipates recognizing approximately $6 million in BI income in 2025 related to Hurricanes Helene and Milton. This income will be included in Adjusted EBITDAre and Adjusted FFO but does not factor into Same-Property Hotel EBITDA.

Capital Investments and Strategic Property Redevelopments

In 2024, the Company made $91.0 million in capital investments throughout its portfolio, excluding expenditures related to repairing and rebuilding LaPlaya. These investments were primarily directed toward completing several major redevelopment and repositioning projects, including the comprehensive $50 million redevelopment of Newport Harbor Island Resort, the $26 million renovation and repositioning of Estancia La Jolla Hotel & Spa, and the $20 million expansion at Skamania Lodge, which added new accommodations – such as treehouses, glamping units, and villas – along with upgraded and expanded utility and road infrastructure to support future accommodations at the resort.

With these transformative projects now largely complete, the Company has substantially concluded its multi-year strategic redevelopment program. Paradise Point Resort's potential conversion to Margaritaville Island Resort remains the only significant redevelopment opportunity in the portfolio. As a result, capital investments are expected to be meaningfully lower over the next few years.

In 2025, the Company anticipates $65 to $75 million in capital investments, primarily for regular capital maintenance, replacements, and minor property refreshes and refurbishments.

Since 2018, the Company has reinvested approximately $525 million to transform and reposition its hotels and resorts, including over $278 million in return on investment (ROI)-generating projects. These initiatives and investments – ranging from amenity additions and enhancements to the reimagination and remerchandising of indoor and outdoor spaces – have meaningfully elevated the quality of the portfolio and created new profit-generating spaces. The Company expects these strategic initiatives to drive substantial returns and sustainable organic growth, mirroring the success of past redevelopment projects.

Common Share Repurchases

The Company repurchased 1.1 million common shares in 2024 at an average price of $13.29 per share. On a cumulative basis since October 2022, the Company has repurchased more than 12 million common shares – approximately 9% of its outstanding shares – at an average price of $14.40. This figure represents an approximate 42% discount to the midpoint of the Company's most recently published Net Asset Value ("NAV") per share.

Balance Sheet

In 2024, Pebblebrook successfully completed $1.6 billion in debt financings and extensions, enhancing its balance sheet flexibility and eliminating significant maturities until December 2026. The weighted-average maturity of the Company's debt is now approximately 3.1 years, with a weighted-average interest rate of 4.2%. Of the $2.3 billion in consolidated debt and convertible notes, roughly 91% is effectively fixed at a 4.0% rate, and the same proportion is unsecured.

As of December 31, 2024, the Company had approximately $217.6 million in cash, cash equivalents, and restricted cash, plus $642.6 million of undrawn availability on its $650 million senior unsecured revolving credit facilities.

Common and Preferred Dividends

On December 16, 2024, the Company declared a quarterly cash dividend of $0.01 per share on its common shares and a regular quarterly cash dividend for the following preferred shares of beneficial interest:

• $0.39844 per 6.375% Series E Cumulative Redeemable Preferred Share;
• $0.39375 per 6.3% Series F Cumulative Redeemable Preferred Share;
• $0.39844 per 6.375% Series G Cumulative Redeemable Preferred Share; and
• $0.35625 per 5.7% Series H Cumulative Redeemable Preferred Share.

Update on Curator Hotel & Resort Collection

Curator Hotel & Resort Collection ("Curator") is a curated collection of experientially focused small brands and independent lifestyle hotels and resorts worldwide founded by Pebblebrook and several industry-leading independent lifestyle hotel operators. As of December 31, 2024, Curator had 90 member hotels and resorts and 122 master service agreements with preferred vendor partners. The master service agreements provide Curator member hotels, including Pebblebrook hotels, with preferred pricing, enhanced operating terms, and early access to curated new technologies. Curator's mission is to support lifestyle hotels and resorts through its best-in-class operating agreements, services, and technology, while helping properties amplify their independent brands and what makes them unique.

2025 Outlook

The Company's 2025 Outlook assumes no acquisitions or dispositions. It includes an estimated $6.0 million in BI income and $7.5 million in Q4 2025 EBITDA related to LaPlaya, with both included in Adjusted EBITDAre, Adjusted FFO and Adjusted FFO per diluted share. LaPlaya is incorporated into Same-Property metrics for January through September 2025 and 2024. Newport Harbor Island Resort ("Newport") is included in Same-Property metrics for July through December 2025 and 2024.

This forecast assumes stable travel conditions unaffected by pandemics, major weather events (other than the LA fires), federal shutdowns, or material adverse macroeconomic factors.

This Q1 and Full Year 2025 Outlook is based, in part, on the following impact from the LA fires:

This 2025 Outlook is based, in part, on the following estimates and assumptions:

The Company's Q1 2025 Outlook is as follows:

This Q1 2025 Outlook is based, in part, on the following estimates and assumptions:

The Q1 2025 outlook includes an estimated $4.0 million from an initial BI income settlement related to LaPlaya for lost income due to Hurricanes Helene and Milton. While this does not affect Same-Property Hotel EBITDA, it positively impacts the Company's Adjusted EBITDAre, Adjusted FFO, and net loss.

Fourth Quarter 2024 Earnings Call

The Company will conduct its quarterly analyst and investor conference call on Thursday, February 27, 2025, beginning at 9:00 AM ET. Please dial (877) 407-3982 approximately ten minutes before the call begins to participate. A live webcast of the conference call will also be available through the Investor Relations section of www.pebblebrookhotels.com. To access the webcast, click on https://investor.pebblebrookhotels.com/news-and-events/webcasts/default.aspx ten minutes before the conference call. A replay of the conference call webcast will be archived and available online.

About Pebblebrook Hotel Trust

Pebblebrook Hotel Trust (NYSE:PEB) is a publicly traded real estate investment trust ("REIT") and the largest owner of urban and resort lifestyle hotels and resorts in the United States. The Company owns 46 hotels and resorts, totaling approximately 12,000 guest rooms across 13 urban and resort markets. For more information, visit www.pebblebrookhotels.com and follow @PebblebrookPEB.

This press release contains certain "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Reform Act of 1995. Forward-looking statements are generally identifiable by the use of forward-looking terminology such as "may," "will," "should," "potential," "intend," "expect," "seek," "anticipate," "estimate," "approximately," "believe," "could," "project," "predict," "forecast," "continue," "assume," "plan," references to "outlook" or other similar words or expressions. Forward-looking statements are based on certain assumptions and can include future expectations, future plans and strategies, financial and operating projections and forecasts and other forward-looking information and estimates. Examples of forward-looking statements include the following: descriptions of the Company's plans or objectives for future capital investment projects, operations or services; forecasts of the Company's future economic performance; forecasts of hotel industry performance; expectations of business interruption insurance proceeds; and descriptions of assumptions underlying or relating to any of the foregoing expectations including assumptions regarding the timing of their occurrence. These forward-looking statements are subject to various risks and uncertainties, many of which are beyond the Company's control, which could cause actual results to differ materially from such statements. These risks and uncertainties include, but are not limited to, the state of the U.S. economy and the supply of hotel properties, and other factors as are described in greater detail in the Company's filings with the SEC, including, without limitation, the Company's Annual Report on Form 10-K for the year ended December 31, 2024. Unless legally required, the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

For further information about the Company's business and financial results, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections of the Company's filings with the U.S. Securities and Exchange Commission, including, but not limited to, its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, copies of which may be obtained at the Investor Relations section of the Company's website at www.pebblebrookhotels.com.

All information in this press release is as of February 26, 2025. The Company undertakes no duty to update the statements in this press release to conform the statements to actual results or changes in the Company's expectations.

For additional information or to receive press releases via email, please visit www.pebblebrookhotels.com

Considerations Regarding Non-GAAP Financial Measures

This press release includes certain non-GAAP financial measures. These measures are not in accordance with, or an alternative to, measures prepared in accordance with GAAP and may be different from similarly titled non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations determined in accordance with GAAP.

Funds from Operations ("FFO") - FFO represents net income (computed in accordance with GAAP), excluding gains or losses from sales of properties, plus real estate-related depreciation and amortization and after adjustments for unconsolidated partnerships. The Company considers FFO a useful measure of performance for an equity REIT because it facilitates an understanding of the Company's operating performance without giving effect to real estate depreciation and amortization, which assume that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, the Company believes that FFO provides a meaningful indication of its performance. The Company also considers FFO an appropriate performance measure given its wide use by investors and analysts. The Company computes FFO in accordance with standards established by the Board of Governors of Nareit in its March 1995 White Paper (as amended in November 1999 and April 2002), which may differ from the methodology for calculating FFO utilized by other equity REITs and, accordingly, may not be comparable to that of other REITs. Further, FFO does not represent amounts available for management's discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments and uncertainties, nor is it indicative of funds available to fund the Company's cash needs, including its ability to make distributions. The Company presents FFO per diluted share based on the outstanding dilutive common shares plus the outstanding Operating Partnership units for the periods presented.

Earnings before Interest, Taxes, and Depreciation and Amortization ("EBITDA") - The Company believes that EBITDA provides investors a useful financial measure to evaluate its operating performance, excluding the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortization).

EBITDA for Real Estate ("EBITDAre") - The Company believes that EBITDAre provides investors a useful financial measure to evaluate its operating performance, and the Company presents EBITDAre in accordance with Nareit guidelines, as defined in its September 2017 white paper "Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate." EBITDAre adjusts EBITDA for the following items, which may occur in any period: (1) gains or losses on the disposition of depreciated property, including gains or losses on change of control; (2) 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 (3) adjustments to reflect the entity's share of EBITDAre of unconsolidated affiliates.

The Company also evaluates its performance by reviewing Adjusted FFO and Adjusted EBITDAre because it believes that adjusting FFO and EBITDAre to exclude certain recurring and non-recurring items described below provides useful supplemental information regarding the Company's ongoing operating performance and that the presentation of Adjusted FFO and Adjusted EBITDAre, when combined with the primary GAAP presentation of net income (loss), more completely describes the Company's operating performance. The Company adjusts FFO available to common share and unit holders and EBITDAre for the following items, which may occur in any period, and refers to these measures as Adjusted FFO and Adjusted EBITDAre:

- Transaction costs: The Company excludes transaction costs expensed during the period because it believes that including these costs in Adjusted FFO and Adjusted EBITDAre does not reflect the underlying financial performance of the Company and its hotels.

- Non-cash ground rent: The Company excludes the non-cash ground rent expense, which is primarily made up of the straight-line rent impact from a ground lease.

- Management/franchise contract transition costs: The Company excludes one-time management and/or franchise contract transition costs expensed during the period because it believes that including these costs in Adjusted FFO and Adjusted EBITDAre does not reflect the underlying financial performance of the Company and its hotels.

- Interest expense adjustment for acquired liabilities: The Company excludes interest expense adjustment for acquired liabilities assumed in connection with acquisitions, because it believes that including these non-cash adjustments in Adjusted FFO does not reflect the underlying financial performance of the Company.

- Finance lease adjustment: The Company excludes the effect of non-cash interest expense from finance leases because it believes that including these non-cash adjustments in Adjusted FFO does not reflect the underlying financial performance of the Company.

- Non-cash amortization of acquired intangibles: The Company excludes the non-cash amortization of acquired intangibles, which includes but is not limited to the amortization of favorable and unfavorable leases or management agreements and above/below market real estate tax reduction agreements because it believes that including these non-cash adjustments in Adjusted FFO and Adjusted EBITDAre does not reflect the underlying financial performance of the Company.

- Early extinguishment of debt and deferred tax benefit: The Company excludes these items because the Company believes that including these adjustments in Adjusted FFO does not reflect the underlying financial performance of the Company and its hotels.

- Gain on insurance settlement, amortization of share-based compensation expense and hurricane-related costs: The Company excludes these items because it believes that including these costs in Adjusted FFO and Adjusted EBITDAre does not reflect the underlying financial performance of the Company and its hotels.

The Company presents weighted-average number of basic and fully diluted common shares and units by excluding the dilutive effect of shares issuable upon conversion of convertible debt.

The Company's presentation of FFO and Adjusted FFO should not be considered as alternatives to net income (computed in accordance with GAAP) as an indicator of the Company's financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of its liquidity. The Company's presentation of EBITDAre and Adjusted EBITDAre should not be considered as alternatives to net income (computed in accordance with GAAP) as an indicator of the Company's financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of its liquidity.